Document:

Exhibit

Exhibit 10.44
Freddie Mac Loan Number: 932790054
Property Name: Lofts at NoHo Commons
MULTIFAMILY LOAN AND SECURITY AGREEMENT
(Revised 7-12-2016)
	
		
	Borrower:
	NOHO COMMONS PACIFIC OWNER LLC,
a Delaware limited liability company

	Lender:
	WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association

	Date:
	November 16, 2016

	Loan Amount:
	$72,100,000.00

	
	
	Reserve Fund Information
(See Article IV)

	
		
	Imposition Reserves
	(fill in “Collect” or “Deferred” as appropriate for each item)

	Collect
	Insurance

	Collect
	Taxes

	Deferred
	water/sewer

	N/A
	Ground Rents

	Deferred
	assessments/other charges

	 
	 

	
				
	Repairs & Repair Reserve
	Repairs required?
	     X   Yes
	            No

	 
	If No, is radon testing required?
	           Yes
	            No

	 
	If Yes, is a Reserve required?
	           Yes
	     X    No

	If Yes to Repairs, but No Reserve, is a Letter of Credit required?
	           Yes
	            No

	 
	 
	 
	 

	
					
	Replacement Reserve
	    X    Yes
	If Yes:
	    X     Funded 
	             Deferred

	 
	            No
	 
	 
	 

	 
	 
	 
	 
	 

	
					
	Rental Achievement Reserve
	           Yes
	If Yes:
	            Cash
	            Letter of Credit

	 
	   X      No
	 
	 
	 

	 
	 
	 
	 
	 

	
					
	Rate Cap Agreement Reserve
	 
	               Yes
	          X      No
	 

	 
	 
	 
	 
	 

	
				
	Other Reserve(s)
	           Yes
	            No
	 

	If Yes, specify:                                                                                                                                 

	 
	 
	 
	 

	
					
	Lease-Up Transaction
	          Yes
	            No
	 
	 

	 
	If Yes, is a Reserve required?
	           Yes
	            No

	 
	If Yes, is a Letter of Credit required?
	           Yes
	            No

	 
	 
	 
	 
	 

Attached Riders 
(See Article XIII)
    

	
		
	Name of Rider
	Date Revised

	Rider to Multifamily Loan and Security Agreement – Affiliate Transfer
	7-12-2016

	Rider to Multifamily Loan and Security Agreement – Buy-Sell Transfer
	7-12-2016

	Rider to Multifamily Loan and Security Agreement – Cooperation with Rating Agencies and Investors
	1-27-2015

	Rider to Multifamily Loan and Security Agreement – Repairs – No Repair Reserve Established
	7-12-2016

	Rider to Multifamily Loan and Security Agreement – Replacement Reserve Fund – Immediate Deposits
	7-1-2014

	Rider to Multifamily Loan and Security Agreement – Tax Method of Accounting
	3-1-2014

	Rider to Multifamily Loan and Security Agreement – Value-Add Transaction
	7-28-2015

	Rider to Multifamily Loan and Security Agreement – Splitting the Note
	1-7-2015

	Rider to Multifamily Loan and Security Agreement – Entity Guarantor
	3-1-2014

	Rider to Multifamily Loan and Security Agreement – Regulatory Agreement and Owner Participation Agreement
	7-17-2014

	Rider to Multifamily Loan and Security Agreement – Standard Freddie Mac Modifications
	10-19-2016

	
	
	Exhibit B Modifications 
(See Article XIV)

	
			
	Are any Exhibit B modifications attached?    
	    X    Yes
	            No

	 
	 
	 

 

TABLE OF CONTENTS
ARTICLE I    DEFINED TERMS; CONSTRUCTION
		
	1.01
	Defined Terms

		
	1.02
	Construction

		
	ARTICLE II
	LOAN

		
	2.01
	Loan Terms

		
	2.02
	Prepayment Premium

		
	2.03
	Exculpation

		
	2.04
	Application of Payments

		
	2.05
	Usury Savings

		
	2.06
	Floating Rate Mortgage - Third Party Cap Agreement

		
	ARTICLE III
	LOAN SECURITY AND GUARANTY

		
	3.01
	Security Instrument

		
	3.02
	Reserve Funds

		
	3.03
	Uniform Commercial Code Security Agreement

		
	3.04
	Cap Agreement and Cap Collateral Assignment

		
	3.05
	Guaranty

		
	3.06
	Reserved

		
	3.07
	Reserved

		
	3.08
	Reserved

		
	ARTICLE IV
	RESERVE FUNDS AND REQUIREMENTS

		
	4.01
	Reserves Generally

		
	4.02
	Reserves for Taxes, Insurance and Other Charges

		
	4.03
	Repairs; Repair Reserve Fund

		
	4.04
	Replacement Reserve Fund

		
	4.05
	Rental Achievement Provisions

		
	4.06
	Debt Service Reserve

		
	4.07
	Rate Cap Agreement Reserve Fund

		
	4.08
	through 4.20 are Reserved

		
	ARTICLE V
	REPRESENTATIONS AND WARRANTIES

		
	5.01
	Review of Documents

		
	5.02
	Condition of Mortgaged Property

		
	5.03
	No Condemnation

		
	5.04
	Actions; Suits; Proceedings

		
	5.05
	Environmental

		
	5.06
	Commencement of Work; No Labor or Materialmen’s Claims

		
	5.07
	Compliance with Applicable Laws and Regulations

		
	5.08
	Access; Utilities; Tax Parcels

		
	5.09
	Licenses and Permits

		
	5.10
	No Other Interests

Multifamily Loan and Security Agreement      Page iii
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	5.11
	Term of Leases

		
	5.12
	No Prior Assignment; Prepayment of Rents

		
	5.13
	Illegal Activity

		
	5.14
	Taxes Paid

		
	5.15
	Title Exceptions

		
	5.16
	No Change in Facts or Circumstances

		
	5.17
	Financial Statements

		
	5.18
	ERISA – Borrower Status

		
	5.19
	No Fraudulent Transfer or Preference

		
	5.20
	No Insolvency or Judgment

		
	5.21
	Working Capital

		
	5.22
	Cap Collateral

		
	5.23
	Ground Lease

		
	5.24
	Purpose of Loan

		
	5.25
	Through 5.39 are Reserved

5.40    Recycled SPE Borrower
5.41    Recycled SPE Equity Owner
		
	5.42
	through 5.50 are Reserved

		
	5.51
	Survival

5.52    through 5.57 are Reserved
5.58    Prohibited Parties Lists; Economic Sanctions Laws
5.59    through 5.62 are Reserved
		
	ARTICLE VI
	BORROWER COVENANTS

		
	6.01
	Compliance with Laws

		
	6.02
	Compliance with Organizational Documents

		
	6.03
	Use of Mortgaged Property

		
	6.04
	Non-Residential Leases

		
	6.05
	Prepayment of Rents

		
	6.06
	Inspection

		
	6.07
	Books and Records; Financial Reporting

		
	6.08
	Taxes; Operating Expenses; Ground Rents

		
	6.09
	Preservation, Management and Maintenance of Mortgaged Property

		
	6.10
	Insurance

		
	6.11
	Condemnation

		
	6.12
	Environmental Hazards

		
	6.13
	Single Purpose Entity Requirements

		
	6.14
	Repairs and Capital Replacements

		
	6.15
	Residential Leases Affecting the Mortgaged Property

		
	6.16
	Litigation; Government Proceedings

		
	6.17
	Further Assurances and Estoppel Certificates; Lender’s Expenses

		
	6.18
	Cap Collateral

		
	6.19
	Ground Lease

		
	6.20
	ERISA Requirements

		
	6.21
	through 6.52 are Reserved

		
	6.53
	Economic Sanctions Laws

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	6.54
	through 6.58 are Reserved

		
	ARTICLE VII
	TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER

		
	7.01
	Permitted Transfers

		
	7.02
	Prohibited Transfers

		
	7.03
	Conditionally Permitted Transfers

		
	7.04
	Preapproved Intrafamily Transfers

		
	7.05
	Lender’s Consent to Prohibited Transfers

		
	7.06
	SPE Equity Owner Requirement Following Transfer

		
	7.07
	Additional Transfer Requirements - External Cap Agreement

		
	7.08
	Reserved

		
	7.09
	Reserved

		
	ARTICLE VIII
	SUBROGATION

		
	ARTICLE IX
	EVENTS OF DEFAULT AND REMEDIES

		
	9.01
	Events of Default 

		
	9.02
	Protection of Lender’s Security; Security Instrument Secures Future Advances

		
	9.03
	Remedies

		
	9.04
	Forbearance

		
	9.05
	Waiver of Marshalling

		
	ARTICLE X
	RELEASE; INDEMNITY

		
	10.01
	Release 

		
	10.02
	Indemnity

		
	10.03
	Reserved

		
	ARTICLE XI
	MISCELLANEOUS PROVISIONS

		
	11.01
	Waiver of Statute of Limitations, Offsets and Counterclaims

		
	11.02
	Governing Law; Consent to Jurisdiction and Venue

		
	11.03
	Notice

		
	11.04
	Successors and Assigns Bound

		
	11.05
	Joint and Several (and Solidary) Liability

		
	11.06
	Relationship of Parties; No Third Party Beneficiary

		
	11.07
	Severability; Amendments

		
	11.08
	Disclosure of Information

		
	11.09
	Determinations by Lender

		
	11.10
	Sale of Note; Change in Servicer; Loan Servicing

		
	11.11
	Supplemental Financing

		
	11.12
	Defeasance

		
	11.13
	Lender’s Rights to Sell or Securitize

		
	11.14
	Cooperation with Rating Agencies and Investors

		
	11.15
	Letter of Credit Requirements

		
	11.16
	through 11.18 are Reserved

		
	11.19
	State Specific Provisions

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	11.20
	Time is of the Essence 

ARTICLE XII    DEFINITIONS

ARTICLE XIII    INCORPORATION OF ATTACHED RIDERS
ARTICLE XIV    INCORPORATION OF ATTACHED EXHIBITS

ARTICLE XV    RESERVED.

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MULTIFAMILY LOAN AND SECURITY AGREEMENT

THIS MULTIFAMILY LOAN AND SECURITY AGREEMENT (“Loan Agreement”) is dated as of the 16th day of November, 2016 and is made by and between NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association (together with its successors and assigns, “Lender”).

RECITAL

Lender has agreed to make and Borrower has agreed to accept a loan in the original principal amount of $72,100,000.00 (“Loan”). Lender is willing to make the Loan to Borrower upon the terms and subject to the conditions set forth in this Loan Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of these promises, the mutual covenants contained in this Loan Agreement and other good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

ARTICLE I        DEFINED TERMS; CONSTRUCTION.

		
	1.01
	Defined Terms. Each defined term in this Loan Agreement will have the meaning ascribed to that term in Article XII unless otherwise defined in this Loan Agreement.

		
	1.02
	Construction. 

		
	(a)
	The captions and headings of the Articles and Sections of this Loan Agreement are for convenience only and will be disregarded in construing this Loan Agreement. 

		
	(b)
	Any reference in this Loan Agreement to an “Exhibit,” an “Article” or a “Section” will, unless otherwise explicitly provided, be construed as referring, respectively, to an Exhibit attached to this Loan Agreement or to an Article or Section of this Loan Agreement. 

		
	(c)
	All Exhibits and Riders attached to or referred to in this Loan Agreement are incorporated by reference in this Loan Agreement. 

		
	(d)
	Any reference in this Loan Agreement to a statute or regulation will be construed as referring to that statute or regulation as amended from time to time. 

		
	(e)
	Use of the singular in this Loan Agreement includes the plural and use of the plural includes the singular. 

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	(f)
	As used in this Loan Agreement, the term “including” means “including, but not limited to” and the term “includes” means “includes without limitation.” 

		
	(g)
	The use of one gender includes the other gender, as the context may require. 

		
	(h)
	Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document in this Loan Agreement will be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth in this Loan Agreement), and (ii) any reference in this Loan Agreement to any Person will be construed to include such Person’s successors and assigns.

		
	(i)
	Any reference in this Loan Agreement to “Lender’s requirements,” “as required by Lender,” or similar references will be construed, after Securitization, to mean Lender’s requirements or standards as determined in accordance with Lender’s and Loan Servicer’s obligations under the terms of the Securitization documents.

ARTICLE II         LOAN. 

		
	2.01
	Loan Terms. The Loan will be evidenced by the Note and will bear interest and be paid in accordance with the payment terms set forth in the Note.

		
	2.02
	Prepayment Premium. Borrower will be required to pay a prepayment premium in connection with certain prepayments of the Indebtedness, including a payment made after Lender’s exercise of any right of acceleration of the Indebtedness, as provided in the Note.

		
	2.03
	Exculpation. Borrower’s personal liability for payment of the Indebtedness and for performance of the other obligations to be performed by it under this Loan Agreement is limited in the manner, and to the extent, provided in the Note.

		
	2.04
	Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, then Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender (unless otherwise required by applicable law), in Lender’s sole and absolute discretion. Neither Lender’s acceptance of an amount that is less than all amounts then due and payable, nor Lender’s application of such payment in the manner authorized, will constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Notwithstanding the application of any such amount to the Indebtedness, Borrower’s obligations under this Loan Agreement, the Note and all other Loan Documents will remain unchanged.

		
	2.05
	Usury Savings. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower is interpreted so that any charge provided for in any Loan Document, whether considered separately or together with other charges levied 

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in connection with any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that charge is reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts will be applied by Lender to reduce the principal amount of the Indebtedness. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness which constitutes interest, as well as all other charges levied in connection with the Indebtedness which constitute interest, will be deemed to be allocated and spread ratably over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading will be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note.

		
	2.06
	Floating Rate Mortgage - Third Party Cap Agreement. If (a) the Note does not provide for interest to accrue at a floating or variable interest rate (other than during any Extension Period, if applicable), and (b) a third party Cap Agreement is not required, then this Section 2.06 and Section 3.04 will be of no force or effect.

		
	(a)
	So long as there is no Event of Default, Lender or Loan Servicer will remit to Borrower each Cap Payment received by Lender or Loan Servicer with respect to any month for which Borrower has paid in full the monthly installment of principal and interest or interest only, as applicable, due under the Note. Alternatively, at Lender’s option, so long as there is no Event of Default, Lender may apply a Cap Payment received by Lender or Loan Servicer with respect to any month to the applicable monthly payment of accrued interest due under the Note if Borrower has paid in full the remaining portion of such monthly payment of principal and interest or interest only, as applicable.

		
	(b)
	Neither the existence of a Cap Agreement nor anything in this Loan Agreement will relieve Borrower of its primary obligation to timely pay in full all amounts due under the Note and otherwise due on account of the Indebtedness.

ARTICLE III     LOAN SECURITY AND GUARANTY.

		
	3.01
	Security Instrument. Borrower will execute the Security Instrument dated of even date with this Loan Agreement. The Security Instrument will be recorded in the applicable land records in the Property Jurisdiction.

		
	3.02
	Reserve Funds.

		
	(a)
	Security Interest. To secure Borrower’s obligations under this Loan Agreement and to further secure Borrower’s obligations under the Note and the other Loan Documents, Borrower conveys, pledges, transfers and grants to Lender a security interest pursuant to the Uniform Commercial Code of the Property Jurisdiction or any other applicable law in and to all money in the Reserve Funds, as the same may increase or decrease from time to time, all interest and dividends thereon and all proceeds thereof.

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	(b)
	Supplemental Loan. If this Loan Agreement is entered into in connection with a Supplemental Loan and if the same Person is or becomes both Senior Lender and Supplemental Lender, then:

		
	(i)
	Borrower assigns and grants to Supplemental Lender a security interest in the Reserve Funds established in connection with the Senior Indebtedness as additional security for all of Borrower’s obligations under the Supplemental Note.

		
	(ii)
	In addition, Borrower assigns and grants to Senior Lender a security interest in the Reserve Funds established in connection with the Supplemental Indebtedness as additional security for all of Borrower’s obligations under the Senior Note.

		
	(iii)
	It is the intention of Borrower that all amounts deposited by Borrower in connection with either the Senior Loan Documents, the Supplemental Loan Documents, or both, constitute collateral for the Supplemental Indebtedness secured by the Supplemental Instrument and the Senior Indebtedness secured by the Senior Instrument, with the application of such amounts to such Senior Indebtedness or Supplemental Indebtedness to be at the discretion of Senior Lender and Supplemental Lender.

		
	3.03
	Uniform Commercial Code Security Agreement. This Loan Agreement is also a security agreement under the Uniform Commercial Code for any of the Mortgaged Property which, under applicable law, may be subjected to a security interest under the Uniform Commercial Code, for the purpose of securing Borrower’s obligations under this Loan Agreement and to further secure Borrower’s obligations under the Note, Security Instrument and other Loan Documents, whether such Mortgaged Property is owned now or acquired in the future, and all products and cash and non-cash proceeds thereof (collectively, “UCC Collateral”), and by this Loan Agreement, Borrower grants to Lender a security interest in the UCC Collateral.

		
	3.04
	Cap Agreement and Cap Collateral Assignment. Reserved.

		
	3.05
	Guaranty. Borrower will cause each Guarantor (if any) to execute a Guaranty of all or a portion of Borrower’s obligations under the Loan Documents effective as of the date of this Loan Agreement.

3.06    Reserved.

3.07    Reserved.

3.08    Reserved.

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ARTICLE IV        RESERVE FUNDS AND REQUIREMENTS.

		
	4.01
	Reserves Generally.

		
	(a)
	Establishment of Reserve Funds; Investment of Deposits. Unless otherwise provided in Section 4.03 and/or Section 4.04, each Reserve Fund will be established on the date of this Loan Agreement and each of the following will apply:

		
	(i)
	All Reserve Funds will be deposited in an Eligible Account at an Eligible Institution or invested in “permitted investments” as then defined and required by the Rating Agencies.

		
	(ii)
	Lender will not be obligated to open additional accounts or deposit Reserve Funds in additional institutions when the amount of any Reserve Fund exceeds the maximum amount of the federal deposit insurance or guaranty. Borrower acknowledges and agrees that it will not have the right to direct Lender as to any specific investment of monies in any Reserve Fund. Lender will not be responsible for any losses resulting from investment of monies in any Reserve Fund or for obtaining any specific level or percentage of earnings on such investment.

		
	(b)
	Interest on Reserve Funds; Trust Funds. Unless applicable law requires, Lender will not be required to pay Borrower any interest, earnings or profits on the Reserve Funds. Any amounts deposited with Lender under this Article IV will not be trust funds, nor will they operate to reduce the Indebtedness, unless applied by Lender for that purpose pursuant to the terms of this Loan Agreement.

		
	(c)
	Use of Reserve Funds. Each Reserve Fund will, except as otherwise provided in this Loan Agreement, be used for the sole purpose of paying, or reimbursing Borrower for payment of, the item(s) for which the applicable Reserve Fund was established. Borrower acknowledges and agrees that, except as specified in this Loan Agreement, monies in one Reserve Fund will not be used to pay, or reimburse Borrower for, matters for which another Reserve Fund has been established.

		
	(d)
	Termination of Reserve Funds. Upon the payment in full of the Indebtedness, Lender will pay to Borrower all funds remaining in any Reserve Funds.

		
	(e)
	Reserved.

		
	4.02
	Reserves for Taxes, Insurance and Other Charges.

		
	(a)
	Deposits to Imposition Reserve Deposits. Borrower will deposit with Lender on the day monthly installments of principal or interest, or both, are due under the Note (or on another day designated in writing by Lender), until the Indebtedness 

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is paid in full, an additional amount sufficient to accumulate with Lender the entire sum required to pay, when due, the items marked “Collect” below. Except as provided in Section 4.02(e), Lender will not require Borrower to make Imposition Reserve Deposits with respect to the items marked “Deferred” below.

		
	Collect
	Property Insurance premiums or premiums for other Insurance required by Lender under Section 6.10

		
	Collect
	Taxes and payments in lieu of taxes

		
	Deferred
	water and sewer charges that could become a Lien on the Mortgaged Property

		
	N/A
	Ground Rents

		
	Deferred
	assessments or other charges that could become a Lien on the Mortgaged Property, including home owner association dues

The amounts deposited pursuant to this Section 4.02(a) are collectively referred to in this Loan Agreement as the “Imposition Reserve Deposits.” The obligations of Borrower for which the Imposition Reserve Deposits are required are collectively referred to in this Loan Agreement as “Impositions.” The amount of the Imposition Reserve Deposits must be sufficient to enable Lender to pay each Imposition before the last date upon which such payment may be made without any penalty or interest charge being added. Lender will maintain records indicating how much of the monthly Imposition Reserve Deposits and how much of the aggregate Imposition Reserve Deposits held by Lender are held for the purpose of paying Taxes, Insurance premiums, Ground Rent (if applicable) and each other Imposition.

		
	(b)
	Disbursement of Imposition Reserve Deposits. Lender will apply the Imposition Reserve Deposits to pay Impositions so long as no Event of Default has occurred and is continuing. Lender will pay all Impositions from the Imposition Reserve Deposits held by Lender upon Lender’s receipt of a bill or invoice for an Imposition. If Borrower holds a ground lessee interest in the Mortgaged Property and Imposition Reserve Deposits are collected for Ground Rent, then Lender will pay the monthly or other periodic installments of Ground Rent from the Imposition Reserve Deposits, whether or not Lender receives a bill or invoice for such installments. Lender will have no obligation to pay any Imposition to the extent it exceeds the amount of the Imposition Reserve Deposits then held by Lender. Lender may pay an Imposition according to any bill, statement or estimate from the appropriate public office, Ground Lessor (if applicable) or insurance company without inquiring into the accuracy of the bill, statement or estimate or into the validity of the Imposition.

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	(c)
	Excess or Deficiency of Imposition Reserve Deposits. If at any time the amount of the Imposition Reserve Deposits held by Lender for payment of a specific Imposition exceeds the amount reasonably deemed necessary by Lender, the excess will be credited against future installments of Imposition Reserve Deposits. If at any time the amount of the Imposition Reserve Deposits held by Lender for payment of a specific Imposition is less than the amount reasonably estimated by Lender to be necessary, Borrower will pay to Lender the amount of the deficiency within 15 days after Notice from Lender.

		
	(d)
	Delivery of Invoices. Borrower will promptly deliver to Lender a copy of all notices of, and invoices for, Impositions.

		
	(e)
	Deferral of Collection of Any Imposition Reserve Deposits; Delivery of Receipts. If Lender does not collect an Imposition Reserve Deposit with respect to an Imposition either marked “Deferred” in Section 4.02(a) or pursuant to a separate written deferral by Lender, then on or before the earlier of the date each such Imposition is due, or the date this Loan Agreement requires each such Imposition to be paid, Borrower will provide Lender with proof of payment of each such Imposition. Upon Notice to Borrower, Lender may revoke its deferral and require Borrower to deposit with Lender any or all of the Imposition Reserve Deposits listed in Section 4.02(a), regardless of whether any such item is marked “Deferred” (i) if Borrower does not timely pay any of the Impositions, (ii) if Borrower fails to provide timely proof to Lender of such payment, (iii) at any time during the existence of an Event of Default or (iv) upon placement of a Supplemental Loan in accordance with Section 11.11.

		
	(f)
	through (i) are Reserved.

		
	4.03
	Repairs; Repair Reserve Fund. Reserved.

		
	4.04
	Replacement Reserve Fund. Reserved.

		
	4.05
	Rental Achievement Provisions. Reserved.

4.06    Debt Service Reserve. Reserved.

4.07    Rate Cap Agreement Reserve Fund. Reserved.

4.08    through 4.20 are Reserved.

ARTICLE V        REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants to Lender as follows as of the date of this Loan Agreement:

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	5.01
	Review of Documents. Borrower has reviewed:  (a) the Note, (b) the Security Instrument, (c) the Commitment Letter, and (d) all other Loan Documents.

		
	5.02
	Condition of Mortgaged Property. Except as Borrower may have disclosed to Lender in writing in connection with the issuance of the Commitment Letter, the Mortgaged Property has not been damaged by fire, water, wind or other cause of loss, or any previous damage to the Mortgaged Property has been fully restored.

		
	5.03
	No Condemnation. No part of the Mortgaged Property has been taken in Condemnation or other like proceeding, and, to the best of Borrower’s knowledge after due inquiry and investigation, no such proceeding is pending or threatened for the partial or total Condemnation or other taking of the Mortgaged Property.

		
	5.04
	Actions; Suits; Proceedings.

		
	(a)
	There are no judicial, administrative, mediation or arbitration actions, suits or proceedings pending or, to the best of Borrower’s knowledge, threatened in writing against or affecting Borrower (and, if Borrower is a limited partnership, any of its general partners or if Borrower is a limited liability company, any member of Borrower) or the Mortgaged Property which, if adversely determined, would have a Material Adverse Effect.

		
	(b)
	Reserved.

		
	5.05
	Environmental. Except as previously disclosed by Borrower to Lender in writing (which written disclosure may be in certain environmental assessments and other written reports accepted by Lender in connection with the funding of the Indebtedness and dated prior to the date of this Loan Agreement), each of the following is true:

		
	(a)
	Borrower has not at any time engaged in, caused or permitted any Prohibited Activities or Conditions on the Mortgaged Property.

		
	(b)
	To the best of Borrower’s knowledge after due inquiry and investigation, no Prohibited Activities or Conditions exist or have existed on the Mortgaged Property.

		
	(c)
	The Mortgaged Property does not now contain any underground storage tanks, and, to the best of Borrower’s knowledge after due inquiry and investigation, the Mortgaged Property has not contained any underground storage tanks in the past. If there is an underground storage tank located on the Mortgaged Property that has been previously disclosed by Borrower to Lender in writing, that tank complies with all requirements of Hazardous Materials Laws.

		
	(d)
	To the best of Borrower’s knowledge after due inquiry and investigation, Borrower has complied with all Hazardous Materials Laws, including all requirements for notification regarding releases of Hazardous Materials. Without 

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limiting the generality of the foregoing, all Environmental Permits required for the operation of the Mortgaged Property in accordance with Hazardous Materials Laws now in effect have been obtained and all such Environmental Permits are in full force and effect.

		
	(e)
	To the best of Borrower’s knowledge after due inquiry and investigation, no event has occurred with respect to the Mortgaged Property that constitutes, or with the passage of time or the giving of notice, or both, would constitute noncompliance with the terms of any Environmental Permit.

		
	(f)
	There are no actions, suits, claims or proceedings pending or, to the best of Borrower’s knowledge after due inquiry and investigation, threatened in writing that involve the Mortgaged Property and allege, arise out of, or relate to any Prohibited Activity or Condition.

		
	(g)
	Borrower has received no actual or constructive notice of any written complaint, order, notice of violation or other communication from any Governmental Authority with regard to air emissions, water discharges, noise emissions or Hazardous Materials, or any other environmental, health or safety matters affecting the Mortgaged Property or any property that is adjacent to the Mortgaged Property.

		
	5.06
	Commencement of Work; No Labor or Materialmen’s Claims. Except as set forth on Exhibit E, prior to the recordation of the Security Instrument, no work of any kind has been or will be commenced or performed upon the Mortgaged Property, and no materials or equipment have been or will be delivered to or upon the Mortgaged Property, for which the contractor, subcontractor or vendor continues to have any rights including the existence of or right to assert or file a mechanic’s or materialmen’s Lien. If any such work of any kind has been commenced or performed upon the Mortgaged Property, or if any such materials or equipment have been ordered or delivered to or upon the Mortgaged Property, then prior to the execution of the Security Instrument, Borrower has satisfied each of the following conditions:

		
	(a)
	Borrower has fully disclosed in writing to the title insurance company issuing the mortgagee title insurance policy insuring the Lien of the Security Instrument that work has been commenced or performed on the Mortgaged Property, or materials or equipment have been ordered or delivered to or upon the Mortgaged Property.

		
	(b)
	Borrower has obtained and delivered to Lender and the title company issuing the mortgagee title insurance policy insuring the Lien of the Security Instrument Lien waivers from all contractors, subcontractors, suppliers or any other applicable party, pertaining to all work commenced or performed on the Mortgaged Property, or materials or equipment ordered or delivered to or upon the Mortgaged Property.

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Borrower represents and warrants that all parties furnishing labor and materials for which a Lien or claim of Lien may be filed against the Mortgaged Property have been paid in full and, except for such Liens or claims insured against by the policy of title insurance to be issued in connection with the Loan, there are no mechanics’, laborers’ or materialmen’s Liens or claims outstanding for work, labor or materials affecting the Mortgaged Property, whether prior to, equal with or subordinate to the Lien of the Security Instrument.

		
	5.07
	Compliance with Applicable Laws and Regulations.

		
	(a)
	To the best of Borrower’s knowledge after due inquiry and investigation, each of the following is true:

		
	(i)
	All Improvements and the use of the Mortgaged Property comply with all applicable statutes, rules and regulations, including all applicable statutes, rules and regulations pertaining to requirements for equal opportunity, anti-discrimination, fair housing, environmental protection, zoning and land use (“legal, non-conforming” status with respect to uses or structures will be considered to comply with zoning and land use requirements for the purposes of this representation).

		
	(ii)
	The Improvements comply with applicable health, fire, and building codes.

		
	(iii)
	There is no evidence of any illegal activities relating to controlled substances on the Mortgaged Property.

		
	(b)
	Reserved.

		
	(c)
	Reserved.

		
	5.08
	Access; Utilities; Tax Parcels. The Mortgaged Property (a) has ingress and egress via a publicly dedicated right of way or via an irrevocable easement permitting ingress and egress, (b) is served by public utilities and services generally available in the surrounding community or otherwise appropriate for the use in which the Mortgaged Property is currently being utilized, and (c) constitutes one or more separate tax parcels.

		
	5.09
	Licenses and Permits.

		
	(a)
	Borrower, any commercial tenant of the Mortgaged Property and/or any operator of the Mortgaged Property is in possession of all material licenses, permits and authorizations required for use of the Mortgaged Property, which are valid and in full force and effect as of the date of this Loan Agreement.

		
	(b)
	Through (i) are reserved.

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	5.10
	No Other Interests. To the best of Borrower’s knowledge after due inquiry and investigation, no Person has (a) any possessory interest in the Mortgaged Property or right to occupy the Mortgaged Property except under and pursuant to the provisions of existing Leases by and between tenants and Borrower (a form of residential lease having been previously provided to Lender together with the material terms of any and all Non-Residential Leases at the Mortgaged Property), or (b) an option to purchase the Mortgaged Property or an interest in the Mortgaged Property, except as has been disclosed to and approved in writing by Lender.

		
	5.11
	Term of Leases. All Leases for residential dwelling units with respect to the Mortgaged Property satisfy each of the following conditions:

		
	(a)
	They are on forms that are customary for similar multifamily properties in the Property Jurisdiction.

		
	(b)
	They are for initial terms of at least 6 months and not more than 2 years (unless otherwise approved in writing by Lender).

		
	(c)
	They do not include any Corporate Leases (unless otherwise approved in writing by Lender).

		
	(d)
	They do not include options to purchase.

		
	5.12
	No Prior Assignment; Prepayment of Rents. Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender, or that is being paid off and discharged with the proceeds of the Loan evidenced by the Note or, if this Loan Agreement is entered into in connection with a Supplemental Loan, other than an assignment of Rents securing any Senior Indebtedness), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement, unless otherwise approved by Lender in writing, there has been no prepayment of any Rents for more than 2 months prior to the due dates of such Rents.

		
	5.13
	Illegal Activity. No portion of the Mortgaged Property has been or will be purchased with the proceeds of any illegal activity.

		
	5.14
	Taxes Paid. Borrower has filed all federal, state, county and municipal tax returns required to have been filed by Borrower, and has paid all Taxes which have become due pursuant to such returns or to any notice of assessment received by Borrower, and Borrower has no knowledge of any basis for additional assessment with respect to such Taxes. To the best of Borrower’s knowledge after due inquiry and investigation, there are not presently pending any special assessments against the Mortgaged Property or any part of the Mortgaged Property.

		
	5.15
	Title Exceptions. To the best of Borrower’s knowledge after due inquiry and investigation, none of the items shown in the schedule of exceptions to coverage in the 

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title policy issued to and accepted by Lender contemporaneously with the execution of this Loan Agreement and insuring Lender’s interest in the Mortgaged Property will have a Material Adverse Effect on the (a) ability of Borrower to pay the Loan in full, (b) ability of Borrower to use all or any part of the Mortgaged Property in the manner in which the Mortgaged Property is being used on the Closing Date, except as set forth in Section 6.03, (c) operation of the Mortgaged Property, or (d) value of the Mortgaged Property.

		
	5.16
	No Change in Facts or Circumstances.

		
	(a)
	All information in the application for the Loan submitted to Lender, including all financial statements for the Mortgaged Property, Borrower, and any Borrower Principal, and all Rent Schedules, reports, certificates, and any other documents submitted in connection with the application (collectively, “Loan Application”) is complete and accurate in all material respects as of the date such information was submitted to Lender.

		
	(b)
	There has been no change in any fact or circumstance since the Loan Application was submitted to Lender that would make any information submitted as part of the Loan Application materially incomplete or inaccurate.

		
	(c)
	The organizational structure of Borrower is as set forth in Exhibit H.

		
	5.17
	Financial Statements. The financial statements of Borrower and each Borrower Principal furnished to Lender as part of the Loan Application reflect in each case a positive net worth as of the date of the applicable financial statement.

		
	5.18
	ERISA – Borrower Status. Borrower represents as follows:

		
	(a)
	Borrower is not an “investment company,” or a company under the Control of an “investment company,” as such terms are defined in the Investment Company Act of 1940, as amended.

		
	(b)
	Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA or a “plan” to which Section 4975 of the Tax Code applies, and the assets of Borrower do not constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA.

		
	(c)
	Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA, and is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.

		
	5.19
	No Fraudulent Transfer or Preference. No Borrower or Borrower Principal (a) has made, or is making in connection with and as security for the Loan, a transfer of an interest in the property of Borrower or Borrower Principal to or for the benefit of Lender 

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or otherwise as security for any of the obligations under the Loan Documents which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws, or (b) has made, or is making in connection with the Loan, a transfer (including any transfer to or for the benefit of an insider under an employment contract) of an interest of Borrower or any Borrower Principal in property which is or could constitute a voidable preference under federal bankruptcy, state insolvency or similar applicable creditors’ rights laws, or (c) has incurred, or is incurring in connection with the Loan, any obligation (including any obligation to or for the benefit of an insider under an employment contract) which is or could constitute a fraudulent transfer under federal bankruptcy, state insolvency, or similar applicable creditors’ rights laws.

		
	5.20
	No Insolvency or Judgment.

		
	(a)
	No Pending Proceedings or Judgments. No Borrower or Borrower Principal is (i) the subject of or a party to (other than as a creditor) any completed or pending bankruptcy, reorganization or insolvency proceeding, or (ii) the subject of any judgment unsatisfied of record or docketed in any court located in the United States.

		
	(b)
	Insolvency. Borrower is not presently insolvent, and the Loan will not render Borrower insolvent. As used in this Section, the term “insolvent” means that the total of all of a Person’s liabilities (whether secured or unsecured, contingent or fixed, or liquidated or unliquidated) is in excess of the value of all of the assets of the Person that are available to satisfy claims of creditors.

		
	5.21
	Working Capital. After the Loan is made, Borrower intends to have sufficient working capital, including cash flow from the Mortgaged Property or other sources, not only to adequately maintain the Mortgaged Property, but also to pay all of Borrower’s outstanding debts as they come due (other than any balloon payment due upon the maturity of the Loan). Lender acknowledges that no members or partners of Borrower or any Borrower Principal will be obligated to contribute equity to Borrower for purposes of providing working capital to maintain the Mortgaged Property or to pay Borrower’s outstanding debts except as may otherwise be required under their organizational documents.

5.22    Cap Collateral. Reserved.

		
	5.23
	Ground Lease. Reserved.

		
	5.24
	Purpose of Loan. The purpose of the Loan is as indicated by the checked boxes below:  

		
	[     ]
	Refinance Loan: The Loan is a refinancing of existing indebtedness and, except to the extent specifically required by Lender, there is to be no change in the ownership of either the Mortgaged Property or Borrower Principals. The intended 

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use of any cash received by Borrower from Lender, to the extent applicable, in connection with the refinancing has been fully disclosed to Lender.

		
	X
	Acquisition Loan – Mortgaged Property: All of the consideration given or received or to be given or received in connection with the acquisition of the Mortgaged Property has been fully disclosed to Lender. The Mortgaged Property was or will be purchased from REDROCK NOHO RESIDENTIAL, LLC (“Property Seller”). No Borrower or Borrower Principal has or had, directly or indirectly (through a family member or otherwise), any interest in the Property Seller and the acquisition of the Mortgaged Property is an arm’s-length transaction. To the best of Borrower’s knowledge after due inquiry and investigation, the purchase price of the Mortgaged Property represents the fair market value of the Mortgaged Property and Property Seller is not or will not be insolvent subsequent to the sale of the Mortgaged Property. 

		
	[     ]
	Acquisition Loan – Membership Interests: All of the consideration given or received or to be given or received in connection with the acquisition of 100% of the membership interests of the Borrower (“Membership Interests”) has been fully disclosed to Lender. The Membership Interests were or will be purchased from _________________________________ (“Membership Interests Seller”). No Borrower Principal has or had, directly or indirectly (through a family member or otherwise), any interest in the Membership Interests Seller and the acquisition of the Membership Interests is an arm’s-length transaction. To the best of Borrower’s knowledge after due inquiry and investigation, the purchase price of the Membership Interests represents the fair market value of the Membership Interests and Membership Interest Seller is not or will not be insolvent subsequent to the sale of the Membership Interest. 

		
	[     ]
	Supplemental Loan: The Loan is a Supplemental Loan and, except to the extent specifically required or approved by Lender, there has been no change in the ownership of either the Mortgaged Property or Borrower Principals since the date of the Senior Note. The intended use of any cash received by Borrower from Lender, to the extent applicable, in connection with the Supplemental Loan has been fully disclosed to Lender.

		
	[     ]
	Cross-Collateralized/Cross-Defaulted Loan Pool: The Loan is part of a cross-collateralized/cross-defaulted pool of loans described as follows: 

		
	____
	being simultaneously made to Borrower and/or Borrower’s Affiliates

		
	____
	made previously to Borrower and/or Borrower’s Affiliates

The intended use of any cash received by Borrower from Lender, to the extent applicable, in connection with the Loan and the other loans comprising the cross-collateralized/cross-defaulted loan pool has been fully disclosed to Lender.

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	5.25
	through 5.39 are reserved.

5.40    Recycled SPE Borrower. Reserved.

5.41    Recycled SPE Equity Owner. Reserved.

		
	5.42
	through 5.50 are Reserved.

		
	5.51
	Survival. The representations and warranties set forth in this Loan Agreement will survive until the Indebtedness is paid in full; however, the representations and warranties set forth in Section 5.05 will survive beyond repayment of the entire Indebtedness, to the extent provided in Section 10.02(i).

5.52    through 5.57 are Reserved.

		
	5.58
	Prohibited Parties Lists; Economic Sanctions Laws. To the best of Borrower’s knowledge, after due inquiry and investigation, none of (a) Borrower, (b) any Borrower Principal, (c) any Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more, or (d) any Non-U.S. Equity Holder, is presently listed or at any time has been listed on any Prohibited Parties List.

5.59    through 5.62 are Reserved.

ARTICLE VI     BORROWER COVENANTS.
		
	6.01
	Compliance with Laws. Borrower will comply with all laws, ordinances, rules, regulations and requirements of any Governmental Authority having jurisdiction over the Mortgaged Property and all licenses and permits and all recorded covenants and agreements relating to or affecting the Mortgaged Property, including all laws, ordinances, regulations, requirements and covenants pertaining to health and safety, construction of improvements on the Mortgaged Property, Repairs, Capital Replacements, fair housing, disability accommodation, zoning and land use, applicable building codes, special use permits and environmental regulations, Leases and the maintenance and disposition of tenant security deposits. Borrower will take appropriate measures to prevent, and will not engage in or knowingly permit, any illegal activities at the Mortgaged Property, including those that could endanger tenants or visitors, result in damage to the Mortgaged Property, result in forfeiture of the Mortgaged Property, or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in the Mortgaged Property. Borrower will at all times maintain records sufficient to demonstrate compliance with the provisions of this Section 6.01.

		
	6.02
	Compliance with Organizational Documents. Borrower will at all times comply with all laws, regulations and requirements of any Governmental Authority relating to Borrower’s formation, continued existence and good standing in its state of formation and, if different, in the Property Jurisdiction. Borrower will at all times comply with its organizational documents, including its partnership agreement (if Borrower is a 

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partnership), its by-laws (if Borrower is a corporation or housing cooperative corporation or association) or its operating agreement (if Borrower is a limited liability company or tenancy-in-common). If Borrower is a housing cooperative corporation or association, Borrower will at all times maintain its status as a “cooperative housing corporation” as such term is defined in Section 216(b) of the Internal Revenue Code of 1986, as amended, or any successor statute thereto.

		
	6.03
	Use of Mortgaged Property.

		
	(a)
	Unless required by applicable law, without the prior written consent of Lender, Borrower will not take any of the following actions:

		
	(i)
	Allow changes in the use for which all or any part of the Mortgaged Property is being used at the time this Loan Agreement is executed.

		
	(ii)
	Convert any individual dwelling units or common areas to commercial use.

		
	(iii)
	Initiate a change in the zoning classification of the Mortgaged Property or acquiesce to a change in the zoning classification of the Mortgaged Property.

		
	(iv)
	Establish any condominium or cooperative regime with respect to the Mortgaged Property beyond any which may be in existence on the date of this Loan Agreement.

		
	(v)
	Combine all or any part of the Mortgaged Property with all or any part of a tax parcel which is not part of the Mortgaged Property.

		
	(vi)
	Subdivide or otherwise split any tax parcel constituting all or any part of the Mortgaged Property.

		
	(vii)
	Add to or change any location at which any of the Mortgaged Property is stored, held or located unless Borrower (A) gives Notice to Lender within 30 days after the occurrence of such addition or change, (B) executes and delivers to Lender any modifications of or supplements to this Loan Agreement that Lender may require, and (C) authorizes the filing of any financing statement which may be filed in connection with this Loan Agreement, as Lender may require.

		
	(viii)
	Convert, in whole or in part, any non-residential income producing units to non-income producing units.

		
	(b)
	Reserved.

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	(c)
	Notwithstanding anything contained in this Section to the contrary, if Borrower is a housing cooperative corporation or association, Lender acknowledges and consents to Borrower’s use of the Mortgaged Property as a housing cooperative.

		
	6.04
	Non-Residential Leases.

		
	(a)
	Prohibited New Non-Residential Leases or Modified Non-Residential Leases. Except as set forth in Section 6.04(b), Borrower will not enter into any New Non-Residential Lease, enter into any Modified Non-Residential Lease or terminate any Non-Residential Lease (including any Non-Residential Lease in existence on the date of this Loan Agreement) without the prior written consent of Lender.

		
	(b)
	New Non-Residential Leases or Modified Non-Residential Leases for which Lender’s Consent is Not Required. Lender’s consent will not be required for Borrower to enter into a Modified Non-Residential Lease or a New Non-Residential Lease, provided that the Modified Non-Residential Lease or New Non-Residential Lease satisfies each of the following requirements:

		
	(i)
	The tenant under the New Non-Residential Lease or Modified Non-Residential Lease is not an Affiliate of Borrower or any Guarantor.

		
	(ii)
	The terms of the New Non-Residential Lease or Modified Non-Residential Lease are at least as favorable to Borrower as those customary in the applicable market at the time Borrower enters into the New Non-Residential Lease or Modified Non-Residential Lease.

		
	(iii)
	The Rents paid to Borrower pursuant to the New Non-Residential Lease or Modified Non-Residential Lease are not less than 90% of the rents paid to Borrower pursuant to the Non-Residential Lease, if any, for that portion of the Mortgaged Property that was in effect prior to the New Non-Residential Lease or Modified Non-Residential Lease.

		
	(iv)
	The term of the New Non-Residential Lease or Modified Non-Residential Lease, including any option to extend, is 10 years or less.

		
	(v)
	Any New Non-Residential Lease must provide that the space may not be used or operated, in whole or in part, for any of the following:

		
	(A)
	The operation of a so-called “head shop” or other business devoted to the sale of articles or merchandise normally used or associated with illegal or unlawful activities such as, but not limited to, the sale of paraphernalia used in connection with marijuana or controlled drugs or substances.

		
	(B)
	A gun shop, shooting gallery or firearms range.

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	(C)
	A so-called massage parlor or any business which sells, rents or permits the viewing of so-called “adult” or pornographic materials such as, but not limited to, adult magazines, books, movies, photographs, sexual aids, sexual articles and sex paraphernalia.

		
	(D)
	Any use involving the sale or distribution of any flammable liquids, gases or other Hazardous Materials.

		
	(E)
	An off-track betting parlor or arcade.

		
	(F)
	A liquor store or other establishment whose primary business is the sale of alcoholic beverages for off-site consumption.

		
	(G)
	A burlesque or strip club.

		
	(H)
	Any illegal activity.

		
	(vi)
	The aggregate of the income derived from the space leased pursuant to the New Non-Residential Lease accounts for less than 20% of the gross income of the Mortgaged Property on the date that Borrower enters into the New Non-Residential Lease.

		
	(vii)
	Such New Non-Residential Lease is not an oil or gas lease, pipeline agreement or other instrument related to the production or sale of oil or natural gas.

		
	(c)
	Executed Copies of Non-Residential Leases. Borrower will, without request by Lender, deliver a fully executed copy of each Non-Residential Lease to Lender promptly after such Non-Residential Lease is signed.

		
	(d)
	Subordination and Attornment Requirements. All Non-Residential Leases, regardless of whether Lender’s consent or approval is required, will specifically include the following provisions:

		
	(i)
	The Lease is subordinate to the Lien of the Security Instrument, with such subordination to be self-executing.

		
	(ii)
	The tenant will attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner.

		
	(iii)
	The tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request.

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	(iv)
	The tenant will, upon receipt of a written request from Lender following the occurrence of and during the continuance of an Event of Default, pay all Rents payable under the Lease to Lender.

(v)    Reserved.
(vi)    Reserved.

		
	6.05
	Prepayment of Rents. Borrower will not receive or accept Rent under any Lease (whether a residential Lease or a Non-Residential Lease) for more than 2 months in advance.

		
	6.06
	Inspection. 

		
	(a)
	Right of Entry. Borrower will permit Lender, its agents, representatives and designees and any interested Governmental Authority to make or cause to be made entries upon and inspections of the Mortgaged Property to inspect, among other things:  (i) Repairs, (ii) Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and (v) any other Improvements, both in process and upon completion (including environmental inspections and tests performed by professional inspection engineers) during normal business hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection is to include occupied residential units (which Notice need not be in writing). During normal business hours, or at any other reasonable time, Borrower will also permit Lender to examine all books and records and contracts and bills pertaining to the foregoing. Notice to Borrower will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

		
	(b)
	Inspection of Mold. If Lender determines that Mold has or may have developed as a result of a water intrusion event or leak, Lender, at Lender’s Discretion, may require that a professional inspector inspect the Mortgaged Property to confirm whether Mold has developed and, if so, thereafter as frequently as Lender determines is necessary until any issue with Mold and its cause(s) are resolved to Lender’s satisfaction. Such inspection will be limited to a visual and olfactory inspection of the area that has experienced the Mold, water intrusion event or leak. Borrower will be responsible for the cost of each such professional inspection and any remediation deemed to be necessary as a result of the professional inspection. After any issue with Mold is remedied to Lender’s satisfaction, Lender will not require a professional inspection any more frequently than once every 3 years unless Lender otherwise becomes aware of Mold as a result of a subsequent water intrusion event or leak.

		
	(c)
	Certification in Lieu of Inspection. If Lender or Loan Servicer determines not to conduct an annual inspection of the Mortgaged Property, and in lieu thereof Lender requests a certification, Borrower will provide to Lender a factually 

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correct certification, each year that the annual inspection is waived, to the following effect:
Borrower has not received any written complaint, notice, letter or other written communication from any tenant, Property Manager or governmental authority regarding mold, fungus, microbial contamination or pathogenic organisms (“Mold”) or any activity, condition, event or omission that causes or facilitates the growth of Mold on or in any part of the Mortgaged Property or, if Borrower has received any such written complaint, notice, letter or other written communication, that Borrower has investigated and determined that no Mold activity, condition or event exists or alternatively has fully and properly remediated such activity, condition, event or omission in compliance with the Moisture Management Plan for the Mortgaged Property.
If Borrower is unwilling or unable to provide such certification, Lender may require a professional inspection of the Mortgaged Property at Borrower’s expense.

6.07    Books and Records; Financial Reporting.

		
	(a)
	Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with GAAP consistently applied (or such other method which is reasonably acceptable to Lender), and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

		
	(b)
	Delivery of Statement of Income and Expenses; Rent Schedule and Other Statements. Borrower will furnish to Lender each of the following:

		
	(i)
	Within 25 days after the end of each calendar quarter prior to Securitization and within 35 days after each calendar quarter after Securitization, each of the following:

		
	(A)
	A Rent Schedule dated no earlier than the date that is 5 days prior to the end of such quarter.

		
	(B)
	A statement of income and expenses for Borrower’s operation of the Mortgaged Property that is either of the following:

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	(1)
	For the 12 month period ending on the last day of such quarter.

		
	(2)
	If at the end of such quarter Borrower or any Affiliate of Borrower has owned the Mortgaged Property for less than 12 months, for the period commencing with the acquisition of the Mortgaged Property by Borrower or its Affiliate, and ending on the last day of such quarter.

		
	(C)
	When requested by Lender, a balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal quarter.

		
	(ii)
	Within 90 days after the end of each fiscal year of Borrower, each of the following:

		
	(A)
	An annual statement of income and expenses for Borrower’s operation of the Mortgaged Property for that fiscal year.

		
	(B)
	A balance sheet showing all assets and liabilities of Borrower relating to the Mortgaged Property as of the end of that fiscal year and a profit and loss statement for Borrower.

		
	(C)
	An accounting of all security deposits held pursuant to all Leases, including the name of the institution (if any) and the names and identification numbers of the accounts (if any) in which such security deposits are held and the name of the person to contact at such financial institution, along with any authority or release necessary for Lender to access information regarding such accounts.

		
	(iii)
	Within 30 days after the date of filing, copies of all tax returns filed by Borrower.

		
	(c)
	Delivery of Borrower Financial Statements Upon Request. Borrower will furnish to Lender each of the following:

		
	(i)
	Upon Lender’s request, in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s Discretion, a monthly Rent Schedule and a monthly statement of income and expenses for Borrower’s operation of the Mortgaged Property, in each case within 25 days after the end of each month.

		
	(ii)
	Upon Lender’s request in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s 

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Discretion, within 10 days after such a request from Lender, each of the following:

		
	(A)
	A statement that identifies all owners of any interest in Borrower and any Designated Entity for Transfers and the interest held by each (unless Borrower or any Designated Entity for Transfers is a publicly-traded entity in which case such statement of ownership will not be required), and if Borrower or a Designated Entity for Transfers is a corporation then all officers and directors of Borrower and the Designated Entity for Transfers, and if Borrower or a Designated Entity for Transfers is a limited liability company then all non-member Managers.

		
	(B)
	To the extent not included in the statement provided under Section 6.07(c)(ii)(A), a statement that identifies (1) all Persons with a collective equity interest (whether direct or indirect) of 25% or more in Borrower, and (2) all Non-U.S. Equity Holders.

		
	(iii)
	Upon Lender’s request in Lender’s Discretion, such other financial information or property management information (including information on tenants under Leases to the extent such information is available to Borrower, copies of bank account statements from financial institutions where funds owned or controlled by Borrower are maintained, and an accounting of security deposits) as may be required by Lender from time to time, in each case within 30 days after such request.

		
	(iv)
	Upon Lender’s request in Lender’s Discretion, a monthly property management report for the Mortgaged Property, showing the number of inquiries made and rental applications received from tenants or prospective tenants and deposits received from tenants and any other information requested by Lender within 30 days after such request. However, Lender will not require the foregoing more frequently than quarterly except when there has been an Event of Default and such Event of Default is continuing, in which case Lender may require Borrower to furnish the foregoing more frequently.

		
	(d)
	Form of Statements; Audited Financials. A natural person having authority to bind Borrower (or the SPE Equity Owner or Guarantor, as applicable) will certify each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) will be in such form and contain such detail as Lender may reasonably require. Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b), 6.07(c) and 6.07(f) be audited at Borrower’s expense by independent certified public accountants acceptable to Lender, at any time when an Event of Default has occurred and is 

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continuing or at any time that Lender, in its reasonable judgment, determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or of the Mortgaged Property.

		
	(e)
	Failure to Timely Provide Financial Statements. If Borrower fails to provide in a timely manner the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f), Lender will give Notice to Borrower specifying the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) that Borrower has failed to provide. If Borrower has not provided the required statements, schedules and reports within 10 Business Days following such Notice, then (i) Borrower will pay a late fee of $500 for each late statement, schedule or report, plus an additional $500 per month that any such statement, schedule or report continues to be late, and (ii) Lender will have the right to have Borrower’s books and records audited, at Borrower’s expense, by independent certified public accountants selected by Lender in order to obtain such statements, schedules and reports, and all related costs and expenses of Lender will become immediately due and payable and will become an additional part of the Indebtedness as provided in Section 9.02. Notice to Borrower of Lender’s exercise of its rights to require an audit will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

		
	(f)
	Delivery of Guarantor and SPE Equity Owner Financial Statements. Borrower will cause Guarantor and/or SPE Equity Owner to deliver each of the following to Lender within 10 Business Days following Lender’s request:

		
	(i)
	Guarantor’s or SPE Equity Owner’s (as applicable) balance sheet and profit and loss statement as of the end of (A) the quarter that ended at least 30 days prior to the due date of the requested items, and/or (B) the fiscal year that ended at least 90 days prior to the due date of the requested items.

		
	(ii)
	Other Guarantor or SPE Equity Owner (as applicable) financial statements as Lender may reasonably require.

		
	(iii)
	Written updates on the status of all litigation proceedings that Guarantor or SPE Equity Owner (as applicable) disclosed or should have disclosed to Lender as of the Closing Date. 

		
	(iv)
	If an Event of Default has occurred and is continuing, copies of Guarantor’s or SPE Equity Owner’s (as applicable) most recent filed state and federal tax returns, including any current tax return extensions. 

 
		
	(g)
	Reporting Upon Event of Default. If an Event of Default has occurred and is continuing, Borrower will deliver to Lender upon written demand all books and records relating to the Mortgaged Property or its operation.

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	(h)
	Credit Reports. Borrower authorizes Lender to obtain a credit report on Borrower at any time.

		
	(i)
	Reserved.

		
	6.08
	Taxes; Operating Expenses; Ground Rents.

		
	(a)
	Payment of Taxes and Ground Rent. Subject to the provisions of Sections 6.08(c) and (d), Borrower will pay or cause to be paid (i) all Taxes when due and before the addition of any interest, fine, penalty or cost for nonpayment, and (ii) if Borrower’s interest in the Mortgaged Property is as a Ground Lessee, then the monthly or other periodic installments of Ground Rent before the last date upon which each such installment may be made without penalty or interest charges being added.

		
	(b)
	Payment of Operating Expenses. Subject to the provisions of Section 6.08(c), Borrower will (i) pay the expenses of operating, managing, maintaining and repairing the Mortgaged Property (including utilities, Repairs and Capital Replacements) before the last date upon which each such payment may be made without any penalty or interest charge being added, and (ii) pay Insurance premiums at least 30 days prior to the expiration date of each policy of Insurance, unless applicable law specifies some lesser period.

		
	(c)
	Payment of Impositions and Reserve Funds. If Lender is collecting Imposition Reserve Deposits pursuant to Article IV, then so long as no Event of Default exists, Borrower will not be obligated to pay any Imposition for which Imposition Reserve Deposits are being collected, whether Taxes, Insurance premiums, Ground Rent (if applicable) or any other individual Impositions, but only to the extent that sufficient Imposition Reserve Deposits are held by Lender for the purpose of paying that specific Imposition and Borrower has timely delivered to Lender any bills or premium notices that it has received with respect to that specific Imposition (other than Ground Rent). Lender will have no liability to Borrower for failing to pay any Impositions to the extent that:  (i) any Event of Default has occurred and is continuing, (ii) insufficient Imposition Reserve Deposits are held by Lender at the time an Imposition becomes due and payable, or (iii) Borrower has failed to provide Lender with bills and premium notices as provided in this Section.

		
	(d)
	Right to Contest. Borrower, at its own expense, may contest by appropriate legal proceedings, conducted diligently and in good faith, the amount or validity of any Imposition other than Insurance premiums and Ground Rent (if applicable), if:  (i) Borrower notifies Lender of the commencement or expected commencement of such proceedings, (ii) the Mortgaged Property is not in danger of being sold or forfeited, (iii) if Borrower has not already paid the Imposition, Borrower deposits with Lender reserves sufficient to pay the contested Imposition, if requested by Lender, and (iv) Borrower furnishes whatever additional security is required in 

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the proceedings or is reasonably requested by Lender, which may include the delivery to Lender of reserves established by Borrower to pay the contested Imposition.

		
	6.09
	Preservation, Management and Maintenance of Mortgaged Property.

		
	(a)
	Maintenance of Mortgaged Property; No Waste. Borrower will keep the Mortgaged Property in good repair, including the replacement of Personalty and Fixtures with items of equal or better function and quality. Borrower will not commit waste or permit impairment or deterioration of the Mortgaged Property.

		
	(b)
	Abandonment of Mortgaged Property. Borrower will not abandon the Mortgaged Property.

		
	(c)
	Preservation of Mortgaged Property. Borrower will restore or repair promptly, in a good and workmanlike manner, any damaged part of the Mortgaged Property to the equivalent of its original condition, or such other condition as Lender may approve in writing, whether or not Insurance proceeds or Condemnation awards are available to cover any costs of such Restoration or repair; provided, however, that Borrower will not be obligated to perform such Restoration or repair if (i) no Event of Default has occurred and is continuing, and (ii) Lender has elected to apply any available Insurance proceeds and/or Condemnation awards to the payment of Indebtedness pursuant to Section 6.10(l) or Section 6.11(d).

		
	(d)
	Property Management. Borrower will provide for professional management of the Mortgaged Property by the Property Manager at all times under a property management agreement approved by Lender in writing. Borrower will not surrender, terminate, cancel, modify, renew or extend its property management agreement, or enter into any other agreement relating to the management or operation of the Mortgaged Property with Property Manager or any other Person, or consent to the assignment by the Property Manager of its interest under such property management agreement, in each case without the consent of Lender, which consent will not be unreasonably withheld.

		
	(i)
	If at any time Lender consents to the appointment of a new Property Manager, such new Property Manager and Borrower will, as a condition of Lender’s consent, execute an Assignment of Management Agreement in a form acceptable to Lender.

		
	(ii)
	If any such replacement Property Manager is an Affiliate of Borrower, and if a nonconsolidation opinion was delivered on the Closing Date, Borrower will deliver to Lender an updated nonconsolidation opinion in form and substance satisfactory to Lender with regard to nonconsolidation.

		
	(iii)
	Reserved.

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	(e)
	Alteration of Mortgaged Property. Borrower will give Notice to Lender of and, unless otherwise directed in writing by Lender, will appear in and defend any action or proceeding purporting to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement. Borrower will not (and will not permit any tenant or other Person to) remove, demolish or alter the Mortgaged Property or any part of the Mortgaged Property, including any removal, demolition or alteration occurring in connection with a rehabilitation of all or part of the Mortgaged Property, except that each of the following is permitted: 

		
	(i)
	Repairs or Capital Replacements in accordance with the terms and conditions of this Loan Agreement. 

		
	(ii)
	Any repairs or replacements made in connection with the replacement of tangible Personalty. 

		
	(iii)
	If Borrower is a cooperative housing corporation or association, repairs or replacements to the extent permitted with respect to individual dwelling units under the form of a proprietary lease or occupancy agreement. 

		
	(iv) 
	Any repairs or replacements in connection with making an individual unit ready for a new occupant or pursuant to Sections 6.09(a) and (c). 

		
	(v)
	Property Improvement Alterations, provided that each of the following conditions is satisfied:

		
	(A)
	At least 30 days prior to the commencement of any Property Improvement Alterations, Borrower must submit to Lender a Property Improvement Notice. The Property Improvement Notice must include all of the following information:

		
	(1)
	The expected start date and completion date of the Property Improvement Alterations.

		
	(2)
	A description of the anticipated Property Improvement Alterations to be made.

		
	(3)
	The projected budget of the Property Improvement Alterations and the source of funding.

If any changes to Property Improvement Alterations as described in the Property Improvement Notice are made that extend beyond the overall scope and intent of the Property Improvement Alterations set forth in the Property Improvement Notice (e.g., renovations changed to renovate common areas but Property Improvement Notice only described renovations to the residential 

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dwelling unit bathrooms), then Borrower must submit a new Property Improvement Notice to Lender in accordance with this Section 6.09(e)(v)(A).

		
	(B)
	The Property Improvement Alterations may not be commenced within 12 months prior to the Maturity Date without prior written consent of the Lender and must be completed at least 6 months prior to the Maturity Date.

		
	(C)
	Neither the performance nor completion of the Property Improvement Alterations may result in any of the following:

(1)    An adverse effect on any Major Building System.

		
	(2)
	A change in residential dwelling unit configurations on a permanent basis.

		
	(3)
	An increase or decrease in the total number of residential dwelling units.

		
	(4)
	The demolition of any existing Improvements.

		
	(5)
	A permanent obstruction of tenants’ access to units or a temporary obstruction of tenants’ access to units without a reasonable alternative access provided during the period of renovation which causes the obstruction.

		
	(D)
	The cost of the Property Improvement Alterations made to residential dwelling units during the term of the Mortgage must not exceed the Property Improvement Total Amount.

 
		
	(E)
	The Leases used to calculate Minimum Occupancy for use in Section 6.09(e)(v)(I) must meet all of the following conditions:

		
	(1)
	The Leases are with tenants that are not Affiliates of Borrower or Guarantor (except as otherwise expressly agreed by Lender in writing).

