-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HhyAV3c/Yu5k4/BzRh85I6qe+crgSdOR/Fu0bWtW43iyw9/S9m5DfHxGiO0c0No4 oQE1pntjeABqK3+Tfwk27A== 0001157523-03-000425.txt : 20030219 0001157523-03-000425.hdr.sgml : 20030219 20030219160947 ACCESSION NUMBER: 0001157523-03-000425 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20021206 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KOGER EQUITY INC CENTRAL INDEX KEY: 0000835664 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 592898045 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09997 FILM NUMBER: 03572805 BUSINESS ADDRESS: STREET 1: 8880 FREEDOM CROSSING TRAIL CITY: JACKSONVILLE STATE: FL ZIP: 32256 BUSINESS PHONE: 9047321000 MAIL ADDRESS: STREET 1: 8880 FREEDOM CROSSING TRAIL CITY: JACKSONVILLE STATE: FL ZIP: 32256 8-K/A 1 a4339684.txt KOGER EQUITY 8-K/A SECURITIES and EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): December 6, 2002 KOGER EQUITY, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) FLORIDA - -------------------------------------------------------------------------------- (State or other jurisdiction of incorporation) 1-9997 59-2898045 - -------------------------------------------------------------------------------- (Commission File Number) (IRS Employer Identification No.) 225 NE Mizner Boulevard, Suite 200 Boca Raton, Florida 33432 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (561) 395-9666 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Koger Equity, Inc. (the "Company") is amending its Form 8-K filed on December 17, 2002, to include (i) a Statement of Revenues and Certain Expenses for The Lakes on Post Oak for the year ended December 31, 2001 as required by Rule 3-14 of Regulation S-X of the Securities and Exchange Commission and (ii) unaudited pro forma financial statements including (a) the Company's pro forma balance sheet as of December 31, 2001, as if the acquisition of The Lakes on Post Oak occurred on December 31, 2001, (b) the Company's pro forma statement of operations for the year ended December 31, 2001, as if the acquisition of The Lakes on Post Oak occurred on January 1, 2001, and (c) a pro forma statement of estimated taxable operating results and estimated cash to be made available by operations of the Company for the year ended December 31, 2001, as if the acquisition of The Lakes on Post Oak occurred on January 1, 2001. Item 2. Acquisition or Disposition of Assets. On December 6, 2002, Koger Equity, Inc. (the "Company") acquired The Lakes on Post Oak (the "Property") in Houston, Texas for approximately $102 million. The Property is comprised of three office buildings adjacent to the Galleria Mall, which contain approximately 1.2 million square feet of rentable space. The funds required for this acquisition were drawn from a $77 million mortgage secured by the Property and from the Company's secured revolving credit facility. The Property was acquired from 4849 Greenville I, Ltd. and West Oak/Nissei Associates, unrelated third parties. The Company considered various factors in determining the price to be paid for this acquisition. Factors considered included the nature of the tenants and terms of leases in place, opportunities for alternative and new tenancies, historical and expected cash flows, occupancy rates, current operating costs on the Property and anticipated changes therein under Company ownership, the physical condition and location of the Property, the need for capital improvements, the anticipated effect on the Company's financial results, and other factors. The Company took into consideration capitalization rates at which it believed other comparable properties had recently sold. However, the Company determined the price it was willing to pay primarily on the factors discussed above relating to the Property itself and its fit into the Company's existing operations. No separate independent appraisal was obtained in connection with this acquisition. The Company, after investigation, is not aware of any material factors, other than those discussed above, that would cause the financial information reported not to be necessarily indicative of future operating results. The Company intends to lease office space in the Property to tenants as it does the other office buildings contained in its portfolio. The Property will be managed and leased by a third party management company. 1 Item 7. Financial Statements and Exhibits Listed below are the financial statements, pro forma financial information and exhibits, if any, filed as part of this report. (a) Financial Statements of Real Estate Acquired. Statement of Revenues and Certain Expenses of The Lakes on Post Oak for the year ended December 31, 2001. 2 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders of Koger Equity, Inc. Boca Raton, Florida: We have audited the accompanying statement of revenues and certain expenses of the property known as The Lakes on Post Oak (the "Property") for the year ended December 31, 2001. On December 6, 2002, the Property was acquired by Koger Post Oak Limited Partnership, a wholly owned subsidiary of Koger Equity, Inc. This financial statement is the responsibility of the Property's former management. Our responsibility is to express an opinion on the financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying statement of revenues and certain expenses was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the filing of a Form 8-K/A of Koger Equity, Inc. dated December 6, 2002 as a result of the acquisition of the Property). Material amounts, described in Note 1 to the statement of revenues and certain expenses, that would not be comparable to those resulting from future operations of the Property are excluded and the statement is not intended to be a complete presentation of the Property's revenues and expenses. In our opinion, the financial statement referred to above presents fairly, in all material respects, the revenues and certain expenses of the Property for the year ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Certified Public Accountants West Palm Beach, Florida February 7, 2003 3
THE LAKES ON POST OAK- HOUSTON, TEXAS STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2001 REVENUES: Base rental income $ 17,189,224 Operating expense recovery 1,906,021 Parking, antennae, and other income 781,955 ------------ Total revenues 19,877,200 ------------ CERTAIN EXPENSES: Property operating 6,007,319 Real estate and other taxes 3,088,900 Management costs and fees 1,028,193 ------------ Total certain expenses 10,124,412 ----------- REVENUES IN EXCESS OF CERTAIN EXPENSES $ 9,752,788 ============ See notes to statement of revenues and certain expenses.
4 THE LAKES ON POST OAK- HOUSTON, TEXAS NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2001 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Lakes on Post Oak (the "Property"), three office buildings containing approximately 1.2 million square feet and located in Houston, Texas, was acquired by Koger Post Oak Limited Partnership, a wholly owned subsidiary of Koger Equity, Inc. (the "Company") on December 6, 2002. The statement of revenues and certain expenses includes information related to the operations of the Property for the year ended December 31, 2001 as recorded by the Property's previous owners, 4849 Greenville I, Ltd. and West Oak/Nissei Associates, subject to the adjustments described below. The accompanying historical financial statement information is presented in conformity with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission. Accordingly, the financial statement is not representative of the actual operations for the year ended December 31, 2001 as certain expenses, which may not be comparable to the expenses expected to be incurred in the future operations of the Property, have been excluded. Expenses excluded consist of interest, depreciation and amortization, and other costs not directly related to the future operations of the acquired property. Management's Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Rental Income - Rental income is recognized on a straight-line basis over the terms of the related leases. Property Operating Expenses - Property operating expenses consist primarily of utilities, insurance, repairs and maintenance, security and safety, cleaning, bad debts and other administrative expenses. Management Costs and Fees - The Property was managed by a third party manager for a property management fee of four percent of rental and other revenues plus reimbursement of personnel and other costs related to management of the properties. 5 THE LAKES ON POST OAK- HOUSTON, TEXAS NOTES TO STATEMENT OF REVENUES AND CERTAIN EXPENSES YEAR ENDED DECEMBER 31, 2001 2. OPERATING LEASES Operating revenue is principally obtained from business tenant rentals under operating leases. Future minimum rentals under all tenant operating leases as of December 31, 2001 are as follows:
Year ending December 31, Amount - ------------------------ -------------- 2002 $ 17,044,769 2003 15,303,772 2004 12,103,976 2005 10,090,337 2006 9,065,322 Thereafter 21,367,625 ------------- Total $ 84,975,801 =============
For the year ended December 31, 2001, Bechtel Corporation contributed approximately 39% of the Property's base rental revenues. 6 (b) Pro Forma Financial Statements The following unaudited pro forma financial statements set forth (i) the pro forma balance sheet as of December 31, 2001, as if the acquisition occurred on December 31, 2001, and (ii) the pro forma statement of operations for the year ended December 31, 2001, as if the acquisition occurred on January 1, 2001. The pro forma financial statements are based upon assumptions contained in the notes thereto and should be read in conjunction with such notes. The following unaudited pro forma financial statements may not necessarily reflect the results of operations or financial position of the Company which would have actually resulted had the acquisition occurred as of the date and for the periods indicated, nor should they be taken as indicative of the future results of operations or the future financial position of the Company. Differences would result from various factors, including but not limited to changes in the Property's occupancy, rental rates and rental expenses, and changes in the interest rates assumed on the Company's secured revolving credit facility and the mortgage on the Property. 7
KOGER EQUITY, INC. UNAUDITED PRO FORMA BALANCE SHEET December 31, 2001 (In Thousands) Historical Pro Forma Pro Forma 12/31/2001 Adjustments 12/31/2001 ------------ -------------- ------------ ASSETS Operating properties: Real estate $ 660,204 $ 103,065 (a) $ 763,269 Furniture and equipment 3,082 3,082 Accumulated depreciation (123,999) (123,999) --------- --------- ---------- Operating properties - net 539,287 103,065 642,352 Undeveloped land held for investment 13,779 13,779 Undeveloped land held for sale, net 76 76 Cash and cash equivalents 113,370 (3,000) (a) 110,370 Restricted cash 13,340 (a) 13,340 Accounts receivable, net 11,574 11,574 Cost in excess of fair value of net assets acquired - net 595 595 Other assets 11,904 1,232 (a) 13,136 ---------- ---------- ---------- TOTAL ASSETS $ 690,585 $ 114,637 $ 805,222 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Mortgages and loans payable $ 248,683 $ 110,873 (a) $ 359,556 Accounts payable 4,962 4,962 Accrued real estate taxes payable 1,007 1,007 Accrued liabilities - other 9,206 2,752 (a) 11,958 Dividends payable 44,159 44,159 Advance rents and security deposits 5,103 1,012 (a) 6,115 ---------- ----------- ---------- Total Liabilities 313,120 114,637 427,757 ---------- ----------- ---------- Minority interest 22,923 22,923 ---------- ----------- ---------- Shareholders' Equity: Common stock 297 297 Capital in excess of par value 469,779 469,779 Notes receivable from stock sales (5,066) (5,066) Retained earnings 21,180 21,180 Treasury stock, at cost (131,648) (131,648) ---------- ----------- ---------- Total Shareholders' Equity 354,542 354,542 ---------- ----------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 690,585 $ 114,637 $ 805,222 ========== =========== ==========
See accompanying notes to unaudited pro forma financial statements. 8
KOGER EQUITY, INC. UNAUDITED PRO FORMA STATEMENT OF OPERATIONS For the year ended December 31, 2001 (In Thousands except per Share Data) Historical Pro Forma Pro Forma 2001 Adjustments 2001 ---------- ----------- ---------- REVENUES Rental and other rental services $165,623 $19,877 (a) $185,500 Management fees 4,080 4,080 Interest 776 (30) (b) 746 Income from Koger Realty Services, Inc. 81 81 ---------- ---------- --------- Total revenues 170,560 19,847 190,407 ---------- ---------- --------- EXPENSES Property operations 61,608 10,124 (a) 71,732 Depreciation and amortization 36,007 2,446 (c) 38,453 Mortgage and loan interest 25,204 7,099 (d) 32,303 General and administrative 8,412 8,412 Direct cost of management fees 3,378 3,378 Other 189 189 ---------- ---------- --------- Total expenses 134,798 19,669 154,467 ---------- ---------- --------- INCOME BEFORE GAIN ON SALE OF ASSETS, INCOME TAXES AND MINORITY INTEREST 35,762 178 35,940 Gain on sale of assets 39,189 39,189 ---------- ---------- --------- INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 74,951 178 75,129 Income tax provision 684 55 (e) 739 ---------- ---------- --------- INCOME BEFORE MINORITY INTEREST 74,267 123 74,390 Minority interest 1,044 1,044 ---------- ---------- --------- NET INCOME $73,223 $123 $73,346 ========== ========== ========= EARNINGS PER COMMON SHARE: Basic $2.76 $2.77 ========= ========= Diluted $2.75 $2.76 ========= ========= WEIGHTED AVERAGE COMMON SHARES: Basic 26,517 26,517 ========= ========= Diluted 26,610 26,610 ========= =========
See accompanying notes to unaudited pro forma financial statements. 9 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS 1. Basis of Presentation On December 6, 2002, Koger Post Oak Limited Partnership, a wholly-owned subsidiary of Koger Equity, Inc. (the "Company"), acquired The Lakes on Post Oak (the "Property"), three office buildings containing approximately 1.2 million square feet and located in Houston, Texas. This acquisition was funded with the Company's existing cash reserves, a $77.0 million mortgage secured by the Property (a portion of which was set aside by the lender as restricted cash to fund future capital improvements and leasing costs), and $33.9 million from the Company's secured revolving credit facility. The Company intends to lease office space in the Property to tenants as it does the other office buildings contained in its portfolio. The Property will be managed and leased by a third party management company. 2. Unaudited Pro Forma Balance Sheet The unaudited pro forma balance sheet as of December 31, 2001 is based on the historical balance sheet for the Company presented in the Annual Report on Form 10-K for the year ended December 31, 2001. The unaudited pro forma balance sheet includes adjustments assuming this acquisition occurred as of December 31, 2001. Significant pro forma adjustments in the unaudited pro forma balance sheet include the following: (a) The Company purchased the Property, located in Houston, Texas, for $102 million plus acquisition costs. This acquisition was funded with the Company's existing cash reserves, a $77.0 million mortgage secured by the Property (a portion of which was set aside by the lender as restricted cash to fund future capital improvements and leasing costs), and $33.9 million from the Company's secured revolving credit facility. The Company intends to make capital improvements of approximately $6.9 million and $5.8 million to the Property during the year ended December 31, 2003 and thereafter, respectively. These expenditures will be funded from the Company's restricted cash balances as necessary based upon leasing activity at the Property. 10 KOGER EQUITY, INC. NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS (continued) 3. Unaudited Pro Forma Statement of Operations The unaudited pro forma statement of operations for the year ended December 31, 2001 is based on the historical statement of operations for the Company presented in the Annual Report on Form 10-K for the year ended December 31, 2001. The unaudited pro forma statement of operations includes adjustments assuming that the acquisition of the Property occurred as of January 1, 2001. Significant pro forma adjustments in the unaudited pro forma statement of operations include the following: (a) Adjustment required for the historical rental revenues and operating expenses for the Property. Operating expenses include management costs and fees calculated using the historical management costs of the Property. The Property was managed by a third party manager for a property management fee of four percent of rental and other revenues plus reimbursement of personnel and other costs related to management of the properties. The Company has engaged a third-party manager to operate the Property at a management fee rate of 1.35 percent of total rental and other revenues of the Property. Approximately 30% of the Property's rentable office space was vacant at the time of the Company's acquisition of the Property. The Company expects to lease substantially all of this vacant space over the next three years. (b) Adjustment required to reflect forfeited interest income on cash paid for the Property of approximately $3.0 million. The estimated average interest rate used to calculate this adjustment was 1.0 percent. (c) Adjustment required to reflect depreciation on the Property, based on the total cost of the acquisition. The Company uses the straight-line method for depreciation and amortization using an estimated life of 39 years for the Property. (d) Adjustment required to reflect interest expense related to the amounts drawn on the Property's mortgage ($77.0 million) and the Company's secured revolving credit facility ($33.9 million) to fund the acquisition of the Property. The estimated average interest rate on the Property's mortgage and the Company's secured revolving credit facility were 6.8 percent and 5.5 percent, respectively. (e) Adjustment required to reflect applicable federal income and state franchise taxes on the Property's taxable income. The Property's taxable income has been reduced by ninety percent for dividends paid to the Company's shareholders. 11
KOGER EQUITY, INC. UNAUDITED STATEMENT OF ESTIMATED TAXABLE OPERATING RESULTS AND ESTIMATED CASH TO BE MADE AVAILABLE BY OPERATIONS FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2001 (In Thousands) Revenues Rental and other rental services $183,901 Management fees 4,080 Interest 746 --------- Total revenues 188,727 --------- Expenses Property operations 72,029 Depreciation and amortization 29,979 Mortgage and loan interest 32,303 General and administrative 8,621 Direct cost of management fees 3,378 Other 189 Compensation - exercise of stock options 365 --------- Total expenses 146,864 --------- Estimated Taxable Operating Income 41,863 Add Back: Depreciation and Amortization 29,979 --------- Estimated Cash To Be Made Available By Operations $ 71,842 =========
Note 1: This statement of estimated taxable operating results and estimated cash to be made available by operations is an estimate of operating results of the Company for the twelve month period ended December 31, 2001 assuming that the acquisition of the Lakes on Post Oak occurred on the first day of the twelve month period. However, this statement does not purport to reflect actual taxable results for any period. Note 2: Tax depreciation was determined based upon the actual tax depreciation for the Company's existing portfolio and based upon the assumption that the acquisition of the Lakes on Post Oak occurred on the first day of the twelve month period. 12 (c) Exhibits
EXHIBIT INDEX The following designated exhibits are filed herewith: Exhibit Number Description of Exhibit ------- ---------------------- 10(a) Koger Post Oak Partnership Limited Partnership Agreement, dated December 2, 2002, Between Koger Post Oak, Inc. and Koger Equity, Inc. (the "Company") 10(b) Loan Agreement dated as of December 6, 2002 Between Koger Post Oak Limited Partnership, as Borrower, (the "Partnership") and Column Financial, Inc., as Lender (the "Lender"). 10(c) Deed of Trust and Security Agreement, dated as of December 6, 2002, given by the Partnership to David Parnell, as Trustee for the benefit of the Lender. 10(d) Promissory Note, dated December 6, 2002, issued by the Partnership payable to the Lender, in the principal amount of $77,000,000. 10(e) Assignment of Leases and Rents dated as of December 6, 2002, given by the Partnership to the Lender. 10(f) Guaranty Agreement, dated December 6, 2002, executed by the Company for the benefit of the Lender. 10(g) Assignment of Management Agreement and Subordination of Management Fees, dated as of December 6, 2002, given by the Partnership to Lender and consented and agreed to by Cottonwood Partners Management Ltd. (the "Manager"). 10(h) Assignment of Management Agreement and Subordination of Management Fees, dated as of December 6, 2002, given by the Partnership to Lender and consented and agreed to by Hines Interests Limited Partnership (the "Manager"). 10(i) Collateral Assignment of Interest Rate Protection Agreement, dated as of December 6, 2002, by the Partnership in favor of the Lender. 10(j) Deposit Account Agreement, dated as of December 6, 2002, by and among the Partnership and the Lender. 10(k) Environmental Indemnity Agreement, dated as of December 6, 2002, by the Partnership in favor of the Lender. 23 Consent of Deloitte and Touche LLP 99 Koger Equity, Inc. News Release dated December 10, 2002 which is Exhibit 99 to the Company's current report on Form 8-K dated December 10, 2002 which Exhibit is incorporated herein by reference.
13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. KOGER EQUITY, INC. Dated: February 17, 2003 By: /s/ THOMAS J. CROCKER ------------------------------ Thomas J. Crocker Title: Chief Executive Officer 14 Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-55179 of Koger Equity, Inc. on Form S-3, Registration Statement No. 33-54617 of Koger Equity , Inc. on Form S-8, Registration Statement No. 333-20975 of Koger Equity, Inc. on Form S-3, Registration Statement No. 333-23429 of Koger Equity, Inc. on Form S-8, Registration Statement No. 333-37919 of Koger Equity, Inc. on Form S-3, Registration Statement No. 333-33388 of Koger Equity, Inc. on Form S-8 and Registration Statement No. 333-38712 of Koger Equity, Inc. on Form S-8 of our report dated February 7, 2003, on the statement of revenues and certain expenses of The Lakes on Post Oak for the year ended December 31, 2001 appearing in this Current Report on Form 8-K/A of Koger Equity, Inc., dated December 6, 2002. DELOITTE & TOUCHE LLP West Palm Beach, Florida February 17, 2003 15 EX-10 3 a4339684-10a.txt KOGER EXHIBIT 10-A LIMITED PARTNERSHIP AGREEMENT OF KOGER POST OAK LIMITED PARTNERSHIP THIS AGREEMENT of Limited Partnership is made and entered into as of December 2, 2002, by and between KOGER POST OAK, INC., a Delaware corporation ("KPO" or "General Partner"), and KOGER EQUITY, INC. ("KE" or "Limited Partner"). WITNESSETH: WHEREAS, the Partners desire to enter into this Agreement to more fully set forth their respective rights and obligations. IN WITNESS WHEREOF, the parties hereto do hereby agree to the following terms and conditions: Section 1. Definitions. As used in this Agreement, the following terms have the definitions as hereinafter indicated (unless otherwise specifically indicated): "Adjusted Capital Account Deficit" shall mean, with respect to any Partner, the deficit balance, if any, in such Partner's Capital Account as of the end of the applicable fiscal year after (i) crediting thereto any amounts which such Partner is, or is deemed to be, obligated to restore pursuant to Regulations ss. 1.704-2(g)(1) and ss. 1.704-2(i)(5) and (ii) debiting such Capital Account by the amount of the items described in Regulations ss. 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulation ss. 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith. "Affiliate" means any Person that directly or indirectly Controls, is Controlled By, or is Under Common Control With any Partner, and any spouse, ancestor or lineal descendant of any individual Partner. "Agreement" means this Limited Partnership Agreement, as it may be amended or modified from time to time in accordance with Section 21. "Capital Account" means an amount computed as provided in Section 5.5. "Capital Contribution(s)" means, with respect to any Partner, the aggregate amount contributed by such Partner to the capital of the Partnership. "Capital Loan" shall have the meaning provided in Section 16.1 hereof. "Certificates" means any issue of securities issued in respect of a pool of mortgage loans that includes the First Mortgage. 1 "Code" means the Internal Revenue Code of 1986, as amended. "Control" of a Person (including, with correlative meaning, the terms "Controlling," "Controlled by" and "Under Common Control With") shall mean (x) the beneficial ownership (as defined in Rule 13d-3 under the Securities and Exchange Act of 1934) of 10 percent or more of the voting securities of such Person, (y) the status of being a director, officer, partner, executor, trustee or other fiduciary of such Person or (z) the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by contract or otherwise. For purposes of the foregoing, the managing partner of a general or limited partnership and any general partner of a limited partnership and the adviser of a partnership, corporation, trust or other entity shall be deemed to be in control thereof. "Defaulting Partner" shall have the meaning provided in Section 16.1 hereof. "Deficiency" shall have the meaning provided in Section 16.1 hereof. "First Mortgage" means the mortgage note loan from the Lender to the Partnership expected to be entered into in December 2002. "Fiscal Year" means calendar year. "General Partner" means KPO and any other Person admitted pursuant to this Agreement, as a general partner to the Partnership and their successors. "Income" means gross income of the Partnership for any Fiscal Year determined on the basis utilized in preparing the Partnership's federal income tax information return including gains realized on the sale, exchange or other disposition of the Partnership's assets. "Interest" or "Partnership Interest" means the ownership interest of a Partner in Partnership capital and the Partnership generally as set forth in Section 5.3(a), including the right of a Partner to any and all benefits to which the Partner may be entitled as provided in this Agreement and in the Partnership Act, together with the obligations of the Partner to comply with all the terms and provisions of this Agreement and of the Partnership Act. "Independent Director" means as the term is defined in the Certificate of Incorporation of the General Partner. "IRS" means the Internal Revenue Service. "Lender" means Column Financial, Inc., a Delaware corporation, and its successors and assigns. "Limited Partner" shall mean KE. "Loan Documents" shall mean (i) the First Mortgage and any and all other financing documents entered into with the Lender in connection with the First Mortgage, as such documents may be amended, or (ii) any other financing documents entered into by the Partnership with any lender from time to time. 2 "Loss" means the aggregate of losses and deductions of the Partnership for each year, determined on the basis utilized in preparing the Partnership's federal income tax information return including losses incurred on the sale, exchange or other disposition of the Partnership's assets. "Major Decisions" shall have the meaning provided in Section 10.3 hereof. "Net Cash Flow" means, for the applicable period, all cash receipts of the Partnership excluding (i) receipts of Capital Contributions to the Partnership; (ii) proceeds from loans to the Partnership and (iii) proceeds from Net Sales and Financing Proceeds, less (w) all operating expenses of the Partnership other than any expense not involving a cash expenditure (such as any amount charged for amortization or depreciation); (x) all payments on account of any loans made to, and obligations of, the Partnership; (y) any sum expended by the Partnership for capital expenditures; and (z) cash reserves for working capital or other purposes determined after consideration of the Partnership's financial position, including anticipated operating income, expenses, liabilities, debt service, capital expenditures and prudent reserves, the aggregate amount of which shall be reasonably determined by the General Partner. "Net Sale and Financing Proceeds" shall mean the net proceeds from all financings or refinancings or sales or dispositions and takings of the Project or any part thereof, and proceeds arising from casualty to the Project or any part thereof, after the payment of all costs and other expenses related thereto and the payment for any capital expenditures or other expenses for which such proceeds are used and the satisfaction of any debt being refinanced or discharged and any other debts or liabilities of the Project for which the Partners decide to use the same, and the setting aside of any reserves therefrom. "Non-Consolidation Opinion" shall mean an opinion of counsel to the Partnership (reasonably satisfactory to the Lender and each Rating agency in form and substance, from counsel reasonably satisfactory to the Lender and each Rating Agency and containing assumptions, limitations and qualifications customary for opinions of such type) to the effect that a court of competent jurisdiction in a proceeding under the United States Bankruptcy Code would not consolidate the assets and liabilities of the Partnership with those of any partner or Affiliate thereof which became a debtor under the United States Bankruptcy Code (and would not consolidate the assets and liabilities of the Corporation with those of any equity owner thereof which became a debtor under the United States Bankruptcy Code). "Nondefaulting Partners" shall have the meaning provided in Section 16.1 hereof. "Nonrecourse Deduction" shall have the meaning set forth in Regulation ss. 1.704-2(b)(1). "Nonrecourse Liability" shall have the meaning set forth in Regulations ss. 1.704-2(b)(3). "Partner" means the General Partner or any Limited Partner. 3 "Partner Group" shall mean the Stein Group or the Sutton Group, as the case may be. "Partner Minimum Gain" shall mean an amount, determined in accordance with Regulations ss. 1.704-2(i)(3) with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if such Partner Nonrecourse Debt were treated as a Nonrecourse Liability. "Partner Nonrecourse Debt" shall have the meaning given such term in Regulations ss. 1.704-2(b)(4). "Partner Nonrecourse Deductions" shall have the meaning given such term in Regulations ss. 1.704-2(i). "Partners" shall mean, collectively, all of the Limited Partners and the General Partner. "Partnership" means Koger Post Oak Limited Partnership, a Delaware limited partnership. "Partnership Act" means the Delaware Revised Uniform Limited Partnership Act, as amended. "Partnership Minimum Gain" shall have the meaning attributed to "partnership minimum gain" as set forth in Regulations ss. 1.704-2(b)(2) and 1.704-2(d). "Partnership Property" shall mean the Property, and any improvements constructed thereon, and all other assets, real or personal, tangible or intangible, now or hereafter owned by the Partnership. "Percentage Interest" shall have the meaning given such term in Section 5.3 hereof. "Permitted Transferee" shall have the meaning provided in Section 13.1 hereof. "Person" means any individual, partnership, corporation, trust, association, limited liability company or other entity. "Prime Rate" shall mean the prime rate announced as such from time to time in the Citibank, N.A. as in effect from time to time. Any interest payable under this Agreement with reference to the Prime Rate shall be adjusted on a daily basis and shall be calculated on the basis of a 360 day year with 12 months of 30 days each. "Property" shall mean the buildings located at 3000 Post Oak Boulevard, Houston, Texas, 3040 Post Oak Boulevard, Houston, Texas, and 3050 Post Oak Boulevard, Houston, Texas. 4 "Purchase and Sale Agreements" shall mean that certain Agreement of Purchase and Sale between Koger Equity, Inc. and 4849 Greenville I, Ltd. dated October 4, 2002 and between Koger Equity, Inc. and West Oak/Nissei Associates dated October 8, 2002. "Rating Agency" means any nationally recognized rating agency that has been requested by the Lender or any transferee of the Lender to rate any Certificates which is then rating, or expected to rate, such Certificates. "Regulations" means the Treasury Regulations promulgated pursuant to the Code, as amended. "Requested Amount" shall have the meaning provided in Section 16.1 hereof. "Single Purpose Entity" shall have the meaning provided in the First Mortgage, provided however, any Single Purpose Entity shall have at least two Independent Directors (as such term is defined in the certificate of incorporation of the General Partner). "State" means the State of Delaware. "Substituted Limited Partner" means any Person admitted to the Partnership as a limited partner pursuant to Section 13.4. "Transfer" shall mean any transfer, conveyance, pledge, hypothecation, encumbrance, assignment, or other disposition, in whole or in part. Section 2. Organization of Partnership. 2.1. Formation. The Partnership was formed by the General Partner upon the filing of the Certificate of Limited Partnership pursuant to the provisions of the Partnership Act. The rights and liabilities of the Partners shall be as provided in the Partnership Act except as herein otherwise expressly provided. 2.2. Name; Filing. The Partnership shall be called KOGER POST OAK LIMITED PARTNERSHIP. All business of the Partnership shall be conducted under such name or such other name as the General Partner deems necessary or appropriate to comply with the requirements of law in any jurisdiction in which the Partnership may elect to do business. The Partners shall promptly execute and the General Partner shall file and record with the proper offices in each jurisdiction and political subdivision in which the Partnership does business, all certificates required by each applicable limited partnership act, fictitious name act or similar statute. 2.3. Principal Office. The principal office of the Partnership shall be 433 Plaza Real, Suite 335, Boca Raton, Florida 33432. The Partnership may change the location of its principal office to such other place or places as may be determined from time to time by the General Partner. The General Partner shall promptly notify the Limited Partners of any change in the Partnership's principal office. The Partnership may maintain other offices at other places if the General Partner deems it advisable. 