		
	(2)
	The Leases are on arms’ length terms and conditions.

		
	(3)
	The Leases otherwise satisfy the requirements of the Loan Documents.  

		
	(F)
	The Property Improvement Alterations must be completed in accordance with Section 6.14 and any reference to Repairs in 

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Sections 6.06 and 6.14 will be deemed to include Property Improvement Alterations. 

		
	(G)
	Upon completion of the applicable Property Improvement Alterations, Borrower must provide all of the following to the Lender:

		
	(1)
	Borrower’s Certificate of Property Improvement Alterations Completion, in the form attached as Exhibit O (“Certificate of Completion”). 

		
	(2)
	Any other certificates or approval, acceptance or compliance required by Lender, including certificates of occupancy, from any Governmental Authority having jurisdiction over the Mortgaged Property and the Property Improvement Alterations and professional engineers certifications.

		
	(H)
	Borrower must deliver to Lender within 10 days of Lender’s request a written status update on the Property Improvement Alterations.

		
	(I)
	While Property Improvement Alterations that result in individual residential dwelling units not being available for leasing are ongoing, if a Rent Schedule shows that the occupancy of the Mortgaged Property has decreased to less than the Minimum Occupancy, Borrower must take each of the following actions: 

		
	(1)
	Complete all pending Property Improvement Alterations to such individual residential dwelling units in a timely manner until the Mortgaged Property satisfies the Minimum Occupancy requirement. 

		
	(2)
	Suspend any additional Property Improvement Alterations which would cause residential dwelling units to be unavailable for leasing until the Mortgaged Property satisfies the Minimum Occupancy requirement.

		
	(J)
	If Borrower has commenced Property Improvement Alterations on the Mortgaged Property, then Borrower will deliver to Lender, upon Lender’s request, and in a timely manner, the Certificate of Completion together with such additional information as Lender may request.

		
	(K)
	At no time during the term of the Loan may the Property Improvement Total Amount (including any amounts expended by 

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Borrower on Property Improvement Alterations for Non-Residential Units) then outstanding for services and/or materials that are then due and payable exceed 10% of the original principal loan amount; provided that at no time will such amount exceed the Property Improvement Total Amount. 

(vi)    Reserved.

(vii)    Reserved.

(viii)    Reserved.

		
	(f)
	Establishment of MMP. Unless otherwise waived by Lender in writing, Borrower will have or will establish and will adhere to the MMP. If Borrower is required to have an MMP, Borrower will keep all MMP documentation at the Mortgaged Property or at the Property Manager’s office and available for review by Lender or the Loan Servicer during any annual assessment or other inspection of the Mortgaged Property that is required by Lender. At a minimum, the MMP must contain a provision for:  (i) staff training, (ii) information to be provided to tenants, (iii) documentation of the plan, (iv) the appropriate protocol for incident response and remediation, and (v) routine, scheduled inspections of common space and unit interiors.

		
	(g)
	No Reduction of Housing Cooperative Charges. If Borrower is a housing cooperative corporation or association, until the Indebtedness is paid in full, Borrower will not reduce the maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements below a level which is sufficient to pay all expenses of Borrower, including all operating and other expenses for the Mortgaged Property and all payments due pursuant to the terms of the Note and any Loan Documents.

		
	(h)
	through (l) are reserved.

		
	6.10
	Insurance. At all times during the term of this Loan Agreement, Borrower will maintain at its sole cost and expense, for the mutual benefit of Borrower and Lender, all of the Insurance specified in this Section 6.10, as required by Lender and applicable law, and in such amounts and with such maximum deductibles as Lender may require, as those requirements may change:

		
	(a)
	Property Insurance. Borrower will keep the Improvements insured at all times against relevant physical hazards that may cause damage to the Mortgaged Property as Lender may require (“Property Insurance”). Required Property Insurance coverage may include any or all of the following:

		
	(i)
	All Risks of Physical Loss. Insurance against loss or damage from fire, wind, hail, and other related perils within the scope of a “Special Causes 

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of Loss” or “All Risk” policy, in an amount not less than the Replacement Cost of the Mortgaged Property.
		
	(ii)
	Ordinance and Law. If any part of the Mortgaged Property is legal non-conforming under current building, zoning or land use laws or ordinances, then “Ordinance and Law Coverage” in the amount required by Lender.

		
	(iii)
	Flood.  If any of the Improvements are located in an area identified by the Federal Emergency Management Agency (or any successor to that agency) as a “Special Flood Hazard Area,” flood Insurance in the amount required by Lender.

		
	(iv)
	Windstorm. If windstorm and/or windstorm related perils and/or “named storm” are excluded from the “Special Causes of Loss” policy required under Section 6.10(a)(i), then separate coverage for such risks (“Windstorm Coverage”), either through an endorsement or a separate policy. Windstorm Coverage will be written in an amount not less than the Replacement Cost of the Mortgaged Property.

		
	(v)
	Boiler and Machinery/Equipment Breakdown. If the Mortgaged Property contains a central heating, ventilation and cooling system (“HVAC System”) where steam boilers and/or other pressurized systems are in operation and are regulated by the Property Jurisdiction, Insurance providing coverage in the amount required by Lender.

		
	(vi)
	Builder’s Risk. During any period of construction or Restoration, builder’s risk Insurance (including fire and other perils within the scope of a policy known as “Causes of Loss – Special Form” or “All Risk” policy) in an amount not less than the sum of the related contractual arrangements.

		
	(vii)
	Other. Insurance for other physical perils applicable to the Mortgaged Property as may be required by Lender including earthquake, sinkhole, mine subsidence, avalanche, mudslides, and volcanic eruption. If Lender reasonably requires any updated reports or other documentation to determine whether additional Insurance is necessary or prudent, Borrower will pay for the updated reports or other documentation at its sole cost and expense.

		
	(viii)
	Reserved. 

		
	(ix)
	Reserved.

		
	(b)
	Business Income/Rental Value. Business income/rental value Insurance for all relevant perils to be covered in the amount required by Lender, but in no case less than the effective gross income attributable to the Mortgaged Property for the preceding 12 months, as determined by Lender in Lender’s Discretion. 

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	(c)
	Commercial General Liability Insurance. Commercial general liability Insurance against legal liability claims for personal and bodily injury, property damage and contractual liability in such amounts and with such maximum deductibles as Lender may require, but not less than $1,000,000 per occurrence and $2,000,000 in the general aggregate on a per-location basis, plus excess and/or umbrella liability coverage in such amounts as Lender may require.

		
	(d)
	Terrorism Insurance. Insurance required under Section 6.10(a)(i) and (ii) and Section 6.10(b) will provide coverage for acts of terrorism. Terrorism coverage may be provided through one or more separate policies, which will be on terms (including amounts) consistent with those required under Section 6.10(a)(i) and (ii) and Section 6.10(b). If Insurance against acts of terrorism is not available at commercially reasonable rates and if the related hazards are not at the time commonly insured against for properties similar to the Mortgaged Property and located in or around the region in which the Mortgaged Property is located, then Lender may opt to temporarily suspend, cap or otherwise limit the requirement to have such terrorism insurance for a period not to exceed one year, unless such suspension or cap is renewed by Lender for additional one year increments.

		
	(e)
	Payment of Premiums. All Property Insurance premiums and premiums for other Insurance required under this Section 6.10 will be paid in the manner provided in Article IV, unless Lender has designated in writing another method of payment.

		
	(f)
	Policy Requirements. The following requirements apply with respect to all Insurance required by this Section 6.10:

		
	(i)
	All Insurance policies will be in a form approved by Lender. 

		
	(ii)
	All Insurance policies will be issued by Insurance companies authorized to do business in the Property Jurisdiction and/or acting as eligible surplus insurers in the Property Jurisdiction, which have a general policyholder’s rating satisfactory to Lender.

		
	(iii)
	All Property Insurance policies will contain a standard mortgagee or mortgage holder’s clause and a loss payable clause, in favor of, and in a form approved by, Lender.

		
	(iv)
	If any Insurance policy contains a coinsurance clause, the coinsurance clause will be offset by an agreed amount endorsement in an amount not less than the Replacement Cost. 

		
	(v)
	All commercial general liability and excess/umbrella liability policies will name Lender, its successors and/or assigns, as additional insured.

		
	(vi)
	Professional liability policies will not include Lender, its successors and/or assigns, as additional insured.

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	(vii)
	All Insurance policies will provide that the insurer will notify Lender in writing of cancelation of policies at least 10 days before the cancelation of the policy by the insurer for nonpayment of the premium or nonrenewal and at least 30 days before cancelation by the insurer for any other reason.

		
	(g)
	Evidence of Insurance; Insurance Policy Renewals. Borrower will deliver to Lender a legible copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies. Borrower will ensure that the Mortgaged Property is continuously covered by the required Insurance. At least 15 days prior to the expiration date of each Insurance policy, Borrower will deliver to Lender evidence acceptable to Lender in Lender’s Discretion that each policy has been renewed. If the evidence of a renewal does not include a legible copy of the renewal policy, Borrower will deliver a legible copy of such renewal no later than the earlier of the following:

		
	(i) 
	60 days after the expiration date of the original policy.

		
	(ii)
	The date of any Notice of an insured loss given to Lender under Section 6.10(i).

		
	(h)
	Compliance With Insurance Requirements. Borrower will comply with all Insurance requirements and will not permit any condition to exist on the Mortgaged Property that would invalidate any part of any Insurance coverage required under this Loan Agreement.

		
	(i)
	Obligations Upon Casualty; Proof of Loss. 

		
	(i)
	If an insured loss occurs, then Borrower will give immediate written notice to the Insurance carrier and to Lender. 

		
	(ii)
	Borrower authorizes and appoints Lender as attorney in fact for Borrower to make proof of loss, to adjust and compromise any claims under policies of Property Insurance, to appear in and prosecute any action arising from such Property Insurance policies, to collect and receive the proceeds of Property Insurance, to hold the proceeds of Property Insurance, and to deduct from such proceeds Lender’s expenses incurred in the collection of such proceeds. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 6.10 will require Lender to incur any expense or take any action. 

		
	(j)
	Lender’s Options Following a Casualty. Lender may, at Lender’s option, take one of the following actions:

		
	(i)
	Require a “repair or replacement” settlement, in which case the proceeds will be used to reimburse Borrower for the cost of restoring and repairing 

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the Mortgaged Property to the equivalent of its original condition or to a condition approved by Lender (“Restoration”). If Lender determines to require a repair or replacement settlement and to apply Insurance proceeds to Restoration, Lender will apply the proceeds in accordance with Lender’s then-current policies relating to the Restoration of casualty damage on similar multifamily properties. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Restoration items, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector.
		
	(ii)
	Require an “actual cash value” settlement in which case the proceeds may be applied to the payment of the Indebtedness, whether or not then due. 

		
	(k)
	Borrower’s Options Following a Casualty. Subject to Section 6.10(l), Borrower may take the following actions:

		
	(i)
	If a casualty results in damage to the Mortgaged Property for which the cost of Repairs will be less than the Borrower Proof of Loss Threshold, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the Insurance proceeds are used solely for the Restoration of the Mortgaged Property.

		
	(ii)
	If a casualty results in damage to the Mortgaged Property for which the cost of Repairs will be more than the Borrower Proof of Loss Threshold, but less than the Borrower Proof of Loss Maximum, Borrower is authorized to make proof of loss and adjust and compromise the claim without the prior consent of Lender, and Lender will hold the applicable Insurance proceeds to be used to reimburse Borrower for the cost of Restoration of the Mortgaged Property and will not apply such proceeds to the payment of the Indebtedness.

		
	(l)
	Lender’s Right to Apply Insurance Proceeds to Indebtedness. Lender will have the right to apply Insurance proceeds to the payment of the Indebtedness if Lender determines, in Lender’s Discretion, that any of the following conditions are met:

		
	(i)
	An Event of Default (or any event, which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing.

		
	(ii)
	There will not be sufficient funds from Insurance proceeds, anticipated contributions of Borrower of its own funds or other sources acceptable to Lender to complete the Restoration.

		
	(iii)
	The rental income from the Mortgaged Property after completion of the Restoration will not be sufficient to meet all operating costs and other 

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expenses, deposits to Reserve Funds and Loan repayment obligations relating to the Mortgaged Property.

		
	(iv) 
	The Restoration will be completed less than (A) 6 months prior to the Maturity Date if re-leasing will be completed prior to the Maturity Date, or (B) 12 months prior to the Maturity Date if re-leasing will not be completed prior to the Maturity Date.

		
	(v)
	The Restoration will not be completed within one year after the date of the loss or casualty.

		
	(vi)
	The casualty involved an actual or constructive loss of more than 30% of the fair market value of the Mortgaged Property, and rendered untenantable more than 30% of the residential units of the Mortgaged Property.

		
	(vii)
	After completion of the Restoration the fair market value of the Mortgaged Property is expected to be less than the fair market value of the Mortgaged Property immediately prior to such casualty (assuming the affected portion of the Mortgaged Property is re-let within a reasonable period after the date of such casualty).

		
	(viii)
	Leases covering less than 35% of the residential units of the Mortgaged Property will remain in full force and effect during and after the completion of Restoration. 

		
	(m)
	Lender’s Succession to Insurance Policies. If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender will automatically succeed to all rights of Borrower in and to any Insurance policies and unearned Insurance premiums and in and to the proceeds resulting from any damage to the Mortgaged Property prior to such sale or acquisition.

		
	(n)
	Payment of Installments After Application of Insurance Proceeds. Unless Lender otherwise agrees in writing, any application of any Insurance proceeds to the Indebtedness will not extend or postpone the due date of any monthly installments referred to in the Note, Article IV of this Loan Agreement or change the amount of such installments.

		
	(o)
	Assignment of Insurance Proceeds. Borrower agrees to execute such further evidence of assignment of any Insurance proceeds as Lender may require.

		
	(p)
	Borrower Acknowledgment of Lender’s Right to Change Insurance Requirements. Borrower acknowledges and agrees that Lender’s Insurance requirements may change from time to time throughout the term of the Indebtedness to include coverage for the kind of risks customarily insured against and in such minimum coverage amounts and maximum deductibles as are 

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generally required by institutional lenders for properties comparable to the Mortgaged Property.

		
	6.11
	Condemnation. 

		
	(a)
	Rights Generally. Borrower will promptly notify Lender in writing of any action or proceeding or notice relating to any proposed or actual condemnation or other taking, or conveyance in lieu thereof, of all or any part of the Mortgaged Property, whether direct or indirect (“Condemnation”). Borrower will appear in and prosecute or defend any action or proceeding relating to any Condemnation unless otherwise directed by Lender in writing. Borrower authorizes and appoints Lender as attorney in fact for Borrower to commence, appear in and prosecute, in Lender’s or Borrower’s name, any action or proceeding relating to any Condemnation and to settle or compromise any claim in connection with any Condemnation, after consultation with Borrower and consistent with commercially reasonable standards of a prudent lender. This power of attorney is coupled with an interest and therefore is irrevocable. However, nothing contained in this Section 6.11(a) will require Lender to incur any expense or take any action. Borrower transfers and assigns to Lender all right, title and interest of Borrower in and to any award or payment with respect to (i) any Condemnation, or any conveyance in lieu of Condemnation, and (ii) any damage to the Mortgaged Property caused by governmental action that does not result in a Condemnation.

		
	(b)
	Application of Award. Lender may hold such awards or proceeds and apply such awards or proceeds, after the deduction of Lender’s expenses incurred in the collection of such amounts (including Attorneys’ Fees and Costs) at Lender’s option, to the Restoration or repair of the Mortgaged Property or to the payment of the Indebtedness, with the balance, if any, to Borrower. Unless Lender otherwise agrees in writing, any application of any awards or proceeds to the Indebtedness will not extend or postpone the due date of any monthly installments referred to in the Note or Article IV of this Loan Agreement, or change the amount of such installments. Borrower agrees to execute such further evidence of assignment of any Condemnation awards or proceeds as Lender may require.

		
	(c)
	Borrower’s Right to Condemnation Proceeds. Notwithstanding any provision to the contrary in this Section 6.11, but subject to Section 6.11(e), in the event of a partial Condemnation of the Mortgaged Property, as long as no Event of Default, or any event which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default, has occurred and is continuing, in the event of a partial Condemnation resulting in proceeds or awards in the amount of less than $100,000, Borrower will have the sole right to make proof of loss, adjust and compromise the claim and collect and receive any proceeds directly without the approval or prior consent of Lender so long as the proceeds or awards are used solely for the Restoration of the Mortgaged Property.

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	(d)
	Right to Apply Condemnation Proceeds to Indebtedness. In the event of a partial Condemnation of the Mortgaged Property resulting in proceeds or awards in the amount of $100,000 or more and subject to Section 6.11(e), Lender will have the right to exercise its option to apply Condemnation proceeds to the payment of the Indebtedness only if Lender, in Lender’s Discretion, determines that at least one of the following conditions is met:

		
	(i)
	An Event of Default (or any event, which, with the giving of Notice or the passage of time, or both, would constitute an Event of Default) has occurred and is continuing.

		
	(ii)
	There will not be sufficient funds from Condemnation proceeds, anticipated contributions of Borrower of its own funds or other sources acceptable to Lender to complete the Restoration.

		
	(iii)
	The rental income from the Mortgaged Property after completion of the Restoration will not be sufficient to meet all operating costs and other expenses, deposits to Reserve Funds and Loan repayment obligations relating to the Mortgaged Property.

		
	(iv)
	The Restoration will not be completed at least one year before the Maturity Date (or 6 months before the Maturity Date if re-leasing of the Mortgaged Property will be completed within such 6 month period).

		
	(v)
	The Restoration will not be completed within one year after the date of the Condemnation.

		
	(vi)
	The Condemnation involved an actual or constructive loss of more than 15% of the fair market value of the Mortgaged Property, and rendered untenantable more than 25% of the residential units of the Mortgaged Property.

		
	(vii)
	After Restoration the fair market value of the Mortgaged Property is expected to be less than the fair market value of the Mortgaged Property immediately prior to the Condemnation (assuming the affected portion of the Mortgaged Property is re-let within a reasonable period after the date of the Condemnation).

		
	(viii)
	Leases covering less than 35% of residential units of the Mortgaged Property will remain in full force and effect during and after the completion of Restoration.

		
	(e)
	Right to Apply Condemnation Proceeds in Connection with a Partial Release. Notwithstanding anything to the contrary set forth in this Loan Agreement, including this Section 6.11, for so long as the Loan or any portion of the Loan is included in a Securitization in which the Note is assigned to a REMIC trust, then each of the following will apply:

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	(i)
	If any portion of the Mortgaged Property is released from the Lien of the Loan in connection with a Condemnation and if the ratio of (A) the unpaid principal balance of the Loan to (B) the value of the Mortgaged Property (with the value of the Mortgaged Property first being reduced by the outstanding principal balance of any Senior Indebtedness or any indebtedness secured by the Mortgaged Property that is at the same level of priority with the Indebtedness and taking into account only the related land and buildings and not any personal property or going-concern value), as determined by Lender in its sole and absolute discretion based on a commercially reasonable valuation method permitted in connection with a Securitization, is greater than 125% immediately after such Condemnation and before any Restoration or repair of the Mortgaged Property (but taking into account any planned Restoration or repair of the Mortgaged Property as if such planned Restoration or repair were completed), then Lender will apply any net proceeds or awards from such Condemnation, in full, to the payment of the principal of the Indebtedness whether or not then due and payable, unless Lender has received an opinion of counsel (acceptable to Lender if such opinion is provided by Borrower) that a different application of the net proceeds or awards will not cause such Securitization to fail to meet applicable federal income tax qualification requirements or subject such Securitization to any tax, and the net proceeds or awards are applied in the manner specified in such opinion.. 

		
	(ii)
	If (A) neither Borrower nor Lender has the right to receive any or all net proceeds or awards as a result of the provisions of any agreement affecting the Mortgaged Property (including any Ground Lease (if applicable), condominium document, or reciprocal easement agreement) and, therefore cannot apply the net proceeds or awards to the payment of the principal of the Indebtedness as set forth above, or (B) Borrower receives any or all of the proceeds or awards described in Section 6.11(e)(ii)(A) and fails to apply the proceeds in accordance with Section 6.11(e)(i), then Borrower will prepay the Indebtedness in an amount which Lender, in its sole and absolute discretion, deems necessary to ensure that the Securitization will not fail to meet applicable federal income tax qualification requirements or be subject to any tax as a result of the Condemnation, unless Lender has received an opinion of counsel (acceptable to Lender if such opinion is provided by Borrower) that a different application of the net proceeds or awards will not cause such Securitization to fail to meet applicable federal income tax qualification requirements or subject such Securitization to any tax, and the net proceeds or awards are applied in the manner specified in such opinion. 

		
	(f)
	Succession to Condemnation Proceeds. If the Mortgaged Property is sold at a foreclosure sale or Lender acquires title to the Mortgaged Property, Lender will 

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automatically succeed to all rights of Borrower in and to any Condemnation proceeds and awards prior to such sale or acquisition.

		
	6.12
	Environmental Hazards.

		
	(a)
	Prohibited Activities and Conditions. Except for matters described in this Section 6.12, Borrower will not cause or permit Prohibited Activities or Conditions. Borrower will comply with all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the generality of the previous sentence, Borrower will:  (i) obtain and maintain all Environmental Permits required by Hazardous Materials Laws and comply with all conditions of such Environmental Permits, (ii) cooperate with any inquiry by any Governmental Authority, and (iii) comply with any governmental or judicial order that arises from any alleged Prohibited Activity or Condition.

		
	(b)
	Employees, Tenants and Contractors. Borrower will take all commercially reasonable actions (including the inclusion of appropriate provisions in any Leases executed after the date of this Loan Agreement) to prevent its employees, agents and contractors, and all tenants and other occupants from causing or permitting any Prohibited Activities or Conditions. Borrower will not lease or allow the sublease or use of all or any portion of the Mortgaged Property to any tenant or subtenant for nonresidential use by any user that, in the ordinary course of its business, would cause or permit any Prohibited Activity or Condition.

		
	(c)
	O&M Programs. As required by Lender, Borrower will also have established a written operations and maintenance program with respect to certain Hazardous Materials. Each such operations and maintenance program and any additional or revised operations and maintenance programs established for the Mortgaged Property pursuant to this Section 6.12 must be approved by Lender and will be referred to in this Loan Agreement as an “O&M Program.” Borrower will comply in a timely manner with, and cause all employees, agents, and contractors of Borrower and any other Persons present on the Mortgaged Property to comply with each O&M Program. Borrower will pay all costs of performance of Borrower’s obligations under any O&M Program, and Lender’s out of pocket costs incurred in connection with the monitoring and review of each O&M Program must be paid by Borrower upon demand by Lender. Any such out-of-pocket costs of Lender that Borrower fails to pay promptly will become an additional part of the Indebtedness as provided in Section 9.02.

		
	(d)
	Notice to Lender. Borrower will promptly give Notice to Lender upon the occurrence of any of the following events:

		
	(i)
	Borrower’s discovery of any Prohibited Activity or Condition.

		
	(ii)
	Borrower’s receipt of or knowledge of any written complaint, order, notice of violation or other communication from any tenant, Property Manager, 

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Governmental Authority or other Person with regard to present or future alleged Prohibited Activities or Conditions, or any other environmental, health or safety matters affecting the Mortgaged Property.
		
	(iii)
	Borrower’s breach of any of its obligations under this Section 6.12.

Any such Notice given by Borrower will not relieve Borrower of, or result in a waiver of, any obligation under this Loan Agreement, the Note or any other Loan Document.

		
	(e)
	Environmental Inspections, Tests and Audits. Borrower will pay promptly the costs of any environmental inspections, tests or audits, a purpose of which is to identify the extent or cause of or potential for a Prohibited Activity or Condition (“Environmental Inspections”), required by Lender in connection with any foreclosure or deed in lieu of foreclosure, or as a condition of Lender’s consent to any Transfer under Article VII, or required by Lender following a reasonable determination by Lender that Prohibited Activities or Conditions may exist. Any such costs incurred by Lender (including Attorneys’ Fees and Costs and the costs of technical consultants whether incurred in connection with any judicial or administrative process or otherwise) that Borrower fails to pay promptly will become an additional part of the Indebtedness as provided in Section 9.02. As long as:  (i) no Event of Default has occurred and is continuing, (ii) Borrower has actually paid for or reimbursed Lender for all costs of any such Environmental Inspections performed or required by Lender, and (iii) Lender is not prohibited by law, contract or otherwise from doing so, Lender will make available to Borrower, without representation of any kind, copies of Environmental Inspections prepared by third parties and delivered to Lender. Lender reserves the right, and Borrower expressly authorizes Lender, to make available to any party, including any prospective bidder at a foreclosure sale of the Mortgaged Property, the results of any Environmental Inspections made by or for Lender with respect to the Mortgaged Property. Borrower consents to Lender notifying any party (either as part of a notice of sale or otherwise) of the results of any Environmental Inspections made by or for Lender. Borrower acknowledges that Lender cannot control or otherwise ensure the truthfulness or accuracy of the results of any Environmental Inspections and that the release of such results to prospective bidders at a foreclosure sale of the Mortgaged Property may have a material and adverse effect upon the amount that a party may bid at such sale. Borrower agrees that Lender will have no liability whatsoever as a result of delivering the results of any Environmental Inspections made by or for Lender to any third party, and Borrower releases and forever discharges Lender from any and all claims, damages or causes of action arising out of, connected with or incidental to the results of the delivery of any Environmental Inspections made by or for Lender.

		
	(f)
	Remedial Work. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that 

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has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 9.02.
6.13    Single Purpose Entity Requirements.

		
	(a)
	Single Purpose Entity Requirements. Until the Indebtedness is paid in full, each Borrower and any SPE Equity Owner will remain a “Single Purpose Entity,” which means at all times since its formation and thereafter it will satisfy each of the following conditions:

		
	(i)
	It will not engage in any business or activity, other than the ownership, operation and maintenance of the Mortgaged Property and activities incidental thereto.

		
	(ii)
	It will not acquire, own, hold, lease, operate, manage, maintain, develop or improve any assets other than the Mortgaged Property and such Personalty as may be necessary for the operation of the Mortgaged Property and will conduct and operate its business as presently conducted and operated.

		
	(iii)
	It will preserve its existence as an entity duly organized, validly existing and in good standing (if applicable) under the laws of the jurisdiction of its formation or organization and will do all things necessary to observe organizational formalities.

		
	(iv)
	It will not merge or consolidate with any other Person.

		
	(v)
	It will not take any action to dissolve, wind-up, terminate or liquidate in whole or in part; to sell, transfer or otherwise dispose of all or substantially all of its assets; to change its legal structure; transfer or permit the direct or indirect transfer of any partnership, membership or other equity interests, as applicable, other than Transfers permitted under this Loan Agreement; issue additional partnership, membership or other equity interests, as applicable, or seek to accomplish any of the foregoing.

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	(vi)
	It will not, without the prior unanimous written consent of all of Borrower’s partners, members, or shareholders, as applicable, and, if applicable, the prior unanimous written consent of 100% of the members of the board of directors or of the board of Managers of Borrower or the SPE Equity Owner, take any of the following actions:

		
	(A)
	File any insolvency, or reorganization case or proceeding, to institute proceedings to have Borrower or any SPE Equity Owner be adjudicated bankrupt or insolvent.

		
	(B)
	Institute proceedings under any applicable insolvency law.

		
	(C)
	Seek any relief under any law relating to relief from debts or the protection of debtors.

		
	(D)
	Consent to the filing or institution of bankruptcy or insolvency proceedings against Borrower or any SPE Equity Owner.

		
	(E)
	File a petition seeking, or consent to, reorganization or relief with respect to Borrower or any SPE Equity Owner under any applicable federal or state law relating to bankruptcy or insolvency.

		
	(F)
	Seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian, or any similar official for Borrower or a substantial part of its property or for any SPE Equity Owner or a substantial part of its property.

		
	(G)
	Make any assignment for the benefit of creditors of Borrower or any SPE Equity Owner.

		
	(H)
	Admit in writing Borrower’s or any SPE Equity Owner’s inability to pay its debts generally as they become due.

		
	(I)
	Take action in furtherance of any of the foregoing.

		
	(vii)
	It will not amend or restate its organizational documents if such change would cause the provisions set forth in those organizational documents not to comply with the requirements set forth in this Section 6.13.

		
	(viii)
	It will not own any subsidiary or make any investment in, any other Person.

		
	(ix)
	It will not commingle its assets with the assets of any other Person and will hold all of its assets in its own name.

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	(x)
	It will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than the following:

		
	(A)
	The Indebtedness and any further indebtedness as described in Section 11.11 with regard to Supplemental Instruments.

		
	(B)
	Customary unsecured trade payables incurred in the ordinary course of owning and operating the Mortgaged Property provided the same are not evidenced by a promissory note, do not exceed, in the aggregate, at any time a maximum amount of 2% of the original principal amount of the Indebtedness and are paid within 60 days of the date incurred.

		
	(C)
	through (H) are reserved.

		
	(xi)
	It will maintain its records, books of account, bank accounts, financial statements, accounting records and other entity documents separate and apart from those of any other Person and will not list its assets as assets on the financial statement of any other Person; provided, however, that Borrower’s assets may be included in a consolidated financial statement of its Affiliate provided that (A) appropriate notation will be made on such consolidated financial statements to indicate the separateness of Borrower from such Affiliate and to indicate that Borrower’s assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person, and (B) such assets will also be listed on Borrower’s own separate balance sheet.

		
	(xii)
	Except for capital contributions or capital distributions permitted under the terms and conditions of its organizational documents, it will only enter into any contract or agreement with any general partner, member, shareholder, principal or Affiliate of Borrower or any Guarantor, or any general partner, member, principal or Affiliate thereof, upon terms and conditions that are commercially reasonable and substantially similar to those that would be available on an arm’s-length basis with third parties.

		
	(xiii)
	It will not maintain its assets in such a manner that will be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person.

		
	(xiv)
	It will not assume or guaranty (excluding any guaranty that has been executed and delivered in connection with the Note) the debts or obligations of any other Person, hold itself out to be responsible for the debts of another Person, pledge its assets to secure the obligations of any other Person or otherwise pledge its assets for the benefit of any other Person, or hold out its credit as being available to satisfy the obligations of any other Person.

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	(xv)
	It will not make or permit to remain outstanding any loans or advances to any other Person except for those investments permitted under the Loan Documents and will not buy or hold evidence of indebtedness issued by any other Person (other than cash or investment-grade securities).

		
	(xvi)
	It will file its own tax returns separate from those of any other Person, except to the extent that Borrower is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law, and will pay any taxes required to be paid under applicable law.

		
	(xvii)
	It will hold itself out to the public as a legal entity separate and distinct from any other Person and conduct its business solely in its own name, will correct any known misunderstanding regarding its separate identity and will not identify itself or any of its Affiliates as a division or department of any other Person.

		
	(xviii)
	It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and will pay its debts and liabilities from its own assets as the same become due.

		
	(xix)
	It will allocate fairly and reasonably shared expenses with Affiliates (including shared office space) and use separate stationery, invoices and checks bearing its own name.

		
	(xx)
	It will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s funds) its own liabilities (including salaries of its own employees) from its own funds.

		
	(xxi)
	It will not acquire obligations or securities of its partners, members, shareholders, or Affiliates, as applicable.

		
	(xxii)
	Except as contemplated or permitted by the property management agreement with respect to the Property Manager, it will not permit any Affiliate or constituent party independent access to its bank accounts.

		
	(xxiii)
	It will maintain a sufficient number of employees (if any) in light of its contemplated business operations and pay the salaries of its own employees, if any, only from its own funds.

		
	(xxiv)
	If such entity is a single member limited liability company, such entity will satisfy each of the following conditions:

		
	(A)
	Be formed and organized under Delaware law.

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	(B)
	Have either one springing member that is a corporation or two springing members who are natural persons. If there is more than one springing member, only one springing member will be the sole member of Borrower or SPE Equity Owner (as applicable) at any one time, and the second springing member will become the sole member only upon the first springing member ceasing to be a member.

		
	(C)
	Otherwise comply with all Rating Agencies’ criteria for single member limited liability companies (including the delivery of Delaware single member limited liability company opinions acceptable in all respects to Lender).

		
	(D)
	At all times Borrower or SPE Equity Owner (as applicable) will have one and only one member.

		
	(xxv)
	If such entity is a single member limited liability company that is board-managed, such entity will have a board of Managers separate from that of Guarantor and any other Person and will cause its board of Managers to keep minutes of board meetings and actions and observe all other Delaware limited liability company required formalities.

		
	(xxvi)
	If an SPE Equity Owner is required pursuant to this Loan Agreement, if Borrower is (A) a limited liability company with more than one member, then Borrower has and will have at least one member that is an SPE Equity Owner that has satisfied and will satisfy the requirements of Section 6.13(b) and such member is its managing member, or (B) a limited partnership, then all of its general partners are SPE Equity Owners that have satisfied and will satisfy the requirements set forth in Section 6.13(b).

(xxvii)    Reserved.

(xxviii)    Reserved.

		
	(b)
	SPE Equity Owner Requirements. The SPE Equity Owner, if applicable, will at all times since its formation and thereafter comply in its own right (subject to the modifications set forth below), and will cause Borrower to comply, with each of the requirements of a Single Purpose Entity. Upon the withdrawal or the disassociation of an SPE Equity Owner from Borrower, Borrower will immediately appoint a new SPE Equity Owner, whose organizational documents are substantially similar to those of the withdrawn or disassociated SPE Equity Owner, and deliver a new nonconsolidation opinion to Lender in form and substance satisfactory to Lender with regard to nonconsolidation by a bankruptcy court of the assets of each of Borrower and SPE Equity Owner with those of its Affiliates.

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	(i)
	With respect to Section 6.13(a)(i), the SPE Equity Owner will not engage in any business or activity other than being the managing member or general partner, as the case may be, of Borrower and owning at least 0.5% equity interest in Borrower.

		
	(ii)
	With respect to Section 6.13(a)(ii), the SPE Equity Owner has not and will not acquire or own any assets other than its equity interest in Borrower and personal property related thereto.

		
	(iii)
	With respect to Section 6.13(a)(viii), the SPE Equity Owner will not own any subsidiary or make any investment in any other Person, except for Borrower.

		
	(iv)
	With respect to Section 6.13(a)(x), the SPE Equity Owner has not and will not incur any debt, secured or unsecured, direct or contingent (including guaranteeing any obligation), other than (A) customary unsecured payables incurred in the ordinary course of owning Borrower provided the same are not evidenced by a promissory note, do not exceed, in the aggregate, at any time a maximum amount of $10,000 and are paid within 60 days of the date incurred, and (B) in its capacity as general partner of Borrower (if applicable).

		
	(v)
	With respect to Section 6.13(a)(xiv), the SPE Equity Owner will not assume or guaranty the debts or obligations of any other Person, hold itself out to be responsible for the debts of another Person, pledge its assets to secure the obligations of any other Person or otherwise pledge its assets for the benefit of any other Person, or hold out its credit as being available to satisfy the obligations of any other Person, except for in its capacity as general partner of Borrower (if applicable).

		
	(c)
	Effect of Transfer on Single Purpose Entity Requirements. Notwithstanding anything to the contrary in this Loan Agreement, no Transfer will be permitted under Article VII unless the provisions of this Section 6.13 are satisfied at all times.

		
	6.14
	Repairs and Capital Replacements.

		
	(a)
	Completion of Repairs. Borrower will commence any Repairs as soon as practicable after the date of this Loan Agreement and will diligently proceed with and complete such Repairs on or before the Completion Date. All Repairs and Capital Replacements will be completed in a good and workmanlike manner, with suitable materials, and in accordance with good building practices and all applicable laws, ordinances, rules, regulations, building setback lines and restrictions applicable to the Mortgaged Property. Borrower agrees to cause the replacement of any material or work that is defective, unworkmanlike or that does 

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not comply with the requirements of this Loan Agreement, as determined by Lender.

		
	(b)
	Purchases. Without the prior written consent of Lender, no materials, machinery, equipment, fixtures or any other part of the Repairs or Capital Replacements will be purchased or installed under conditional sale contracts or lease agreements, or any other arrangement wherein title to such Repairs or Capital Replacements is retained or subjected to a purchase money security interest, or the right is reserved or accrues to anyone to remove or repossess any such Repairs or Capital Replacements, or to consider them as personal property.

		
	(c)
	Lien Protection. Borrower will promptly pay or cause to be paid, when due, all costs, charges and expenses incurred in connection with the construction and completion of the Repairs or Capital Replacements, and will keep the Mortgaged Property free and clear of any and all Liens other than the Lien of the Security Instrument and any other Lien to which Lender has consented.

		
	(d)
	Adverse Claims. Borrower will promptly advise Lender in writing of any litigation, Liens or claims affecting the Mortgaged Property and of all complaints and charges made by any Governmental Authority that may delay or adversely affect the Repairs or Capital Replacements.

		
	6.15
	Residential Leases Affecting the Mortgaged Property.

		
	(a)
	Borrower will, promptly upon Lender’s request, deliver to Lender an executed copy of each residential Lease then in effect. 

		
	(b)
	All Leases for residential dwelling units will satisfy the following conditions:

		
	(i)
	They will be on forms that are customary for similar multifamily properties in the Property Jurisdiction.

		
	(ii)
	They will be for initial terms of at least 6 months and not more than 2 years (unless otherwise approved in writing by Lender).

		
	(iii)
	They will not include any Corporate Leases (unless otherwise approved in writing by Lender).

		
	(iv)
	They will not include options to purchase.

		
	(c)
	If Borrower is a cooperative housing corporation or association, notwithstanding anything to the contrary contained in this Loan Agreement, so long as Borrower remains a cooperative housing corporation or association and is not in breach of any covenant of this Loan Agreement, Lender consents to each of the following:

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	(i)
	The execution of Leases for terms in excess of 2 years to a tenant shareholder of Borrower, so long as such Leases, including proprietary Leases, are and will remain subordinate to the Lien of the Security Instrument.

		
	(ii)
	The surrender or termination of such Leases where the surrendered or terminated Lease is immediately replaced or where Borrower makes its best efforts to secure such immediate replacement by a newly-executed Lease of the same apartment to a tenant shareholder of Borrower. However, no consent is given by Lender to any execution, surrender, termination or assignment of a Lease under terms that would waive or reduce the obligation of the resulting tenant shareholder under such Lease to pay cooperative assessments in full when due or the obligation of the former tenant shareholder to pay any unpaid portion of such assessments.

		
	6.16
	Litigation; Government Proceedings. Borrower will give prompt Notice to Lender of any litigation or governmental proceedings pending or, to the best of Borrower’s knowledge, threatened in writing against Borrower or any Borrower Principal which might have a Material Adverse Effect. As and when requested by Lender, Borrower will provide Lender with written updates on the status of all litigation proceedings affecting Borrower or any Borrower Principal.

		
	6.17
	Further Assurances and Estoppel Certificates; Lender’s Expenses. Within 10 days after a request from Lender, in Lender’s Discretion, Borrower will take each of the following actions:

		
	(a)
	Deliver to Lender a written statement, signed and acknowledged by Borrower, certifying to Lender or any Person designated by Lender, as of the date of such statement:  (i) that the Loan Documents are unmodified and in full force and effect (or, if there have been modifications, that the Loan Documents are in full force and effect as modified and setting forth such modifications), (ii) the unpaid principal balance of the Note, (iii) the date to which interest under the Note has been paid, (iv) that Borrower is not in default in paying the Indebtedness or in performing or observing any of the covenants or agreements contained in this Loan Agreement or any of the other Loan Documents (or, if Borrower is in default, describing such default in reasonable detail), (v) whether there are any then-existing setoffs or defenses known to Borrower against the enforcement of any right or remedy of Lender under the Loan Documents, and (vi) any additional facts requested by Lender.

		
	(b)
	Execute, acknowledge and/or deliver, at its sole cost and expense, all further acts, deeds, conveyances, assignments, estoppel certificates, financing statements or amendments, transfers and assurances as Lender may require from time to time in order to better assure, grant and convey to Lender the rights intended to be granted, now or in the future, to Lender under this Loan Agreement and the Loan Documents or in connection with Lender’s consent rights under Article VII.

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Borrower acknowledges and agrees that, in connection with each request by Borrower under this Loan Agreement or any Loan Document, Borrower will pay all reasonable Attorneys’ Fees and Costs and expenses incurred by Lender and Loan Servicer, including any fees charged by the Rating Agencies, if applicable, regardless of whether the matter is approved, denied or withdrawn. Any amounts payable by Borrower under this Loan Agreement will be deemed a part of the Indebtedness, will be secured by the Security Instrument and will bear interest at the Default Rate if not fully paid within 10 days of written demand for payment.

		
	6.18
	Cap Collateral. Reserved.

		
	6.19
	Ground Lease. Reserved.

		
	6.20
	ERISA Requirements.

		
	(a)
	Borrower will not engage in any transaction which would cause an obligation, or action taken or to be taken under this Loan Agreement (or the exercise by Lender of any of its rights under the Note, this Loan Agreement or any of the other Loan Documents) to be a non-exempt prohibited transaction under ERISA or Section 4975 of the Tax Code.

		
	(b)
	Borrower will deliver to Lender such certifications or other evidence from time to time throughout the term of this Loan Agreement, as requested by Lender in Lender’s Discretion, confirming each of the following:

		
	(i)
	Borrower is not an “employee benefit plan” as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, a “plan” to which Section 4975 of the Tax Code applies, or an entity whose underlying assets constitute “plan assets” of one or more of such plans.

		
	(ii)
	Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA.

		
	(iii)
	Borrower is not subject to state statutes regulating investments or fiduciary obligations with respect to governmental plans.

		
	(iv)
	One or more of the following circumstances is true:

		
	(A)
	Equity interests in Borrower are publicly offered securities within the meaning of 29 C.F.R. Section 2510.3-101(b)(2), as amended from time to time or any successor provision.

		
	(B)
	Less than 25% of each outstanding class of equity interests in Borrower are held by “benefit plan investors” within the meaning 

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of Section 3(42) of ERISA, as amended from time to time or any successor provision.

		
	(C)
	Borrower qualifies as either an “operating company” or a “real estate operating company” within the meaning of 29 C.F.R. Section 2510.3-101(c) or (e), as either may be amended from time to time or any successor provisions, or is an investment company registered under the Investment Company Act of 1940.

6.21 through 6.52 are Reserved.

6.53    Economic Sanctions Laws.

		
	(a)
	Borrower, each Borrower Principal and each Non-U.S. Equity Holder will at all times comply with the Economic Sanctions Laws.

		
	(b)
	Borrower and each Borrower Principal will have in place practices and procedures to ensure, and will ensure, that no Person who is listed on any Prohibited Parties List is admitted into the ownership or management of Borrower or any Borrower Principal.

6.54 through 6.58 are Reserved.
		
	ARTICLE VII
	TRANSFERS OF THE MORTGAGED PROPERTY OR INTERESTS IN BORROWER.

Upon the occurrence of a Transfer prohibited by or requiring Lender’s approval (if applicable) under this Article VII, Lender may, in Lender’s Discretion, by Notice to Borrower and the proposed transferee(s), modify or render void, any or all of the negotiated modifications to the Loan Documents (and/or deferral of deposits to Reserve Funds) as a condition to Lender’s consent to the proposed Transfer.

		
	7.01
	Permitted Transfers. The occurrence of any of the following Transfers will not constitute an Event of Default under this Loan Agreement, notwithstanding any provision of Section 7.02 to the contrary:

		
	(a)
	A Transfer to which Lender has consented.

		
	(b)
	A Transfer that is not a prohibited Transfer pursuant to Section 7.02.

		
	(c)
	A Transfer that is conditionally permitted pursuant to Section 7.03 upon the satisfaction of all applicable conditions.

		
	(d)
	The grant of a leasehold interest in an individual dwelling unit for a term of 2 years or less (or longer if approved by Lender in writing) not containing an option to purchase.

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	(e)
	Entering into any New Non-Residential Lease, or modifying or terminating any Non-Residential Lease, in each case in compliance with Section 6.04.

		
	(f)
	A Condemnation with respect to which Borrower satisfies the requirements of Section 6.11.

		
	(g)
	A Transfer of obsolete or worn out Personalty or Fixtures that are contemporaneously replaced by items of equal or better function and quality, which are free of Liens, encumbrances and security interests other than those created by the Loan Documents or consented to by Lender.

		
	(h)
	The creation of a mechanic’s, materialmen’s, or judgment Lien against the Mortgaged Property, which is released of record, bonded, or otherwise remedied to Lender’s satisfaction within 60 days of the date of creation; provided, however, if Borrower is diligently prosecuting such release or other remedy and advises Lender that such release or remedy cannot be consummated within such 60-day period, Borrower will have an additional period of time (not exceeding 120 days from the date of creation or such earlier time as may be required by applicable law in which the lienor must act to enforce the Lien) within which to obtain such release of record or consummate such other remedy.

		
	(i)
	If Borrower is a housing cooperative corporation or association, the Transfer of the shares in the housing cooperative or the assignment of the occupancy agreements or Leases relating thereto to tenant shareholders of the housing cooperative or association.

		
	(j)
	A Supplemental Instrument that complies with Section 11.11(if applicable) or Defeasance that complies with Section 11.12 (if applicable).

		
	(k)
	If applicable, a Preapproved Intrafamily Transfer that satisfies the requirements of Section 7.04.

		
	(l)
	Reserved

		
	7.02
	Prohibited Transfers. The occurrence of any of the following Transfers will constitute an Event of Default under this Loan Agreement:

		
	(a)
	A Transfer of all or any part of the Mortgaged Property or any interest in the Mortgaged Property, including the grant, creation or existence of any Lien on the Mortgaged Property, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, other than the Lien of the Security Instrument or, if this Loan Agreement is entered into in connection with a Supplemental Loan, the Lien of the Senior Instrument, or any other Lien to which Lender has consented.

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	(b)
	A Transfer or series of Transfers of any legal or equitable interest of any Guarantor which owns a direct or indirect interest in Borrower that result(s) in such Guarantor no longer owning any direct or indirect interest in Borrower.

		
	(c)
	A Transfer or series of Transfers of any legal or equitable interest since the Closing Date that result(s) in a change of more than 50% of the ownership interests (or beneficial interests, if the applicable entity is a trust) in Borrower or any Designated Entity for Transfers.

		
	(d)
	A Transfer of any general partnership interest in a partnership, or any manager interest (whether a member manager or nonmember manager) in a limited liability company, or a change in the trustee of a trust other than as permitted in Section 7.04, if such partnership, limited liability company, or trust, as applicable, is Borrower or a Designated Entity for Transfers.

		
	(e)
	If Borrower or any Designated Entity for Transfers is a corporation whose outstanding voting stock is held by 100 or more shareholders, one or more Transfers by a single transferor within a 12-month period affecting an aggregate of 10% or more of that stock.

		
	(f)
	The grant, creation or existence of any Lien, whether voluntary, involuntary or by operation of law, and whether or not such Lien has priority over the Lien of the Security Instrument, on any ownership interest in Borrower or any Designated Entity for Transfers, if the foreclosure of such Lien would result in a Transfer prohibited under Sections 7.02(b), (c), (d), or (e).

		
	(g)
	If Borrower is a trust (i) the termination or revocation of the trust, or (ii) the removal, appointment or substitution of a trustee of the trust.

		
	(h)
	Reserved.

		
	(i)
	Reserved.

		
	(j)
	Reserved.

		
	7.03
	Conditionally Permitted Transfers. The occurrence of any of the following Transfers will not constitute a prohibited Transfer under Section 7.02, provided that Borrower has complied with all applicable specified conditions in this Section.

		
	(a)
	Transfer by Devise, Descent or Operation of Law. Upon the death of a natural person, a Transfer which occurs by devise, descent, or by operation of law to one or more Immediate Family Members of such natural person or to a trust or family conservatorship established for the benefit of such Immediate Family Members (each a “Beneficiary”), provided that each of the following conditions is satisfied:

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	(i)
	The Property Manager continues to be responsible for the management of the Mortgaged Property, and such Transfer will not result in a change in the day-to-day operations of the Mortgaged Property.

		
	(ii)
	Lender receives confirmation acceptable to Lender, in Lender’s Discretion, that Borrower continues to satisfy the requirements of Section 6.13.

		
	(iii)
	Each Guarantor executes such documents and agreements as Lender requires in Lender’s Discretion to evidence and effect the ratification of each Guaranty, or in the event of the death of any Guarantor, Borrower causes one of the following to occur:

		
	(A)
	One or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

		
	(B)
	The estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within 6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

		
	(iv)
	Borrower gives Lender Notice of such Transfer together with copies of all documents effecting such Transfer not more than 30 calendar days after the date of such Transfer, and contemporaneously with the Notice, takes each of the following additional actions:

		
	(A)
	Borrower reaffirms the representations and warranties under Article V.

		
	(B)
	Borrower satisfies Lender, in Lender’s Discretion, that the Beneficiary’s organization, credit and experience in the management of similar properties are appropriate to the overall structure and documentation of the existing financing.

		
	(v)
	Borrower or Beneficiary causes to be delivered to Lender such legal opinions as Lender deems necessary, in Lender’s Discretion, including a nonconsolidation opinion (if a nonconsolidation opinion was delivered on the Closing Date and if required by Lender), an opinion that the ratification of the Loan Documents and Guaranty (if applicable) have been duly authorized, executed, and delivered and that the ratification 

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documents and Guaranty (if applicable) are enforceable as the obligations of Borrower, Beneficiary or Guarantor, as applicable.

		
	(vi)
	Borrower (A) pays the Transfer Processing Fee to Lender, and (B) pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with such Transfer; provided, however, that Lender will not be entitled to collect a Transfer Fee.

		
	(b)
	Easement, Restrictive Covenant or Other Encumbrance. The grant of an easement, restrictive covenant or other encumbrance, provided that each of the following conditions is satisfied:

		
	(i)
	Borrower provides Lender with at least 30 days prior Notice of the proposed grant.

		
	(ii)
	Prior to the grant, Lender determines, in Lender’s Discretion, that the easement, restrictive covenant or other encumbrance will not materially affect the operation or value of the Mortgaged Property or Lender’s interest in the Mortgaged Property.

		
	(iii)
	Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with reviewing Borrower’s request for Lender’s review of such grant of easement, restrictive covenant or other encumbrance; provided, however, that Lender will not be entitled to collect a Transfer Fee.

		
	(iv)
	If the Note is held by a REMIC trust, Lender may require an opinion of counsel which meets each of the following requirements:

		
	(A)
	The counsel providing the opinion is acceptable to Lender.

		
	(B) 
	The opinion is addressed to Lender.

		
	(C) 
	The opinion is paid for by Borrower.

		
	(D) 
	The opinion is in form and substance satisfactory to Lender in its sole and absolute discretion.

		
	(E) 
	The opinion confirms each of the following:

		
	(1)
	The grant of such easement has been effected in accordance with the requirements of Treasury Regulation Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to time).

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	(2)
	The qualification and status of the REMIC trust as a REMIC will not be adversely affected or impaired as a result of such grant.

		
	(3)
	The REMIC trust will not incur a tax under Section 860G(d) of the Tax Code as a result of such grant.

		
	(c)
	Publicly-Held Fund or Publicly-Held Real Estate Investment Trust. If a Designated Entity for Transfers is a publicly-held fund or a publicly-held real estate investment trust, either of the following:

		
	(i)
	The public issuance of common stock, convertible debt, equity or other similar securities (“Public Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT Securities.

		
	(ii)
	The acquisition by a single Public Fund/REIT Securities holder of an ownership percentage of 10% or more in the Designated Entity for Transfers, if within 30 days following the acquisition, Borrower does each of the following:

		
	(A)
	Provides notice to Lender of that acquisition.

(B)    Complies with each of the following conditions:

		
	(1)
	Borrower delivers to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) of 25% or more in Borrower is on any Prohibited Parties List.

		
	(2)
	Borrower either (a) certifies in writing to Lender that there are no Non-U.S. Equity Holders, or (b) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

		
	(d)
	Transaction Specific Transfers.

(i) through (v) are reserved.

		
	(vi)
	Limited Partner or Non-Managing Member Transfer. A Transfer that results in the cumulative Transfer of more than 50% and up to 100% of the non-managing membership interests in or the limited partnership interests in Borrower or any Designated Entity for Transfer (“Investor Interests”) to third party transferees (“Investor Interest Transfer”), provided that each of the following conditions is satisfied:

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	(A)
	Borrower provides Lender with at least 30 days prior Notice of the proposed Investor Interest Transfer.

		
	(B)
	At the time of the proposed Investor Interest Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

		
	(C)
	Following the Investor Interest Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Investor Interest Transfer and there is no change in the Guarantor, if applicable.

		
	(D)
	The Investor Interest Transfer does not result in a Transfer of the type described in Section 7.02(b).  

		
	(E)
	At any time that one Person acquires 25% or more of the aggregate of direct or indirect Investor Interests as a result of the Investor Interest Transfer, Borrower must meet the following additional requirements:

		
	(1)
	Borrower pays to Lender the Transfer Processing Fee at the time the Borrower provides Lender with the Notice set forth in Section 7.03(d)(vi)(A).

		
	(2)
	Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Investor Interest Transfer.

		
	(3)
	Lender receives confirmation acceptable to Lender that (X) the requirements of Section 6.13 continue to be satisfied, and (Y) the term of existence of the holder of 25% or more of the Investor Interests after the Investor Interest Transfer (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

		
	(4)
	Lender receives organizational charts reflecting the structure of Borrower prior to and after the Investor Interest Transfer and copies of the then-current organizational documents of Borrower and the entity in which Investor Interests were transferred, if different from Borrower, including any amendments.

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	(5)
	Each transferee with an interest of 25% or more delivers to Lender a certification that each of the following is true:

		
	(X)
	He/she/it has not been convicted of fraud or a crime involving moral turpitude (or if an entity, then no principal of such entity has been convicted of fraud or a crime involving moral turpitude).

		
	(Y)
	He/she/it has not been involved in a bankruptcy or reorganization within the ten years preceding the date of the Investor Interest Transfer.

		
	(6)
	Borrower delivers to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more is on any Prohibited Parties List.

		
	(7)
	If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Investor Interest Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

		
	(F)
	Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

(vii) through (x) are reserved.

(e) through (k) are reserved.

		
	7.04
	Preapproved Intrafamily Transfers. The occurrence of a Transfer of more than a 50% interest in Borrower or a Designated Entity for Transfers as set forth in this Section will be considered to be a “Preapproved Intrafamily Transfer” provided that each of the conditions set forth in Sections 7.04(a) and (b) is satisfied:

		
	(a)
	Type of Transfer. The Transfer is one of the following:

		
	(i)
	A sale or transfer to one or more of the transferor’s Immediate Family Members.

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	(ii)
	A sale or transfer to any trust having as its sole beneficiaries the transferor and/or one or more of the transferor’s Immediate Family Members.

		
	(iii)
	A sale or transfer from a trust to any one or more of its beneficiaries who are the settlor and/or Immediate Family Members of the settlor of the trust.

		
	(iv)
	The substitution or replacement of the trustee of any trust with a trustee who is an Immediate Family Member of the settlor of the trust.

		
	(v)
	A sale or transfer from a natural person to an entity owned and under the Control of the transferor or the transferor’s Immediate Family Members.

		
	(b)
	Conditions. The Preapproved Intrafamily Transfer satisfies each of the following conditions:

		
	(i)
	Borrower must provide Lender with 30 days prior Notice of the proposed Preapproved Intrafamily Transfer.

		
	(ii)
	Following the Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Transfer and there is no change in the Guarantor, if applicable.

		
	(iii)
	At the time of the Preapproved Intrafamily Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

		
	(iv)
	At any time that one Person acquires 25% or more of the aggregate of direct or indirect interests in Borrower or a Designated Entity for Transfers as a result of the Preapproved Intrafamily Transfer, Borrower must meet the following additional requirements:

		
	(A)
	Borrower must pay to Lender the Transfer Processing Fee at the time the Borrower provides Lender with the Notice set forth in Section 7.04(b)(i).

		
	(B)
	Borrower must pay or reimburse Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Preapproved Intrafamily Transfer.

		
	(C)
	Borrower must deliver to Lender organizational charts reflecting the structure of Borrower prior to and after the Preapproved Intrafamily Transfer, together with copies of the then-current 

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organizational documents of Borrower and any other entity in which interests were transferred, including any amendments made in connection with the Preapproved Intrafamily Transfer.

		
	(D)
	Each transferee with an interest of 25% or more must deliver to Lender a certification that each of the following is true:

		
	(1)
	He/she/it has not been convicted of fraud or a crime involving moral turpitude (or if an entity, then no principal of such entity has been convicted of fraud or a crime involving moral turpitude).

		
	(2)
	He/she/it has not been involved in a bankruptcy or reorganization within the 10 years preceding the date of the Preapproved Intrafamily Transfer.

		
	(E)
	Borrower must deliver to Lender searches confirming that no Person with a collective equity interest (whether direct or indirect) in Borrower of 25% or more is on any Prohibited Parties List.

		
	(F)
	If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Preapproved Intrafamily Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower must deliver to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

		
	(v)
	Borrower either (A) certifies that there are no Non-U.S. Equity Holders, or (B) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

		
	7.05
	Lender’s Consent to Prohibited Transfers.

		
	(a)
	Conditions for Lender’s Consent. With respect to a Transfer that would otherwise constitute an Event of Default under this Article VII, Lender will consent, without any adjustment to the rate at which the Indebtedness bears interest or to any other economic terms of the Indebtedness set forth in the Note, provided that, prior to such Transfer, each of the following requirements is satisfied:

		
	(i)
	Borrower has submitted to Lender all information required by Lender to make the determination required by this Section along with the Transfer Processing Fee.

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	(ii)
	No Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default unless such Transfer would cure the Event of Default.

		
	(iii)
	Lender in Lender’s Discretion has determined that the transferee meets Lender’s eligibility, credit, management and other standards (including any standards with respect to previous relationships between Lender and the transferee).

		
	(iv)
	Lender in Lender’s Discretion has determined that the transferee’s organization, credit and experience in the management of similar properties to be appropriate to the overall structure and documentation of the Loan.

		
	(v)
	Lender in Lender’s Discretion has determined that the Mortgaged Property will be managed by a Property Manager meeting the requirements of Section 6.09(d).

		
	(vi)
	Lender in Lender’s Discretion has determined that the Mortgaged Property, at the time of the proposed Transfer, meets all of Lender’s standards as to its physical condition, occupancy, net operating income and the accumulation of reserves.

		
	(vii)
	Lender in Lender’s Discretion has determined that the transferee and any SPE Equity Owner of such transferee meet the requirements of Section 6.13.

		
	(viii)
	If any Supplemental Instrument is outstanding, Borrower has obtained the consent of each Supplemental Lender, if different from Lender.

		
	(ix)
	In the case of a Transfer of all or any part of the Mortgaged Property, each of the following conditions is satisfied:

		
	(A)
	The transferee executes Lender’s then-standard assumption agreement that, among other things, requires the transferee to perform all obligations of Borrower set forth in the Note, the Security Instrument, this Loan Agreement and any other Loan Document, and may require that the transferee comply with any provisions of this Loan Agreement or any other Loan Document which previously may have been waived or modified by Lender.

		
	(B)
	If Lender requires, the transferee causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a Guaranty in a form acceptable to Lender.

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	(C)
	The transferee executes such additional documentation (including filing financing statements, as applicable) as Lender may require.

		
	(x)
	In the case of a Transfer of any interest in Borrower or a Designated Entity for Transfers, if a Guarantor requests that Lender release the Guarantor from its obligations under a Guaranty executed and delivered in connection with the Note, this Loan Agreement or any of the other Loan Documents, then Borrower causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a Guaranty in a form acceptable to Lender.

		
	(xi)
	Lender has received such legal opinions as Lender deems necessary, including a nonconsolidation opinion (if a nonconsolidation opinion was delivered on the Closing Date and if required by Lender), an opinion that the assignment and assumption of the Loan Documents has been duly authorized, executed, and delivered and that the assignment documents and the Loan Documents are enforceable as the obligations of Borrower, transferee and Guarantor, as applicable.

		
	(xii)
	Lender collects all costs, including the cost of all title searches, title insurance and recording costs, and all Attorneys’ Fees and Costs incurred in reviewing the Transfer request and any fees charged by the Rating Agencies, if applicable.

		
	(xiii)
	At the time of the Transfer, Borrower pays the Transfer Fee to Lender.

		
	(xiv)
	The Transfer will not occur during any Extension Period, if applicable.

		
	(xv)
	Reserved.

		
	(b)
	Continuing Liability of Borrower. If Borrower requests a release of its liability under the Loan Documents in connection with a Transfer of all of Borrower’s interest in the Mortgaged Property, and Lender approves the Transfer pursuant to Section 7.05(a), then one of the following will apply:

		
	(i)
	If Borrower delivers to Lender a current Site Assessment which (A) is dated within 90 days prior to the date of the proposed Transfer, and (B) evidences no presence of Hazardous Materials on the Mortgaged Property and no other Prohibited Activities or Conditions with respect to the Mortgaged Property (“Clean Site Assessment”), then Lender will release Borrower from all of Borrower’s obligations under the Loan Documents except for any liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability, damage, claim, cost or expense which directly or indirectly arises from or relates to any Prohibited Activities or Conditions existing prior to the date of the Transfer.

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	(ii)
	If Borrower does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender will release Borrower from all of Borrower’s obligations under the Loan Documents except for liability under Section 6.12 or Section 10.02(b).

		
	(c)
	Continuing Liability of Guarantor. If Guarantor requests a release of its liability under the Guaranty in connection with a Transfer which is permitted, preapproved, or approved by Lender pursuant to this Article VII, and Borrower has provided a replacement Guarantor acceptable to Lender under the terms of Section 7.05(a)(ix)(B), then one of the following will apply:

		
	(i)
	If Borrower delivers to Lender a Clean Site Assessment, then Lender will release Guarantor from all of Guarantor’s obligations except Guarantor’s obligation to guaranty Borrower’s liability under Section 6.12 or Section 10.02(b) with respect to any loss, liability, damage, claim, cost or expense which directly or indirectly arises from or relates to any Prohibited Activities or Conditions existing prior to the date of the Transfer.

		
	(ii)
	If Borrower does not deliver a Clean Site Assessment as described in Section 7.05(b)(i), then Lender will release Guarantor from all of Guarantor’s obligations except for Guarantor’s obligation to guaranty Borrower’s liability under Section 6.12 or Section 10.02(b).

		
	7.06
	SPE Equity Owner Requirement Following Transfer. Following any Transfer pursuant to this Article VII, Borrower must satisfy the applicable conditions regarding an SPE Equity Owner set forth in Section 6.13(a)(xxvi) of this Loan Agreement.

		
	7.07
	Additional Transfer Requirements - External Cap Agreement. 

		
	(a)
	Continuation of Cap Agreement. If a Transfer of all or part of the Mortgaged Property permitted by this Loan Agreement occurs, Borrower will ensure that any third-party Cap Agreement is transferred to the applicable transferee or, if the Cap Agreement is not transferable, Borrower will replace the third-party Cap Agreement in accordance with Lender’s then-current requirements. 

		
	(b)
	Establishment or Modification of Rate Cap Agreement Reserve Fund

		
	(i)
	If the third-party Cap Agreement which will be in place immediately following the Transfer is scheduled to expire prior to the Maturity Date, Lender may require Borrower to establish a Rate Cap Agreement Reserve Fund. 

		
	(ii)
	If Borrower has previously established a Rate Cap Agreement Reserve Fund, then Lender will determine whether the balance of any existing Rate Cap Agreement Reserve Fund is sufficient under then-current market 

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conditions to purchase a Replacement Cap Agreement, and may then take any of the following actions:

		
	(A)
	Lender may require Borrower to make an additional deposit into the Rate Cap Agreement Reserve Fund.

		
	(B)
	If funding of the Rate Cap Agreement Reserve Fund has been deferred, Lender may require Borrower to begin making monthly deposits into the Rate Cap Agreement Reserve Fund.

		
	(C)
	Lender may require Borrower to increase the amount of monthly deposits to the Rate Cap Agreement Reserve Fund.

7.08    Reserved.

7.09    Reserved.

ARTICLE VIII    SUBROGATION.

If, and to the extent that, the proceeds of the Loan, or subsequent advances under Section 9.02, are used to pay, satisfy or discharge a Prior Lien, such Loan proceeds or advances will be deemed to have been advanced by Lender at Borrower’s request, and Lender will automatically, and without further action on its part, be subrogated to the rights, including Lien priority, of the owner or holder of the obligation secured by the Prior Lien, whether or not the Prior Lien is released.

ARTICLE IX     EVENTS OF DEFAULT AND REMEDIES.

		
	9.01
	Events of Default. The occurrence of any one or more of the following will constitute an Event of Default under this Loan Agreement:

		
	(a)
	Borrower fails to pay or deposit when due any amount required by the Note, this Loan Agreement or any other Loan Document.

		
	(b)
	Borrower fails to maintain the Insurance coverage required by Section 6.10.

		
	(c)
	Borrower or any SPE Equity Owner fails to comply with the provisions of Section 6.13 or if any of the assumptions contained in any nonconsolidation opinions delivered to Lender at any time is or becomes untrue in any material respect.

		
	(d)
	Borrower or any SPE Equity Owner, any of its officers, directors, trustees, general partners or managers or any Guarantor commits fraud or a material misrepresentation or material omission in connection with:  (i) the application for or creation of the Indebtedness, (ii) any financial statement, Rent Schedule, or other report or information provided to Lender during the term of the 

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Indebtedness, or (iii) any request for Lender’s consent to any proposed action, including a request for disbursement of funds under this Loan Agreement.
		
	(e)
	Borrower fails to comply with the Condemnation provisions of Section 6.11.

		
	(f)
	A Transfer occurs that violates the provisions of Article VII, whether or not any actual impairment of Lender’s security results from such Transfer.

		
	(g)
	A forfeiture action or proceeding, whether civil or criminal, is commenced which could result in a forfeiture of the Mortgaged Property or otherwise materially impair the Lien created by the Security Instrument or Lender’s interest in the Mortgaged Property.

		
	(h)
	Borrower fails to perform any of its obligations under this Loan Agreement (other than those specified in Section 9.01), as and when required, which failure continues for a period of 30 days after Notice of such failure by Lender to Borrower. However, if Borrower’s failure to perform its obligations as described in this Section 9.01(h) is of the nature that it cannot be cured within the 30 day cure period after such Notice from Lender but reasonably could be cured within 90 days, then Borrower will have additional time as determined by Lender in Lender’s Discretion, not to exceed an additional 60 days, in which to cure such default, provided that Borrower has diligently commenced to cure such default during the initial 30 day cure period and diligently pursues the cure of such default. However, no such Notice or cure periods will apply in the case of any such failure which could, in Lender’s judgment, absent immediate exercise by Lender of a right or remedy under this Loan Agreement, result in harm to Lender, danger to tenants or third parties, or impairment of the Note, the Security Instrument or this Loan Agreement or any other security given under any other Loan Document.

		
	(i)
	Borrower fails to perform any of its obligations as and when required under any Loan Document other than this Loan Agreement which failure continues beyond the applicable cure period, if any, specified in that Loan Document.

		
	(j)
	The holder of any other debt instrument secured by a mortgage, deed of trust or deed to secure debt on the Mortgaged Property exercises any right to declare all amounts due under that debt instrument immediately due and payable.

		
	(k)
	Any of the following occurs:

		
	(i)
	Borrower or any SPE Equity Owner commences any case, Proceeding or other action under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship or relief of debtors (A) seeking to have an order for relief entered with respect to it, or seeking to adjudicate it bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, 

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liquidation, dissolution, composition or other relief with respect to it or its debt, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets.

		
	(ii)
	Any party other than Lender commences any case, Proceeding, or other action of a nature referred to in Section 9.01(k)(i) against Borrower or any SPE Equity Owner which (A) results in the entry of an order for relief or any such adjudication or appointment, or (B) has not been dismissed, discharged or bonded for a period of 90 days.

		
	(iii)
	Any case, Proceeding or other action is commenced against Borrower or any SPE Equity Owner seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets which results in the entry of any order by a court of competent jurisdiction for any such relief which is not vacated, discharged, or stayed or bonded pending appeal within 90 days from the entry thereof.

		
	(iv)
	Borrower or any SPE Equity Owner takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in Section 9.01(k)(i), (ii) or (iii).

		
	(l)
	Borrower or any SPE Equity Owner has made any representation or warranty in Article V or any other Section of this Loan Agreement that is false or misleading in any material respect.

		
	(m)
	If the Loan is secured by an interest under a Ground Lease, Borrower fails to comply with the provisions of Section 6.19.

		
	(n)
	If the Loan is a Supplemental Loan, any Event of Default occurs under (i) the Senior Note, the Senior Instrument or any other Senior Loan Document, or (ii) any loan document related to another loan in connection with the Mortgaged Property, regardless of whether Borrower has obtained Supplemental Lender’s approval of the placement of such Lien on the Mortgaged Property. In addition, if the Loan is a Supplemental Loan, as Borrower under both the Supplemental Instrument and the Senior Instrument, Borrower acknowledges and agrees that if there is an Event of Default under the Supplemental Note, the Supplemental Instrument or any other Supplemental Loan Document, such Event of Default will be an Event of Default under the terms of the Senior Instrument and will entitle Senior Lender to invoke any and all remedies permitted to Senior Lender by applicable law, the Senior Note, the Senior Instrument or any of the other Senior Loan Documents.

		
	(o)
	If the Mortgaged Property is subject to any covenants, conditions and/or restrictions, land use restriction agreements or similar agreements, Borrower fails 

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to perform any of its obligations under any such agreement as and when required, and such failure continues beyond any applicable cure period.

		
	(p)
	A Guarantor files for bankruptcy protection under the Bankruptcy Code or a Guarantor voluntarily becomes subject to any reorganization, receivership, insolvency proceeding or other similar proceeding pursuant to any other federal or state law affecting debtor and creditor rights, or any creditor (other than Lender) of a Guarantor commences any involuntary case against a Guarantor pursuant to the Bankruptcy Code or other federal or state law affecting debtor and creditor rights, unless each of the following conditions is satisfied:

		
	(i)
	Borrower or Guarantor provides Notice of such action to Lender within 30 days after the filing of such action.

		
	(ii)
	Either (A) the case is dismissed or discharged within 90 days after filing, or (B) within 90 days following the date of such filing or commencement, the affected Guarantor is replaced with one or more other Persons acceptable to Lender, in Lender’s Discretion, each of whom executes and delivers to Lender a replacement Guaranty in form and content acceptable to Lender, together with such legal opinions as Lender deems necessary.

		
	(iii)
	If Borrower must provide a replacement Guarantor pursuant to Section 9.01(p)(ii), then Borrower pays the Transfer Processing Fee to Lender.

(q)    With respect to a Guarantor, either of the following occurs:

		
	(i)
	The death of any Guarantor who is a natural person, unless within 30 days following the Guarantor’s death, Borrower causes one of the following to occur:

		
	(A)
	One or more Persons acceptable to Lender, in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

		
	(B)
	The estate of the deceased Guarantor immediately ratifies the Guaranty in writing, and within 6 months after the date of the death of the deceased Guarantor one or more Persons, acceptable to Lender in Lender’s Discretion, execute(s) and deliver(s) to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

		
	(ii)
	The dissolution of any Guarantor who is an entity, unless each of the following conditions is satisfied:

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	(A)
	Within 30 days following the dissolution of the Guarantor, Borrower causes one or more Persons acceptable to Lender, in Lender’s Discretion, to execute and deliver to Lender a guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date, without any cost or expense to Lender.

		
	(B)
	Borrower pays the Transfer Processing Fee to Lender.

		
	(r)
	If a Cap Agreement is required, Borrower fails to provide Lender with a Replacement Cap Agreement prior to the expiration of the then-existing Cap Agreement.

(s)    through (hhh) are Reserved.

		
	9.02
	Protection of Lender’s Security; Security Instrument Secures Future Advances.

		
	(a)
	If Borrower fails to perform any of its obligations under this Loan Agreement or any other Loan Document, or if any action or proceeding is commenced which purports to affect the Mortgaged Property, Lender’s security or Lender’s rights under this Loan Agreement, including eminent domain, insolvency, code enforcement, civil or criminal forfeiture, enforcement of Hazardous Materials Laws, fraudulent conveyance or reorganizations or proceedings involving a bankrupt or decedent, then Lender, in Lender’s Discretion, may make such appearances, file such documents, disburse such sums and take such actions as Lender reasonably deems necessary to perform such obligations of Borrower and to protect Lender’s interest, including:  (i) payment of Attorneys’ Fees and Costs, (ii) payment of fees and out-of-pocket expenses of accountants, inspectors and consultants, (iii) entry upon the Mortgaged Property to make Repairs or secure the Mortgaged Property, (iv) procurement of the Insurance required by Section 6.10, (v) payment of amounts which Borrower has failed to pay under Section 6.08, (vi) performance of Borrower’s obligations under Section 6.09, and (vii) advances made by Lender to pay, satisfy or discharge any obligation of Borrower for the payment of money that is secured by a Prior Lien.

		
	(b)
	Any amounts disbursed by Lender under this Section 9.02, or under any other provision of this Loan Agreement that treats such disbursement as being made under this Section 9.02, will be secured by the Security Instrument, will be added to, and become part of, the principal component of the Indebtedness, will be immediately due and payable and will bear interest from the date of disbursement until paid at the Default Rate.

		
	(c)
	Nothing in this Section 9.02 will require Lender to incur any expense or take any action.

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	9.03
	Remedies.

		
	(a)
	Upon an Event of Default, Lender may exercise any or all of its rights and remedies provided under the Loan Documents and Borrower will pay all costs associated therewith, including Attorneys’ Fees and Costs.

		
	(b)
	Each right and remedy provided in this Loan Agreement is distinct from all other rights or remedies under this Loan Agreement or any other Loan Document or afforded by applicable law or equity, and each will be cumulative and may be exercised concurrently, independently or successively, in any order. Lender’s exercise of any particular right or remedy will not in any way prevent Lender from exercising any other right or remedy available to Lender. Lender may exercise any such remedies from time to time and as often as Lender chooses.

		
	(c)
	Lender will have all remedies available to Lender under Revised Article 9 of the Uniform Commercial Code of the Property Jurisdiction, the Loan Documents and under applicable law.

		
	(d)
	Lender may also retain (i) all money in the Reserve Funds, including interest, and (ii) any Cap Payment, and in Lender’s sole and absolute discretion, may apply such amounts, without restriction and without any specific order of priority, to the payment of any and all Indebtedness.

		
	(e)
	If a claim or adjudication is made that Lender has acted unreasonably or unreasonably delayed acting in any case where, by law or under this Loan Agreement or the other Loan Documents, Lender has an obligation to act reasonably or promptly, then Lender will not be liable for any monetary damages, and Borrower’s sole remedy will be limited to commencing an action seeking injunctive relief or declaratory judgment. Any action or proceeding to determine whether Lender has acted reasonably will be determined by an action seeking declaratory judgment.

		
	(f)
	Reserved.

		
	9.04
	Forbearance.

		
	(a)
	Lender may (but will not be obligated to) agree with Borrower, from time to time, and without giving Notice to, or obtaining the consent of, or having any effect upon the obligations of, any Guarantor or other third party obligor, to take any of the following actions:

		
	(i)
	Extend the time for payment of all or any part of the Indebtedness.

		
	(ii)
	Reduce the payments due under this Loan Agreement, the Note or any other Loan Document.

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	(iii)
	Release anyone liable for the payment of any amounts under this Loan Agreement, the Note or any other Loan Document.

		
	(iv)
	Accept a renewal of the Note.

		
	(v)
	Modify the terms and time of payment of the Indebtedness.

		
	(vi)
	Join in any extension or subordination agreement.

		
	(vii)
	Release any portion of the Mortgaged Property.

		
	(viii)
	Take or release other or additional security.

		
	(ix)
	Modify the rate of interest or period of amortization of the Note or change the amount of the monthly installments payable under the Note.

		
	(x)
	Otherwise modify this Loan Agreement, the Note or any other Loan Document.

		
	(b)
	Any forbearance by Lender in exercising any right or remedy under the Note, this Loan Agreement or any other Loan Document or otherwise afforded by applicable law, will not be a waiver of or preclude the exercise of any other right or remedy, or the subsequent exercise of any right or remedy. The acceptance by Lender of payment of all or any part of the Indebtedness after the due date of such payment, or in an amount which is less than the required payment, will not be a waiver of Lender’s right to require prompt payment when due of all other payments on account of the Indebtedness or to exercise any remedies for any failure to make prompt payment. Enforcement by Lender of any security for the Indebtedness will not constitute an election by Lender of remedies so as to preclude the exercise of any other right available to Lender. Lender’s receipt of any awards or proceeds under Sections 6.10 and 6.11 will not operate to cure or waive any Event of Default.

		
	9.05
	Waiver of Marshalling. Notwithstanding the existence of any other security interests in the Mortgaged Property held by Lender or by any other party, Lender will have the right to determine the order in which any or all of the Mortgaged Property will be subjected to the remedies provided in this Loan Agreement or any other Loan Document or applicable law. Lender will have the right to determine the order in which any or all portions of the Indebtedness are satisfied from the proceeds realized upon the exercise of such remedies. Borrower and any party who now or in the future acquires a security interest in the Mortgaged Property and who has actual or constructive notice of the Security Instrument waives any and all right to require the marshalling of assets or to require that any of the Mortgaged Property be sold in the inverse order of alienation or that any of the Mortgaged Property be sold in parcels or as an entirety in connection with the exercise of any of the remedies permitted by applicable law or provided in this Loan Agreement.

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ARTICLE X        RELEASE; INDEMNITY.

		
	10.01
	Release. Borrower covenants and agrees that, in performing any of its duties under this Loan Agreement, none of Lender, Loan Servicer or any of their respective agents or employees will be liable for any losses, claims, damages, liabilities and expenses that may be incurred by any of them as a result of such performance, except that no party will be released from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.

		
	10.02
	Indemnity.

		
	(a)
	General Indemnity. Borrower agrees to indemnify, hold harmless and defend Lender, including any custodian, trustee and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties, any prior owner or holder of the Note, the Loan Servicer, any prior Loan Servicer, the officers, directors, shareholders, partners, employees and trustees of each of the foregoing, and the heirs, legal representatives, successors and assigns of each of the foregoing (collectively, “Indemnitees”) against any and all losses, claims, damages, liabilities and expenses including Attorneys’ Fees and Costs, which may be imposed or incurred by any of them directly or indirectly arising out of, or in any way relating to, or as a result of:  (i) any failure of the Mortgaged Property to comply with the laws, regulations, ordinance, code or decree of any Governmental Authority, including those pertaining to the Americans with Disabilities Act, zoning, occupancy and subdivision of real property, (ii) any obligation of Borrower under any Lease, and (iii) any accident, injury or death to any natural person on the Mortgaged Property or any damage to personal property located on the Mortgaged Property, except that no such party will be indemnified from liability for any losses, claims, damages, liabilities or expenses arising out of the willful misconduct or gross negligence of such party.

		
	(b)
	Environmental Indemnity. Borrower agrees to indemnify, hold harmless and defend Indemnitees from and against all proceedings, claims, damages, penalties and costs (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs and remediation costs, whether incurred in connection with any judicial or administrative process or otherwise, arising directly or indirectly from any of the following:

		
	(i)
	Any breach of any representation or warranty of Borrower in Section 5.05.

		
	(ii)
	Any failure by Borrower to perform any of its obligations under Section 6.12.

		
	(iii)
	The existence or alleged existence of any Prohibited Activity or Condition.

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	(iv)
	The presence or alleged presence of Hazardous Materials on or under the Mortgaged Property or in any of the Improvements.

		
	(v)
	The actual or alleged violation of any Hazardous Materials Law.

		
	(c)
	Indemnification Regarding ERISA Covenants. BORROWER WILL INDEMNIFY LENDER AND DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ALL CIVIL PENALTIES, EXCISE TAXES, OR OTHER LOSS, COST, DAMAGE AND EXPENSE (INCLUDING REASONABLE ATTORNEYS’ FEES AND COSTS INCURRED IN THE INVESTIGATION, DEFENSE AND SETTLEMENT OF CLAIMS AND LOSSES INCURRED IN CORRECTING ANY PROHIBITED TRANSACTION OR IN THE SALE OF A PROHIBITED LOAN, AND IN OBTAINING ANY INDIVIDUAL PROHIBITED TRANSACTION EXEMPTION UNDER ERISA THAT MAY BE REQUIRED, IN LENDER’S SOLE AND ABSOLUTE DISCRETION) THAT LENDER MAY INCUR, DIRECTLY OR INDIRECTLY, AS A RESULT OF DEFAULT UNDER SECTION 6.20. THIS INDEMNITY WILL SURVIVE ANY TERMINATION, SATISFACTION OR FORECLOSURE OF THE SECURITY INSTRUMENT.

		
	(d)
	Securitization Indemnification.

		
	(i)
	Borrower agrees to indemnify, hold harmless and defend the Indemnified Parties from and against any and all proceedings, losses, claims, damages, liabilities, penalties, costs and expenses (whether initiated or sought by Governmental Authorities or private parties), including Attorneys’ Fees and Costs, which may be incurred by any Indemnified Party (either directly or indirectly), which arise out of, are in any way related to, or are as a result of a claim that the Borrower Information contains an untrue statement of any material fact or the Borrower Information omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading (collectively, the “Securitization Indemnification”).

		
	(ii)
	Borrower will not be liable under the Securitization Indemnification if the claim is based on Borrower Information which Lender has materially misstated or materially misrepresented in the Disclosure Document.

(iii)    For purposes of this Section 10.02(d):

		
	(A)
	“Borrower Information” includes any information provided at any time to Lender or Loan Servicer by Borrower, any SPE Equity Owner, any Guarantor, any Property Manager or any Affiliates of the foregoing with respect to any of the following:

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	(1)
	Any Person listed in Section 10.02(d)(iii)(A).

		
	(2)
	The Loan.

		
	(3)
	The Mortgaged Property.

Borrower Information includes:  (i) representations and warranties made in the Loan Documents, (ii) financial statements of Borrower, any SPE Equity Owner, any Designated Entity for Transfers or any Guarantor, and (iii) operating statements and rent rolls with respect to the Mortgaged Property. Borrower Information does not include any information provided directly to Lender or Loan Servicer by a third party such as an appraiser or an environmental consultant.

		
	(B)
	The term “Lender” includes its officers and directors.

		
	(C)
	An “Issuer Person” includes all of the following:

		
	(1)
	Any Person that has filed the registration statement, if any, relating to the Securitization, and any Affiliate of such Person.

		
	(2)
	Any Person acting as issuer, depositor, sponsor and/or in a similar capacity with respect to the Securitization, and any Affiliate of such Person.

		
	(D)
	The “Issuer Group” includes all of the following:

		
	(1)
	Each director and officer of any Issuer Person.

		
	(2)
	Each entity that Controls any Issuer Person within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act.

		
	(E)
	The “Underwriter Group” includes all of the following:

		
	(1)
	Each entity which is acting as an underwriter, manager, placement agent, initial purchaser or in a similar capacity with respect to the Securitization.

		
	(2)
	Each entity that Controls any such entity described in Section 10.02(d)(iii)(E)(1) within the meaning of Section 15 of the Securities Act or Section 20 of the Securities Exchange Act and is acting as an underwriter, manager, 

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placement agent, initial purchaser or in a similar capacity with respect to the Securitization.

		
	(3)
	The directors and officers of the entities described in Section 10.02(d)(iii)(E)(1) and Section 10.02(d)(iii)(E)(2).

		
	(F)
	“Indemnified Party” or “Indemnified Parties” means one or more of Lender, Issuer Person, Issuer Group, and Underwriter Group.

		
	(e)
	Selection and Direction of Counsel. Counsel selected by Borrower to defend Indemnitees will be subject to the approval of those Indemnitees. In any circumstances in which the indemnity under this Article X applies, Lender may employ its own legal counsel and consultants to prosecute, defend or negotiate any claim or legal or administrative proceeding and Lender, with the prior written consent of Borrower (which will not be unreasonably withheld, delayed or conditioned) may settle or compromise any action or legal or administrative proceeding. However, unless an Event of Default has occurred and is continuing, or the interests of Borrower and Lender are in conflict, as determined by Lender in Lender’s Discretion, Lender will permit Borrower to undertake the actions referenced in this Article X so long as Lender approves such action, which approval will not be unreasonably withheld or delayed. Borrower will reimburse Lender upon demand for all costs and expenses incurred by Lender, including all costs of settlements entered into in good faith, consultants’ fees and Attorneys’ Fees and Costs.

		
	(f)
	Settlement or Compromise of Claims. Borrower will not, without the prior written consent of those Indemnitees who are named as parties to a claim or legal or administrative proceeding (“Claim”), settle or compromise the Claim if the settlement (i) results in the entry of any judgment that does not include as an unconditional term the delivery by the claimant or plaintiff to Lender of a written release of those Indemnitees, satisfactory in form and substance to Lender, or (ii) may materially and adversely affect Lender, as determined by Lender in Lender’s Discretion.

		
	(g)
	Effect of Changes to Loan on Indemnification Obligations. Borrower’s obligation to indemnify the Indemnitees will not be limited or impaired by any of the following, or by any failure of Borrower or any Guarantor to receive notice of or consideration for any of the following:

		
	(i)
	Any amendment or modification of any Loan Document.

		
	(ii)
	Any extensions of time for performance required by any Loan Document.

		
	(iii)
	Any provision in any of the Loan Documents limiting Lender’s recourse to property securing the Indebtedness, or limiting the personal liability of 

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Borrower or any other party for payment of all or any part of the Indebtedness.

		
	(iv)
	The accuracy or inaccuracy of any representations and warranties made by Borrower under this Loan Agreement or any other Loan Document.

		
	(v)
	The release of Borrower or any other Person, by Lender or by operation of law, from performance of any obligation under any Loan Document.

		
	(vi)
	The release or substitution in whole or in part of any security for the Indebtedness.

		
	(vii)
	Lender’s failure to properly perfect any Lien or security interest given as security for the Indebtedness.

		
	(h)
	Payments by Borrower. Borrower will, at its own cost and expense, do all of the following:

		
	(i)
	Pay or satisfy any judgment or decree that may be entered against any Indemnitee or Indemnitees in any legal or administrative proceeding incident to any matters against which Indemnitees are entitled to be indemnified under this Article X.

		
	(ii)
	Reimburse Indemnitees for any expenses paid or incurred in connection with any matters against which Indemnitees are entitled to be indemnified under this Article X.

		
	(iii)
	Reimburse Indemnitees for any and all expenses, including Attorneys’ Fees and Costs, paid or incurred in connection with the enforcement by Indemnitees of their rights under this Article X, or in monitoring and participating in any legal or administrative proceeding.

		
	(i)
	Other Obligations. The provisions of this Article X will be in addition to any and all other obligations and liabilities that Borrower may have under applicable law or under other Loan Documents, and each Indemnitee will be entitled to indemnification under this Article X without regard to whether Lender or that Indemnitee has exercised any rights against the Mortgaged Property or any other security, pursued any rights against any Guarantor, or pursued any other rights available under the Loan Documents or applicable law. If Borrower consists of more than one Person, the obligation of those Persons to indemnify the Indemnitees under this Article X will be joint and several. The obligation of Borrower to indemnify the Indemnitees under this Article X will survive any repayment or discharge of the Indebtedness, any foreclosure proceeding, any foreclosure sale, any delivery of any deed in lieu of foreclosure, and any release of record of the Lien of the Security Instrument. Notwithstanding the foregoing, if Lender has never been a mortgagee-in-possession of, or held title to, the 

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Mortgaged Property, Borrower will have no obligation to indemnify the Indemnitees under this Article X after the date of the release of record of the Lien of the Security Instrument by payment in full at the Maturity Date or by voluntary prepayment in full.

(j)    Reserved.

10.03    Reserved.

ARTICLE XI     MISCELLANEOUS PROVISIONS.

		
	11.01
	Waiver of Statute of Limitations, Offsets and Counterclaims. Borrower waives the right to assert any statute of limitations as a bar to the enforcement of this Loan Agreement or the Lien of the Security Instrument or to any action brought to enforce any Loan Document. Borrower waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or otherwise to offset any obligations to make the payments required by the Loan Documents. No failure by Lender to perform any of its obligations under the Loan Documents will be a valid defense to, or result in any offset against, any payments that Borrower is obligated to make under any of the Loan Documents.

		
	11.02
	Governing Law; Consent to Jurisdiction and Venue. 

		
	(a)
	This Loan Agreement, and any Loan Document which does not itself expressly identify the law which is to apply to it, will be governed by the laws of the Property Jurisdiction.

		
	(b)
	Borrower agrees that any controversy arising under or in relation to the Note, the Security Instrument, this Loan Agreement or any other Loan Document may be litigated in the Property Jurisdiction. The state and federal courts and authorities with jurisdiction in the Property Jurisdiction will have jurisdiction over all controversies that may arise under or in relation to the Note, any security for the Indebtedness or any other Loan Document. Borrower irrevocably consents to service, jurisdiction and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. However, nothing in this Section 11.02 is intended to limit Lender’s right to bring any suit, action or proceeding relating to matters under this Loan Agreement in any court of any other jurisdiction.

		
	11.03
	Notice. 

		
	(a)
	All Notices under or concerning this Loan Agreement will be in writing. Each Notice will be deemed given on the earliest to occur of:  (i) the date when the Notice is received by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery, or (iii) the third Business Day 

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after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as follows:

	
		
	If to Lender:
	Wells Fargo Bank, National Association
2010 Corporate Ridge, Suite 1000
McLean, Virginia 22102
Attention:  Loan Servicing Department

	If to Borrower:
	NoHo Commons Pacific Owner LLC
13949 Ventura Boulevard, Suite 350
Sherman Oaks, California 91423
Attention:  Karl Slovin

		
	(b)
	Any party to this Loan Agreement may change the address to which Notices intended for it are to be directed by means of Notice given to the other party in accordance with this Section 11.03. Each party agrees that it will not refuse or reject delivery of any Notice given in accordance with this Section 11.03, that it will acknowledge, in writing, the receipt of any Notice upon request by the other party and that any Notice rejected or refused by it will be deemed for purposes of this Section 11.03 to have been received by the rejecting party on the date so refused or rejected, as conclusively established by the records of the U.S. Postal Service or the courier service.

		
	(c)
	Any Notice under the Note and any other Loan Document that does not specify how Notices are to be given will be given in accordance with this Section 11.03.

		
	(d)
	Reserved.

		
	11.04
	Successors and Assigns Bound. This Loan Agreement will bind the respective successors and assigns of Borrower and Lender, and the rights granted by this Loan Agreement will inure to Lender’s successors and assigns.

		
	11.05
	Joint and Several (and Solidary) Liability. If more than one Person signs this Loan Agreement as Borrower, the obligations of such Persons will be joint and several. For a Mortgaged Property located in Louisiana, if more than one Person signs this Loan Agreement as Borrower, the obligations of such Persons with be joint and several and solidary, and wherever the phrase “joint and several” appears in this Loan Agreement, the phrase is amended to read “joint, several, and solidary.”

		
	11.06
	Relationship of Parties; No Third Party Beneficiary.

		
	(a)
	The relationship between Lender and Borrower will be solely that of creditor and debtor, respectively, and nothing contained in this Loan Agreement will create any other relationship between Lender and Borrower. Nothing contained in this Loan Agreement will constitute Lender as a joint venturer, partner or agent of 

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Borrower, or render Lender liable for any debts, obligations, acts, omissions, representations or contracts of Borrower.

		
	(b)
	No creditor of any party to this Loan Agreement and no other Person will be a third party beneficiary of this Loan Agreement or any other Loan Document. Without limiting the generality of the preceding sentence:  (i) any arrangement (“Servicing Arrangement”) between Lender and any Loan Servicer for loss sharing or interim advancement of funds will constitute a contractual obligation of such Loan Servicer that is independent of the obligation of Borrower for the payment of the Indebtedness, (ii) Borrower will not be a third party beneficiary of any Servicing Arrangement, and (iii) no payment by the Loan Servicer under any Servicing Arrangement will reduce the amount of the Indebtedness.

		
	11.07
	Severability; Amendments. 

		
	(a)
	The invalidity or unenforceability of any provision of this Loan Agreement will not affect the validity or enforceability of any other provision, and all other provisions will remain in full force and effect. This Loan Agreement contains the entire agreement among the parties as to the rights granted and the obligations assumed in this Loan Agreement.

		
	(b)
	This Loan Agreement may not be amended or modified except by a writing signed by the party against whom enforcement is sought.

		
	11.08
	Disclosure of Information. Borrower acknowledges that Lender may provide to third parties with an existing or prospective interest in the servicing, enforcement, evaluation, performance, ownership, purchase, participation or Securitization of the Loan, including any of the Rating Agencies, any entity maintaining databases on the underwriting and performance of commercial mortgage loans, as well as governmental regulatory agencies having regulatory authority over Lender, any and all information which Lender now has or may hereafter acquire relating to the Loan, the Mortgaged Property, Borrower, any SPE Equity Owner or any Guarantor, as Lender determines necessary or desirable and that such information may be included in disclosure documents in connection with a Securitization or syndication of participation interests, including a prospectus, prospectus supplement, offering memorandum, private placement memorandum or similar document (each, a “Disclosure Document”) and also may be included in any filing with the Securities and Exchange Commission pursuant to the Securities Act or the Securities Exchange Act. To the fullest extent permitted under applicable law, Borrower irrevocably waives all rights, if any, to prohibit such disclosure, including any right of privacy.

		
	11.09
	Determinations by Lender. Unless otherwise provided in this Loan Agreement, in any instance where the consent or approval of Lender may be given or is required, or where any determination, judgment or decision is to be rendered by Lender under this Loan Agreement, the granting, withholding or denial of such consent or approval and the rendering of such determination, judgment or decision will be made or exercised by 

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Lender (or its designated representative) at its sole and exclusive option and in its sole and absolute discretion.

		
	11.10
	Sale of Note; Change in Servicer; Loan Servicing. The Note or a partial interest in the Note (together with this Loan Agreement and the other Loan Documents) may be sold one or more times without prior Notice to Borrower. A sale may result in a change of the Loan Servicer. There also may be one or more changes of the Loan Servicer unrelated to a sale of the Note. If there is a change of the Loan Servicer, Borrower will be given Notice of the change. All actions regarding the servicing of the Loan evidenced by the Note, including the collection of payments, the giving and receipt of Notice, inspections of the Mortgaged Property, inspections of books and records, and the granting of consents and approvals, may be taken by the Loan Servicer unless Borrower receives Notice to the contrary. If Borrower receives conflicting Notices regarding the identity of the Loan Servicer or any other subject, any such Notice from Lender will govern.

11.11    Supplemental Financing.

		
	(a)
	This Section will apply only if at the time of any application referred to in Section 11.11(b), Freddie Mac has in effect a product described in its Multifamily Seller/Servicer Guide under which it purchases supplemental mortgages on multifamily properties that meet specified criteria (“Supplemental Mortgage Product”). For purposes of this Section 11.11 only, the term “Freddie Mac” will include any affiliate or subsidiary of Freddie Mac.

		
	(b)
	After the first anniversary of the date of the most recently incurred Senior Indebtedness, Freddie Mac will consider an application from an originating lender that is generally approved by Freddie Mac to sell mortgages to Freddie Mac under the Supplemental Mortgage Product (“Approved Seller/Servicer”) for the purchase by Freddie Mac of a proposed indebtedness of Borrower to the Approved Seller/Servicer to be secured by one or more Supplemental Instruments on the Mortgaged Property. Freddie Mac will purchase each Supplemental Loan secured by the Mortgaged Property if each of the following conditions is satisfied:

		
	(i)
	At the time of the proposed Supplemental Loan, no Event of Default may have occurred and be continuing and no event or condition may have occurred and be continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

		
	(ii)
	Borrower and the Mortgaged Property must be acceptable to Freddie Mac under its Supplemental Mortgage Product.

		
	(iii)
	New loan documents must be entered into to reflect each Supplemental Loan, such documents to be acceptable to Freddie Mac in its discretion.

		
	(iv)
	No Supplemental Loan may cause the combined debt service coverage ratio of the Mortgaged Property after the making of that Supplemental 

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Loan to be less than the Minimum DSCR. As used in this Section, the term “combined debt service coverage ratio” means, with respect to the Mortgaged Property, the ratio of:

		
	(A)
	the annual net operating income from the operations of the Mortgaged Property at the time of the proposed Supplemental Loan,

to

		
	(B)
	the aggregate of the annual principal and interest payable on all of the following:

		
	(I)
	the Indebtedness under this Loan Agreement (using a 30 year amortization schedule),

		
	(II)
	any “Indebtedness” as defined in any security instruments recorded against the Mortgaged Property (using a 30 year amortization schedule for any Supplemental Loans), and

		
	(III)
	the proposed “Indebtedness” for any Supplemental Loan (using a 30 year amortization schedule).

As used in this Section, “annual principal and interest” with respect to a floating rate loan will be calculated by Freddie Mac using an interest rate equal to one of the following:

		
	(X)
	If the loan has an internal interest rate cap, the Capped Interest Rate.

		
	(Y)
	If the loan has an external interest rate cap, the Strike Rate plus the Margin.

		
	(Z)
	If the loan has no interest rate cap, the greater of (I) 7%, or (II) the then-current LIBOR Index Rate plus the Margin plus 300 basis points.

The annual net operating income of the Mortgaged Property will be as determined by Freddie Mac in its discretion considering factors such as income in place at the time of the proposed Supplemental Loan and income during the preceding 12 months, and actual, historical and anticipated operating expenses. Freddie Mac will determine the combined debt service coverage ratio of the Mortgaged Property based on its underwriting. Borrower will provide Freddie Mac such financial statements and other information Freddie Mac may require to make these determinations.

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	(v)
	No Supplemental Loan may cause the combined loan to value ratio of the Mortgaged Property after the making of that Supplemental Loan to exceed the Maximum Combined LTV, as determined by Freddie Mac. As used in this Section, “combined loan to value ratio” means, with respect to the Mortgaged Property, the ratio, expressed as a percentage, of:

		
	(A)
	the aggregate outstanding principal balances of all of the following:

		
	(I)
	the Indebtedness under this Loan Agreement,

		
	(II)
	any “Indebtedness” as defined in any security instruments recorded against the Mortgaged Property, and

		
	(III)
	the proposed “Indebtedness” for any Supplemental Loan,

to

		
	(B)
	the value of the Mortgaged Property.

Freddie Mac will determine the combined loan to value ratio of the Mortgaged Property based on its underwriting. Borrower will provide Freddie Mac such financial statements and other information Freddie Mac may require to make these determinations. In addition, Freddie Mac, at Borrower’s expense, may obtain MAI appraisals of the Mortgaged Property in order to assist Freddie Mac in making the determinations under this Section. If Freddie Mac requires an appraisal, then the value of the Mortgaged Property that will be used to determine whether the Maximum Combined LTV has been met will be the lesser of the appraised value set forth in such appraisal or the value of the Mortgaged Property as determined by Freddie Mac.

		
	(vi)
	Borrower’s organizational documents are amended to permit Borrower to incur additional debt in the form of Supplemental Loans (Lender will consent to such amendment(s)).

		
	(vii)
	One or more Persons acceptable to Freddie Mac executes and delivers to the Approved Seller/Servicer a Guaranty in a form acceptable to Freddie Mac with respect to the exceptions to non-recourse liability described in Freddie Mac’s form promissory note, unless Freddie Mac has elected to waive its requirement for a Guaranty.

		
	(viii)
	The loan term of each Supplemental Loan will be coterminous with the Senior Indebtedness or longer than the Senior Indebtedness, in Freddie Mac’s discretion.

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	(ix)
	The Prepayment Premium Period of each Supplemental Loan will be coterminous with the Prepayment Premium Period or the combined Lockout Period and Defeasance Period, as applicable, of the Senior Indebtedness.

		
	(x)
	The interest rate of each Supplemental Loan will be determined by Freddie Mac in its discretion.

		
	(xi)
	Lender enters into an intercreditor agreement (“Intercreditor Agreement”) acceptable to Freddie Mac and to Lender for each Supplemental Loan.

		
	(xii)
	Borrower’s payment of fees and other expenses charged by Lender, Freddie Mac, the Approved Seller/Servicer, and the Rating Agencies (including reasonable Attorneys’ Fees and Costs) in connection with reviewing and originating each Supplemental Loan.

		
	(xiii)
	Commencing on the date that the first Supplemental Loan is originated and continuing for so long as any Supplemental Loan is outstanding, the first lien Senior Lender will begin collection of any deferred Monthly Deposit or Revised Monthly Deposit for Capital Replacements in accordance with Section 4.04(e) (if applicable) as well as Imposition Reserve Deposits for any of the following Impositions marked ‘Deferred’ in Section 4.02(a):

		
	(A)
	Property Insurance premiums or premiums for other Insurance required by Lender under Section 6.10.

(B)    Taxes and payments in lieu of taxes

(C)    Ground Rents

Such deposits will be credited to the payment of any such required Imposition Reserve Deposits under any Supplemental Loan.

		
	(xiv)
	If any covenants, conditions and restrictions affecting the Mortgaged Property provide for a lien for any assessments or other unpaid amounts, Borrower will provide satisfactory evidence that such lien will be subordinate to the lien of the Supplemental Instrument.

		
	(xv)
	All other requirements of the Supplemental Mortgage Product must be met, unless Freddie Mac has elected to waive one or more of its requirements.

		
	(xvi)
	Reserved.

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	(xvii)
	Reserved.

		
	(xviii)
	Reserved.

		
	(c)
	No later than 5 Business Days after Lender’s receipt of a written request from Borrower, Lender will provide the following information to an Approved Seller/Servicer:

		
	(i)
	The then-current outstanding principal balance of the Senior Indebtedness.

		
	(ii)
	Payment history of the Senior Indebtedness.

		
	(iii)
	Whether any Reserve Funds are being collected on the Senior Indebtedness and the amount of each such Reserve Fund deposit as of the date of the request.

		
	(iv)
	Whether any Repairs, Capital Replacements or improvements or rental achievement or burn-off guaranty requirements are existing or outstanding under the terms of the Senior Indebtedness.

		
	(v)
	A copy of the most recent inspection report for the Mortgaged Property.

		
	(vi)
	Whether any modifications or amendments have been made to the Loan Documents for the Senior Indebtedness since origination of the Senior Indebtedness and, if applicable, a copy of such modifications and amendments.

		
	(vii)
	Whether to Lender’s knowledge any Event of Default exists under the Senior Indebtedness.

Lender will only be obligated to provide this information in connection with Borrower’s request for a Supplemental Loan from an Approved Seller/Servicer. Notwithstanding anything in this Section to the contrary, if Freddie Mac is the owner of the Note, this Section 11.11(c) is not applicable.

		
	(d)
	Lender will have no obligation to consent to any mortgage or Lien on the Mortgaged Property that secures any indebtedness other than the Indebtedness, except as set forth in this Loan Agreement.

		
	(e)
	If a Supplemental Loan is made to Borrower, Borrower agrees that the terms of the Intercreditor Agreement will govern with respect to any distributions of excess proceeds by Lender to the Supplemental Lender, and Borrower agrees that Lender may distribute any excess proceeds received by Lender pursuant to the Loan Documents to Supplemental Lender pursuant to the Intercreditor Agreement.

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	11.12
	Defeasance. (Section Applies if Loan is Assigned to REMIC Trust Prior to the Cut-off Date and if the Note provides for Defeasance). This Section 11.12 will apply only if the Note is assigned to a REMIC trust prior to the Cut-off Date, and if the Note provides for Defeasance. If both of these conditions are met, then, subject to Section 11.12(a) and (c), Borrower will have the right to defease the Loan in whole (“Defeasance”) and obtain the release of the Mortgaged Property from the Lien of the Security Instrument upon the satisfaction of each of the following conditions:

		
	(a)
	Borrower will not have the right to obtain Defeasance at any of the following times:

		
	(i)
	If the Loan is not assigned to a REMIC trust.

		
	(ii)
	During the Lockout Period.

		
	(iii)
	After the expiration of the Defeasance Period.

		
	(iv)
	After Lender has accelerated the maturity of the unpaid principal balance of, accrued interest on, and other amounts payable under, the Note pursuant to Section 11 of the Note.

		
	(b)
	Borrower will give Lender Notice (“Defeasance Notice”) specifying a Business Day (“Defeasance Closing Date”) on which Borrower desires to close the Defeasance. The Defeasance Closing Date specified by Borrower may not be more than 60 calendar days, nor less than 30 calendar days, after the date on which Lender receives the Defeasance Notice. Lender will acknowledge receipt of the Defeasance Notice and will notify Borrower of the identity of the accommodation borrower (“Successor Borrower”).

		
	(c)
	The Defeasance Notice must be accompanied by a $10,000 non-refundable fee (“Defeasance Fee”) for Lender’s processing of the Defeasance. If Lender does not receive the Defeasance Fee, then Borrower’s right to obtain Defeasance pursuant to that Defeasance Notice will terminate.

		
	(d)
	(i)    If Borrower timely pays the Defeasance Fee, but Borrower fails to perform its other obligations under this Section, Lender will have the right to retain the Defeasance Fee as liquidated damages for Borrower’s default and, except as provided in Section 11.12(d)(ii), Borrower will be released from all further obligations under this Section 11.12. Borrower acknowledges that Lender will incur financing costs in arranging and preparing for the release of the Mortgaged Property from the Lien of the Security Instrument in reliance on the executed Defeasance Notice. Borrower agrees that the Defeasance Fee represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Loan 

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Agreement, of the damages Lender will incur by reason of Borrower’s default.

		
	(ii)
	If the Defeasance is not consummated on the Defeasance Closing Date for any reason, Borrower agrees to reimburse Lender for all third party costs and expenses (other than financing costs covered by Section 11.12(d)(i)) incurred by Lender in reliance on the executed Defeasance Notice, within 5 Business Days after Borrower receives a written demand for payment, accompanied by a statement, in reasonable detail, of Lender’s third party costs and expenses.

		
	(iii)
	All payments required to be made by Borrower to Lender pursuant to this Section 11.12 will be made by wire transfer of immediately available funds to the account(s) designated by Lender in its acknowledgement of the Defeasance Notice.

		
	(e)
	No Event of Default has occurred and is continuing.

		
	(f)
	Borrower will deliver each of the following documents to Lender, in form and substance satisfactory to Lender, on or prior to the Defeasance Closing Date, unless Lender has issued a written waiver of its right to receive any such document:

		
	(i)
	One or more opinions of counsel for Borrower confirming each of the following:

		
	(A)
	Lender has a valid and perfected first Lien and first priority security interest in the Defeasance Collateral and the proceeds of the Defeasance Collateral.

		
	(B)
	The Pledge Agreement is duly authorized, executed, delivered and enforceable against Borrower in accordance with its terms.

		
	(C)
	If, as of the Defeasance Closing Date, the Note is held by a REMIC trust, then each of the following is correct:

		
	(1)
	The Defeasance has been effected in accordance with the requirements of Treasury Regulation Section 1.860G-2(a)(8) (as such regulation may be modified, amended or replaced from time to time).

		
	(2)
	The qualification and status of the REMIC trust as a REMIC will not be adversely affected or impaired as a result of the Defeasance.

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	(3)
	The REMIC trust will not incur a tax under Section 860G(d) of the Tax Code as a result of the Defeasance.

		
	(D)
	The Defeasance will not result in a “sale or exchange” of the Note within the meaning of Section 1001(c) of the Tax Code and the temporary and final regulations promulgated thereunder.

		
	(ii)
	A written certificate from an independent certified public accounting firm (reasonably acceptable to Lender), confirming that the Defeasance Collateral will generate cash sufficient to make all Scheduled Debt Payments as they fall due under the Note, including full payment due on the Note on the Maturity Date.

		
	(iii)
	Lender’s form of a pledge and security agreement (“Pledge Agreement”) and financing statements which pledge and create a first priority security interest in the Defeasance Collateral in favor of Lender.

		
	(iv)
	Lender’s form of a transfer and assumption agreement (“Transfer and Assumption Agreement”), pursuant to which Borrower and any Guarantor (in each case, subject to satisfaction of all requirements under this Loan Agreement) will be relieved from liability in connection with the Loan to the extent described in Sections 7.05(b) and 7.05(c), respectively, and Successor Borrower will assume all remaining obligations.

		
	(v)
	Forms of all documents necessary to release the Mortgaged Property from the Liens created by the Security Instrument and related UCC financing statements (collectively, “Release Instruments”), each in appropriate form required by the Property Jurisdiction.

		
	(vi)
	Any other opinions, certificates, documents or instruments that Lender may reasonably request.

		
	(g)
	Borrower will deliver to Lender, on or prior to the Defeasance Closing Date, each of the following:

		
	(i)
	The Defeasance Collateral, which meets all of the following requirements:

		
	(A)
	It is owned by Borrower, free and clear of all Liens and claims of third-parties.

		
	(B)
	It is in an amount sufficient to provide for (1) redemption payments to occur prior, but as close as possible, to all successive Installment Due Dates occurring under the Note after the Defeasance Closing Date, and (2) delivery of redemption proceeds at least equal to the amount of principal and interest due on the 

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Note on each Installment Due Date including full payment due on the Note on the Maturity Date (“Scheduled Debt Payments”).

		
	(C)
	All redemption payments received from the Defeasance Collateral will be paid directly to Lender to be applied on account of the Scheduled Debt Payments occurring after the Defeasance Closing Date.

		
	(D)
	The pledge of the Defeasance Collateral will be effected through the book-entry facilities of a qualified securities intermediary designated by Lender in conformity with all applicable laws.

		
	(ii)
	All accrued and unpaid interest and all other sums due under the Note, this Loan Agreement and under the other Loan Documents, including all amounts due under Section 11.12(i), up to the Defeasance Closing Date.

		
	(h)
	Reserved.

		
	(i)
	Borrower will pay all reasonable costs and expenses incurred by Lender in connection with the Defeasance in full on or prior to the Defeasance Closing Date, which payment is required prior to Lender’s issuance of the Release Instruments and whether or not Defeasance is completed. Such expenses include all fees, costs and expenses incurred by Lender and its agents in connection with the Defeasance (including Attorneys’ Fees and Costs for the review and preparation of the Pledge Agreement and of the other materials described in this Loan Agreement and any related documentation, Rating Agencies’ fees, or other costs related to the Defeasance).

Lender reserves the right to require that Borrower post a deposit to cover costs which Lender reasonably anticipates that Lender will incur in connection with the Defeasance.

		
	(j)
	No Transfer Fee will be payable to Lender upon a Defeasance made in accordance with this Section 11.12.

		
	(k)
	Reserved.

		
	11.13
	Lender’s Rights to Sell or Securitize. Borrower acknowledges that Lender, and each successor to Lender’s interest, may (without prior Notice to Borrower or Borrower’s prior consent), sell or grant participations in the Loan (or any part of the Loan), sell or subcontract the servicing rights related to the Loan, securitize the Loan or place the Loan in a trust. Borrower agrees to cooperate with all reasonable requests of Lender in connection with any of the foregoing including taking the following actions: 

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	(a)
	Executing any financing statements or other documents deemed necessary by Lender or its transferee to create, perfect or preserve the rights and interest to be acquired by such transferee.

		
	(b)
	Delivering revised organizational documents, counsel opinions, and executed amendments to the Loan Documents satisfactory to the Rating Agencies.

		
	(c)
	Providing updated financial information with appropriate verification through auditors’ letters, if required by Lender. (If Lender requires that Borrower’s updated financial information be accompanied by appropriate verification through auditors’ letters, then Lender will reimburse Borrower for the costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters.)

		
	(d)
	Providing updated information on all litigation proceedings affecting Borrower or any Borrower Principal as required in Section 6.16.

		
	 (e)
	Reviewing information contained in any Disclosure Document and providing a mortgagor estoppel certificate, written confirmation of Borrower’s indemnification obligations under this Loan Agreement, and such other information about Borrower, any SPE Equity Owner, any Guarantor, any Property Manager or the Mortgaged Property as Lender may require for Lender’s offering materials.

		
	11.14
	Cooperation with Rating Agencies and Investors. Borrower covenants and agrees that if Lender decides to include the Loan as an asset of a Secondary Market Transaction, Borrower will do all of the following:  

		
	(a)
	At Lender’s request, meet with representatives of the Rating Agencies and/or investors to discuss the business and operations of the Mortgaged Property.

		
	(b) 
	Permit Lender or its representatives to provide related information to the Rating Agencies and/or investors.

		
	(c)
	Cooperate with the reasonable requests of the Rating Agencies and/or investors in connection with all of the foregoing.

		
	11.15
	Letter of Credit Requirements. 

		
	(a)
	Any Letter of Credit required under this Loan Agreement must satisfy the following conditions:

		
	(i)
	It must be a clean, irrevocable, unconditional standby letter of credit.

		
	(ii)
	It must name Lender as the sole beneficiary and permit Lender to assign the Letter of Credit without further consent from Issuer.

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	(iii)
	It must have an initial term of not less than 12 months.

		
	(iv)
	It must be in the form required by Lender.

		
	(v)
	It must provide that it may be drawn on by Lender or Loan Servicer, in whole or in part, by presentation to Issuer of a sight draft without any other restrictions on the right to draw.

		
	(vi)
	It must be issued by an Issuer meeting Lender’s requirements, which Issuer (i) must be an Eligible Institution, and (ii) may not, unless Lender agrees in writing, be an affiliate of Borrower or Lender.

		
	(vii)
	It must be obtained on behalf of Borrower by a Person other than Borrower’s general partners or managing members if Borrower is a general or limited partnership or limited liability company. Neither Borrower nor the general partners or managing members, if applicable, may have any liability or other obligations under any reimbursement agreement with respect to the Letter of Credit. 

		
	(viii)
	It may not be secured by a lien on all or any part of the Mortgaged Property or related Personalty.

		
	(ix)
	When delivered to Lender, it must be accompanied by an opinion acceptable to Lender in Lender’s Discretion issued by counsel to the Issuer that includes opinions as to Issuer’s power and authority to issue the Letter of Credit and the enforceability of the Letter of Credit against Issuer and an updated nonconsolidation opinion with regard to any such Letter of Credit in form and substance satisfactory to Lender.

		
	(b)
	If at any time the Issuer of a Letter of Credit held by Lender ceases to be an Eligible Institution, Lender will have the right to immediately draw down the Letter of Credit in full and hold the Proceeds in an escrow account in accordance with the terms of this Loan Agreement.

		
	(c)
	Each Letter of Credit held by Lender pursuant to this Loan Agreement provides additional collateral for the Indebtedness in addition to the lien of the Security Instrument.

		
	11.16
	Reserved.

11.17    Reserved. 

		
	11.18
	Reserved.

		
	11.19
	State Specific Provisions.  Reserved.

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	11.20
	Time is of the Essence. Time is of the essence with respect to each covenant of this Loan Agreement.

ARTICLE XII    DEFINITIONS.

The following terms, when used in this Loan Agreement (including when used in the recitals), will have the following meanings:

“Affiliate” of any Person means:

(i)    Any other individual or entity that is, directly or indirectly, one of the following:

(A)    In Control of the applicable Person.

(B)    Under the Control of the applicable Person.

(C)    Under common Control with the applicable Person.

		
	(ii)
	Any individual that is a director or officer of the applicable Person.

		
	(iii)
	Any individual that is a director or officer of any entity described in clause (i) of this definition.

“Approved Seller/Servicer” is defined in Section 11.11(b).

“Assignment of Management Agreement” means the Assignment of Management Agreement and Subordination of Management Fees, dated the same date as this Loan Agreement, among Borrower, Lender and Property Manager, including all schedules, riders, allonges and addenda, as such Assignment of Management Agreement may be amended from time to time, and any future Assignment of Management Agreement and Subordination of Management Fees executed in accordance with Section 6.09(d).

“Attorneys’ Fees and Costs” means:  (i) fees and out of pocket costs of Lender’s and Loan Servicer’s attorneys, as applicable, including costs of Lender’s and Loan Servicer’s in-house counsel, support staff costs, costs of preparing for litigation, computerized research, telephone and facsimile transmission expenses, mileage, deposition costs, postage, duplicating, process service, videotaping and similar costs and expenses; (ii) costs and fees of expert witnesses, including appraisers; (iii) investigatory fees; and (iv) costs for any opinion required by Lender pursuant to the terms of the Loan Documents.

“Bankruptcy Code” means the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq., as amended from time to time.

“Borrower” means all Persons identified as “Borrower” in the first paragraph of this Loan Agreement, together with their successors and assigns.

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“Borrower Information” is defined in Section 10.02(d).

“Borrower Principal” means any of the following:

		
	(i)
	Any general partner of Borrower (if Borrower is a partnership).

		
	(ii)
	Any manager or managing member of Borrower (if Borrower is a limited liability company).

		
	(iii)
	Any Person (limited partner, member or shareholder) with a collective direct or indirect equity interest in Borrower equal to or greater than 25%.

		
	(iv)
	Any Guarantor of all or any portion of the Loan or of any obligations of Borrower under the Loan Documents.

“Borrower Proof of Loss Threshold” means $200,000.

“Borrower Proof of Loss Maximum” means $800,000.

“Business Day” means any day other than a Saturday, a Sunday, or any other day on which Lender or the national banking associations are not open for business.

“Cap Agreement” means any interest rate cap agreement, interest rate swap agreement or other interest rate-hedging contract or agreement, in a form acceptable to Lender, obtained by Borrower from a Cap Provider as a requirement of any Loan Document or as a condition of Lender’s making the Loan.

“Cap Collateral” means all of the following:

		
	(i)
	The Cap Agreement.

		
	(ii)
	The Cap Payments.

		
	(iii)
	All rights of Borrower under any Cap Agreement and all rights of Borrower to all Cap Payments, including contract rights and general intangibles, whether existing now or arising after the date of this Loan Agreement.

		
	(iv)
	All rights, liens and security interests or guaranties granted by a Cap Provider or any other Person to secure or guaranty payment of any Cap Payments whether existing now or granted after the date of this Loan Agreement.

		
	(v)
	All documents, writings, books, files, records and other documents arising from or relating to any of the foregoing, whether existing now or created after the date of this Loan Agreement.

		
	(vi)
	All cash and non-cash proceeds and products of (ii) through (v) of this definition.

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“Cap Payment(s)” means any and all monies payable pursuant to any Cap Agreement by a Cap Provider.

“Cap Provider” means the third-party financial institution approved by Lender that is the counterparty under any Cap Agreement or Replacement Cap Agreement.

“Capital Replacement” means the replacement of those items listed on Exhibit F.

“Capped Interest Rate” is defined in the Note, if applicable.

“Claim” is defined in Section 10.02(f).

“Clean Site Assessment” is defined in Section 7.05(b)(i).

“Closing Date” means the date on which Lender disburses the proceeds of the Loan to or for the account of Borrower.

“Commitment Letter” means the fully executed commitment letter or early rate lock application between Lender and Borrower issued in connection with the Loan, as such document may have been modified, amended or extended.

“Completion Date” means, with respect to any Repair, the date specified for that Repair in the Repair Schedule of Work (Exhibit C), as such date may be extended by Lender in writing.

“Condemnation” is defined in Section 6.11(a).

“Control” means to possess, directly or indirectly, the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or otherwise, including the power to elect a majority of the directors or trustees of a corporation or trust, as the case may be.

“Corporate Lease” means a Lease for one or more residential units under which one entity will rent all such units from Borrower and will have the right to sublease such units to individual subtenants.

 “Cut-off Date” is defined in the Note, if applicable.

“Default Rate” is defined in the Note.

“Defeasance” is defined in Section 11.12.

“Defeasance Closing Date” is defined in Section 11.12(b).

“Defeasance Collateral” means:  (i) a Freddie Mac Debt Security, (ii) a Fannie Mae Debt Security, (iii) U.S. Treasury Obligations, or (iv) FHLB Obligations.

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“Defeasance Fee” is defined in Section 11.12(c).

“Defeasance Notice” is defined in Section 11.12(b).

“Defeasance Period” is defined in the Note, if applicable.

“Designated Entity for Transfers” means each entity so identified in Exhibit I, and that entity’s successors and permitted assigns.

“Disclosure Document” is defined in Section 11.08.

“Economic Sanctions Laws” means the foreign assets control regulations, 31 C.F.R. Chapter V, as amended, and any amending legislation or executive order relating to such legislation, as administered by OFAC.

“Eligible Account” means an identifiable account which is separate from all other funds held by the holding institution that is either (i) an account or accounts maintained with the corporate trust department of a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts maintained with the corporate trust department of a federal or state chartered depository institution or trust company acting in its fiduciary capacity which, in the case of a state chartered depository institution or trust company is subject to regulations substantially similar to 12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal and state authority. An Eligible Account will not be evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” means a federal or state chartered depository institution or trust company 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 Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., P-1 by Moody’s Investors Service, Inc. and F-3 by Fitch, Inc. in the case of accounts in which funds are held for 30 days or less or, in the case of letters of credit or accounts in which funds are held for more than 30 days, the long term unsecured debt obligations of which are rated at least “A” by Fitch, Inc. and Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., and “A2” by Moody’s Investors Service, Inc. If at any time an Eligible Institution does not meet the required rating, the Loan Servicer must move the Eligible Account within 30 days of such event to an appropriately rated Eligible Institution.

“Environmental Inspections” is defined in Section 6.12(e).

“Environmental Permit” means any permit, license, or other authorization issued under any Hazardous Materials Law with respect to any activities or businesses conducted on or in relation to the Mortgaged Property.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

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“Event of Default” means the occurrence of any event listed in Section 9.01.

“Extension Period” is defined in the Note, if applicable.

“Fannie Mae Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by the Federal National Mortgage Association.

“FHLB Obligations” mean direct, non-callable and non-redeemable securities issued, or fully insured as to payment, by the Federal Home Loan Bank.

“Fixtures” means all property owned by Borrower which is attached to the Land or the Improvements so as to constitute a fixture under applicable law, including: machinery, equipment, engines, boilers, incinerators and installed building materials; systems and equipment for the purpose of supplying or distributing heating, cooling, electricity, gas, water, air or light; antennas, cable, wiring and conduits used in connection with radio, television, security, fire prevention or fire detection or otherwise used to carry electronic signals; telephone systems and equipment; elevators and related machinery and equipment; fire detection, prevention and extinguishing systems and apparatus; security and access control systems and apparatus; plumbing systems; water heaters, ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances; light fixtures, awnings, storm windows and storm doors; pictures, screens, blinds, shades, curtains and curtain rods; mirrors; cabinets, paneling, rugs and floor and wall coverings; fences, trees and plants; swimming pools; and exercise equipment.

“Freddie Mac” means the Federal Home Loan Mortgage Corporation.

“Freddie Mac Debt Security” means any non-callable bond, debenture, note, or other similar debt obligation issued by Freddie Mac.

“Freddie Mac Web Site” means the web site of Freddie Mac, located at www.freddiemac.com.

“GAAP” means generally accepted accounting principles.

“Governmental Authority” means any board, commission, department, agency or body of any municipal, county, state or federal governmental unit, or any subdivision of any of them, that has or acquires jurisdiction over the Mortgaged Property, or the use, operation or improvement of the Mortgaged Property, or over Borrower.

“Guarantor” means the Person(s) required by Lender to guaranty all or a portion of Borrower’s obligations under the Loan Documents, as set forth in the Guaranty. The required Guarantors as of the date of this Loan Agreement are set forth in Exhibit I.

“Guaranty” means the Guaranty executed by Guarantor and/or any replacement or supplemental guaranty executed pursuant to the terms of this Loan Agreement.

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“Hazardous Materials” means petroleum and petroleum products and compounds containing them, including gasoline, diesel fuel and oil; explosives; flammable materials; radioactive materials; polychlorinated biphenyls (PCBs) and compounds containing them; lead and lead-based paint; asbestos or asbestos containing materials in any form that is or could become friable; underground or above-ground storage tanks, whether empty or containing any substance; any substance the presence of which on the Mortgaged Property is prohibited by any Governmental Authority; any substance that requires special handling and any other material or substance now or in the future that (i) is defined as a “hazardous substance,” “hazardous material,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “contaminant,” or “pollutant” by or within the meaning of any Hazardous Materials Law, or (ii) is regulated in any way by or within the meaning of any Hazardous Materials Law.