5 Section 3. Purpose of the Partnership and Investment Objectives. The purpose of the Partnership is limited solely to (i) acquiring the Property (ii) financing, improving, leasing, operating, transferring, exchanging and managing the Property as permitted under the Loan Documents, (iii) at some future time, marketing the Property, and (iv) engaging in all other activities that are incident, necessary and appropriate to accomplish the foregoing. Section 4. Term. The term of the Partnership shall continue until December 31, 2052, unless sooner terminated because of the dissolution or winding-up of the Partnership in accordance with this Agreement or by operation of law or judicial decree. Section 5. Capital Contributions; Capital Accounts. 5.1. General Partner's Initial Capital Contributions. Upon the closing under the Purchase and Sale Agreement, the General Partner shall contribute the amount set forth next to its name on Schedule A hereto. Except as otherwise provided in Section 5.6, the General Partner shall not be obligated to make contributions, advances or loan monies to the Partnership, except to the extent that the General Partner shall be required by the Partnership Act to pay any Partnership liability upon which it shall be obligated in its capacity as a general partner of the Partnership. The General Partner shall not be liable to any Limited Partner for repayment of the Limited Partner's Capital Contribution. 5.2. Initial Capital Contributions of the Limited Partners. Upon execution of this Agreement, KE shall cause all of his rights, title, and interest, in and to the Purchase and Sale Agreements to be contributed to the Partnership and shall receive a credit to its Capital Account in the amount of the earnest money deposit under the Purchase and Sale Agreements. Upon the closing of the Purchase and Sale Agreement, each of the Limited Partners shall contribute the amount set forth next to his, her or its name on Schedule A hereto. 5.3. Percentage Ownership Interest. (a) As of the execution date of this Agreement, each of the Partners has the percentage ownership interest ("Percentage Interest") in the Partnership set forth opposite its name under Column II on Schedule A hereto. 5.4. Return of Capital Contribution. Except as otherwise provided herein, no Partner shall have any right to withdraw or make a demand for withdrawal of the balance reflected in its Capital Account (as determined under Section 5.5) until the full and complete winding up and liquidation of the business of the Partnership, unless agreed otherwise by all of the Partners. 5.5. Capital Accounts. (a) An individual Capital Account shall be maintained for each Partner in accordance with Section 1.704-1(b)(iv) of the Regulations. The Capital Account of each Partner will reflect the amount of such Partner's initial contribution to the capital of the Partnership. (b) Each Partner's Capital Account shall be increased by: 6 (i) All additional Capital Contributions to the capital of the Partnership by the Partner, (ii) The Partner's share of Income allocated to such Partner under Section 7 and the Partner's share of the gain on the sale or other disposition of Partnership assets allocated to such Partner under Section 7, and (iii) The Partner's share of income or profits, if any, not otherwise taken into account in this Section 5.5(b). (c) Each Partner's Capital Account shall be decreased by: (i) All distributions made to such Partner pursuant to Sections 6 and Section 18.3(d), (e) and (f); (ii) The Partner's share of Loss allocated to such Partner under Section 7; (iii) The Partner's share of Partnership expenses or losses, if any, not otherwise taken into account in this Section 5.5(c). 5.6. Additional Funds. In the event that the General Partner determines in its reasonable discretion at any future time that additional funds are necessary to carry on the purposes of the Partnership, upon providing five (5) days prior written notice to the Partners, the Partners shall contribute additional funds to the Partnership pro rata in proportion to their respective Percentage Interests. 5.7. No Interest on Capital. Interest earned on Partnership funds shall inure solely to the benefit of the Partnership, and no interest shall be paid upon any contributions to the capital of the Partnership nor upon any undistributed or reinvested income or profits of the Partnership. Section 6. Distributions. 6.1. Distributions of Net Cash Flow. Except as otherwise provided in Section 18.3, Net Cash Flow shall be distributed at such time or times as the General Partner shall determine in its sole discretion, provided that Net Cash Flow shall be distributed at least once quarterly, to the Partners pro rata in accordance with their respective Percentage Interests. 6.2. Distributions of Net Sale and Refinancing Proceeds. Except as otherwise provided in Section 18.3, Net Sales and Refinancing Proceeds shall be distributed to the Partners at such time or times as the General Partner so determines, in its reasonable discretion, provided that Net Sales and Refinancing Proceeds shall be distributed at least once quarterly to the Partners pro rata in accordance with their respective Percentage Interests. 7 Section 7. Allocation of Income and Loss and of Gain and Loss on Disposition of Partnership Assets. 7.1. Allocation of Income and Loss. (a) Allocation of Loss. Subject to Section 7.2, Loss shall be allocated among the Partners at the end of each Fiscal Year in the following order of priority: (i) First, to the Partners until the cumulative amount of Loss allocated under this Section 7.1(a)(i) equals the excess, if any, of the cumulative allocations of Income to the Partners pursuant to Section 7.1(b)(ii), over the cumulative amount of distributions to such Partners under Sections 6.1, 6.2 and 18.3(d), such allocations being made in proportion to such prior allocations of Income made pursuant to Section 7.1(b)(ii), over the cumulative amount of distributions to such Partners under Sections 6.1(b), 6.2(c) and 18.3(d), such allocations being made in proportion to such prior allocations of Income made pursuant to Section 7.1(b)(ii); and (ii) Thereafter, to the Partners pro rata in proportion to their respective Percentage Interests. (b) Allocation of Income. Subject to Section 7.2, Income shall be allocated among the Partners at the end of each Fiscal Year in the following order of priority: (i) First, to the Partners until the cumulative amount of Income allocated pursuant to this Section 7.1(b)(i) equals the cumulative amount of Loss allocated pursuant to Section 7.1(a)(ii), such allocation being made in proportion to such prior allocations of Loss pursuant to Section 7.1(a)(ii) made to each such Partner; and (ii) Thereafter, to the Partners pro rata in proportion to their respective Percentage Interests. 7.2. Special Allocations. Notwithstanding any of the provisions of Section 7 to the contrary, the following special allocations shall be made in the following order: (a) Minimum Gain Chargeback. If there is a net decrease in Partnership Minimum Gain during any fiscal year, each Partner shall be specially allocated items of Partnership income and gain for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Partner's share of the net decrease in Partnership Minimum Gain, determined in accordance with Regulations ss. 1.704-2(g). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations ss. 1.704-2(f)(6) and ss. 1.704-2(j)(2). This Section 7.2(a) is intended to comply with the minimum gain chargeback requirement in Regulations ss. 1.704-2(f) and shall be interpreted consistently therewith. To the extent permitted by such Regulations and for purposes of this Section 7.2(a) only, each Partner's net decrease in Partnership Minimum Gain shall be determined prior to any other allocations pursuant to this Section 7 with respect to such fiscal year and without regard to any net decrease in Partnership Minimum Gain during such fiscal year. 8 (b) Partner Minimum Gain Chargeback. Notwithstanding any other provision of this Section 7 except Section 7.2(a), if there is a net decrease in Partner Minimum Gain attributable to Partner Nonrecourse Debt during any fiscal year, each Partner who has a share of the Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations ss. 1.704-2(i)(5), shall be specially allocated items of Partnership Income for such fiscal year (and, if necessary, subsequent fiscal years) in an amount equal to such Partner's share of the net decrease in Partner Minimum Gain attributable to such Partner Nonrecourse Debt, determined in accordance with Regulations ss. 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Partner pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations ss. 1.704-2(i)(4) and ss. 1.704-2(j)(2)(ii). This Section 7.2(b) is intended to comply with the minimum gain chargeback requirement in Regulations ss. 1.704-2(i)(4) and shall be interpreted consistently therewith. Solely for purposes of this Section 7.2(b), each Partner's net decrease in Partner Minimum Gain shall be determined prior to any other allocations pursuant to this Section 7 with respect to such fiscal year, other than allocations pursuant to Section 7.2(a). (c) Qualified Income Offset. In the event that any Partner unexpectedly receives any adjustments, allocations, or distributions described in Regulations ss. 1.704-1(b)(2)(ii)(d)(4), (5), or (6), items of Partnership Income shall be specifically allocated to each such Partner in an amount and manner sufficient to eliminate, to the extent required by the Regulations, the Adjusted Capital Account Deficit of such Partner as quickly as possible, provided that an allocation pursuant to this Section 7.2(c) shall be made if and only to the extent that such Partner would have an Adjusted Capital Account Deficit after all other allocations provided for in this Section 7 have been tentatively made as if this Section 7.2(c) were not in this Agreement. The foregoing provision is intended to comply with Regulations ss. 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in a manner consistent with such Regulations. (d) Gross Income Allocation. In the event that any Partner has an Adjusted Capital Account Deficit at the end of any fiscal year, then each such Partner shall be specially allocated items of Partnership income and gain in the amount of such excess as quickly as possible, provided that an allocation pursuant to this Section 7.2(d) shall be made if and only to the extent that such Partner would have an Adjusted Capital Account Deficit in excess of such sum after all other allocations provided for in this Section 7.2 have been tentatively made as if this Section 7.2(d) were not in this Agreement. (e) Nonrecourse Deductions. Any item of Nonrecourse Deduction shall be allocated to the Partners in accordance with their then respective Percentage Interests. (f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for any fiscal year or other period shall be specially allocated to the Partner who bears the economic risk of loss with respect to the Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable in accordance with Regulations ss. 1.704-2(i). 9 (g) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Partnership asset pursuant to Code Section 734(b) or Section 743(b) is required pursuant to Regulations ss. 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Account shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis), and such gain or loss shall be specially allocated to the Partners in a manner consistent with the manner in which their Capital Accounts are required to be adjusted pursuant to such Regulations. (h) Curative Allocations. Any special allocation of items of income or gain pursuant to Section 7.2(a), (b), (c) or (d) shall be taken into account in computing subsequent allocations pursuant to Sections 7.1 and 7.2, so that the net amount of any items allocated to each Partner pursuant to Sections 7.1 and 7.2 shall, to the extent practicable, be equal to the net amount that would have been allocated to each such Partner pursuant to the provisions of such Sections if such special allocations under this Section 7.2 had not occurred. (i) Section 704(c) Property. If the fair market value of property contributed to the Partnership differs from the Partnership's adjusted basis in the contributed property following the transfer, the Income or Loss with respect to the contributed property shall be allocated in accordance with Section 704(c) of the Code. (j) Interest Income. Subject to the other subsections of this Section 7.2, if, in any Partnership fiscal period any interest income for federal income tax purposes shall be imputed to the Partnership with respect to any note delivered to the Partnership by a Partner in payment of a capital contribution, then such interest income shall be allocated in its entirety to the Partner that is the maker of such note. 7.3. Allocation with Respect to Transferred Interests. Each item of Income or Loss allocable to a Partner's Interest that is transferred in whole or in part during any year shall, if permitted by law, be allocated on a daily basis according to the varying Interests of the Partners during the year. 7.4. No Liability of General Partner for Computation or Determination. With respect to all matters (including disputes with respect thereto) relating to computations and determinations required to be made under this Agreement the General Partner may rely upon, and shall have no liability to the Limited Partners or the Partnership if it relies upon, the opinion of independent certified public accountants retained by the Partnership. Section 8. Records, Books of Account and Reports. ------------------------------------- 8.1. Maintenance of Books and Records. Proper and complete records and books of account shall be maintained by the General Partner in which shall be entered fully and accurately all transactions and other matters relative to the Partnership's business as are usually entered into records and books of accounts maintained by persons engaged in business of like character. In addition, the General Partner shall maintain records adequate to file the Partnership's federal income tax information return. The books and records shall upon reasonable notice be made available during regular business hours at the principal office of the Partnership, or such other place or places as the General Partner approves, for the reasonable inspection and examination of any Partner or his duly authorized representatives. Any Partner may at any time request that a firm of independent certified public accountants, acceptable to all of the Partners, audit the Partnership's books and records. The cost of such audit shall be borne by the Partner who requested such audit; provided, however, that if the audit shall disclose any substantial discrepancy from any of the Partnership's books and records of account, the cost of the audit shall be paid by the Partnership. 10 8.2. Tax Information. (a) The General Partner shall serve as the Partnership's "Tax Matters Partner" within the meaning of Section 6231(a)(7) of the Code and shall have all of the powers and duties expressly conferred upon the Tax Matters Partner by the Code, as well as those powers and duties that are necessary and proper for the exercise of the Tax Matters Partner's express powers and duties under the Code. (b) Within 90 days after the end of each calendar year, the General Partner shall send to each person who was a holder of a Partnership Interest at any time during the calendar year then ended (including any assignee permitted under Section 13 without regard to whether the assignee is a Substituted Limited Partner) all Partnership tax information kept on a tax basis as shall be necessary for the preparation of the holder's federal income tax return. This information shall also include a statement showing the share of contributions, distributions, Income, Loss and other relevant fiscal items of the Partnership allocable to the holder's Partnership Interest for such fiscal year. On request by a Partner, the General Partner shall furnish such holder with copies of all federal, state and local income tax returns or information returns, if any, which the Partnership is required to file. In the event any Partner shall report an item inconsistent with the manner in which the Partnership reported such item to the Partner, such Partner shall (i) file all necessary informational statements with the appropriate taxing authority regarding the inconsistent treatment and (ii) disclose the inconsistent treatment to the Partnership. 8.3. Upon a transfer by a Partner of an Interest, or any portion thereof, in the Partnership, which transfer is permitted by the terms hereof, or upon a distribution of the Partnership's property to one or more of the Partners, the General Partner shall cause the Partnership's accountants to file an election on behalf of the Partners, pursuant to Section 754 of the Code, to cause the basis of the Partnership's property to be adjusted for federal income tax purposes in the manner prescribed in Sections 734 or 743 of the Code, as the case may be. The cost of preparing such election, and all additional accounting expenses of the Partnership relating to such election, shall be borne by such transferees or distributees. 8.4. Financial Statements. Within 90 days after the end of each fiscal year, the General Partner shall send to each Partner a balance sheet of the Partnership as of the end of the fiscal year and statements of income, Partners' equity and changes in financial position of the Partnership for the fiscal year. In addition to the foregoing, the General Partner shall deliver to each Partner, within 45 days after the end of each Partnership fiscal quarter, Partnership financial statements for the fiscal quarter then ended. 8.5. Separateness Provisions. Notwithstanding any other provisions of this Agreement to the contrary, the Partnership shall: 11 (i) maintain books and records separate from any other person or entity; (ii) maintain its bank accounts separate from any other person or entity; (iii) not commingle its assets with those of any other person or entity and hold all of its assets in its own name; (iv) conduct its own business in its own name; (v) maintain separate financial statements, showing its assets and liabilities separate and apart from those of any other person or entity and file, or cause to be filed, a separate federal information tax return for the Partnership; (vi) pay its own liabilities and expenses only out of its own funds; (vii) observe all partnership and other organizational formalities; (viii) maintain a commercially reasonable relationship with its Affiliates and enter into transactions with Affiliates only on a commercially reasonable basis and an arms length terms; (ix) pay the salaries of its own employees from its own funds; (x) maintain a sufficient number of employees in light of its contemplated business operations; (xi) not guarantee or become obligated for the debts of any other entity or person; (xii) not hold out its credit as being available to satisfy the obligations of any other person or entity; (xiii) not acquire the obligations or securities of its Affiliates or owners, including partners, members or shareholders, as appropriate; (xiv) not make loans to any other person or entity or buy or hold evidence of indebtedness issued by any other person or entity (other than cash and investment-grade securities); (xv) allocate fairly and reasonably (and pay or charge for, as applicable) any overhead expenses that are shared with an Affiliate, including paying for office space provided by and services performed by any employee of an Affiliate; (xvi) use separate stationary, invoices, and checks bearing its own name; 12 (xvii) not pledge its assets for the benefit of any other person or entity; (xviii) hold itself out as a separate entity; (xix) correct any known misunderstanding regarding its separate identity; (xx) not identify itself as a division of any other person or entity; (xxi) maintain its assets in such a manner that it would not be costly or difficult to segregate, ascertain, or identify its assets from those of any other person or entity; (xxii) maintain adequate capital in light of its contemplated business operations; and (xxiii) not acquire, hold or form any subsidiary or own any equity interest in any other entity. Section 9. Fiscal Year and Accounting Method. 9.1. Fiscal Year. The fiscal year of the Partnership shall end on the 31st day of December of each calendar year. In the event, however, that the General Partner determines that a change to another fiscal year would be in the best interests of the Partnership, the General Partner may, upon the approval of all of the Limited Partners, which approval shall not be unreasonably withheld, change the fiscal year of the Partnership to such other fiscal year (subject to applicable rules and regulations of the United States Department of the Treasury) as it shall select. 9.2. Accounting Method. The Partnership books shall be kept on the accounting method selected by the General Partner, subject to the approval of all of the Limited Partners, which approval shall not be unreasonably withheld. If the General Partner determines that a change to another accounting method would be in the best interests of the Partnership, the General Partner may, subject to the approval of all of the Limited Partners, which approval shall not be unreasonably withheld, change to such other accounting method (subject to applicable rules and regulations of the United States Department of the Treasury) as it shall select. Section 10. Status and Rights of Limited Partners. 10.1. No Participation in Management; Voting Rights. Except as provided in Section 10.3, no Limited Partner shall participate in the management or control of the Partnership's business, transact any business for the Partnership or have the power to act for or bind the Partnership, said powers being vested solely and exclusively in the General Partner. 13 10.2. Limited Liability. No Limited Partner shall be liable for any debts or obligations of the Partnership in excess of his contribution to the Partnership capital plus any capital returned to the Limited Partner as to which, by the terms of the Partnership Act, the Limited Partner shall remain liable. All undistributed cash available for distribution by the Partnership that would otherwise be distributed to the Limited Partner, however, shall be available to creditors to the extent provided by law to satisfy the debts and obligations of the Partnership until the time of actual distribution. 10.3. Major Decisions. Notwithstanding anything contained herein to the contrary, the General Partner shall not individually or on behalf of the Partnership undertake, and shall not cause or, to the extent within its power or control, permit to occur, any of the following (each a "Major Decision") without obtaining the written approval of the Partners holding at least 80% of the Percentage Interests in the Partnership. In addition, for so long as the First Mortgage is outstanding, except to the extent not prohibited under any of the loan documents entered into in connection with the First Mortgage and except for matters relating to the financing with Column Financial, Inc., the General Partner shall not individually or on behalf of the Partnership undertake, or cause to be taken, or to the extent within its power and control, permit to occur any Major Decision: (a) the acquisition of any land or interest therein except the Property; (b) financing or refinancing of the Partnership, including the mortgaging or the placing or suffering of any other encumbrance on the Partnership Property other than the entering into of the First Mortgage; (c) the sale or other transfer of the Partnership Property; (d) the admission of new Partners to the Partnership other than as a result of a Transfer of an Interest pursuant to, and in compliance with, the terms of Section 13 hereof; (e) the commencement or defense of lawsuits or any other litigation other than the commencement or defense of any litigation relating to a landlord/tenant matter; and (f) the merger or consolidation of the Partnership with or into one or more limited companies or other business entities. 10.4. Prohibited Acts. Notwithstanding any other provisions contained in the Certificate of Limited Partnership of the Partnership or this Agreement to the contrary, so long as the First Mortgage is outstanding, except as expressly permitted in the First Mortgage, the Partnership shall be prohibited from doing any of the following: (a) (i) incurring any indebtedness, secured or unsecured, direct or contingent (including guarantying any obligation), other than the First Mortgage and unsecured trade debt incurred in the ordinary course of business which is payable within thirty (30) days of the date incurred, provided that the total outstanding amount of such trade debt does not exceed any maximum amount provided in the First Mortgage at any one time; (ii) dissolving or liquidating, in whole or in part; 14 (iii) consolidating or merging with or into any other entity or conveying or Transferring its properties and assets substantially as an entirety to any person or entity; (iv) amending or causing to be amended this Section or Sections 1, 2.2, 3, 4, 8.5, 11.5, 11.7, 13.1, 13.5, 17, 19.1, 19.3, 21 and 24.14 of this Agreement; or (v) taking any action that might cause the Partnership to become insolvent. (b) The unanimous consent of all partners (including that of the General Partner , which will in turn require the affirmative vote of at least two Independent Directors) is required for the Partnership to: (i) File or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding; institute any proceedings under any applicable insolvency law or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally; (ii) Seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for the Partnership or a substantial portion of its properties; (iii) Make any assignment for the benefit of the Partnership's creditors; or (iv) Take any action in furtherance of any of the foregoing. Section 11. Powers, Rights and Duties of the General Partner. 11.1. General Partner's Authority. Except as provided in Section 10.3, the General Partner shall have full authority to manage the operations and affairs of the Partnership and to make all decisions regarding the business of the Partnership. Persons dealing with the Partnership are entitled to rely conclusively on the power and authority of the General Partner. In no event shall any person dealing with the General Partner or its duly authorized agents with respect to any business or property of the Partnership be obligated to ascertain that the terms of this Agreement have been complied with, or be obligated to inquire into the necessity or expedience of any act or action of the General Partner or its duly authorized agents; and every contract, agreement, deed, mortgage, promissory note or other instrument or document executed by the General Partner or its duly authorized representative with respect to any business or property of the Partnership shall be conclusive evidence in favor of any and every person relying thereon or claiming thereunder that (i) at the time of the execution and delivery thereof this Agreement was in full force and effect, (ii) the instrument or document was duly executed in accordance with the terms and provisions of this Agreement and is binding upon the Partnership, and (iii) the General Partner or its duly authorized agents were duly authorized and empowered to execute and deliver any and every such instrument or document for and on behalf of the Partnership. 15 11.2. Authority to Contract. Except as otherwise set forth herein, the General Partner shall have the right, power and authority to do on behalf of the Partnership all things which, in such General Partner's judgment and discretion are necessary, proper or desirable in connection with its role and function as general partner, including but not limited to the right, power and authority, on behalf of the Partnership, to enter into contracts and agreements under such terms and conditions as it deems necessary, appropriate or desirable; and to perform all the obligations of the Partnership and enforce all rights of the Partnership under the terms and conditions of all contracts and agreements entered into by the Partnership. 11.3. Delegation of Authority. Subject to the provisions of Section 11.4, the General Partner shall devote such time to the Partnership's business as it shall deem to be necessary to manage and supervise the Partnership's business and affairs, but nothing in this Agreement shall preclude the employment of any agent, third party or Affiliate to manage or provide other services in respect of the Partnership's properties or business subject to the control and supervision of the General Partner. The General Partner shall have responsibility for the safekeeping and use of all funds and assets of the Partnership, whether or not in its immediate possession or control, and shall not employ or permit another to employ such funds or assets in any manner except for the exclusive benefit of the Partnership. 11.4. Limitation on Liability. Neither the General Partner nor any Affiliate of the General Partner shall be liable, responsible or accountable, in damages or otherwise, to the Partnership or the Limited Partners for acts or omissions performed or omitted in good faith on behalf of the Partnership and in a manner reasonably believed to be in the best interests of the Partnership and within the scope of the authority conferred on the General Partner by this Agreement or by law, unless the act or omission was performed or omitted fraudulently or constituted gross negligence or willful misconduct. Nothing in this provision is intended to reduce the fiduciary obligation that a general partner owes to its limited partners under Delaware law. 11.5. Indemnification by Partnership. (a) Subject to Section 11.5(c), the Partnership shall indemnify, hold harmless and defend the General Partner, and all its agents and employees from and against any loss, expense, damage or injury suffered or sustained by them by reason of any acts or omissions arising out of their activities on behalf of the Partnership or in furtherance of the interests of the Partnership, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, if the indemnified party reasonably believed in good faith that the acts or omissions upon which such actual or threatened action, proceeding or claim is based were in the best interest of the Partnership, and if the acts or omissions were not performed or omitted fraudulently or as a result of gross negligence or willful misconduct by the indemnified party. For purposes of this Section 11.6, reliance upon the advice of legal counsel, appraisers, accountants or other professionals, shall raise a rebuttable presumption of "good faith." Reasonable expenses incurred by the indemnified party, in connection with the foregoing matters may be paid or reimbursed by the Partnership in advance of the final disposition of such proceeding upon receipt by the Partnership of (i) written affirmation by the Person requesting indemnification of his or its good faith belief that he has met the standard of conduct necessary for indemnification by the Partnership, and (ii) a written undertaking by or on behalf of such Person to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that such Person has not met such standard of conduct, which undertaking shall be an unlimited general obligation of the indemnified party but need not be secured. This Section 11.6 shall not apply to a claim by the Partnership against any Partner or a derivative claim on behalf of the Partnership unless the Partner against whom the claim is pursued prevails on the merits. 16 (b) To the extent the General Partner or an agent or employee of the General Partner has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a) above, or in defense of any claim, issue or matter therein, the Partnership shall indemnify it against the expenses, including attorneys' fees, actually and reasonably incurred by it in connection therewith. (c) Notwithstanding anything to the contrary herein or any other documents governing the formation, management or operation of the Partnership to the contrary, any indemnification shall be fully subordinated to any obligations respecting the First Mortgage and shall not constitute a claim against the Partnership in the event that the cash flow of the Partnership after payment of all obligations under the First Mortgage is insufficient to pay such obligations. 11.6. Reimbursements. The General Partner shall be reimbursed for the organization and operating expenses of the Partnership incurred on behalf of the Partnership. The operating expenses of the Partnership shall include travel and overnight expenses related to the Property, all general and administrative expenses, costs of office space used primarily for the business of the Partnership, professional fees, costs of utilities, supplies, clerical labor, postage and mailing, recordkeeping and the preparation and mailing of reports to the Limited Partners, and any other expenses or costs actually incurred by or on behalf of the Partnership in connection with the expenses of its business. Nothing in the foregoing shall permit reimbursement of general overhead expense not directly and specifically incurred for the primary benefit of the Partnership. 11.7. Single Purpose Entity. Notwithstanding anything to the contrary contained herein or in the Certificate of Limited Partnership of the Partnership, for so long as the First Mortgage is outstanding, every general partner of the Partnership shall be a Single Purpose Entity and own at least a ..1% ownership interest in the Partnership. Upon the dissociation or withdrawal of the Single Purpose Entity from the Partnership or the bankruptcy, insolvency or liquidation of the Single Purpose Entity general partner, the Partnership must (i) appoint a new Single Purpose Entity as general partner, (ii) deliver an acceptable non-consolidation opinion to the holder of the First Mortgage and to any applicable rating agency concerning, as applicable, the Partnership, the new Single Purpose Entity general partner, and its owners, and (iii) obtain confirmation from the applicable rating agencies that the change in the Single Purpose Entity general partner will not result in a qualification, withdrawal or downgrade of any securities rating. Section 12. Compensation of the General Partner, Affiliates and Others. 12.1. Limitations on Compensation. Nothing contained in this Agreement shall be deemed to restrict the right of the General Partner to be reimbursed for sums expended by the General Partner in the conduct of the business of the Partnership if such expenditures are reasonable in amount and do not exceed the actual cost to the General Partner. Furthermore, this Section 12 shall not restrict the right of the General Partner or any other Person to receive the income to which it would otherwise be entitled as owner of an Interest in the Partnership as a general partner or as a limited partner. 17 12.2. Compensation for Services. Except as otherwise provided in this Agreement, the General Partner shall not be entitled to receive compensation for any services which it performs for the Partnership in its capacity as the General Partner. Section 13. Transfer of Interests. 13.1. Restrictions on Transfer of Limited Partners' Interest. Except as provided in this Section 13, no Partner may Transfer its Interest in whole or in part other than to a Permitted Transferee which in all events must be in accordance with the terms and conditions of the documents of the First Mortgage. A "Permitted Transferee" shall mean, with respect to any Partner, any Affiliate. 13.2. Transfer of Limited Partner's Interest for Valuable Consideration. If a Limited Partner desires to Transfer its Partnership Interest, it must first obtain the consent of the General Partner, who may refuse to grant such consent in its reasonable discretion. 13.3. Admission of a Substituted Limited Partner. (a) Except as otherwise provided in this Agreement, including without limitation Section 13.4 and Section 13.5 hereof, an assignee of the whole or any portion of a Limited Partner's Interest shall not have the right to be admitted as a Limited Partner in place of its assignor unless: (i) the assignee shall have accepted, adopted and approved in writing, the terms and provisions of this Agreement, as amended, by executing a counterpart hereof, and such other documents or instruments as the General Partner may require; (ii) the assignment instrument shall be in form and substance satisfactory to the General Partner; (iii) if the assignee is a corporation, the assignee shall have provided the General Partner with evidence satisfactory to counsel for the Partnership of the assignee's authority to become a limited partner under the terms and provisions of this Agreement; (iv) all procedures required by applicable law shall have been performed; and (v) there shall have been paid all reasonable legal fees of the Partnership and the General Partner and all filing, recording and publication costs in connection with his substitution as a Limited Partner. 18 (b) For the purpose of allocating profits and losses and distributing cash received by the Partnership from operations, as provided in Sections 6 and 7 hereof, a Substituted Limited Partner shall be treated as having become, and appearing in the records of the Partnership as, a Limited Partner upon its signing and delivery of all of the instruments required by the General Partner as provided in subparagraphs (a)(i) and (ii) above. (c) The General Partner shall, upon the request of a Limited Partner, furnish documentation required by this Section 13.4 and make all official filings, recordings and publications required under the Partnership Act and other applicable law. 13.4. Rights of Assignee of Partnership Interest. (a) Subject to the provisions of this Section 13, and except as required by operation of law, the Partnership shall not be obligated for any purpose whatsoever to recognize the assignment by a Limited Partner of its Interest until the Partnership has received notice of the assignment. (b) Any person who is the assignee of all or any part of a Limited Partner's Interest, but does not become a Substituted Limited Partner and desires to make a further assignment of such Interest, shall be subject to all the provisions of this Section 13. (c) Unless and until any assignee, transferee, heir or legatee becomes a ("Substituted Limited Partner") (in accordance with Section 13.3), the Person's status and rights shall be limited to the rights of an assignee of a Limited Partner's Interest. An assignee who does not become a Substituted Limited Partner shall have no right to require any information concerning the Partner's transactions, to inspect the Partnership's books or to vote on any of the matters on which a Limited Partner may vote (such rights being collectively referred to as the "residual rights") and shall, consistent with the terms of the assignment, be entitled only to receive the share of the profits or other compensation by way of income, or the return of the contributions, to which the assignor would otherwise be entitled. In the event that (i) a Limited Partner assigns its Interest to an assignee who does not become a Substituted Limited Partner (in accordance with Section 13.3) and (ii) the assignor agrees to exercise the residual rights solely in favor of and in the interest of the assignee, then the assignor shall immediately and automatically forfeit all of its residual rights. 13.5. Restrictions on Transfer. In addition to any requirements set forth in the Agreement and notwithstanding any other provision of the Certificate of Limited Partnership of the Partnership to the contrary, so long as the First Mortgage is outstanding, no partner of the Partnership may Transfer any direct or indirect ownership interest, unless such Transfer complies with the requirements, to the extent applicable, set forth in the First Mortgage. 19 Section 14. Intentionally left blank. Section 15. Intentionally left blank. Section 16. Default. 16.1. Monetary Default. If any Partner (a "Defaulting Partner") shall fail to contribute its full share of capital contributions as required by this Agreement (such amount, the "Requested Amount") within the period provided, the Partnership shall retain the amount, if any as a capital contribution and the remaining Partners (the "Nondefaulting Partners"), in addition to any other remedies it may have hereunder or at law, shall have the right to make a loan (a "Capital Loan") to the Defaulting Partner by advancing the remaining amount due from the Defaulting Partner (such amount, the "Deficiency") to the Partnership as a capital contribution by the Defaulting Partner. 16.2. (a) If one or more of the Nondefaulting Partners (the "Lending Partners") elects to make a Capital Loan pursuant to Section 16.1 herein, the Capital Loan shall bear interest at the rate of two (2) percent per annum in excess of the Prime Rate, and shall be repaid within ten (10) days after demand and shall be repaid whether or not the Lending Partners have demanded repayment of such Capital Loan, by the Defaulting Partner from all distributions which the Defaulting Partner would be entitled to receive but for this provision, such distributions to be credited first to any interest then due on the Capital Loan made to the Defaulting Partner with the balance of such distributions to be credited against the outstanding principal balance of such Capital Loan. Any interest due in any Fiscal Year on any Capital Loan which is not paid shall, to the extent not prohibited by law, be added to the principal amount of said Capital Loan at the end of such Fiscal Year. All Capital Loans made to a Defaulting Partner shall automatically become due and payable upon the transfer of the Defaulting Partner's interest in the Partnership. Each Lending Partner shall loan to the Defaulting Partner pursuant to this Section 16.2(a) an amount equal to the Deficiency multiplied by a fraction, the numerator of which shall equal the Percentage Interest held by such Lending Partner and the denominator of which shall equal the sum of the Percentage Interests of all of the Lending Partners. (b) The Defaulting Partner shall have the right, at any time, to repay in full or in part any Capital Loan(s) made to it by the Nondefaulting Partner (any such payment to be applied first to the interest accrued on such Capital Loan(s). (c) Subject to the requirements of the First Mortgage, each of the Limited Partners hereby pledge, transfer, assign and hypothecate their entire interest in the Partnership to each other Partner as security for the repayment of the aggregate amount of any and all Capital Loans. To the extent permitted under applicable law, this Agreement shall be deemed to be a "security agreement," as defined in the Uniform Commercial Code, as amended from time to time, and the Nondefaulting Partner shall have all of the rights and remedies of a secured party under the Uniform Commercial Code. Each Limited Partner hereby authorizes each other Partner to file UCC-1 Financing Statements evidencing this pledge and any continuation statements with respect to the UCC-1 Financing Statements in form satisfactory to each other Partner without its signature whenever lawful and upon request, the each Limited Partner will execute such continuation statements. Subject to the requirements of the First Mortgage, the Nondefaulting Partners have the right to realize its security interest by selling, assigning, transferring, endorsing and delivering the Defaulting Partner's partnership interest at public or private sale. As an alternative to exercising the power of sale herein conferred upon it, unless otherwise restricted under any of the Loan Documents, the Nondefaulting Partners may proceed by suit or suits at law or in equity to foreclose its security interest under this Agreement and sell the Defaulting Partner's interest or any part thereof pursuant to judgment or decree of a court or courts having competent jurisdiction. 20 (d) Each Limited Partner hereby designates each other Partner its attorney-in-fact to execute on its behalf all security agreements which are necessary or desirable to secure any Capital Loans incurred because it failed to advance their Requested Amount. (e) Notwithstanding anything contained in this Agreement to the contrary, any security interest granted pursuant to Section 16.2(c) hereof shall be subordinated to any and all claims of the Lender under the First Mortgage and all of the Partners hereby covenant not to take any action to realize upon such security interest so long as the First Mortgage is outstanding. Section 17. Dissolution of Partnership. 17.1. Causes of Dissolution. Except to the extent prohibited pursuant to Section 10.4 hereof, the Partnership shall be dissolved upon the happening of any one of the following events: (a) (i) so long as the First Mortgage is no longer outstanding, or if the written consent of the Lender and confirmation from any applicable rating agency that such dissolution will not result in a qualification, withdrawal or downgrade of any securities rating is obtained, (A) all of the Partners of the Partnership approve in writing, or (B) the Partnership sells or otherwise disposes of its interest in all or substantially all of its assets, (ii) the filing of a voluntary or involuntary petition for relief under Title 11 of the United States Code by or against the General Partner or (iii) the occurrence of any other event which acts to dissolve the Partnership under the Act. (b) Upon the occurrence of any event that results in the General Partner ceasing to be a general partner of the Partnership under the Act, if at the time of the occurrence of such event there is at least one remaining general partner of the Partnership, such remaining general partner of the Partnership is hereby authorized to and, to the fullest extent permitted by law, shall, carry on the business of the Partnership. Upon the occurrence of any event that causes the last remaining General Partner of the Partnership to cease to be a general partner of the Partnership, to the fullest extent permitted by law, all the Partners agree that the personal representative of such general partner is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such general partner in the Partnership, agree in writing (i) to continue the Partnership and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute general partner of the Partnership, effective as of the occurrence of the event that terminated the continued membership of the last remaining general partner of the Partnership in the Partnership. 21 (c) Upon the occurrence of any event that causes the last remaining Limited Partner of the Partnership to cease to be a limited partner of the Partnership, to the fullest extent permitted by law, all the Partners agree that the personal representative of such limited partner is hereby authorized to, and shall, within 90 days after the occurrence of the event that terminated the continued membership of such limited partner in the Partnership, agree in writing (i) to continue the Partnership and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute limited partner of the Partnership, effective as of the occurrence of the event that terminated the continued membership of the last remaining limited partner of the Partnership in the Partnership. (d) The Bankruptcy of the General Partner shall not cause the General Partner to cease to be a general partner of the Partnership, and upon the occurrence of such an event, the Partnership shall continue without dissolution. (e) The death, incompetency, Bankruptcy, dissolution or other cessation to exist as a legal entity of a Limited Partner shall not, in and of itself, dissolve the Partnership. In any such event, the personal representative (as defined in the Act) of such Limited Partner may exercise all of the rights of such Limited Partner for the purpose of settling such Limited Partner's estate or administering its property, subject to the terms and conditions of this Agreement; or (f) The expiration of the term of the Partnership as specified in Section 4. 17.2. Definition of Bankruptcy. For purposes of this Agreement, the "bankruptcy" of the General Partner shall be deemed to have occurred upon the happening of any of the following: (a) The filing of an application by the General Partner for, or the General Partner's consent to, the appointment of a trustee of all or a substantial portion of its assets; (b) The filing by the General Partner of a voluntary petition in bankruptcy or the filing of a pleading in any court of record admitting in writing its inability to pay its debts as they become due; (c) The making by the General Partner of a general assignment for the benefit of creditors; (d) The filing by the General Partner of answers admitting the material allegations of, or its consent to or defaulting in answering, a bankruptcy petition filed against it in any bankruptcy proceeding; or (e) The entry of any order, judgment or decree by any court of competent jurisdiction adjudicating the General Partner a bankrupt or appointing a trustee of all or a substantial portion of its assets, and the order, judgment or decree continuing unstayed and in effect for a period of 30 days after such entry. 22 Section 18. Winding up the Partnership and Distribution of Assets. 18.1. Powers, Duties and Authority of Liquidator. Upon the dissolution of the Partnership pursuant to Section 17.1 hereof, the General Partner shall commence to wind up the affairs of the Partnership and to liquidate and sell the Partnership's assets. The General Partner shall proceed with such liquidation in as expeditious a manner as is reasonably practicable. The Partners shall continue to share distributions and allocations of Income and Losses during the period of liquidation in accordance with Sections 6 and 7 hereof. The General Partner shall consult with each of the Limited Partners in determining the time, manner and terms of any sale or sales of Partnership property pursuant to the liquidation, and shall have due regard for the activity and condition of the relevant market and general financial and economic conditions. 18.2. Cash Reserves. After making payment or provision for payment of all debts and liabilities of the Partnership and all expenses of liquidation, the General Partner may set up, for a period not to exceed two years, such cash reserves as the General Partner may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Partnership. 18.3. Distribution of Liquidation Proceeds. Upon dissolution of the Partnership, all distributions shall be as follows: (a) First, to pay the expenses of liquidation and the debts owed by the Partnership to persons other than the Partners; (b) Second, to pay the debts owed by the Partnership to the Partners; (c) Third, to establish reserves in accordance with Section 18.3 hereof; and (d) Thereafter, to the Partners in accordance with their respective positive Capital Account balances, after taking into account all allocations of Income and Loss on liquidation. 18.4. Statement of Assets and Liabilities. Within a reasonable time following the completion of the liquidation of the Partnership's properties, the General Partner shall supply to each of the Partners a statement which shall set forth the assets and liabilities of the Partnership upon liquidation, each Partner's pro rata share of distributions pursuant to Section 18.3, and the amount retained as reserves pursuant to Section 18.2. 18.5. Distributions and Return of Capital From Partnership Assets Only. The Limited Partners shall look solely to the assets of the Partnership for all distributions with respect to the Partnership, its Capital Contributions (including the return thereof) and its share of profits or losses, and shall have no recourse (upon dissolution or otherwise) against the General Partner for such sums. The Limited Partners shall have no right to demand or receive property other than cash upon dissolution and termination of the Partnership. 18.6. Final Termination. Upon completion of the liquidation of the Partnership and the distribution of all the Partnership funds, the Partnership shall terminate and the General Partner is hereby given the authority to execute and record all documents required to effectuate the liquidation, winding up and termination of the Partnership. 23 Section 19. Withdrawal or Removal of General Partner. 19.1. Withdrawal. (a) The General Partner may not withdraw from the Partnership unless (i) the consent of the Partners holding at least 80% of the Percentage Interests is obtained as to its withdrawal, (ii) a substitute general partner, if any, is admitted simultaneously with the withdrawal, (as long as there is at least one general partner remaining that complies with clause (iii) hereof, it shall not be required that the withdrawing General Partner be replaced), (iii) such substitute general partner, (or in the event that after such withdrawal there will be a remaining general partner who complies with the requirements of this clause (iii), such remaining general partner) is a Single Purpose Entity and the substitution of such general partner as the General Partner complies with Section 1.13 of the First Mortgage, including, without limitation, any non-consolidation opinion and any Rating Agency confirmation, (iv) counsel for the Partnership renders an opinion (relying on such opinions from other counsel as may be necessary) that the withdrawal of the General Partner is in conformity with the Partnership Act and that none of the actions taken in connection with such withdrawal will cause the dissolution of the Partnership or will cause it to be classified other than as a partnership for federal income tax purposes and (v) if there is more than one general partner then serving, all of the other general partners have consented thereto in writing. (b) In the event that the General Partner withdraws from the Partnership or sells, transfers or assigns its entire Interest, it shall immediately cease to act as a general partner and its Interest in the net profit, net losses, distributions or other sums payable to it pursuant to this Agreement shall terminate; provided, however, it shall remain liable for all obligations and liabilities incurred by it as a general partner before the withdrawal, sale, transfer or assignment shall have become effective, but shall be free of any obligation or liability incurred on account of the activities of the Partnership from and after the time the withdrawal, sale, transfer or assignment shall have become effective. 19.2. Admission of a Substitute or Additional General Partner; General Conditions. A person shall be admitted as a general partner of the Partnership only if the following terms and conditions are satisfied: (a) The admission shall have been consented to by (i) all general partners and (ii) the Partners holding 80% of the Percentage Interests and, if required, by an agreement between the Partnership and any creditors; (b) The successor or additional Persons to be admitted as a general partner shall have accepted and agreed to be bound by all the terms and provisions of this Agreement by executing a counterpart hereof and such other documents or instruments as may be required or appropriate in order to effect admission as a general partner of the Partnership, and a certificate evidencing such admission shall have been filed for recordation and all other actions required by this Section 19.2 in connection with such admission shall have been performed; 24 (c) If the successor or additional Person is a corporation, it shall have provided the Partnership with evidence satisfactory to counsel for the Partnership of its authority to become a general partner and to be bound by the terms and provisions of this Agreement; and (d) Counsel for the Partnership shall have rendered an opinion (relying on such opinions from other counsel as may be necessary) that the admission of the successor or additional person as a general partner of the Partnership is in conformity with the Partnership Act, and that none of the actions taken in connection with the admission of such person will cause the dissolution of the Partnership or will cause it to be classified other than as a partnership for federal income tax purposes. 19.3. Continuation of Partnership. Notwithstanding anything in this Agreement to the contrary, if at any time there ceases to be a General Partner of the Partnership, the Partnership shall not dissolve and shall continue in existence so long as within 90 days after there ceases to be a General Partner, the Limited Partners holding a majority of all of the Percentage Interests elect to continue the Partnership. For so long as the First Mortgage remains outstanding, the Limited Partners agree to take such actions necessary to continue the Partnership. Section 20. Notices. All notices and demands required or permitted to be given under this Agreement must be in writing and must be given (i) by depositing them in the United States mail, postage prepaid, certified or registered, return receipt requested, (ii) by prepaid telegram, or (iii) by delivering them in person and receiving a signed receipt. The initial addresses of the General Partner and the Limited Partners shall be as set forth on Schedule A hereto. Any Limited Partner or his assignee may designate a different address to which notices or demands shall thereafter be directed by written notice given in the required manner and directed to the Partnership at its offices. The General Partner may designate a different address to which notices or demands shall thereafter be directed by providing written notice to the Limited Partners in the required manner. Section 21. Amendment of Agreement. Except to the extent prohibited by Section 10.4, the General Partner shall have the authority to amend this Agreement, (i) to form, qualify or continue the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in all jurisdictions in which the Partnership conducts or plans to conduct business, (ii) to satisfy any requirements, conditions, guidelines or options contained in any opinion, directive, order, ruling or regulation of the Securities and Exchange Commission, the Internal Revenue Service or any other federal or state agency, or in any federal or state statute, compliance with which it deems to be in the best interests of the Partnership or (iii) to make any changes that the General Partner deems necessary or advisable to reflect the admission of additional limited partners, so long as such amendment under clause (iii) does not materially adversely affect the interest of the Limited Partners. No amendment shall reduce a partner's Percentage Interest in the Partnership. 25 Section 22. Intentionally left blank. Section 23. Intentionally left blank. Section 24. Miscellaneous. 24.1. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof. It supersedes any prior agreement or understanding among them, and it may not be modified or amended in any manner other than as set forth in this Agreement. 24.2. Governing Law. This Agreement and the rights of the parties under this Agreement shall be governed by, and interpreted in accordance with, the laws of the State. 24.3. Binding Effect. Except as herein otherwise specifically provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and assigns. 24.4. Phrase Reference. Wherever from the context it appears appropriate, each term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in the masculine, the feminine or the neuter gender shall include the masculine, feminine and neuter. 24.5. Caption. All captions contained in this Agreement are inserted only as a matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. 24.6. Partial Invalidity. If any provision of this Agreement, or the application of that provision to any Person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of that provision to Persons or circumstances other than those to which it is held invalid, shall not be affected. 24.7. Counterparts. This Agreement may be executed in several counterparts, including facsimile counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument. It shall not be necessary for all Partners to execute the same counterpart. 24.8. Further Assurances. If required by the General Partner, each party hereto agrees to execute, with acknowledgment or affidavit, any and all documents and writings which may be necessary or expedient in connection with the creation and maintenance of the Partnership and the achievement of its purposes, specifically including (i) the Partnership's Certificate of Limited Partnership and all future amendments thereto, (ii) any amendments to this Agreement and those certificates and other documents as the General Partner deems necessary or appropriate to form, qualify or continue the Partnership as a limited partnership (or a partnership in which the limited partners have limited liability) in the State and in all other jurisdictions in which the Partnership conducts or plans to conduct business and (iii) all agreements, certificates, tax statements, information returns and other documents as may be required of the Partnership or its Partners by the laws of the United States of America, the State or any other state in which the Partnership conducts or plans to conduct business, or any political subdivision or agency. 26 24.9. Consents. Any consent required by this Agreement may be given as follows: (a) By a written consent given by the consenting Partner at or before the doing of the act or thing for which the consent is solicited, provided that such consent shall be nullified by either (i) notification to the General Partner by the consenting Partner at or before the time of, or the negative vote by such consenting Partner at, any meeting held to consider the doing of such act or thing, or (ii) notification to the General Partner by the consenting Partner before the doing of any act or thing the doing of which is not subject to approval at such a meeting; or (b) By the affirmative vote by the consenting Partner to the doing of the act or thing for which the consent is solicited at any meeting duly called and held to consider the doing of such act or thing. 24.10. Force Majeure. The parties to this Agreement shall be excused from performance of their obligations under this Agreement where they are prevented from so performing by revolution or other disorder, war, act of enemy, fire, flood or act of God. All parties shall perform such parts or aspects of their obligations that are not interfered with by such causes. 24.11. Partition. Each of the parties hereto irrevocably waives any and all rights that he may have to maintain any action for partition of any of the properties owned by the Partnership. 24.12. Attorneys' Fees. If any Partner commences an action against the other Partners or the Partnership to interpret or enforce any of the terms of this Agreement or as the result of a breach by the other Partner of any terms hereof, each Partner and the Partnership shall pay its own attorneys' fees, costs and expenses incurred in connection with the prosecution or defense of such action, regardless of which party prevails and whether or not the action is prosecuted to a final judgment. 24.13. Equitable Remedies. In the event of a breach or threatened breach of this Agreement by any Partner, the remedy at law in favor of the other Partners will be inadequate and such other Partners, in addition to any and all other rights which may be available shall accordingly have the right of specific performance in the event of any breach, or injunction in the event of any threatened breach of this Agreement by any Partner. 24.14. No Third Party Rights. Except for Lender, the provisions of this Agreement are for the exclusive benefit of the Partnership and the Partners and no other party (including without limitation, any creditor of the Partnership) shall have any right or claim against the Partnership or any Partner by reason of those provisions or be entitled to enforce any of those provisions against the Partnership or any Partner. 27 24.15. Brokers. Each of the Partners represents and warrants that such Partner has not dealt with any broker or finder in connection with any of the transactions contemplated by this Agreement, and, insofar as such Partner knows, no broker or other person is entitled to any commission or finder's fee in connection with any of these transactions. 24.16. Survival. All covenants, agreements, representations and warranties made herein or otherwise made in writing by any Partner pursuant hereto shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby. 24.17. Reliance on Experts. Whenever any Partner reasonably requires or retains the use of an expert in order to discharge a duty hereunder, such Partner's sole responsibility in connection with said duties shall be the reasonable reliance upon the advice of the experts and no Partner shall be liable on account of any duty or obligation imposed hereunder in the event of a reliance upon professional advice. 24.18. Bad Faith. Notwithstanding any other provision hereof, each Partner shall be liable only for bad faith breach of an express provision of this Agreement or for gross negligence, but in no event shall be liable for good faith mistakes or judgment. 24.19. Submission to Jurisdiction. Each of the Partners irrevocably and unconditionally (a) agrees that any suit, action or other legal proceeding arising out of or relating to this Agreement shall be brought in the Courts of record of the State in Dade County or the Courts of the United States, Southern District of Florida; (b) consents to the jurisdiction of each such Court in any such suit, action or proceeding; (c) waives any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts; and (d) agrees that service of any court paper may be effected on such party by mail or in such other manner as may be provided under applicable laws or court rules. 24.20. WAIVER OF TRIAL BY JURY. THE PARTNERS HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, COUNTERCLAIM OR PROCEEDING BROUGHT BY EITHER PARTY, THEIR ASSIGNS OR SUCCESSORS IN INTEREST, ON ANY MATTER ARISING OUT OF OR IN ANY WAY RELATED TO THE INTERPRETATION OR ENFORCEMENT OF THIS AGREEMENT OR THE RELATIONSHIP, PERFORMANCE OR NONPERFORMANCE OF EITHER PARTY PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP CREATED HEREIN. 24.21. No Waiver. One or more waivers of the breach of any provision of this Agreement by any Partner shall not be construed as a waiver of a subsequent breach of the same or any other provision, nor shall any delay or omission by a nondefaulting Partner to seek a remedy for any breach of this Agreement or to exercise the rights accruing to a nondefaulting Partner by reason of such breach be deemed a waiver by a nondefaulting Partner of its remedies and rights with respect to such breach. 24.22. Confidentiality. Except as required in the normal conduct of a Partner's business or by law, no Partner, without the written approval of the other Partner, during continuance of the Partnership or after its termination shall at any time during the term of this Agreement or thereafter divulge to any person not a member of the Partnership, other than its attorneys, accountants, employees and professional advisers, any information concerning the business of the Partnership or the content of this Agreement or any other contract or agreement entered into by the Partnership. 28 24.23. Construction. This Agreement shall be interpreted without regard to any presumption or rule requiring construction against the party causing this Agreement to be drafted. [Signatures on next page.] 29 IN WITNESS WHEREOF, the parties hereto have executed this Limited Partnership Agreement as of the day and in the year first above written, which counterparts, when taken together, shall constitute one and the same instrument. GENERAL PARTNER: KOGER POST OAK, INC., a Delaware corporation By: /S/ Thomas J. Crocker ------------------------------------------- Thomas J. Crocker, President LIMITED PARTNERS: KOGER EQUITY, INC. By: /S/ Thomas J. Crocker ------------------------------------------ Thomas J. Crocker, President 30 EXHIBIT A Legal description of Property 31
SCHEDULE A ----------- Column I Column II Limited Partners: Initial Contribution Percentage Interest - ---------------- -------------------- ------------------- Koger Equity, Inc. $2,997,000 99.9% 433 Plaza Real Suite 335 Boca Raton, FL 33432 General Partner: - ---------------- Koger Post Oak, Inc. $3,000 433 Plaza Real Suite 335 Boca Raton, Florida 33432 .1% Total $3,000,000 100%
32 EX-10 4 a4339684-ex10b.txt KOGER EXHIBIT 10B EXHIBIT 10(b) LOAN AGREEMENT Dated as of December 6, 2002 Between KOGER POST OAK LIMITED PARTNERSHIP, as Borrower and COLUMN FINANCIAL, INC., as Lender
TABLE OF CONTENTS Page ----------------- ---- I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION Section 1.1.Definitions 1 Section 1.2.Principles of Construction 23 II. GENERAL TERMS Section 2.1.Loan Commitment; Disbursement to Borrower. 23 Section 2.2.Interest Rate. 23 Section 2.3.Loan Payment. 29 Section 2.4.Prepayments. 29 Section 2.5.Release of Property 30 Section 2.6.Cash Management. 31 Section 2.7.Extension of the Initial Maturity Date 32 III. CONDITIONS PRECEDENT Section 3.1.Conditions Precedent to Closing 33 IV. REPRESENTATIONS AND WARRANTIES Section 4.1.Borrower Representations 36 Section 4.2.Survival of Representations 44 V. BORROWER COVENANTS Section 5.1.Affirmative Covenants 44 Section 5.2.Negative Covenants 55 VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS Section 6.1.Insurance 60 Section 6.2.Casualty 64 Section 6.3.Condemnation 64 Section 6.4.Restoration 65 VII. RESERVE FUNDS Section 7.1.Required Repair Funds. 69 Section 7.2.Tax and Insurance Escrow Fund 70 Section 7.3.Replacements and Replacement Reserve. 71 Section 7.4.Rollover Reserve. 72 Section 7.5.Reserve Funds, Generally. 73 Section 7.6.Delivery of Letters of Credit 75
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VIII.DEFAULTS Section 8.1.Event of Default 76 Section 8.2.Remedies 78 IX. SPECIAL PROVISIONS Section 9.1.Sale of Notes and Securitization 80 Section 9.2.Securitization Indemnification 81 Section 9.3.[Intentionally Deleted] 85 Section 9.4.Exculpation 85 Section 9.5.Matters Concerning Manager 87 Section 9.6.Servicer 87 Section 9.7.Severance Documentation 87 X. MISCELLANEOUS Section 10.1. Survival 87 Section 10.2. Lender's Discretion 88 Section 10.3. Governing Law. 88 Section 10.4. Modification, Waiver in Writing 89 Section 10.5. Delay Not a Waiver 89 Section 10.6. Notices 90 Section 10.7. Trial by Jury. 91 Section 10.8. Headings 91 Section 10.9. Severability 91 Section 10.10. Preferences 91 Section 10.11. Waiver of Notice 91 Section 10.12. Remedies of Borrower 92 Section 10.13. Expenses; Indemnity 92 Section 10.14. Schedules Incorporated 93 Section 10.15. Offsets, Counterclaims and Defenses 93 Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries 93 Section 10.17. Publicity 94 Section 10.18. Cross-default; Cross-collateralization; Waiver of Marshalling of Assets 94 Section 10.19. Waiver of Counterclaim 94 Section 10.20. Conflict; Construction of Documents; Reliance 94 Section 10.21. Brokers and Financial Advisors 95 Section 10.22. Prior Agreements 95