“Hazardous Materials Law” and “Hazardous Materials Laws” means any and all federal, state and local laws, ordinances, regulations and standards, rules, policies and other governmental requirements, administrative rulings and court judgments and decrees in effect now or in the future, including all amendments, that relate to Hazardous Materials or the protection of human health or the environment and apply to Borrower or to the Mortgaged Property. Hazardous Materials Laws include the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq., the Toxic Substance Control Act, 15 U.S.C. Section 2601, et seq., the Clean Water Act, 33 U.S.C. Section 1251, et seq., and the Hazardous Materials Transportation Act, 49 U.S.C. Section 5101 et seq., and their state analogs.

“HVAC System” is defined in Section 6.10(a)(v).

“Immediate Family Members” means a Person’s spouse, parent, child (including stepchild), grandchild (including step-grandchild) or sibling.

“Imposition Reserve Deposits” is defined in Section 4.02(a).

“Impositions” is defined in Section 4.02(a).

“Improvements” means the buildings, structures and improvements now constructed or at any time in the future constructed or placed upon the Land, including any future alterations, replacements and additions.

“Indebtedness” means the principal of, interest at the fixed or variable rate set forth in the Note on, and all other amounts due at any time under, the Note, this Loan Agreement or any other Loan Document, including prepayment premiums, late charges, default interest, and advances as provided in Section 9.02 to protect the security of the Security Instrument.
“Indemnified Party/ies” is defined in Section 10.02(d).
“Indemnitees” is defined in Section 10.02(a).

“Installment Due Date” is defined in the Note.

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“Insurance” means Property Insurance, liability insurance and all other insurance that Lender requires Borrower to maintain pursuant to this Loan Agreement.

“Intercreditor Agreement” is defined in Section 11.11(b).

“Investor Interest Transfer” is defined in Section 7.03(d)(vi).

“Investor Interests” is defined in Section 7.03(d)(vi).

“Issuer” means the issuer of any Letter of Credit. 
 
“Issuer Group” is defined in Section 10.02(d).

“Issuer Person” is defined in Section 10.02(d).

“Land” means the land described in Exhibit A.

“Leases” means all present and future leases, subleases, licenses, concessions or grants or other possessory interests now or hereafter in force, whether oral or written, covering or affecting the Mortgaged Property, or any portion of the Mortgaged Property (including proprietary leases or occupancy agreements if Borrower is a cooperative housing corporation), and all modifications, extensions or renewals.

“Lender” means the entity identified as “Lender” in the first paragraph of this Loan Agreement, or any subsequent holder of the Note.

“Lender’s Discretion” means Lender’s reasonable discretion unless otherwise set forth in this Loan Agreement.

“Letter of Credit” means any letter of credit required under the terms of this Loan Agreement or any other Loan Document.

“LIBOR Index Rate” is defined in the Note, if applicable.

“Lien” means any mortgage, deed of trust, deed to secure debt, security interest or other lien or encumbrance on the Mortgaged Property.

“Loan” is defined on Page 1 of this Loan Agreement.

“Loan Agreement” means this Multifamily Loan and Security Agreement.

“Loan Application” is defined in Section 5.16(a).

“Loan Documents” means the Note, the Security Instrument, this Loan Agreement, all guaranties, all indemnity agreements, all collateral agreements, UCC filings, O&M Programs, 

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the MMP and any other documents now or in the future executed by Borrower, any Guarantor or any other Person in connection with the Loan evidenced by the Note, as such documents may be amended from time to time.

“Loan Servicer” means the entity that from time to time is designated by Lender to collect payments and deposits and receive Notices under the Note, the Security Instrument, this Loan Agreement and any other Loan Document, and otherwise to service the Loan evidenced by the Note for the benefit of Lender. 

“Lockout Period,” if applicable, is defined in the Note.

“Major Building System” means one that is integral to the Improvements, providing basic services to the tenants and other occupants of the Improvements including:

•Electrical (electrical lines or power upgrades, excluding fixture replacement).
•HVAC (central and unit systems, excluding replacement of in kind unit systems).
•Plumbing (supply and waste lines, excluding fixture replacement).
•Structural (foundation, framing, and all building support elements).

“Manager” or “Managers” means a Person who is named or designated as a manager or managing member or otherwise acts in the capacity of a manager or managing member of a limited liability company in a limited liability company agreement or similar instrument under which the limited liability company is formed or operated.

“Margin” is defined in the Note, if applicable.

“Material Adverse Effect” means a significant detrimental effect on:  (i) the Mortgaged Property, (ii) the business, prospects, profits, operations or condition (financial or otherwise) of Borrower, (iii) the enforceability, validity, perfection or priority of the Lien of any Loan Document, or (iv) the ability of Borrower to perform any obligations under any Loan Document.

“Maturity Date” means the Scheduled Maturity Date, as defined in the Note.

“Maximum Combined LTV” [CHOOSE ONE AS REQUIRED BY THE COMMITMENT OR ERLA:] means_________%. [INSERT LTV REQUIRED BY COMMITMENT OR ERLA].

“Membership Interests” is defined in Section 5.24.

“Membership Interests Seller” is defined in Section 5.24.

“Minimum DSCR” means, with respect to a Supplemental Loan, (i) if the Senior Indebtedness bears interest at a fixed rate, 1.25:1, or (ii) if the Senior Indebtedness bears interest at a floating rate, 1.10:1.

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“Minimum Occupancy” means __% of units at the Mortgaged Property with leases that comply with Section 5.11, Section 6.09(e)(v)(E), and Section 6.15.

“MMP” means a moisture management plan to control water intrusion and prevent the development of Mold or moisture at the Mortgaged Property throughout the term of this Loan Agreement.

“Modified Non-Residential Lease” means an extension or modification of any Non-Residential Lease, which Non-Residential Lease was in existence as of the date of this Loan Agreement.

“Mold” means mold, fungus, microbial contamination or pathogenic organisms.

“Mortgaged Property” means all of Borrower’s present and future right, title and interest in and to all of the following:
		
	(i)
	The Land, or, if Borrower’s interest in the Land is pursuant to a Ground Lease, the Ground Lease and the Leasehold Estate.

		
	(ii)
	The Improvements.

		
	(iii)
	The Fixtures.

		
	(iv)
	The Personalty.

		
	(v)
	All current and future rights, including air rights, development rights, zoning rights and other similar rights or interests, easements, tenements, rights of way, strips and gores of land, streets, alleys, roads, sewer rights, waters, watercourses and appurtenances related to or benefiting the Land or the Improvements, or both, and all rights-of-way, streets, alleys and roads which may have been or may in the future be vacated.

		
	(vi)
	All proceeds paid or to be paid by any insurer of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, whether or not Borrower obtained the Insurance pursuant to Lender’s requirement.

		
	(vii)
	All awards, payments and other compensation made or to be made by any municipal, state or federal authority with respect to the Land or the Leasehold Estate, as applicable, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property, including any awards or settlements resulting from Condemnation proceedings or the total or partial taking of the Land, the Improvements, the Fixtures, the Personalty or any other part of the Mortgaged Property under the power of eminent domain or otherwise and including any conveyance in lieu thereof.

		
	(viii)
	All contracts, options and other agreements for the sale of the Land, or the Leasehold Estate, as applicable, the Improvements, the Fixtures, the Personalty or 

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any other part of the Mortgaged Property entered into by Borrower now or in the future, including cash or securities deposited to secure performance by parties of their obligations.

		
	(ix)
	All proceeds from the conversion, voluntary or involuntary, of any of the items described in items (i) through (viii) of this definition, into cash or liquidated claims, and the right to collect such proceeds.

		
	(x)
	All Rents and Leases.

		
	(xi)
	All earnings, royalties, accounts receivable, issues and profits from the Land, the Improvements or any other part of the Mortgaged Property, and all undisbursed proceeds of the Loan.

		
	(xii) 
	All Imposition Reserve Deposits.

		
	(xiii)
	All refunds or rebates of Impositions by any Governmental Authority or insurance company (other than refunds applicable to periods before the real property tax year in which this Loan Agreement is dated).

		
	(xiv)
	All tenant security deposits which have not been forfeited by any tenant under any Lease and any bond or other security in lieu of such deposits.

		
	(xv)
	All names under or by which any of the Mortgaged Property may be operated or known, and all trademarks, trade names and goodwill relating to any of the Mortgaged Property.

		
	(xvi)
	If required by the terms of Section 4.05 or elsewhere in this Loan Agreement, all rights under any Letter of Credit and the Proceeds, as such Proceeds may increase or decrease from time to time.

		
	(xvii) 
	If the Note provides for interest to accrue at a floating or variable rate and there is a Cap Agreement, the Cap Collateral.

		
	(xviii)
	through (xxv) are Reserved.

“New Non-Residential Lease” is any Non-Residential Lease not in existence as of the date of this Loan Agreement.

“Non-Residential Lease” is a Lease of a portion of the Mortgaged Property to be used for non-residential purposes.

“Non-U.S. Equity Holder” means any Person with a collective equity interest (whether direct or indirect of 10% or more in Borrower, and which is either (a) an individual who is not a citizen of the United States, or (b) an entity formed outside the United States.

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“Note” means the Multifamily Note (including any Amended and Restated Note, Consolidated, Amended and Restated Note, or Extended and Restated Note) executed by Borrower in favor of Lender and dated as of the date of this Loan Agreement, including all schedules, riders, allonges and addenda, as such Multifamily Note may be amended, modified and/or restated from time to time.

“Notice” or “Notices” means all notices, demands and other communication required under the Loan Documents, provided in accordance with the requirements of Section 11.03.

“O&M Program” is defined in Section 6.12(c) and consists of the following: Operations and Maintenance program for Asbestos as set forth in the environmental report dated September 20, 2016, prepared by Partner Engineering and Science, Inc.

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets Control.

“Person” means any natural person, sole proprietorship, corporation, general partnership, limited partnership, limited liability company, limited liability partnership, limited liability limited partnership, joint venture, association, joint stock company, bank, trust, estate, unincorporated organization, any federal, state, county or municipal government (or any agency or political subdivision thereof), endowment fund or any other form of entity.

“Personalty” means all of the following:
		
	(i)
	Accounts (including deposit accounts) of Borrower related to the Mortgaged Property.

		
	(ii)
	Equipment and inventory owned by Borrower, which are used now or in the future in connection with the ownership, management or operation of the Land or Improvements or are located on the Land or Improvements, including furniture, furnishings, machinery, building materials, goods, supplies, tools, books, records (whether in written or electronic form) and computer equipment (hardware and software).

		
	(iii)
	Other tangible personal property owned by Borrower which is used now or in the future in connection with the ownership, management or operation of the Land or Improvements or is located on the Land or in the Improvements, including ranges, stoves, microwave ovens, refrigerators, dishwashers, garbage disposers, washers, dryers and other appliances (other than Fixtures).

		
	(iv)
	Any operating agreements relating to the Land or the Improvements.

		
	(v)
	Any surveys, plans and specifications and contracts for architectural, engineering and construction services relating to the Land or the Improvements.

		
	(vi)
	All other intangible property, general intangibles and rights relating to the operation of, or used in connection with, the Land or the Improvements, including 

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all governmental permits relating to any activities on the Land and including subsidy or similar payments received from any sources, including a Governmental Authority.

		
	(vii)
	Any rights of Borrower in or under any Letter of Credit.

“Pledge Agreement” is defined in Section 11.12(f)(iii).

“Preapproved Intrafamily Transfer” is defined in Section 7.04.

“Prepayment Premium Period” is defined in the Note.

“Prior Lien” means a pre-existing mortgage, deed of trust or other Lien encumbering the Mortgaged Property.

“Proceeding” means, whether voluntary or involuntary, any case, proceeding or other action against Borrower or any SPE Equity Owner under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors.

“Proceeds” means the cash obtained by a draw on a Letter of Credit.

“Prohibited Activity or Condition” means each of the following:

		
	(i)
	The presence, use, generation, release, treatment, processing, storage (including storage in above-ground and underground storage tanks), handling or disposal of any Hazardous Materials on or under the Mortgaged Property.

		
	(ii)
	The transportation of any Hazardous Materials to, from or across the Mortgaged Property.

		
	(iii)
	Any occurrence or condition on the Mortgaged Property, which occurrence or condition is or may be in violation of Hazardous Materials Laws.

		
	(iv)
	Any violation of or noncompliance with the terms of any Environmental Permit with respect to the Mortgaged Property.

		
	(v)
	Any violation or noncompliance with the terms of any O&M Program.

However, the term “Prohibited Activity or Condition” expressly excludes lawful conditions permitted by an O&M Program or the safe and lawful use and storage of quantities of:  (i) pre-packaged supplies, cleaning materials and petroleum products customarily used in the operation and maintenance of comparable multifamily properties, (ii) cleaning materials, personal grooming items and other items sold in pre-packaged containers for consumer use and used by tenants and occupants of residential dwelling units in the Mortgaged Property, and (iii) petroleum products used in the operation and maintenance of motor vehicles from time to time located on 

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the Mortgaged Property’s parking areas, so long as all of the foregoing are used, stored, handled, transported and disposed of in compliance with Hazardous Materials Laws.

“Prohibited Parties List” means any one or more of the following:

(i)    The OFAC Specially Designated Nationals and Blocked Persons List.
(ii)    The OFAC Consolidated Sanctions List.
		
	(iii)
	The list of individuals and entities prohibited from doing business with the Department of Housing and Urban Development.

“Property Improvement Alterations” means alterations and additions to the Improvements existing at or upon the Mortgaged Property as of the date of this Loan Agreement, which are being made to renovate or upgrade the Mortgaged Property and are not otherwise permitted under Section 6.09(e). Repairs, Capital Replacements, Restoration or other work required to be performed at the Mortgaged Property pursuant to Sections 6.10 or 6.11 will not constitute Property Improvement Alterations.

“Property Improvement Notice” means a Notice to Lender that Borrower intends to begin the Property Improvement Alterations identified in the Property Improvement Notice.    

“Property Improvement Total Amount” means the aggregate of $_____________ during the term of the Mortgage. 
[INSERT THE FOLLOWING AS APPLICABLE:
		
	•
	FOR LOANS UP TO $50MM, ENTER AMOUNT THAT IS THE LESSER OF (i) 20% OF THE APPRAISED VALUE OF THE PROPERTY OR (ii) $10,000,000.

		
	•
	FOR LOANS $50MM OR GREATER, ENTER AMOUNT THAT IS THE LESSER OF (i) 15% OF THE APPRAISED VALUE OF THE PROPERTY OR (ii) $15,000,000.]

“Property Insurance” is defined in Section 6.10(a).

“Property Jurisdiction” means the jurisdiction in which the Land is located.

“Property Manager” means POLARIS PROPERTY MANAGEMENT LLC, a California limited liability company, or another residential rental property manager which is approved by Lender in writing. 

“Property Seller” is defined in Section 5.24.

“Public Fund/REIT Securities” is defined in Section 7.03(c).

“Rate Cap Agreement Reserve Fund” means the account established pursuant to Section 4.07, if applicable, to pay for the cost of a Replacement Cap Agreement.

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“Rating Agencies” means Fitch, Inc., Moody’s Investors Service, Inc., or Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor entity of the foregoing, or any other nationally recognized statistical rating organization.

“Release Instruments” is defined in Section 11.12(f).

“Remedial Work” is defined in Section 6.12(f).

“Rent(s)” means all rents (whether from residential or non-residential space), revenues and other income of the Land or the Improvements, parking fees, laundry and vending machine income and fees and charges for food, health care and other services provided at the Mortgaged Property, whether now due, past due or to become due, and deposits forfeited by tenants, and, if Borrower is a cooperative housing corporation or association, maintenance fees, charges or assessments payable by shareholders or residents under proprietary leases or occupancy agreements, whether now due, past due or to become due.

“Rent Schedule” means a written schedule for the Mortgaged Property showing the name of each tenant, and for each tenant, the space occupied, the lease expiration date, the rent payable for the current month, the date through which rent has been paid, and any related information requested by Lender.

“Repairs” means the repairs to be made to the Mortgaged Property, as described on the Repair Schedule of Work (Exhibit C) or as otherwise required by Lender in accordance with this Loan Agreement.

“Replacement Cap Agreement” means any Cap Agreement satisfying the provisions of this Loan Agreement, using documentation approved by Lender, and purchased by Borrower to replace any initial Cap Agreement or subsequent Cap Agreement.

“Replacement Cost” means the estimated replacement cost of the Improvements, Fixtures, and Personalty (or, when used in reference to a property that is not the Mortgaged Property, all improvements, fixtures, and personalty located on such property), excluding any deduction for depreciation, all as determined annually by Borrower using customary methodology and sources of information acceptable to Lender in Lender’s Discretion. Replacement Cost will not include the cost to reconstruct foundations or site improvements, such as driveways, parking lots, sidewalks, and landscaping.

“Reserve Fund” means each account established for Imposition Reserve Deposits, the Replacement Reserve Fund, the Repair Reserve Fund (if any), the Rate Cap Agreement Reserve Fund (if any), the Rental Achievement Reserve Fund (if any), and any other account established pursuant to Article IV of this Loan Agreement.

“Restoration” is defined in Section 6.10(j)(i).

“Scheduled Debt Payments” is defined in Section 11.12(g)(i)(B).

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“Secondary Market Transaction” means:  (i) any sale or assignment of this Loan Agreement, the Note and the other Loan Documents to one or more investors as a whole loan, (ii) a participation of the Loan to one or more investors, (iii) any deposit of this Loan Agreement, the Note and the other Loan Documents with a trust or other entity which may sell certificates or other instruments to investors evidencing an ownership interest in the assets of such trust or other entity, or (iv) any other sale, assignment or transfer of the Loan or any interest in the Loan to one or more investors.

“Securitization” means when the Note or any portion of the Note is assigned to a REMIC or grantor trust.

“Securitization Indemnification” is defined in Section 10.02(d).

“Security Instrument” means the mortgage, deed of trust, deed to secure debt or other similar security instrument encumbering the Mortgaged Property and securing Borrower’s performance of its Loan obligations, including Borrower’s obligations under the Note and this Loan Agreement (including any Amended and Restated Security Instrument, Consolidation, Modification and Extension Agreement, Extension and Modification Agreement or similar agreement or instrument amending and restating existing security instruments).

“Senior Indebtedness” means, for a Supplemental Loan, if any, the Indebtedness evidenced by each Senior Note and secured by each Senior Instrument for the benefit of each Senior Lender.

“Senior Instrument” – Not applicable.

“Senior Lender” means each holder of a Senior Note.

“Senior Loan Documents” means, for a Supplemental Loan, if any, all documents relating to each loan evidenced by a Senior Note.

“Senior Note” means, for a Supplemental Loan, if any, each Multifamily Note secured by a Senior Instrument.

“Servicing Arrangement” is defined in Section 11.06(b).

“Single Purpose Entity” is defined in Section 6.13(a).

“Site Assessment” means an environmental assessment report for the Mortgaged Property prepared at Borrower’s expense by a qualified environmental consultant engaged by Borrower, or by Lender on behalf of Borrower, and approved by Lender, and in a manner reasonably satisfactory to Lender, based upon an investigation relating to and making appropriate inquiries to evaluate the risks associated with Mold and any existence of Hazardous Materials on or about the Mortgaged Property, and the past or present discharge, disposal, release or escape of any such substances, all consistent with the most current version of the ASTM 1527 standard (or any successor standard published by ASTM) and good customary and commercial practice.

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“SPE Equity Owner” is not applicable. Borrower will not be required to maintain an SPE Equity Owner in its organizational structure during the term of the Loan and all references to SPE Equity Owner in this Loan Agreement and in the Note will be of no force or effect.

“Successor Borrower” is defined in Section 11.12(b).

“Supplemental Indebtedness” the Indebtedness evidenced by the Supplemental Note(s) and secured by the Supplemental Instrument(s) for the benefit of Supplemental Lender(s), if any.

“Supplemental Instrument” means, for each Supplemental Loan (whether one or more), if any, the Security Instrument executed to secure the Supplemental Note for that Supplemental Loan.

“Supplemental Lender” means, for each Supplemental Loan (whether one or more), if any, the lender named in the Supplemental Instrument for that Supplemental Loan and its successors and/or assigns.

“Supplemental Loan” means any loan that is subordinate to the Senior Indebtedness.

“Supplemental Loan Documents” means, for each Supplemental Loan (whether one or more), if any, all documents relating to the loan evidenced by the Supplemental Note for that Supplemental Loan.

“Supplemental Mortgage Product” is defined in Section 11.11(a).

“Supplemental Note” means, for each Supplemental Loan (whether one or more), if any, the Multifamily Note secured by the Supplemental Instrument for that Supplemental Loan.

“Tax Code” means the Internal Revenue Code of the United States, 26 U.S.C. Section 1 et seq., as amended from time to time.

“Taxes” means all taxes, assessments, vault rentals and other charges, if any, whether general, special or otherwise, including all assessments for schools, public betterments and general or local improvements, which are levied, assessed or imposed by any public authority or quasi-public authority, and which, if not paid, will become a Lien on the Land or the Improvements.

 “Total Insurable Value” means the sum of the Replacement Cost, business income/rental value Insurance and the value of any business personal property.

“Transfer” means any of the following:
		
	(i)
	A sale, assignment, transfer or other disposition or divestment of any interest in Borrower, a Designated Entity for Transfers, or the Mortgaged Property (whether voluntary, involuntary or by operation of law).

		
	(ii)
	The granting, creating or attachment of a Lien, encumbrance or security interest (whether voluntary, involuntary or by operation of law).

Multifamily Loan and Security Agreement    Page 103
Lofts at NoHo Commons

		
	(iii)
	The issuance or other creation of an ownership interest in a legal entity, including a partnership interest, interest in a limited liability company or corporate stock.

		
	(iv)
	The withdrawal, retirement, removal or involuntary resignation of a partner in a partnership or a member or Manager in a limited liability company.

		
	(v)
	The merger, dissolution, liquidation, or consolidation of a legal entity or the reconstitution of one type of legal entity into another type of legal entity.

		
	(vi)
	A change of the Guarantor.

For purposes of defining the term “Transfer,” the term “partnership” means a general partnership, a limited partnership, a joint venture, a limited liability partnership, or a limited liability limited partnership and the term “partner” means a general partner, a limited partner, or a joint venturer.

“Transfer” does not include any of the following:

		
	(i)
	A conveyance of the Mortgaged Property at a judicial or non-judicial foreclosure sale under the Security Instrument.

		
	(ii)
	The Mortgaged Property becoming part of a bankruptcy estate by operation of law under the Bankruptcy Code.

		
	(iii)
	The filing or recording of a Lien against the Mortgaged Property for local taxes and/or assessments not then due and payable.

“Transfer and Assumption Agreement” is defined in Section 11.12(f)(iv).

“Transfer Fee” means a fee paid when the Transfer is completed. Unless otherwise specified, the Transfer Fee will be equal to the lesser of the following:

		
	(i)
	1% of the outstanding principal balance of the Indebtedness as of the date of the Transfer.

		
	(ii)
	$250,000.

“Transfer Processing Fee” means a nonrefundable fee of $15,000 for Lender’s review of a proposed or completed Transfer.

“U.S. Treasury Obligations” means direct, non-callable and non-redeemable securities issued, or fully insured as to payment, by the United States of America.

“UCC Collateral” is defined in Section 3.03.

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“Underwriter Group” is defined in Section 10.02(d).

“Uniform Commercial Code” means the Uniform Commercial Code as promulgated in the applicable jurisdiction.

“Windstorm Coverage” is defined in Section 6.10(a)(iv).

 

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ARTICLE XIII    INCORPORATION OF ATTACHED RIDERS.

The Riders listed on Page ii are attached to and incorporated into this Loan Agreement.

ARTICLE XIV    INCORPORATION OF ATTACHED EXHIBITS.

The following Exhibits, if marked with an “X” in the space provided, are attached to this Loan Agreement:

	
				
	X
	 
	Exhibit A
	Description of the Land (required)

	 
	 
	 
	 

	X
	 
	Exhibit B
	Modifications to Multifamily Loan and Security Agreement

	 
	 
	 
	 

	X
	 
	Exhibit C
	Repair Schedule of Work

	 
	 
	 
	 

	X
	 
	Exhibit D
	Repair Disbursement Request (required)

	 
	 
	 
	 

	 
	 
	Exhibit E
	Work Commenced at Mortgaged Property

	 
	 
	 
	 

	X
	 
	Exhibit F
	Capital Replacements (required)

	 
	 
	 
	 

	 
	 
	Exhibit G
	Description of Ground Lease

	 
	 
	 
	 

	X
	 
	Exhibit H
	Organizational Chart of Borrower as of the Closing Date (required)

	 
	 
	 
	 

	X
	 
	Exhibit I
	Designated Entities for Transfers and Guarantor(s) (required)

	
				
	 
	 
	Exhibit J
	Description of Release Parcel

	
				
	X
	 
	Exhibit K
	Reserved

	
				
	X
	 
	Exhibit L
	Reserved

	
				
	 
	 
	Exhibit M
	Reserved

	 
	 
	 
	 

	 
	 
	Exhibit N
	Reserved

	 
	 
	 
	 

	X
	 
	Exhibit O
	Borrower’s Certificate of Property Improvement Alterations Completion (required)

ARTICLE XV    RESERVED.

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REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; 
SIGNATURES ON FOLLOWING PAGES

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BORROWER:

NOHO COMMONS PACIFIC OWNER LLC,
a Delaware limited liability company

By:    KBS SOR II LOFTS AT NOHO COMMONS, LLC,
a Delaware limited liability company
its sole member

By:    NOHO COMMONS PACIFIC INVESTORS LLC,
a Delaware limited liability company,
its Managing Member

By:     SLOVIN PROPERTIES, INC.,
a Delaware corporation,
its Manager

By:    /s/ Karl Slovin                
Name:    Karl Slovin                
Title:    President                

SIGNATURES CONTINUE ON FOLLOWING PAGE

Multifamily Loan and Security Agreement    Page S-1
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LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association

By:    /s/ Christian Adrian                
Name:    Christian Adrian
Title:    Director

Multifamily Loan and Security Agreement    Page S-2
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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

AFFILIATE TRANSFER

(Revised 7-12-2016)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 7.03(d)(i) is deleted and replaced with the following:

		
	(i)
	Affiliate Transfer. A Transfer of any direct or indirect interests in Borrower held by an entity owned and Controlled by KEK Family Holdings, LLC (“Affiliate Transferor”) to one or more of Affiliate Transferor’s Affiliates (“Affiliate Transfer”) provided that each of the following conditions is satisfied:

		
	(A)
	Borrower provides Lender with at least 30 days prior Notice of the proposed Affiliate Transfer and pays to Lender the Transfer Processing Fee.

		
	(B)
	At the time of the proposed Affiliate Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default.

		
	(C)
	Borrower pays or reimburses Lender, upon demand, for all costs and expenses including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Affiliate Transfer.

		
	(D)
	Lender determines, in Lender’s Discretion, that the Affiliate meets Lender’s eligibility, credit, management and other standards.

		
	(E)
	After the Affiliate Transfer, Control and management of the day-to-day operations of Borrower continue to be held by the Person exercising such Control and management immediately prior to the Affiliate Transfer and there is no change in the Guarantor, if applicable.

		
	(F)
	Lender receives organizational charts reflecting the structure of Borrower prior to and after the Affiliate Transfer.    

		
	(G)
	Lender will not be entitled to collect a Transfer Fee as the result of the Affiliate Transfer. 

		
	(H)
	Lender receives confirmation acceptable to Lender that (1) the requirements of Section 6.13 continue to be satisfied, and (2) the term of 

Rider To Multifamily Loan and Security Agreement    
Affiliate Transfer
Lofts at NoHo Commons

existence of the Affiliate (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

		
	(I)
	Borrower delivers to Lender a search confirming that the Affiliate is not on any Prohibited Parties List.

		
	(J)
	If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Affiliate Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender, with regard to nonconsolidation.

		
	(K)
	Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

		
	B.
	The following definition is added to Article XII:

“Affiliate Transfer” is defined in Section 7.03(d)(i).

“Affiliate Transferor” is defined in Section 7.03(d)(i).

Rider To Multifamily Loan and Security Agreement    
Affiliate Transfer
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

BUY-SELL TRANSFER

(Revised 7-12-2016)

[MODIFIED]

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 7.03(d)(iii) is deleted and replaced with the following:

		
	(iii)
	Buy-Sell Transfer. A one-time Transfer (“Buy-Sell Transfer”) pursuant to a buy-sell agreement, operating agreement, joint venture agreement or similar agreement of the interests in KBS SOR II LOFTS AT NOHO COMMONS, LLC, the sole member of Borrower

(A)    The Buy-Sell Transfer may consist of either of the following Transfers:

		
	(1)
	The Transfer of the interests of NOHO Commons Pacific Investors LLC (“Manager”) to KBS SOR II LOFTS AT NOHO COMMONS JV, LLC or to its wholly owned Affiliate (“Equity”) (either by purchase of the ownership interest of the Manager or replacement of the Manager as the general partner, manager or managing member).

		
	(2)
	The Transfer of the Equity’s ownership to the Manager or to a wholly owned Affiliate of Manager.

		
	(B)
	The Buy-Sell Transfer will be a permitted Transfer if each of the following conditions is satisfied:

		
	(1)
	Borrower provides Lender with at least 30 days prior Notice of the proposed Buy-Sell Transfer and pays to Lender the Transfer Processing Fee.

		
	(2)
	At the time of the proposed Buy-Sell Transfer, no Event of Default has occurred and is continuing and no event or condition has occurred and is continuing that, with the giving of Notice or the passage of time, or both, would become an Event of Default; provided, however, if the Buy-Sell Transfer would cure the Event of Default, the Buy-Sell Transfer must occur within 60 days after all conditions in this Section have been met to Lender’s satisfaction.

Rider To Multifamily Loan and Security Agreement    
Buy-Sell Transfer
Lofts at NoHo Commons

		
	(3)
	Borrower pays or reimburses Lender, upon demand, for all costs and expenses, including all Attorneys’ Fees and Costs, incurred by Lender in connection with the Buy-Sell Transfer.

		
	(4)
	If there is a new manager of Borrower (“New Manager”), New Manager provides a guarantor (“New Manager Guarantor”) acceptable to Lender in Lender’s Discretion, and each of the following requirements is met (collectively, the “New Manager Requirements”):

		
	(I)
	At the time of the Buy-Sell Transfer, New Manager Guarantor has a net worth of at least $32,445,000, and liquid assets of at least $10,815,000. 

		
	(II)
	Lender receives all information and organizational documents requested by Lender in Lender’s Discretion, with respect to New Manager Guarantor.

		
	(III)
	New Manager Guarantor executes a Guaranty in a form acceptable to Lender and in substantially the same form as the Guaranty executed on the Closing Date (“New Manager Guaranty”), however, if New Manager Guarantor is an entity, the following conditions will be applicable:

		
	(X)
	The New Manager Guaranty has been modified to include, at New Manager Guarantor’s option, either the Rider to Guaranty – Material Adverse Change, or the Rider to Guaranty – Minimum Net Worth/Liquidity.

		
	(Y)
	Section 9.01(ccc) will be deleted and replaced with the following:

		
	(ccc)
	Any failure by Guarantor to comply with the Minimum Net Worth/Liquidity Rider to the Guaranty, or the Material Adverse Change Rider to the Guaranty, if applicable.

		
	(IV)
	Following the Buy-Sell Transfer, Control and management of the day-to-day operations of the Equity continues to be held by the Person exercising such Control and management immediately prior to the Buy-Sell Transfer.

		
	(5)
	The Mortgaged Property continues to be managed by the initial Property Manager or a successor Property Manager satisfactory to 

Rider To Multifamily Loan and Security Agreement    
Buy-Sell Transfer
Lofts at NoHo Commons

Lender pursuant to a property management agreement approved by Lender in writing; which approval will not be unreasonably withheld, provided that such successor Property Manager and Borrower execute an assignment of the management agreement in form acceptable to Lender.
		
	(6)
	[CHOOSE ONE] [FOR CONVENTIONAL LOAN: Reserved.] [OR] [FOR SENIORS LOAN: If applicable, the Facility continues to be operated by the initial operator of the Facility or a successor operator of the Facility satisfactory to Lender pursuant to an operating lease approved by Lender in writing, provided that such successor operator of the Facility and Borrower execute a subordination and assignment of such operating lease in form acceptable to Lender.] At the time of the proposed Buy-Sell Transfer, Borrower must have completed the Value-Add Work in substantial conformance with the Value-Add Schedule of Work.

		
	(7)
	At the time of the proposed Buy-Sell Transfer, if the Equity becomes a New Manager, it certifies to Lender that its net worth and liquidity are substantially the same as or better than its net worth and liquidity as of the date of this Loan Agreement and there is not any pending bankruptcy, reorganization or litigation which would substantially negatively affect such net worth and/or liquidity.

		
	(8)
	Lender receives organizational charts reflecting the structure of Borrower prior to and after the Buy-Sell Transfer.

		
	(9)
	Lender receives confirmation acceptable to Lender that (1) the requirements of Section 6.13 continue to be satisfied, and (2) the term of existence of the Equity (exclusive of any unexercised extension options or rights) does not expire prior to the Maturity Date.

		
	(10)
	If the Transfer is to a wholly-owned Affiliate of either the Equity or Manager, Borrower delivers to Lender a search confirming that the transferee Affiliate is not on any Prohibited Parties List.

		
	(11)
	If a nonconsolidation opinion was delivered on the Closing Date and if, after giving effect to the Buy-Sell Transfer and all prior Transfers, 50% or more in the aggregate of direct or indirect interests in Borrower are owned by any Person and its Affiliates that owned less than a 50% direct or indirect interest in Borrower as of the Closing Date, Borrower delivers to Lender an opinion of counsel for Borrower, in form and substance satisfactory to Lender with regard to nonconsolidation. 

Rider To Multifamily Loan and Security Agreement    
Buy-Sell Transfer
Lofts at NoHo Commons

		
	(12)
	If there is a New Manager Guarantor and all of the New Manager Requirements have been satisfied, the Guarantor may request a release of its liability under the Guaranty in accordance with Section 7.05(c) of this Loan Agreement.

		
	(13)
	Borrower either (1) certifies that there are no Non-US Equity Holders, or (2) delivers to Lender searches confirming that no Non-U.S. Equity Holder is on any Prohibited Parties List.

		
	B.
	The following definitions are added to Article XII:

“Buy-Sell Transfer” is defined in Section 7.03(d)(iii).

“Equity” is defined in Section 7.03(d)(iii)(A)(1).

“Manager” is defined in Section 7.03(d)(iii)(A)(1).

“New Manager” is defined in Section 7.03(d)(iii)(B)(4).

“New Manager Guarantor” is defined in Section 7.03(d)(iii)(B)(4).

“New Manager Guaranty” is defined in Section 7.03(d)(iii)(B)(4)(III).

“New Manager Requirements” is defined in Section 7.03(d)(iii)(B)(4).

Rider To Multifamily Loan and Security Agreement    
Buy-Sell Transfer
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

COOPERATION WITH RATING AGENCIES AND INVESTORS

(Revised 1-27-2015)

		
	A.
	Section 11.14 is deleted and replaced with the following:

		
	11.14
	Cooperation with Rating Agencies and Investors. At the request of Lender and, to the extent not already required to be provided by Borrower under this Loan Agreement, Borrower must use reasonable efforts to satisfy 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 Securities secured by or evidencing ownership interests in the Note and this Loan Agreement, including all of the following:

		
	(a)
	Borrower will provide financial and other information with respect to the Mortgaged Property, the Borrower and the Property Manager.

		
	(b)
	Borrower will perform or permit or cause to be performed or permitted such site inspections and other due diligence investigations of the Mortgaged Property, as may be requested by Lender in Lender’s Discretion or may reasonably be requested by the Rating Agencies or as may be necessary or appropriate in connection with the Secondary Market Transaction. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with any such due diligence investigation.

		
	(c)
	Borrower will make such representations and warranties as of the closing date of the Secondary Market Transaction with respect to the Mortgaged Property, Borrower and the Loan Documents as are customarily provided in securitization transactions and as may be requested by Lender in Lender’s Discretion or may reasonably be requested by the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date of this Loan Agreement, including the representations and warranties made in the Loan Documents, 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 to the Rating Agencies. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with obtaining such auditors’ letters or opinions of counsel.

		
	(d)
	Borrower will cause its counsel to render opinions, which may be relied upon by Lender, the Rating Agencies and their respective counsel, agents 

Rider to Multifamily Loan and Security Agreement 
Cooperation with Rating Agencies and Investors
Lofts at NoHo Commons

and representatives, as to nonconsolidation or any other opinion customary in securitization transactions with respect to the Mortgaged Property and Borrower and its Affiliates, which counsel and opinions must be satisfactory to Lender in Lender’s Discretion and be reasonably satisfactory to the Rating Agencies. Lender will reimburse Borrower for any third party costs which Borrower reasonably incurs in connection with obtaining such opinions of Borrower’s counsel.

		
	(e)
	Borrower will execute such amendments to the Loan Documents and organizational documents, establish and fund the Replacement Reserve Fund, if any, and complete any Repairs, if any, as may be requested by Lender or by the Rating Agencies or otherwise to effect the Secondary Market Transaction; provided, however, that the Borrower will not be required to modify or amend any Loan Document if such modification or amendment would (i) change the interest rate, the stated maturity or the amortization of principal set forth in the Note, or (ii) modify or amend any other material economic term of the Loan.

B.    The following definitions are added to Article XII: 

“Provided Information” means the information provided by Borrower as required by Section 11.14 (a), (b) and (c).
 
“Securities” means single or multi‐class securities. 

Rider to Multifamily Loan and Security Agreement 
Cooperation with Rating Agencies and Investors
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REPAIRS – NO REPAIR RESERVE ESTABLISHED

(Revised 5-1-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 4.03 is deleted and replaced with the following:

		
	4.03
	Repairs – No Repair Reserve Fund Established. No Repair Reserve Fund has been established. Borrower must commence and complete the Repairs as required pursuant to Section 6.14.

		
	(a)
	Reporting Requirements; Completion. Prior to the applicable Completion Date, Borrower will deliver all of the following to Lender:

		
	(i)
	Contractor’s Certificate. If required by Lender, a certificate signed by each major contractor and supplier of materials, as reasonably determined by Lender, engaged to provide labor or materials for the Repairs to the effect that such contractor or supplier has been paid in full for all work completed and that the portion of the Repairs provided by such contractor or supplier has been fully completed in accordance with the plans and specifications (if any) provided to it by Borrower and that such portion of the Repairs is in compliance with all applicable building codes and other rules and regulations promulgated by any applicable regulatory authority or Governmental Authority.

		
	(ii)
	Borrower’s Certificate. A certificate signed by Borrower to the effect that the Repairs have been fully paid for and no claim exists against Borrower or against the Mortgaged Property out of which a lien based on furnishing labor or material exists or might ripen. Borrower may except from the certificate described in the preceding sentence any claim(s) that Borrower intends to contest, provided that any such claim is described in Borrower’s certificate. If required by Lender, Borrower also must certify to Lender that the Repairs are in compliance with all applicable building codes and zoning ordinances.

		
	(iii)
	Engineer’s Certificate. If required by Lender, a certificate signed by the professional engineer employed by Lender to the effect that the Repairs have been completed in a good and workmanlike manner in compliance with the Repair Schedule of Work and all applicable building codes, zoning ordinances and other rules and 

Rider to Multifamily Loan and Security Agreement    
Repairs – No Repair Reserve Fund Established
Lofts at NoHo Commons

regulations promulgated by applicable regulatory or Governmental Authority.

		
	(iv)
	Other Certificates. Any other certificates of approval, acceptance or compliance required by Lender from any Governmental Authority having jurisdiction over the Mortgaged Property and the Repairs.

		
	(b)
	Right to Complete Repairs. If Borrower abandons or fails to proceed diligently with the Repairs or otherwise, or there exists an Event of Default under this Loan Agreement, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of the Repairs. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact of Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Repairs and the payment, settlement, or compromise of all claims for materials and work performed in connection with the Repairs) and do any and all things necessary or proper to complete the Repairs including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete the Repairs, but Lender may, in Lender’s sole and absolute discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Loan Documents pertaining to the protection of Lender’s security and advances made by Lender.

		
	(c)
	Completion of Repairs. Any acknowledgment by Lender of completion of any Repair in a manner satisfactory to Lender will not be deemed a certification by Lender that the Repair has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will at all times have the sole responsibility for insuring that all Repairs are completed in accordance with all such governmental requirements.

		
	(d)
	Costs Charged by Lender. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Repairs pursuant to the terms of Section 6.06, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector. Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

Rider to Multifamily Loan and Security Agreement    
Repairs – No Repair Reserve Fund Established
Lofts at NoHo Commons

B.    The following definitions are added to Article XII:

“Repair Schedule of Work” means the Repair Schedule of Work attached as Exhibit C.

Rider to Multifamily Loan and Security Agreement    
Repairs – No Repair Reserve Fund Established
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REPLACEMENT RESERVE FUND – IMMEDIATE DEPOSITS

(Revised 7-1-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 4.04 is deleted and replaced with the following:

4.04    Replacement Reserve Fund.

		
	(a)
	Deposits to Replacement Reserve Fund. On the Closing Date, the parties will establish the Replacement Reserve Fund and Borrower will pay the Initial Deposit to Lender for deposit into the Replacement Reserve Fund. Commencing on the date the first installment of principal and/or interest is due under the Note and continuing on the same day of each successive month until the Loan is paid in full, Borrower will pay the Monthly Deposit to Lender for deposit into the Replacement Reserve Fund, together with its regular monthly payments of principal and/or interest as required by the Note. A transfer of funds into the Replacement Reserve Fund from the Repair Reserve Fund, pursuant to the terms of Section 4.03(e), if applicable, will not alter or reduce the amount of any deposits to the Replacement Reserve Fund.

		
	(b)
	Costs Charged by Lender. 

		
	(i)
	If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Capital Replacements pursuant to the terms of Section 6.06, Lender may charge Borrower an amount sufficient to pay all reasonable costs and expenses charged by such third party inspector.

		
	(ii)
	If there are sufficient funds in Replacement Reserve Fund, Lender will be entitled, but not obligated, to deduct from the Replacement Reserve Fund the costs and expenses set forth in Section 4.04(b)(i). Lender will be entitled to charge Borrower for such costs and expenses and Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

		
	(iii)
	If there are insufficient funds in the Replacement Reserve Fund, then Lender will be entitled to charge Borrower for the costs and expenses specified in Section 4.04(b)(i), and Borrower will pay the amount of such item(s) to Lender immediately after Notice from Lender to Borrower of such charge(s).

Rider to Multifamily Loan and Security Agreement    
Replacement Reserve Fund – Immediate Deposits
Lofts at NoHo Commons

		
	(c)
	Adjustments to Replacement Reserve Fund. If the initial term of the Loan is greater than 120 months, then the following provisions will apply:

		
	(i)
	Lender reserves the right to adjust the amount of the Monthly Deposit based on Lender’s assessment of the physical condition of the Mortgaged Property, however, Lender will not make such an adjustment prior to the date that is 120 months after the first installment due date, nor more frequently than every 10 years thereafter during the term of the Loan. 

		
	(ii)
	Borrower will pay the cost of any assessment required by Lender pursuant to Section 4.04(c)(i) to Lender immediately after Notice from Lender to Borrower of such charge.

		
	(iii)
	Upon Notice from Lender or Loan Servicer, Borrower will begin paying the Revised Monthly Deposit on the first monthly payment date that is at least 30 days after the date of Lender’s or Loan Servicer’s Notice. If Lender or Loan Servicer does not provide Borrower with Notice of a Revised Monthly Deposit, Borrower will continue to pay the Monthly Deposit or the Revised Monthly Deposit then in effect.

		
	(d)
	Insufficient Amount in Replacement Reserve Fund. If Borrower requests disbursement from the Replacement Reserve Fund for a Capital Replacement in accordance with this Loan Agreement in an amount which exceeds the amount on deposit in the Replacement Reserve Fund, Lender will disburse to Borrower only the amount on deposit in the Replacement Reserve Fund. Borrower will pay all additional amounts required in connection with any such Capital Replacement from Borrower’s own funds.

		
	(e)
	Reserved.

		
	(f)
	Reserved.

		
	(g)
	Disbursements from Replacement Reserve Fund.

		
	(i)
	Requests for Disbursement. Lender will disburse funds from the Replacement Reserve Fund as follows:

		
	(A)
	Borrower’s Request. If Borrower determines, at any time or from time to time, that a Capital Replacement is necessary or desirable, Borrower will perform such Capital Replacement and request from Lender, in writing, reimbursement for such Capital Replacement. Borrower’s request for reimbursement will include (1) a detailed description of the Capital Replacement performed, together 

Rider to Multifamily Loan and Security Agreement    
Replacement Reserve Fund – Immediate Deposits
Lofts at NoHo Commons

with evidence, satisfactory to Lender, that the cost of such Capital Replacement has been paid, and (2) if required by Lender, lien waivers from each contractor and material supplier supplying labor or materials for such Capital Replacement.
		
	(B)
	Lender’s Request. If Lender reasonably determines at any time or from time to time, that a Capital Replacement is necessary for the proper maintenance of the Mortgaged Property, it will so notify Borrower, in writing, requesting that Borrower obtain and submit to Lender bids for all labor and materials required in connection with such Capital Replacement. Borrower will submit such bids and a time schedule for completing each Capital Replacement to Lender within 30 days after Borrower’s receipt of Lender’s Notice. Borrower will perform such Capital Replacement and request from Lender, in writing, reimbursement for such Capital Replacement. Borrower’s request for reimbursement will include (1) a detailed description of the Capital Replacement performed, together with evidence, satisfactory to Lender, that the cost of such Capital Replacement has been paid, and (2) if required by Lender, lien waivers from each contractor and material supplier supplying labor or materials for such Capital Replacement.

		
	(ii)
	Conditions Precedent. Disbursement from the Replacement Reserve Fund will be made no more frequently than once every Replacement Reserve Disbursement Period and, except for the final disbursement, no disbursement will be made in an amount less than the Minimum Replacement Disbursement Request Amount. Disbursements will be made only if the following conditions precedent have been satisfied, as determined by Lender in Lender’s Discretion:

		
	(A)
	Each Capital Replacement has been performed and/or installed on the Mortgaged Property in a good and workmanlike manner with suitable materials (or in the case of a partial disbursement, performed and/or installed on the Mortgaged Property to an acceptable stage), in accordance with good building practices and all applicable laws, ordinances, rules and regulations, building setback lines and restrictions applicable to the Mortgaged Property, and has been paid for by Borrower as evidenced by copies of all applicable paid invoices or bills submitted to Lender by Borrower at the time Borrower requests disbursement from the Replacement Reserve Fund.

Rider to Multifamily Loan and Security Agreement    
Replacement Reserve Fund – Immediate Deposits
Lofts at NoHo Commons

		
	(B)
	There is no condition, event or act that would constitute a default (with or without Notice and/or lapse of time).

		
	(C)
	No Lien or claim based on furnishing labor or materials has been recorded, filed or asserted against the Mortgaged Property, unless Borrower has properly provided a bond or other security against loss in accordance with applicable law.

		
	(D)
	All licenses, permits and approvals of any Governmental Authority required for the Capital Replacement as completed to the applicable stage have been obtained and submitted to Lender upon Lender’s request.

		
	(h)
	Right to Complete Capital Replacements. If Borrower abandons or fails to proceed diligently with any Capital Replacement in a timely fashion or an Event of Default occurs and continues under this Loan Agreement for 30 days after Notice of such failure by Lender to Borrower, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of such Capital Replacement. However, no such Notice or cure period will apply in the case of such failure which could, in Lender’s sole and absolute discretion, absent immediate exercise by Lender of a right or remedy under this Loan Agreement, result in harm to Lender, tenants or third parties or impairment of the security given under this Loan Agreement, the Security Instrument or any other Loan Document. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact for Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Capital Replacement and the payment, settlement or compromise of all bills and claims for materials and work performed in connection with the Capital Replacement) and do any and all things necessary or proper to complete any Capital Replacement, including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete any Capital Replacement, but Lender may, in Lender’s Discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Note, this Loan Agreement, the Security Instrument and any other Loan Document pertaining to the protection of Lender’s security and advances made by Lender.

Rider to Multifamily Loan and Security Agreement    
Replacement Reserve Fund – Immediate Deposits
Lofts at NoHo Commons

		
	(i)
	Completion of Capital Replacements. Lender’s disbursement of monies from the Replacement Reserve Fund or other acknowledgment of completion of any Capital Replacement in a manner satisfactory to Lender in Lender’s Discretion will not be deemed a certification by Lender that the Capital Replacement has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will at all times have the sole responsibility for ensuring that all Capital Replacements are completed in accordance with all such requirements of any Governmental Authority.

(j)    Reserved.

(k)    Reserved.

B.    The following definitions are added to Article XII:

“Initial Deposit” means $146,000.

“Minimum Replacement Disbursement Request Amount” means $5,000.

“Monthly Deposit” means $567.

“Replacement Reserve Deposit” means the Initial Deposit, the Monthly Deposit and/or the Revised Monthly Deposit, as appropriate.

“Replacement Reserve Disbursement Period” means the interval between disbursements from the Replacement Reserve Fund, which interval will be no shorter than once a month.

“Replacement Reserve Fund” means the account established pursuant to this Loan Agreement to defray the costs of Capital Replacements.

“Revised Monthly Deposit” means the adjusted amount per month that Lender determines Borrower must deposit in the Replacement Reserve Fund following any adjustment determination by Lender pursuant to Section 4.04(c).

Rider to Multifamily Loan and Security Agreement    
Replacement Reserve Fund – Immediate Deposits
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

TAX METHOD OF ACCOUNTING

(Revised 3-1-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 6.07(a) is deleted and replaced with the following:

		
	(a)
	Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with Borrower’s tax method of accounting, consistently applied, and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. Under the tax method of accounting, the accrual basis may be used for interest expense, real estate taxes and insurance expense, and the cash basis will be used for all other items, including, income, prepaid rent, utilities and payroll expense. Financial statements may exclude depreciation and amortization. Any change in tax methods by Borrower must be disclosed to Lender in writing. If Borrower adopts or returns to the GAAP method of accounting, then Borrower must maintain its books and records in accordance with such GAAP method of accounting, consistently applied, for the remainder of the term of the Loan. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

Rider to Multifamily Loan and Security Agreement    
Tax Method of Accounting
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

VALUE-ADD TRANSACTION

(Revised 7-28-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

		
	A.
	Section 6.09(e)(viii) is deleted and replaced with the following:

(viii)    Value-Add Work pursuant to Section 6.42.

B.    The following Section is added to Article VI: 

		
	6.42
	Value-Add Work. 

		
	(a)
	Completion of Value-Add Work; Minimum Expenditure Requirement.

		
	(i)
	Borrower will commence the Value-Add Work no later than 90 days after the date of this Loan Agreement and will diligently proceed with and complete the Value-Add Work on or before the Value-Add Completion Date. All Value-Add Work will be completed in a good and workmanlike manner, with suitable materials, and in accordance with good building practices and all applicable laws, ordinances, rules, regulations, building setback lines and restrictions applicable to the Mortgaged Property. Borrower agrees to cause the replacement of any material or work that is defective, unworkmanlike or that does not comply with the requirements of this Loan Agreement, as determined by Lender. 

		
	(ii)
	During the period that commences on the date of this Loan Agreement through and including the Value-Add Completion Date, Borrower must spend at least $3,985,600 in the aggregate on Qualified Value-Add Work (as defined below) (the “Minimum Expenditure Requirement”). For the purposes hereof, “Qualified Value-Add Work” means Value-Add Work that will (A) increase income from the Mortgaged Property, (B) decrease expenses of the Mortgaged Property; and/or (C) enhance the durability of the Mortgaged Property, all as determined by Lender in Lender’s Discretion. 

		
	(b)
	Conformance to Value-Add Schedule of Work; Modifications 

		
	(i)
	Borrower must complete the Value-Add Work in substantial conformance with the Value-Add Schedule of Work. The Value-Add Schedule of Work as of the date of this Loan Agreement is attached as Exhibit K (“Original Value-Add Schedule of Work”). 

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

		
	(ii)
	Except as set forth in Section 6.42(b)(iii), Borrower may not modify the Value-Add Schedule of Work without Lender’s prior written approval, to be granted or withheld by Lender in its sole discretion. For the purpose of this Loan Agreement, each of the following will be deemed a modification of the Value-Add Schedule of Work: 

		
	(A)
	The completion or performance of any repairs, alterations, replacements and/or other work that are not set forth on the Value-Add Schedule of Work (excluding any Repairs or other items required under the Loan Documents). 

		
	(B)
	The failure to complete any repairs, alterations, replacements and/or other work that are set forth on the Value-Add Schedule of Work. 

Borrower may request Lender’s consent to a modification to the Value-Add Schedule of Work by submitting to Lender a description of the proposed modifications together with a revised Value-Add Schedule of Work together with such other information as may be requested by Lender in Lender’s Discretion. 

		
	(iii)
	Notwithstanding the provisions of 6.42(b)(ii), Borrower may modify the Value-Add Schedule of Work without the prior written consent of Lender provided that each of the following requirements is satisfied: 

		
	(A)
	Such changes do not result in the budgeted costs for the Value-Add Work being more than the Maximum Value-Add Budget Amount or less than the Minimum Value-Add Budget Amount. 

		
	(B)
	Such changes will not cause or result in the Value-Add Work being completed later than the Value-Add Completion Date. 

		
	(C)
	Such changes do not include any Prohibited Work.

		
	(D)
	If such changes, when considered in the aggregate with all previous changes to the Value-Add Schedule of Work, result in an increase or decrease to the Approved Value-Add Budget of more than 20%, Borrower provides to Lender at least 10 days’ prior Notice, together with a description of changes and a copy of the revised Value-Add Schedule of Work. 

		
	(iv)
	The following constitutes “Prohibited Work”: 

		
	(A)
	Repairs, alterations, replacements or other work that will result in a breach of the provisions of this Section 6.42 or any other provision of this Loan Agreement or the other Loan Documents.

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

(B)    Except as expressly approved by Lender in its sole discretion, 

		
	(1)
	Repairs, alterations, or replacements of, or that adversely affect, any Major Building System.

		
	(2)
	Repairs, alterations, or replacements of, or that adversely affect, more than 2 Ancillary Building Systems. 

		
	(3)
	Repairs, alterations, or replacements that result in:

		
	(a)
	A change in residential dwelling unit configurations on a permanent basis.

		
	(b)
	An increase or decrease in the total number of residential dwelling units.

		
	(c)
	The demolition of any existing Improvements.

		
	(d)
	A permanent obstruction of tenants’ access to units or a temporary obstruction of tenants’ access to units without a reasonable alternative access provided during the period of renovation which causes the obstruction.

		
	(v)
	Nothing in this Section will be deemed to modify or waive Borrower’s obligation to satisfy the Minimum Expenditure Requirement. 

		
	(c)
	Purchases. Without the prior written consent of Lender, no materials, machinery, equipment, fixtures or any other part of the Value-Add Work will be purchased or installed under conditional sale contracts or lease agreements, or any other arrangement wherein title to such Value-Add Work is retained or subjected to a purchase money security interest, or the right is reserved or accrues to anyone to remove or repossess any such Value-Add Work, or to consider them as personal property.

		
	(d)
	Lien Protection. Borrower will promptly pay or cause to be paid, when due, all costs, charges and expenses incurred in connection with the construction and completion of the Value-Add Work, and will keep the Mortgaged Property free and clear of any and all Liens other than the Lien of the Security Instrument and any other junior Lien to which Lender has consented.

		
	(e)
	Adverse Claims. Borrower will promptly advise Lender in writing of any litigation, Liens or claims affecting the Mortgaged Property and of all complaints and charges made by any Governmental Authority that may delay or adversely affect the Value-Add Work. 

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

		
	(f)
	Inspection. Lender will be entitled to inspect the Value-Add Work in accordance with Section 6.06. If Lender, in Lender’s Discretion, retains a professional inspection engineer or other qualified third party to inspect any Value-Add Work pursuant to the terms of Section 6.06, Lender also will be entitled to charge Borrower an amount sufficient to pay all reasonable fees and expenses charged by such third party inspector. Borrower will pay any such amounts to Lender immediately after Notice from Lender to Borrower of such charge. 

		
	(g)
	Reporting Requirements. 

		
	(i)
	Within 15 days after the end of each calendar month, Borrower must provide to Lender a written summary regarding the progress of the Value-Add Work. Such summary may be in such format as Borrower uses for its own internal purposes, or in such other format as is acceptable to Lender. 

		
	(ii)
	On each Quarterly Reporting Date, Borrower must provide to Lender the Quarterly Certification, together with such other items, information or certifications as Lender may require in Lender’s Discretion. Borrower must disclose in the Quarterly Certification any failure to achieve the Minimum Occupancy Target and/or the Minimum Unit Improvement Target. 

		
	(ii)
	Prior to the Value-Add Completion Date, Borrower must deliver all of the following to Lender: 

		
	(A)
	Engineer’s Certificate. A certificate signed by the professional engineer employed by Lender to the effect that the Value-Add Work has been completed in a good and workmanlike manner in compliance with the Value-Add Schedule of Work and all applicable building codes, zoning ordinances and other rules and regulations promulgated by applicable regulatory or Governmental Authority.

		
	(B)
	Evidence of Lien-Free Completion. Final Lien waivers from all applicable contractors and other parties providing material or services in connection with the Value-Add Work, and an endorsement to Lender’s title policy evidencing that the Security Instrument continues to be a first Lien and that there are no subordinate liens.

		
	(C)
	Evidence of Compliance with Laws. Evidence satisfactory to Lender that the Mortgaged Property continues to comply with all applicable laws, including building codes and zoning requirements. Such evidence must include any final Certificates of Occupancy, if applicable, and, if required by Lender, an updated zoning letter.

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

		
	(D)
	Evidence of Minimum Expenditure Requirement. Evidence satisfactory to Lender that the Minimum Expenditure Requirement has been satisfied. 

		
	(E)
	Other Certificates and Items. One or more of the following items, if requested by Lender in Lender’s Discretion: 

		
	(1)
	Any other certificates of approval, acceptance or compliance required by Lender from any Governmental Authority having jurisdiction over the Mortgaged Property and the Value-Add Work. 

		
	(2)
	Any certificates as required by Lender in Lender’s Discretion from any architect or major contractor or supplier providing labor or materials for the Value-Add Work. 

		
	(3)
	If the Value-Add Work includes the construction of any new structures or buildings, an updated survey. 

		
	(h)
	Right to Complete Value-Add Work. If Borrower abandons or fails to proceed diligently with the Value-Add Work, or there exists an Event of Default under this Loan Agreement, Lender will have the right (but not the obligation) to enter upon the Mortgaged Property and take over and cause the completion of the Value-Add Work. Any contracts entered into or indebtedness incurred upon the exercise of such right may be in the name of Borrower, and Lender is irrevocably appointed the attorney in fact of Borrower, such appointment being coupled with an interest, to enter into such contracts, incur such obligations, enforce any contracts or agreements made by or on behalf of Borrower (including the prosecution and defense of all actions and proceedings in connection with the Value-Add Work and the payment, settlement, or compromise of all claims for materials and work performed in connection with the Value-Add Work) and do any and all things necessary or proper to complete the Value-Add Work including signing Borrower’s name to any contracts and documents as may be deemed necessary by Lender. In no event will Lender be required to expend its own funds to complete the Value-Add Work, but Lender may, in Lender’s sole and absolute discretion, advance such funds. Any funds advanced will be added to the Indebtedness, secured by the Security Instrument and payable to Lender by Borrower in accordance with the provisions of the Loan Documents pertaining to the protection of Lender’s security and advances made by Lender.

		
	(i)
	Completion of Value-Add Work. Any acknowledgment by Lender of completion of any Value-Add Work in a manner satisfactory to Lender will not be deemed a certification by Lender that the Value-Add Work has been completed in accordance with applicable building, zoning or other codes, ordinances, statutes, laws, regulations or requirements of any Governmental Authority. Borrower will 

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

at all times have the sole responsibility for insuring that all Value-Add Work is completed in accordance with all such governmental requirements.

		
	(j)
	Compliance Required for Freddie Mac Refinance. Borrower acknowledges that compliance with the provisions of this Section 6.42 will be a condition precedent to the issuance of a Freddie Mac Refinance Commitment. Nothing in this subsection or in any other provision of this Loan Agreement or any other Loan Document will be deemed or may be construed as the agreement or obligation of Freddie Mac to issue a Freddie Mac Refinance Commitment or to purchase any loan made to Borrower. 

C.    Section 9.01(dd) is deleted and replaced with the following:

		
	(dd)
	Guarantor fails to comply with the provisions of the Section of the Guaranty entitled “Minimum Net Worth/Liquidity Requirements”.

		
	D.
	The following subsections are added to Section 9.01:

		
	(pp)
	Borrower fails to complete the Value-Add Work on or before the Value-Add Completion Date and/or satisfy the Minimum Expenditure Requirement in accordance with the terms of this Loan Agreement.

		
	(qq)
	Borrower makes a modification of the Value-Add Schedule of Work that is not permitted under or is not in compliance with Section 6.42.

		
	(rr)
	Borrower fails to provide the Quarterly Certification and other information to Lender as and when required under Section 6.42.

		
	E.
	The references to “Repairs” in the following Sections will be deemed to also refer to Value-Add Work: 

Section 6.01
Section 6.06
Section 6.08(b)

		
	F.
	The following provisions are deleted and replaced with:  “Reserved”:

Section 3.02(b)
Section 4.02(e)(iv)
Section 6.06(a)(iv)
Section 6.09(e)(v)
Section 7.05
Section 9.01(n)
Exhibit O

G.    Section 11.11 is deleted and replaced with the following:

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

		
	11.11
	No Supplemental Financing Permitted. 

		
	(a)
	Notwithstanding any provision in Freddie Mac’s Multifamily Seller/Servicer Guide that may be in effect relating to a product under which Freddie Mac purchases supplemental mortgage loans on multifamily properties that meet specified criteria (“Supplemental Mortgage Product”), Borrower may not during the term of the Loan obtain any such supplemental mortgage loan. 