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SCHEDULES --------- Schedule I - Property - Information Schedule II - Rent Roll Schedule III - Required Repairs - Deadlines for Completion Schedule IV - Organization Chart Schedule V - Intentionally Deleted Schedule VI - Aesthetic Repairs - Deadlines for Completion Schedule VII - Unfunded Obligations Reserve Schedule 4.1.4 Litigation Schedule 4.1.5 Agreements Schedule 4.1.24 Physical Condition Schedule 4.1.26 Leases Exhibit A - Approved Management Agreement
iii LOAN AGREEMENT THIS LOAN AGREEMENT, dated as of December 6, 2002 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this "Agreement"), between COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"), and KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place of business at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Borrower"). W I T N E S S E T H: WHEREAS, Borrower desires to obtain the Loan (as hereinafter defined) from Lender; and WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (as hereinafter defined). NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows: I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION SECTION 1.1. Definitions. For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent: "3000 Property" shall mean the Individual Property known as 3000 Post Oak Boulevard, Houston, Texas. "3040 Property" shall mean the Individual Property known as 3040 Post Oak Boulevard, Houston, Texas. "3050 Property" shall mean the Individual Property known as 3050 Post Oak Boulevard, Houston, Texas. "Acceptable Counterparty" shall mean any counterparty to the Interest Rate Cap Agreement that has and shall maintain, until the expiration of the applicable Interest Rate Cap Agreement, a long-term unsecured debt rating of at least "AA" from S&P and "Aa" from Moody's, respectively, which rating shall not include a "t" or otherwise reflect a termination risk. "Acceptable Rating" shall mean a long-term unsecured debt rating of at least "AA" by S&P and "Aa2" from Moody's. "Acquired Property" shall have the meaning set forth in Section 5.1.11(f)(i). 1 "Acquired Property Statements" shall have the meaning set forth in Section 5.1.11(f)(i). "Additional Insolvency Opinion" shall have the meaning set forth in Section 4.1.30c hereof. "Additional Rollover Reserve Monthly Deposit" shall have the meaning set forth in Section 7.4.1. "Aesthetic Repair Account" shall have the meaning set forth in Section 7.6.1 hereof. "Aesthetic Repair Fund" shall have the meaning set forth in Section 7.6.1 hereof. "Aesthetic Repairs" shall have the meaning set forth in Section 7.6.1 hereof. "Affiliate" shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person. "Affiliated Loans" shall mean a loan made by Lender to an Affiliate of Borrower or Guarantor. "Affiliated Manager" shall mean any Manager in which Borrower, Principal or Guarantor has, directly or indirectly, any legal, beneficial or economic interest. "Agent" shall mean any Eligible Institution acting as Agent under the Cash Management Agreement or any successor designated by Lender. "ALTA" shall mean American Land Title Association, or any successor thereto. "Annual Budget" shall mean the operating budget, including all planned Capital Expenditures, for the Properties prepared by Borrower for the applicable Fiscal Year or other period. "Applicable Interest Rate" shall mean the rate or rates at which the outstanding principal amount of the Loan bears interest from time to time in accordance with the provisions of Section 2.2.3 hereof. "Approved Annual Budget" shall have the meaning set forth in Section 5.1.11(d). "Approved Bank" shall mean a bank or financial institution that has an Acceptable Rating. "Approved Blanket Policy" shall have the meaning set forth in Section 6.1(a)(x). "Approved Management Agreement" shall mean a management agreement substantially in the form and substance attached hereto as Exhibit A. 2 "Approved Manager" shall mean (a) Transwestern Commercial Services and/or (b) Trammell Crow Company. "Assignment of Leases" shall mean that certain first priority Assignment of Leases and Rents, dated as of the date hereof, from Borrower, as assignor, to Lender, as assignee, assigning to Lender all of Borrower's interest in and to the Leases and Rents of each Individual Property as security for the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Assignment of Management Agreement" shall mean, with respect to each the 3040 Property, individually and the 3000 Property and the 3050 Property, collectively, that certain Assignment of Management Agreement and Subordination of Management Fees dated as of the date hereof among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Award" shall mean any compensation paid by any Governmental Authority in connection with a Condemnation with respect to all or any part of any Individual Property. "Bankruptcy Action" shall mean with respect to any Person (a) such Person filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against such Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition against such Person; (c) such Person filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law (which is not discharged within ninety (90) days from the date of such filing), or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (d) such Person consenting to or acquiescing in or joining in an applicable for the appointment of a custodian, receiver, trustee, or examiner for such Person or any portion of the Property; or (e) such Person making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debt as they become due. "Basic Carrying Costs" shall mean, with respect to each Individual Property, the sum of the following costs associated with such Individual Property for the relevant Fiscal Year or payment period: (i) Taxes and (ii) Insurance Premiums. "Borrower" shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns. "Borrower Sections" shall have the meaning set forth in Section 9.2(b) hereof. "Breakage Costs" shall have the meaning set forth in Section 2.2.3(h) hereof. "Business Day" shall mean any day other than a Saturday, Sunday or any other day on which national banks in New York, New York are not open for business. 3 "Capital Expenditures" shall mean, for any period, the amount expended for items capitalized under GAAP (including expenditures for building improvements or major repairs, leasing commissions and tenant improvements). "Cash Expenses" shall mean, for any period, the Operating Expenses for the operation of the Properties to the extent that such expenses are actually incurred by Borrower minus any payments into the Tax and Insurance Escrow Fund. "Cash Management Agreement" shall mean, collectively, the Lockbox Account Agreement and the Deposit Account Agreement. "Casualty" shall have the meaning specified in Section 6.2 hereof. "Casualty Consultant" shall have the meaning set forth in Section 6.4(b)(iii) hereof. "Casualty Retainage" shall have the meaning set forth in Section 6.4(b)(iv) hereof. "CFO Certificate" shall mean a certificate delivered to Lender by Borrower which is signed by the Chief Financial Officer of Borrower. "Closing Date" shall mean the date of the funding of the Loan. "Code" shall mean the Internal Revenue Code of 1986, as amended, as it may be further amended from time to time, and any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form. "Collateral Assignment of Interest Rate Cap Agreement" shall mean that certain Collateral Assignment of Interest Rate Cap Agreement, dated the date hereof, executed by Borrower in connection with the Loan for the benefit of the Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Condemnation" shall mean a temporary or permanent taking by any Governmental Authority as the result or in lieu or in anticipation of the exercise of the right of condemnation or eminent domain, of all or any part of any Individual Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting such Individual Property or any part thereof. "Control" shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management and policies of the business and affairs of the entity in question by reason of the ownership of beneficial interests, by contract or otherwise. "Counterparty" means, with respect to the Interest Rate Cap Agreement, CDC Financial Products Inc. and with respect to any Replacement Interest Rate Cap Agreement, any substitute Acceptable Counterparty. 4 "Credit Suisse First Boston" shall have the meaning set forth in Section 9.2(b) hereof. "Credit Suisse First Boston Group" shall have the meaning set forth in Section 9.2(b) hereof. "Debt" shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note, together with all interest accrued and unpaid thereon and all other sums (including the Prepayment Premium) due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document. "Debt Service Coverage Ratio" shall mean a ratio for the applicable period in which: (a) the numerator is the Net Operating Income (excluding interest on credit accounts) for such period as set forth in the financial statements required hereunder; and (b) the denominator is the greater of (i) the actual aggregate amount of principal and interest due and payable on the Loan for the same period used in determining Net Operating Income above, less payments received under the Interest Rate Cap Agreement, if any, and (ii) the assumed aggregate amount of principal and interest due and payable on the Loan for the same period in determining Net Operating Income above, using an assumed interest rate for such period of eight and thirty-two one hundredths percent (8.32%). "Default" shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default. "Default Rate" shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law or (b) four percent (4%) above the Applicable Interest Rate. "Deposit Account" shall have the meaning set forth in Section 2.6.1 hereof. "Deposit Account Agreement" shall mean that certain Deposit Management Agreement by and among Borrower, Agent and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Deposit Account. "Determination Date" shall mean, with respect to any Interest Period, the date that is two (2) London Business Days prior to the fifteenth (15th) day of the calendar month in which such Interest Period commences. "Disclosure Document" shall have the meaning set forth in Section 5.1.11(f) hereof. 5 "DSCR Event" shall mean any time when the Debt Service Coverage Ratio for the Loan, as determined every calendar quarter, is less than the Threshold DSCR. For purposes of determining whether a "DSCR Event" has occurred (a) from the Closing Date until the first (1st) anniversary thereof, the Debt Service Coverage Ratio shall be based on year to date Net Operating Income (with appropriate adjustments to be made by Lender, in its reasonable discretion, to recognize annual income and expense items on a projected basis) and (b) after the first (1st) anniversary of the Closing Date, the Debt Service Coverage Ratio shall be based on the trailing twelve (12) month period. "Eligible Account" shall mean an account separate and identifiable from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) a segregated trust account or accounts maintained with 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" shall mean a depository institution or trust company, the short-term unsecured debt obligations or commercial paper of which are rated at least A-1+ by Standard & Poor's Ratings Group, P-1 by Moody's Investors Service, Inc. and F-1+ by Fitch Inc. in the case of accounts in which funds are held for thirty (30) days or less (or, in the case of accounts in which funds are held for more than thirty (30) days, the long-term unsecured debt obligations of which are rated at least "AA" by Fitch and S&P and "Aa2" by Moody's). "Embargoed Person" shall have the meaning set forth in Section 4.1.35 hereof. "Environmental Indemnity" shall mean that certain Environmental and Hazardous Substance Indemnification Agreement executed by Borrower in connection with the Loan for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Event of Default" shall have the meaning set forth in Section 8.1(a) hereof. "Exchange Act" shall have the meaning set forth in Section 9.2(a) hereof. "Exchange Act Filing" shall have the meaning set forth in Section 5.1.11(i). "Extended Maturity Date" shall have the meaning set forth in Section 2.7 hereof. "Extension Option" shall have the meaning set forth in Section 2.7 hereof. 6 "Extension Interest Rate Cap Agreement" shall mean an interest rate cap agreement from an Acceptable Counterparty with terms identical to the Interest Rate Cap Agreement except that the same shall be effective in connection with the Extension Option. "Extraordinary Expense" shall have the meaning set forth in Section 5.1.11(e) hereof. "Fiscal Year" shall mean each twelve (12) month period commencing on January 1 and ending on December 31 during each year of the term of the Loan. "Fitch" shall mean Fitch, Inc., Duff & Phelps. "Foreign Taxes" shall have the meaning set forth in Section 2.2.3(e) hereof. "GAAP" shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report. "Governmental Authority" shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence. "Gross Income from Operations" shall mean all income, computed in accordance with GAAP, derived from the ownership and operation of the Properties from whatever source, including, but not limited to, Rents, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees and other pass-through or reimbursements paid by tenants under the Leases of any nature; but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any government or Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, Insurance Proceeds and Condemnation Proceeds (other than business interruption or other loss of income insurance), any disbursements to the Borrower from the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Rollover Reserve Fund, or any other escrow fund established by the Loan Documents, proceeds from a resale or refinancing of a Property and payments by the Counterparty under the Interest Rate Cap Agreement. "Guarantor" shall mean Koger Equity, Inc., a Florida corporation. "Guaranty" shall mean that certain Guaranty, dated as of the date hereof, from Guarantor to Lender. "Improvements" shall have the meaning set forth in the granting clause of the related Mortgage with respect to each Individual Property. "Indebtedness" of a Person, at a particular date, means the sum (without duplication) at such date of (a) indebtedness or liability for borrowed money and indebtedness in the form of mezzanine debt or preferred equity; (b) obligations evidenced by bonds, debentures, notes, or other similar instruments; (c) obligations for the deferred purchase price of property or services (including trade obligations); (d) obligations under letters of credit; (e) obligations under acceptance facilities; (f) all guaranties, endorsements (other than for collection or deposit in the ordinary course of business) and other contingent obligations to purchase, to provide funds for payment, to supply funds, to invest in any Person or entity, or otherwise to assure a creditor against loss; and (g) obligations secured by any Liens, whether or not the obligations have been assumed. 7 "Indemnified Person" shall have the meaning set forth in Section 9.2(h) hereof. "Independent Director" or "Independent Manager" shall mean a Person who is not at the time of initial appointment, or at any time while serving as a director or manager, as applicable, and has not been at any time during the preceding five (5) years: (a) a stockholder, director (with the exception of serving as the Independent Director or Independent Manager), officer, employee, partner, member, attorney or counsel of the Principal, the Borrower or any Affiliate of either of them; (b) a customer, supplier or other person who derives any of its purchases or revenues from its activities with the Principal, the Borrower or any Affiliate of either of them; (c) a Person controlling or under common control with any such stockholder, director, officer, partner, member, customer, supplier or other Person; or (d) a member of the immediate family of any such stockholder, director, officer, employee, partner, customer, supplier or other person. As used in this definition, the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of management, policies or activities of a Person, whether through ownership of voting securities, by contract or otherwise. A natural person who satisfies the foregoing definition other than subparagraph (b) shall not be disqualified from serving as an Independent Director if such individual is an independent director provided by a nationally-recognized company that provides professional independent directors and that also provides other corporate services in the ordinary course of its business. A natural person who otherwise satisfies the foregoing shall not be disqualified from serving as an Independent Director if such individual is at the time of initial appointment, or at any time while serving as an Independent Director, an Independent Director of a "special purpose entity" affiliated with Borrower (other than any mezzanine borrower) if such individual is an independent director provided by a nationally-recognized company that provides professional independent directors. For purposes of this paragraph, a "special purpose entity" is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity's separateness that are substantially similar to those of Borrower, and provide, inter alia, that it: (a) is organized for the limited purpose of owning and operating one or more properties; (b) has restrictions on its ability to incur indebtedness, dissolve, liquidate, consolidate, merge and/or sell assets; (c) may not file voluntarily a bankruptcy petition on its own behalf without the consent of the Independent Director and (d) shall conduct itself in accordance with certain "separateness covenants", including, but not limited to, the maintenance of its books, records, bank accounts and assets separate from those of any other person or entity. "Individual Property" shall mean each parcel of real property, the Improvements thereon and all personal property owned by Borrower and encumbered by a Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the Granting Clauses of the Mortgage and referred to therein as the "Property". "Initial Maturity Date" shall mean December 9, 2004. 8 "Insolvency Opinion" shall mean that certain non-consolidation opinion letter dated the date hereof delivered by White & Case LLP in connection with the Loan. "Insurance Premiums" shall have the meaning set forth in Section 6.1(b) hereof. "Insurance Proceeds" shall have the meaning set forth in Section 6.4(b) hereof. "Interest Period" shall mean, with respect to any Payment Date, the period commencing on the ninth (9th) day of the preceding calendar month and terminating on the eighth (8th) day of the calendar month in which such Payment Date occurs; provided, however, that no Interest Period shall end later than the Maturity Date (other than for purposes of calculating interest at the Default Rate), and the initial Interest Period shall begin on the Closing Date and shall end on the immediately following eighth (8th) day of the calendar month. "Interest Rate Cap Agreement" means an Interest Rate Cap Agreement (together with the confirmation and schedules relating thereto) in form and substance reasonably satisfactory to Lender between Borrower and an Acceptable Counterparty. "Koger Properties" shall have the meaning set forth in Section 6.1(a)(x) hereof. "Lease" shall mean any lease, sublease or subsublease, letting, license, concession or other agreement (whether written or oral and whether now or hereafter in effect) pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any Individual Property of Borrower, and every modification, amendment or other agreement relating to such lease, sublease, subsublease, or other agreement entered into in connection with such lease, sublease, subsublease, or other agreement and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto. "Legal Requirements" shall mean, with respect to each Individual Property, all federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting such Individual Property or any part thereof, or the construction, use, alteration or operation thereof, or any part thereof, whether now or hereafter enacted and in force, and all permits, licenses and authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting such Individual Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to such Individual Property or any part thereof, or (b) in any way limit the use and enjoyment thereof. "Lender" shall have the meaning set forth in the introductory paragraph hereto, together with its successors and assigns. "Liabilities" shall have the meaning set forth in Section 9.2(b) hereof. "LIBOR" shall mean, with respect to each Interest Period, the rate (expressed as a percentage per annum and rounded upward, if necessary, to the next nearest 1/1000 of 1%) for deposits in U.S. dollars, for a one-month period, that appears on Telerate Page 3750 (or the successor thereto) as of 11:00 a.m., 9 London time, on the related Determination Date. If such rate does not appear on Telerate Page 3750 as of 11:00 a.m., London time, on such Determination Date, LIBOR shall be the arithmetic mean of the offered rates (expressed as a percentage per annum) for deposits in U.S. dollars for a one-month period that appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, if at least two such offered rates so appear. If fewer than two such offered rates appear on the Reuters Screen Libor Page as of 11:00 a.m., London time, on such Determination Date, Lender shall request the principal London Office of any four major reference banks in the London interbank market selected by Lender to provide such bank's offered quotation (expressed as a percentage per annum) to prime banks in the London interbank market for deposits in U.S. dollars for a one-month period as of 11:00 a.m., London time, on such Determination Date for the amounts of not less than U.S. $1,000,000. If at least two such offered quotations are so provided, LIBOR shall be the arithmetic mean of such quotations. If fewer than two such quotations are so provided, Lender shall request any three major banks in New York City selected by Lender to provide such bank's rate (expressed as a percentage per annum) for loans in U.S. dollars to leading European banks for a one- month period as of approximately 11:00 a.m., New York City time, on the applicable Determination Date for amounts of not less than U.S. $1,000,000. If at least two such rates are so provided, LIBOR shall be the arithmetic mean of such rates. LIBOR shall be determined conclusively by Lender or its agent in accordance with this definition. "LIBOR Loan" shall mean the Loan at such time as interest thereon accrues at a rate of interest based upon LIBOR. "Licenses" shall have the meaning set forth in Section 4.1.22 hereof. "Lien" shall mean, with respect to each Individual Property, any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the related Individual Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic's, materialmen's and other similar liens and encumbrances. "Loan" shall mean the loan made by Lender to Borrower pursuant to this Agreement. "Loan Documents" shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Leases, the Environmental Indemnity, the Assignment of Management Agreement, the Guaranty, the Cash Management Agreement, the Collateral Assignment of Interest Rate Cap Agreement and all other documents executed and/or delivered in connection with the Loan. "Lockbox Account" shall mean, collectively, the account or accounts, if any, specified in the Lockbox Account Agreement for deposit of Rents and other receipts from the Properties. 10 "Lockbox Account Agreement" shall mean that certain Lockbox Account Agreement by and among Borrower, Manager, Lockbox Bank and Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, relating to funds deposited in the Lockbox Account. "Lockbox Bank" shall mean Fleet National Bank, a national banking association. "Lockout Release Date" shall mean June 9, 2004. "London Business Day" shall mean any day other than a Saturday, Sunday or any other day on which commercial banks in London, England are not open for business. "Management Agreement" shall mean, with respect to any Individual Property, the management agreement entered into by and between Borrower and the Manager, pursuant to which the Manager is to provide management and other services with respect to such Individual Property, or, if the context requires, the Replacement Management Agreement executed in accordance with the terms and provisions of this Agreement. "Manager" shall mean (a) with respect to the 3040 Property, Hines Interests Limited Partnership, a Delaware limited partnership and (b) with respect to the 3000 and 3050 Property, Cottonwood Partners Management, Ltd., a Utah limited partnership, or, if the context requires, a Qualified Manager who is managing the Properties in accordance with the terms and provisions of this Agreement. "Maturity Date" shall mean the Initial Maturity Date, or, if applicable, the Extended Maturity Date, or such other date on which the final payment of principal of the Note becomes due and payable as therein or herein provided, whether at such stated maturity date, by declaration of acceleration, or otherwise. "Maximum Legal Rate" shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan. "Moody's" shall mean Moody's Investors Service, Inc. "Mortgage" shall mean, that certain first priority Deed of Trust and Security Agreement, dated the date hereof, executed and delivered by Borrower as security for the Loan and encumbering each Individual Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Net Cash Flow" for any period shall mean the amount obtained by subtracting Operating Expenses and Capital Expenditures for such period from Gross Income from Operations for such period. "Net Cash Flow Schedule" shall have the meaning set forth in Section 5.1.11(b) hereof. 11 "Net Operating Income" means the amount obtained by subtracting Operating Expenses from Gross Income from Operations. "Net Proceeds" shall have the meaning set forth in Section 6.4(b) hereof. "Net Proceeds Deficiency" shall have the meaning set forth in Section 6.4(b)(vi) hereof. "Note" shall mean that certain promissory note of even date herewith in the principal amount of Seventy-Seven Million and No/100 Dollars ($77,000,000.00), made by Borrower in favor of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Offering Document Date" shall have the meaning set forth in Section 5.1.11(f)(iv). "Offering Materials" shall have the meaning set forth in Section 9.2(b) hereof. "Officers' Certificate" shall mean a certificate delivered to Lender by Borrower which is signed by an authorized senior officer of the general partner or managing member of Borrower. "Operating Expenses" shall mean the total of all expenditures, computed in accordance with generally accepted accounting principles, of whatever kind relating to the operation, maintenance and management of the Properties that are incurred on a monthly or other periodic basis, including without limitation, utilities, ordinary repairs and maintenance, insurance, license fees, property taxes and assessments, advertising expenses, management fees, payroll and related taxes, computer processing charges, the Replacement Reserve Monthly Deposit (as adjusted pursuant to the terms hereof), the Rollover Reserve Monthly Deposit (as adjusted pursuant to the terms hereof), operational equipment or other lease payments as approved by Lender, and other similar costs, but excluding depreciation, debt service, Capital Expenditures, and distributions to Borrower from the Replacement Reserve Fund, the Tax and Insurance Escrow Fund, the Rollover Reserve Fund and any other reserves required under the Loan Documents. "Origination Fee" shall have the meaning set forth in Section 2.1.5 hereof. "Other Charges" shall mean all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining any Individual Property, now or hereafter levied or assessed or imposed against such Individual Property or any part thereof. "Payment Date" shall mean the ninth (9th) day of each calendar month during the term of the Loan or, if such day is not a Business Day, the immediately preceding Business Day. "Permitted Encumbrances" shall mean, with respect to an Individual Property, collectively, (a) the Liens and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title 12 Insurance Policies relating to such Individual Property or any part thereof, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender's sole discretion, which Permitted Encumbrances in the aggregate do not materially adversely affect the value or use of such Individual Property or Borrower's ability to repay the Loan. "Permitted Investments" shall have the meaning set forth in the Deposit Account Agreement. "Person" shall mean any individual, corporation, partnership, joint venture, limited liability company, estate, trust, unincorporated association, any federal, state, county or municipal government or any bureau, department or agency thereof and any fiduciary acting in such capacity on behalf of any of the foregoing. "Personal Property" shall have the meaning set forth in the granting clause of the Mortgage with respect to each Individual Property. "Physical Conditions Report" shall mean, with respect to each Individual Property, a report prepared by a company satisfactory to Lender regarding the physical condition of such Individual Property, satisfactory in form and substance to Lender in its sole discretion. "Policies" shall have the meaning specified in Section 6.1(b) hereof. "Prepayment Premium" shall mean an amount equal to the following: one percent (1%) of the principal balance of the Loan being prepaid if the prepayment occurs on or after the Lockout Release Date up to, but not including, the Initial Maturity Date. "Prime Rate" shall mean the annual rate of interest publicly announced by Citibank, N.A. in New York, New York, as its base rate, as such rate shall change from time to time. If Citibank, N.A. ceases to announce a base rate, Prime Rate shall mean the rate of interest published in The Wall Street Journal from time to time as the "Prime Rate". If more than one "Prime Rate" is published in The Wall Street Journal for a day, the average of such "Prime Rates" shall be used, and such average shall be rounded up to the nearest one-eighth of one percent (0.125%). If The Wall Street Journal ceases to publish the "Prime Rate", the Lender shall select an equivalent publication that publishes such "Prime Rate", and if such "Prime Rates" are no longer generally published or are limited, regulated or administered by a governmental or quasigovernmental body, then Lender shall select a comparable interest rate index. "Prime Rate Loan" shall mean the Loan at such time as interest thereon accrues at a rate of interest based upon the Prime Rate. "Prime Rate Spread" shall mean the difference (expressed as the number of basis points) obtained by subtracting (b) from (a) as follows: (a) LIBOR plus the Spread on the date LIBOR was last applicable to the Loan and (b) the Prime Rate on the date that LIBOR was last applicable to the Loan; provided, however, in no event shall such difference be a negative number. 13 "Principal" shall mean Koger Post Oak, Inc., a Delaware corporation. "Properties" shall mean, collectively, each and every Individual Property which is subject to the terms of this Agreement. "Provided Information" shall have the meaning set forth in Section 9.1(a) hereof. "Qualified Manager" shall mean either (a) Manager; (b) an Approved Manager; or (c) in the reasonable judgment of Lender, a reputable and experienced management organization (which may be an Affiliate of Borrower) possessing experience in managing properties similar in size, scope, use and value as the Properties, provided, that Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that management of the Properties by such Person will not cause a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof. "Qualified Transferee" shall mean any one of the following Persons: (i) a pension fund, pension trust or pension account that has total real estate assets of at least $1 Billion; or (ii) a pension fund advisor who (a) immediately prior to such transfer, controls at least $1 Billion of real estate equity assets and (b) is acting on behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (i) of this definition; or (iii) an insurance company which is subject to supervision by the insurance commissioner, or a similar official or agency, of a state or territory of the United States (including the District of Columbia) (a) with a net worth, as of a date no more than six (6) months prior to the date of the transfer of at least $500 Million and (b) who, immediately prior to such transfer, controls real estate equity assets of at least $1 Billion; or (iv) a corporation organized under the banking laws of the United States or any state or territory of the United States (including the District of Columbia) (a) with a combined capital and surplus of at least $500 Million and (b) who, immediately prior to such transfer, controls real estate equity assets of at least $1 Billion; or (v) any Person (a) with a long-term unsecured debt rating from the Rating Agencies of at least investment grade or (b) who (i) owns or operates at least five million square feet of rentable area, (ii) has a net worth, as of a date no more than six (6) months prior to the date of such transfer, of at least $500 Million and (iii) immediately prior to such transfer, controls real estate equity assets of at least $1 Billion . "Rating Agencies" shall mean each of S&P, Moody's and Fitch, or any other nationally-recognized statistical rating agency which has been approved by Lender. 14 "Registration Statement" shall have the meaning set forth in Section 9.2(b) hereof. "Release Amount" shall mean for an Individual Property the amount set forth on Schedule I hereto. "REMIC Trust" shall mean a "real estate mortgage investment conduit", within the meaning of Section 860D of the Code, that holds the Note. "Rents" shall mean, with respect to each Individual Property, all rents, rent equivalents, moneys payable as damages or in lieu of rent or rent equivalents, royalties (including, without limitation, all oil and gas or other mineral royalties and bonuses), income, receivables, receipts, revenues, deposits that are returned to or earned by Borrower (including, without limitation, security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or its agents or employees from any and all sources arising from or attributable to the Individual Property, and proceeds, if any, from business interruption or other loss of income insurance. "Replacement Interest Rate Cap Agreement" means an interest rate cap agreement from an Acceptable Counterparty with terms identical to the Interest Rate Cap Agreement except that the same shall be effective in connection with replacement of the Interest Rate Cap Agreement following a downgrade, withdrawal or qualification of the long-term unsecured debt rating of the Counterparty; provided that, to the extent any such interest rate cap agreement does not meet the foregoing requirements, a "Replacement Interest Rate Cap Agreement" shall be such interest rate cap agreement approved in writing by each of the Rating Agencies with respect thereto. "Replacement Management Agreement" shall mean, collectively, (a) either (i) a management agreement with a Qualified Manager substantially in the same form and substance as the Management Agreement, (ii) a management agreement with a Qualified Manager, which management agreement shall be reasonably acceptable to Lender in form and substance, provided, with respect to this subclause (ii), Lender, at its option, may require that Borrower obtain confirmation from the applicable Rating Agencies that such management agreement will not cause a downgrading, withdrawal or qualification of the then current rating of the Securities or any class thereof or (iii) an Approved Management Agreement with a Qualified Manager; and (b) an assignment of management agreement and subordination of management fees substantially in the form then used by Lender (or of such other form and substance reasonably acceptable to Lender), executed and delivered to Lender by Borrower and such Qualified Manager at Borrower's expense. "Replacement Reserve Account" shall have the meaning set forth in Section 7.3.1 hereof. "Replacement Reserve Additional Deposit" shall have the meaning set forth in Section 2.7 hereof. 15 "Replacement Reserve Fund" shall have the meaning set forth in Section 7.3.1 hereof. "Replacement Reserve Initial Deposit" shall have the meaning set forth in Section 7.3.1 hereof. "Replacement Reserve Monthly Deposit" shall have the meaning set forth in Section 7.3.1 hereof. "Replacements" shall have the meaning set forth in Section 7.3.1(a) hereof. "Required Repair Account" shall have the meaning set forth in Section 7.1.1 hereof. "Required Repair Fund" shall have the meaning set forth in Section 7.1.1 hereof. "Required Repairs" shall have the meaning set forth in Section 7.1.1 hereof. "Reserve Funds" shall mean the Tax and Insurance Escrow Fund, the Replacement Reserve Fund, the Rollover Reserve Fund, the Required Repair Fund, the Aesthetic Repair Fund any other escrow fund established by the Loan Documents. "Restoration" shall mean the repair and restoration of an Individual Property after a casualty or Condemnation as nearly as possible to the condition the Individual Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender. "Restricted Party" shall mean Borrower, Principal, any Guarantor, or any Affiliated Manager or any shareholder, partner, member or non-member manager, or any direct or indirect legal or beneficial owner of, Borrower, Principal, or any Guarantor, any Affiliated Manager or any non-member manager. "Rollover Reserve Account" shall have the meaning set forth in Section 7.4.1 hereof. "Rollover Reserve Deposit" shall mean collectively, the Initial Rollover Reserve Deposit and, if applicable, the Additional Rollover Reserve Deposit. "Rollover Reserve Fund" shall have the meaning set forth in Section 7.4.1 hereof. "Rollover Reserve Monthly Deposit" shall have the meaning set forth in Section 7.4.1 hereof. "S&P" shall mean Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies. 16 "Sale or Pledge" shall mean a voluntary or involuntary sale, conveyance, transfer or pledge of a legal or beneficial interest. "Securities" shall have the meaning set forth in Section 9.1 hereof. "Securities Act" shall have the meaning set forth in Section 9.2(a) hereof. "Securitization" shall have the meaning set forth in Section 9.1 hereof. "Security Agreement" shall have the meaning set forth in Section 2.4.1(a)(vi) hereof. "Servicer" shall have the meaning set forth in Section 9.6 hereof. "Servicing Agreement" shall have the meaning set forth in Section 9.6 hereof. "Severed Loan Documents" shall have the meaning set forth in Section 8.2c hereof. "SNDA" shall have the meaning set forth in Section 5.1.20. "Special Purpose Entity" shall mean a corporation, limited partnership or limited liability company which at all times on and after the date hereof: (i) is organized solely for the purpose of (A) acquiring, developing, owning, holding, selling, leasing, transferring, exchanging, managing and operating the Properties, entering into this Agreement with the Lender, refinancing the Properties in connection with a permitted repayment of the Loan, and transacting lawful business that is incident, necessary and appropriate to accomplish the foregoing; or (B) acting as a general partner of the limited partnership that owns the Properties or member of the limited liability company that owns the Properties; (ii) is not engaged and will not engage in any business unrelated to (A) the acquisition, development, ownership, management or operation of the Properties, (B) acting as general partner of the limited partnership that owns the Properties or (C) acting as a member of the limited liability company that owns the Properties, as applicable; (iii) does not have and will not have any assets other than those related to the Properties or its partnership interest in the limited partnership or the member interest in the limited liability company that owns the Properties or acts as the general partner or managing member thereof, as applicable; (iv) has not engaged, sought or consented to and will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger, sale of all or substantially all of its assets, transfer of partnership or membership interests (if such entity is a general partner in a limited partnership or a member in a limited liability company) or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or operating agreement (as applicable) with respect to the matters set forth in this definition; 17 (v) if such entity is a limited partnership, has, as its only general partners, Special Purpose Entities that are corporations, limited partnerships or limited liability companies (with more than one member); (vi) if such entity is a corporation, has at least two (2) Independent Directors, and has not caused or allowed and will not cause or allow the board of directors of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the members of its board of directors unless two Independent Directors shall have participated in such vote; (vii) if such entity is a limited liability company with more than one member (other than a special member), has at least one member that is a Special Purpose Entity that is a corporation that has at least two Independent Directors and that owns at least one percent (1.0%) of the equity of the limited liability company or if such entity is a limited liability company with one member has at least one (1) Independent Director; (viii) if such entity is a limited liability company with only one member, is a limited liability company organized in the State of Delaware that has (i) as its only member a non-managing member, (ii) at least two Independent Managers and has not caused or allowed and will not cause or allow the board of managers of such entity to take any action requiring the unanimous affirmative vote of one hundred percent (100%) of the managers unless two Independent Managers shall have participated in such vote and (iii) at least one springing member that will become the non-managing member of such entity upon the dissolution of the existing non-managing member; (ix) if such entity is (a) a limited liability company, has articles of organization, a certificate of formation and/or an operating agreement, as applicable, (b) a limited partnership, has a limited partnership agreement, or (c) a corporation, has a certificate of incorporation or articles that, in each case, provide that such entity will not: (1) dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of its assets or the assets of the Borrower (as applicable); (3) engage in any other business activity, or amend its organizational documents with respect to the matters set forth in this definition without the consent of the Lender; or (4) without the affirmative vote of two (2) Independent Directors and of all other directors of the corporation (that is such entity or the general partner or managing or co-managing member of such entity) or with one Independent Director in the case of a limited liability company with a single member (other than a special member), file a bankruptcy or insolvency petition or otherwise institute insolvency proceedings with respect to itself or to any other entity in which it has a direct or indirect legal or beneficial ownership interest; 18 (x) if such entity is a limited partnership or a limited liability company that is the general partner of a limited partnership or the member of a limited liability company (with more than one member) that is the Borrower, has a corporation that has at least two Independent Directors and that owns at least 1.0% (one percent) of the equity of such entity as its general partner or managing member, as applicable, that is a Special Purpose Entity; (xi) is and will remain solvent and pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) from its assets as the same shall become due, and is maintaining and 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; (xii) has not failed and will not fail to correct any known misunderstanding regarding the separate identity of such entity; (xiii) has maintained and will maintain its accounts, books and records separate from any other Person and will file its own tax returns, except to the extent that it is required to file consolidated tax returns by law; (xiv) has maintained and will maintain its own records, books, resolutions and agreements; (xv) other than as provided in the Cash Management Agreement, (a) has not commingled and will not commingle its funds or assets with those of any other Person and (b) has not participated and will not participate in any cash management system with any other Person; (xvi) has held and will hold its assets in its own name; (xvii) has conducted and will conduct its business in its name or in a name franchised or licensed to it by an entity other than an Affiliate of Borrower, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (xxx) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Borrower; (xviii) has maintained and will maintain its financial statements, accounting records and other entity documents separate from any other Person and has not permitted and will not permit its assets to be listed as assets on the financial statement of any other entity except with respect to the consolidated financial statements of Guarantor; provided, however, that any such consolidated financial statement shall contain a note indicating that its separate assets and liabilities are neither available to pay the debts of the consolidated entity nor constitute obligations of the consolidated entity; (xix) has paid and will pay its own liabilities and expenses, including the salaries of its own employees, out of its own funds and assets, and has maintained and will maintain a sufficient number of employees in light of its contemplated business operations; 19 (xx) has observed and will observe all partnership, corporate or limited liability company formalities, as applicable; (xxi) has and will have no Indebtedness other than (i) the Loan, (ii) liabilities incurred in the ordinary course of business relating to the ownership and operation of the Property and the routine administration of Borrower (other than real estate taxes, Rents paid in advance and security deposits), in amounts not to exceed $3,000,000 which liabilities are not more than sixty (60) days past the date incurred, are not evidenced by a note and are paid when due, and which amounts are normal and reasonable under the circumstances, and (iii) such other liabilities that are permitted pursuant to this Agreement; (xxii) has not and will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except as permitted pursuant to this Agreement; (xxiii) has not and will not acquire obligations or securities of its partners, members or shareholders or any other Affiliate; (xxiv) has allocated and will allocate fairly and reasonably any overhead expenses that are shared with any Affiliate, including, but not limited to, paying for shared office space and services performed by any employee of an Affiliate; (xxv) maintains and uses and will maintain and use separate stationery, invoices and checks bearing its name. The stationery, invoices, and checks utilized by the Special Purpose Entity or utilized to collect its funds or pay its expenses shall bear its own name and shall not bear the name of any other entity unless such entity is clearly designated as being the Special Purpose Entity's agent; (xxvi) has not pledged and will not pledge its assets for the benefit of any other Person; (xxvii) has held itself out and identified itself and will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other Person, except for services rendered under a business management services agreement with an Affiliate that complies with the terms contained in Subsection (xxx) below, so long as the manager, or equivalent thereof, under such business management services agreement holds itself out as an agent of the Borrower; (xxviii) has maintained and will maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; 20 (xxix) has not made and will not make loans to any Person or hold evidence of indebtedness issued by any other Person or entity (other than cash and investment-grade securities issued by an entity that is not an Affiliate of or subject to common ownership with such entity); (xxx) has not identified and will not identify its partners, members or shareholders, or any Affiliate of any of them, as a division or part of it, and has not identified itself and shall not identify itself as a division of any other Person; (xxxi) has not entered into or been a party to, and will not enter into or be a party to, any transaction with its partners, members, shareholders or Affiliates except (A) in the ordinary course of its business and on terms which are intrinsically fair, commercially reasonable and are no less favorable to it than would be obtained in a comparable arm's-length transaction with an unrelated third party and (B) in connection with this Agreement; (xxxii) has not and will not have any obligation to, and will not, indemnify its partners, officers, directors or members, as the case may be, unless such an obligation is fully subordinated to the Debt and will not constitute a claim against it in the event that cash flow in excess of the amount required to pay the Debt is insufficient to pay such obligation; (xxxiii) if such entity is a corporation, it shall consider the interests of its creditors in connection with all corporate actions; (xxxiv) does not and will not have any of its obligations guaranteed by any Affiliate, other than the Guaranty; and (xxxv) has complied and will comply with all of the terms and provisions contained in its organizational documents. The statement of facts contained in its organizational documents are true and correct and will remain true and correct. "Spread" shall mean two and eighty-seven one hundredths percent (2.87%). "Standard Statements" shall have the meaning set forth in Section 5.1.11(f)(i). "State" shall mean, with respect to an Individual Property, the State or Commonwealth in which such Individual Property or any part thereof is located. "Survey" shall mean a survey of the Individual Property in question prepared by a surveyor licensed in the State and satisfactory to Lender and the company or companies issuing the Title Insurance Policies, and containing a certification of such surveyor satisfactory to Lender. "Tax and Insurance Escrow Fund" shall have the meaning set forth in Section 7.2.1 hereof. 21 "Taxes" shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against any Individual Property or part thereof. "Threshold Amount" shall have the meaning set forth in Section 5.1.21 hereof. "Threshold DSCR" shall mean a Debt Service Coverage Ratio, for the Loan, with respect to the Properties, equal to 1.25 to 1.00. "Title Insurance Policies" shall mean, with respect to each, the 3040 Property, individually and the 3000 Property and 3050 Property, collectively, an ALTA mortgagee title insurance policy or "mark-up" of a title insurance commitment in the form (acceptable to Lender) (or, if an Individual Property is in a State which does not permit the issuance of such ALTA policy, such form as shall be permitted in such State and acceptable to Lender) issued with respect to such Individual Property and insuring the lien of the Mortgage encumbering such Individual Property. "Transfer" shall have the meaning set forth in Section 5.2.10 hereof. "Trigger Period" shall mean the period occurring (i) after such time as a DSCR Event occurs until the Debt Service Coverage Ratio, for the Loan, equals or exceeds the Threshold DSCR, as determined during the succeeding calendar quarter determination, or (ii) after the occurrence of an Event of Default until six (6) months have elapsed after Lender's acceptance of a cure of such Event of Default. "UCC" or "Uniform Commercial Code" shall mean the Uniform Commercial Code as in effect in the applicable State in which an Individual Property is located. "Underwriter Group" shall have the meaning set forth in Section 9.2(b) hereof. "Unfunded Obligation" shall have the meaning set forth in Section 7.7.1 hereof. "Unfunded Obligations Fund" shall have the meaning set forth in Section 7.7.1 hereof. "Unfunded Obligations Reserve Account" shall have the meaning set forth in Section 7.7.1 hereof. "Unused Amount" shall mean with respect to an Individual Property and the Replacement Reserve Fund and Rollover Reserve Fund the amount, if any, by which (i) the product of (x) the percentage set forth on Schedule I with respect to such Individual Property and (y) the aggregate amount deposited into the Replacement Reserve Fund or Rollover Reserve Fund, as the case may be, exceeds (ii) the amount withdrawn from the Replacement Reserve Fund or Rollover Reserve Fund, as the case may be, with respect to such Individual Property. "U.S. Obligations" shall mean non-redeemable securities evidencing an obligation to timely pay principal and/or interest in a full and timely manner that are (a) direct obligations of the United States of America for the payment of which its full faith and credit is pledged, or (b) to the extent acceptable to the Rating Agencies, other "government securities" within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended. 22 Section 1.2. Principles of Construction. All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word "including" shall mean "including, without limitation" unless the context shall indicate otherwise. Unless otherwise specified, the words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined. II. GENERAL TERMS SECTION 2.1. Loan Commitment; Disbursement to Borrower. 2.1.1 Agreement to Lend and Borrow. Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date. 2.1.2 Single Disbursement to Borrower. Borrower may request and receive only one borrowing hereunder in respect of the Loan and any amount borrowed and repaid hereunder in respect of the Loan may not be reborrowed. 2.1.3 The Note, Mortgage and Loan Documents. The Loan shall be evidenced by the Note and secured by the Mortgage, the Assignment of Leases and the other Loan Documents. 2.1.4 Use of Proceeds. Borrower shall use the proceeds of the Loan to (a) acquire the Properties and/or repay and discharge any existing loans relating to the Properties, (b) pay all past-due Basic Carrying Costs, if any, with respect to the Properties, (c) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (d) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, (e) fund any working capital requirements of the Properties and (f) distribute the balance, if any, to Borrower or as Borrower shall otherwise direct. 2.1.5 Origination Fee. On the Closing Date, Borrower shall pay to Lender, or have deducted from the proceeds of the Loan, a non-refundable origination fee (the "Origination Fee") in an amount equal to one percent (1%) of the Loan (i.e. $770,000). Section 2.2. Interest Rate. 2.2.1 Interest Generally. Interest on the outstanding principal balance of the Loan shall accrue from the Closing Date through and including the end of the Interest Period during which the Maturity Date occurs at the Applicable Interest Rate. Borrower shall pay to Lender on each Payment Date the interest accrued on the Loan for the preceding Interest Period. 23 2.2.2 Interest Calculation. Interest on the outstanding principal balance of the Loan shall be calculated by multiplying (a) the actual number of days elapsed in the period for which the calculation is being made by (b) a daily rate based on a three hundred sixty (360) day year by (c) the outstanding principal balance. 2.2.3 Determination of Interest Rate. (a) The Applicable Interest Rate with respect to the Loan shall be: (i) LIBOR plus the Spread with respect to the applicable Interest Period for a LIBOR Loan or (ii) the Prime Rate plus the Prime Rate Spread for a Prime Rate Loan if the Loan is converted to a Prime Rate Loan pursuant to the provisions of Section 2.2.3 c or (f). (b) Subject to the terms and conditions of this Section 2.2.3, the Loan shall be a LIBOR Loan and Borrower shall pay interest on the outstanding principal amount of the Loan at LIBOR plus the Spread for the applicable Interest Period. Any change in the rate of interest hereunder due to a change in the Applicable Interest Rate shall become effective as of the opening of business on the first day on which such change in the Applicable Interest Rate shall become effective (within a reasonable time after such change, Lender shall give Borrower notice thereof). Each determination by Lender of the Applicable Interest Rate shall be conclusive and binding for all purposes, absent manifest error. (c) In the event that Lender shall have determined (which determination shall be conclusive and binding upon Borrower absent manifest error) that by reason of circumstances affecting the interbank eurodollar market, adequate and reasonable means do not exist for ascertaining LIBOR, then Lender shall forthwith give notice by telephone of such determination, confirmed in writing, to Borrower at least one (1) day prior to the last day of the related Interest Period. If such notice is given, the related outstanding LIBOR Loan shall be converted, on the last day of the then current Interest Period, to a Prime Rate Loan. (d) If, pursuant to the terms of this Agreement, any portion of the Loan has been converted to a Prime Rate Loan and Lender shall determine (which determination shall be conclusive and binding upon Borrower absent manifest error) that the event(s) or circumstance(s) which resulted in such conversion shall no longer be applicable, Lender shall give notice by telephone of such determination, confirmed in writing, to Borrower at least one (1) day prior to the last day of the related Interest Period. If such notice is given, the related outstanding Prime Rate Loan shall be converted to a LIBOR Loan on the last day of the then current Interest Period. (e) With respect to a LIBOR Loan, all payments made by Borrower hereunder shall be made free and clear of, and without reduction for or on account of, income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions, reserves or withholdings imposed, levied, collected, withheld or assessed by any Governmental Authority, which are imposed, enacted or become effective after the date hereof (such non-excluded taxes being referred to collectively as "Foreign Taxes"), excluding income and franchise taxes of the United States of America or any political subdivision or taxing authority thereof or therein (including Puerto Rico). If any Foreign Taxes are required to be withheld from any amounts payable to Lender hereunder, the amounts so payable to Lender shall be increased to the extent necessary to yield to Lender (after payment of all Foreign Taxes) interest or any such other amounts payable hereunder at the rate or in the amounts specified hereunder. Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as promptly as possible thereafter, Borrower shall send to Lender an original official receipt, if available, or certified copy thereof showing payment of such Foreign Tax. Borrower hereby indemnifies Lender for any incremental taxes, interest or penalties that may become payable by Lender which may result from any failure by Borrower to pay any such Foreign Tax when due to the appropriate taxing authority or any failure by Borrower to remit to Lender the required receipts or other required documentary evidence. 24 (f) If any requirement of law or any change therein or in the interpretation or application thereof, shall hereafter make it unlawful for Lender to make or maintain a LIBOR Loan as contemplated hereunder, (i) the obligation of Lender hereunder to make a LIBOR Loan or to convert a Prime Rate Loan to a LIBOR Loan shall be canceled forthwith and (ii) any outstanding LIBOR Loan shall be converted automatically to a Prime Rate Loan on the next succeeding Payment Date or within such earlier period as required by law. Borrower hereby agrees promptly to pay Lender, upon demand, any reasonable amounts necessary to compensate Lender for any costs incurred by Lender in making any conversion in accordance with this Agreement, including, without limitation, any interest or fees payable by Lender to lenders of funds obtained by it in order to make or maintain the LIBOR Loan hereunder. Lender's notice of such costs, as certified to Borrower, shall be conclusive absent manifest error. (g) In the event that any change in any requirement of law or in the interpretation or application thereof, or compliance by Lender with any request or directive (whether or not having the force of law) hereafter issued from any central bank or other Governmental Authority: (i) shall hereafter impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of Lender which is not otherwise included in the determination of LIBOR hereunder; (ii) shall hereafter have the effect of reducing the rate of return on Lender's capital as a consequence of its obligations hereunder to a level below that which Lender could have achieved but for such adoption, change or compliance (taking into consideration Lender's customary and ordinary policies with respect to capital adequacy) by any amount deemed by Lender to be material; or (iii) shall hereafter impose on Lender any other condition and the result of any of the foregoing is to increase the cost to Lender of making, renewing or maintaining loans or extensions of credit or to reduce any amount receivable hereunder; then, in any such case, Borrower shall promptly pay Lender, upon demand, any additional amounts necessary to compensate Lender for such additional cost or reduced amount receivable which Lender deems to be material as determined by Lender. If Lender becomes entitled to claim any additional amounts pursuant to this Section 2.2.3(g), Lender shall provide Borrower with not less than ninety (90) days written notice specifying in reasonable detail the event by reason of which it has become so entitled and the additional amount required to fully compensate Lender for such additional cost or reduced amount. A certificate as to any additional costs or amounts payable pursuant to the foregoing sentence submitted by Lender to Borrower shall be conclusive in the absence of manifest error. This provision shall survive payment of the Note and the satisfaction of all other obligations of Borrower under this Agreement and the Loan Documents. 25 (h) Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or expense which Lender sustains or incurs as a consequence of (i) any default by Borrower in payment of the principal of or interest on a LIBOR Loan, including, without limitation, any such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder, (ii) any prepayment (whether voluntary or mandatory) of the LIBOR Loan on a day that (A) is not the Payment Date immediately following the last day of an Interest Period with respect thereto or (B) is the Payment Date immediately following the last day of an Interest Period with respect thereto if Borrower did not give the prior written notice of such prepayment required pursuant to the terms of this Agreement, including, without limitation, such loss or expense arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain the LIBOR Loan hereunder and (iii) the conversion (for any reason whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate from LIBOR plus the Spread to the Prime Rate plus the Prime Rate Spread with respect to any portion of the outstanding principal amount of the Loan then bearing interest at LIBOR plus the Spread on a date other than the Payment Date immediately following the last day of an Interest Period, including, without limitation, such loss or expenses arising from interest or fees payable by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred to collectively as the "Breakage Costs"); provided, however, Borrower shall not indemnify Lender from any loss or expense arising from Lender's willful misconduct or gross negligence. This provision shall survive payment of the Note in full and the satisfaction of all other obligations of Borrower under this Agreement and the other Loan Documents. (i) Lender shall not be entitled to claim compensation pursuant to this Section 2.2.3 for any Foreign Taxes, increased cost or reduction in amounts received or receivable hereunder, or any reduced rate of return, which was incurred or which accrued more than the earlier of (i) ninety (90) days before the date Lender notified Borrower of the change in law or other circumstance on which such claim of compensation is based and delivered to Borrower a written statement setting forth in reasonable detail the basis for calculating the additional amounts owed to Lender under this Section 2.2.3, which statement shall be conclusive and binding upon all parties hereto absent manifest error, or (ii) any earlier date provided that Lender notified Borrower of such change in law or circumstance and delivered the written statement referenced in clause (i) promptly after Lender received written notice of such change in law or circumstance (provided that Lender shall notify Borrower within thirty (30) days of such change). (j) Borrower shall enter into an Interest Rate Cap Agreement with a LIBOR strike price not to exceed five and forty-five hundredths percent (5.45%) at the Closing Date. The Interest Rate Cap Agreement (i) shall be in a form reasonably acceptable to Lender, (ii) shall be with an 26 Acceptable Counterparty, (iii) shall direct such Acceptable Counterparty to deposit directly into the Deposit Account any amounts due Borrower under such Interest Rate Cap Agreement so long as any portion of the Debt exists, provided that the Debt shall be deemed to exist if the Property is transferred to Lender or an Affiliate of Lender by judicial or non-judicial foreclosure or deed-in-lieu thereof, (iv) shall be for a period equal to the term of the Loan and (v) shall have an initial notional amount equal to the principal balance of the Loan. Borrower shall collaterally assign to Lender, pursuant to the Collateral Assignment of Interest Rate Cap Agreement, all of its right, title and interest to receive any and all payments under the Interest Rate Cap Agreement, and shall deliver to Lender an executed counterpart of such Interest Rate Cap Agreement (which shall, by its terms, authorize the assignment to Lender and require that payments be deposited directly into the Lockbox Account). (k) Borrower shall comply with all of its obligations under the terms and provisions of the Interest Rate Cap Agreement. All amounts paid by the Counterparty under the Interest Rate Cap Agreement to Borrower or Lender shall be deposited immediately into the Lockbox Account or if the Lockbox Account is not then required to be in effect, into such account as specified by Lender. Borrower shall take all actions reasonably requested by Lender to enforce Lender's rights under the Interest Rate Cap Agreement in the event of a default by the Counterparty and shall not waive, amend or otherwise modify any of its rights thereunder. (l) In the event of any downgrade, withdrawal or qualification of the rating of the Counterparty by S&P or Moody' so that such Counterparty no longer has a long-term unsecured debt rating of at least "AA-" from S&P and "Aa-" from Moody's, respectively, Borrower shall replace the Interest Rate Cap Agreement with a Replacement Interest Rate Cap Agreement not later than ten (10) Business Days following receipt of notice from Lender of such downgrade, withdrawal or qualification. (m) In the event that Borrower fails to purchase and deliver to Lender the Interest Rate Cap Agreement or any replacement Interest Rate Cap Agreement as and when required hereunder, Lender may purchase such Interest Rate Cap Agreement and the cost incurred by Lender in purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender with interest thereon at the Default Rate from the date such cost was incurred by Lender until such cost is paid by Borrower to Lender. (n) In connection with the Interest Rate Cap Agreement, Borrower shall obtain and deliver to Lender an opinion of counsel from counsel (which counsel may be in-house counsel for the Counterparty) for the Counterparty (upon which Lender and its successors and assigns may rely) which shall provide, in relevant part, that: (1) the Counterparty is duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation and has the organizational power and authority to execute and deliver, and to perform its obligations under, the Interest Rate Cap Agreement; (2) the execution and delivery of the Interest Rate Cap Agreement by the Counterparty, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been and remain duly authorized by all necessary action and do not contravene any provision of its certificate of incorporation or by-laws (or equivalent organizational documents) or any law, regulation or contractual restriction binding on or affecting it or its property; 27 (3) all consents, authorizations and approvals required for the execution and delivery by the Counterparty of the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, and the performance of its obligations thereunder have been obtained and remain in full force and effect, all conditions thereof have been duly complied with, and no other action by, and no notice to or filing with any governmental authority or regulatory body is required for such execution, delivery or performance; and (4) the Interest Rate Cap Agreement, and any other agreement which the Counterparty has executed and delivered pursuant thereto, has been duly executed and delivered by the Counterparty and constitutes the legal, valid and binding obligation of the Counterparty, enforceable against the Counterparty in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors' rights generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 2.2.4 Additional Costs. Lender will use reasonable efforts (consistent with legal and regulatory restrictions) to maintain the availability of the LIBOR Loan and to avoid or reduce any increased or additional costs payable by Borrower under Section 2.2.3, including, if requested by Borrower, a transfer or assignment of the Loan to a branch, office or Affiliate of Lender in another jurisdiction, or a redesignation of its lending office with respect to the Loan, in order to maintain the availability of the LIBOR Loan or to avoid or reduce such increased or additional costs, provided that the transfer or assignment or redesignation (a) would not result in any additional costs, expenses or risk to Lender that are not reimbursed by Borrower and (b) would not be disadvantageous in any other respect to Lender as determined by Lender in its reasonable discretion. 