		
	(b)
	Any provision or reference in this Loan Agreement or in any other Loan Document relating to the following terms (other than in Section 11.11(a) above) will be deemed of no force and effect: 

“Supplemental Indebtedness” 
“Supplemental Instrument” 
“Supplemental Lender” 
“Supplemental Loan” 
“Supplemental Loan Documents” 
“Supplemental Note” 
H.    The following definitions are added to Article XII:
“Ancillary Building System” means a building system that may affect all, or limited, building areas and provides support service to tenants, including the following:  (i) security, (ii) elevators, (iii) fire protection equipment (excluding replacement of in-kind equipment), and (iv) photovoltaic (solar) panel installation. 

“Approved Value-Add Budget” means the budget contained in the Original Value-Add Schedule of Work, or any subsequent budget expressly approved by Lender pursuant to 6.42(b)(ii). 

“Freddie Mac Refinance Commitment” is defined in the Note. 

“Maximum Value-Add Budget Amount” means $7,300,000. 

“Minimum Occupancy Target” means that no less than 85.5% of the residential units are occupied pursuant to Leases that (1) are with tenants that are not Affiliates of Borrower or Guarantor (except as otherwise expressly agreed by Lender in writing), (2) are on arms’ length terms and conditions, and (3) otherwise satisfy the requirements of the Loan Documents. 

“Minimum Expenditure Requirement” is defined in Section 6.42. 

“Minimum Unit Improvement Target” means at least 50% of the budgeted costs for the Value-Add Schedule of Work is allocated to improvements to the interiors of the residential dwelling units at the Mortgaged Property. 

“Minimum Value-Add Budget Amount” means $2,920,000. 

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

“Original Value-Add Schedule of Work” is defined in Section 6.42. 

“Qualified Value-Add Work” is defined in Section 6.42.

“Quarterly Certification” means a certification in the form attached to this Loan Agreement as Exhibit L. 

“Quarterly Reporting Date” means 25 days after the end of each calendar quarter. 

“Value-Add Completion Date” means August 16, 2019, provided, however, that Lender may in its sole discretion extend the Value-Add Completion Date so long as (i) no Event of Default exists, and (ii) the Scheduled Initial Maturity Date has been extended in accordance with the terms of the Note. 

“Value-Add Schedule of Work” means the Original Value-Add Schedule of Work, as amended by any modifications permitted under Section 6.42. 

“Value-Add Work” means the repairs, alterations, replacements or other work to be made or done to the Mortgaged Property as described on the Value-Add Schedule of Work. 

I.    The following definitions are deleted from Article XII:

“Approved Seller/Servicer”
“Intercreditor Agreement”
“Maximum Combined LTV”
“Minimum DSCR”
“Minimum Occupancy”
“Property Improvement Alterations”
“Property Improvement Notice”
“Property Improvement Total Amount”

Rider to Multifamily Loan and Security Agreement    
Value-Add Transaction
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

SPLITTING THE NOTE

(Revised 1-7-2015)

The following changes are made to the Loan Agreement which precedes this Rider:

		
	A.
	Section 11.17 is deleted and replaced with the following:

11.17    Splitting the Note. 

		
	(a)
	Lender has the right from time to time to sever the Note into two or more separate promissory notes in such denominations as Lender determines in its sole discretion, which promissory notes may be included in separate sales or Securitizations undertaken by Lender. In conjunction with any such action, Lender may redefine the interest rate and amortization schedule; provided however, each of the following will be true: 

		
	(i)
	If Lender elects to sever the Note during any period that the interest rate is a Fixed Interest Rate (as defined in the Note), and if Lender redefines the interest rate, then the weighted average of the interest rates contained in the severed promissory notes taken in the aggregate will equal the Fixed Interest Rate.

		
	(ii)
	If Lender elects to sever the Note during any period that the interest rate is floating, and if Lender redefines the interest rate, then the weighted average of the margins contained in the severed promissory notes taken in the aggregate will equal the Margin (as defined in the Note).

		
	(iii)
	If Lender redefines the amortization schedule, the amortization of the severed promissory notes taken in the aggregate will require no more amortization to be paid under the Loan than as was required under the Note at the time such action was taken by Lender and such redefined amortization will not result in a change in the amount of the monthly payment due under the Note. 

		
	(b)
	Borrower will only be required to make one payment under such separate promissory notes. Subject to the foregoing, each severed promissory note, and the Loan evidenced by each severed promissory note, will be upon all of the terms and provisions contained in this Loan Agreement and the Loan Documents which continue in full force and effect, except that Lender may allocate specific collateral given for the Loan as security for 

Rider to Multifamily Loan and Security Agreement    
Splitting the Note
Lofts at NoHo Commons

performance of specific promissory notes, in each case with or without cross default provisions.

		
	(c)
	Following any severance of the Note, the term "Lender" will be deemed to refer collectively to the holder(s) of the Notes, and the Loan will be serviced by Loan Servicer as if the Loan were evidenced by a single Note.

		
	(d)
	Borrower agrees to cooperate with all reasonable requests of Lender to accomplish the foregoing, including execution and prompt delivery to Lender of a severance agreement and such other documents as Lender requires in Lender’s Discretion, and Lender will reimburse Borrower for all costs reasonably incurred by Borrower in connection with actions taken by Borrower pursuant to Lender’s request under the terms of this Section 11.17.

		
	(e)
	Borrower hereby appoints Lender its attorney-in-fact with full power of substitution (which appointment will be deemed to be coupled with an interest and irrevocable until the Loan is paid in full and the Security Instrument is discharged of record, with Borrower hereby ratifying all that its said attorney may do by virtue of such power) to make and execute all documents necessary or desirable to effect the severance set forth in Section 11.17(a); provided, however, Lender will not make or execute any such documents under such power until 10 Business Days after Lender has given Borrower Notice of Lender’s intent to exercise its rights under such power.

		
	(f)
	Borrower’s failure to deliver any of the documents requested by Lender under this Section for a period of 10 Business Days after Notice of such request by Lender will, at Lender’s option, constitute an Event of Default under this Loan Agreement.

Rider to Multifamily Loan and Security Agreement    
Splitting the Note
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

ENTITY GUARANTOR

(Revised 3-1-2014) 

The following changes are made to the Loan Agreement which precedes this Rider:

A.    Section 9.01(dd) is deleted and replaced with the following:

		
	(dd)
	Guarantor fails to comply with the provisions of the Section of the Guaranty entitled “Material Adverse Change” or “Minimum Net Worth/Liquidity Requirements”, as applicable.

Rider to Multifamily Loan and Security Agreement    
Entity Guarantor
Lofts at NoHo Commons

RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

REGULATORY AGREEMENT AND OWNER PARTICIPATION AGREEMENT

(Revised 7-17-2014)

The following changes are made to the Loan Agreement which precedes this Rider:

		
	A.
	Section 3.07 is deleted and replaced with the following:

3.07    Owner Participation Agreement.

		
	(a)
	The Mortgaged Property is the subject of the Owner Participation Agreement. The security interest granted by Borrower to Lender under Section 3.01 will include, without limitation, a security interest in the OPA Contract Rights.

		
	(b)
	If an Event of Default has occurred and is continuing, Lender may direct the Regulatory Agreement Agency to remit future Housing Subsidy Payments to Lender. Borrower consents to all such remittances. Lender will apply to the Indebtedness any Housing Subsidy Payments that it receives.

		
	B.
	Section 5.46 is deleted and replaced with the following:

		
	5.46
	Regulatory Agreement and Owner Participation Agreement. Borrower represents and warrants that all of the following are correct:

		
	(a)
	No Default. Borrower is in compliance with all requirements of the Regulatory Agreement and Owner Participation Agreement. Borrower has not received any notice from the Regulatory Agreement Agency that Borrower is in default under the Regulatory Agreement or the Owner Participation Agreement.

		
	(b)
	Accurate Copy. The copy of the Regulatory Agreement and Owner  Participation Agreement that Borrower has provided to Lender includes all amendments, schedules and exhibits and is complete and accurate in all respects.

		
	(c)
	Termination Date. The Regulatory Agreement terminates on August 31, 2044.

		
	(d)
	Intentionally Omitted

		
	B.
	Section 6.36 is deleted and replaced with the following:

Rider to Multifamily Loan and Security Agreement    
Regulatory Agreement and Owner Participation Agreement
Lofts at NoHo Commons

		
	6.36
	Regulatory Agreement. Lender acknowledges that the Mortgaged Property is subject to the Regulatory Agreement.

		
	(a)
	Annual Compliance. Borrower will submit to Lender on an annual basis evidence that the Mortgaged Property is in ongoing compliance with all income, occupancy and rent restrictions under the Regulatory Agreement. Such submissions to Lender will be made contemporaneously with the submission of reports to the Regulatory Agreement Agency as required under the Regulatory Agreement, if applicable.

		
	(b)
	Reporting Requirements. Borrower will promptly provide Lender with a copy of any notice Borrower receives alleging that Borrower is in breach of the Regulatory Agreement. Borrower will provide Lender with Notice upon termination of the Regulatory Agreement.

		
	(c)
	Lender’s Consent. Borrower will obtain Lender’s prior approval for any amendment to or modification of the Regulatory Agreement.

C.    Section 9.01(jj) is deleted and replaced with the following:

		
	(jj)
	Any default, event of default, or breach under the Regulatory Agreement (however such terms may be defined) which continues beyond the applicable cure period, if any.

 
Section 9.01(kk) is deleted and replaced with the following:

		
	(kk)
	Any Transfer of:  (i) the Property, (ii) any interest in the Property, or (iii) any interest in the Borrower without any prior consent of the Regulatory Agreement Agency that is required by the Owner Participation Agreement.

D.    The following definitions are added to Article XII:

“Regulatory Agreement” means Agreement Containing Covenants Affecting Real Property (SubArea B-2) dated August 31, 2004 and recorded in the applicable land records of the Property Jurisdiction at recording number 04-2252756 and First Amendment to Agreement Containing Covenants Affecting Real Property (SubArea B-2) dated January 1, 2007 and recorded in the applicable land records of the Property Jurisdiction at recording number 2007-0050952, by and between  Borrower’s predecessor-in-interest and  The Community Redevelopment Agency of the City of Los Angeles [predecessor in interest to RA/LA, A DESIGNATED LOCAL AUTHORITY, a public body formed pursuant to California Health & Safety Code Section 34173(d)(3)].
    
“Regulatory Agreement Agency” means CRA/LA, A DESIGNATED LOCAL

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AUTHORITY, a public body formed pursuant to California Health & Safety Code Section 34173(d)(3), acting through any authorized representative, or any other Governmental Authority or quasi-governmental authority entitled to enforce the provisions of the Regulatory Agreement (as successor to The Community Redevelopment Agency of the City of Los Angeles).

		
	E.
	The following definitions are added to Article XII:

“Owner Participation Agreement” means the Owner Participation Agreement dated as of March 5, 2002, as supplemented and amended by (i) that certain First Implementation Agreement dated as of November 18, 2002, (ii) that certain Second Implementation Agreement dated as of December 12, 2003, (iii) that certain Third Implementation Agreement dated as of October 1, 2004, (iv) that certain Partial Assignment and Assumption Agreement dated as of December 18, 2003, (v) that certain Second Partial Assignment and Assumption Agreement dated as of October 1, 2004, (vi) that certain Third Partial Assignment of Owner Participation Agreement and Consent to Assignment, dated as of January 9, 2007, (vii) that certain letter agreement dated August 31, 2005 correcting Attachment 10, (viii) that certain Fourth Partial Assignment of Owner Participation Agreement and Consent to Assignment, dated as of August 3, 2007, (ix) that certain Fourth Implementation Agreement dated June 16, 2008, (x) that certain Fifth Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of August 19, 2008, (xi) that certain Sixth Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of May 1, 2015, and (xii) that certain Seventh Partial Assignment of Owner Participation Agreement and Consent to Assignment dated as of November 16, 2016.

“OPA Contract Rights” means the right to Housing Subsidy Payments and all other interests and rights of the Borrower in and under the Owner Participation Agreement.

“Housing Subsidy Payments” means payments received under the Owner Participation Agreement.

		
	F.
	The following definitions in Article XII are modified as follows:

The “Mortgaged Property” granted, conveyed and assigned to Lender will include the Borrower’s right to receive Housing Subsidy Payments under the Owner Participation Agreement and any and all other OPA Contract Rights and all amendments, renewals and extensions of the Owner Participation Agreement.

The “UCC Collateral” will include the Borrower’s right to receive Housing Subsidy Payments under the Owner Participation Agreement and any and all other OPA Contract Rights and all amendments, renewals and extensions of the Owner Participation Agreement.

Rider to Multifamily Loan and Security Agreement    
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RIDER TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

STANDARD FREDDIE MAC MODIFICATIONS

(Revised 10-19-2016) 

The following changes are made to the Loan Agreement which precedes this Rider:

		
	A.
	Section 5.09(a) is deleted and replaced with the following: 

		
	(a)
	Borrower and any operator of the Mortgaged Property, if applicable, and to the best of Borrower’s knowledge any commercial tenant of the Mortgaged Property is in possession of all material licenses, permits and authorizations required for use of the Mortgaged Property, which are valid and in full force and effect as of the date of this Loan Agreement.

		
	B.
	Section 5.12 is deleted and replaced with the following: 

		
	5.12
	No Prior Assignment; Prepayment of Rents. Borrower has (a) not executed any prior assignment of Rents (other than an assignment of Rents securing any prior indebtedness that is being assigned to Lender, or that is being paid off and discharged with the proceeds of the Loan evidenced by the Note or, if this Loan Agreement is entered into in connection with a Supplemental Loan, other than an assignment of Rents securing any Senior Indebtedness), and (b) not performed any acts and has not executed, and will not execute, any instrument which would prevent Lender from exercising its rights under any Loan Document. At the time of execution of this Loan Agreement, unless otherwise approved by Lender in writing, there has been no prepayment of any Rents for more than 2 months prior to the due dates of such Rents other than the last month’s rent that is collected at the time a tenant enters into a Lease.

		
	C.
	Sections 6.04(d) is deleted and replaced with the following: 

		
	(d)
	Subordination and Attornment Requirements. All Non-Residential Leases entered into after the date of this Loan Agreement, regardless of whether Lender’s consent or approval is required, will specifically include the following provisions:

		
	(i)
	The Lease is subordinate to the Lien of the Security Instrument, with such subordination to be self-executing.

		
	(ii)
	The tenant will attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the Mortgaged Property by any purchaser at a foreclosure sale or by Lender in any manner.

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	(iii)
	The tenant agrees to execute such further evidences of attornment as Lender or any purchaser at a foreclosure sale may from time to time request.

		
	(iv)
	The tenant will, upon receipt of a written request from Lender following the occurrence of and during the continuance of an Event of Default, pay all Rents payable under the Lease to Lender.

		
	(v)
	Reserved

		
	(vi)
	Reserved

		
	D.
	Section 6.06(a) is deleted and replaced with the following: 

		
	(a)
	Right of Entry. Subject to the rights of tenants under Leases, Borrower will permit Lender, its agents, representatives and designees and any interested Governmental Authority to make or cause to be made entries upon and inspections of the Mortgaged Property to inspect, among other things:  (i) Repairs, (ii) Capital Replacements, (iii) Restorations, (iv) Property Improvement Alterations, and (v) any other Improvements, both in process and upon completion (including environmental inspections and tests performed by professional inspection engineers) during normal business hours, or at any other reasonable time, upon reasonable Notice to Borrower if the inspection is to include occupied residential units (which Notice need not be in writing). During normal business hours, or at any other reasonable time, Borrower will also permit Lender to examine all books and records and contracts and bills pertaining to the foregoing. Notice to Borrower will not be required in the case of an emergency, as determined in Lender’s Discretion, or when an Event of Default has occurred and is continuing.

		
	E.
	Section 6.07(a) is deleted and replaced with the following: 

		
	(a)
	Delivery of Books and Records. Borrower will keep and maintain at all times at the Mortgaged Property, its main business office, or the Property Manager’s office, and upon Lender’s request will make available at the Mortgaged Property (or, at Borrower’s option, at the Property Manager’s office), complete and accurate books of account and records (including copies of supporting bills and invoices) adequate to reflect correctly the operation of the Mortgaged Property, in accordance with GAAP consistently applied (or such other method which is reasonably acceptable to Lender), and copies of all written contracts, Leases, and other instruments which affect the Mortgaged Property. The books, records, contracts, Leases and other instruments will be subject to examination and inspection by Lender at any reasonable time.

		
	F.
	Section 6.07(c)(ii) is deleted and replaced with the following:

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	(c)
	(ii)    Upon Lender’s request in Lender’s sole and absolute discretion prior to a Securitization, and thereafter upon Lender’s request in Lender’s Discretion, within 10 days after such a request from Lender, each of the following:

		
	(A)
	A statement that identifies all owners of any interest in Borrower and any designated Entities for Transfer Persons with a collective equity interest (whether direct or indirect) of 25% or more in Borrower, and the interest held by each (unless Borrower or any Designated Entity for Transfers such Person is a publicly-traded entity in which case such statement of ownership will not be required), and if such Person Borrower or a Designated Entity for Transfers is a corporation then all officers and directors of such Person Borrower and the Designated Entity for Transfers, and if such Person Borrower or a Designated Entity for Transfers is a limited liability company then all non-member Managers.

		
	(B)
	To the extent not included in the statement provided under Section 6.07(c)(ii)(A), a statement that identifies (1) all Persons with a collective equity interest (whether direct or indirect) of 25% or more in Borrower and (2) all Non-U.S. Equity Holders.

		
	G.
	Section 6.07(d) is deleted and replaced with the following: 

		
	(d)
	Form of Statements; Audited Financials. A natural person having authority to bind Borrower (or the SPE Equity Owner or Guarantor, as applicable), acting in his or her capacity as a manager, general partner, or an officer of Borrower, SPE Equity Owner, or Guarantor, and not in his or her individual capacity, will certify each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) to be complete and accurate. Each of the statements, schedules and reports required by Sections 6.07(b), 6.07(c) and 6.07(f) will be in such form and contain such detail as Lender may reasonably require. Lender also may require that any of the statements, schedules or reports listed in Sections 6.07(b), 6.07(c) and 6.07(f) be audited at Borrower’s expense by independent certified public accountants acceptable to Lender, at any time when an Event of Default has occurred and is continuing or at any time that Lender, in its reasonable judgment, determines that audited financial statements are required for an accurate assessment of the financial condition of Borrower or of the Mortgaged Property.

		
	H.
	Section 6.12(a) is deleted and replaced with the following: 

		
	(a)
	Prohibited Activities and Conditions. Except for matters described in this Section 6.12, Borrower will not cause or permit Prohibited Activities or Conditions. Borrower will comply with all Hazardous Materials Laws applicable to the Mortgaged Property. Without limiting the generality of the previous sentence, Borrower will: (i) obtain and maintain all Environmental Permits required by 

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Lofts at NoHo Commons

Hazardous Materials Laws and comply with all conditions of such Environmental Permits, (ii) cooperate with any inquiry by any Governmental Authority, and (iii) comply with any governmental or judicial order that arises from any alleged Prohibited Activity or Condition.  Subsection (iii) of this Section 6.12(a) is subject to the final sentence of Section 6.12(f).
		
	I.
	Section 6.12(f) is deleted and replaced with the following: 

		
	(f)
	Remedial Work. If any investigation, site monitoring, containment, clean-up, Restoration or other remedial work (“Remedial Work”) is necessary to comply with any Hazardous Materials Law or order of any Governmental Authority that has or acquires jurisdiction over the Mortgaged Property or the use, operation or improvement of the Mortgaged Property, or is otherwise required by Lender as a consequence of any Prohibited Activity or Condition or to prevent the occurrence of a Prohibited Activity or Condition, Borrower will, by the earlier of (i) the applicable deadline required by Hazardous Materials Law, or (ii) 30 days after Notice from Lender demanding such action, begin performing the Remedial Work, and thereafter diligently prosecute it to completion, and must in any event complete the work by the time required by applicable Hazardous Materials Law. If Borrower fails to begin on a timely basis or diligently prosecute any required Remedial Work, Lender may, at its option, cause the Remedial Work to be completed, in which case Borrower will reimburse Lender on demand for the cost of doing so. Any reimbursement due from Borrower to Lender will become part of the Indebtedness as provided in Section 9.02. Notwithstanding the foregoing, Borrower may contest the order of any Governmental Authority in good faith through appropriate proceedings, provided that (i) Borrower has demonstrated to Lender’s satisfaction that any delay in completing Remedial Work pending the outcome of such proceedings would not result in damage to the Mortgaged Property or to persons who use or occupy the Improvements, or otherwise impair Lender’s interest under this Loan Agreement, and (ii) if any delay in completing the Remedial Work results or may result in a Lien against the Mortgaged Property, Borrower must promptly furnish to Lender a bond or other security satisfactory to Lender in an amount no less than 150% of the applicable claim.

		
	J.
	Sections 6.13(a)(xvi), (xviii), (xx), and (xxiii) are deleted and replaced with the following: 

		
	(xvi)
	It will file its own tax returns separate from those of any other Person, except to the extent that (A) Borrower is treated as a “disregarded entity” for tax purposes and is not required to file tax returns under applicable law or (B) is required by applicable law to file consolidated tax returns, and will pay any taxes required to be paid under applicable law.

		
	(xviii)
	It will maintain adequate capital for the normal obligations reasonably foreseeable in a business of its size and character and in light of its contemplated business operations and will pay its debts and liabilities 

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Lofts at NoHo Commons

from its own assets as the same become due; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

		
	 (xx)
	It will pay (or cause the Property Manager to pay on behalf of Borrower from Borrower’s funds) its own liabilities (including salaries of its own employees) from its own funds; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

		
	(xxiii)
	It will maintain a sufficient number of employees (if any) in light of its contemplated business operations and pay the salaries of its own employees, if any, only from its own funds; provided, however, nothing in this Section will require any member or partner of Borrower or any Borrower Principal to make any equity contribution to Borrower.

		
	K.
	The lead paragraph of Section 7.01 is deleted and replaced with the following: 

		
	7.01
	Permitted Transfers.  The occurrence of any of the following Transfers will not constitute an Event of Default under this Loan Agreement, notwithstanding any provision of Section 7.02 to the contrary:

		
	L.
	Section 7.01(h) is deleted and replaced with the following: 

		
	(h)
	The creation of a mechanic’s, materialmen’s, or judgment Lien against the Mortgaged Property, which is released of record, bonded, or otherwise remedied to Lender’s satisfaction within 60 days of the date of creation, or is being contested as otherwise provided in this Loan Agreement; provided, however, if Borrower is diligently prosecuting such release or other remedy and advises Lender that such release or remedy cannot be consummated within such 60-day period, Borrower will have an additional period of time (not exceeding 120 days from the date of creation or such earlier time as may be required by applicable law in which the lienor must act to enforce the Lien) within which to obtain such release of record or consummate such other remedy.

		
	M.
	Section 11.03(a) is deleted and replaced with the following: 

		
	(a)
	All Notices under or concerning this Loan Agreement will be in writing. Each Notice will be deemed given on the earliest to occur of: (i) the date when the Notice is received by the addressee, (ii) the first Business Day after the Notice is delivered to a recognized overnight courier service, with arrangements made for payment of charges for next Business Day delivery, or (iii) the third Business Day after the Notice is deposited in the United States mail with postage prepaid, certified mail, return receipt requested. Addresses for Notice are as follows:

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Lofts at NoHo Commons

	
		
	If to Lender:
	Wells Fargo Bank, National Association
2010 Corporate Ridge, Suite 1000
McLean, Virginia 22102
Attention:  Loan Servicing Department

	If to Borrower:
	NoHo Commons Pacific Owner LLC
13949 Ventura Boulevard, Suite 350
Sherman Oaks, California 91423
Attention:  Karl Slovin

Lender will endeavor to provide a courtesy copy of any Notice given to Borrower by Lender, at the following address. However, the failure to provide such courtesy copy will not affect the validity or sufficiency of any Notice to Borrower, will not affect Lender’s rights and remedies under this Loan Agreement or any other Loan Document, and will not subject Lender to any claims by or liability to Borrower or any other Person. No person listed below will be a third-party beneficiary of any of the Loan Documents.

	
		
	Courtesy Copy to:
	KBS Strategic Opportunity REIT II, Inc.
800 Newport Center Drive, Suite 700
Newport Beach, California 92660
Attention:  Brian Ragsdale

		
	N.
	The following is added to the end of Section 11.13: 

Notwithstanding anything set forth above, Borrower will not be required to execute any document that changes the interest rate, the stated maturity date, or the amortization of principal set forth in the Note, or modifies or amends any essential economic terms of the Loan.

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EXHIBIT A

DESCRIPTION OF THE LAND

 
Multifamily Loan and Security Agreement    Page A-1
Lofts at NoHo Commons

EXHIBIT B

MODIFICATIONS TO MULTIFAMILY LOAN AND SECURITY AGREEMENT

1.    Section 6.10(g) of the Loan Agreement is replaced with the following:

		
	(g)
	Evidence of Insurance; Insurance Policy Renewals. Borrower will deliver to Lender a legible copy of each Insurance policy, and Borrower will promptly deliver to Lender a copy of all renewal and other notices received by Borrower with respect to the policies. Borrower will ensure that the Mortgaged Property is continuously covered by the required Insurance. At least 15 days prior to the expiration date of each Insurance policy, Borrower will deliver to Lender evidence acceptable to Lender in Lender’s Discretion that each policy has been renewed. If the evidence of a renewal does not include a legible copy of the renewal policy, Borrower will deliver a legible copy of such renewal no later than the earlier of the following:

(i)     60 days after the expiration date of the original policy.

		
	(ii)
	The date of any Notice of an insured loss given to Lender under Section 6.10(i).

2.    Section 7.03(c)(i) of the Loan Agreement is replaced with the following:

		
	(i)
	The public issuance of common stock, convertible debt, equity or other similar securities, including securities registered under Section 12(b) of 12(g) of the Securities Exchange Act of 1934, as amended (“Public Fund/REIT Securities”) and the subsequent Transfer of such Public Fund/REIT Securities.

3.    The Loan Agreement must be modified to include the following:

11.16.    Litigation Updates. In connection with the UFAS Lawsuit, Borrower must provide, or cause to be provided, to Lender periodic updates regarding the status of the UFAS Lawsuit within 10 days of Lender’s request prior to Securitization, if applicable, and then quarterly updates thereafter or within 10 days of Lender’s written request; provided that copies of any court orders or settlement agreements that are issued or agreed upon in connection with the UFAS Lawsuit, together with a summary acceptable to Lender, must be delivered promptly to Lender upon issuance or execution of such court order or settlement agreement.

The following definitions must be added to Article XII:

 
Multifamily Loan and Security Agreement    Page B-1
Lofts at NoHo Commons

“Defendant” means Redrock Noho Residential, LLC.

“UFAS Lawsuit” means the lawsuit filed against Defendant (and other parties) known as Independent Living Center et al. v. City of Los Angeles, Redrock Noho Residential, LLC et al., Docket No. 2:12-cv-00551-FMO-PJW (C.D. CA)  (“UFAS Litigation”)  and any counterclaims filed in connection therewith.  

 
Multifamily Loan and Security Agreement    Page B-2
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EXHIBIT C

REPAIR SCHEDULE OF WORK

	
		
	Description of Repair
	Completion Date
Days after Origination)

	Landscaping planter repairs - Planter
Waterproofing should be restored.
	180

	Irrigation repairs - Irrigation should be
fitted with directional heads to eliminate water spraying onto building
	180

	Metal fencing repairs - Metal guard railing
should be replaced due to corrosion.
	180

	Building sealants - Sealant along base
of the building should be replaced as needed.
	180

	Arrest active water infiltration - Perform epoxy injection at SE corner of perimeter wall at lower level parking deck.
	180

	Elevator room HVAC - Install a dedicated
split dx system due to high temperatures.
	180

	Ventilation in gas meter rooms - Increase ventilation to gas meter rooms.
	180

	ADA improvements – Correct non-compliant ADA design issues.
	180

 
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EXHIBIT D

REPAIR DISBURSEMENT REQUEST

The undersigned requests from                                          (“Lender”) the disbursement of funds in the amount of $_________________         (“Disbursement Request”) from the Repair Reserve Fund established pursuant to the Multifamily Loan and Security Agreement dated                     , 20     by and between Lender and the undersigned ( “Loan Agreement”) to pay for repairs to the multifamily apartment project known as                                  and located in                             .

The undersigned represents and warrants to Lender that the following information and certifications provided in connection with this Disbursement Request are true and correct as of the date hereof:

		
	1.
	Purpose for which disbursement is requested:

                                                        

		
	2.
	To whom the disbursement will be made (may be the undersigned in the case of reimbursement for advances and payments made or cost incurred for work done by the undersigned):                                            

		
	3.
	Estimated costs of completing the uncompleted Repairs as of the date of this Disbursement Request:                                                                                                       

		
	4.
	The undersigned certifies that each of the following is true:

(a)    The disbursement requested pursuant to this Disbursement Request will be used solely to pay a cost or costs allowable under the Loan Agreement.
(b)    None of the items for which disbursement is requested pursuant to this Disbursement Request has formed the basis for any disbursement previously made from the Repair Reserve Fund.
(c)    All labor and materials for which disbursements have been requested have been incorporated into the Improvements or suitably stored upon the Mortgaged Property in accordance with reasonable and standard building practices, the Loan Agreement and all applicable laws, ordinances, rules and regulations of any governmental authority having jurisdiction over the Mortgaged Property.
(d)    The materials, supplies and equipment furnished or installed for the Repairs are not subject to any Lien or security interest or that the funds to be disbursed pursuant to this Disbursement Request are to be used to satisfy any such Lien or security interest.

Multifamily Loan and Security Agreement    Page D-1
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	5.
	All capitalized terms used in this Disbursement Request without definition will have the meanings ascribed to them in the Loan Agreement.

IN WITNESS WHEREOF, the undersigned has executed this Disbursement Request as of the day and date first above written.
                            	
		
	Date:                    
	BORROWER:

                        
                        

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EXHIBIT E

WORK COMMENCED AT MORTGAGED PROPERTY

None.

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EXHIBIT F

CAPITAL REPLACEMENTS

		
	•
	Carpet/vinyl flooring

		
	•
	Window treatments

		
	•
	Roofs

		
	•
	Furnaces/boilers

		
	•
	Air conditioners

		
	•
	Ovens/ranges

		
	•
	Refrigerators

		
	•
	Dishwashers

		
	•
	Water heaters

		
	•
	Garbage disposals

		
	•
	Pool and/or spa plaster/liner

		
	•
	Pool and/or spa filtration equipment

		
	•
	Exterior walls (paint/repair)

		
	•
	Microwaves

		
	•
	Clothes washer

		
	•
	Clothes dryer

		
	•
	Other items that Lender may approve subject to any conditions that Lender may require, all in Lender’s sole and absolute discretion.

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EXHIBIT H

ORGANIZATIONAL CHART OF BORROWER AS OF THE CLOSING DATE

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EXHIBIT I

DESIGNATED ENTITIES FOR TRANSFERS AND GUARANTOR(S)

Designated Entities for Transfers

KBS SOR II LOFTS AT NOHO COMMONS, LLC
KBS SOR II LOFTS AT NOHO COMMONS JV, LLC
KBS SOR II ACQUISITION V, LLC
KBS SOR US PROPERTIES II LLC
KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II
KBS STRATEGIC OPPORTUNITY HOLDINGS II, LLC
KBS STRATEGIC OPPORTUNITY REIT II, INC.
NOHO COMMONS PACIFIC INVESTORS LLC
SLOVIN PROPERTIES, INC.

Guarantor(s)

KARL SLOVIN
KEK FAMILY HOLDINGS, LLC

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EXHIBIT K

SCOPE OF WORK AND BUDGET FOR VALUE-ADD WORK
 

Multifamily Loan and Security Agreement    Page K-1
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EXHIBIT L 

Freddie Mac Loan Number:  932790054
Property Name:  Lofts at NoHo Commons

BORROWER QUARTERLY CERTIFICATION

VALUE-ADD TRANSACTION

(Revised 5-1-2015)

THIS CERTIFICATION (“Certification”) dated _________ 1, 20____ is made in connection with the mortgage loan (“Loan”) in the original principal amount of $_________________ payable by NOHO COMMONS PACIFIC OWNER LLC, a Delaware limited liability company (“Borrower”) and currently held by Federal Home Loan Mortgage Corporation (together with its successors and/or assigns, “Freddie Mac”). Capitalized terms not defined in this Certification will have the meanings set forth in that certain Multifamily Loan and Security Agreement dated ______________, 20__ executed by Borrower in connection with the Loan, as amended (“Loan Agreement”). 

Pursuant to the requirements of the Loan Agreement, Borrower certifies, represents, and warrants the following to Freddie Mac as of the date set forth above: 

		
	1.
	Attached as Exhibit A is the current Value-Add Schedule of Work. No modifications have been made to the Original Value-Add Schedule of Work except in compliance with the provisions of the Loan Agreement. If the Value-Add Schedule of Work does not satisfy the Minimum Unit Improvement Target, Exhibit A contains an explanation as to the cause. [THE VALUE-ADD SCHEDULE OF WORK ATTACHED TO THIS CERTIFICATION MUST SET FORTH THE VALUE-ADD WORK AND COSTS IN AT LEAST AS MUCH DETAIL AS THE SCHEDULE OF WORK ATTACHED TO THE LOAN AGREEMENT.] 

		
	2.
	Attached as Exhibit B is a summary that sets forth the following:  (a) the Value-Add Work that has been completed, (b) the progress and status of the remaining Value-Add Work, and (c) the costs incurred and paid to date with respect to the Value-Add Work. No claim exists against Borrower or against the Mortgaged Property out of which a lien based on furnishing labor or material exists or might ripen, except for those claim(s) Borrower intends to contest that are expressly described on Exhibit B. 

		
	3.
	Except as described on Exhibit C, the occupancy for the Mortgaged Property has achieved the Minimum Occupancy Target during each month since the date of the last Quarterly Certification delivered to Lender, or, if no Quarterly Certification was previously delivered to Lender, since the date of the origination of the Loan. If the Minimum Occupancy Target 

Borrower Quarterly Certification                                             Page L-1
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has not been achieved, Exhibit C includes an explanation as to the cause and Borrower’s plan to increase the occupancy. 

		
	4.
	Borrower has performed the Value-Add Work in conformance with, and has otherwise complied with, the provisions of Section 6.42 of the Loan Agreement. 

[INSERT ANY ADDITIONAL CERTIFICATIONS REQUIRED BY LENDER]

Borrower Quarterly Certification                                             Page L-2
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Lofts at NoHo Commons

IN WITNESS WHEREOF, the undersigned has executed this Certification as of the day and date first above written.

BORROWER:

NOHO COMMONS PACIFIC OWNER LLC,
a Delaware limited liability company

By:    KBS SOR II LOFTS AT NOHO COMMONS, LLC,
a Delaware limited liability company
its sole member

By:    NOHO COMMONS PACIFIC INVESTORS LLC,
a Delaware limited liability company,
its Managing Member

By:     SLOVIN PROPERTIES, INC.,
a Delaware corporation,
its Manager

By:                        
Name:                        
Title:                        

(SIGNATURES CONTINUE ON FOLLOWING PAGE)

Borrower Quarterly Certification                                             Page L-3
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By its signature below, Guarantor certifies that it is in compliance with the provisions of the Section of the Guaranty entitled “Minimum Net Worth/Liquidity Requirements”.

GUARANTOR: 

___________________________________
KARL SLOVIN

(SIGNATURES CONTINUE ON FOLLOWING PAGE)

Borrower Quarterly Certification                                             Page L-4
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GUARANTOR:

KEK FAMILY HOLDINGS, LLC, a
Delaware limited liability company

By:     _____________________________
Robert Zimmerman, Manager

Borrower Quarterly Certification                                             Page L-5
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EXHIBIT A

VALUE-ADD SCHEDULE OF WORK

Borrower Quarterly Certification                                             Page L-1
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EXHIBIT B

SUMMARY OF PROGRESS; CONTESTED CLAIMS

Borrower Quarterly Certification                                             Page L-1
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EXHIBIT C

MINIMUM OCCUPANCY TARGET

[IF PROPERTY HAS NOT FALLEN BELOW MINIMUM OCCUPANCY TARGET INSERT “NOT APPLICABLE”] 

Borrower Quarterly Certification                                             Page L-1
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Lofts at NoHo Commons

EXHIBIT O

BORROWER’S CERTIFICATE OF
PROPERTY IMPROVEMENT ALTERATIONS COMPLETION
 
THIS BORROWER’S CERTIFICATE OF PROPERTY IMPROVEMENT ALTERATIONS COMPLETION (“Certificate”) is made as of _______ ___, 20___, by ______________, a ________________ (“Borrower”) for the benefit of ________________, a ________________, and it successors and assigns (collectively, “Lender”).

In connection with Section 6.09(e)(v)(G) of the Loan Agreement, Borrower certifies to Lender as follows:

[INSERT THE APPLICABLE SECTION (a) AND DELETE THE OTHER:]

[USE THE FOLLOWING IF ALL PROPERTY IMPROVEMENT ALTERATIONS THAT WERE COMMENCED HAVE BEEN COMPLETED] 
		
	(a)
	All Property Improvement Alterations described in the Property Improvement Notice that were commenced have been completed.  The completed Property Improvement Alterations and their completion dates are as follows:

	
		
	Description of Property Improvement Alteration Commenced
	Completion Date

	 
	 

	 
	 

[OR]

[USE THE FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT AND NOT ALL THE PROPERTY IMPROVEMENT ALTERATIONS THAT WERE COMMENCED HAD BEEN COMPLETED AT SUCH TIME] 
		
	(a)
	All Property Improvement Alterations described in the Property Improvement Notice that resulted in individual residential dwelling units not being available for leasing that were commenced have been or will be completed in a timely manner.  Such Property Improvement Alterations that were commenced and their completion dates and/or, if applicable, anticipated completion dates, are as follows:

	
				
	Description of Property Improvement Alteration Commenced
	Completion Date
	Anticipated Completion Date
	Comments

	 
	 
	 
	 

	 
	 
	 
	 

Multifamily Loan and Security Agreement    Page O-1
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[FOR ALL LOANS:]

		
	(b)
	The completed Property Improvement Alterations were completed in a good and workmanlike manner and in compliance with all laws (including, without limitation, any and all life safety laws, environmental laws, building codes, zoning ordinances and laws for the handicapped and/or disabled) 

		
	(c)
	Should Borrower intend to contest any claim or claims for labor, materials or other costs, Borrower agrees to give Lender notice within 30 days of the existence of such claim or claims and certifies to Lender that payment of the full amount which might in any event be payable in order to satisfy such claim or claims will be made.

[INSERT THE FOLLOWING IF MINIMUM OCCUPANCY HAS DECREASED BELOW THE MINIMUM OCCUPANCY REQUIREMENT]

		
	(d)
	Any additional Property Improvement Alterations not yet commenced which would cause residential dwelling units to be unavailable for leasing have been suspended.

[BORROWER SIGNATURE]

Multifamily Loan and Security Agreement    Page O-2
Lofts at NoHo CommonsExhibit

Exhibit 10.45
LIMITED LIABILITY COMPANY AGREEMENT 
OF KBS SOR II 210 WEST 31ST STREET, LLC
This LIMITED LIABILITY COMPANY AGREEMENT OF KBS SOR II 210 WEST 31ST, LLC (this “Agreement”), is entered into effective as of October   28  , 2016 (the “Effective Date”), by and between ONYX 31ST STREET, LLC, a Delaware limited liability company (“JV Member”), and KBS SOR II 210 WEST 31st STREET JV, LLC, a Delaware limited liability company (“KBS” or “Co-Managing Member”).  JV Member and KBS may hereinafter be referred to herein collectively, as the “Members” or individually as a “Member.”
RECITALS
WHEREAS, the Members desire to form KBS SOR II 210 West 31st Street, LLC, a Delaware limited liability company (the “Company”).
WHEREAS, the Company shall cause 210 West 31st Street Owner LLC, a Delaware limited liability company (“Property Owner Subsidiary”) and a wholly owned subsidiary of the Company, to enter into that certain Purchase and Sale Agreement to Assign Eighty Percent (80%) Ground Lease (the “Purchase Agreement”) with JV Member and other parties to be joined thereto (Phalanx Fund II, L.P., Onyx EP 31st Street, LLC and LMB II, LLC) as contemplated by the Purchase Agreement, collectively as seller and ground lessee (collectively, “Seller”), in a form approved by the Members, for the purchase of eighty percent (80%) of a leasehold interest in 210 West 31st Street, New York, New York and the improvements located thereon (along with the contribution of the remaining 20% by the JV Member hereunder, the “Property”) pursuant to that certain Amended and Restated Ground Lease Agreement dated as of December 30, 2014, as modified by Second Amendment to Option Agreement and First Amendment to Lease dated December 30, 2014  (collectively, the “Ground Lease”), together with Seller’s Project Work Product (defined below).
WHEREAS, the Members desire to redevelop the Property as a 2-story commercial retail building with approximately 29,018 square feet, a basement level and a terraced roof, as more particularly described in the Preliminary Development Plan (defined below) (the “Project”).
WHEREAS, at the closing of the transaction contemplated by the Purchase Agreement (the “Property Closing”), the Company will cause Property Owner Subsidiary to obtain a mortgage loan (“Mortgage Loan”) from a lender acceptable to the Members (“Lender”), on and subject to the terms and conditions of this Agreement.
ARTICLE I
FORMATION
1.01.    Formation.  The Company was formed pursuant to this Agreement and the filing of that certain Certificate of Formation dated October 27, 2016 pursuant to the Act.  The term “Act” means the 6 Delaware Code §§18 101, et. seq., Delaware Limited Liability Code, as hereafter amended from time to time.  Joshua Weiss, Esq. is designated as an “authorized person” within the meaning of the Act, and such “authorized person” has executed, delivered and filed the Certificate 

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of Formation with the Secretary of State of the State of Delaware.  Upon the filing of the Certificate of Formation, his power as an “authorized person” ceased, and Managing Member thereupon became the designated “authorized person” and shall continue as the designated “authorized person” within the meaning of the Act.  Subject to the terms of this Agreement, Managing Member or an attorney authorized by Managing Member shall execute, acknowledge and file such other documents and instruments as are necessary and/or appropriate to register, qualify to do business and/or operate the Company as a foreign limited liability company in any jurisdiction in which the Company may own property or wish to conduct business.  The existence of the Company as a separate legal entity shall continue until cancellation of the Certificate of Formation as provided in the Act.
1.02.    Names and Addresses.  The name of the Company is KBS SOR II 210 West 31st Street, LLC.  The principal office of the Company in the State of Delaware. The name and address of the registered agent of the Company in the State of Delaware currently is Registered Agent Solutions, Inc., 1679 S. DuPont Highway, Suite 100, Dover, County of Kent, Delaware 19901 until changed by the Managing Member with written notice to all Members.  The names and addresses of the Members are set forth on Exhibit A attached hereto.  The organizational structure of the Company and any subsidiaries directly or indirectly owned by the Company, including Property Owner Subsidiary (each, a “Subsidiary” and collectively, the “Subsidiaries”), that will exist as of the consummation of the Property Closing, is as set forth on Exhibit B attached hereto.  The ownership interests of the Members in the Company shall not be certificated interests, unless otherwise determined as a Major Decision pursuant to Section 2.02 below.
1.03.    Nature of Business.  The express, limited and only purposes of the Company shall be (i) to indirectly acquire, own, redevelop, lease, hold for long-term investment, sell, exchange, dispose of and otherwise realize the economic benefit from the Property, and (ii) to conduct such other activities with respect to the Property as are appropriate to carrying out the foregoing purposes and to do all things incidental to or in furtherance of the above-enumerated purposes.  Neither the Company nor any of the Subsidiaries shall engage in any other business or activity, unless such other business or activity has been approved as a Major Decision (as defined below).
1.04.    Term of Company.  The term of the Company shall commence on the date the Certificate of Formation for the Company is filed with the Office of the Delaware Division of Corporations and shall continue until dissolved pursuant to Article VIII.  The existence of the Company as a separate legal entity shall continue until the cancellation of the Company’s Certificate of Formation.
1.05.    Purchase Agreement.  The Members acknowledge that the Purchase Agreement will provide for certain conditions to the Property Owner Subsidiary’s obligation to close, including the absence of a default by Seller (“Buyer Closing Conditions”).  The decision as to whether each of such conditions have been satisfied as of the closing date under the Purchase Agreement shall be decided by the Members, subject to the following:
(a)    Failed Conditions; Members Agree to Terminate.  If both Members determine that any of the Buyer Closing Conditions have not been satisfied (after expiration of any notice and cure periods) and do not desire to close over any unsatisfied Buyer Closing Conditions, Managing Member (as defined below) shall deliver to Seller a termination notice under the Purchase Agreement 

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and seek a return of the Earnest Money (as such term is defined under the Purchase Agreement) to the extent all or any portion of the Earnest Money is refundable and thereafter cause the Company to be dissolved pursuant to Article VIII.
(b)    Failed Conditions; KBS Desires to Proceed.  If Co-Managing Member has notified JV Member in writing that it desires to close over any unsatisfied Buyer Closing Condition, but JV Member has notified Co-Managing Member in writing of its desire to terminate the Purchase Agreement, then Co-Managing Member shall have the right, in its sole and absolute discretion, to elect to (A) deliver to Seller a termination notice under the Purchase Agreement and seek a return of the Earnest Money, or (B) deliver written notice to JV Member requiring JV Member to withdraw from the Company.  If Managing Member elects to deliver a notice pursuant to clause (B), then the Co-Managing Member shall reimburse JV Member for the amount of the Earnest Money then posted by JV Member (and not previously reimbursed by Co-Managing Member) to the extent all or any portion of the Earnest Money is refundable and Co-Managing Member shall be free to cause the Property Owner Subsidiary or an Affiliate of KBS to consummate the Property Closing without JV Member being a Member of the Company or otherwise a party to such transaction.
(c)    Failed Conditions; JV Member Desires to Proceed.  If JV Member has notified Co-Managing Member in writing that it desires to close, but Co-Managing Member has notified JV Member in writing of its desire to terminate the Purchase Agreement, then JV Member shall have the right, in its sole and absolute discretion, to elect to (A) deliver to Seller a termination notice under the Purchase Agreement and seek a return of the Earnest Money to the extent all or any portion of the Earnest Money is refundable, or (B) deliver written notice to Co-Managing Member requiring Co-Managing Member to withdraw from the Company.  If JV Member elects to deliver a notice pursuant to clause (B), then JV Member shall reimburse Co-Managing Member for the amount of the Earnest Money then posted by Co-Managing Member and JV Member shall be free to cause the Property Owner Subsidiary or an Affiliate of JV Member to consummate the Property Closing without KBS being a Member of the Company or otherwise a party to such transaction.
1.06.    Mortgage Loan.  Notwithstanding anything to the contrary in Article II below, Co-Managing Member shall lead and control the sourcing and selection of the Lender and negotiation of the loan documents evidencing and securing the Mortgage Loan.  The Mortgage Loan shall be at least 60% of the Development Budget and non-recourse to the Property Owner Subsidiary, the Company and the Members, except to the extent Lender requires customary non-recourse carve outs, a customary environmental indemnity, and a completion guaranty with respect to the completion of the Project.  JV Member or an Affiliate shall be the party to enter into such guarantees with Lender and JV Member or its Affiliate shall have the right to negotiate such guarantees, and the terms thereof, with Lender.  If requested by Co-Managing Member, JV Member shall cooperate with Co-Managing Member’s efforts to obtain the Mortgage Loan, which cooperation shall include providing the Lender or prospective Lenders with information and documents concerning JV Member and its Affiliates.
1.07.    Preliminary Development Plan; Construction Plans.  Attached hereto as Exhibit C is a development plan the (“Preliminary Development Plan”) for the development and construction of the Project.  The Preliminary Development Plan has been approved by the Members.  Attached 

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hereto as Exhibit C-1 is a list of the current construction plans (the “Preliminary Constructions Plans”) for the Project, which have not been finalized or approved by applicable governmental and quasi-governmental authorities having jurisdiction over the Property and the Project, including specifically, the City of New York (the “Governmental Authorities”).  Attached hereto as Exhibit C-2 is a preliminary development budget (the “Preliminary Development Budget”) that is based the Preliminary Development Plan and the Preliminary Construction Plans.
1.08.    Development Plan.  The Members acknowledge that certain components of the Preliminary Development Plan are not finalized as of the Effective Date.  The Members shall work together diligently and in good faith to finalize the remaining components of the Preliminary Development Plan (and upon the approval of such remaining components pursuant to this Section 1.08, the Preliminary Development Plan shall become the “Development Plan”). The remaining components include, without limitation, the following:
(a)    Approval by all Governmental Authorities of the Preliminary Construction Plans (and upon the approval of the Preliminary Construction Plans, the Preliminary Construction Plan shall become the Preliminary Construction Plans shall be become the “Construction Plans”) and issuance of all necessary permits and approvals for the construction of the Project;
(b)    Approval by the Members of the selection of the general contractor and the form and cost of the Construction Contract (as hereinafter defined) as a Major Decision pursuant to Section 2.02 below;
(c)    Approval by the Members of changes to the Construction Plans for the Project as a Major Decision pursuant to Section 2.02 below; provided, however, that each Member shall not withhold their consent if: (1) the changes are to complete detail not yet completed in the Preliminary Construction Plans and such changes are otherwise consistent with the Preliminary Construction Plans and the Preliminary Development Plan, or (2) the changes are required by Governmental Authorities or are determined to be necessary to obtain the approval by Governmental Authorities for the Construction Plans and the Project and do not materially increase or change the scope of the Project as contemplated by the Preliminary Development Plan (and for purposes of this Section 1.08(c), the Members agree that a material change would include a change that results in more than a twenty-five percent (25%)  reduction in the leasable square footage of the Project or more than a twenty-five percent (25%) reduction in pro-forma rent, or more than a twenty-five percent (25%) in the proposed building height for the Project); and
(d)    Agreement by the Members upon the final budget for the development of the Project (the “Development Budget”) as a Major Decision pursuant to Section 2.02 below; provided, however, that each Member shall not withhold their consent to the final Development Budget if the final Development Budget does not exceed more than twenty-five percent (25%) of the Preliminary Development Budget and is consistent with the approved Construction Contract.  For avoidance of doubt, it shall be a Major Decision to approve the Development Budget if the Development Budget would be more than twenty-five percent (25%) of the Preliminary Development Budget or is inconsistent with the approved Construction Contract.

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1.09.    Development of the Project.  The Development Budget and Development Plan to be approved by the Members is expected to provide for three distinct phases for the development of the Project: (i) the “Permitting Phase,” to commence after the Property Closing and expire upon the receipt of all required building permits for the vertical construction of the Project, and satisfaction of the Mortgage Loan conditions for the disbursement of funds for the construction of the Project (including the fully executed Construction Contract for the Project); (ii) the “Construction Phase,” to commence following the Permitting Phase and to expire following completion of construction of all aspects of the Project, issuance of all necessary certificates of occupancy or similar permits, and opening of the Project (“Completion”); and (iii) the “Operations Phase,” to commence following the Construction Phase.  Notwithstanding the foregoing, the Members intend to authorize the commencement of demolition activities prior to the end of the Permitting Phase, subject to the obtaining of all necessary demolition permits and approvals and approval by both Members of the demolition contract and the demolition contractor.
ARTICLE II
MANAGEMENT OF THE COMPANY
2.01.    Management of the Company.
(a)    Generally.  JV Member is hereby designated as the managing member (the “Managing Member”) of the Company and shall serve as the Managing Member of the Company unless and until it resigns or is removed pursuant to Section 2.06.  Subject to the restrictions set forth in this Agreement, Managing Member shall manage and administer the day-to-day business and affairs of the Company and its Subsidiaries.  Managing Member shall at all times faithfully perform its duties and responsibilities in compliance with all applicable laws, the Business Plan (as defined below), the Development Budget, the Annual Budget (as defined below) and this Agreement, devoting such time, efforts and managerial resources to the business of the Company and its Subsidiaries as it reasonably deems necessary for the operation of the day-to-day business and affairs of the Company and its Subsidiaries.  In the performance of its duties under this Agreement, Managing Member shall regularly consult with the Co-Managing Member.  Managing Member and Co-Managing Member may each engage in business efforts and affairs which are not related to the Company or the Property, and will not be precluded from owning and operating other businesses and/or real estate projects (which may compete with this project) and neither the Company nor the other Members shall have any interest in such businesses or real estate projects.
(b)    Specific Day to Day Duties.  Without limiting the generality of the foregoing, Managing Member shall perform the following duties with respect to the Property, all to be carried out in accordance with this Agreement, the Annual Budget and the Business Plan:
(i)    During the Permitting Phase, use commercially reasonable diligent efforts to obtain all permits, approvals and entitlements from all applicable Governmental Authorities for the Project, and after Completion of the Project, cause to be maintained all governmental and agency approvals, permits and other entitlements necessary for ownership, operation, management and leasing of the Property.

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(ii)    During the Construction Phase, use commercially reasonable diligent efforts to perform those duties and services that are reasonably necessary to commence and complete the Project in accordance with the Development Plan, the Development Budget and the Construction Plans.
(iii)    Coordinate the services of all employees, supervisors, architects, engineers, contractors, construction or development managers, accountants, attorneys, real estate brokers, advertising personnel and other persons necessary or appropriate for the development and construction of the Project and the ownership, operation, management and leasing of the Property after Completion of the Project.
(iv)    Supervise the performance of all work in connection with the Project and the ownership, operation, management and leasing of the Property after Completion the Project.
(v)    Except to the extent such action is a Major Decision, use commercially reasonable efforts to enforce all of the Company’s and its Subsidiaries’ rights and cause performance of all of the Company’s obligations arising in connection with any contract or agreement entered into in connection with the Property, excluding de minimis obligations where the cost to pursue the obligation exceeds the benefit to be gained.
(vi)    Deliver to the Members promptly copies of any written notices or other written materials received by Managing Member in connection with any material dispute or material claims relating to the Property or the Project.
(vii)    Otherwise use commercially reasonable efforts to perform those duties and services that are reasonably necessary in order to acquire, own, operate, manage and lease the Property in accordance with the Business Plan and the Annual Budget.
(c)    Additional Duties.  Without limiting the generality of the foregoing, Managing Member shall have the following additional duties with respect to the overall operation of the Company and its Subsidiaries and the ownership of the Property, all to be carried out in accordance with this Agreement:
(i)    Provide operating reports and financial statements in accordance with Article IX.
(ii)    Notify Co-Managing Member of such matters and render such reports to Co-Managing Member from time to time as Co-Managing Member may reasonably request in writing, including, without limitation, at all times and in each event no less frequently than monthly, keeping Co-Managing Member informed of material information relating to the Property by (1) notifying Co-Managing Member in advance of public hearings and other proceedings relating to any existing or proposed entitlements, mapping, subdivision or material permits for the Property and (2) notifying Co-Managing Member within five (5) business days and promptly delivering to Co-Managing Member copies of any written offers to purchase or otherwise acquire the Property, or any interest therein, and of any written indications of interest, written invitations to deal, written solicitations of sales which represent bona fide offers regarding the Property.

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(iii)    Comply with the Development Budget, as it may be modified in accordance with this Agreement.  With respect to the Development Budget, Managing Member may (i) to the extent covered by contingency funds in the Development Budget, with respect to any line item in the Development Budget, allocate from such contingency funds in an amount not to exceed the lesser of 10% of such line item and $25,000, and (ii) if after the completion of any item, as certified by Managing Member to Co-Managing Member, there remains an excess undisbursed balance, reallocate from such excess balance to any other line item in the Development Budget whose funds are insufficient to complete such item, so long as such amount does not exceed the lesser of 10% of such line item and $25,000.
(iv)    After Completion of the Project, comply with the Annual Budget, as it may be modified in accordance with this Agreement.  Except for expenditures made and obligations incurred, in each case as previously approved pursuant to the Annual Budget and the Permitted Budget Variance (as hereinafter defined) or in writing by the Co-Managing Member, the Managing Member shall have no authority to make any expenditure or incur any obligation or liability on behalf of the Company or any Subsidiary.  Subject to the Annual Budget and the Permitted Budget Variance or as may be approved in writing by the Co-Managing Member, the Managing Member shall not expend on behalf of the Company or any Subsidiary more than what it in good faith believes to be the fair and reasonable market value at the time and place of contracting or any goods purchased or services engaged on behalf of the Company or any Subsidiary.  Subject to Section 2.02(d) below, Managing Member may enter into any such contracts on behalf of the Company or any Subsidiary for goods purchased or services contemplated by the Annual Budget, if any, provided that such contracts shall be terminable by the Company or any applicable Subsidiary upon thirty (30) days’ notice without penalty or if such  contracts are not contemplated by the Annual Budget they shall be for an amount not to exceed (A) the sum of $5,000 as to any single expenditure, and (B) the sum of $25,000 annually (in each case, such expenditures may hereinafter be referred to as the “De Minimis Expenditures”).  Any such contract (other than contracts that are for De Minimis Expenditures) that is either (x) not terminable by the Company or the applicable Subsidiary upon thirty (30) days’ notice or (y) are not contemplated by the Annual Budget shall in each case require the prior written approval of the Co-Managing Member. As used in this Agreement, the term “Permitted Budget Variance” means, with respect to any Annual Budget, any disbursement of funds in any amount that would not result in a particular line item being exceeded 10% of such line item for the year in question or the total Annual Budget being exceeded by more than 5% in the aggregate.
(d)    Affiliate Agreements; Special Powers of KBS Regarding Affiliate Agreements.
(i)    JV Member, in its capacity as Managing Member, shall not cause the Company or any of its Subsidiaries to enter any agreement or other arrangement for the furnishing to or by the Company or any Subsidiary of goods or services or for any other contract or agreement pursuant to which the JV Member or any Affiliate or Related Person (defined below) will receive any benefit with, or pay any fees or compensation to, itself or any Person that is an Affiliate of the JV Member or a Related Person (an “Affiliate Agreement”), unless such agreement or arrangement has been previously approved in writing by Co-Managing Member.  JV Member shall not amend, 

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modify or terminate any such Affiliate Agreement after the entry by the Company, or any Subsidiary, into such Affiliate Agreement without the prior consent of Co-Managing Member.  As used in this agreement, the term “Related Person” shall mean any JV Member Principal (defined below) and such JV Member Principal’s spouse and the ancestors, descendants, aunts, uncles or first cousins of such JV Member Principal, whether by birth or adoption.
(ii)    Notwithstanding anything to the contrary contained herein but subject to Section 2.06(d) below, Co-Managing Member shall have the right, in its sole discretion upon prior written notice to JV Member, to take all actions on behalf of the Company or any Subsidiary with respect to:  (A) the determination of the existence of any default by any Affiliate of JV Member under any agreement made between the Company or any Subsidiary and any Affiliate of JV Member (each an “Affiliate Agreement” and collectively, the “Affiliate Agreements”), (B) the enforcement of all rights and remedies of the Company under any Affiliate Agreements made between the Company or any Subsidiary and any Affiliate of any JV Member, and (C) termination of any Affiliate Agreements made between the Company or any Subsidiary and any Affiliate of any JV Member (subject to the terms and conditions set forth therein for notice of defaults and applicable cure periods).  All Affiliate Agreements shall be terminated upon sale of the portion of the Property to which they relate and in the event of other circumstances or defaults (including, without limitation, any Removal Event (as defined below)) as more particularly set forth therein or herein.  JV Member will cooperate in good faith with Co-Managing Member in the exercise by Co-Managing Member of the foregoing rights and actions hereunder.
(iii)    As used in this Agreement, the term “Affiliate” means any person or entity which, directly or indirectly through one (1) or more intermediaries, controls or is controlled by or is under common control with another person or entity.  The term “control” as used herein (including the terms “controlling,” “controlled by,” and “under common control with”) means the possession, direct or indirect, of the power (i) to vote 51% or more of the outstanding voting securities of such person or entity, or (ii) to otherwise direct management policies of such person by contract (at commercially reasonable rates) or otherwise.  John Saraceno Jr. and Jonathan Schultz  (each a “JV Member Principal” and collectively, the “JV Member Principals”) and their Related Persons and Affiliates shall be deemed “Affiliates” of JV Member.  Any reference in this Agreement to a “Person and an Affiliate” shall be deemed to refer to such Person and an Affiliate of such Person and any references in this Agreement to a “Person or an Affiliate” shall be deemed to refer to such Person or an Affiliate of such Person.
2.02.    Major Decisions.  Notwithstanding anything contained in this Agreement to the contrary, Managing Member shall not take, or cause or permit the Company or any Subsidiary to enter into any agreement to take, any of the following actions on behalf of the Company or any Subsidiary (in each case the taking of which hereinafter shall be referred to as a “Major Decision”) without the prior written consent of Co-Managing Member, which consent may be given or withheld in Co-Managing Member’s sole and absolute  discretion.

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(a)    Purchase Agreement.  Except as expressly set forth in Section 1.05 above, enter into, amend, modify, terminate, or expressly waive any material rights of the Property Owner Subsidiary under, the Purchase Agreement.
(b)    Development Plan.  Except as expressly set forth in Section 1.08 above, approve the Development Plan, or after approval, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Development Plan.  
(c)    Development Budget.  Except as expressly set forth in Section 1.08 above, approve the Development Budget, or after approval, subject to Section 2.01(c)(iii) above, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Development Budget.
(d)    Construction Plans.   Except as expressly set forth in Section 1.08 above, approve the Construction Plans, or after approval, cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Construction Plans. 
(e)    Construction Contract.  General construction services for the Project will be provided by a general contractor, on market terms and conditions with all major subcontracts competitively bid pursuant to a guaranteed maximum price construction contract (the “Construction Contract”) in a form and substance acceptable to the Members.  The selection of the general contractor shall be a Major Decision, and the Construction Contract to be entered into with such general contractor shall also be a Major Decision.  Managing Member shall not cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Construction Contract unless approved as a Major Decision.
(f)    Annual Budget; Business Plan.  Subject to Section 2.01(c)(iv) cause the Company or its Subsidiaries to deviate from, amend, update or replace the Business Plan or deviate from, amend, update or replace the Annual Budget (subject to the Permitted Variance), except as provided in Section 2.10 below.
(g)    Sale of the Company.  Subject to Articles VI and VII and to the limitation on the Override Right (as defined below), sell, convey, exchange, hypothecate, pledge, encumber or otherwise transfer any portion of or any interest in the Company or any Subsidiary or all or any portion of the Property, or enter into any agreement to sell, convey, exchange, hypothecate, pledge, encumber or otherwise transfer any portion or any interest in the Company or any Subsidiary or all or any portion of the Property. 
(h)    Pre-Approved Affiliate Agreements.  Amend, modify, terminate, or waive any rights under, the any of the Pre-Approved Affiliate Agreements (as such term is defined below), or enter into any agreements that would replace any of the Pre-Approved Affiliate Agreements.  For avoidance of doubt, each Pre-Approved Affiliate Agreement is an Affiliate Agreement.
(i)    Acquire Real Property.  Purchase or otherwise acquire any interest in real property other than the Company’s indirect ownership interest in the Property. 

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(j)    Financing.  Without limiting Section 1.06 above, cause the Company or any Subsidiary to enter into (or commit to enter into) to finance or refinance the operations of the Company or any Subsidiary and/or any of the Company’s or any Subsidiary’s assets (including, without limitation, any acquisition, development, construction, interim and long-term financing or refinancing in connection with the Property (or any portion thereof) or the improvement or expansion thereof) (each a “Financing”) or retain any mortgage bankers or brokers on behalf of the Company or any Subsidiary in connection therewith or enter into any modifications, amendments, extensions, substitutions or other agreements regarding any Financing.  Notwithstanding the foregoing, the Members agree that (1) it shall not be a Major Decision (and shall only require the consent of KBS and not of JV Member), for the Property Owner Subsidiary to enter into the Mortgage Loan and any interest rate swap agreement, interest rate cap agreement, or any other similar agreement (collectively, “Interest Rate Protection Agreements”) regarding the Mortgage Loan or any other Financing, and (2) if necessary to amend the Mortgage Loan or any future Financing in order to allow the Property Owner Subsidiary to enter into any Interest Rate Protection Agreements that KBS determines in its sole discretion is necessary or desirable.  In the event the Property Owner Subsidiary enters into any Interest Rate Protection Agreements in accordance with the preceding sentence, the Members shall each pay their pro rata share of the costs and expenses incurred by the Property Owner Subsidiary in connection therewith (including reasonable attorneys’ fees and expenses) in accordance with their Percentage Interests (as defined below).
(k)    Indemnity.  Make, execute or deliver on behalf of the Company or any Subsidiary any indemnity bond or surety bond or obligate the Company, any Subsidiary or any other Member as a surety, guaranty, guarantor or accommodation party to any obligation or grant any lien or encumbrance on any of the assets of the Company or any Subsidiary, including the Property, other than with respect to any Financing that has been approved as a Major Decision.
(l)    Loans.  Lend funds belonging to the Company or any Subsidiary to any Member or its Affiliate or to any third party, or extend any person, firm or corporation credit on behalf of the Company or cause any Member Loan (as defined below) to be made to the Company as provided in Section 3.03. 
(m)    Expenditures.  After Completion, except for De Minimis Expenditures and other amounts contemplated by the Annual Budget (subject to the Permitted Budget Variance), cause the Company or any Subsidiary to take any action or make any expenditure or incur any obligation by or on behalf of the Company or any Subsidiary which is not included in the Annual Budget (including, without limitation, obligating the Company or any Subsidiary to pay for any goods or services in excess of the foregoing), in addition, in the event that the then current Loan or Refinance is within ninety (90) days of its stated maturity, or after its term has expired, or is in default, Managing Member may not reallocate any excess funds among line items or make any expenditures from any reserves without Co-Managing Member’s consent.
(n)    Duties.  Delegate any of the duties of Managing Member set forth herein except as set forth in Section 2.11(a), the Property Management Agreement or the Leasing Agreement or any other approved contract with an Affiliate under the terms of this Agreement or to the officers and employees of Managing Member.

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(o)    Assignment Benefiting Creditors.  Make, execute or deliver on behalf of the Company or any Subsidiary an assignment for the benefit of creditors; file, consent to or cause the Company or any Subsidiary, a Member’s Interest, or the Property, or any part thereof or interest therein, to be subject to the authority of any trustee, custodian or receiver or be subject to any proceeding for bankruptcy, insolvency, reorganization, arrangement, readjustment of debt, relief of debtors, dissolution or liquidation or similar proceedings.
(p)    Partition of Company Assets.  Partition all or any portion of the assets of the Company or any Subsidiary, or file any complaint or institute any proceeding at law or in equity seeking such partition.
(q)    Governmental Proposals.  Make application to, or enter into any agreements with, any government officials relating to mapping, development, zoning, subdivision, environmental or other land use or entitlement matters which may affect the Property or any portion thereof.
(r)    Purchase Assets.  Except as may be provided in the then-applicable Annual Budget, cause the Company or any Subsidiary to purchase any automobiles or vehicular equipment on behalf of or in the name of the Company or any Subsidiary or purchase any fixed assets on behalf of or in the name of the Company or any Subsidiary.
(s)    Commence Future Renovations.  After Completion of the Project, commence any renovations of or changes or upgrades to the completed Project, or significant construction on the Property (including, without limitation, any tenant improvements), or any significant off-site improvement work, or any environmental remediation on the Property.
(t)    Confess Judgments; Legal Actions.  Confess a judgment against the Company or any Subsidiary; settle or adjust any claims against the Company or any Subsidiary; or commence, negotiate and/or settle any legal actions or proceedings brought by the Company or any Subsidiary against unaffiliated third parties; provided however that Managing Member may settle or adjust any claim which is not the subject of a legal action or proceeding of $10,000 or less.
(u)    Dissolve the Company.  Except as provided in this Agreement, dissolve, terminate or liquidate the Company or any Subsidiary prior to the expiration of the term.
(v)    Acts Making Business Impossible.  Do any act that would make it impossible to carry on the business of the Company or any Subsidiary.
(w)    Material Agreements.  Except as provided in the Annual Budget or in the express terms of this Agreement, cause the Company or any Subsidiary to enter into any agreement obligating the Company or any Subsidiary to pay an amount of more than a De Minimis Expenditure and any amendment, modification or termination of any such agreement, including, without limitation, any agreement providing for the payment of any commission, fee or other compensation payable in connection with the sale of all or any portion of the Property or any portion thereof.

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(x)    Limited Liability Company Act.  Take any other action for which the consent of the Members is required under the Act (and such consent is not waivable under the Act) or this Agreement.
(y)    Leasing Agreement.  The Members have agreed that the Property Owner Subsidiary shall retain a third party leasing agent (the “Leasing Agent”) to manage the initial lease-up of the Project and thereafter the ongoing leasing of the Project.  The selection of the Leasing Agent shall be a Major Decision, and the leasing services agreement (the “Leasing Agreement”) to be entered into with such Leasing Agent shall also be a Major Decision.  Managing Member shall not cause the Company or its Subsidiaries to deviate from, amend, update or replace the approved Leasing Agreement unless approved as a Major Decision.  The Members agree that Newmark and Jones Lang LaSalle would each be acceptable to the Members to serve as the initial Leasing Agent for the Project. 
(z)    Leases.  Cause or permit the Company or any Subsidiary to enter into any new space or other lease affecting the Property, or amend, modify, terminate, or waive rights under any existing leases with the Company or any Subsidiary, for space in any of the Property, excluding, however, non-material equipment leases.  
(aa)    Insurance.  Change the insurance program for the Company, any Subsidiary or the Property in a manner inconsistent with the Business Plan (or during construction of the Project, the Development Plan) or inconsistent with the insurance requirements set forth in Section 2.05 below.
(bb)    Employees.  Employ any individual as an employee of the Company or any Subsidiary.
(cc)    Awards and Proceeds.  Settle, apply or dispose of any casualty insurance proceeds in excess of $25,000 or any condemnation award, from any insurance company or any condemning authority, as applicable.
(dd)    No REIT Prohibited Transactions.  Take, or permit to be taken, any action that is or results in a REIT Prohibited Transaction (as defined below).
(ee)    Pledge and Assignment.  Subject to the provisions of Article VI below, sell, transfer or pledge JV Member’s interests in the Company or any Subsidiary.
(ff)    Consultants.  Retain or dismiss on behalf of the Company or any Subsidiary any accountants, auditors, property managers or leasing agents.  Ernst & Young is hereby approved as the approved audit and tax firm for the Company and its Subsidiaries.
(gg)    Additional Capital Contributions.  Except as expressly (1) set forth in Section 3.01 below, (2) set forth in the approved Annual Budget or (3) otherwise approved by the Members in writing, require any additional capital contributions of the Members.
(hh)    Member Loans.  Except as expressly set forth in Section 3.03 or otherwise approved by the Members in writing, require or request any Member Loan.

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(ii)    Certificated Interests.  Elect to have the Members interests in the Company become certificated interests.
(jj)    Accounting.  Alter or change the reporting, accounting and/or auditing systems and/or procedures for the Company, any Subsidiary or the Property.
(kk)    Amendment to this Agreement.  Except as contemplated by Section 2.06(e) or Section 6.03 or as otherwise approved by the Members, amend or supplement this Agreement.
(ll)    Amendment to Subsidiary Documents.  Except as necessary to consummate a Financing permitted by this Agreement or as otherwise approved by the Members, amend or supplement any formation documents or governing agreements of any Subsidiary.
In the event the Co-Managing Member does not respond to any Major Decision in writing within ten (10) days after Co-Managing Member’s receipt of a request therefor from Managing Member, then the Major Decision shall be deemed disapproved.  Nothing in this Agreement shall limit or prevent the Co-Managing Member from requesting that Managing Member initiate a Major Decision.  If, however, Managing Member does not to implement the Major Decision requested by the Co-Managing Member, the Co-Managing Member shall have the right to cause the Company and any of its Subsidiaries to undertake such Major Decision notwithstanding Managing Member’s position (the “Override Right”); provided, however, that for so long as no Removal Event (as defined below) shall have occurred, (x) Co-Managing Member shall not be entitled to use the Override Right with respect to the Major Decision listed in Section 2.02(g) above, and (y) the provisions of Article VII below shall govern Co-Managing Member’s right to cause a sale of the Project; provided, further, however, that prior to the removal of JV Member as Managing Member pursuant to Section 2.06, the Co-Managing Member shall not have the right to cause the Company or any of its Subsidiaries to undertake any action with respect to a Fundamental Decision (defined below) without JV Member’s prior written consent; provided, further, however, that after any such removal with respect to Fundamental Decisions, (A) Section 2.06(c)(i)(3) shall govern if such removal was for cause, and (B) Section 2.06(d)(ii) shall govern if such removal was without cause.
If, during the Construction Phase, the Members are not able to reach agreement on a proposed Major Decision, then, unless the Members mutually agree otherwise, then such Major Decision shall not be approved and the Managing Member shall continue to develop the Project in accordance with the then-current Development Budget and Development Plan; provided that neither Member shall unreasonably withhold or delay its approval of a Major Decision during the  Construction Phase if such Major Decision is necessary to implement and/or continue the construction and development of the Project and, complete the construction thereof and/or to comply with the terms of the Mortgage Loan, as a result of changes in law or requirements of Governmental Authorities applicable to the Project; provided that the forgoing shall not require any Member to reasonably consent to a Major Decision that would result in additional Capital Contributions.
2.03.    Company Funds.  No Company funds, assets, credit or other resources of any kind or description shall be paid to, or used for, the benefit of any Member, except as specifically provided in this Agreement or the Annual Budget or after the written approval of all the Members has been obtained.  All funds of the Company shall be deposited only in such federally insured checking and 

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savings accounts of the Company in the Company name with banks and other financial institutions having not less than $1,000,000,000 in assets as the Co-Managing Member shall approve in writing, shall not be commingled with funds of any other person or entity, and shall be withdrawn only upon such signature or signatures as may be designated in writing from time to time by Managing Member after receiving approval of the Co-Managing Member. 
2.04.    Employees.  The Company and its Subsidiaries shall not have employees.  Except as may be otherwise provided for in the Property Management Agreement, each Member shall be solely responsible for all wages, benefits, insurance and payroll taxes with respect to any of its employees or those of its Affiliates.  Each Member agrees to perform its duties under this Agreement as an independent contractor and not as the agent, employee or servant of the Company.  Each Member shall be solely responsible for its own acts and those of its subordinates, employees and agents during the term of this Agreement and, subject to, and without the waiver of the benefits of, the provisions of Section 2.09, each Member hereby indemnifies and holds harmless the Company and each other Member from any liabilities, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees) arising from the acts of any such subordinates, employees and agents of such Member or those of its Affiliates.
2.05.    Insurance. 
(a)    Company Policies.  Managing Member shall purchase and maintain, or shall cause to be purchased and maintained, for and at the expense of the Company, policies of insurance (i) for the Company’s and its Subsidiaries' operations, (ii) for the protection of the Company’s and its Subsidiaries' assets (including the Property), and (iii) as may be reasonably required to comply with third-party requirements in accordance with guidelines approved by Co-Managing Member, and shall provide the Members upon request with the certificates or other evidence of insurance coverage as provided therein.
(b)    Contractor’s Insurance Obligations.  Managing Member shall require the Property’s general contractors and all subcontractors retained by the Company and any Subsidiary working at the Property, or any portion thereof, to obtain and maintain at all times during performance of work for the Company or any Subsidiary an occurrence form commercial general liability policy with a minimum of $1,000,000 each occurrence/$1,000,000 annual aggregate, or in such other amounts as may be approved by the Co-Managing Member, on which the Company or any Subsidiary is named as an additional insured on a primary and non-contributing basis.  In addition, Managing Member shall require that the Property’s general contractors and all subcontractors retained by the Company and any Subsidiary carry workers’ compensation coverage as required by law, and including a waiver of subrogation in favor of the Company.
(c)    D&O Insurance.  Managing Member may purchase and maintain insurance on behalf of the executive officers of Managing Member (and if requested by Co-Managing Member, executive officers of Co-Managing Member) against liability asserted against such Person and incurred by such Person arising out of such Person’s actions on behalf of Managing Member (or Co-Managing Member, as applicable) under this Agreement; provided that the cost of such insurance is included in the approved Annual Budget for the applicable year and such coverage is available at commercially reasonable rates.

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2.06.    Election, Removal, Resignation of Managing Member.
(a)    Number, Term and Qualifications of Managing Member.  The Company shall have one Managing Member, which shall initially be JV Member.  
(b)    Removal of Managing Member for Cause.  Co-Managing Member may, but shall not be obligated to, exercise any of the remedies provided in Section 2.06(c) below under any of the following circumstances (each, a “Removal Event”): 
(i)    if JV Member, or any principal, officer, executive or employee of JV Member engages in fraud, misappropriation of funds, intentional misrepresentation or willful misconduct with respect to the Company, any Subsidiary or the Property.  Notwithstanding the foregoing, if such fraud, misappropriation of funds, intentional misrepresentation or willful misconduct (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;
(ii)    if JV Member, or any principal, officer, executive or employee of JV Member is convicted or pleads guilty or nolo contendere to (1) any felony that involves the Company, any Subsidiary or the Property, and/or (2) any crime involving moral turpitude or breach of trust that involves the Company, any Subsidiary or the Property.  Notwithstanding the foregoing, if such felony, crime or breach of trust (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter 

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prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;
(iii)    the affairs of JV Member cease to be principally controlled by a JV Member Principal (the “Key Man Event”);
(iv)    JV Member has breached its material obligations as Managing Member under this Agreement or breached any representation or warranty in this Agreement in any material respect.  Notwithstanding the foregoing, if such material breach (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event;
(v)    Bankruptcy of the Company or any Subsidiary filed by the Managing Member without the written approval of Co-Managing Member;
(vi)    Bankruptcy of JV Member or any JV Member Principal;
(vii)    if any default under any Financing is declared by the lender and lender has elected to accelerate the loan and has either instituted legal action and/or made a claim under any Required Guaranty (defined below) (for which there are no notice and cure rights or for which such rights have expired and the lender has not otherwise waived such default in accordance with the terms of any Financing document) occurs, if such default is caused by JV Member or any Affiliate thereof; provided that it shall not be a Removal Event if the event of default in question is a result of the Company having insufficient funds or revenues due to the performance of the Property, if the default was caused by the Co-Managing Member or an Affiliate of the Co-Managing Member, or if Co-Managing Member approved the action of the JV Member or its Affiliate; 

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(viii)    [intentionally omitted];
(ix)    JV Member resigns as Managing Member without the prior written consent of Co-Managing Member; and 
(xi)    JV Member or the Affiliate of the JV Member that is the construction manager under the Construction Management Agreement has materially breached its obligations as construction manager under the Construction Management Agreement if such breach is not cured within the notice and cure periods provided under the Construction Management Agreement and Co-Managing Member elects to terminate the Construction Management Agreement as a result of such material breach.  Notwithstanding the foregoing, if such material breach (a) is committed by an individual other than a JV Member Principal without the knowledge of a JV Member Principal, and (b) (1) is susceptible of cure by the payment of money so that the Company and the applicable Subsidiary can be “made whole”, as reasonably determined by KBS in its good faith discretion, and JV Member makes the necessary “make whole” payment within ten (10) business days after KBS notifies JV Member of its determination of the necessary “make whole” payment, or (2) is not susceptible of cure by the payment of money but JV Member commences such actions as shall be reasonably required in order to cure or ameliorate (and provide for financial compensation for any actual losses suffered for) any damage suffered by the Company or the applicable Subsidiary within ten (10) business days after the date on which JV Member obtained actual knowledge of such event (or, if such default is not susceptible of cure within such ten (10) business day period, within such period as is required to effect such cure so long as JV Member has commenced such cure within such ten (10) business day period and thereafter prosecutes such cure to completion with diligence, not to exceed ninety (90) additional days in the aggregate), then such payment and/or such curative actions shall be deemed to have cured such event and the initial occurrence of such event shall not be a Removal Event.

(c)    Remedies Upon Removal Event.  
(i)    Generally Applicable Remedies.  Upon the occurrence of a Removal Event, as determined by Co-Managing Member, at the option of Co-Managing Member (and in addition to any other remedy available to Co-Managing Member at law or in equity), Co-Managing Member may, but shall not be obligated to, exercise any or all of the following remedies:
1)    terminate any or all of the Affiliate Agreements, in each case, without penalty or payment of termination fees, but any fees earned under any Affiliate Agreement prior to such termination shall be paid through the applicable termination date, but not thereafter; 
2)    replace JV Member as Managing Member by delivering written notice of removal (“Removal Notice”) to JV Member, and designate a new Managing Member (which may be Co-Managing Member or one of its Affiliates);  and/or

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3)    terminate JV Member’s right to participate in Major Decisions, other than the Fundamental Decisions set forth in Section 2.06(d)(ii)(1) through (14), inclusive (but not (15) through (17)). 
(ii)    Further Remedies Upon Certain Removal Events.  In addition to and not in limitation of the rights of KBS pursuant to Section 2.06(c)(i) above, upon the occurrence of a Removal Event identified in Sections 2.06(b)(i), (ii), (iii) (but not if the Key Man Event is caused by death or incapacitation), (iv), (v), (vi), (ix), (x) or (xi) (but not any other Removal Event), at the option of KBS (and in addition to any other remedy available to KBS at law or in equity), KBS may, but shall not be obligated to, exercise any or all of the following remedies:
1)    terminate distributions of Net Cash (defined below) of the Company in accordance with Section 5.01 below and have any and all Net Cash of the Company thereafter distributed in accordance with the provisions of Section 5.02 (i.e., JV Member shall lose its “promote” and Net Cash shall be thereafter distributed pro rata to the Members in accordance with their Percentage Interests in accordance with Section 5.02); and/or
2)    terminate JV Member’s Purchase Election set forth in Section 7.01 below and JV Member’s right to initiate a sale of Interests as set forth in Section 7.02 below.
If, after a Removal Event but prior to the date JV Member cures the underlying default that caused the Removal Event, the Co-Managing Member desires to exercise any or all of the foregoing remedies, the Co-Managing Member may do so at any time thereafter and from time to time, by delivering written notice to JV Member, which notice shall specify the effective date of the election of its remedies and which remedies the Co-Managing Member is electing.  The Co-Managing Member shall not be required to exercise all of the foregoing remedies at one time and no delay in or decision not to exercise all of the foregoing remedies at one time shall limit or impair the Co-Managing Member’s right to exercise any other remedy at a later time or be construed as a waiver thereof provided that the Co-Managing Member delivers written notice to Managing Member or its decision to exercise such subsequent remedies.
As used in this Agreement, the term “Net Cash” shall mean the gross cash receipts of the Company from all sources as of any applicable date of determination, less the portion thereof used to pay (i) all cash disbursements (inclusive of any guaranteed payment within the meaning of Section 707(c) of the Code (as defined below) paid to any Member, including, without limitation, any reimbursements made to any Member and any amounts applied to repay any Member Loans (as defined below), of the Company prior to that date); and (ii) all reserves, established by the Annual Budget or any Financing or otherwise approved by Co-Managing Member for anticipated cash disbursements that will have to be made before additional cash receipts from third parties will provide the funds therefor, including for payment of debt service, capital improvements and other anticipated contingencies and expenses of the Company.

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(d)    Removal of Managing Member Without Cause.  JV Member may be removed as Managing Member for any reason or no reason upon thirty (30) days’ prior written notice by Co-Managing Member.  If Co-Managing Member elects, in its sole discretion, to remove the Managing Member under this Section 2.06(d) and no Removal Event has occurred, then:
(i)    Co-Managing Member may elect to: (1) cause the Company to terminate any and all Affiliate Agreements as provided in Section 2.06(c)(i)(4) above, provided that (x) the Company shall pay the Termination Fee to Managing Member within twenty (20) days after the effective date of any such termination, and (y) Co-Managing Member shall only be entitled to enter into a replacement property management agreement with a replacement property manager that is in the business of providing third-party property management services; (2) replace the Managing Member with a new Managing Member as provided in Section 2.06(c)(i)(2) above; and/or (3) terminate JV Member’s right to participate in Major Decisions as provided in Section 2.06(c)(i)(3) above (but not as to Fundamental Decisions), but in no event shall Co-Managing Member have the remedies in Section 2.06(c)(ii) (terminate JV Member’s “promote” or terminate JV Member’s Purchase Election).  For purposes of this Section 2.06(d)(i), the “Termination Fee” payable to JV Member shall be an amount equal to: (i) fifty percent (50%) of the remaining amount of the construction management fees that would have been payable to Construction Manager under the Construction Management Agreement if the Construction Management Agreement had not been terminated by Co-Managing Member, and (ii) $250,000, which is intended to compensate JV Member for the lost opportunity of receiving future property management fees under the Property Management Agreement.  The Termination Fee shall be determined by KBS using its good faith reasonable judgment, which determination shall be final and conclusive absent manifest error.
(ii)    Notwithstanding the provisions of Section 2.06(d)(i)(3) above, in no event shall the Co-Managing Member, without the written consent of JV Member (each, a “Fundamental Decision” and collectively, the “Fundamental Decisions”):
1)    amend or supplement this Agreement; provided, however, that the prior written consent of JV Member shall not be required to the extent such amendment or supplement is expressly contemplated herein to effect an otherwise approved decision or action pursuant to this Agreement;
2)    amend or supplement any Subsidiary Documents; provided, however, that the prior written consent of JV Member shall not be required to the extent such amendment or supplement is expressly contemplated herein to effect an otherwise approved decision or action pursuant to this Agreement;
3)    (A) cause the Company or any Subsidiary to enter any Financing, or (B) to enter into any modifications, amendments, extensions, of any existing Financing; provided, however, that, in each case, the prior written consent of JV Member shall not be required if: (1) the Financing is with a lender that is not an Affiliate of the Co-Managing Member or the KBS Credit Party (as defined below); and (2) the Financing or the modification, amendments or extension of an existing Financing would not require (A) 

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additional Capital Contributions from JV Member, or (B) a guaranty from JV Member or an Affiliate of JV Member;
4)    cause the Company or any Subsidiary to issue any securities (debt or equity) which would have rights to distributions prior to the rights of JV Member;
5)    admit a new member to the Company or any Subsidiary if and only if such new member would have rights to distributions that dilute the distribution to JV Member;
6)    cause the Company or any Subsidiary to acquire (directly or indirectly) any real property other than the Property;
7)    cause the Company or any Subsidiary to enter into or modify any agreement or transaction with any Affiliate of the Co-Managing Member; provided, however, that the prior written consent of JV Member shall not be required if such agreement is on terms at least as favorable to the Company or any Subsidiary as it would receive pursuant to similar agreement with a third party;
8)    any action or decision that would reasonably be expected to cause liability under any of the Required Guaranties;
9)    the filing on behalf of the Company or any Subsidiary (where the Company or a Subsidiary is the debtor) of any petition, or consent to the appointment of a trustee or receiver or any judgement or order, under state or federal bankruptcy laws;
10)    a loan by the Company or any Subsidiary to any Member or any other person or entity;
11)    making a tax election that is disproportionately adverse to the tax position of JV Member after taking into account the Members' different Percentage Interests;
12)    any action that would reasonably be expected to result in JV Member or the JV Member Principals to have any civil or criminal liability;
13)    any action by the Company or any Subsidiary that would reasonably be expected to result in a violation of any law; or
14)    the use of the name Onyx in any press release or otherwise;
15)    distribution of any property in kind;

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16)    exercise any rights under Section 2.02(c) (Sale of the Company or the Property) other than in accordance with the provisions of Section 7.01; or
17)    the merger or consolidation of the Company or any Subsidiary with any other entity.
(e)    Attorney-in-Fact.  If Co-Managing Member elects to remove JV Member as Managing Member pursuant to Section 2.06(c) or Section 2.06(d), Co-Managing Member shall deliver written notice to Managing Member and JV Member, which notice shall specify the effective date of the removal of JV Member as Managing Member in accordance with said Sections.  Upon the occurrence of the removal of JV Member as Managing Member, JV Member hereby appoints Co-Managing Member as its attorney in fact (such power of attorney coupled with an interest and irrevocable) for the purpose of executing, delivering and filing such documents that are necessary (including, without limitation, any amendment to the Certificate or this Agreement) for the purpose of effecting the remedies selected by Co-Managing Member, but only to the extent such documents and remedies are consistent with this Agreement.
(f)    Effect of Removal of JV Member as Managing Member - Guaranties.  If JV Member is removed as Managing Member in accordance with this Section 2.06: (i) KBS shall use commercially reasonable efforts to have any Guarantor (as hereinafter defined) that is an Affiliate of JV Member replaced or removed as a guarantor(s) under any Required Guaranties (as hereinafter defined), for liabilities arising from conduct, actions, inactions or events first occurring or arising after the date on which JV Member is removed as Managing Member (but such Guarantor(s) shall not be replaced with respect to conduct, actions, inactions, or events first occurring or arising on or before the date of such removal) and (ii) to the extent that the Guarantor is an Affiliate of JV Member and is not replaced or removed as guarantor under the Required Guaranties as provided in clause (i), KBS shall indemnify, defend and hold harmless such Guarantor(s) for any liabilities arising from conduct, actions, inactions or events first occurring or arising from and after the date that JV Member is removed as Managing Member, except for any liabilities arising from the conduct, actions or inactions of JV Member, its Affiliates or the Guarantor shall continue to be governed by Section 3.07 below.  The KBS Credit Party shall guaranty KBS’s indemnity obligations under this Section 2.06(f).  In negotiating the Mortgage Loan with Lender and any future Financing, KBS agrees to use commercially reasonably efforts to have the applicable lender pre-approve KBS Credit Party as a replacement guarantor, subject to typical conditions protecting the lender for matters such as material and adverse changes in the KBS Credit Party.
2.07.    Members Have No Managerial Authority.  The Members shall have no power to participate in the management of the Company, except as expressly authorized by this Agreement.
2.08.    Meetings.  The Company shall not be required to hold regular meetings of Members.  Any Member may call a meeting of Members for the purpose of discussing Company business.  Unless otherwise approved by the Members, any meeting of Members shall be held during normal business hours either telephonically or in person at the Company's principal office on such day and at such time as are reasonably convenient for the Members.

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2.09.    Liability and Indemnity.  No Member (nor any officer, director, member, manager, constituent partner, agent or employee of the Company or a Member) shall be liable or accountable in damages or otherwise to the Company or to any other Member for any good faith error of judgment or any good faith mistake of fact or law in connection with this Agreement, or the services provided to the Company, except in the case of willful misconduct or gross negligence.  To the maximum extent permitted by law, the Company does hereby indemnify, defend and agree to hold each Member and its Affiliates (and each such officer, director, member, manager, constituent partner, agent or employee) wholly harmless from and against any loss, expense or damage (including, without limitation, attorneys’ fees and costs) suffered by such Member and its Affiliates (and/or such officer, director, member, manager, constituent partner, agent or employee) by reason of anything which such Member and its Affiliates (and/or such officer, director, member, manager, constituent partner, agent or employee) may do or refrain from doing hereafter for and on behalf of the Company and in furtherance of its interest, except in the case of willful misconduct or gross negligence.  To the maximum extent permitted by law, each Member does hereby indemnify, defend and agree to hold the Company and each other Member wholly harmless from and against any loss, expense or damage (including, without limitation, attorneys’ fees and costs) suffered by the Company or such other Member as a result of such indemnifying Member’s willful misconduct or gross negligence in performing or failing to perform such indemnifying Member’s duties hereunder.  No person shall be entitled to indemnification under this Section 2.09 to the extent any losses arise directly or indirectly our of such Indemnitee’s gross negligence, willful misconduct, fraud, intentional misrepresentation or criminal conduct.
2.10.    Business Plan and Budget.  No later than sixty (60) days before the projected date of Completion of the Project,  Managing Member shall prepare and deliver to Co-Managing Member a plan which sets forth the general description of the overall business plan of the Company with respect to the management and operation of the Property (the “Business Plan”).  The approval of the Business Plan is a Major Decision under Section 2.02(f).  In the event of any conflict or inconsistency between any provision of the Business Plan and any provision of this Agreement, the provisions of this Agreement shall control and supersede the provisions of the Business Plan. On or before the Update Date (defined below) in any year after Completion of the Project, Managing Member shall prepare an update and any other necessary modifications to the Business Plan for Co-Managing Member’s review and approval.
(a)    Annual Budget.  No later than sixty (60) days before the projected date of Completion of the Project, Managing Member shall prepare and deliver to Co-Managing Member the initial annual operating budget for the Property after Completion of the Project (the “Annual Budget”) that sets forth, by category, the estimated costs that are projected to be incurred in connection with the ownership and operation of the Property.  On or before the last business day of November of each year after the initial Annual Budget is approved (each an “Update Date”), Managing Member shall prepare a new Annual Budget for the upcoming calendar year which shall be required to be approved by the Co-Managing Member as a Major Decision under Section 2.02(f), which shall set forth, by individual category, the costs and expenses projected to be incurred by the Company for the ensuing fiscal year.  In the event the Co-Managing Member does not respond to the proposed Annual Budget within fifteen (15) business days after receipt of such budget, the proposed Annual Budget shall be deemed disapproved.  

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(b)    Interim Annual Budget.  If any Annual Budget, or any category thereof, is not approved as a Major Decision under Section 2.02(f) for any fiscal year as of the commencement of such fiscal year (or other period), then the approved categories of the proposed Annual Budget shall be in effect, but as to the categories which were disapproved, one hundred five percent (105%) of the last approved Annual Budget line items, shall be in effect until the new Annual Budget as to such categories is approved as a Major Decision under Section 2.02(f).  Adjustments to the last approved Annual Budget shall automatically be made to reflect actual increases in real property taxes, insurance premiums, utility charges and payments required under contracts to which the Company is a party at the time of the expiration of the Annual Budget, and shall not require approval under Section 2.02(f).
(c)    Emergency Expenditures; Reallocation.  After Completion of the Project, Managing Member shall have the right, power and authority, without approval of Co-Managing Member pursuant to Section 2.02, to cause the Company to incur emergency expenditures not included in the Annual Budget to the extent Managing Member reasonably believes that such expenditures are necessary following a casualty or other comparable event to prevent imminent damage to persons or property on or about the Property, or the imposition of imminent civil or criminal liability against the Company, and Subsidiary, or any member, partner, officer, director, shareholder, agent, employee or representative of any of them (and shall notify the Members prior to making or authorizing such expenditures to the extent reasonably possible under the circumstances).  
2.11.    Pre-Approved Affiliate Agreements.  The Members contemplate that the Company shall cause Property Owner Subsidiary to execute the following agreements (individually a “Pre-Approved Affiliate Agreement” and collectively, the “Pre-Approved Affiliate Agreements”), but no fees or other amounts payable by the Property Owner Subsidiary thereunder shall accrue prior to the applicable effective date of each such agreement:
(a)    Property Management Agreement.  Prior to Completion of the Project, Property Owner Subsidiary shall enter into a property management agreement substantially in the form of Exhibit D attached hereto (the “Property Management Agreement”) with Onyx Management Group, LLC  (the “Property Manager”) or such other entity approved by the Members.  The fee payable to Property Manager shall be as set forth in the Property Management Agreement.  The Property Management Agreement is an Affiliate Agreement and the Co-Managing Member hereby approves the entering into of the Property Management Agreement by the Property Owner Subsidiary.  If Property Manager is unable to deliver all of the reports set forth in Section 6.2 of the Property Management Agreement shall enter into a sub-management agreement acceptable to Co-Managing Member with an entity acceptable to Co-Managing Member that is qualified to prepare such reports.  Transwestern would be acceptable to Co-Managing Member to serve as a sub-manager for this purpose.  The cost and expense of retaining such sub-manager would be borne by the Company.
(b)    Construction Management Agreement.  At the Property Closing, Property Owner Subsidiary shall enter into a Construction Management Agreement in a form agreed to by the Members in their reasonable discretion (the “Construction Management Agreement”) with Onyx Management Group LLC (the “Construction Manager”) or such other entity approved by the Members.  The fee payable to Construction Manager shall be equal to three percent (3%) of the 

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hard costs of construction of the Project as set forth in the Development Budget (the “Construction Management Fee”), shall be earned and payable in monthly installments over the period to be established in the Construction Management Agreement.  The Construction Management Agreement will be an Affiliate Agreement.  Construction Manager may enter into a sub-construction management agreement with a third party so long as such sub-construction manager and the form of the sub-construction management agreement are reasonably acceptable to Co-Managing Member and the Construction Management Fee is allocated between Construction Manager and such sub-construction manager so that there shall be no additional fees, costs or expenses to the Property Owner Subsidiary or the Company as a result of the engagement of the sub-construction manager.
2.12.    Reimbursements and Fees.
(a)    Reimbursements.  Except as otherwise provided by this Agreement, none of the Members (or their respective Affiliates and/or other representatives) shall be paid any compensation for rendering services to the Company.  Each Member shall be reimbursed for any costs and/or expenses incurred by such Member on behalf of the Company that relate to the business and affairs of the Company to the extent such Member had authority to act on behalf of the  Company (without reduction to such Member’s capital account in the Company maintained in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv) (each a “Capital Account”)); provided, however, that except as otherwise provided in this Agreement or in the Annual Budget no Member shall be reimbursed for any such costs and/or expenses that exceed an aggregate amount of $10,000 during any calendar year without the consent of the Co-Managing Member.  As used in this Agreement, the term:  “Treasury Regulation” means any proposed, temporary, and/or final federal income tax regulation promulgated by the United States Department of the Treasury as heretofore and hereafter amended from time to time (and/or any corresponding provisions of any superseding revenue law and/or regulation).
(b)    Reimbursement for Pre-Formation Costs.  Subject to the prior approval of Co-Managing Member, at or within five (5) business days after the date of the  Property Closing, the Company shall reimburse KBS and JV Member (but not Seller, which is an Affiliate of JV Member) for any and all reasonable legal and accounting fees, organizational costs and any other formation and due diligence costs incurred by KBS and JV Member (and/or any Affiliate or representative thereof, other than Seller) in connection with the formation of the Company, the negotiation and documentation of this Agreement and the acquisition of the Property by the Property Owner Subsidiary.  The foregoing reimbursements shall not be debited to or otherwise reduce any Member’s Capital Account.  KBS and JV Member shall use good faith commercially reasonable efforts to cause all such amounts approved by Co-Managing Member to be reimbursed hereunder to be included in the Company’s final escrow closing statement for the acquisition of the Property.  Notwithstanding the foregoing, the Members acknowledge that an Affiliate of JV Member is the Seller and has incurred costs prior to the Effective Date to design and create and/or obtain, as applicable, the concept of the Project, the Preliminary Development  Plan, the Preliminary Construction Plans, the Preliminary Budget, the due diligence materials delivered to KBS and the various other plans, surveys, studies, reports and investigations pertaining to the Property and the Project (the “Project Work Product”) and that such costs, and the benefit of the Project Work Product, were factored into the purchase price payable to Seller for the Property pursuant to the 

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Purchase Agreement so that none of such costs are to be reimbursed by the Company pursuant to this Section.  
2.13.    Limited Liability.  Except as otherwise provided by the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and the Members shall not be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member of the Company.
2.14.    Representations, Warranties and Covenants.  
(a)    By the Members.  Each Member hereby represents and warrants to the Company and the other Member as follows:
(i)    Such Member is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.
(ii)    Such Member has all requisite power, authority and capacity to enter into and perform its obligations under this Agreement.
(iii)    Such Member has duly authorized the execution and delivery of this Agreement, and this Agreement constitutes a binding obligation of such Member, enforceable against such Member in accordance with its terms.
(iv)    The execution, delivery and performance of this Agreement by such Member will not violate any agreement to which such Member or any of its Affiliates is a party or order of a governmental body.
(v)    Such Member is otherwise duly qualified to purchase and hold its Interest and to execute and deliver this Agreement and all other instruments executed and delivered on behalf of it in connection with the acquisition of its Interest.
(b)    By JV Member.  JV Member, as the owner of the 20% Ground Lease Interest (as defined below), hereby makes each of the representations and warranties set forth in Section 4.1(a) of the Purchase Agreement to the Company and the Co-Managing Member as if each of such representations and warranties were set forth herein.  The representations and warranties of JV Member in this Section 2.14(b) are subject to the survival period set forth in Section 5.2 of the Purchase Agreement and any claims will be aggregated with the claims arising under the Purchase Agreement, if any, and subject to the same monetary limitations applied in the aggregate set forth in Section 15 of the Purchase Agreement. 

ARTICLE III
MEMBERS' CONTRIBUTIONS TO COMPANY
3.01.    Initial Capital Commitments.  
(a)    JV Member.  JV Member shall commit to contribute to the capital of the Company, as follows:

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(i)    Within two (2) Business Days after the Effective Date (or such earlier date as may be required by the Purchase Agreement), an amount in cash equal to 20% of the Purchase Deposit (i.e., $600,000.00); 
(ii)    Prior to the date required by the Purchase Agreement, an amount in cash equal to 20% of any additional deposits to be made under Section 8.1 of the Purchase Agreement, as applicable;
(iii)    JV Member’s execution of the assignment of the Ground Lease in the form attached as Exhibit 8.4(a) of the Purchase Agreement (the “Ground Lease Assignment”) at the Property Closing to transfer a twenty percent (20%) tenant-in-common interest in the Ground Lease (the “20% Ground Lease Interest”) to the Property Owner Subsidiary or the Company as a capital contribution shall be deemed to a contribution to the Company of capital in the amount of $9,600,000.00, plus or minus an amount equal to twenty-five percent (25%) of the prorations and adjustments described in the Purchase Agreement (the “Adjustments”) depending upon whether the Adjustments increase or decrease the Purchase Price under the Purchase Agreement.  By way of example, if the Adjustment under the Purchase Agreement (based on an 80% assignment of the Ground Lease) results in a $800.00 increase, then the adjustment to JV Member’s capital contribution would be a $200.00 increase.  For avoidance of doubt, JV Member is not assigning the other interests in the Ground Lease that it holds and will hold on the Property Closing Date and the remaining thirty percent (30%) tenant-in-common interest in the Ground Lease that JV Member will own on the Property Closing Date will be conveyed to the Property Owner Subsidiary pursuant to the Purchase Agreement at the Property Closing) and 
(iv)    within ten (10) Business Days after demand from Managing Member, an amount equal to the product of the JV Member’s Percentage Interest and the equity needed to complete the Project as set forth in the Development Plan, including Cost Overruns (unless JV Member is solely responsible for such Cost Overrun pursuant to Section 3.07(c)(iii)(1) below); provided, however, that the additional capital for the Project may be requested and funded in monthly intervals if the Development Budget contemplates such monthly funding (instead of a lump sum capital call) and the Lender allows such monthly funding of such capital.
(b)    KBS.  KBS shall commit to contribute to the capital of the Company, in cash, as follows:

                                             
1 JV Member will own a fifty percent (50%) tenant in common interest in the Ground Lease immediately prior to the Property Closing: sixty percent (60%) of which, representing a 30% tenant in common interest in the Ground Lease, will be assigned for cash pursuant to the Purchase Agreement, and forty percent (40%) of which, representing a 20% tenant in common interest in the Ground Lease, will be assigned as a capital contribution to the Company in exchange for the Membership Interest hereunder.

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(i)    Within two (2) Business Days after the Effective Date (or such earlier date as may be required by the Purchase Agreement), an amount equal to 80% of the initial equity necessary to fund the Purchase Deposit (i.e., $2,400,000.00);
(ii)    Prior to the date required by the Purchase Agreement, an amount in cash equal to 80% of any additional deposits to be made under Section 8.1 of the Purchase Agreement, as applicable;
(iii)    at or prior to the Property Closing, an amount equal to 100% of the cash necessary to consummate the Property Closing and capitalize the Company as set forth in the sources and uses schedule attached hereto Exhibit E; and
(iv)    within ten (10) Business Days after demand from Managing Member, an amount equal to the product of the KBS’s Percentage Interest and the equity needed to complete the Project as set forth in the Development Plan, including Cost Overruns (unless JV Member is solely responsible for such Cost Overrun pursuant to Section 3.07(c)(iii)(1) below); provided, however, that the additional capital for the Project may be requested and funded in monthly intervals if the Development Budget contemplates such monthly funding (instead of a lump sum capital call) and the Lender allows such monthly funding of such capital.
(c)    Failure to Close Property Closing.  The Members acknowledge that upon execution of this Agreement, (i) the Property Owner Subsidiary will have funded (or may be obligated to fund) the Earnest Money under the Purchase Agreement and (ii) the Members shall be obligated to fund their respective initial capital contributions set forth in this Section 3.01.  In the event a Member fails to fund the portion of its initial capital contribution required to be funded at or prior to the Property Closing pursuant to Section 3.01(a) or (b), as applicable, or otherwise refuses to allow the Property Owner Subsidiary to close the Property Closing under the Purchase Agreement and such failure to fund or close results in or would result in a default under the Purchase Agreement, then in addition to any other remedy set forth in this Agreement, the non-defaulting Member shall have the unilateral authority and without the consent of the defaulting Member to cause the Company and the Property Owner Subsidiary to close the Property Closing, in which event the defaulting Member shall be no longer be a Member of the Company and shall receive no return of its capital to the extent such defaulting Member had previously funded any part of its capital under this Section 3.01.  In the event a Member fails to fund the portion of its initial capital contribution required to be funded at or prior to the Property Closing pursuant to Section 3.01(a) or (b), as applicable, or otherwise refuses to allow the Property Owner Subsidiary to close the Property Closing under the Purchase Agreement and such failure to fund or close results in or would result in a default under the Purchase Agreement and the non-defaulting member elects not to close the Property Closing, the defaulting Member shall be liable for the non-defaulting Member’s share of the Earnest Money that is not returned to the non-defaulting Member and for all costs and expenses incurred by such non-defaulting Member incurred in connection with this Agreement and the Property, including all costs to negotiate this Agreement, to the extent such costs and expenses have not previously been reimbursed to such non-defaulting Member (the lost Earnest Money and such costs and expenses, collectively, the “Reimbursable Expenses”).  The defaulting Member shall pay to the non-defaulting Member such reimbursement within ten (10) days of the non-defaulting Member’s written request therefor, which request shall reasonably substantiate the costs and expenses incurred.  If 

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the defaulting Member is (i) Co-Managing Member then KBS SOR US Properties II LLC (the “KBS Credit Party”) shall guaranty the payment of the Reimbursable Expenses incurred by JV Member, or (ii) JV Member then Onyx Equities, LLC, a New Jersey limited liability company (the “JV Member Credit Party”) shall guaranty the Reimbursable Expenses incurred by Co-Managing Member.  Except as provided in Section 1.05 above, if the Property Closing does not otherwise occur and the Earnest Money is returned to the Property Owner Subsidiary, then the Company shall be dissolved pursuant to Article VIII.
(d)    JV Member’s Property Closing Deliveries.  To effectuate the contribution of the 20% Ground Lease Interest, JV Member shall execute and deliver the following at the Property Closing: (1) the Ground Lease Assignment, (2) an certificate updating the representations and warranties of JV Member in Section 2.14(b) above in the form described in Section 8.4(o) of the Purchase Agreement, and (3) each of the other closing documents and deliveries listed in Section 8.4 of the Purchase Agreement as and to the extent applicable to the assignment of the 20% Ground Lease Interest (e.g., Bill of Sale, Assignment of Service Contracts, title affidavits, tax affidavits, other instruments reasonably requested by the Title Company, etc.). In addition, JV Member shall pay all transfer taxes, recording fees and charges necessary or required for the Ground Lease Assignment to be recorded pursuant to Section 8.6 of the Purchase Agreement, and if JV Member desires to claim the “mere change of identity” exemption described in said Section 8.6, the provisions of said Section 8.6 shall apply, including the indemnification in favor of the Company and Co-Managing Member as described therein.  The purpose of this Section 3.01(d) and the intent of the Members is that the Company and the Co-Managing Member should be in the same position as they would, and the JV Member should have the same obligations and liabilities (including deliveries at the Property Closing), as it would as if JV Member were to assign one hundred percent (100%) of the leasehold estate under the Ground Lease pursuant to the Purchase Agreement and that the JV Member should have the same obligations as the Seller under the Purchase Agreement as to the 20% Ground Lease Interest; it being agreed, however, that the 20% Ground Lease Interest is being conveyed to Property Owner Subsidiary as a contribution pursuant to this Agreement as described herein and intended to qualify as a contribution to capital pursuant to Section 721 of the Internal Revenue Code of 1986, as amended. The Members to agree to report, and cause the Company to report, these transactions consistent with this intent for all tax purposes.  
  
3.02.    Default in Capital Commitment.  If JV Member or KBS (as applicable, the “Defaulting Member”) shall fail to contribute (a “Contribution Failure”) its share of any capital required to be contributed pursuant to Section 3.01 or any approved additional capital contributions pursuant to Section 3.06 (the “Defaulted Amount”) and such Contribution Failure shall continue for at least five (5) business days following notice to the Defaulting Member (provided that no notice or cure period shall apply to a Member’s failure to fund its share of the required capital to the Company for the Property Closing pursuant to the Purchase Agreement), KBS or JV Member, as applicable, (the “Non-Defaulting Member(s)”) may, but shall not be obligated to, contribute some or all of the Defaulted Amount as a capital contribution to the Company or as a loan to the Defaulting Member (a “Default Loan”).  If the Non-Defaulting Member elects to contribute some or all of the Defaulted Amount as a capital contribution to the Company, the Percentage Interests of Co-Managing Member and the JV Member shall be adjusted as follows: 

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(a)    with respect to the first two (2) Contribution Failures by a Defaulting Member occurring between the Effective Date and the second (2nd) anniversary of the Effective Date (the “Initial Contribution Period”): (x) the amount which the Non-Defaulting Member elects to contribute to fund the Defaulted Amount shall be deemed to be equal to 150% of the amount that the Non-Defaulting Member actually funds (the “Deemed Capital”); (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed  by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus the Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus the Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member;
(b)    if there have been two Contribution Failures by a Defaulting Member during the Initial Contribution Period, then the following shall apply to future  Default Loans by the Non-Defaulting Member during the Initial Contribution Period: (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 300% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed  by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member;
(c)    if there have been two or less Contribution Failures by a Defaulting Member during the Initial Contribution Period, then with respect to the first two (2) Contribution Failures by such Defaulting Member occurring after the Initial Contribution Period, (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 150% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed  by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member; and
(d)    if there have been more than two Contribution Failures by a Defaulting Member during the Initial Contribution Period, then  with respect to any subsequent Contribution Failures by such Defaulting Member occurring after the Initial Contribution Period: (x) the Deemed Capital contributed by the Non-Defaulting Member shall be deemed to be equal to 200% of the amount that the Non-Defaulting Member actually funds; (y) the Non-Defaulting Member’s Percentage Interest shall be equal to the percentage equivalent of a fraction, the numerator of which is equal to the aggregate capital contributed  by the Non-Defaulting Member, exclusive of the amount funded to replace the Defaulted Amount, plus such Deemed Capital, and the denominator of which 

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is the total capital contributed by all Members, other than the amount contributed to replace the Defaulted Amount, plus such Deemed Capital; and (z) the Defaulting Member’s Percentage Interest shall equal 100% minus the recomputed Percentage Interest of the Non-Defaulting Member.  
If the Non-Defaulting Member elects to provide the Default Loan, then it shall pay the proceeds directly to the Company.  A Default Loan shall not be considered a capital contribution by the Non-Defaulting Member and shall not increase the Capital Account balance or the Percentage Interest of the Non-Defaulting Member, but instead shall be treated as a non-recourse loan by the Non-Defaulting Member to the Defaulting Member (and a capital contribution by the Defaulting Member) and shall bear interest at the lesser of (x) the Default Loan Rate (as defined below) or (y) the maximum amount permitted by law.  To the extent not repaid directly by the Defaulting Member, a Default Loan, together with any accrued and unpaid interest thereon, shall be repaid out of any subsequent distributions of Net Cash or any other payment from the Company to which the Defaulting Member would otherwise be entitled (but such distributions actually paid to the lending Members shall nonetheless constitute a distribution to the Defaulting Member for purposes of this Agreement), and such payments shall be applied first to the payment of accrued but unpaid interest on each such obligation and then to the payment of the outstanding principal until the Default Loan is paid in full.  “Default Loan Rate” is defined as a cumulative annual rate equal to eighteen percent (18%), compounded quarterly (pro-rated for periods of less than one year), on the daily average outstanding balance during each fiscal year of the Member’s aggregate unreturned Default Loan.
3.03.    Member Loans.  In the event Managing Member determines, in its reasonable discretion, that funds in addition to those otherwise obtained pursuant to Section 3.01 are necessary for the Company or any Subsidiary to meet the Annual Budget, Business Plan, then Managing Member shall deliver written notice of such actual or projected cash deficit to the Members requesting that they agree that a loan (a “Member Loan”) should be made to the Company, which notice shall specify the term and interest rate of the requested Member Loan.  Within 10 business days following the effective date of such notice, each such Member shall notify Managing Member (a) whether or not such Member agrees that Member Loan(s) to the Company should be made in the amount specified in Managing Member’s notice, and (b) whether such Member elects, in its sole and absolute discretion, to make such Member Loan.  If all Members (y) agree that a Member Loan in the amount specified in Managing Member’s notice should be made, and (z) elect to advance such funds by the Company, such funds shall be advanced by Members in proportion to their respective percentage set forth opposite such Member's name under the column labeled “Percentage Interest” on Exhibit A attached hereto, as such Percentage Interests may adjusted under this Agreement (the “Percentage Interests”) (or as such Members otherwise agree).  Notwithstanding the foregoing, if the Co-Managing Member elects that the Member Loan should be made but the JV Member does not, the Co-Managing Member may elect to make the entire Member Loan or such portion as it may so elect.  Any and all advances made by any Member to the Company pursuant to this Section 3.03 shall be treated as a Member Loan with recourse only to the assets of the Company (and not to the assets of any Member), and shall bear annual interest as set forth in Managing Member’s notice.  Furthermore, the Company and the Co-Managing Member shall structure any Member Loan from the Co-Managing Member such that the Member Loan is, at all times, a “real estate asset” under Section 856(c) of the Code.  If, from any circumstances whatsoever, the Company ever receives as interest under a Member Loan in an amount which would exceed the 

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highest lawful rate, such amount which would be excessive interest shall be applied to the reduction of the unpaid principal balance due under such Member Loan and not to the payment of interest.  Any and all Member Loans shall be due and payable from the first available funds of the Company and in any event upon the liquidation of the Company.  The repayment of any Member Loan shall be made prior to any distributions of Net Cash or other cash proceeds to the Members.  Accordingly, notwithstanding the provisions of Articles V and VIII, until any and all Member Loans are repaid in full, the Members shall draw no further distributions from the Company and all cash or property otherwise distributable with respect to the Interests of the Members shall be paid to the Member(s) making Member Loan(s) in proportion to, and as a reduction of, the outstanding balance(s) of such Member Loan(s), with such funds being applied first to reduce any interest accrued thereon, and then to reduce the principal amount thereof.  As used in this Agreement, the term “Interest” means in respect to any Member, all of such Member’s right, title and interest in and to the Net Profits, Net Losses, Net Cash, and capital of the Company, and any and all other interests therein in accordance with the provisions of this Agreement and the Act.  As used in this Agreement, the terms “Net Profits” and “Net Losses” mean, for each fiscal year or other period, an amount equal to the Company’s taxable income or loss, as the case may be, for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss and deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss); provided, however, for purposes of computing such taxable income or loss, (i) such taxable income or loss shall be adjusted by any and all adjustments required to be made in order to maintain Capital Account balances in compliance with Treasury Regulation Section 1.704-1(b), and (ii) any and all items of gross income or gain and/or partnership and/or partner “nonrecourse deductions” specially allocated to any Member pursuant to Section 4.02 shall not be taken into account in calculating such taxable income or loss.  If Co-Managing Member does not approve a Member Loan, such disapproval shall be deemed final and conclusive for all purposes.  
3.04.    Determination of IRR Returns.  The IRR Return described in Section 5.01 below shall be determined based upon internal rate of return of KBS.  As used in this Agreement, the term “IRR Return” means for each of KBS the annual discount rate that when compounded quarterly results in a net present value equal to zero when the discount rate is applied to all capital contributions by Co-Managing Member and all distributions made by the Company to Co-Managing Member pursuant to this Agreement.  The IRR Return shall be calculated using the XIRR function provided in Microsoft Office Excel or any replacement software issued by Microsoft to compute internal rate of return. It is understood by the Members that the achievement of a particular IRR Return requires both a return of all capital contributions plus a cumulative return on such capital contributions at the applicable percentage IRR Return.
3.05.    Capital Contributions in General.  Except as otherwise expressly provided in this Agreement or as otherwise agreed to by all Members in writing (i) no Member may withdraw all or any portion of any contribution that such Member may have made to the capital of the Company without each other Member’s consent, (ii) no Member shall be entitled to receive interest on such Member’s contributions to the capital of the Company, and (iii) no Member shall be required or entitled to contribute additional capital to the Company

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3.06.    Additional Capital Contributions.  Following the contribution of all the amounts described in Section 3.01, either Member shall have the right to make a capital call by delivering written notice to the other Member under this Section 3.06 if and only if such additional capital was either: (1) set forth in the approved Annual Budget or Interim Annual Budget, as applicable, (2) otherwise approved as a Major Decision pursuant to Section 2.02, or (3) Cost Overruns (other than any Cost Overruns governed by Section 3.07(c)(iii)(1)).  Each Member shall contribute its share of the additional capital contributions required to be contributed under this Section 3.06 (in accordance with its Percentage Interest) in cash on or before the due date specified in the written notice, which due date shall be no less than ten (10) business days from the date of this written notice.  If a Member fails to make its share of the additional capital contributions required to be contributed on or before the due date specified in Managing Member’s written notice, the Non-Defaulting Member shall have the right (but not the obligation and without waiving any remedies hereunder as a result of such failure) to receive a return of all or part of the additional Capital Contribution made by the Non-Defaulting Member, to make a Default Loan or to make a capital contribution to the Company of some or all of the Defaulted Amount pursuant to Section 3.02.
3.07.    Guaranties.
(a)    Required Guaranties.  Except as set forth in Section 1.06 or Section 3.07(a)(ii) below, if in connection with any Financing of the Property, including the Mortgage Loan, a lender requires a guaranty of (each a “Required Guaranty” and collectively, the “Required Guaranties”): (i) standard non-recourse carve outs, (ii) certain environmental conditions, (iii) a completion guaranty with respect to the Project (a “Completion Guaranty”), (iv) an operating guaranty (a “Carry Guaranty”), and/or (v) a guaranty of the Member’s future capital commitments to the Company (“Future Funding Guaranty”), such Required Guaranties shall be from the Company and/or JV Member or an entity affiliated with JV Member (individually and collectively, the “Guarantor”).  The Guarantor shall not receive any fees or other compensation for making a Required Guaranty. The form, amount and terms and conditions of any Required Guaranty shall be approved by the Members.  Notwithstanding the foregoing, KBS agrees to cause the KBS Credit Party to execute a Carry Guaranty in favor of lender and a Future Funding Guaranty in favor of lender, each in a form and substance reasonably acceptable to KBS and the KBS Credit Party.
(b)    Proportionate Guaranty Obligations of the Members.  Except to the extent Section 3.07(c) provides otherwise, if a Guarantor shall deliver a Required Guaranty and if such Guarantor shall make, or be required to make, any payment under any such Required Guaranty, each Member hereby covenants and agrees to satisfy, or cause to be satisfied, its Proportionate Guaranty Obligation (as defined below) with respect to any and all of the Required Guaranties and each Member’s payment or its Proportionate Guaranty Obligation shall be treated as an additional capital contribution to the Company by each Member for all purposes of this Agreement.  If and to the extent a Member (or its Affiliate) has failed to fully satisfy its Proportionate Guaranty Obligation within thirty (30) days following the date such Member is notified that such Guarantor has made, or is required to make, such payment under the applicable Required Guaranty, the other Member may exercise its rights under Section 3.07(d) below.  “Proportionate Guaranty Obligation” means with respect to any Required Guaranty which any Guarantor shall provide to a lender, the obligation of each Member pursuant to this Section 3.07(b) to make payments (to a third party lender, the 

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Company, to any other Member or the Guarantor) in an amount equal to the product of (x) the aggregate amount paid and/or due and payable under any and all such Required Guaranties multiplied by (y) the Percentage Interest of such Member.  The KBS Credit Party shall guaranty KBS’s obligations under this Section 3.07(b).  The JV Member Credit Party shall guaranty JV Member’s obligations under this Section 3.07(b).
(c)    Exceptions to Proportionate Guaranty Obligations.  Notwithstanding anything to the contrary in Section 3.07(b):
(i)    Conduct By KBS.  Any and all amounts paid by a Guarantor with respect to any Required Guaranty as a result of any conduct or action that KBS (or its Affiliates) shall have taken in violation of this Agreement or which is a result of any gross negligence, fraud or intentional misconduct of KBS (and/or its Affiliates) shall be funded solely by KBS (subject to the rights of indemnification set forth in Section 3.07(e)), JV Member (or its Affiliate) shall have no Proportionate Guaranty Obligation with respect to such payments, such amounts funded by KBS (or its Affiliates) shall not be considered a capital contribution by KBS, and KBS (or its Affiliate) shall reimburse the applicable Guarantor for such amount within thirty (30) days of written demand. If KBS (or its Affiliate) fails to make such payment, JV Member shall, as its sole remedy, be entitled to exercise its rights set forth in Section 3.07(d) hereof; 
(ii)    Conduct by JV Member.  Any and all amounts paid by a Guarantor with respect to any Required Guaranty as a result of any conduct or action that the JV Member (or its Affiliates) shall have taken in violation of this Agreement or which is a result of any gross negligence, fraud or intentional misconduct of JV Member (or its Affiliates) shall be funded solely by the JV Member (subject to the rights of indemnification set forth in Section 3.07(e)), KBS (or its Affiliate) shall have no Proportionate Guaranty Obligation with respect to such payments, such amounts funded by the JV Member (or its Affiliates) shall not be considered a capital contribution by the JV Member, the JV Member (or its Affiliate) shall reimburse the applicable Guarantor for such amount within thirty (30) days of written demand. If the JV Member (or its Affiliate) fails to make such payment, KBS shall, as its sole remedy, be entitled to exercise its rights set forth in Section 3.07(d) hereof; and
(iii)    Cost Overruns Pertaining to the Project.  At such times as either Member determines that the Project reasonably requires additional funds to cover costs and expenses in excess of the amounts for either hard costs or soft costs included in the approved Development Budget (each, a “Cost Overrun”), after application of all available contingencies, and taking into account all actual cost savings for completed work (so long as such savings or contingency application is permitted under the Mortgage Loan), the following shall apply:
(1)    Each Cost Overrun that results from a breach by Managing Member under this Agreement or a breach by Construction Manager under the Construction Management Agreement shall be paid solely by JV Member and such amounts shall not be considered as capital contributions to the Company.
(2)    If the applicable Cost Overrun is not governed by Section 3.07(c)(iii)(1) above, the amount of the Cost Overrun shall be provided to the Company in cash pro rata by the Members in accordance with their respective Percentage Interests as Capital Contributions to 