2.2.5 Default Rate. In the event that, and for so long as, any Event of Default shall have occurred and be continuing, the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest in respect of the Loan, shall accrue interest at the Default Rate, calculated from the date such payment was due without regard to any grace or cure periods contained herein. 2.2.6 Usury Savings. This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Applicable Interest Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding. 28 Section 2.3. Loan Payment. 2.3.1 Payments Generally. The first Interest Period hereunder shall commence on and include the Closing Date and end on January 8, 2003. Each Interest Period thereafter shall commence on the ninth (9th) day of each calendar month during the term of the Loan and shall end on and include the eighth (8th) day of the next occurring calendar month. For purposes of making payments hereunder, but not for purposes of calculating Interest Periods, if the day on which such payment is due is not a Business Day, then amounts due on such date shall be due on the immediately preceding Business Day and with respect to payments of principal due on the Maturity Date, interest shall be payable at the Applicable Interest Rate or the Default Rate, as the case may be, through and including the day immediately preceding such Maturity Date. All amounts due pursuant to this Agreement and the other Loan Documents shall be payable without setoff, counterclaim, defense or any other deduction whatsoever. 2.3.2 Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the outstanding principal balance, all accrued and unpaid interest and all other amounts due hereunder and under the Note, the Mortgage and other the Loan Documents. 2.3.3 Late Payment Charge. If any principal, interest or any other sums due under the Loan Documents is not paid by Borrower on the date on which it is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of three percent (3%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by the Mortgage and the other Loan Documents to the extent permitted by applicable law. 2.3.4 Method and Place of Payment. Except as otherwise specifically provided herein, all payments and prepayments under this Agreement and the Note shall be made to Lender not later than 2:00 p.m., New York City time, on the date when due and shall be made in lawful money of the United States of America in immediately available funds at Lender's office, and any funds received by Lender after such time shall, for all purposes hereof, be deemed to have been paid on the next preceding Business Day. Section 2.4. Prepayments. 2.4.1 Voluntary Prepayments. Prior to the Lockout Release Date, the outstanding principal amount of the Loan may not be prepaid in whole or in part. On or after the Lockout Release Date, Borrower may, at its option and upon thirty (30) days prior written notice to Lender, prepay the Debt in whole or in part; provided that such prepayment is accompanied by the Prepayment Premium, if any, and further provided that any prepayment shall be accompanied by the amount of interest that would have accrued on the principal amount of such prepayment through the end of the Interest Period during which such prepayment is made. Lender shall not be obligated to accept any prepayment unless it is accompanied by the Prepayment Premium due in connection therewith. Any partial prepayment shall be applied to the last payments of principal due under the Loan. Notwithstanding anything herein to the contrary, the Borrower may not voluntarily prepay the Loan on the day after a Payment Date to the day before a Determination Date during any month. 29 2.4.2 Mandatory Lender Prepayments. On the next occurring Payment Date following the date on which Borrower actually receives any Net Proceeds, if Lender is not obligated to make such Net Proceeds available to Borrower for the Restoration of any Individual Property, Borrower shall prepay the outstanding principal balance of the Note in an amount equal to one hundred percent (100%) of such Net Proceeds. Other than following an Event of Default, no Prepayment Premium shall be due in connection with any prepayment made pursuant to this Section 2.4.2. The Release Amount with respect to such Individual Property shall be reduced in an amount equal to such prepayment. Any partial prepayment under this Section shall be applied to the last payments of principal due under the Loan. 2.4.3 Prepayments After Default. If, following an Event of Default, payment of all or any part of the Debt is tendered by Borrower or otherwise recovered by Lender, (a) such tender or recovery shall be applied by Lender to the Debt on the next occurring Payment Date and deemed a voluntary payment by Borrower and (b) Borrower shall pay, in addition to the Debt an amount equal to the Prepayment Premium, if any. Section 2.5. Release of Property. Except as set forth in this Section 2.5, no repayment or prepayment of all or any portion of the Note shall cause, give rise to a right to require, or otherwise result in, the release of any Lien of any Mortgage on any Individual Property. 2.5.1 Release of Individual Property. After the Lockout Release Date, Borrower may obtain the release of an Individual Property from the Lien of the Mortgage thereon (and related Loan Documents) and the release of Borrower's obligations under the Loan Documents with respect to such Individual Property (other than those expressly stated to survive), upon the satisfaction of each of the following conditions: (a) Borrower shall pay to Lender (x) the Release Amount for the applicable Individual Property and (y) the Prepayment Premium, if any, due in connection therewith; (b) Borrower shall submit to Lender, not less than thirty (30) days prior to the date of such release, a release of Lien (and related Loan Documents) for such Individual Property for execution by Lender. Such release shall be in a form appropriate in each jurisdiction in which the Individual Property is located and reasonably acceptable to Lender. In addition, Borrower shall provide all other documentation Lender reasonably requires to be delivered by Borrower in connection with such release, together with an Officer's Certificate certifying that such documentation (i) is in compliance with all Legal Requirements, (ii) will effect such release in accordance with the terms of this Agreement, and (iii) will not impair or otherwise adversely affect the Liens, security interests and other rights of Lender under the Loan Documents not being released (or as to the parties to the Loan Documents and Properties subject to the Loan Documents not being released); 30 (c) After giving effect to such release, the Debt Service Coverage Ratio for the Properties shall not be less than the Debt Service Coverage Ratio in existence at the time of closing the Loan; (d) The Individual Property to be released shall be conveyed to a Person other than a Borrower or any of its Affiliates; and (e) No Event of Default shall have occurred and remain uncured. 2.5.2 Release on Payment in Full. Lender shall, upon the written request and at the expense of Borrower, upon payment in full of all principal and interest due on the Loan and all other amounts due and payable under the Loan Documents in accordance with the terms and provisions of the Note and this Loan Agreement, release the Lien of the Mortgage on each Individual Property not theretofore released. Section 2.6. Cash Management. 2.6.1 (a) Borrower shall establish and maintain a Lockbox Account pursuant to the Lockbox Account Agreement. Borrower shall, or shall cause Manager to, deliver written instructions to all tenants under Leases to deliver all Rents payable thereunder directly to the Lockbox Account. In the event that either Borrower or Manager receives any amounts constituting Rents or other revenue of any kind from the Property, Borrower shall, or shall cause Manager to, deposit said amounts into the Lockbox Account in accordance with the Cash Management Agreement. (b) At all times other than during a Trigger Period, Borrower shall be entitled to use and apply all funds deposited in the Lockbox Account. (c) During a Trigger Period, Borrower shall no longer be entitled to use and apply the funds deposited in the Lockbox Account and all funds in the Lockbox Account shall be swept daily by the Lockbox Bank into an account ("Deposit Account") with Agent and applied in accordance with this Agreement and the Deposit Account Agreement. Except as set forth in the Cash Management Agreement, Borrower shall have no rights to make withdrawals from the Lockbox Account or Deposit Account or receive the proceeds thereof. (d) Borrower hereby grants to Lender a first priority security interest in the Lockbox Account and Deposit Account and all deposits at any time contained therein and the proceeds thereof and will take all actions necessary to maintain in favor of Lender a perfected first priority security interest in the Lockbox Account and Deposit Account, including, without limitation, executing and filing UCC-1 Financing Statements and continuations thereof. All costs and expenses for establishing and maintaining the Lockbox Account and Deposit Account shall be paid by Borrower. Borrower will not in any way alter or modify the Cash Management Agreement without Lender's consent and will notify Lender of the Lockbox Account number. 2.6.2 Payments Received Under the Cash Management Agreement. Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents, and provided no Event of Default has occurred and is continuing, Borrower's obligations with respect to the monthly payment of principal and interest and amounts due for the Tax and Insurance Escrow Fund, Required Repair Fund, Aesthetic Repair Fund, Replacement Escrow Fund, Rollover Escrow Fund, Unfunded Obligations Reserve Fund and any other payment reserves established pursuant to this Agreement or any other Loan Document shall be deemed satisfied to the extent sufficient amounts are deposited in the Deposit Account established pursuant to the Cash Management Agreement to satisfy such obligations on the dates each such payment is required, regardless of whether any of such amounts are so applied by Lender. 31 Section 2.7. Extension of the Initial Maturity Date. Borrower shall have the option to extend the term of the Loan beyond the Initial Maturity Date for three successive terms (each, an "Extension Option") of one (1) year each (the maturity date following the exercise of each such option is hereinafter the "Extended Maturity Date") upon satisfaction of the following terms and conditions: (a) no Event of Default shall have occurred and be continuing at the time the applicable Extension Option is exercised and on the date that the applicable extension term is commenced; (b) Borrower shall notify Lender of its irrevocable election to extend the Maturity Date as aforesaid not earlier than six (6) months, and no later than three (3) months, prior to (i) with respect to the first Extension Option, the Initial Maturity Date, (ii) with respect to the second Extension Option, the end of the first Extension Option and (iii) with respect to the third Extension Option, the end of the second Extension Option; (c) if the Interest Rate Cap Agreement is scheduled to mature prior to the applicable Extended Maturity Date, Borrower shall obtain and deliver to Lender not later than ten (10) Business Days prior to the first day of each Extension Option, one or more Replacement Interest Rate Cap Agreements from an Acceptable Counterparty which Replacement Interest Rate Cap Agreement shall be effective commencing on the first date of such Extension Option and shall have a maturity date not earlier than the applicable Extended Maturity Date; (d) In connection with each Extension Option Borrower shall have delivered to Lender together with its notice pursuant to subsection (b) of this Section 2.7 and as of the commencement of the applicable Extension Option, an Officer's Certificate in form acceptable to the Lender certifying that each of the representations and warranties of Borrower contained in the Loan Documents is true, complete and correct in all material respects as of the date of such Officer's Certificate to the extent such representation and warranties are not matters which by their nature can no longer be true and correct as a result of the passage of time; and (e) In connection with the second Extension Option, Borrower shall (a) deposit the amount of $2,000,000 (the "Additional Rollover Reserve Deposit") in the form of cash and/or a Letter of Credit (or any combination thereof) in accordance with the terms and conditions set forth in Section 7.6 below, into the Rollover Reserve Fund and (b) commence to make an additional deposit on each Payment Date in the amount of $55,800 (the "Additional Rollover Reserve Monthly Deposit") into the Rollover Reserve Fund; provided that Borrower shall not be obligated to make such deposits in the event that the 3000 Property has been released in accordance with the provisions set forth in Section 2.5.1. 32 (f) In connection with the second Extension Option and the third Extension Option, Borrower shall pay to Lender on or before the first day of the second Extension Option and the third Extension Option, as the case may be, an extension fee equal to one-quarter of one percent (0.25%) of the outstanding principal balance of the Loan. III. CONDITIONS PRECEDENT SECTION 3.1. Conditions Precedent to Closing. The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date: 3.1.1 Representations and Warranties; Compliance with Conditions. The representations and warranties of Borrower contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and no Default or an Event of Default shall have occurred and be continuing; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed. 3.1.2 Loan Agreement and Note. Lender shall have received a copy of this Agreement and the Note, in each case, duly executed and delivered on behalf of Borrower. 3.1.3 Delivery of Loan Documents; Title Insurance; Reports; Leases. (a) Mortgage, Assignment of Leases. Lender shall have received from Borrower fully executed and acknowledged counterparts of the Mortgage and the Assignment of Leases and evidence that counterparts of the Mortgage and Assignment of Leases have been delivered to the title company for recording, in the reasonable judgment of Lender, so as to effectively create upon such recording valid and enforceable Liens upon each Individual Property, of the requisite priority, in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents. Lender shall have also received from Borrower fully executed counterparts of the Environmental Indemnity, Guaranty, Cash Management Agreement and Assignment of Management Agreement. (b) Title Insurance. Lender shall have received Title Insurance Policies with respect to the 3000 Property and the 3050 Property, issued by Commonwealth Title Insurance Company, and with respect to the 3040 Property, issued by First American Title Insurance Company and each dated as of the Closing Date, with reinsurance and direct access agreements acceptable to Lender. Such Title Insurance Policies shall (i) provide coverage in amounts satisfactory to Lender in its reasonable discretion, (ii) insure Lender that the relevant Mortgage creates a valid lien on the Individual Property encumbered thereby of the requisite priority, free and clear of all exceptions from coverage other than Permitted Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (iii) contain such legally available endorsements and affirmative coverages as Lender may reasonably request, and (iv) name Lender as the insured. To the extent permitted by the terms and provisions thereof, the Title Insurance Policies shall be assignable. Lender also shall have received evidence that all premiums in respect of such Title Insurance Policies have been paid. 33 (c) Survey. Lender shall have received a current survey for each Individual Property, certified to Lender and its successors and assigns, in form and content satisfactory to Lender and prepared by a professional and properly licensed land surveyor satisfactory to Lender in accordance with the Accuracy Standards for ALTA/ACSM Land Title Surveys as adopted by American Land Title Association, American Congress on Surveying & Mapping and National Society of Professional Surveyors in 1999. Each such survey shall reflect the same legal description contained in the Title Insurance Policies relating to such Individual Property referred to in clause (ii) above and shall include, among other things, unless the Individual Property is platted, a metes and bounds description of the real property comprising part of such Individual Property reasonably satisfactory to Lender. The surveyor's seal shall be affixed to each survey and the surveyor shall provide a certification for each survey in form and substance acceptable to Lender. (d) Insurance. Lender shall have received valid certificates of insurance for the policies of insurance required hereunder, satisfactory to Lender in its sole discretion, and evidence of the payment of all premiums payable for the existing policy period. (e) Environmental Reports. Lender shall have received a Phase I environmental report (and, if recommended by the Phase I environmental report, a Phase II environmental report) in respect of each Individual Property, in each case satisfactory in form and substance to Lender. (f) [INTENTIONALLY DELETED]. (g) Encumbrances. Borrower shall have taken or caused to be taken such actions in such a manner so that Lender has a valid and perfected first Lien as of the Closing Date with respect to each Mortgage on the applicable Individual Property, subject only to applicable Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory evidence thereof. 3.1.4 Related Documents. Each additional document not specifically referenced herein, but relating to the transactions contemplated herein, shall be in form and substance reasonably satisfactory to Lender, and shall have been duly authorized, executed and delivered by all parties thereto and Lender shall have received and approved certified copies thereof. 3.1.5 Delivery of Organizational Documents. On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender copies certified by Borrower of all organizational documentation related to Borrower and/or the formation, structure, existence, good standing and/or qualification to do business, as Lender may reasonably request, including, without limitation, good standing certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates as may be reasonably requested by Lender. 34 3.1.6 Opinions of Borrower's Counsel. Lender shall have received opinions of Borrower's counsel (a) with respect to non-consolidation issues, and (b) with respect to due execution, authority, enforceability of the Loan Documents and such other matters as Lender may reasonably require, all such opinions in form, scope and substance reasonably satisfactory to Lender and Lender's counsel. 3.1.7 [INTENTIONALLY DELETED]. 3.1.8 Basic Carrying Costs. Borrower shall have paid all Basic Carrying Costs relating to the Properties which are in arrears, including, without limitation, (a) accrued but unpaid insurance premiums relating to the Properties, (b) Taxes due for the year 2002 and for all previous years with respect to the Properties, and (c) currently due and payable Other Charges relating to the Properties, which amounts shall be funded with proceeds of the Loan. 3.1.9 Completion of Proceedings. All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement and other Loan Documents and all documents incidental thereto shall be reasonably satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request. 3.1.10 Payments. All payments, deposits or escrows required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid or funded with proceeds of the Loan. 3.1.11 Tenant Estoppels. Lender shall have received an executed tenant estoppel letter, which shall be in the form reasonably acceptable to Lender (a) with respect to the 3040 Property, from lessees of not less than seventy-five percent (75%) of the gross leased area of the 3040 Property that was leased up as of November 2, 2002 and (b) with respect to the 3000 Property and the 3050 Property, (i) from all tenants leasing more than 10,000 square feet and (ii) other tenants who lease at least fifty percent (50%) of the remaining gross leased area. 3.1.12 Transaction Costs. Borrower shall have paid or reimbursed Lender for all title insurance premiums, recording and filing fees, costs of environmental reports, Physical Conditions Reports, appraisals and other reports, the fees and costs of Lender's counsel and all other third party out-of-pocket expenses incurred in connection with the origination of the Loan. 3.1.13 Material Adverse Change. There shall have been no material adverse change in the financial condition or business condition of Borrower, Guarantor or the Properties since the date of the most recent financial statements delivered to Lender. The income and expenses of the Properties, the occupancy leases thereof, and all other features of the transaction shall be as represented to Lender without material adverse change. Neither Borrower, Guarantor nor any of its constituent Persons shall be the subject of any bankruptcy, reorganization, or insolvency proceeding. 3.1.14 Leases and Rent Roll. Lender shall have received copies of all tenant leases, certified copies of any tenant leases as requested by Lender. Lender shall have received a current certified rent roll of the Properties, reasonably satisfactory in form and substance to Lender. 35 3.1.15 [INTENTIONALLY DELETED]. 3.1.16 Tax Lot. Lender shall have received evidence that each Individual Property constitutes one (1) or more separate tax lots, which evidence shall be reasonably satisfactory in form and substance to Lender. 3.1.17 Physical Conditions Reports. Lender shall have received Physical Conditions Reports with respect to each Individual Property, which reports shall be reasonably satisfactory in form and substance to Lender. 3.1.18 Management Agreement. Lender shall have received a certified copy of the Management Agreement with respect to the Properties which shall be satisfactory in form and substance to Lender. 3.1.19 Appraisal. Lender shall have received an appraisal of each Individual Property, which shall be satisfactory in form and substance to Lender. 3.1.20 Financial Statements. Lender shall have received a balance sheet with respect to each Individual Property for the two most recent Fiscal Years and statements of income with respect to each Individual Property for the two most recent Fiscal Years, each in form and substance reasonably satisfactory to Lender. 3.1.21 Further Documents. Lender or its counsel shall have received such other and further approvals, opinions, documents and information as Lender or its counsel may have reasonably requested including the Loan Documents in form and substance satisfactory to Lender and its counsel. IV. REPRESENTATIONS AND WARRANTIES SECTION 4.1. Borrower Representations. Borrower represents and warrants as of the date hereof and as of the Closing Date that: 4.1.1 Organization. Borrower is duly organized and validly existing and in good standing with requisite power and authority to own its properties and to transact the businesses in which it is now engaged. Borrower is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with its properties, businesses and operations. Borrower possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to own its properties and to transact the businesses in which it is now engaged, and the sole business of Borrower is the ownership, management and operation of the Properties. The ownership interests of Borrower are set forth in the Chart attached hereto as Schedule IV. 4.1.2 Proceedings. Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower and constitute legal, valid and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law). 36 4.1.3 No Conflicts. The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement, partnership agreement, management agreement or other agreement or instrument to which Borrower is a party or by which any of Borrower's property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over Borrower or any of Borrower's properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any court or any such regulatory authority or other governmental agency or body required for the execution, delivery and performance by Borrower of this Agreement or any other Loan Documents has been obtained and is in full force and effect. 4.1.4 Litigation. Except as set forth on Schedule 4.1.4, there are no actions, suits or proceedings at law or in equity by or before any Governmental Authority or other agency now pending or threatened against or affecting Borrower or any Individual Property, which actions, suits or proceedings, if determined against Borrower or any Individual Property, might materially adversely affect the condition (financial or otherwise) or business of Borrower or the condition or ownership of any Individual Property. 4.1.5 Agreements. Except as set forth on Schedule 4.1.5, Borrower is not a party to any agreement or instrument or subject to any restriction which might materially and adversely affect Borrower or any Individual Property, or Borrower's business, properties or assets, operations or condition, financial or otherwise. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or any of the Properties are bound. Borrower has no material financial obligation under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which Borrower is a party or by which Borrower or the Properties is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Properties as permitted pursuant to clause (xx) of the definition of "Special Purpose Entity" set forth in Section 1.1 hereof and (b) obligations under the Loan Documents. 4.1.6 Title. Borrower has good and insurable fee simple title to the real property comprising part of each Individual Property and good title to the balance of such Individual Property, free and clear of all Liens whatsoever except the Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. The Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the applicable Individual Property (as currently used) or Borrower's ability to repay the Loan. Each Mortgage, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the applicable Individual Property, subject only to Permitted Encumbrances and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. There are no claims for payment for work, labor or materials affecting the Properties which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents. 37 4.1.7 Solvency. Borrower (a) has not entered into the transaction or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for its obligations under such Loan Documents. Giving effect to the Loan, the fair saleable value of Borrower's assets exceeds and will, immediately following the making of the Loan, exceed Borrower's total liabilities, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. The fair saleable value of Borrower's assets is and will, immediately following the making of the Loan, be greater than Borrower's probable liabilities, including the maximum amount of its contingent liabilities on its debts as such debts become absolute and matured. Borrower's assets do not and, immediately following the making of the Loan will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Borrower does not intend to, and does not believe that it will, incur debt and liabilities (including contingent liabilities and other commitments) beyond its ability to pay such debt and liabilities as they mature (taking into account the timing and amounts of cash to be received by Borrower and the amounts to be payable on or in respect of obligations of Borrower). Except as expressly disclosed to Lender in writing, no petition in bankruptcy has been filed against Borrower or any constituent Person, and neither Borrower nor any constituent Person has ever made an assignment for the benefit of creditors or taken advantage of any insolvency act for the benefit of debtors. Neither Borrower nor any of its constituent Persons are contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of Borrower's assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against it or such constituent Persons. 4.1.8 Full and Accurate Disclosure. No statement of fact made by Borrower in this Agreement or in any of the other Loan Documents contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to Borrower which has not been disclosed to Lender which materially and adversely affects, nor as far as Borrower can foresee, might materially and adversely affect, any Individual Property or the business, operations or condition (financial or otherwise) of Borrower. 4.1.9 No Plan Assets. Borrower is not an "employee benefit plan," as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of Borrower constitutes or will constitute "plan assets" of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) Borrower is not a "governmental plan" within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Loan Agreement. 38 4.1.10 Compliance. To the best of Borrower's knowledge, Borrower and the Properties and the use thereof comply in all material respects with all applicable Legal Requirements, including, without limitation, building and zoning ordinances and codes. Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority. There has not been committed by Borrower or, to Borrower's knowledge, any other Person in occupancy of or involved with the operation or use of the Properties any act or omission affording the federal government or any other Governmental Authority the right of forfeiture as against any Individual Property or any part thereof or any monies paid in performance of Borrower's obligations under any of the Loan Documents. 4.1.11 Financial Information. To the best of Borrower's knowledge, all financial data, including, without limitation, the statements of income and operating expense, that have been delivered to Lender in respect of the Properties (i) are true, complete and correct in all material respects, (ii) accurately represent the financial condition of the Properties as of the date of such reports, and (iii) to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. Except for Permitted Encumbrances, Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a materially adverse effect on any Individual Property or the operation thereof, except as referred to or reflected in said financial statements. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower from that set forth in said financial statements. 4.1.12 Condemnation. No Condemnation or other proceeding has been commenced or, to Borrower's best knowledge, is threatened or contemplated with respect to all or any portion of any Individual Property or for the relocation of roadways providing access to any Individual Property. 4.1.13 Federal Reserve Regulations. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any "margin stock" within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or by the terms and conditions of this Agreement or the other Loan Documents. 4.1.14 Utilities and Public Access. Each Individual Property has rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service such Individual Property for its respective intended uses. All public utilities necessary or convenient to the full use and enjoyment of each Individual Property are located either in the public right-of-way abutting such Individual Property (which are connected so as to serve such Individual Property without passing over other property) or in recorded easements serving such Individual Property and such easements are set forth in and insured by the Title Insurance Policies. All roads necessary for the use of each Individual Property for their current respective purposes have been completed and dedicated to public use and accepted by all Governmental Authorities. 39 4.1.15 Not a Foreign Person. Borrower is not a "foreign person" within the meaning of 1445(f)(3) of the Code. 4.1.16 Separate Lots. Each Individual Property is comprised of one (1) or more parcels which constitute a separate tax lot or lots and does not constitute a portion of any other tax lot not a part of such Individual Property. 4.1.17 Assessments. There are no pending or, to Borrower's knowledge, proposed special or other assessments for public improvements or otherwise affecting any Individual Property, nor to Borrower's knowledge are there any contemplated improvements to any Individual Property that may result in such special or other assessments. 4.1.18 Enforceability. The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable (subject to principles of equity and bankruptcy, insolvency and other laws generally affecting creditors' rights and the enforcement of debtors' obligations), and Borrower has not asserted any right of rescission, set-off, counterclaim or defense with respect thereto. 4.1.19 No Prior Assignment. There are no prior assignments of the Leases or any portion of the Rents due and payable or to become due and payable which are presently outstanding. 4.1.20 Insurance. Borrower has obtained and has delivered to Lender certified copies of all insurance policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement, provided that the requirement of a certification shall be upon request by Lender. There are no outstanding claims under any such policy, and no Person, including Borrower, has done, by act or omission, anything which would impair the coverage of any such policy. 4.1.21 Use of Property. Each Individual Property is used exclusively for office purposes and other appurtenant and related uses. 4.1.22 Certificate of Occupancy; Licenses. All certifications, permits, licenses and approvals, including, without limitation, certificates of completion and occupancy permits required for the legal use, occupancy and operation of each Individual Property as an office building (collectively, the "Licenses"), have been obtained and are in full force and effect. Borrower shall keep and maintain all licenses necessary for the operation of each Individual Property as an office building. The use being made of each Individual Property is in conformity with the certificate of occupancy issued for such Individual Property. 4.1.23 Flood Zone. None of the Improvements on any Individual Property are located in an area as identified by the Federal Emergency Management Agency as an area having special flood hazards or, if so located, the flood insurance required pursuant to Section 6.1(a)(i) is in full force and effect with respect to each such Individual Property. 40 4.1.24 Physical Condition. Except as set forth on Schedule 4.1.24, each Individual Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects (provided that the obligation to maintain such items in good condition shall be relative to the age of such item); there exists no structural or other material defects or damages in any Individual Property, whether latent or otherwise, and Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in any Individual Property, or any part thereof, which would materially and adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond. 4.1.25 Boundaries. All of the improvements which were included in determining the appraised value of each Individual Property lie wholly within the boundaries and building restriction lines of such Individual Property, and no improvements on adjoining properties encroach upon such Individual Property, and no easements or other encumbrances upon the applicable Individual Property encroach upon any of the improvements, so as to affect the value or marketability of the applicable Individual Property except those which are insured against by title insurance. 4.1.26 Leases. The Properties are not subject to any Leases other than the Leases described in Schedule II attached hereto and made a part hereof. Borrower is the owner and lessor of landlord's interest in the Leases. No Person has any possessory interest in any Individual Property or right to occupy the same except under and pursuant to the provisions of the Leases. Except as set forth on Schedule 4.1.26, the current Leases are in full force and effect and there are no defaults thereunder by either party and, to Borrower's knowledge, there are no conditions that, with the passage of time or the giving of notice, or both, would constitute defaults thereunder. No Rent (excluding security deposits) has been paid more than one (1) month in advance of its due date. Except as set forth on Schedule 4.1.26, all work to be performed by Borrower under each Lease has been performed as required and has been accepted by the applicable tenant, and any payments, free rent, partial rent, rebate of rent or other payments, credits, allowances or abatements required to be given by Borrower to any tenant has already been received by such tenant. There has been no prior sale, transfer or assignment, hypothecation or pledge of any Lease or of the Rents received therein which is outstanding as of the date hereof. No tenant under any Lease has a right or option pursuant to such Lease or otherwise to purchase all or any part of the leased premises or the building of which the leased premises are a part. No tenant under any Lease has any right or option for additional space in the Improvements. To Borrower's knowledge, no hazardous wastes or toxic substances, as defined by applicable federal, state or local statutes, rules and regulations, have been disposed, stored or treated by any tenant under any Lease on or about the leased premises nor does Borrower have any knowledge of any tenant's intention to use its leased premises for any activity which, directly or indirectly, involves the use, generation, treatment, storage, disposal or transportation of any petroleum product or any toxic or hazardous chemical, material, substance or waste except in compliance with the Legal Requirements. 41 4.1.27 Survey. The Survey for each Individual Property delivered to Lender in connection with this Agreement has been prepared in accordance with the provisions of Section 3.1.3c hereof, and, to Borrower's knowledge, does not fail to reflect any material matter affecting such Individual Property or the title thereto. 4.1.28 Principal Place of Business; State of Organization. Borrower's principal place of business as of the date hereof is the address set forth in the introductory paragraph of this Agreement. The Borrower is organized under the laws of the State of Delaware. 4.1.29 Filing and Recording Taxes. All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer taxes required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the transfer of the Properties to Borrower have been paid. All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage has been paid, and, under current Legal Requirements, the Mortgage is enforceable in accordance with its respective terms by Lender (or any subsequent holder thereof), subject to principles of equity and bankruptcy, insolvency and other laws generally applicable to creditors' rights and the enforcement of debtors' obligations. 4.1.30 Special Purpose Entity/Separateness. (a) Until the Debt has been paid in full, Borrower hereby represents, warrants and covenants that (i) Borrower is, shall be and shall continue to be a Special Purpose Entity, and (ii) Principal is, shall be and shall continue to be a Special Purpose Entity. (b) The representations, warranties and covenants set forth in Section 4.1.30(a) shall survive for so long as any amount remains payable to Lender under this Agreement or any other Loan Document. (c) All of the assumptions made in the Insolvency Opinion, including, but not limited to, any exhibits attached thereto, are true and correct in all respects and any assumptions made in any subsequent non-consolidation opinion required to be delivered in connection with the Loan Documents (an "Additional Insolvency Opinion"), including, but not limited to, any exhibits attached thereto, will have been and shall be true and correct in all respects. Borrower has complied and will comply with, and Principal has complied and Borrower will cause Principal to comply with, all of the assumptions made with respect to Borrower or Principal in the Insolvency Opinion. Borrower will have complied and will comply with all of the assumptions made with respect to Borrower or Principal in any Additional Insolvency Opinion. Each entity other than Borrower or Principal with respect to which an assumption shall be made in any Additional Insolvency Opinion will have complied and will comply with all of the assumptions made with respect to it in any Additional Insolvency Opinion. 4.1.31 Management Agreement. The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and, to Borrower's knowledge, no event has occurred that, with the passage of time and/or the giving of notice, would constitute a default thereunder. 42 4.1.32 Illegal Activity. No portion of any Individual Property has been or will be purchased with proceeds of any illegal activity. 4.1.33 No Change in Facts or Circumstances; Disclosure. All information submitted by Borrower to Lender and in all financial statements, rent rolls, reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects. There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the use, operation or value of the Properties or the business operations or the financial condition of Borrower. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any Provided Information or representation or warranty made herein to be materially misleading. 4.1.34 Investment Company Act. Borrower is not (a) an "investment company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended; (b) a "holding company" or a "subsidiary company" of a "holding company" or an "affiliate" of either a "holding company" or a "subsidiary company" within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or State law or regulation which purports to restrict or regulate its ability to borrow money. 4.1.35 Embargoed Person. At all times throughout the term of the Loan, including after giving effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower, Principal and Guarantor constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including, but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by the Lender is in violation of law ("Embargoed Person"); (b) no Embargoed Person has any interest of any nature whatsoever in Borrower, Principal or Guarantor, as applicable, with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower, Principal or Guarantor, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower, Principal or Guarantor, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law. 4.1.36 Cash Management Account. (a) This Agreement, together with the other Loan Documents, creates a valid and continuing security interest in the Lockbox Account and Deposit Account in favor of Lender, which security interest is prior to all other Liens, other than Permitted Encumbrances, and is enforceable as such against creditors of and purchasers from Borrower. Other than in connection with the Loan Documents and except for Permitted Encumbrances, Borrower has not sold or otherwise conveyed the Lockbox Account and Deposit Account; 43 (b) Each of the Lockbox Account and Deposit Account constitute "deposit accounts" within the meaning of the Uniform Commercial Code; (c) Pursuant and subject to the terms hereof, the Lockbox Bank has agreed to comply with all instructions originated by Lender, without further consent by Borrower, directing disposition of the Lockbox Account and all sums at any time held, deposited or invested therein, together with any interest or other earnings thereon, and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities; and (d) The Lockbox Account and Deposit Account are not in the name of any Person other than Borrower, as pledgor, or Lender, as pledgee. Section 4.2. Survival of Representations. Borrower agrees that all of the representations and warranties of Borrower set forth in Section 4.1 and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any amount remains owing to Lender under this Agreement or any of the other Loan Documents by Borrower. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf. V. BORROWER COVENANTS SECTION 5.1. Affirmative Covenants. From the date hereof and until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Liens of the Mortgage encumbering the Properties (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower hereby covenants and agrees with Lender that: 5.1.1 Existence; Compliance with Legal Requirements. Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply, in all material respects, with all Legal Requirements applicable to it and the Properties. There shall never be committed by Borrower any act or omission affording the federal government or any state or local government the right of forfeiture against any Individual Property or any part thereof or any monies paid in performance of Borrower's obligations under any of the Loan Documents. 44 Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording such right of forfeiture. Borrower shall at all times maintain, preserve and protect all franchises and trade names and preserve all the remainder of its property used or useful in the conduct of its business and shall keep the Properties in good working order and repair in all material respects and from time to time make, or cause to be made, all reasonably necessary repairs, renewals, replacements, betterments and improvements thereto, all as more fully provided in the Mortgage. Borrower shall keep the Properties insured at all times by financially sound and reputable insurers, to such extent and against such risks, and maintain liability and such other insurance, as is more fully provided in this Agreement. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding promptly initiated and conducted in good faith and with due diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement to Borrower or any Individual Property or any alleged violation of any Legal Requirement, provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the applicable Mortgage; (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; (iv) no Individual Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (v) Borrower shall promptly upon final determination thereof comply with any such Legal Requirement determined to be valid or applicable or cure any violation of any Legal Requirement; (vi) such proceeding shall suspend the enforcement of the contested Legal Requirement against Borrower or any Individual Property; and (vii) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure compliance with such Legal Requirement, together with all interest and penalties payable in connection therewith. Lender may apply any such security, as necessary to cause compliance with such Legal Requirement at any time when, in the reasonable judgment of Lender, the validity, applicability or violation of such Legal Requirement is finally established or any Individual Property (or any part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, cancelled or lost. 5.1.2 Taxes and Other Charges. Borrower shall pay all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Properties or any part thereof as the same become due and payable; provided, however, Borrower's obligation to directly pay Taxes shall be suspended for so long as Borrower complies with the terms and provisions of Section 7.2 hereof. Borrower will deliver to Lender receipts for payment or other evidence reasonably satisfactory to Lender that the Taxes and Other Charges have been so paid or are not then delinquent prior to the date on which the Taxes and/or Other Charges would otherwise be delinquent if not paid. Borrower shall furnish to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 7.2 hereof). Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Properties, and shall promptly pay for all utility services provided to the Properties. After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Default or Event of Default has occurred and remains uncured; (ii) Borrower is permitted to do so under the provisions of any mortgage or deed of trust superior in lien to the applicable Mortgage; (iii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable statutes, laws and ordinances; 45 (iv) no Individual Property nor any part thereof or interest therein will be in imminent danger of being sold, forfeited, terminated, cancelled or lost; (v) Borrower shall promptly upon final determination thereof pay the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (vi) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the applicable Individual Property; and (vii) Borrower shall furnish such security as may be required in the proceeding, or as may be reasonably requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon. Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or any Individual Property (or part thereof or interest therein) shall be in imminent danger of being sold, forfeited, terminated, cancelled or lost or there shall be any danger of the Lien of any Mortgage being primed by any related Lien. 5.1.3 Litigation. Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened against Borrower which might materially adversely affect Borrower's condition (financial or otherwise) or business or any Individual Property. 5.1.4 Access to Properties. Borrower shall permit agents, representatives and employees of Lender to inspect the Properties or any part thereof at reasonable hours upon reasonable advance notice. 5.1.5 Notice of Default. Borrower shall promptly advise Lender of any material adverse change in Borrower's condition, financial or otherwise, or of the occurrence of any Default or Event of Default of which Borrower has knowledge. 5.1.6 Cooperate in Legal Proceedings. Borrower shall cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings. 5.1.7 Perform Loan Documents. Borrower shall observe, perform and satisfy all the terms, provisions, covenants and conditions of, and shall pay when due all costs, fees and expenses to the extent required under the Loan Documents executed and delivered by, or applicable to, Borrower. 5.1.8 Award and Insurance Benefits. Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in connection with any Individual Property, and Lender shall be reimbursed for any expenses incurred in connection therewith (including reasonable attorneys' fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of Casualty or Condemnation affecting any Individual Property or any part thereof) out of such Insurance Proceeds. 5.1.9 Further Assurances. Borrower shall, at Borrower's sole cost and expense: 46 (a) furnish to Lender all instruments, documents, boundary surveys, footing or foundation surveys, certificates, plans and specifications, appraisals, title and other insurance reports and agreements, and each and every other document, certificate, agreement and instrument required to be furnished by Borrower pursuant to the terms of the Loan Documents or reasonably requested by Lender in connection therewith; (b) execute and deliver to Lender such documents, instruments, certificates, assignments and other writings, and do such other acts reasonably necessary, to evidence, preserve and/or protect the collateral at any time securing or intended to secure the obligations of Borrower under the Loan Documents, as Lender may reasonably require; and (c) do and execute all and such further lawful and reasonable acts, conveyances and assurances for the purpose of carrying out of the intents and purposes of this Agreement and the other Loan Documents, as Lender shall reasonably require from time to time. 5.1.10 Supplemental Mortgage Affidavits. As of the date hereof, Borrower represents that it has paid all state, county and municipal recording and all other taxes imposed upon the execution and recordation of the Mortgage. If at any time Lender determines, based on applicable law, that Lender is not being afforded the maximum amount of security available from any one or more of the Properties as a direct or indirect result of applicable taxes not having been paid with respect to any Individual Property, Borrower agrees that Borrower will execute, acknowledge and deliver to Lender, immediately upon Lender's request, supplemental affidavits increasing the amount of the Debt attributable to any such Individual Property (as set forth as the Release Amount on Schedule I annexed hereto) for which all applicable taxes have been paid to an amount determined by Lender to be equal to the lesser of (a) the greater of the fair market value of the applicable Individual Property (i) as of the date hereof and (ii) as of the date such supplemental affidavits are to be delivered to Lender, and (b) the amount of the Debt attributable to any such Individual Property (as set forth as the Release Amount on Schedule I annexed hereto), and Borrower shall, on demand, pay any additional taxes. 5.1.11 Financial Reporting. (a) Borrower will keep and maintain or will cause to be kept and maintained on a Fiscal Year basis, in accordance with GAAP (or such other accounting basis acceptable to Lender), proper and accurate books, records and accounts reflecting all of the financial affairs of Borrower and all items of income and expense in connection with the operation on an individual basis of the Properties. Lender shall have the right from time to time at all times during normal business hours upon reasonable notice to examine such books, records and accounts at the office of Borrower or any other Person maintaining such books, records and accounts and to make such copies or extracts thereof as Lender shall desire. After the occurrence and during the continuance of an Event of Default, Borrower shall pay any reasonable costs and expenses incurred by Lender to examine Borrower's accounting records with respect to the Properties, as Lender shall determine to be reasonably necessary or appropriate in the protection of Lender's interest. (b) Borrower will furnish to Lender annually, within ninety (90) days following the end of each Fiscal Year of Borrower, a complete copy of Borrower's and Guarantor's annual consolidated financial statements audited by Deloitte & Touche or another "Big Five" accounting firm or other independent certified public accountant acceptable to Lender in 47 accordance with GAAP (or such other accounting basis acceptable to Lender) covering the Properties on a combined basis for such Fiscal Year and containing statements of profit and loss for Borrower, Guarantor and the Properties and a balance sheet for Borrower and Guarantor. Such statements shall utilize the accrual method of accounting and shall set forth the financial condition and the results of operations for the Properties for such Fiscal Year, and shall include, but not be limited to, amounts representing annual Net Cash Flow, Net Operating Income, Gross Income from Operations and Operating Expenses; provided that notwithstanding anything contained herein to the contrary, Guarantor shall only be required to deliver to Lender financial statements in the form required to be delivered by Guarantor to the Securities and Exchange Commission as part of Guarantor's "Form 10-K" annual filing and "Form 10-Q" quarterly filing. Borrower's and Guarantor's annual financial statements shall be accompanied by (i) a CFO Certificate stating that each such annual financial statement presents fairly the financial condition and the results of operations of Borrower, Guarantor and the Properties being reported upon and has been prepared in accordance with GAAP, (ii) an unqualified opinion of Deloitte & Touche or another "Big Five" accounting firm or other independent certified public accountant reasonably acceptable to Lender, (iii) a list of tenants, if any, occupying more than twenty (20%) percent of the total floor area of the Improvements, (iv) a breakdown showing the year in which each Lease then in effect expires and the percentage of total floor area of the Improvements and the percentage of base rent with respect to which Leases shall expire in each such year, each such percentage to be expressed on both a per year and cumulative basis, and (v) a Schedule audited by such independent certified public accountant reconciling Net Operating Income to Net Cash Flow (the "Net Cash Flow Schedule"), which shall itemize all adjustments made to Net Operating Income to arrive at Net Cash Flow deemed material by such independent certified public accountant. Together with Borrower's and Guarantor's annual financial statements, Borrower shall furnish to Lender an Officers' Certificate certifying as of the date thereof whether there exists an event or circumstance which constitutes a Default or Event of Default under the Loan Documents executed and delivered by, or applicable to, Borrower, and if such Default or Event of Default exists, the nature thereof, the period of time it has existed and the action then being taken to remedy the same. (c) Borrower will furnish, or cause to be furnished, to Lender on or before thirty (30) days after the end of each calendar month and forty five (45) days at the end of each quarter, the following items, accompanied by a CFO Certificate stating that such items are true, correct, accurate, and complete and fairly present the financial condition and results of the operations of Borrower and the Properties on a combined basis as well as each Individual Property (subject to normal year-end adjustments) as applicable: (i) a rent roll for the subject month accompanied by a CFO Certificate with respect thereto; (ii) monthly and year-to-date operating statements (including Capital Expenditures) prepared for each calendar month, noting Net Operating Income, Gross Income from Operations, and Operating Expenses (not including any contributions to the Replacement Reserve Fund and the Rollover Reserve Fund), and other information necessary and sufficient to fairly represent the financial position and results of operation of the Properties during such calendar month, and containing a comparison of budgeted income and expenses and the actual income and expenses, all in form reasonably satisfactory to Lender; (iii) a calculation reflecting the annual Debt Service Coverage Ratio for the immediately preceding quarter as of the last day of such quarter accompanied by a CFO Certificate with respect thereto; and (iv) a Net Cash Flow Schedule. In addition, such CFO Certificate shall also state that the representations and warranties of Borrower set forth in Section 4.1.30(a) are true and correct as of the date of such certificate and that there are no trade payables outstanding for more than sixty (60) days. 48 (d) For the partial Fiscal Year commencing on the date hereof, and for each Fiscal Year thereafter, Borrower shall submit to Lender an Annual Budget not later than thirty (30) days prior to the commencement of such period or Fiscal Year in form reasonably satisfactory to Lender. The Annual Budget shall be subject to Lender's written approval, which approval shall not be unreasonably withheld or delayed (each such Annual Budget, an "Approved Annual Budget"). In the event that Lender objects to a proposed Annual Budget submitted by Borrower which requires the approval of Lender hereunder, Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise such Annual Budget and resubmit the same to Lender. Lender shall advise Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such objections) and Borrower shall promptly revise the same in accordance with the process described in this subsection until Lender approves the Annual Budget. Until such time that Lender approves a proposed Annual Budget which requires the approval of Lender hereunder, the most recently Approved Annual Budget shall apply; provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in real estate taxes, insurance premiums and utilities expenses. (e) In the event that, Borrower must incur an extraordinary operating expense or capital expense not set forth in the Approved Annual Budget (each, an "Extraordinary Expense"), then Borrower shall promptly deliver to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for Lender's approval, which approval shall not be unreasonably withheld or delayed. (f) If requested by Lender, Borrower shall provide Lender, promptly upon request, with the following financial statements if, at the time a preliminary or final prospectus, prospectus supplement, private placement memorandum, offering circular or other offering document (the "Disclosure Document") is being prepared for a Securitization, it is expected that the principal amount of the Loan together with any Affiliated Loans at the time of Securitization may, or if the principal amount of the Loan together with any Affiliated Loans at any time during which the Loan and any Affiliated Loans are included in a Securitization does, equal or exceed 20% of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in the Securitization: (i) A balance sheet with respect to each Individual Property for the two most recent fiscal years, meeting the requirements of Section 210.3-01 of Regulation S-X of the Securities Act and statements of income and statements of cash flows with respect to each Individual Property for the three most recent fiscal years, meeting the requirements of Section 210.3-02 of Regulation S-X, and, to the extent that such balance sheet is more than 135 days old as of the date of the document in which such financial statements are included, interim financial statements of each 49 Individual Property meeting the requirements of Section 210.3-01 and 210.3-02 of Regulation S-X (all of such financial statements, collectively, the "Standard Statements"); provided, however, that with respect to each Individual Property (other than properties that are hotels, nursing homes, or other properties that would be deemed to constitute a business and not real estate under Regulation S-X or other legal requirements) that has been acquired by Borrower from an unaffiliated third party (such Property, "Acquired Property"), as to which the other conditions set forth in Section 210.3-14 of Regulation S-X for provision of financial statements in accordance with such Section have been met, in lieu of the Standard Statements otherwise required by this Section, Borrower shall instead provide the financial statements required by such Section 210.3-14 of Regulation S-X ("Acquired Property Statements"). (ii) Not later than thirty (30) days after the end of each fiscal quarter following the date hereof, a balance sheet of each Individual Property as of the end of such fiscal quarter, meeting the requirements of Section 210.3-01 of Regulation S-X, and statements of income and statements of cash flows of each Individual Property for the period commencing following the last day of the most recent fiscal year and ending on the date of such balance sheet and for the corresponding period of the most recent fiscal year, meeting the requirements of Section 210.3-02 of Regulation S-X (provided, that if for such corresponding period of the most recent fiscal year Acquired Property Statements were permitted to be provided hereunder pursuant to subsection (i) above, Borrower shall instead provide Acquired Property Statements for such corresponding period). (iii) Not later than seventy-five (75) days after the end of each fiscal year following the date hereof, a balance sheet of each Individual Property as of the end of such fiscal year, meeting the requirements of Section 210.3-01 of Regulation S-X, and statements of income and statements of cash flows of the each Individual Property for such fiscal year, meeting the requirements of Section 210.3-02 of Regulation S-X. (iv) Within ten (10) Business Days after notice from the Lender in connection with the Securitization of this Loan, such additional financial statements, such that, as of the date (each, an "Offering Document Date") of each Disclosure Document, Borrower shall have provided Lender with all financial statements as described in subsection (f)(i) above; provided that the fiscal year and interim periods for which such financial statements shall be provided shall be determined as of such Offering Document Date. (g) If requested by Lender, Borrower shall provide Lender, promptly upon request, with summaries of the financial statements referred to in Section 5.1.11(f) hereof if, at the time a Disclosure Document is being prepared for a Securitization, it is expected that the principal amount of the Loan and any Affiliated Loans at the time of Securitization may, or if the principal amount of the Loan and any Affiliated Loans at any time during which the Loan and any Affiliated Loans are included in a Securitization does, equal or exceed 10% (but is less than 20%) of the aggregate principal amount of all mortgage loans included or expected to be included, as applicable, in a Securitization. Such summaries shall meet the requirements for "summarized financial information," as defined in Section 210.1-02(bb) of Regulation S-X, or such other requirements as may be determined to be necessary or appropriate by Lender. 50 (h) All financial statements provided by Borrower hereunder pursuant to Section 5.1.11(f) and (g) hereof shall be prepared in accordance with GAAP, and shall meet the requirements of Regulation S-X and other applicable legal requirements. All financial statements referred to in Subsections 5.1.11(f)(i) and 5.1.11(f)(iii) above shall be audited by independent accountants of Borrower acceptable to Lender in accordance with Regulation S-X and all other applicable legal requirements, shall be accompanied by the manually executed report of the independent accountants thereon, which report shall meet the requirements of Regulation S-X and all other applicable legal requirements, and shall be further accompanied by a manually executed written consent of the independent accountants, in form and substance acceptable to Lender, to the inclusion of such financial statements in any Disclosure Document and any Exchange Act Filing and to the use of the name of such independent accountants and the reference to such independent accountants as "experts" in any Disclosure Document and Exchange Act Filing (as defined below), all of which shall be provided at the same time as the related financial statements are required to be provided. All financial statements (audited or unaudited) provided by Borrower under Section 5.1.11(f) and (g) shall be certified by the chief financial officer or administrative member of Borrower, which certification shall state that such financial statements meet the requirements set forth in the first sentence of this Section 5.1.11(h). (i) If requested by Lender, Borrower shall provide Lender, promptly upon request, with any other or additional financial statements, or financial, statistical or operating information, as Lender shall determine to be required pursuant to Regulation S-X or any amendment, modification or replacement thereto or other legal requirements in connection with any Disclosure Document or any filing under or pursuant to the Exchange Act in connection with or relating to a Securitization (hereinafter, an "Exchange Act Filing") or as shall otherwise be reasonably requested by the Lender. (j) In the event Lender determines, in connection with a Securitization, that the financial statements required in order to comply with Regulation S-X or other legal requirements are other than as provided herein, then notwithstanding the provisions of Section 5.1.11(f), (g) and (h) hereof, Lender may request, and Borrower shall promptly provide, such combination of Acquired Property Statement and/or Standard Statements or such other financial statements as Lender determines to be necessary or appropriate for such compliance. (k) Any reports, statements or other information required to be delivered under this Agreement shall be delivered (i) in paper form, (ii) on a diskette, and (iii) if requested by Lender and within the capabilities of Borrower's data systems without change or modification thereto, in electronic form and prepared using a Microsoft Word for Windows or WordPerfect for Windows files (which files may be prepared using a spreadsheet program and saved as word processing files). Borrower agrees that Lender may disclose information regarding the Properties and Borrower that is provided to Lender pursuant to this Section in connection with the Securitization to such parties requesting such information in connection with such Securitization. 51 5.1.12 Business and Operations. Borrower will continue to engage in the businesses presently conducted by it as and to the extent the same are necessary for the ownership, maintenance, management and operation of the Properties. Borrower will qualify to do business and will remain in good standing under the laws of each jurisdiction as and to the extent the same are required for the ownership, maintenance, management and operation of the Properties. 5.1.13 Title to the Properties. Borrower will warrant and defend (a) the title to each Individual Property and every part thereof, subject only to Liens permitted or created hereunder (including Permitted Encumbrances) and (b) the validity and priority of the Liens of the Mortgage and the Assignment of Leases on the Properties, subject only to Liens permitted or created hereunder (including Permitted Encumbrances), in each case against the claims of all Persons whomsoever. Borrower shall reimburse Lender for any losses, costs, damages or expenses (including reasonable attorneys' fees and court costs) incurred by Lender if an interest in any Individual Property, other than as permitted hereunder, is claimed by another Person. 