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the Company, and Managing Member shall have the right to make a capital call to call such amounts pursuant to Section 3.06.
(d)    Failure to Pay Portion of Guaranty Payment by a Member.   If any Member fails to pay (A) its Proportionate Guaranty Obligation in accordance with Section 3.07(b) or (B) the amounts such Member is required to pay under Section 3.07(c)(iii)(2), as applicable, the non-defaulting Member affiliated with such guarantor may elect to either (X) contribute some or all of the amount incurred by the Guarantor that should have been repaid by the defaulting Member as a capital contribution to the Company (so the Company can reimburse the Guarantor), then, in accordance with Section 3.02, the Percentage Interests of the Members shall be adjusted as if the non-defaulting Member contributed 150% of the amount of capital actually contributed by the non-defaulting Member, or (Y) treat such amount incurred by the Guarantor that should have been repaid by the defaulting Member as a Default Loan made to the defaulting Member.  If KBS is the defaulting Member under Sections 3.07(b) or (c)(iii)(2), then the KBS Credit Party shall guaranty KBS’s payment obligations under these sections.  If the JV Member is the defaulting Member under Sections 3.07(b) or (c)(iii)(2), then the JV Member Credit Party shall guaranty JV Member’s payment obligations under these sections.
(e)    Indemnification.  The Company shall indemnify, defend and hold harmless each Guarantor for any and all losses suffered under any Required Guaranty, provided that no such indemnification shall be made (and a Guarantor shall reimburse any funds advanced to them in connection with a defense of a claim and indemnify the Company and the other Member) to the extent a court of competent jurisdiction determines that the Member affiliated with such Guarantor is solely liable for the losses suffered under any Required Guaranty pursuant to Section 3.07(c). The KBS Credit Party shall guaranty KBS’s indemnification obligations under this Section 3.07(e).  The JV Member Credit Party shall guaranty JV Member’s indemnification obligations under this Section 3.07(e).
ARTICLE IV
ALLOCATION OF PROFITS AND LOSSES
4.01.    In General.
(a)    Net Profits and Net Losses shall be allocated among the Members in such a manner so as, to the maximum extent possible, to make each Member’s Capital Account as of the close of each year (increased by the Member’s share of “partnership minimum gain” as defined in Treasury Regulation Section 1.704-2(b)(2) and “partner nonrecourse debt minimum gain” as defined in Treasury Regulation Section 1.704-2(i)(5)) equal the amount that the Member would receive if, as of the close of such year, all the assets of the Company were sold for their Deemed Book Values (as determined immediately before such deemed sale), the proceeds were applied to pay all Company liabilities and the remaining net proceeds were distributed to the Members in accordance with Section 5.01 or 5.02, as then applicable at the time of such allocations. As used in this Agreement, the term “Deemed Book Value” means the book value of the Company’s assets as determined under Treasury Regulation Section 1.704-1(b)(2)(iv) (i.e., the adjusted tax basis of such assets unless the asset was contributed to the capital of the Company or there has been a revaluation of book value 

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under Treasury Regulation Section 1.704-1(b)(2)(iv)(f) and in such latter case the fair market value of such assets on the revaluation date).
(b)    The Company shall maintain “Capital Accounts” for each Member in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv).  The Company shall make all adjustments required under Treasury Regulation Section 1.704-1(b)(2)(iv), including the adjustments contained in Section 1.704-1(b)(2)(iv)(g), relating to Section 704(c) property as set forth in Section 4.03, below.
4.02.    Special Allocations.
(a)    Minimum Gain Chargeback.  Notwithstanding any other provision of this Agreement, if there is a net decrease in partnership minimum gain for a Company taxable year, each Member shall be allocated, before any other allocation of Company items for the taxable year, items of gross income and gain for the year (and, if necessary, for subsequent years) in proportion to, and to the extent of, the amount of the Member’s share of the net decrease in minimum gain during the year as provided in Treasury Regulation Section 1.704-2(f).  The income allocated under this Section 4.02(a) in any taxable year shall consist first of gains recognized from the disposition of property subject to one or more nonrecourse liabilities of the Company, and any remainder shall consist of a pro rata portion of other items of income or gain of the Company.  The allocation otherwise required by this Section 4.02(a) shall not apply to a Member to the extent not required, as provided in Treasury Regulation Section 1.704-2(f)(2) through (5).
(b)    Qualified Income Offset.  Notwithstanding any other provision of this Agreement, if a Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that causes or increases an Adjusted Capital Account Deficit with respect to the Member, items of Company gross income and gain shall be specially allocated to the Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible.
(c)    Gross Income Allocation.  If at the end of any Company taxable year, a Member has an Adjusted Capital Account Deficit, the Member shall be specially allocated items of Company income or gain in an amount and manner sufficient to eliminate the Adjusted Capital Account Deficit as quickly as possible.
(d)    Nonrecourse Deductions.  Any “nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(b)(1)) shall be allocated among the Members in accordance with their Percentage Interests.
(e)    Partner Nonrecourse Debt.  Notwithstanding any other provision of this Agreement, any “partner nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(i)(2)) shall be allocated to those Members that bear the economic risk of loss for the applicable partner nonrecourse debt, and among those Members in accordance with the ratios in which they share the economic risk, determined in accordance with Treasury Regulation Section 1.704-2(i).  If there is a net decrease for a Company taxable year in any partner nonrecourse debt minimum gain, each Member with a share of such partner nonrecourse debt minimum gain as of 

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the beginning of such year shall be allocated items of gross income and gain in the manner and to the extent provided in Treasury Regulation Section 1.704-2(i)(4).
(f)    Adjusted Capital Account Deficit.  As used in this Agreement, “Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in the Member’s Capital Account as of the end of the relevant taxable year, after giving effect to the following adjustments:  (i) crediting thereto (A) the amount of the Member’s shares of partnership minimum gain and partner nonrecourse debt minimum gain, and (B) the amount of Company liabilities allocated to the Member under Section 752 of the Code with respect to which the Member bears the economic risk of loss (as defined in Treasury Regulation Section 1.752-2(a)), to the extent such liabilities do not constitute partner nonrecourse debt under Treasury Regulation Section 1.752-2 and (ii) reduced by all reasonably expected adjustments, allocations and distributions described in Treasury Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(g)    Interpretation.  The foregoing provisions of this Section 4.02 are intended to comply with Treasury Regulation Sections 1.704-1(b) and 1.704-2 and shall be interpreted consistently with this intention.  Any terms used in such provisions that are not specifically defined in this Agreement shall have the meaning, if any, given such terms in the Regulations cited above.
4.03.    Differing Tax Basis; Tax Allocation.
(a)    Except as otherwise provided in this Section 4.03, items of income, gain, loss and deduction of the Company to be allocated for income tax purposes shall be allocated among the Members on the same basis as the corresponding book items are allocated under Sections 4.01 and 4.02.
(b)    Depreciation and/or cost recovery deductions and gain or loss with respect to each item of property treated as contributed to the capital of the Company or revalued under Treasury Regulation Section 1.704-1(b)(2)(iv)(f) shall be allocated among the Members for federal income tax purposes in accordance with the principles of Section 704(c) of the Code and the Treasury Regulations promulgated thereunder, and for state income tax purposes in accordance with comparable provisions of the applicable law in the state in which the property is located and the regulations promulgated thereunder using the co-called “traditional method”, so as to take into account the variation, if any, between the adjusted tax basis of such property and its book value (as determined for purposes of the maintenance of Capital Accounts in accordance with this Agreement and Treasury Regulation Section 1.704-1(b)(2)(iv)(g)).  For purposes of this Agreement, the term “Code” means the Internal Revenue Code of 1986, as heretofore and hereafter amended from time to time (and/or any corresponding provision of any superseding revenue laws).
ARTICLE V
DISTRIBUTION OF CASH FLOW
5.01.    Distribution of Net Cash Prior to Removal of JV Member as Managing Member for Cause.  The determination of whether there is sufficient Net Cash so that distributions may be made to the Members in accordance with this Agreement (including, without limitation, pursuant to this Article V) shall be at the reasonable discretion of KBS.  Prior to any removal of the JV Member as 

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Managing Member for Cause pursuant to Section 2.06 of this Agreement), Net Cash shall be determined and distributed quarterly (or at such other times as are determined in the reasonable discretion of Co-Managing Member, taking into account the reasonable business needs of the Company) in the following order of priority:  
(a)    First, 100% to KBS and JV Member, pari passu in proportion to their Percentage Interests (“Pari Passu”), until KBS has received an IRR Return of 12%;
(b)    Second, after KBS has received an IRR Return of 12% and until distributions under this Section 5.01 have resulted in KBS having received an IRR Return of 17%, (i) 65% to KBS, and (ii) 35% to JV Member;
(c)    Third, after KBS has received an IRR Return of 17% and thereafter, (i) 50% to KBS, and (ii) 50% to JV Member.
(d)    Notwithstanding the foregoing, if JV Member is not a Defaulting Member, then upon the first Financing of the Company secured by the Property, prior to any distributions pursuant to Sections 5.01(a), (b), or (c) above, the Company shall cause the Property Owner Subsidiary to distribute the Required Amount (as hereinafter defined) to the Company which shall be immediately distributed solely to the JV Member.  As used herein, the “Required Amount” shall be the amount by which the Capital Account of the JV Member (prior to such distribution) exceeds the product of (A) 20% and (B) the total amount of capital (or deemed value of capital) contributed by both Members, including the value attributed to JV Member’s in kind contribution of the 20% Ground Lease Interest.  The purpose of this Section 5.01(d) is to create a distribution to JV Member so that JV Member’s Capital Account will not exceed 20% of the aggregate Capital Accounts of the Members, after taking into account the proceeds from the Financing, since JV Member’s Capital Account without such distribution would otherwise be disproportionate. 
5.02.    Distribution of Net Cash After Removal of the JV Member for Cause.  After the removal of the JV Member as Managing Member for Cause pursuant to Section 2.06(b) of this Agreement, Co-Managing Member shall determine on a quarterly basis whether there is sufficient Net Cash so that distributions may be distributed quarterly (or at such other times as are determined in the reasonable discretion of Co-Managing Member, taking into account the reasonable business needs of the Company) to the Members in accordance with their Percentage Interests.
5.03.    Limitation on Distributions.  Notwithstanding any other provision contained in this Agreement, the Company shall not make any distributions of Net Cash (or other proceeds) to any Member if such distribution would violate the Act or other applicable law.
5.04.    In-Kind Distribution.  Subject to Section 10.06, assets of the Company (other than cash) shall not be distributed in kind to the Members without approval of the Co-Managing Member.  In the event of any distribution of real property in kind, each Member hereby waives any right of partition in respect thereof.

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5.05.    Tax Distributions.  Unless this provision is waived by KBS notwithstanding anything to the contrary in Sections 5.01 or 5.02 but to the fullest extent possible consistent with the distribution provisions of this Article V, the Managing Member shall use commercially reasonable efforts to cause the Company to distribute cash to KBS by the end of each fiscal year in an amount not less than 100% of the taxable income (including any net capital gain) allocated, directly or indirectly, to KBS for federal income tax purposes for each such fiscal year so that KBS or any owner of KBS that is a REIT may satisfy the requirements of Section 857(a)(1) of the Code for its taxable year with respect to the income and gain allocated to that owner from KBS for the taxable year, and otherwise distribute 100% of its taxable income and net capital gain.  In addition, notwithstanding anything to the contrary in Sections 5.01 or 5.02 but subject to the distribution to KBS in the immediately preceding sentence and to the fullest extent possible consistent with the distribution provisions of this Article V, Managing Member shall have the right to cause Company to distribute cash to JV Member by the end of each fiscal year in an amount not less than 100% of the taxable income (including any net capital gain) allocated, directly or indirectly, to JV Member for federal income tax purposes for each such fiscal year, and otherwise distribute 100% of its taxable income and net capital gain.  Any cash distributed to a Member under this Section 5.05 shall be applied against and reduce the next distributions of Net Cash that would otherwise be made to the Member under Section 5.01 or Section 5.02 (as may apply), as if the cash distributed under this Section 5.05 were actually distributed under Section 5.01 or Section 5.02 (as may apply).
ARTICLE VI 
RESTRICTIONS ON TRANSFERS OF COMPANY INTERESTS
6.01.    Limitations on Transfer.  Except as set forth in Section 6.02 below, no Member shall be entitled to sell, exchange, assign, transfer or otherwise dispose of, pledge, hypothecate, encumber or otherwise grant a security interest in, directly or indirectly (collectively, a “Transfer”), all or any part of such Member’s Interest, without the prior written consent of the non-transferring Member (which consent may be withheld in such Member’s sole and absolute discretion).  Any attempted Transfer in violation of the restrictions set forth in this Article VI shall be null and void ab initio and of no force or effect.  Each Member shall indemnify, defend and hold the other Member and the Company harmless from and against any and all costs, expenses and losses associated with any Transfer (including any Permitted Transfer (as defined below)), including without limitation any transfer taxes and any increase in real estate or other taxes incurred as a result of such transfer.
6.02.    Permitted Transfers.  Any Member and/or any direct or indirect constituent owner of any Member may transfer all or any portion of such Member’s Interest and/or such constituent owner’s direct or indirect ownership interest in such Member as follows (each a “Permitted Transfer”) to a person or entity described below (a “Permitted Transferee”) without complying with the provisions of Section 6.01:

                                  
2 NTD: DLA had questions about transfer taxes, which may or may not translate into comments.  We will circle back on our end, but wanted to note this.

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(a)    Transfer Between Members.  Notwithstanding anything stated to the contrary in this Article VI or elsewhere in this Agreement, any Member may sell, assign or otherwise transfer all or any part of its Interest to any other Member on such terms as are agreed to by both Members.
(b)    KBS Indirect Transfers.  Notwithstanding anything stated to the contrary in this Article VI or elsewhere in the Agreement, any Transfer of equity interests or other interests in KBS, or in any of the direct or indirect owners of KBS (including, without limitation, KBS SOR II Acquisition VI, LLC, KBS SOR US Properties II, LLC, KBS Strategic Opportunity Limited Partnership II or KBS Strategic Opportunity REIT II, Inc.) shall not be prohibited (and shall be expressly permitted) provided that KBS Strategic Opportunity REIT II, Inc. continues to control and own, either directly or indirectly, at least fifty-one percent (51%) of the ownership interests in KBS.  All such transfers permitted pursuant to this Section 6.02(b) shall be at the sole cost and expense of KBS or a KBS Affiliate (defined below) and none of the Managing Member, JV Member or the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto.
(c)    KBS Transfers.  Notwithstanding anything stated to the contrary in this Article VI or elsewhere in this Agreement, KBS shall have the right to Transfer all of its Interest (a) to a KBS Affiliate (defined below) without JV Member’s approval, and (b) to another entity that is not a KBS Affiliate with JV Member’s approval, which approval may be withheld in JV Member’s reasonable discretion.  JV Member’s failure to respond to KBS’s request for the approval of a Transfer within five (5) business days following delivery of KBS’s written request for such consent shall be deemed to constitute JV Member’s consent.  A “KBS Affiliate” is any entity in which at least fifty-one percent (51%) of the ownership interests is owned, directly or indirectly, through one or more intermediaries, by KBS Strategic Opportunity REIT II, Inc.  All such transfers permitted pursuant to this Section 6.02(c) shall be at the sole cost and expense of KBS or a KBS Affiliate and none of the Managing Member, JV Member or the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto. Notwithstanding anything to the contrary contained herein, in the event KBS elects to transfer KBS’s Interest to an entity that is not a KBS Affiliate, JV Member may, during the Consent Period, require, as a condition of its consent to the transaction (which KBS hereby agrees is a condition precedent to the consummation of the transaction) that the third-party also purchase all of JV Member’s Interest on the same terms, including the same purchase price (adjusted for the different percentages of Interest) as those offered to KBS.
(d)    JV Member Transfers.  Notwithstanding anything stated to the contrary in this Article VI or elsewhere in the Agreement, any direct or indirect constituent owner of JV Member may transfer all or any portion of such constituent owner’s direct or indirect ownership interest in JV Member so long as at least one JV Member Principal continues to directly or indirectly have the power to direct management decisions of the JV Member and such JV Member Principal (or their respective heirs or estates) continue to own, directly or indirectly, at least twenty five percent (25%) of the ownership interests in JV Member.  All such transfers permitted pursuant to this Section 6.02(d) shall be at the sole cost and expense of JV Member and none of KBS, the Company nor any Subsidiary or Affiliate of the Company shall bear any cost with respect thereto.

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In the event of any Permitted Transfer, any such Permitted Transferee shall receive and hold such Interest, such ownership interest or portion thereof subject to the terms of this Agreement and to the obligations hereunder of the transferor and there shall be no further transfer of such Interest, such ownership interest or portion thereof except to a person or entity to whom such Permitted Transferee could have transferred such Interest, such ownership interest or portion thereof in accordance with this Section 6.02 had such Permitted Transferee originally been a Member or a constituent owner of a Member as of the date hereof or otherwise in accordance with the terms of this Agreement.  Notwithstanding any provision of this Agreement to the contrary, no Member and/or any direct or indirect constituent owner of any Member shall transfer all or any portion of such Member’s Interest or permit the transfer of any direct or indirect ownership interest in such Member if such transfer would be a default under the Loan or any Refinance.
6.03.    Admission of Substituted Members.  If any Member transfers such Member’s Interest to a transferee in accordance with Sections 6.01 or 6.02, then such transferee shall only be entitled to be admitted into the Company as a substituted Member if (i) the Members approve such admission in writing and this Agreement is amended to reflect such admission; (ii) the non-transferring Member approves the form and content of the instrument of transfer, such approval not to be unreasonably withheld; (iii) the transferor and transferee named therein execute and acknowledge such other instruments as the non-transferring Member may deem reasonably necessary to effectuate such admission; (iv) the transferee in writing accepts and adopts all of the terms and conditions of this Agreement, as the same may have been amended; (v) the transferor pays, as the non-transferring Member may reasonably determine, all reasonable expenses incurred in connection with such admission, including, without limitation, legal fees and costs; and (vi) to the extent required the lender under any Financing has consented to such transfer.  To the maximum extent permitted by applicable law, any transferee of an Interest who does not become a substituted Member shall have no right to require any information or account of the Company’s transactions, to inspect the Company books, or to vote on any of the matters as to which a Member would be entitled to vote under this Agreement.  Any such transferee shall only be entitled to share in such Net Profits and Net Losses, to receive such distributions, and to receive such allocations of income, gain, loss, deduction or credit or similar items to which the transferor was entitled, to the extent transferred.  A Member that transfers such Member’s Interest pursuant to Section 6.02 shall not cease to be a Member of the Company until the admission of the transferee as a substituted Member in accordance with this Agreement and, except as provided in the preceding sentence, shall continue to be entitled to exercise, and shall continue to be subject to, all of the other rights, duties and obligations of such Member under this Agreement.
6.04.    Election; Allocations Between Transferor and Transferee.  Upon the transfer of the Interest of any Member or the distribution of any property of the Company to a Member, the Company shall file, in the reasonable discretion of the Members, an election in accordance with applicable Treasury Regulations, to cause the basis of the Company property to be adjusted for federal income tax purposes as provided by Sections 734 and 743 of the Code.  Upon the transfer of all or any part of the Interest of a Member as hereinabove provided, Net Profits and Net Losses shall be allocated between the transferor and transferee on the basis of a computation method that is in conformity with the methods prescribed by Section 706 of the Code and Treasury Regulation Section 1.706-1(c)(2) and approved by the Members affected by the method.

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6.05.    Waiver of Withdrawal and Purchase Rights.  In accordance with the Act, each Member acknowledges and agrees that such Member may not voluntarily withdraw, resign or retire from the Company without the prior written consent of each other Member, which consent may be withheld in each such other Member’s sole and absolute discretion.  Each Member further acknowledges and agrees that such Member shall not be entitled to receive the fair market value of such Member’s Interest in the Company pursuant to the Act.
ARTICLE VII
MEMBER’S RIGHT TO CAUSE SALE OF THE PROPERTY OR INTERESTS
7.01.    KBS’s Right to Sell Property.
(a)    At any time after the second anniversary of the date the Project is completed and leasing has commenced (as such date is determined by Co-Managing Member, the “REIT Hold Completion Date”), Co-Managing Member (the “Offering Member”) shall have the continuing right (exercisable no more frequently than twice in any 24 month period) to elect to sell the Property; provided that prior to retaining a broker and/or soliciting offers from third parties the Offering Member shall provide written notice (a “Sale Notice”) to the JV Member (the “Purchasing Member”) of its intent to solicit offers for the Property.  For ten (10) business days following receipt of a Sale Notice, the Purchasing Member may elect to offer to buy the Offering Member’s Interest in the Company (a “Purchase Election”) in lieu of having the Property sold  by delivering written notice to Offering Member (the “Offer Notice”).  The Offer Notice shall set forth the proposed sales price for the Property (the “Proposed Project Value”) on which Purchasing Member’s offer is based. If a Purchase Election is timely made, the purchase price for the Offering Member’s Interest shall be the amount the Offering Member would receive if the Property were to be sold for the Proposed Property Value and the proceeds distributed upon a liquidation of the Company had the Property been sold for the Proposed Property Value as provided in this Agreement.  The Offering Member shall have thirty (30) days to decide whether to (1) accept the Purchasing Member’s Purchase Election, or (2) reject the Purchasing Member’s Purchase Election and proceed to market the Property for sale.  A failure by the Offering Member to accept the Purchasing Member’s Purchase Election shall be deemed to be a rejection of the Purchase Election under clause (2).
(b)    If the Offering Member elects to accept the Purchasing Member’s Purchase Election, the closing of the purchase and sale of the Offering Member’s Interest in the Company shall take place on a date agreed upon by the Members, which date may not be later than sixty (60) days following the date of the Purchase Election (the “Purchase Closing Date”).  Within five (5) days of Offering Member’s written acceptance of the Purchase Election, Purchasing Member must deliver (a) a non-refundable (but applicable to the purchase price) cash deposit (the “Member Deposit”) to an escrow agent appointed by the Purchasing Member equal to five percent (5%) of the Proposed Property Value, and (b) a draft sales agreement (“Member Purchase Agreement”) to be executed by the Offering Member and the Purchasing Member containing such terms to which such parties may agree that are consistent with the provisions of this Section 7.01 and that provides for the transfer of the Offering Member’s Interest in the Company to such Purchasing Member free and clear of all liens, encumbrances and similar claims.  The Offering Member and the Purchasing Member shall use their good faith diligent efforts to execute the Member Purchase Agreement within 

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thirty (30) days thereafter.  Notwithstanding anything stated to the contrary herein, if the Members are unable to agree upon the Member Purchase Agreement within sixty (60) days after the Purchase Election after good faith and diligent efforts to do so then each Member shall have the right to terminate the Purchase Election, and upon the return of the Member Deposit to the Purchasing Member, the Offering Member shall have the right to cause the Company to sell the Property pursuant to this Section 7.01.  In the event Purchasing Member fails to close the purchase of the Offering Member's Interests on or before the Purchase Closing Date (other than by reason of a default by the Offering Member) (a “Purchase Default Event”), the Offering Member shall have the right to terminate the Member Purchase Agreement and retain the Member Deposit as liquidated damages, and the Member Purchase Agreement shall so provide, and thereafter, the Offering Member shall have the right to cause the Company to sell the Property pursuant to this Section 7.01 subject to the restriction’s set forth in Sections 7.01(c).
(c)    If a Purchase Election is not timely made or Offering Member elects to reject the Purchase Election (the earlier of such dates, the “Trigger Date”), then the Co-Managing Member shall have the right to retain brokers on behalf of the Company and to advertise the Property for sale at a price no less than 95% of the Proposed Project Value; provided however, such sale must be consummated within two hundred forty (240) days of the Trigger Date or the Co-Managing Member must comply with the provisions of Section 7.01(a) again.  Co-Managing Member shall keep JV Member informed of the progress of the sale of the Property.  Managing Member shall cooperate with Co-Managing Member in connection with the sale of the Property and shall execute such documents (in its capacity as a Member in the Company, and/or as the Managing Member, as applicable) as may be reasonably required to effectuate the sale of the Property; provided that the Members shall not be exposed to any personal liability.  Member hereby irrevocably constitutes and appoints Co-Managing Member as its agent and attorney-in-fact, coupled with an interest, for the purpose of executing and delivering any documents required to be executed and delivered by Managing Member (in its capacity as a member in the Company and, so long as it is the Managing Member, as the Managing Member of the Company) pursuant to this Section 7.01 in the event Managing Member fails or refuses to execute the same upon the request of Co-Managing Member.  Notwithstanding the foregoing and provided that a Purchase Default Event has not occurred, if as a result of the Offering Member’s marketing efforts, the Offering Member receives a bona fide offer from a third party purchaser and desires to sell the Property in a sale that will result in a purchase price that is less than ninety-five percent (95%) of the Proposed Property Value, the Offering Member shall deliver a revised Sale Notice to the Purchasing Member, which shall set forth the new proposed sales price for the Property, and the Purchasing Member shall have twenty (20) business days following receipt of the revised Sale Notice to make a Purchase Election based on the new Proposed Property Value in the manner described in Section 7.01(a) above in lieu of having the Property sold.  If a Purchase Election with respect to the revised Sale Notice is not timely made, the Offering Member shall have the right to cause the Company and its Subsidiary to sell the Property pursuant to this Section 7.01(c).  If a Purchase Election is timely made with respect to the revised Sale Notice, the Members shall follow the procedures set forth in Section 7.01(a) above; provided, however, that references to Proposed Property Value shall instead refer to the Proposed Property Value set forth in the revised Sale Notice.  If a Purchase Election is timely made and a Purchase Default Event occurs, the Offering Member shall be entitled to retain the Member Deposit, and Offering Member 

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shall be thereafter be entitled to sell the Property pursuant to this Section 7.01 without further restriction.
7.02.    JV Member’s Right to Initiate Sale of Interests.
(a)    At any time after the later of (i) the fourth (4th) anniversary of the date of this Agreement, or (ii) the REIT Hold Completion Date, the JV Member (the “Initiating Member”) shall have the continuing right to deliver written notice to KBS (the “Non-Initiating Member”) of its desire to liquidate its investment in the Company (the “Call Notice”) by either purchasing KBS’s entire Interest in the Company or KBS acquiring JV Member’s Interest in accordance with the provisions of this Section 7.02.  Notwithstanding the foregoing, the JV Member shall not be permitted to send a Call Notice if KBS has previously sent a Sale Notice under Section 7.01 and the procedures of Section 7.01 remain in effect, including that KBS is authorized to sell the Property under Section 7.01 and the Company has retained a broker to advertise the sale of the Property.  Upon the delivery of a Call Notice, the Members shall be required to comply with the terms of Section 7.02(b).
(b)    The Call Notice shall make reference to this Section 7.02(b) and shall state (i) the purchase price that the Initiating Member would be willing to pay for the purchase of all of the Company’s assets (the “Purchase Price”), (ii) that the Initiating Member thereby offers to purchase the Non-Initiating Member’s Interest in the Company for the Call Purchase Price (as defined in Section 7.02(c)), and (iii) a specified date for such purchase, which such date shall be not less than sixty (60) days and not more than one hundred twenty (120) days after the delivery of the Call Notice.
(c)    In the event that the Initiating Member delivers the Call Notice as aforesaid, the Non-Initiating Member shall, by delivery of written notice (the “Call Response Notice”) to the Initiating Member within thirty (30) days following the receipt of the Call Notice (time being of the essence) choose either to:  (A) accept the Initiating Member’s offer to purchase the Non-Initiating Member’s interest in the Company for a sum equal to the amount that the Non-Initiating Member would be entitled to receive if the Company sold its assets at the Purchase Price, including the payment of all existing Company debts and liabilities and any prepayment penalties actually incurred (pursuant to the terms of any mortgage encumbering all or any portion of the assets without further negotiations with the holder of such mortgage) in connection with the exercise of the right contained in this Section 7.02 and distributed the net proceeds (i.e., net of reasonable and customary closing costs) to the Members in liquidation of the Company pursuant to Section 8.02 (the “Call Purchase Price”), on the date set forth in the Call Notice; or (B) purchase the Initiating Member’s Interest for the Initiating Member Call Purchase Price (as hereinafter defined), and on the date set forth in the Call Notice.  Failure to deliver the Call Response Notice within said thirty (30) day period shall be deemed to constitute an acceptance by the Non-Initiating Member of the Initiating Member’s offer to purchase the Non-Initiating Member’s Interest for the Call Purchase Price, on the date set forth in the Call Notice.  In the event the Non-Initiating Member shall choose to purchase the Initiating Member’s interest in the Company pursuant to the terms of this Section, the Initiating Member shall be obligated to sell its Interest to the Non-Initiating Member for the Initiating Member Call Purchase Price, on the date set forth in the Call Notice.  For purposes of this Section, the term 

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“Initiating Member Call Purchase Price” shall mean a sum equal to the amount that Initiating Member would be entitled to receive if the Company of the Company sold its assets at the Purchase Price, including the payment of all existing Company debts and liabilities and any prepayment penalties actually incurred (pursuant to the terms of any mortgage encumbering all or any portion of the assets without further negotiations with the holder of such mortgage) in connection with the exercise of the right contained in this Section 7.02 and distributed the net proceeds (i.e., net of reasonable and customary closing costs) to the Members in liquidation of the Company pursuant to Section 8.02.  Once the Buy/Sell Purchaser (as hereinafter defined) is determined, the Buy/Sell Purchaser shall post a deposit in escrow with First American Title Insurance Company or Fidelity National Title Insurance Company (“Buy/Sell Escrow Agent”) a deposit equal to five percent (5%) of the Call Purchase Price or the Initiating Member Call Purchase Price, as applicable (the “Deposit”).
(d)    The closing of the purchase and sale of the Interests of the Company of the Member selling its Interests in the Company pursuant to the terms of this Section (the “Buy/Sell Seller”) shall be held on or before the date provided in the Call Notice, at the office of the Company, or at such other location as the parties shall find mutually agreeable.  At the closing:  (A) the Buy/Sell Seller shall receive, by wire transfer of immediately available federal funds to an account designated by the Buy/Sell Seller, an amount equal to the Call Purchase Price or the Initiating Member Call Purchase Price, as the case may be; (B) the Buy/Sell Seller shall deliver to the Member purchasing the Seller’s Interest (the “Buy/Sell Purchaser”) a duly executed and acknowledged instrument assigning to the Buy/Sell Purchaser the Buy/Sell Seller’s Interest, which assignment shall be accompanied by such other documents and instruments, including, without limitation, corporate resolutions, as may be reasonably requested by the Buy/Sell Purchaser and the Company in the exercise of their reasonable judgment or any other documents requested by any title company; (C) Buy/Sell Purchaser shall deliver to the Buy/Sell Seller a duly executed and acknowledged instrument assuming the Buy/Sell Seller’s Interest and releasing Buy/Sell Seller from all claims pertaining to the Interests or the Company other than claims for breach of the representations and warranties of Buy/Sell Seller described in the following sentence or a breach of any of the assignment documents executed by Buy/Sell Seller and delivered to Buy/Sell Purchaser in connection with the transfer contemplated in this Section; (D) on the effective date of such assignment, the Company shall deliver a release to the Buy/Sell Seller releasing the Buy/Sell Seller from all liabilities and obligations of the Company arising from and after the date of such assignment; and (E) the Company shall use good faith commercially reasonable efforts to cause the Buy/Sell Seller or its Affiliates to be released from any liabilities under any guaranties for the benefit of the Company executed by the Buy/Sell Seller or its Affiliates, and if the beneficiaries of any such guaranty will not agree to such a release, the Buy/Sell Purchaser (or if reasonably required by Buy/Sell Seller, a creditworthy Affiliate of Buy/Sell Purchaser) shall indemnify and hold harmless the Buy/Sell Seller or its Affiliates who are guarantors of such liabilities in a form reasonably acceptable to Buy/Sell Seller.  Such assignment shall be free and clear of all liens and encumbrances, and the Buy/Sell Seller shall deliver a written representation and warranty to such effect at the closing, which representation and warranty shall survive for a period of six (6) months following the closing.  Each Member shall pay its legal fees in connection with the conveyance of the Interest pursuant to this Section, and all other costs and expenses (including, without limitation, transfer taxes) shall be shared by the Members in accordance with their Interests.  In the event that the Buy/Sell Purchaser defaults in its 

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obligation to purchase the Buy/Sell Seller’s Interests pursuant to this Section 7.02, the Deposit shall be forfeited by the Buy/Sell Purchaser.  In the event that the Buy/Sell Seller defaults in its obligation to sell the Buy/Sell Seller’s Interests pursuant to this Section 7.02, the Buy/Sell Purchaser may elect either to avail itself of the remedy of specific performance or direct Buy/Sell Escrow Agent to return the Deposit to it.
ARTICLE VIII
DISSOLUTION AND WINDING UP OF THE COMPANY
8.01.    Events Causing Dissolution of the Company.  Upon any Member’s bankruptcy, retirement, resignation, expulsion or other cessation to serve or the admission of any new member into the Company, the Company shall not dissolve, but the business of the Company shall continue without interruption and without any break in continuity.  The Company shall be dissolved and its affairs wound up upon the first to occur of:  (i) the sale, transfer or other disposition by the Company of all or substantially all of its assets and the collection by the Company of any and all Net Cash derived therefrom; (ii) the agreement of the Members to dissolve the Company; or (iii) the entry of a decree of judicial dissolution pursuant to the Act.
8.02.    Winding Up of the Company.  Upon the Liquidation of the Company caused by other than the termination of the Company under Code Section 708(b)(1)(B) (in which latter case the Company shall remain in existence in accordance with the provisions of such Section of the Code), the Managing Member shall proceed to the winding up of the affairs of the Company.  During such winding up process, the Net Profits, Net Losses and Net Cash distributions shall continue to be shared by the Members in accordance with this Agreement.  The assets shall be liquidated as promptly as consistent with obtaining a fair value therefor, and the proceeds therefrom, to the extent available, shall be applied and distributed by the Company on or before the end of the taxable year of such Liquidation or, if later, within ninety (90) days after such Liquidation, in the following order:  (i) first, to creditors of the Company (including Members who are creditors in the order of priority as provided by law including, without limitation, any Members that have made Member Loans); (ii) second, to the setting up of any reserves which Co-Managing Member determines, in its reasonable discretion, are necessary for any contingent, conditional or unmatured liabilities or obligations of the Company (which shall be distributed at such time as is determined in the reasonable discretion of Co-Managing Member); and (iii) the balance, if any, to the Members in accordance with the distribution schedule of Section 5.01 or Section 5.02, as then applicable at the time of such Liquidation.  Such distribution shall be made by the date specified in Treasury Regulation Section 1.704-1(b)(2)(ii)(b)(2).  As used in this Agreement, the term “Liquidation” means (i) in respect to the Company the earlier of the date upon which the Company is terminated under Code Section 708(b)(1)(A) or the date upon which the Company ceases to be a going concern (even though it may continue in existence for the purpose of winding up its affairs, paying its debts and distributing any remaining balance to its Members), and (ii) in respect to a Member wherein the Company is not in Liquidation, means the liquidation of a Member’s interest in the Company under Treasury Regulation Section 1.761-1(d).
8.03.    Negative Capital Account Restoration.  No Member shall have any obligation whatsoever upon the Liquidation of such Member’s Interest, the Liquidation of the Company or in 

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any other event, to contribute all or any portion of any negative balance standing in such Member’s Capital Account to the Company, to each other Member or to any other person or entity.
ARTICLE IX
BOOKS AND RECORDS
9.01.    Books of Account and Bank Accounts.  The fiscal year and taxable year of the Company shall be the year ending December 31.  Managing Member shall keep accurate records of all transactions entered into with respect to the Company and shall  maintain full and accurate  books and records of the Company on an accrual basis in accordance with generally accepted accounting principles, consistently applied with respect to the management and operation of the Company, which books and accounts shall accurately reflect all income and expenses of the Company, all payments on any indebtedness secured by the assets of the Company, all payments on other Company indebtedness and all capital expenditures with respect to the Company.  Manager Member shall provide by the fifteenth (15th) day of each succeeding calendar month (i)operating reports and financial statements to the Members not less frequently than once each month summarizing the operating activities of the Company during the immediately preceding calendar month and on a year-to-date basis, any material deviations from the Business Plan or the Annual Budget during such preceding calendar month, (ii) an unaudited balance sheet of the Company dated as of the end of such calendar month, (iii) an unaudited related income statement of the Company for such calendar month, (iv) an unaudited detailed job cost report of the Project for such calendar month and latest supporting general contractor invoice,  (v)  an unaudited trial balance of the Company, (vi) bank reconciliations for all bank accounts of the Company including bank statement and support for reconciling items, (vii) an unaudited statement of each Member’s Capital Account showing the detail of each Member’s contributions and distributions for such calendar month, and (viii) an unaudited statement of cash flow of the Company for such calendar month. and (ix) such other information as is reasonably requested by any Member.  During normal business hours at the Property, on not less than three (3) business days prior notice, all of the following shall be made available for inspection and copying by all of the Members at their own expense for any purpose reasonably related to each such Member’s Interest in the Company:  (i) all books and records relating to the business and financial condition of the Company, (ii) a current list of the name and last known business, residence or mailing address of each Member, (iii) a copy of this Agreement, the Certificate of Formation and all amendments thereto, together with executed copies of any written powers-of-attorney pursuant to which this Agreement, the Certificate of Formation and all amendments thereto have been executed, (iv) the amount of cash and a description and statement of the agreed value of any other property or services contributed by each Member to the capital of the Company and which each Member has agreed to contribute in the future, and (v) the date upon which each Member became a Member of the Company.
9.02.    Audits.  KBS is indirectly owned by a non-traded public REIT.  As such, KBS is obligated to make disclosures to the Securities and Exchange Commission and to maintain its books and records and establish certain controls and test such controls for its investments.  KBS shall have the right to conduct audits of the books and records and operations of the Company and its Subsidiaries from time to time, which may be on a regular basis or on a periodic basis as the KBS determines may be necessary.  Such audits may be performed by KBS personnel and its outside auditors, which is currently Ernst & Young.  The costs of such audits incurred by KBS shall be 

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borne by KBS.  Managing Member shall cooperate with each such audit and shall cause Property Manager to cooperate with such audit, which cooperation shall include, without limitation, making the materials and information requested available to KBS and the necessary personnel available to KBS to answer questions and inquiries and to provide any follow-up information or materials in response to such questions or inquiries.
(a)    Sarbanes-Oxley Compliance.  Managing Member shall provide Co-Managing Member’s internal audit team (A) reasonable access to Managing Member’s personnel and books and records to facilitate the completion of the Co-Managing Member’s annual Sarbanes-Oxley Compliance Plan, (B) copies reasonably requested by Co-Managing Member of current internal control documentation, (C) availability to discuss, review and provide comments on process flow diagrams, narratives, walkthroughs and testing of controls to ensure that those documents accurately reflect Managing Member’s processes in connection with its obligation to Co-Managing Member, (D) timely response to internal control recommendations and observations, reasonably agree to remedial action plans (if any), and timely implement those plans in order to ensure compliance with Co-Managing Member’s annual Sarbanes-Oxley Compliance Plan, and (E) copies of SOC I Type II and bridge letters for key applications used to record business and accounting transactions. To the extent the Property Manager or a sub-property manager is performing any of these functions on behalf of the Company, Co-Managing Member’s internal audit team shall have reasonable access to the personnel and books and recorded of such entity(ies) and the right to have the discussions with and receive responses and copies from such entity(ies) described in clause (A) through (E), and Managing Member shall cooperate with such matters.
(b)    SOC 1 Report.  If Managing Member preforms accounting services, Managing Member will deliver to Co-Managing Member, at Managing Member’s sole cost and expense, Managing Member’s Service Organization Control 1 Type 2 report (the “SOC 1 Type 2 Report”) prepared by a qualified independent audit firm with respect to the Statement on Standards for Attestation Engagements 16, Reporting on Controls at a Service Organization (“SSAE 16”) as promulgated by the Auditing Standard Board of the American Institute of Certified Public Accountants, as same may be amended, from time to time.  The SOC 1 Type 2 Report must be issued by December 1st of each calendar year and cover the entire preceding Fiscal Year. Additionally, Manager must deliver a "Bridge Letter" to Co-Managing Member stating that the Managing Member’s control environment relevant to SSAE 16 has not changed since the end of the effective date of the audited SOC 1 Type 2 Report (or equivalent report) and must cover through Managing Member’s fiscal year end.  Notwithstanding the foregoing, Managing Member may delegate any or all of these functions and obligations to the Property Manager or a sub-property manager so long as Managing Member shall cause such reports and deliveries to be delivered to Co-Managing Member by the Property Manager or sub-property manager under the applicable agreement.
9.03.    Tax Returns.  Managing Member shall cause to be prepared and timely filed and distributed to each Member, at the expense of the Company (and prepared by an accounting firm approved pursuant to Section 2.02(bb) above), all required federal and state Company tax returns, which shall be delivered to the Members by no later than March 31 each year; provided however, in the event that it is not possible for Managing Member to have such materials by said date using best efforts to meet the deadline, Managing Member shall: (i) notify the other Members by March 

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15 that such materials will not be available, (ii) deliver estimated drafts of such information to the other Members by March 31, and (iii) deliver all such information to the other Members by June 30 of said year. Managing Member shall not file any tax return on behalf of the Company without the prior written approval of KBS; provided that if the Co-Managing Member shall not respond to a written request to approve a tax return within fifteen (15) days the Co-Managing Member shall be deemed to have disapproved such tax return. 
9.04.    Tax Matters.
(a)    Tax Matters Partner.  JV Member is designated as the initial “Tax Matters Partner” of the Company as provided in Section 6231(a)(7) of the Code and corresponding provisions of applicable state law.  This designation is effective only for the purpose of activities performed pursuant to the Code, corresponding provisions of applicable state law, the applicable laws of any non-U.S. jurisdiction (and political subdivisions thereof), and under this Agreement.  The Tax Matters Partner shall inform the Members before making any material decision or taking any material action.  In addition, the Tax Matters Partner shall (a) provide the Internal Revenue Service with the information required to provide the notices contemplated in Section 6223(a) of the Code, and (b) keep the Members informed of all material information pertaining to all administrative and judicial proceedings involving taxes and provide timely notice of all administrative adjustments with respect thereto.  The Tax Matters Partner shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred in its capacity as Tax Matters Partner.  KBS may replace the Tax Matters Partner with any entity appointed by KBS, including itself or a KBS Affiliate, at any time after the occurrence of a Removal Event.
(b)    Partnership Representative. JV Member is designated as the “partnership representative” of the Company under section 6223 of the Code (as modified by the Bipartisan Budget Act of 2015, as amended (and any comparable provisions of state or local tax law) (the “BB Act”)) (the “Partnership Representative”); provided, however, the Partnership Representative shall consult with KBS and obtain KBS’s consent (not to be unreasonably withheld, conditioned or delayed) before taking any binding action with respect to this clause (b) or otherwise with respect to any tax matters that either (A) could reasonably be expected to adversely impact KBS or its direct or indirect owners or (B) is material and made pursuant to tax audit provisions of the BB Act (other than an election to apply sections 6226 of the Code to the Company). Furthermore, to the maximum extent permitted by applicable law, the Partnership Representative shall have the same obligations, be subject to the same restrictions and limitations, and granted the rights and protections in each case, as imposed on or granted to the Tax Matters Partner pursuant to this Section 9.04.  In addition, unless the KBS provides otherwise, the Partnership Representative shall make an election on behalf of the Company to treat a “Partnership Adjustment” as an adjustment to be taken into account by each Member in accordance with Section 6226(b) of the Code as modified by the BB Act.  KBS may replace the Partnership Representative with any entity appointed by KBS, including KBS itself or a KBS Affiliate, at any time after the occurrence of a Removal Event.
(c)    In the event the Company incurs any liability for taxes, interest or penalties pursuant to the BB Act (provided, however, that the Partnership Representative shall elect to cause any income adjustment to occur at the member level rather than at the Partnership level): (A) each Member (including any former Member, it being understood that this Section 9.04(c) shall survive 

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the transfer by any Member of its Interest) shall pay the amount attributable to such Member (or former Member) as determined in good faith by KBS, and such payment shall not be treated as a capital contribution hereunder for any purpose; (B) any amount not paid within five (5) days following request from the Partnership Representative shall accrue interest at the rate of ten percent (10%) per annum, compounded quarterly, until paid, and such Member (or former Member) shall also be liable to the Company for any damages resulting from a delay in making such payment beyond the date such payment is requested by the Partnership Representative (for this purpose the fact that the Company could have paid this amount with other funds shall not be taken into account in determining such damages); (C) without reduction in a Member’s (or former Member’s) obligation under clauses (A) or (B) of this Section 9.04(c), any amount paid by the Company that is attributable to a Member (or former Member),  and that is not paid by such Member pursuant to clauses (A) or (B) of this Section 9.04(c), shall be treated for purposes of Article V as a distribution to such Member (or former Member) (including for purposes of maintaining Capital Accounts), and the Company may deduct from, and set off against, any distribution or other amount otherwise due or payable to a Member (or former Member) by the Company pursuant to this Agreement or otherwise, the payment obligations of such Member (or former Member) under clauses (A) or (B) of this Section 9.04(c).
ARTICLE X
MISCELLANEOUS
10.01.    Notices.  All notices or other communications required or permitted hereunder shall be in writing, and shall be delivered or sent, as the case may be, by any of the following methods:  (i) personal delivery, (ii) overnight commercial carrier, (iii) registered or certified mail, postage prepaid, return receipt requested, or (iv) telecopy or facsimile.  Any such notice or other communication shall be deemed received and effective upon the date of acceptance or rejection of delivery.  Any notice or other communication sent by cable, telex, or telecopy must be confirmed within 48 hours by letter mailed or delivered in accordance with the foregoing.  Any reference herein to the date of receipt, delivery, or giving, or effective date, as the case may be, of any notice or communication shall refer to the date such communication becomes effective under the terms of this Section 10.01.  Any such notice or other communication so delivered shall be addressed to the party to be served at the address for such party set forth on Exhibit A attached hereto, with a copy (which shall not constitute notice) in the case of the JV Member to Jordan Metzger, Esq, at Cole Schotz PC.  Such addresses may be changed by giving written notice to the other parties in the manner set forth in this Section 10.01.  Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to constitute receipt of notice or other communication sent.
10.02.    Construction of Agreement.  This Agreement contains the entire understanding between the parties hereto and supersedes any prior or contemporaneous understanding, correspondence, negotiations or agreements between them respecting the within subject matter.  No alteration, modification or interpretation hereof shall be binding unless in writing signed by all of the Members (and the KBS Credit Party and the JV Member Credit Party, as applicable, if such modification would affect such credit party’s obligations under the Agreement).  The Article and Section headings of this Agreement are used herein for reference purposes only and shall not govern, limit, or be used in construing this Agreement or any provision hereof.  Any Exhibit attached hereto 

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is incorporated herein by this reference and expressly made a part of this Agreement for all purposes.  Time is of the essence of this Agreement.  The provisions of this Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, and all rights, duties, obligations and remedies shall be governed by the Act without regard to principles of conflict of laws.  If any legal action is brought by any Member against any other Member that arises out of this Agreement, then the prevailing Member in such legal action shall be entitled to recover reasonable attorneys’ fees and costs.  Subject to the restrictions set forth in Articles VI and VII, and Section 10.04, this Agreement shall inure to the benefit of and shall bind the parties hereto and their respective personal representatives, successors, and assigns.  Any agreement to pay any amount and any assumption of liability herein contained, express or implied, shall be only for the benefit of the Members and their respective successors and assigns, and such agreements and assumptions shall not inure to the benefit of the obligees of any indebtedness or any other party, whomsoever, deemed to be a third-party beneficiary of this Agreement.  Each of the Exhibits attached hereto is incorporated herein by this reference and expressly made a part of this Agreement for all purposes.  References to any Exhibit made in this Agreement shall be deemed to include this reference and incorporation.  This Agreement may be executed in multiple counterparts, each of which shall be deemed an original Agreement, but all of which shall constitute a single Agreement, binding on the parties hereto.  Where the context so requires, the use of the neuter gender shall include the masculine and feminine genders, the masculine gender shall include the feminine and neuter genders, and the singular number shall include the plural and vice versa.  The signature of any party hereto to any counterpart hereof shall be deemed a signature to, and may be appended to, any other counterpart.  Every provision of this Agreement is intended to be severable.  Each Member acknowledges that (i) each Member is of equal bargaining strength and (ii) each Member has actively participated in the drafting, preparation and negotiation of this Agreement.  The Recitals set forth at the beginning of this Agreement are a material part of this Agreement and are incorporated into this Agreement.
10.03.    Partnership Intended Solely for Tax Purposes.  The Members have formed the Company as a Delaware limited liability company under the Act, and do not intend to form a corporation or a general or limited partnership under Delaware  or any other state law.  The Members do not intend to be shareholders and/or partners to one another or to any third party.  The Members intend the Company to be classified and treated as a partnership solely for federal and state income taxation purposes.  Each Member agrees to act consistently with the foregoing provisions of this Section 10.03 for all purposes, including, without limitation, for purposes of reporting the transactions contemplated herein to the Internal Revenue Service and all state and local taxing authorities.
10.04.    Investment Representations.  Each Member agrees as follows with respect to investment representations:
(a)    Each Member understands:
(i)    That the Interests in the Company evidenced by this Agreement have not been registered under the Securities Act of 1933, 15 U.S.C. § 15b et seq., or any state securities laws (collectively, the “Securities Acts”) because the Company is issuing Interests in the Company in reliance upon the exemptions from the registration requirements of the Securities Acts providing for issuance of securities not involving a public offering;

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(ii)    That the Company has relied upon the representation made by each Member that such Member’s Interest in the Company is to be held by such Member for investment; and
(iii)    That exemption from registration under the Securities Acts would not be available if any Interest in the Company was acquired by a Member with a view to distribution.  Each Member agrees that the Company is under no obligation to register the Interests in the Company or to assist the Members in complying with any exemption from registration under the Securities Acts if the Member should at a later date wish to dispose of such Member’s Interest in the Company.
(b)    Each Member hereby represents to the Company that such Member is acquiring such Member’s Interest in the Company for such Member’s own account, for investment and not with a view to the resale or distribution of such Interest (except for any transfers made in accordance with the provisions of Article VI).
(c)    Each Member recognizes that no public market exists with respect to the Interests and no representation has been made that such a public market will exist at a future date.
(d)    Each Member hereby represents that such Member has not received any advertisement or general solicitation with respect to the sale of the Interests.
(e)    Each Member acknowledges that such Member has a preexisting personal or business relationship with the Company or its officers or principal Interest holders, or, by reason of such Member’s business or financial experience or the business or financial experience of such Member’s financial advisors (who are not affiliated with the Company), could be reasonably assumed to have the capacity to protect such Member’s own interest in connection with the purchase of such Member’s Interest.  Each Member further acknowledges that such Member is familiar with the financial condition and prospects of the Company’s business, and has discussed with each other Member the current activities of the Company.  Each Member believes that the Interests are securities of the kind such Member wishes to purchase and hold for investment, and that the nature and amount of the Interests to be acquired by such Member is consistent with such Member’s investment program.
(f)    Before acquiring any Interest in the Company, each Member has investigated the Company and its business and the Company has made available to each Member all information necessary for the Member to make an informed decision to acquire an Interest in the Company.  Each Member considers itself to be a person possessing experience and sophistication as an investor adequate for the evaluation of the merits and risks of the Member’s investment in the Company.
(g)    Each Member understands the meaning and consequences of the representations, warranties and covenants made by such Member set forth herein and that the Company has relied upon such representations, warranties and covenants.  Each Member hereby indemnifies, defends, protects and holds wholly free and harmless the Company and each other Member from and against any and all losses, damages, expenses or liabilities arising out of the breach and/or inaccuracy of any such representation, warranty and/or covenant.  All representations, warranties and covenants contained herein and the indemnification contained in this Section 10.04

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(g) shall survive the execution of this Agreement, the formation of the Company, and the liquidation of the Company.
10.05.    Waiver of Conflict of Interest.  The Company is not represented by separate counsel; provided, however, in connection with the formation of the Company and the drafting and negotiation of this Agreement, JV Member and the Company (and not KBS) have been represented by Cole Schotz PC, Attention, Jordan Metzger, and KBS (and not JV Member or the Company) has been represented by Sheppard Mullin Richter & Hampton, LLP, Attention, Scott Morehouse.  To the extent that the foregoing representation constitutes a conflict of interest, the Company and each Member hereby expressly waive any such conflict of interest.  Upon creation of the Company, the Company shall only be represented by counsel in accordance with Section 2.02 above.
10.06.    Section 1031 Exchange.  Subject to the provisions of this Section 10.06, each Member agrees to take any and all actions reasonably necessary to accommodate each other Member in effectuating a like-kind exchange pursuant to Section 1031 of the Code prior to the negotiation of or in connection with any proposed sale of all or any portion of the Property and any purchase and sale of a Member’s Interest pursuant to Article VII or otherwise including, without limitation, allowing any Member to cause the Company to make an in-kind distribution of a portion of the Property to such Member (and/or any Affiliate thereof).  In furtherance of the foregoing, each Member hereby agrees to execute any and all deeds, documents and/or other instruments that may be required to distribute and vest an undivided interest in the Property in such Member and/or otherwise necessary to effect such Code Section 1031 exchange, provided that (i) the distribution and exchange of such portion of the Property does not reduce the cash proceeds that otherwise would be distributed to any non-exchanging Member from the sale of the Property; (ii) the distribution and exchange does not materially delay or otherwise adversely affect the closing of any such sale of the Property; (iii) the exchanging Member pays any and all additional costs, fees, and/or expenses, including, without limitation, attorneys’ fees and costs incurred as a result of the proposed distribution and exchange; and (iv) there is no additional loss, cost or damage incurred (or which may be incurred) by the Company or any non-exchanging Member as a direct consequence of the distribution and exchange.  In addition, nothing contained herein shall obligate any Member to offer to any other Member any interest in any particular Code Section 1031 exchange structured by the exchanging Member.
10.07.    Outside Activities.  Any Member may engage in business efforts and affairs which are not related to the Company, and will not be precluded from owning and operating other businesses and/or real estate projects and neither the Company nor the other Members shall have any interest in such business or real estate projects. No Member shall have any obligations (fiduciary or otherwise) with respect to the Company or the other Members insofar as making other investment opportunities available to the Company or to the other Members.  Except as provided above, the Members may, notwithstanding the existence of this Agreement, engage in whatever activities they may choose, whether the same are competitive with the Company or otherwise, without having or incurring any obligation to offer any interest in such activities to the Company or to the other Members.  Neither this Agreement nor any activities undertaken pursuant hereto shall prevent a Member from engaging in such activities.

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10.08.    Tax Consequences.  Each Member acknowledges and agrees that it has relied fully upon the advice of its own legal counsel and/or accountant in determining the tax consequences of this Agreement and the transactions contemplated hereby and not upon the representations or advice by any other Member.
ARTICLE XI
REIT PROTECTION
11.01.    Certain Definitions.  For the purposes of this Article XI, the following terms shall have the following meanings:
(a)    “KBS” shall mean KBS as defined in the recitals hereto and KBS Strategic Opportunity REIT, Inc., a Maryland corporation that has elected to be taxable for federal income tax purposes as a real estate investment trust under the Code (herein, a “REIT”); and/or any subsidiary or affiliate of KBS.
(b)    “REIT Prohibited Transactions” shall mean any action specified in Section 11.02.
11.02.    Prohibited Transactions.  Unless expressly defined herein, all capitalized terms used herein shall have the meaning ascribed to such terms in this Agreement.  Notwithstanding anything to the contrary contained in this Agreement, during the time KBS is a Member of the Company, neither the Company nor any Subsidiary nor the Managing Member nor any other Member of the Company, shall take any of the following actions:
(a)    Entering into any lease or permitting any sublease that provides for rent based in whole or in part on the income or profits of any person, excluding for this purpose a lease that provides for rent based in whole or in part on a fixed percentage or percentages of gross receipts or gross sales of any person without reduction for any sublessor costs;
(b)    Leasing personal property, excluding for this purpose a lease of personal property that is entered into in connection with a lease of real property where the rent attributable to the personal property is less than 15% of the total rent provided for under the lease, determined as set forth in Section 856(d)(1) of the Code;
(c)    Acquiring or holding debt (other than Member Loans and Default Loans) unless (a) the amount of interest income received or accrued by the Company under such loan does not, directly or indirectly, depend in whole or in part on the income or profits of any person, and (b) the debt is fully secured by mortgages on real property or on interests in real property;
(d)    Acquiring or holding more than 10% of the outstanding voting securities of any one issuer other than a corporation that has properly elected to be a “taxable REIT subsidiary” of KBS;
(e)    Acquiring or holding more than 10% of the total value of the outstanding securities (debt or equity) of any one issuer other than a corporation that has properly elected to be a “taxable REIT subsidiary” of the REIT;

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(f)    Making an election or taking any action that would cause the Company to be treated as (i) an entity that is not classified as a partnership for federal income tax purposes or (ii) a publicly traded partnership as defined in Section 7704 of the Code;
(g)    Entering into any agreement where the Company receives amounts, directly or indirectly, for rendering services to the tenants of the properties that are owned, directly or indirectly, by the Company other than (i) amounts received for services that are customarily furnished or rendered in connection with the rental of real property of a similar class in the geographic areas in which the properties are located where such services are either provided by (a) an Independent Contractor (as defined in Section 856(d)(3) of the Code) who is adequately compensated for such services and from which the Company does not, directly or indirectly, derive revenue or (b) a taxable REIT subsidiary of KBS (as defined in Section 856(l) of the Code) who is adequately compensated for such services or (ii) amounts received for services that are customarily furnished or rendered in connection with the rental of space for occupancy only (as opposed to being rendered primarily for the convenience of the Company’s Subsidiary’s tenants);
(h)    Holding cash of the Company or any Subsidiary for operations or distribution in any manner other than a traditional bank checking or savings account, or money market account; or
(i)    Entering into any agreement where income or gain, as applicable, received or accrued by the Company under such agreement, directly or indirectly, (a) does not qualify as “rents from real property” within the meaning of Section 856 of the Code, (b) does not qualify as “interest on obligations secured by mortgages on real property or on interests in real property” within the meaning of Section 856 of the Code or (c) constitutes income from a sale of “inventory” or “stock in trade” or property held “primarily for sale to customers” in the ordinary course of trade or business of the Company within the meaning of Section 1221(a)(1) of the Code other than a sale that would qualify under the Section 857(b)(6)(C) “safe harbor” with respect to KBS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the day and year first above written.
“JV MEMBER”
ONYX 31ST STREET, LLC, 
a Delaware limited liability company

By:     /s/ John Saraceno        
Name:    John Saraceno                
Title:      Managing Principal        
Solely as to express its agreement in Sections 3.01 and 3.07:
“JV MEMBER CREDIT PARTY” 
ONYX EQUITIES, LLC 
a New Jersey limited liability company
By:     /s/ John Saraceno         
Name:     John Saraceno             
Title:       Managing Principal        

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“KBS”
KBS SOR II 210 WEST 31ST STREET JV, LLC, 
a Delaware limited liability company
By:    KBS SOR II ACQUISITION VI, LLC, 
a Delaware limited liability company,
its sole member
By:      KBS SOR US PROPERTIES II, LLC, 
a Delaware limited liability company, 
its sole member
By:    KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II, 
a Delaware limited partnership, 
its sole member
By:     KBS STRATEGIC OPPORTUNITY REIT II, INC., 
a Maryland corporation, 
        its sole general partner
By:    /s/ Jeffrey K. Waldvogel        
Jeffrey K. Waldvogel 
Chief Financial Officer

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Solely as to express its agreement in Sections 2.06(f), 3.01 and 3.07
“KBS CREDIT PARTY”
KBS SOR US PROPERTIES II, LLC, 
a Delaware limited liability company
By:     KBS STRATEGIC OPPORTUNITY LIMITED PARTNERSHIP II, 
a Delaware limited partnership, 
its sole member

By:     KBS STRATEGIC OPPORTUNITY REIT II, INC., 
a Maryland corporation, 
its sole general partner

By:    /s/ Jeffrey K. Waldvogel         
        Jeffrey K. Waldvogel 
        Chief Financial Officer

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EXHIBITS:

	
		
	Exhibit A
	NAMES AND ADDRESSES AND PERCENTAGE INTERESTS OF THE MEMBERS

	Exhibit B
	ORGANIZATIONAL CHART OF THE COMPANY

	Exhibit C
	PRELIMINARY DEVELOPMENT PLAN

	Exhibit C-1
	LIST OF PRELIMINARY CONSTRUCTION PLANS

	Exhibit C-2
	PRELIMINARY DEVELOPMENT BUDGET

	Exhibit D
	FORM OF PROPERTY MANAGEMENT AGREEMENT

	Exhibit E
	SCHEDULE OF SOURCES AND USES OF FUNDS

	 
	 

SMRH:479330698.9

EXHIBIT A
NAMES, ADDRESSES, CAPITAL CONTRIBUTIONS AND PERCENTAGE INTERESTS OF THE MEMBERS
	
			
	Names and Addresses of the Members:
	Percentage Interest  
	Projected Initial Capital Account at Closing*

	KBS SOR II 210 West 31st Street JV, LLC 
620 Newport Center Drive, Suite 1300 
Newport Beach, CA 92660
	80%
	$38,400,000.00**

	ONYX 31ST Street, LLC 
c/o Onyx Equities, LLC
 900 Route 9 North, Suite 400
Woodbridge, New Jersey 07095

	20%
	$10,200,000.00***

*The amounts of the Member’s respective Capital Accounts set forth in this Exhibit A lists the Capital Accounts of the Members that will result after the funding of their capital contributions set forth in Section 3.01(a)(i) and (iii) as to the JV Member, and Section 3.01(b)(i) and (iii) as to KBS; provided, however, that amount amounts do not reflect the additional amounts that may be payable under Section 3.01(a)(ii) and Section 3.01(b)(ii) to cover any additional deposits made under the Purchase Agreement, transaction costs that are not sufficiently known as of the Effective Date, Adjustments at the Property  Closing, and costs to capitalize the Company pursuant to the sources and uses in Exhibit E attached hereto.
** This amount equals the Purchase Price under the Purchase Agreement (for 80% of the Ground Lease).  This amount will be adjusted as noted above to an actual 80%/20% allocation to reflect the Member’s Percentage Interests as a result of the Financing as described in Section 3.01 and Section 5.01(d) above.
*** This amount equals the $9,600,000 value attributed to the 20% Ground Lease Interest plus the $600,000 in cash to be paid pursuant to Section 3.01(a)(i).  This amount will be adjusted as noted above to an 80%/20% allocation to reflect the Member’s Percentage Interests as a result of the Financing as described in Section 3.01 and Section 5.01(d) above.

    

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EXHIBIT B
ORGANIZATIONAL CHART
(Attached)

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EXHIBIT C
PRELIMINARY DEVELOPMENT PLAN
See Attached:

SMRH:479330698.9    C-1

Preliminary Development Plan 

The proposed project is to redevelop the building located at 210 West 31st Street, New York, NY (“Property”). The Property is currently a 3-story building with a basement located on the south side of West 31st Street.  It previously served as a Friary and Sacristy for the priests of the Capuchin Order. 

The business plan to redevelop the Property includes: (1) finalizing the permitting and ultimately demolishing the existing 3-story building (2) erecting a new 2-story retail building with a cellar and rooftop deck, and (3) leasing the new building to a single or multiple retail tenants who will provide traditional retail and/or food and beverage services. 

The implementation of the plan is comprised of four major steps. The first is completing construction drawings (“CD’s”). The second step is finalizing the permitting of the asbestos abatement, demolition, and construction of the proposed redeveloped building. The third stage is to construct the physical building.  The Venture will begin marketing the building for lease at the day of Closing and will either prelease the Property if leasing options are attractive or wait to lease space midway through construction.  

The projected timeline from closing on the transaction to the last tenant taking occupancy at the Property is projected to be approximately three years (see timeline).  

SMRH:479330698.9    C-1

SMRH:479330698.9    C-1

EXHIBIT C-1
LIST OF PRELIMINARY CONSTRUCTION PLANS

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EXHIBIT C-2
PRELIMINARY DEVELOPMENT BUDGET

C-2-1
40000/0153-13662267v3
October 10, 2016
Error! Unknown document property name.

C-2-1
40000/0153-13662267v3
October 10, 2016
Error! Unknown document property name.

EXHIBIT D
FORM OF MANAGEMENT AGREEMENT 
PROPERTY MANAGEMENT   AGREEMENT
    
This Agreement is made as of __________________ (the “Effective Date”) between 210 WEST 31st STREET OWNER, LLC, a Delaware limited liability company ("Owner"), and ONYX MANAGEMENT GROUP, LLC, a New Jersey limited liability company ("Manager"), with reference to the following facts:

A.    Owner is the owner of certain the land and improvements commonly known as 210 West 31st Street, New York, New York (collectively, the "Premises").

B.     Manager represents that it is in the business of managing properties similar to the Premises and possesses the skills and experience necessary for the efficient first class management of the Premises
Now, Therefore, Owner and Manager agree as follows:

ARTICLE I
BASIC TERMS

1.1Appointment.  Manager's appointment under Article III shall become effective as of the Effective Date.
1.2Term.  The initial term of this Agreement (the "Initial Term") commences on the Effective Date and continues through and until the day immediately preceding the first (1st) anniversary of the Effective Date, subject to the rights of termination set forth in Article X below. The Initial Term shall be deemed renewed for successive periods of one (1) year, subject at all times to the rights of termination set forth in Section 10.1 (the Initial Term, and, to the extent renewed, all applicable renewal periods are hereinafter collectively referred to as the "Term").
1.3Role of Owner's Representative.  ________________ ("Owner's Representative") is the duly authorized representative of Owner for the purpose of this Agreement and all powers and rights of Owner under this Agreement shall be exercised by Owner's Representative and all communications, remittances and things of any kind required to be delivered to Owner shall be delivered to Owner's Representative. Owner may from time to time designate a different Owner's Representative by written notice.
1.4Limit on Amount Authorized For Non-Emergency Purchase and Repairs and Contract Amount Requiring Owner Approval.  The limit on the amount Manager may incur for non-emergency purchases or repairs not contemplated under the Budget approved by Owner without Owner's consent is $5,000.00 in any one instance.

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1.5Bank.  Manager shall designate a bank (the "Bank") in which the rents and other revenues from the Premises shall be deposited pursuant to Section 5.10, subject to Owner's written approval, not to be unreasonably withheld, conditioned or delayed. The account or accounts shall be named as follows: ________________________ as Agent of ___________________, LLC (the "Bank Account"). The Owner may designate a different bank or a different account name at any time upon at least thirty (30) days' prior written notice to Manager.
1.6Manager's Commercial Crime Insurance Policy. See Section 5.16.
1.7Address of Owner.  Unless changed by notice to Manager, the address of Owner for notices under Section 11.2 shall be:
c/o Onyx Equities, LLC
900 Route 9 North, Suite 400
Woodbridge, New Jersey  07095
Attn:  John A. Saraceno, Jr.
and
c/o KBS Capital Advisors LLC
800 Newport Center Drive, Suite 800
Newport Beach, California 92603
Attn: Shep Wainwright

1.8Address of Manager. Unless changed by notice to Owner, the address of Manager for notices under Section 11.2 shall be.

Onyx Management Group, LLC
900 Route 9 North, Suite 400
Woodbridge, New Jersey 07095
Attn:  Samuel Giordano

1.9Management Fee.  Subject to Article IX, the Management Fee payable to Manager for its services under this Agreement shall be an amount per month equal to the greater of (1) three percent (3%) of Operating Receipts (as hereinafter defined), or (2) $8,500.
ARTICLE II
INDEX OF DEFINED TERMS AND EXHIBITS

	
		
	Term
	Where Defined

	Bank
	Section 1.5

	Bank Account
	Section 1.5

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	Budget
	Section 6.1(a)

	Effective Date
	Section 1.1

	Emergencies
	Section 5.4(a)

	Hazardous Wastes
	Section 5.17(a)

	Initial Term
	Section 1.2

	Management Fee
	Sections 1.9 and 9.1

	Manager
	Introductory paragraph of Agreement

	Operating Receipts
	Section 9.1

	Owner
	Introductory paragraph of Agreement

	Owner’s Representative
	Section 1.3

	PPR
	Section 6.2(a)(ii)

	Premises
	Recital A

	Term
	Section 1.2

	
			
	Exhibit
	Title
	Reference

	A
	Schedule of Employees
	Section 5.3

	B
	List and Forms of Receipts
	Section 6.2

ARTICLE III
APPOINTMENT

Owner hereby appoints Manager as the manager for the Premises as of the Effective Date, and hereby authorizes Manager to exercise such powers with respect to the Premises as may be necessary for the performance of Manager's obligations under Article V. Manager hereby accepts such appointment on the terms and conditions hereinafter set forth for the Term of this Agreement. Manager shall have no right or authority, express or implied, to commit or otherwise obligate Owner in any manner whatsoever, except to the extent expressly provided in this Agreement.

ARTICLE IV
LEASING

Manager shall not be responsible for leasing services for the Premises unless Manager enters into a separate leasing agreement with Owner.

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ARTICLE V
DUTIES OF MANAGER

5.1General Duties.

Manager, on behalf of Owner, shall use its diligent, commercially reasonable good faith efforts to comply with this Agreement and with instructions as set forth herein or as may from time to time be provided by Owner to Manager. Manager shall perform its duties in a professional, diligent, careful and vigilant manner and shall manage, operate, repair, maintain and service the Premises comparable to similar properties. In connection therewith, Manager shall conduct the ordinary and usual business affairs of Owner relating to the Premises as provided in this Agreement and shall implement, or cause to be implemented, the Owner's decisions. Manager shall at all times conform to the policies and programs established by Owner provided such policies and programs are provided to Manager, and the scope of Manager's authority shall be limited thereby.  Manager shall afford Owner the full benefit of the judgment, experience and advice of Manager and Manager's organization with respect to the policies to be pursued in management, and the execution of its responsibilities in a first class, professional, diligent, careful and vigilant manner.  In particular, Manager shall have the duties and obligations set forth hereafter in this Article V. In no event shall Manager be obligated under this Agreement to provide any service or incur any obligations if Owner does not approve the Budget or otherwise provide funds sufficient therefor.
5.2Utility and Service Contracts. Manager shall negotiate contracts on behalf of Owner for gas, electricity, water, telephone, trash collection, sewer, elevator service, janitorial service, security service and such other services for terms of not greater than one (1) year, unless otherwise approved by Owner in writing in its reasonable discretion. All such service contracts entered into after the Effective Date shall be in the name of Owner and shall be terminable on thirty (30) days’ notice or less without penalty unless otherwise approved by Owner in writing. Manager agrees to provide to Owner a form or forms of such contracts for pre-approval. Manager shall have the authority to execute contracts that comply with this Agreement, including without limitation this Section 5.2, as agent for Owner, provided that such contracts do not materially deviate from the pre-approved form of such contracts. Notwithstanding the foregoing, upon written notice to Manager, Owner or Owner's consultants shall have the right to negotiate a master agreement for any and/or all utilities at the Premises.
5.3Employment of Personnel. All persons employed in connection with the operation and maintenance of the Premises shall either be employees of Manager or be independent contractors and shall not be employees of Owner.  Subject to reimbursement pursuant to Section 8.2, Manager shall select, employ, pay, supervise, direct and discharge all employees necessary for the operation and maintenance of the Premises and use reasonable care in the selection and supervision of such employees. Manager shall be responsible for complying with all laws, regulations and collective bargaining agreements affecting such employment. Manager will be and will continue throughout the Term of this Agreement to be an Equal Opportunity Employer. Before employing anyone pursuant to this Section 5.3, Manager shall submit to Owner, for approval by Owner not to be unreasonably withheld, conditioned or delayed, a list in the form of Exhibit A attached hereto, 

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(which shall update any such list previously submitted) showing the number of employees and the wages Manager proposes to pay such employees.
5.4Maintenance.

(a)Manager shall be  responsible for coordinating the operational activities of the Premises to keep the Premises maintained in a clean and sightly condition and, subject to the terms of this Section 5.4, manage all repairs, alterations, replacements, installations, decorating and landscaping, and purchase all supplies necessary for (i) the proper operation of the Premises, (ii) the fulfillment of Owner's obligations under any lease of space in the Premises provided Owner gives Manager a copy of all such leases, (iii) the fulfillment of Owner's obligations under any mortgage encumbering the Premises, provided Owner gives Manager written notice of such mortgage obligations, (iv) compliance with covenants, conditions and restrictions affecting the Premises, provided Owner gives Manager written notice of such covenants, conditions and restrictions, and (v) compliance with all governmental and standard insurance requirements, provided Owner gives Manager a copy of such insurance requirements, and provided Manager shall not make any purchase or order any work costing more than the limit on the amount authorized for non-emergency purchases and repairs set forth in Section 1.4 without Owner's prior written approval (which approval may be obtained in the approved Budget or approved otherwise by Owner), except in circumstances reasonably deemed by Manager to be an emergency requiring immediate action for the protection of the Premises or tenants or other persons or to avoid the suspension of necessary services ("Emergencies"). Manager shall promptly notify Owner of the necessity for the nature of and the cost of such emergency repairs or compliance. If Owner shall require, Manager shall submit a list of contractors and subcontractors who are performing any work, repairs, alterations, replacements or services on the Premises under Manager's direction in excess of Five Thousand and 00/100 Dollars ($5,000.00). All repairs, alterations and replacements shall be of at least equal quality and workmanship to the original work.
(b)Manager shall obtain all necessary receipts, releases, waivers, discharges and assurances necessary to keep the Premises free of any mechanics', laborers', materials suppliers' or vendors' liens in connection with the maintenance or operation of the Premises in connection with work performed at the Premises on behalf of Owner. All such documentation shall be in such form as required by Owner. Upon request from Owner, Manager shall make available for inspection or provide copies of such documentation to Owner, at Owner's expense.

5.5Contracts with Third Parties.

(a)Manager shall supervise and be responsible for all employees, independent contractors, suppliers and other persons and entities engaged in the operation, repair, maintenance and servicing of the Premises on behalf of Owner or in any other activity within the scope of this Agreement. Excluding service agreements specifically referenced in an annual budget approved by Owner, all of such contractors, suppliers, persons and entities, and all contracts in excess of $5,000.00, shall be subject to Owner's prior written approval. Manager shall assure that any party performing work on the Premises maintains insurance satisfactory to Owner, including, but not 

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limited to, Worker's Compensation Insurance (and, when required by law, compulsory non-Occupational Disability Insurance) and insurance against liability for injury to persons and property arising out of all such contractor's operations naming Manager, Owner and Owner's representatives as additional insureds on a primary and non-contributory basis and containing a waiver of subrogation rights against Owner and Property Manager. Manager shall obtain certificates of insurance for all such insurance before the work begins. Manager shall furnish copies of the certificates to Owner if requested by Owner. Manager shall require that all contractors engaged by Manager or Owner and brought onto the Premises have insurance coverage at the contractor's expense, in the following minimum amounts:

	
		
	Worker's Compensation:
	Statutory Amount

	Employer’s Liability:
	$1,000,000.00 minimum

	Commercial General Liability
	$1,000,000.00 each occurrence, $2,000,000.00 aggregate for Bodily Injury and Property Damage

	Commercial Automobile Liability
	$1,000,000.00 per accident for bodily injury and property damage

	Umbrella Excess Liability
	$3,000,000 minimum

(b)    Manager shall not execute, or otherwise enter into or bind Owner with respect to any contract or agreement for equipment, supplies, services or any other item without obtaining (i) two competitive written bids with respect to each purchase in excess of $25,000.00 (provided qualified contractors can be reasonably identified to do so), and (ii) three competitive written bids with respect  to each purchase in excess of $100,000.00 (provided qualified contractors can be reasonably identified to do so). Manager shall not enter into any contract or agreement for more than the amount specified in Section 1.4 without Owner's prior written approval. Unless otherwise approved by Owner, all contracts, agreements or other arrangements made pursuant to this Agreement shall be in the name of Owner and shall be terminable without penalty on thirty (30) days' notice or less, with or without cause, and upon Owner's sale or transfer of the Premises.

5.6Purchase of Supplies and Materials.  Manager shall purchase all equipment, tools, appliances, materials and supplies reasonably necessary or desirable for the maintenance and operation of the Premises. All such purchases shall be subject to the prior review and written approval of Owner if such purchases are not included in the current Budget. Such purchases shall be used solely in connection with the operation and maintenance of the Premises. In connection with the performance of its duties pursuant to this Section 5.6, Manager shall use its diligent, commercially reasonable, good faith efforts to qualify for any cash and trade discounts, refunds, credits, concessions or other incentives. All such discounts, refunds, credits, concessions and other 

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incentives received by Manager shall inure and belong to Owner, and shall be deposited in the Bank Account when they are in the form of cash. If Owner is entitled to discounts from contractors and suppliers under any national or regional agreements, Manager shall avail itself of such national or regional agreements whenever possible.
5.7Contracts with Affiliated Entities.  Manager shall not purchase materials, tools or supplies or contract for repair, construction or any other service for the Premises pursuant to Sections 5.2, 5.4 or 5.6 with a party in which Manager (or any subsidiary, affiliate or related entity) holds a beneficial interest, without the prior written approval of Owner.
5.8Complaints and Notices.

(a)Manager shall handle promptly complaints and requests from tenants, concessionaires and licensees. Manager shall notify Owner promptly of: (i) any notice received by Manager or known to Manager of violation of any governmental requirements (and make recommendations regarding compliance therewith); (ii) any notice received by Manager or known to Manager of any defect or unsafe condition in the Premises; (iii) any notice received by Manager or known to Manager of violation of covenants, conditions and restrictions affecting the Premises or noncompliance with loan documents affecting the Premises, if any; (iv) any notice received by Manager or known to Manager of any fire, accident or other casualty or damage to the Premises; (v) any notice received by Manager or known to Manager of any condemnation proceedings, rezoning or other governmental order, lawsuit or threat thereof involving the Premises; (vi) any notice received by Manager or known to Manager  of any violations relative to the leasing, use, repair and maintenance of the Premises under governmental laws, rules, regulations, ordinances or like provisions; (vii) any notice received by Manager or known to Manager of any defaults under any leases or other agreements affecting the Premises; or (viii) any notice received by Manager or known to Manager of any violation of any insurance requirement. Manager shall promptly deliver to Owner copies of any documentation in its possession relating to such matters. Manager shall keep Owner reasonably informed of the status of the particular matter through the final resolution thereof.  In the case of any fire or other damage to the Premises or violation or alleged violation of laws respecting Hazardous Wastes, Manager shall immediately give telephonic notice thereof to Owner. Manager shall complete all necessary and customary loss reports in connection with any fire or other damage to the Premises. Manager shall retain in the records it maintains for the Premises copies of all supporting documentation with reference to such notices.
(b)Manager shall promptly notify Owner and any insurance agent Owner may designate of any personal injury or property damage occurring to or claimed by any tenant or third party on or with respect to the Premises. Manager shall promptly forward to Owner with copies to any insurance agent Owner may designate any summons, subpoena or other legal document served upon Manager relating to the actual or alleged potential liability of Owner, of Manager or of the Premises.
(c)Should any claim, demand, suit or other legal proceeding be made or instituted by any third party against Owner which arises out of any matters relating to the Premises, this Agreement or Manager's performance hereunder, Manager shall promptly notify Owner thereof 

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and shall give Owner all pertinent information, and reasonable assistance, in the defense or other disposition thereof.

5.9Tenant Insurance Certificates.  Manager shall endeavor to secure from all tenants ACORD certificates of insurance and renewals thereof required to be furnished by the terms of their leases. Manager shall forward copies of the certificates to Owner if requested by Owner. Manager shall establish systems and procedures to enforce lease requirements that such policies of insurance do not lapse and that all persons required to be named as additional insureds are listed thereon.
5.10Enforcement of Leases and Deposit of Revenue.

(a)Manager shall take all necessary and proper actions to enforce the terms of all leases, concessions and licenses and to receive and collect all rents, including percentage rents, and all other revenues payable to Owner from the Premises as the same become due and payable. Manager shall deposit the rents and other revenues promptly in the Bank Account. The Bank Account shall be used exclusively for funds derived from the operation of the Premises. Owner may supply Manager with written instructions to notify promptly third parties of such deposits, to enable transfer of Owner's monies to other bank accounts. The Bank Account shall be opened by Manager and shall name as signatories only such employees of Manager as are from time to time approved in writing by Owner for such purpose and such other persons as Owner may designate in writing. All withdrawals from the Bank Account shall require two signatures. At Owner's option, the Bank Account may be comprised of two accounts, a checking account in which the funds on deposit shall be kept to the minimum practicable to pay day to day expenses and a money market account or other interest bearing account. Manager shall receive and collect all tenant security deposits payable to Owner by tenants of the Premises and deposit the same promptly in the Bank Account. To the extent tenants are entitled to interest on such security deposits or a refund of such deposits upon vacating the Premises, Manager shall pay such interest and refund such deposits from the Bank Account to the tenants entitled thereto. In the event state law requires that tenant security deposits be held in a separate account, such separate account shall be established by Owner. Checks drawn to refund security deposits to tenants shall be drawn only upon the signatures of an authorized employees of the Manager and Owner's Representative. Manager shall cooperate with Owner to satisfy such conditions as Owner may place on the release of a security deposit from the Bank Account. Manager shall maintain detailed records of all security deposits and allow Owner and its designees access to such records.
(b)Upon prior notice and written approval of Owner, Manager shall institute on Owner's behalf and defend, at Owner's expense, through legal counsel approved by Owner all necessary legal proceedings to: (i) collect rent or other income from tenants, concessionaires and licensees on the Premises; (ii) oust or dispossess any tenants or other persons from the Premises; and (iii) address any other matters requiring legal attention. Owner reserves the right to change the approved counsel to be used by Manager and to otherwise control litigation of any character affecting or arising out of the operation of the Premises.

5.11    Compliance with Laws and Other Requirements.

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(a)    Manager shall supervise compliance of the Premises with all applicable laws, ordinances, rules, regulations, requirements and orders of all federal, state and municipal governments, courts, departments, commissions, boards and offices, any national or local Board of Fire Underwriters or Insurance Services offices having jurisdiction, or anybody exercising functions similar to those of any of the foregoing which may be applicable to the Premises and the operations and management thereof.

(b)    Manager shall comply or supervise compliance with the provisions of any insurance policy or policies insuring Owner in relation to the Premises of which Manager is provided a copy (so as not to decrease the insurance coverage or increase the insurance premiums).

(c)    Manager shall be responsible for the performance by Owner under all leases of space in the Premises and any other lease, sublease, license agreement, easement agreement, covenant, condition, restriction, document of record, use permit, development agreement, operating agreement, mortgage or other similar document governing or applicable to the title, operation, management, occupancy, promotion and leasing of the Premises known to Manager.

5.12    Property Review. Tax Review and Other Programs.

(a)    Manager shall participate in Owner's property review programs to the extent requested by Owner. Such review shall include asset, investment, financial and strategy profiles in form and substance satisfactory to Owner and such assistance as Owner may request in connection with appraisals of the Premises.  Manager shall respond, within 10 days, to Owner's management evaluation reports concerning reasonable actions to be taken by Manager to correct or modify its management standards for the operations or financial services provided for the Premises.

(b)    Manager shall participate in Owner's tax review program. Manager shall check tax assessments and assist Owner, when requested by Owner, in efforts to reduce such taxes. Manager shall promptly furnish Owner with copies of all assessment notices and receipted tax bills received by Manager.

(c)    Manager shall comply with Owner's reasonable energy conservation and Hazardous Wastes policies and submit energy consumption and Hazardous Wastes reports for the Premises in accordance with Owner's program for energy and Hazardous Wastes audits and reviews.

5.13    Permits and Authorizations.

(a)    Manager shall obtain and keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the maintenance, operation, management, repair, servicing or occupancy of the Premises. All of such licenses, permits, consents and authorizations shall be in the name of Owner.

(b)    Manager shall obtain and keep in full force and effect all licenses, permits, consents and authorizations as may be necessary for the proper performance by Manager of its duties and obligations under this Agreement (including, without limitation, qualification to do 

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business) or as may be required under any lease covering any portion of the Premises. All such licenses, permits, consents and authorizations shall be in the name of Manager.

5.14Other Duties. Manager shall, at Owner's expense, perform all other services which are customary, necessary and appropriate to manage, operate and maintain the Premises.
5.15Confidentiality. Manager and all persons retained or employed by Manager in performing its services shall hold in confidence and not use or disclose to others any confidential or proprietary information of Owner heretofore or hereafter disclosed to Manager, including but not limited to any data, information, plans, programs, processes, costs, operations or tenants which may become known to Manager in the performance of, or as a result of, its services, except (i) where Owner specifically authorizes Manager in writing to disclose any of the foregoing to others, (ii) such disclosure reasonably results from the performance of Manager's duties hereunder, (iii) any of the foregoing is generally available to the public, or (iv) to the extent disclosure thereof is required by any applicable law or governmental authority.
5.16Manager's Insurance.  Manager shall obtain a Commercial Crime Insurance Policy covering the activities of Manager and its employees who may handle or be responsible for monies or other property of Owner. The Commercial Crime Insurance Policy shall be in such form and amount and written with insurers authorized to do business in the State of New York and shall be rated at least A-VII by A.M. Best's Rating Service. The form, amount and insurer initially approved by Owner are subject to Owner’s prior approval, in Owner’s reasonable discretion.  Manager shall maintain the Commercial Crime Insurance Policy in an amount equal to the greater of (i) three (3) months’ worth of gross rental income and (ii) $1,000,000.00.  Such Commercial Crime Insurance Policy shall contain a loss payee endorsement in favor of Owner as its interest may appear.  Manager shall furnish a certificate evidencing such Commercial Crime Insurance Policy to Owner prior to the Effective Date and thereafter immediately upon renewing or replacing such Commercial Crime Insurance Policy.

(a)Manager shall maintain the following insurance in Manager's name applicable to Manager's activities under this Agreement:

(i)Commercial General Liability Insurance, in an amount equal to not less than $3,000,000, each occurrence.
(ii)Automobile Liability Insurance, covering both owned (if any) and non-owned vehicles, in an amount equal to not less than $1,000,000, per accident.
(iii)Workers’ Compensation Insurance, as required by law covering all Manager's employees (and, when required by law, compulsory Non­ Occupational Disability Insurance).

Such insurance shall be underwritten by reputable, financially sound companies. Manager shall furnish Owner with ACORD certificates of insurance evidencing such insurance prior to the Effective Date and thereafter upon renewing or replacing such insurance. Any such bond or insurance 

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required under this Agreement shall provide that the insurer shall endeavor to provide thirty (30) days prior written notice to the certificate holder upon cancellation or material modification.  

5.17Hazardous Wastes.

(a)Manager shall not place or cause to be placed on the Premises, other than in the ordinary course of performing its obligations under this Agreement and in compliance with applicable law, any hazardous or toxic wastes or substances, as such terms are defined by federal, state or municipal statutes or regulations promulgated thereunder (collectively, "Hazardous Wastes"), other than usual and customary janitorial, maintenance and cleaning supplies which are kept, used, stored and disposed of in reasonable quantities and in compliance with applicable laws. If Manager discovers the existence of any Hazardous Wastes on the Premises, Manager shall immediately notify Owner. If such Hazardous Wastes were placed or caused to be placed on the Premises by Manager (other than in the ordinary course of performing its obligations under this Agreement and in compliance with applicable law), Manager shall, at its cost, diligently arrange for and complete the immediate removal thereof in accordance with applicable laws and Owner's directions. Manager shall not be responsible for any Hazardous Wastes present on the Premises prior to the Effective Date hereof, nor shall Manager be responsible for any Hazardous Wastes brought onto the Premises by a person other than Manager, its agents, or employees. Manager shall promptly notify Owner of any notice received by Manager from any governmental authority of any actual or threatened violation of any applicable laws, regulations or ordinances governing the use, storage or disposal of any Hazardous Wastes and shall cooperate with Owner in responding to such notice and correcting or contesting any alleged violation at Owner's expense.
(b)Subject to the prior written review and approval of Owner, Manager shall provide its employees, agents, consultants, governmental entities and the public with any notices or disclosures concerning Hazardous Wastes associated with the Premises required to be delivered by Manager under any applicable laws, including without limitation, any notices or disclosures concerning Hazardous Waste which Manager has received from Owner. Owner shall have the right to review such notices and disclosures before their distribution or submission by  Manager and shall have the right, but not the obligation, to prescribe the form and content of any such notices or disclosures as long as the form and content prescribed by Owner comply with all applicable laws relating to such notices or disclosures. Owner shall provide Manager with any notices or disclosures concerning Hazardous Waste associated with the Premises required to be delivered by Owner under any applicable laws.
(c)Without limiting any other indemnification obligations provided by law or specified in this Agreement, Manager shall indemnify, defend (as Manager's sole cost and expense and with legal counsel approved by Owner which approval shall not be unreasonably withheld) and hold harmless the Owner, its affiliates, agents and employees from and against any and all third party claims, demands, losses, damage, disbursements, liabilities, obligations, fines, penalties, actions, causes of action, suits, costs and expenses, including without limitation, reasonable attorneys' fees and costs, and all other professionals' or consultants' expenses incurred in investigating, preparing for, serving as a witness in, or defending any action or proceeding, or in removing or remediating any Hazardous Wastes on, under, from or about the Premises, arising out 

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of or relating to, directly or indirectly, Manager's breach of any of the terms of Section 5.17. This indemnity shall survive termination of this Agreement.
(d)Notwithstanding anything to the contrary contained herein, Manager shall have no liability to Owner whatsoever in connection with any Hazardous Wastes brought upon the Premises by Owner or any other party not under Manager’s direct control.

5.18Asbestos and Similar Compliance Matters.  If the Premises are subject to the Occupational Safety and Health Administration's regulations relating to asbestos, or to any state law or regulation relating to asbestos or to any state law or regulation relating to carcinogenic or toxic chemicals, Manager shall, at Owner's expense, comply with such laws and regulations as they relate to the Premises.
5.19Owner's Insurance. Throughout the Term of this Agreement, Owner, or Manager at Owner's request and at Owner's cost and expense, shall obtain and maintain the insurance described below:

(a)Property insurance (including boiler & machinery coverage) on an estimated full replacement cost basis covering the Premises on an ISO “Causes of Loss – Special Form.”
(b)Commercial general liability insurance on an occurrence basis with limits of not less than Ten Million and Noll 00 Dollars ($10,000,000.00) in annual policy limits. Owner's insurance shall be primary and non-contributory to any insurance otherwise carried by Manager. Owner shall be the insured on such liability policy, with Manager included as an insured property manager.

Should Owner elect to place such insurance coverage directly, Owner shall provide Manager with a duplicate copy of the original policy and, if requested by Owner, Manager shall duly and punctually pay on behalf of Owner all premiums with respect thereto, before the policy's lapse due to nonpayment.

5.20Intentionally Omitted.  

5.21Waiver of Subrogation.  NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, OWNER AND MANAGER  HEREBY WAIVE ANY AND ALL RIGHTS OF RECOVERY, CLAIM, ACTION OR CAUSE OF ACTION AGAINST THE OTHER, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS FOR ANY LOSS OR DAMAGE TO PROPERTY OF THE WAIVING PARTY BY REASON OF FIRE, THE ELEMENTS, OR ANY OTHER CAUSE WHICH IS COVERED OR COULD BE COVERED BY STANDARD "ALL-RISKS" PROPERTY INSURANCE (INCLUDING COMPREHENSIVE BOILER AND  MACHINERY COVERAGE), REGARDLESS OF CAUSE OR ORIGIN, INCLUDING NEGLIGENCE OF THE OTHER PARTY HERETO, ITS AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, PARTNERS, MEMBERS, SERVANTS OR SHAREHOLDERS. EACH PARTY'S PROPERTY INSURANCE POLICIES SHALL CONTAIN PROVISIONS WHERE THE 

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INSURER WAIVES THEIR RIGHT OF SUBROGATION AGAINST SUCH OTHER PARTY. THIS SECTION 5.21 SHALL SURVIVE THE EXPIRATION OR EARLIER TERMINATION OF THIS AGREEMENT.

ARTICLE VI
BUDGETS, REPORTS, AND OTHER FINANCIAL MATTERS

6.1Budgets and Business Plans.

(a)Manager shall prepare and submit to Owner a proposed operating and capital budget (the "Budget") for the operation, repair and maintenance of the Premises for the remainder of the calendar year in which the Effective Date occurs, no later than thirty (30) days after the Effective Date. Thereafter, on or before the date specified each year by Owner (but not later than October 1), Manager shall prepare and submit to Owner an updated Budget for the remainder of the current calendar year and a preliminary Budget for the next calendar year. Thereafter, Manager shall prepare and submit to Owner the final Budget for the next calendar year, incorporating any changes requested by Owner. Such Budgets shall: (i) be prepared utilizing the Kardin software, (ii) be prepared on a cash and/or accrual basis, as directed by Owner, and (ii) show a month by month projection of income, expenses, capital expenditures and reserves. Owner shall have final approval over the Budget, provided Owner may not disapprove the payments required to be made to Manager hereunder. If a Budget is not agreed to prior to the commencement of the next succeeding calendar year, beginning on January 1st of such year until a Budget is approved, Manager shall operate the Premises in accordance with the Budget for the immediately preceding calendar year (subject to an increase of ten percent (10%) in any line items over such line items for the prior calendar year subject to (a) an aggregate limitation for all line items of a five percent (5%) increase, and (b) such provisions of the Budget which have been approved); provided, however, Manager shall be permitted to make such expenditures in excess of the amounts set forth in the last approved Budget for taxes and other governmental charges, insurance premiums, utility charges, union wage and work rule cost increases, amounts required to be paid pursuant to existing leases and contracts, and amounts required to be paid in the event of an emergency to preserve the value of the Premises until a Budget for the current calendar year is approved.
(b)After written approval of each such Budget by Owner, Manager shall (i) implement the Budget and shall be authorized, without the need for further approval by Owner, to make expenditures and incur the obligations provided for in the approved Budget subject to the limitations set forth in Section 5.4 for non-emergency purchases and repairs, and (ii) use commercially reasonable efforts to ensure that the actual cost of operating the Premises shall not exceed the approved Budget, however in no event is Manager guarantying that the Premises can be managed in accordance with such Budget.
(c)Within 30 days following Owner’s written request, which request shall not be made more often than once per calendar year, Manager shall provide Owner with a draft of a business plan for the Premises, containing such information as Owner may reasonably request, including (i) a list of all properties competitive with the Premises, a list of the tenants of each and 

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all other reasonably available information respecting each, and (ii) basic demographic data relating to the market area of the Premises, including population growth, major employers, employment and unemployment levels and, if the Premises is a retail property, retail sales and housing starts.

6.2Reports.

(a)Manager shall, during the Term of this Agreement, deliver the following reports to Owner relating to the management and operation of the Premises in form and substance reasonably determined by Owner.  All accounting shall be done using the MRI accounting software currently used by Owner, and Owner shall pay the associated setup and monthly costs relating thereto as a recoverable property expense. 

(i)Monthly Property  Performance  Report  ("PPR"):  On or before the 10th day of each calendar month, the Manager shall deliver monthly PPR, in format provided by Owner, which will include, among other  things, current and prospective lease status reports and occupancy summaries, status of  capital and leasing improvements, projected capital requirements, status of outstanding  accounts receivable, explanation of cash basis budget to actual variances on a year-to-date basis, and any other significant property events/issues.
(ii)Monthly  U.S.  GAAP  Financial  Statements:  As soon as practicable, and in any event within 5 working days of the 20th of each month, the  Manager shall deliver monthly accrual basis financial statements  for the prior month prepared  in  accordance with US GAAP which shall include straightening of rent and maintenance  of depreciation and amortization on both a GAAP, tax, and E&P basis. Such financial statements shall be prepared in such form as approved by Owner, which shall include, among other things, balance sheet, 13 month income statement with year-to-date actual to budget comparison, depreciation and amortization schedule generated through BNA software, FAS 13 schedules generated through MRI software and supporting schedules for significant balance sheet items such as accounts payable accruals, property taxes, insurance, prepaid, and allowance for doubtful accounts.  See Exhibit B for GAAP Report Table of Contents and Accrual Basis Report Checklist for a complete listing of required reports.  The Accrual Basis Report Checklist is required to be signed by both the preparer of the financial statements and their supervisor as representation that the reports are accurate and complete.  The Monthly U.S. GAAP Financial Statements shall be signed by Manager’s Chief Financial Officer as representation that the statements are accurate and complete.
(iii)Reserved. 
(iv)Annual U.S. GAAP Financial  Statements: For Annual U.S. GAAP Financial Statements, cash cutoff date at year-end (December) shall be the last day of the month. As soon as practicable, and in any event within seven (7) working  days of December 31st, the Manager shall deliver annual accrual basis financial statements prepared in a manner and form consistent with item (ii) above. In addition, Manager shall provide any information as reasonably required to complete the Owner's annual audited financial statements and 10-K.
(v)Other information: From time to time, upon Owner's request, such other information with regard to property as may reasonably be requested, including without 

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limitation such information and forms as are attached hereto as Exhibit B and incorporated herein by this reference.

(b)To ensure the reliability of all reports required by this section, Manager shall for all months other than year-end (December) on or before the 20th of each month: pay all charges, fees, bills and invoices which are normally and customarily incurred monthly in connection with the operation of the Premises and any other amounts which are payable that month, provided that if any charges, fees, bills and invoices for that month cannot be paid by the 20th, Manager shall accrue such items. If due to extraordinary circumstances, Manager incurs any expense after the 20th day of the month which is not reflected on the statements required by this section, Manager shall immediately notify Owner of said expense. At year end, an additional check funding shall be made by Owner as needed to pay charges and expenses required before the end of the year.]

6.3Remittance of Funds to Owner.  No later than the 10th day of each calendar month Manager shall remit to Owner all funds collected as part of Manager's obligations hereunder in excess of (i) anticipated expenditures for the calendar  month that Manager is authorized to make pursuant to the Budget, (ii) any reserves approved by  Owner and (iii) the Management Fee payable pursuant to Section 9.1. Owner shall have the right to require the transfer to Owner at any time of funds in the Bank Account considered by Owner to be in excess of an amount reasonably required by Manager for disbursement and compensation purposes in connection with the operation and management of the Premises.
6.4Records. Manager agrees to keep proper records with respect to the management and operation of the Premises, and to retain those records for periods specified by Owner. Such books, records and accounts shall include, without limitation, vouchers, statements, receipted bills and invoices, employment records, documents, notices, agreements, contracts, correspondence, leases, permits, licenses, authorizations, all collections and disbursements related to the Premises, the deposits to the Bank Account and other business and affairs of the Premises within the responsibility of Manager pursuant to this Agreement. Owner shall have the right, during the Term of this Agreement, to inspect such records and audit the reports required by Section 6.2 during normal business hours upon reasonable prior notice to Manager at such location as Manager shall maintain such records and in a manner so as to not unreasonably interfere with Manager’s normal day-to-day business operations. All such records, data, information and documents shall at all times be the property of Owner and shall be delivered to Owner without demand upon termination of this Agreement.
6.5Duty of Care. Manager shall exercise such control over accounting and financial transactions as is reasonably required to protect Owner's assets from loss or diminution due to error, negligence, recklessness, willful misconduct, fraud or criminal acts on the part of Manager or its employees, but shall have no such responsibility with respect to actions taken by independent contractors, consultants, etc.. Losses caused by such error or activity shall be borne by Manager, to the extent such losses are not paid to Owner pursuant to the insurance required by Section 5.16. In no event shall Manager be responsible for any loss of investments or other losses as the result of the failure of any financial institution or the choice of investments made by Owner.

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6.6Sarbanes-Oxley Compliance.  

(a)    Compliance Services.  Manager shall provide Owner’s internal audit team (A) reasonable access to Manager’s personnel and books and records to facilitate the completion of the Owner’s annual Sarbanes-Oxley Compliance Plan, (B) copies reasonably requested by Owner of current internal control documentation, (C) availability to discuss, review and provide comments on process flow diagrams, narratives, walkthroughs and testing of controls to ensure that those documents accurately reflect Manager’s processes in connection with its obligation to Owner, (D) timely response to internal control recommendations and observations, reasonably agree to remedial action plans (if any), and timely implement those plans in order to ensure compliance with Owner’s annual Sarbanes-Oxley Compliance Plan, and (E) copies of SOC I Type II and bridge letters for key applications used to record business and accounting transactions.

(b)    SOC 1 Report.  If Manager preforms accounting services, Manager will deliver to Owner, at Manager’s sole cost and expense, Manager’s Service Organization Control 1 Type 2 report (the “SOC 1 Type 2 Report”) prepared by a qualified independent audit firm with respect to the Statement on Standards for Attestation Engagements 16, Reporting on Controls at a Service Organization (“SSAE 16”) as promulgated by the Auditing Standard Board of the American Institute of Certified Public Accountants, as same may be amended, from time to time.  The SOC 1 Type 2 Report must be issued by December 1st of each calendar year and cover the entire preceding Fiscal Year. Additionally, Manager must deliver a "Bridge Letter" to Owner stating that the Manager’s control environment relevant to SSAE 16 has not changed since the end of the effective date of the audited SOC 1 Type 2 Report (or equivalent report) and must cover through Owner’s fiscal year end.

(c)    Delegation of Duties.  Manager may, at Manager’s cost and expense, engage a reputable third-party accounting services firm reasonably acceptable to Owner to perform the services required of Manager under this Section 6.6.  Any such engagement shall be pursuant to a written agreement (an “Accounting Services Agreement”) acceptable to Owner in Owner’s reasonable discretion.

ARTICLE VII
INDEMNIFICATION

7.1Without limiting any indemnity provided elsewhere in this Agreement, Manager shall indemnify, defend, protect and hold harmless Owner and Owner's Representative and their officers, directors, partners, members and employees from and against all third party claims, losses and liabilities (including all reasonable expenses and attorneys' fees) resulting from property damage (including, but not limited to, damage to the property of Owner and its agents, affiliates and employees, but only to the extent such property damage is not covered by the proceeds of the insurance policies required to be carried by Owner pursuant to Section 5.19 above), personal injury, death, defamation or false arrest which arise out of (a) any material breach of this Agreement by Manager, or (b) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Manager, its agents or employees.

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7.2Owner shall indemnify, defend, protect and hold harmless Manager and its officers, directors and employees from and against all third party claims, losses and liabilities (including all reasonable expenses and attorneys' fees) resulting from property damage (including, but not limited to, damage to the property of Manager and its agents and employees, but with respect to damage to property of Manager only to the extent such property damage is not covered by the proceeds of the insurance policies required to be carried by Manager under Section 5.16 above), personal injury, death, defamation or false arrest which arise out of (a) any material breach of this Agreement by Owner, or (b) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Owner or its employees or agents.
7.3All indemnities contained in this Agreement shall survive the expiration or termination of this Agreement.

ARTICLE VIII 
COSTS AND EXPENSES

8.1    Costs and Expenses  of Manager.   Except as otherwise expressly provided herein, all costs and expenses incurred by or on behalf of Manager in performing its obligations hereunder shall be borne solely by Manager, including, without limitation, the following expenses or costs in connection with the operation and management of the Premises:

(a)    Cost of gross salary and wages, payroll taxes, insurance, worker's compensation, pension benefits and any other benefits of Manager's supervisory and home and regional office personnel;
(b)    General accounting and reporting services, as such services are considered to be within the reasonable scope of Manager's responsibilities to Owner;
(c)    Cost of forms, stationery, ledgers and other supplies and equipment used in Manager's home office or regional home office;
(d)    Cost or pro rata cost of telephone and general office expenses incurred on the Premises by Manager for the operation and management of properties other than the Premises;
(e)    Cost or pro rata cost of data-processing equipment located at Manager's home or regional office;
(f)    Cost or pro rata cost of data processing provided by computer service companies;
(g)    Cost of all bonuses, incentive compensation, profit sharing or any pay advances to employees employed by Manager in connection with the operation and management of the Premises, except for payments to individuals specifically approved in the Budget or other writing by Owner in advance;

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(h)    Cost of automobile purchases and/or rentals, unless the automobile is being provided by Owner;
(i)    Costs attributable to claims, losses and liabilities arising from (i) any breach of this Agreement by Manager or (ii) the gross negligence, recklessness, willful misconduct, fraud or criminal acts of Manager's agents or employees;
(j)    Cost of comprehensive crime insurance purchased by Manager for its own account;
(k)Costs for meals, travel and hotel accommodations for Manager's home or regional office personnel who travel to and from the Premises, unless expressly authorized by Owner; and
(l)Cost of obtaining and maintaining such licenses, permits, consents and authorizations as are required by Section 5.13(b).

8.2    Reimbursement by Owner.  The following expenses or costs incurred by or on behalf of Manager in connection with the operation and management of the Premises shall be reimbursable monthly by Owner by disbursement from the Bank Account to the extent they are (i) expressly listed in the Budget, (ii) exceed approved Budgets but which result from Emergencies, or (iii) approved in writing by Owner or otherwise specifically provided in this Agreement and are supported by proper documentation from Manager:

(a)Cost of the gross salary, bonuses and other employee benefits and burdens for those employees of Manager providing services to the Premises; if any such employees provide direct management services to properties other than the Premises, costs of the gross salary and employee benefits and burdens for such employees shall be allocated among such properties;
(b)cost of accounting, financial and tax reporting services (prorated if off-site) which are within the reasonable scope of Manager's responsibility to Owner and all other financial reporting requested by Owner, including, but not limited to salary and compensation of accounting, financial and tax reporting staff and the costs, fees and charges, but excluding all costs, fees, and charges due or to become due under any Accounting Services Agreement;
(c)cost of software, forms, paper, ledgers and other supplies and equipment used in Manager's office, including license fees for software used on site and in required offices;
(d)cost of procuring and providing insurance permitted or required to be maintained by Manager pursuant to Section 5.19 of this Agreement and cost of ownership risk mitigation programs;
(e)cost to correct any violation of federal, state and municipal laws, ordinances, regulations and order relative to the leasing, use, repair and maintenance of the Premises, or related to the rules, regulations or order of the local board of fire underwriters or other similar body;

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(f)cost of collection of delinquent rentals;
(g)cost of legal fees of attorneys, provided such attorneys have been designated or approved in advance by Owner;
(h)cost of service contracts and cost of on-site utilities used by Manager in connection herewith;
(i)costs of leasing commissions for leasing space within the Premises payable to third party brokers;
(j)cost of capital expenditures;
(k)cost of professional dues and professional development;
(l)costs of printed checks for each bank account required by Owner;
(m)costs of personal computers, computer software and other technology and equipment used by Manager in connection with the Premises and the cost of connections to Manager's  computer network;
(n)costs of a management office, including necessary furnishings and equipment; 
(o)actual costs of making all repairs, decorations and alterations to the Premises;
(p)the Management Fee payable as provided in Sections 1.9 and 9.1;
(q)cost of audits as required by leases and other outside audits as may be requested by Owner;
(r)political or charitable contributions specifically approved by Owner;
(s)costs and expenses associated with the lease and operation of the conference center in the Premises;
(t)all other costs and expenses reasonably  incurred  by  Manager  in performing its duties hereunder 
(u)all other costs and expenses  for  which  Owner  is obligated  to reimburse Manager as provided in this Agreement; and
(v)any and all other  costs necessary  to  the management,  operation and maintenance of the Premises.

8.3    Payment of Other Costs. Manager may make the expenditures set forth in the approved Budget, provided, the Manager shall not issue a check for any purchase or work in excess of the limit on the amount authorized in the approved Budget or otherwise allowed hereunder without Owner's approval except in Emergencies as authorized in Section 5.4.

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8.4    Payment  of  Certain  Charges  Affecting  the  Premises.  If instructed  by Owner in the Budget or otherwise in writing, Manager shall pay from the Bank Account  all taxes, special assessments, ground rents, insurance premiums and mortgage payments affecting the Premises as they become due and before any delinquency date. Owner reserves the right, at its option, to make any such payments directly, upon written notice to Manager.

8.5    Insufficient Funds in Bank Account. Manager shall not be required to expend any of its own funds for disbursements chargeable to Owner. If there are insufficient funds in the Bank Account for a disbursement, Manager may, after notifying Owner of such insufficiency in writing, defer  making any disbursement until Owner has furnished the  funds necessary for such disbursement.

8.6     Nonpayment.  If Manager fails to make any payment when required or fails to perform any act required under this Agreement, then Owner, after 10 days' written notice to Manager (or, in the case of any emergency, without notice) and without waiving or releasing Manager from any of its obligations hereunder, may (but shall not be required to) make such payment or perform such act, and may exercise such other rights and remedies as are available under this Agreement, at law and/or in equity in connection with such breach by Manager.

ARTICLE IX
COMPENSATION

9.1Management Fee.  Owner shall pay Manager as compensation for the management services rendered hereunder a management fee (the "Management Fee") at the rate specified in Section 1.9. Such Management Fee shall be payable monthly in arrears, on the 1st day of each calendar month. Manager shall withdraw such Management Fee from the Bank Account and shall account for it as required by Section 6.2. The term "Operating Receipts" shall mean all revenues received by or for the benefit of Owner during the Term hereof in connection with the leasing, ownership, use or occupancy of the Premises, including, but not limited to, rents (office, storage, garage, retail and percentage), billings to tenants for services, proceeds of business interruption and rent loss insurance, amounts received in settlement of leases, and payments by tenants for capital improvements; however, Operating Receipts shall exclude (i) fire loss or other insurance proceeds (other than business interruption or rent loss insurance proceeds), (ii) security deposits except for the portion forfeited and applied to rent, (iii) prepaid rents except for the portion applied to the then current month; (iv) sums collected or paid for sales, excise or use taxes, (v) any amount paid for, or in connection with, the termination of leases or other agreements with tenants, or (vi) reimbursement by any tenant (other than rent) in a lump sum for expenditures made by Owner for tenant improvements for which tenant is responsible. 
9.2Owner-Occupied Space.  Manager shall not be entitled to any Management Fee with respect to Owner occupied space in the Premises unless a Management Fee for such space is specifically provided for in Section 1.9. In no event shall Manager be entitled to any Management Fee for any space occupied or used by it in the Premises.

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ARTICLE X
TERMINATION

10.1Termination.

(a)Termination by Manager Without Cause.  Manager, in Manager's sole discretion, shall have the power to terminate this Agreement on sixty (60) days' notice to Owner for any reason or no reason.
(b)Termination by Owner Without Cause.  Owner, in Owner’s sole discretion, shall have the power to terminate this Agreement on thirty (30) days’ notice to Manager for any reason or no reason.
(c)Sale of the Premises.  Owner shall have the power to terminate this Agreement upon the sale of the Premises (but not a pledge or mortgage) to a third party which is unaffiliated with Owner in a bona fide transaction, such termination to be effective as of the date of the sale. Owner shall use reasonable efforts to give Manager not less than thirty (30) days' written notice of such anticipated event.
(d)Termination by Owner With Cause.  Owner shall have the power to terminate this Agreement upon five (5) days' written notice to Manager if any of the following shall occur:

(i)Manager fails to timely pay any sum owed or due and such sum remains unpaid for more than ten (10) days after notice from Owner or another third party;
(ii)Manager commits any fraud, willful misconduct, or breach of trust, makes any material misrepresentation or misappropriates funds in the performance of its obligations under this Agreement;
(iii)Manager, or any principal of Manager is convicted or pleads guilty or nolo contendere to any felony that involves the Premises; 
(iv)Manager files, or there shall be filed against Manager a petition in bankruptcy;
(v)Manager makes an assignment for the benefit of creditors;
(vi)the Premises are damaged or destroyed and Owner decides not to rebuild or restore the Premises;
(vii)a substantial portion of the Premises is taken by condemnation or similar proceedings; and
(viii)Manager shall be in material breach of any other non­monetary obligations contained in this Agreement, and such material breach shall continue for thirty (30) days after written notice thereof from Owner to Manager specifying the particulars of such breach (plus, 

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with respect to breaches which Manager commences diligent efforts to cure within such period, but which cannot reasonably be cured within thirty (30) days, such additional period as is reasonably necessary to cure such breach).

(e)Termination by Manager With Cause.  Manager shall have the power to terminate this Agreement upon five (5) days' written notice to Owner if any of the following events occurs:
(i)Owner fails to timely pay any sum owed to Manager which remains unpaid for more than ten (10) days after notice from Manager; or

(ii)Owner commits a material violation or breach of any other obligation of Owner under this Agreement which remains uncured for more than thirty (30) days after notice from Manager (plus, with respect to breaches which cannot reasonably be cured within thirty (30) days, such additional time as is reasonably necessary to cure such breach).

(f)    Effect of Termination.  In the event that this Agreement is terminated, Manager shall be entitled to all fees and reimbursements earned or accrued through the date of termination, which obligation shall survive such termination. In addition to or in lieu of terminating this Agreement, if Manager or Owner defaults under this Agreement beyond applicable notice and cure periods, Owner or Manager (as applicable) may pursue such other rights and remedies as may be available under applicable law. This Section 10.1(f) shall survive the expiration or termination of this Agreement.

10.2Obligations Upon Termination.

(a)Upon termination of this Agreement for any reason, Manager shall deliver the following to Owner on or before thirty (30) days following the termination date:

(i)A final accounting, reflecting the balance of income and expenses for the Premises as of the date of termination;
(ii)Any monies due to Owner and any tenant security deposits held by Manager with respect to the Premises; and
(iii)All keys, property, supplies, records, contracts, drawings, leases and correspondence, in existence at the time of termination and all other papers or documents pertaining to the Premises (except that Manager may keep copies of such documents as Manager is required by law to retain). All data, information and documents shall at all times be the property of Owner.

Manager shall remove all signs that it may have placed at the Premises containing its name and repair any resulting damage.

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(b)Upon the effective date of the termination of this Agreement for any reason, Manager's right to withdraw funds from the Bank Account or any other account which contains funds collected in connection with the Premises shall terminate.\
(c)Within 30 days after termination of this Agreement, Owner shall reimburse Manager for all expenses incurred by Manager and properly reimbursable by Owner under Section 8.2 and pay all fees properly payable to Manager for services rendered up to the date of such termination.
(d)Upon the expiration or earlier termination of this Agreement in its entirety, neither party shall have any further rights or obligations under the Agreement (other than those obligations which accrued prior to the expiration or termination of this Agreement or which by the terms hereof expressly survive, or expressly provide for obligations to be performed following, such expiration or termination).
ARTICLE XI 
MISCELLANEOUS

11.1    Status of Manager.   It is the intention of the parties to create a relationship wherein Manager is an independent contractor in the management, operation and maintenance of the Premises, and Owner is the beneficiary of such management, operation and maintenance. Nothing herein contained shall be construed as creating the relationship of employer-employee, principal-agent or establishing any partnership or joint venture arrangement between Owner and Manager. Manager shall afford Owner the full benefit of the judgment, experience and advice of Manager and Manager's organization with respect to the policies to be pursued in management, and the execution of its responsibilities in a diligent, careful and vigilant manner.

11.2    Notices. Any statement, notice recommendation, request, demand, consent or approval under this Agreement must be in writing and personally delivered or sent by overnight courier service, such as Federal Express or sent by United States, registered or certified mail, postage prepaid, return receipt requested, and shall be deemed to have been given upon receipt or refusal of delivery, provided that in the case of communications sent by overnight courier service or United States registered or certified mail, the communication is addressed  as set forth in Section 1.7 if sent to the Owner's Representative and as set forth in Section 1.8 if sent to Manager.  Either party may, by written notice, designate a different address.

11.3    Ownership of Fixtures and Personal Property.  Manager acknowledges that Owner owns all fixtures and personal property situated on or about the Premises and used in or necessary for the operation, maintenance and occupancy of the Premises (including, without limitation, any personal property purchased by Manager pursuant to Section 5.6).

11.4    Intentionally omitted.

11.5    Assignment by Manager.  Manager shall not transfer or assign this Agreement or any part thereof or any of its rights or obligations hereunder without the prior written consent of Owner.

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11.6    Severability. Each provision of this Agreement is intended to be severable. If any term or provision hereof or the application thereof to any entity or circumstance shall be determined by a court of competent jurisdiction to be illegal or unenforceable for any reason whatsoever, such term, provision or application thereof shall be severed from this Agreement and shall not affect the validity of the remainder of this Agreement or the application of such term or provision to any other entity or circumstance.

11.7    Costs of Suit.  If Owner or Manager shall institute any action or proceeding against the other relating to this Agreement, the unsuccessful party shall reimburse the successful party for its disbursements incurred in connection therewith and for its reasonable attorneys' fees, as fixed by the court.

11.8    Waiver. No consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance of its obligations hereunder, shall be valid unless in writing. No such consent or waiver shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance by such other party of any other obligations of such party hereunder.  The failure of any party to declare the other party in default shall not constitute a waiver by such party of its rights hereunder, irrespective of how long such failure continues. The granting of any consent or approval in any one instance by or on behalf of Owner shall not be construed to waive or limit the need for such consent in any other or subsequent instance.

11.9    Remedies Cumulative.  No remedy herein contained or otherwise conferred upon or reserved to Owner or Manager shall be considered exclusive of any other remedy, but such remedy shall be cumulative and in addition to every other remedy given hereunder or now or hereafter existing at law, in equity or by statute. Every power and remedy given by this Agreement to Owner or Manager may be exercised from time to time and as often as occasion may arise or as may be deemed expedient.

11.10    Entire Agreement. This Agreement contains the entire agreement between the parties and supersedes all prior oral or written agreements, understandings, representations and covenants, to the extent that they are inconsistent with this Agreement.

11.11    Amendment. This Agreement may not be amended or modified except by an agreement in writing signed by the party against whom enforcement of such change or modification is sought.

11.12    Governing Law; Exclusive Venue. This Agreement and the obligations of Owner and Manager shall be governed by, and construed and enforced in accordance with, the laws of the State of New York, and the parties agree that any dispute amongst them shall be exclusively heard and decided before the courts of appropriate jurisdiction located within the Supreme Court of the State of New York, County of New York, the Civil Court of the City of New York, County of New York and the United States District Court for the Southern District of New York.

11.13    Gifts. Manager shall not accept any gift from vendors employed in connection with the Project, other than gratuities of nominal value received in the ordinary course of business. 

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Manager shall not, on Owner's behalf or in connection with the services being rendered under this Agreement,  provide any gift to or otherwise entertain any public official. The term "public official" means every member, officer, employee or consultant of a state or local agency. The term "gift," as used herein, includes any service or merchandise of any kind, discounts on merchandise or services, meals and any other item of value. Under no circumstance shall Owner be deemed to have waived the provisions of this Section as to a specific gift unless the waiver is in writing and signed by two authorized officers of Owner.

[REMAINDER  OF PAGE INTENTIONALLY  LEFT BLANK; SIGNATURE PAGES FOLLOW.]

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IN WITNESS  WHEREOF,  the parties  have executed  this Agreement  as of the date first above written.

OWNER:
_________________________________,
a ________________________________

By:    ___________________________
Name:    ___________________________
Title:    ___________________________

MANAGER:

_________________________________,
a ________________________________

By:    ___________________________
Name:    ___________________________
Title:    ___________________________

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EXHIBIT A 
SCHEDULE OF EMPLOYEES

This Exhibit A is attached to and incorporated by reference into that certain Property Management Agreement (the "Agreement") dated as of _________________, executed between KBS SOR II ______________________, LLC, a Delaware limited liability company ("Owner"), and ___________________________, a ___________________ ("Manager").

This schedule is to be updated and submitted for Owner's approval pursuant to Section 5.3 of the Agreement prior to any of the following events occurring: (i) employment of new personnel, (ii) any change in compensation and/or fringe benefits or employee burden, (iii) annually upon approval of the operating budget for the next year, or (iv) any change in the onsite cost allocation percentage (personnel or otherwise) between the Premises and other properties managed by any of the onsite staff.

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SCHEDULE

Staffing Schedule

[Reimbursement of personnel will be at the flat rate fee of TBD cents per rentable square foot excluding any overtime required to manage the asset due to emergencies or after hours maintenance requirements.]

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EXHIBIT B

REQUIRED FORMS AND INFORMATION 

	
		
	1.    
	Obtain and review prior month PPR for changes in leasing activity(as noted in Tenant tab of PPR) and other issues or property activity (as noted in Asset Summary tab of PPR) or other sections of PPR, consider impact of these changes on expected trends on the income statement when reviewing 12 month income statement. Consider among other things: 
*Increases in occupancy or new leases, correlate with an increase in revenues  
*Decreases in occupancy or expiring leases, correlate with a decrease in revenues 
*Early terminations, correlate with lease termination income, decrease in revenues in the future, and consideration for write-off of intangible assets, accounts receivable and deferred rent 
*Early renewals, access whether rental rate decreased, possible lease concessions, and corresponding decrease in revenues, consider impact, if any on intangible assets and s/l rent 
*Review manual billing query (MANUALREV) and consider impact on s/l rent and correctness of billings

	2.    
	Based on review of prior month PPR and updated PPR information provided in monthly report package, consider appropriateness of capital accruals (acct 2023), work in progress ("WIP"), and assets that are currently not being depreciated against status of improvement jobs.  Consider among other things: 
* capital accrual should be based on % complete 
* once job completed or substantially complete, should be reclassed out of WIP 
* depreciation should begin once work is completed or substantially complete and be depreciated over its useful life (Bldg Improvements may not necessarily be deprec over 39 years depending on type of improvement, eg. roof replacement generally 10 to 15 years, useful life should be based on estimate provided by property manager or asset manager.  LC/TI's depreciated over life of lease).

	3.    
	Based on review of prior month PPR, consider early vacating tenants and comments in A/R table, in considering adequacy and appropriateness of Allowance for Doubtful Accounts against both A/R and Deferred Rent (s/l rent asset based on base rent only).

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	4.    
	Review comparative balance sheet (current month a year ago, year end, prior month, current month) for reasonableness of trend. Considering among other things: 
* Appropriateness of changes in balances.  For instance, in general, real estate would go up unless property was sold.   A decrease may be an indication of a journal entry accrual reversal that may need to be reset up or an item that has been overaccrued for in which case no adjustment may be needed. Also consider reasonableness of increases based on current improvement and leasing activity. 
*Appropriateness of cyclical accruals such as property taxes against accrual same time previous year 
*Reasonableness of Allowance for Doubtful Accounts based on PPR review and in relation to change and size of A/R balance 
*Appropriateness of static balances.  Eg.  Utility deposits are generally static and might be ok; while a static balance in other assets should be investigated.

	5.    
	Review 12 month income statement for appropriateness of trends over 12 months, considering impact of leasing activity above and items subject to seasonality such as utility expenses and related reimbursement income.  
Compare Total YTD column on 12 month income statement to Total Budget column and review significant variances for reasonableness.   Consider comments in prior month PPR and included in monthly accrual package

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EXHIBIT E
SCHEDULE OF SOURCES AND USES OF FUNDS

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LIMITED LIABILITY COMPANY AGREEMENT 
OF KBS SOR II 210 WEST 31ST STREET, LLC
THIS AGREEMENT HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES ACT OF 1933, 15 U.S.C. § 15b ET SEQ., AS AMENDED (THE “FEDERAL ACT”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF THE FEDERAL ACT.  IN ADDITION, THE ISSUANCE OF THIS SECURITY HAS NOT BEEN QUALIFIED UNDER THE DELAWARE SECURITIES ACT OR ANY OTHER STATE SECURITIES LAWS (COLLECTIVELY, THE “STATE ACTS”), IN RELIANCE UPON ONE (1) OR MORE EXEMPTIONS FROM THE REGISTRATION PROVISIONS OF THE STATE ACTS.  IT IS UNLAWFUL TO CONSUMMATE A SALE OR OTHER TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN TO, OR TO RECEIVE ANY CONSIDERATION THEREFOR FROM, ANY PERSON OR ENTITY WITHOUT THE OPINION OF COUNSEL FOR THE COMPANY THAT THE PROPOSED SALE OR OTHER TRANSFER OF THIS SECURITY DOES NOT AFFECT THE AVAILABILITY TO THE COMPANY OF SUCH EXEMPTIONS FROM REGISTRATION AND QUALIFICATION, AND THAT SUCH PROPOSED SALE OR OTHER TRANSFER IS IN COMPLIANCE WITH ALL APPLICABLE STATE AND FEDERAL SECURITIES LAWS.  THE TRANSFER OF THIS SECURITY IS FURTHER RESTRICTED UNDER THE TERMS OF THE LIMITED LIABILITY COMPANY AGREEMENT GOVERNING THE COMPANY, A COPY OF WHICH IS ON FILE WITH THE COMPANY.

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