5.1.14 Costs of Enforcement. In the event (a) that the Mortgage encumbering each Individual Property is foreclosed in whole or in part or that the Mortgage is put into the hands of an attorney for collection, suit, action or foreclosure, (b) of the foreclosure of any mortgage prior to or subsequent to the Mortgage encumbering each Individual Property in which proceeding Lender is made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other similar proceeding in respect of Borrower or any of its constituent Persons or an assignment by Borrower or any of its constituent Persons for the benefit of its creditors, Borrower, its successors or assigns, shall be chargeable with and agrees to pay all costs of collection and defense, including reasonable attorneys' fees and costs, incurred by Lender or Borrower in connection therewith and in connection with any appellate proceeding or post-judgment action involved therein, together with all required service or use taxes. 5.1.15 Estoppel Statement. (a) After request by Lender, Borrower shall within ten (10) days furnish Lender with a statement, duly acknowledged and certified, setting forth, to Borrower's knowledge (i) the amount of the original principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the Applicable Interest Rate of the Note, (iv) the date installments of interest and/or principal were last paid, (v) any offsets or defenses to the payment of the Debt, if any, and (vi) that the Note, this Agreement, the Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification. (b) Borrower shall use commercially reasonable efforts to deliver to Lender upon request, tenant estoppel certificates from each commercial tenant leasing space at the Properties in form and substance reasonably satisfactory to Lender provided that Borrower shall not be required to deliver such certificates more frequently than once in any calendar year. 5.1.16 Loan Proceeds. Borrower shall use the proceeds of the Loan received by it on the Closing Date only for the purposes set forth in Section 2.1.4. 5.1.17 Performance by Borrower. Borrower shall in a timely manner observe, perform and fulfill in all material respects each and every covenant, term and provision of each Loan Document executed and delivered by, or applicable to, 52 Borrower, and shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination or other modification of any Loan Document executed and delivered by, or applicable to, Borrower without the prior written consent of Lender. 5.1.18 Confirmation of Representations. Borrower shall deliver, in connection with any Securitization, (a) one or more Officer's Certificates certifying as to the accuracy of all representations made by Borrower in the Loan Documents as of the date of the closing of such Securitization in all relevant jurisdictions, and (b) certificates of the relevant Governmental Authorities in all relevant jurisdictions indicating the good standing and qualification of Borrower and its sole member as of the date of the Securitization. 5.1.19 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property (a) with any other real property constituting a tax lot separate from such Individual Property, and (b) which constitutes real property with any portion of such Individual Property which may be deemed to constitute personal property, or any other procedure whereby the lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such real property portion of the Individual Property. 5.1.20 Leasing Matters. Any Leases with respect to an Individual Property written after the date hereof, for more than 20,000 square feet shall be approved by Lender, which approval shall not be unreasonably withheld. Upon request, Borrower shall furnish Lender with executed copies of all Leases. All renewals of Leases and all proposed Leases shall provide for rental rates comparable to existing local market rates. All proposed Leases shall be on commercially reasonable terms and shall not contain any terms which would materially affect Lender's rights under the Loan Documents. All Leases executed after the date hereof shall provide that they are subordinate to the Mortgage encumbering the applicable Individual Property and that the lessee agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of sale. Borrower (i) shall observe and perform the obligations imposed upon the lessor under the Leases in a commercially reasonable manner; (ii) shall enforce and may amend or terminate the terms, covenants and conditions contained in the Leases upon the part of the lessee thereunder to be observed or performed in a commercially reasonable manner and in a manner not to impair the value of the Individual Property involved except that no termination by Borrower or acceptance of surrender by a tenant of any Leases shall be permitted unless by reason of a tenant default and then only in a commercially reasonable manner to preserve and protect the Individual Property; provided, however, that no such termination or surrender of any Lease covering more than 20,000 square feet will be permitted without the written consent of Lender, which consent shall no be unreasonably withheld; (iii) shall not collect any of the rents more than one (1) month in advance (other than security deposits); (iv) shall not execute any other assignment of lessor's interest in the Leases or the Rents (except as contemplated by the Loan Documents); (v) shall not alter, modify or change the terms of the Leases in a manner inconsistent with the provisions of the Loan Documents; and (vi) shall execute and deliver at the request of Lender all such further assurances, confirmations and assignments in connection with the Leases as Lender shall from time to time reasonably require. Notwithstanding anything to the contrary contained herein, Borrower shall not enter into a individual lease of all or substantially all of any Individual Property without Lender's prior written consent, which consent shall no be unreasonably withheld. At the request of Borrower, Lender will, at Borrower's cost and expense, enter into a Subordination, Non-Disturbance and Attornment Agreement ("SNDA") with any tenant leasing more than 5,000 square feet on Lender's standard form, provided, that with respect to any tenant leasing less than 5,000 square feet, Lender will, at Borrower's cost and expense, enter into such SNDA in its reasonable discretion. 53 5.1.21 Alterations. Borrower shall obtain Lender's prior written consent to any alterations to any Improvements, which consent shall not be unreasonably withheld or delayed except with respect to alterations that may have a material adverse effect on Borrower's financial condition, the value of the applicable Individual Property or the Net Operating Income. Notwithstanding the foregoing, Lender's consent shall not be required in connection with any alterations that will not have a material adverse effect on Borrower's financial condition, the value of the applicable Individual Property or the Net Operating Income, provided such alterations are made in connection with (a) tenant improvement work performed pursuant to the terms of any Lease executed on or before the date hereof, (b) tenant improvement work performed pursuant to the terms and provisions of a Lease and not materially adversely affecting any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements, (c) alterations performed in connection with the restoration of an Individual Property after the occurrence of a casualty in accordance with the terms and provisions of this Agreement, or (d) alterations costing less than $750,000 and not effecting any structural component of any Improvements, any utility or HVAC system contained in any Improvements or the exterior of any building constituting a part of any Improvements. If the total unpaid amounts due and payable (for which there are insufficient funds in the appropriate reserves) with respect to alterations to the Improvements at any Individual Property (other than such amounts to be paid or reimbursed by tenants under the Leases) shall at any time exceed $750,000 (the "Threshold Amount"), Borrower shall promptly deliver to Lender as security for the payment of such amounts and as additional security for Borrower's obligations under the Loan Documents any of the following: (A) cash, (B) U.S. Obligations, (C) other securities having a rating acceptable to Lender and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned in connection with any Securitization, or (D) a completion and performance bond or an irrevocable letter of credit (payable on sight draft only) issued by a financial institution having a rating by Standard & Poor's Ratings Group of not less than A-1+ if the term of such bond or letter of credit is no longer than three (3) months or, if such term is in excess of three (3) months, issued by a financial institution having a rating that is reasonably acceptable to Lender and that the applicable Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the initial, or, if higher, then current ratings assigned in connection with any Securitization. Such security shall be in an amount equal to the excess of the total unpaid amounts with respect to alterations to the Improvements on the applicable Individual Property (other than such amounts to be paid or reimbursed by tenants under the Leases) over the Threshold Amount and Lender may apply such security from time to time at the option of Lender to pay for such alterations. 5.1.22 Operation of Property. (a) Borrower shall cause the Properties to be operated, in all material respects, in accordance with the Management Agreement (or Replacement Management Agreement) as applicable; provided, however, that in no event shall Manager be entitled to a management fee in excess of four percent (4%) of Gross Income from Operations. In the event that the Management Agreement expires or is terminated (without limiting any obligation of Borrower to obtain 54 Lender's consent to any termination or modification of the Management Agreement in accordance with the terms and provisions of this Agreement), Borrower shall promptly enter into a Replacement Management Agreement with Manager or another Qualified Manager, as applicable. (b) Borrower shall: (i) promptly perform and/or observe, in all material respects, all of the covenants and agreements required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any material default under the Management Agreement of which it is aware; (iii) if requested from Lender, promptly deliver to Lender a copy of each financial statement, business plan, capital expenditures plan, received by it under the Management Agreement; and (iv) enforce the performance and observance of all of the covenants and agreements required to be performed and/or observed by Manager under the Management Agreement, in a commercially reasonable manner. 5.1.23 O&M Plan. From the date hereof, Borrower shall implement and maintain an operation and maintenance plan, with respect to the 3040 Property and the 3050 Property, reasonably acceptable to Lender in all material respects. 5.1.24 Lead and Drinking Water. Borrower agrees that within fourteen (14) days from the Closing Date, it shall show evidence reasonably satisfactory to Lender that there is no lead in the drinking water above the drinking water standards under applicable environmental laws. In the event that lead is detected above such drinking water standards, Borrower hereby agrees that it will take all necessary steps and actions to remediate the lead in the drinking water to levels in compliance with applicable environmental laws. Section 5.2. Negative Covenants. From the date hereof until payment and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Liens of the Mortgage encumbering the Properties in accordance with the terms of this Agreement and the other Loan Documents, Borrower covenants and agrees with Lender that it will not do, directly or indirectly, any of the following: 5.2.1 Operation of Property. (a) Borrower shall not, without Lender's prior written consent (which consent shall not be unreasonably withheld): (i) surrender, terminate or cancel the Management Agreement; provided, that Borrower may, without Lender's consent, replace the Manager so long as the replacement manager is a Qualified Manager pursuant to a Replacement Management Agreement; (ii) reduce or consent to the reduction of the term of the Management Agreement; (iii) increase or consent to the increase of the amount of any charges under the Management Agreement; or (iv) otherwise modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect. (b) Following the occurrence and during the continuance of an Event of Default, Borrower shall not exercise any rights, make any decisions, grant any approvals or otherwise take any action under the Management Agreement without the prior written consent of Lender, which consent may be granted, conditioned or withheld in Lender's sole discretion. 55 5.2.2 Liens. Borrower shall not create, incur, assume or suffer to exist for more than thirty (30) days after Borrower receives notice thereof any Lien on any portion of any Individual Property or permit any such action to be taken, except: (i) Permitted Encumbrances; (ii) Liens created by or permitted pursuant to the Loan Documents; and (iii) Liens for Taxes or Other Charges not yet due. 5.2.3 Dissolution. Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with or into any other business entity, (b) engage in any business activity not related to the ownership and operation of the Properties, (c) transfer, lease or sell, in one transaction or any combination of transactions, the assets or all or substantially all of the Properties except to the extent permitted by the Loan Documents, (d) modify, amend, waive or terminate its organizational documents or its qualification and good standing in any jurisdiction or (e) cause the Principal to (i) dissolve, wind up or liquidate or take any action, or omit to take an action, as a result of which the Principal would be dissolved, wound up or liquidated in whole or in part, or (ii) amend, modify, waive or terminate the certificate of incorporation or bylaws of the Principal, in each case, without obtaining the prior written consent of Lender. 5.2.4 Change In Business. Borrower shall not enter into any line of business other than the ownership and operation of the Properties, or make any material change in the scope or nature of its business objectives, purposes or operations, or undertake or participate in activities other than the continuance of its present business. 5.2.5 Debt Cancellation. Borrower shall not cancel or otherwise forgive or release any claim or debt (other than termination of Leases in accordance herewith) owed to Borrower by any Person, except for adequate consideration and in the ordinary course of Borrower's business. 5.2.6 Zoning. Borrower shall not initiate or consent to any zoning reclassification of any portion of any Individual Property or seek any variance under any existing zoning ordinance or use or permit the use of any portion of any Individual Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other applicable land use law, rule or regulation, without the prior consent of Lender. 5.2.7 No Joint Assessment. Borrower shall not suffer, permit or initiate the joint assessment of any Individual Property with (a) any other real property constituting a tax lot separate from such Individual Property, or (b) any portion of such Individual Property which may be deemed to constitute personal property, or any other procedure whereby the Lien of any taxes which may be levied against such personal property shall be assessed or levied or charged to such Individual Property. 5.2.8 Principal Place of Business and Organization. Borrower shall not change its principal place of business set forth in the introductory paragraph of this Agreement without first giving Lender thirty (30) days prior written notice. Borrower shall not change the place of its organization as set forth in Section 4.1.28 without the consent of Lender, which consent shall not be unreasonably withheld. Upon Lender's request, Borrower shall execute and deliver additional financing statements, security agreements and other instruments which may be necessary to effectively evidence or perfect Lender's security interest in the Property as a result of such change of principal place of business or place of organization. 56 5.2.9 ERISA. (a) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exercise by Lender of any of its rights under the Note, this Agreement or the other Loan Documents) to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA. (b) Borrower further covenants and agrees to deliver to Lender such certifications or other evidence from time to time throughout the term of the Loan, as requested by Lender in its sole discretion, that (A) Borrower is not and does not maintain an "employee benefit plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA, or a "governmental plan" within the meaning of Section 3(3) of ERISA; (B) Borrower is not subject to state statutes regulating investments and fiduciary obligations with respect to governmental plans; and (C) one or more of the following circumstances is true: (i) Equity interests in Borrower are publicly offered securities, within the meaning of 29 C.F.R. 2510.3-101(b)(2); (ii) Less than twenty-five percent (25%) of each outstanding class of equity interests in Borrower are held by "benefit plan investors" within the meaning of 29 C.F.R. 2510.3-101(f)(2); or (iii) Borrower qualifies as an "operating company" or a "real estate operating company" within the meaning of 29 C.F.R. 2510.3-101c or (e). 5.2.10 Transfers. (a) Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will continue to rely on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the Other Obligations. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Property. (b) Without the prior written consent of Lender and except to the extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall not permit any Restricted Party to, (i) sell, convey, mortgage, grant, bargain, encumber, pledge, assign, grant options with respect to, or otherwise transfer or dispose of (directly or indirectly, voluntarily or involuntarily, by operation of law or otherwise, and whether or not for consideration or of record) the Property or any part thereof or any legal or beneficial interest therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party (collectively, a "Transfer"), other than pursuant to Leases of space in the Improvements to tenants in accordance with the provisions of Section 5.1.20 (provided, however, that Lender acknowledges Borrower's right to request approval of a Transfer). 57 (c) A Transfer shall include, but not be limited to, (i) an installment sales agreement wherein Borrower agrees to sell the Property or any part thereof for a price to be paid in installments; (ii) an agreement by Borrower leasing all or a substantial part of the Property for other than actual occupancy by a space tenant thereunder or a sale, assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation, any merger, consolidation or Sale or Pledge of such corporation's stock or the creation or issuance of new stock; (iv) if a Restricted Party is a limited or general partnership or joint venture, any merger or consolidation or the change, removal, resignation or addition of a general partner or the Sale or Pledge of the partnership interest of any general partner or any profits or proceeds relating to such partnership interest, or the Sale or Pledge of limited partnership interests or any profits or proceeds relating to such limited partnership interest or the creation or issuance of new limited partnership interests; (v) if a Restricted Party is a limited liability company, any merger or consolidation or the change, removal, resignation or addition of a managing member or non-member manager (or if no managing member, any member) or the Sale or Pledge of the membership interest of a managing member (or if no managing member, any member) or any profits or proceeds relating to such membership interest, or the Sale or Pledge of non-managing membership interests or the creation or issuance of new non-managing membership interests; (vi) if a Restricted Party is a trust or nominee trust, any merger, consolidation or the Sale or Pledge of the legal or beneficial interest in a Restricted Party or the creation or issuance of new legal or beneficial interests; or (vii) the removal or the resignation of the managing agent (including, without limitation, an Affiliated Manager) other than in accordance with Section 5.1.22 hereof. (d) Notwithstanding the provisions of this Section 5.1.20, the following transfers shall not be deemed to be a Transfer: (i) the Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the stock in a Restricted Party; provided, however, no such transfers shall result in the change of voting control in the Restricted Party, and as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer, and (ii) the Sale or Pledge, in one or a series of transactions, of not more than forty-nine percent (49%) of the limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party; provided, however, as a condition to each such transfer, Lender shall receive not less than thirty (30) days prior written notice of such proposed transfer. (e) Notwithstanding the provisions of this Section 5.2.10, Borrower shall have a one-time right to transfer, not more than eighty percent (80%) of the stock, limited partnership interests or non-managing membership interests (as the case may be) in a Restricted Party provided that: (a) the proposed transferee shall be a Qualified Transferee; (b) if the Manager shall not be the manager of the Property following such transfer, then the Manager must be a Qualifying Manager; (c) no Event of Default shall have occurred and be continuing under the Loan Documents; (d) payment by Borrower to Lender of all of fees and expenses incurred in connection with such transfer including, without limitation, the cost of any third party reports, legal fees and expenses, rating agency fees (including rating agency counsel) and expenses or required legal opinions; (e) the delivery of a nonconsolidation opinion reflecting the proposed transfer satisfactory in form and substance to Lender and the Rating Agencies; and (f) the delivery of evidence satisfactory to Lender that the single purpose nature and bankruptcy remoteness of Borrower, its shareholders, partners or members, as the case may be, following such transfers are in accordance with the then current standards of Lender and the Rating Agencies. 58 (f) Notwithstanding the provisions of this Section 5.2.10, Borrower shall have the right to transfer the Properties and/or any Restricted Party may transfer the stock, partnership interests or membership interests (as the case may be) in a Restricted Party to Thomas Crocker and/or Guarantor or an entity in which Thomas Crocker and/or Guarantor owns directly or indirectly all of the beneficial interests; provided that: (a) if the Manager shall not be the manager of the Property following such transfer, then the Manager must be a Qualifying Manager; (b) no Event of Default shall have occurred and be continuing under the Loan Documents; (c) prior to a Securitization, Borrower shall have received the prior approval of Lender, which approval Lender shall not unreasonably withhold and after a Securitization, Borrower shall have obtained prior written confirmation from the applicable Rating Agencies that such transfer will not result in a downgrade, withdrawal or qualification of the then current ratings of the Securities or any class thereof; (d) payment by Borrower to Lender of all of fees and expenses incurred in connection with such transfer including, without limitation, the cost of any third party reports, legal fees and expenses, rating agency fees (including rating agency counsel) and expenses or required legal opinions; (e) the delivery of a nonconsolidation opinion reflecting the proposed transfer satisfactory in form and substance to Lender and the Rating Agencies; and (f) the delivery of evidence satisfactory to Lender that the single purpose nature and bankruptcy remoteness of Borrower, its shareholders, partners or members, as the case may be, following such transfers are in accordance with the then current standards of Lender and the Rating Agencies. (g) Notwithstanding the provisions of this Section 5.2.10, Lender shall not unreasonably withhold its prior written consent to a one-time sale, assignment or other transfer of all the Properties, provided that (i) Lender receives sixty (60) days' prior written notice of such transfer and (ii) Lender reserves the right to condition the consent required hereunder upon (a) a modification of the terms hereof and of the Mortgage, the Note or the other Loan Documents; (b) an assumption of this Agreement, the Note, the Mortgage and the other Loan Documents as so modified by the proposed transferee, subject to the provisions of Section 9.4 of this Agreement; (c) payment of all of fees and expenses incurred in connection with such transfer including, without limitation, the cost of any third party reports, legal fees and expenses, rating agency fees (including rating agency counsel) and expenses or required legal opinions; (d) the payment of a non-refundable $5,000 application fee and, in the event that the proposed transferee is not an Affiliate of Borrower, an assumption fee equal to one percent (1%) of the outstanding principal balance of the Loan; (e) the delivery of a nonconsolidation opinion reflecting the proposed transfer satisfactory in form and substance to Lender; (f) the proposed transferee's continued compliance with the representations and covenants set forth in Section 4.1.30 of this Agreement; (g) the delivery of evidence satisfactory to Lender that the single purpose nature and bankruptcy remoteness of Borrower, its shareholders, partners or members, as the case may be, following such transfers are in accordance with the then current standards of Lender and the Rating Agencies; (h) prior to any release of the Guarantor, a 59 substitute guarantor reasonably acceptable to Lender shall have assumed the Guaranty executed by Guarantor or executed a replacement guaranty reasonably satisfactory to Lender; (i) if required by Lender, confirmation in writing from the Rating Agencies to the effect that such transfer will not result in a re-qualification, reduction or withdrawal of the then current rating assigned to the Securities in any applicable Securitization; (j) no Event of Default shall have occurred and be continuing under the Loan Documents; or (k) such other conditions as Lender shall determine in its reasonable discretion to be in the interest of Lender, including, without limitation, the creditworthiness, reputation and qualifications of the transferee with respect to the Loan and the Property. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of default hereunder in order to declare the Debt immediately due and payable upon Borrower's sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property without Lender's consent. This provision shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Property. VI. INSURANCE; CASUALTY; CONDEMNATION; REQUIRED REPAIRS SECTION 6.1. Insurance. (a) Borrower shall obtain and maintain, or cause to be maintained, insurance for Borrower and the Properties providing at least the following coverages: (i) comprehensive all risk insurance on the Improvements and the Personal Property, including contingent liability from Operation of Building Laws, Demolition Costs and Increased Cost of Construction Endorsements, in each case (A) in an amount equal to one hundred percent (100%) of the "Full Replacement Cost," which for purposes of this Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) with a waiver of depreciation, but the amount shall in no event be less than the outstanding principal balance of the Loan; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co-insurance provisions; (C) providing for no deductible in excess of the lesser of (x) Twenty-Five Thousand and No/100 Dollars ($25,000), (y) five percent (5%) of the Replacement Cost and (z) five percent (5%) of Net Operating Income for all such insurance coverage; and (D) containing an "Ordinance or Law Coverage" or "Enforcement" endorsement if any of the Improvements or the use of the Individual Property shall at any time constitute legal non-conforming structures or uses. In addition, Borrower shall obtain: (x) if any portion of the Improvements is currently or at any time in the future located in an area designated as Flood Zone A or Zone V, flood hazard insurance in an amount equal to the lesser of (1) the outstanding principal balance of the Note or (2) the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended or such greater amount as Lender shall require; (y) earthquake insurance in amounts 60 and in form and substance satisfactory to Lender in the event the Individual Property is located in an area with a high degree of seismic activity and (z) coastal windstorm insurance in amounts and in form and substance satisfactory to Lender in the event the Individual Property is located in any coastal region, provided that the insurance pursuant to clauses (x), (y) and (z) hereof shall be on terms consistent with the comprehensive all risk insurance policy required under this subsection (i); (ii) commercial general liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon the Individual Property, such insurance (A) to be on the so-called "occurrence" form with a combined limit of not less than Two Million and No/100 Dollars ($2,000,000) in the aggregate and One Million and No/100 Dollars ($1,000,000) per occurrence (and, if on a blanket policy, containing an "Aggregate Per Location" endorsement); (B) to continue at not less than the aforesaid limit until required to be changed by Lender in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards: (1) premises and operations; (2) products and completed operations on an "if any" basis; (3) independent contractors; (4) blanket contractual liability for all legal contracts; and (5) contractual liability covering the indemnities contained in Article 9 of the Mortgage to the extent the same is available; (iii) business income insurance (A) with loss payable to Lender; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) containing an extended period of indemnity endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or the expiration of twelve (12) months from the date that the applicable Individual Property is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the projected gross income from each Individual Property for a period of twelve (12) months from the date that such Individual Property is repaired or replaced and operations are resumed. The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Borrower's reasonable estimate of the gross income from each Individual Property for the succeeding twelve (12) month period. All proceeds payable to Lender pursuant to this subsection shall be held by Lender and shall be applied to the obligations secured by the Loan Documents from time to time due and payable hereunder and under the Note; provided, however, that nothing herein contained shall be deemed to relieve Borrower of its obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in the Note and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income insurance; 61 (iv) at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Individual Property coverage form does not otherwise apply, (A) owner's contingent or protective liability insurance covering claims not covered by or under the terms or provisions of the above mentioned commercial general liability insurance policy; and (B) the insurance provided for in subsection (i) above written in a so-called builder's risk completed value form (1) on a non-reporting basis, (2) against all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Individual Property, and (4) with an agreed amount endorsement waiving co-insurance provisions; (v) if an Individual Property includes commercial property, worker's compensation insurance with respect to any employees of Borrower, as required by any governmental authority or legal requirement; (vi) comprehensive boiler and machinery insurance, if applicable, in amounts as shall be reasonably required by Lender on terms consistent with the commercial property insurance policy required under subsection (i) above; (vii) umbrella liability insurance in an amount not less than Twenty-Five Million and No/100 Dollars ($25,000,000) per occurrence on terms consistent with the commercial general liability insurance policy required under subsection (ii) above; (viii) motor vehicle liability coverage for all owned and non-owned vehicles, including rented and leased vehicles containing minimum limits per occurrence, including umbrella coverage, of One Million and No/100 Dollars ($1,000,000); (ix) if an Individual Property is or becomes a legal "non-conforming" use, ordinance or law coverage and insurance coverage to compensate for the cost of demolition or rebuilding of the undamaged portion of the Individual Property along with any reduced value and the increased cost of construction in amounts as requested by Lender; and (x) the commercial property and business income insurance required under Sections 6.1(a)(i) and (iii) above shall cover perils of terrorism and acts of terrorism and Borrower shall maintain commercial property and business income insurance for loss resulting from perils and acts of terrorism on terms (including amounts) consistent with those required under Sections 6.1(a)(i) and (iii) above at all times during the term of the Loan so long as Lender reasonably determines that either (i) prudent owners of real estate comparable to the Properties are maintaining same or (ii) prudent institutional lenders (including, without limitation, investment banks) to such owners are requiring that such owners maintain such insurance; provided, that Lender hereby agrees that a blanket policy covering the Property and all of the properties owned directly or indirectly by Koger Equity, Inc. (the "Koger Properties") with an aggregate annual limit of $77,000,000 (the "Approved Blanket Policy") shall be acceptable for this clause (x); provided, further that Borrower hereby acknowledges that if an event occurs at the Koger Properties that reduces the coverage in the Approved Blanket Policy, Borrower agrees to obtain within ten (10) business days of such occurrence a stand-alone policy with respect to the Properties in the amount of the outstanding principal balance of the Loan so long as Lender reasonably determines that such insurance is available at commercially reasonable rates; and 62 (xi) upon sixty (60) days' written notice, such other reasonable insurance and in such reasonable amounts as Lender from time to time may reasonably request against such other insurable hazards which at the time are commonly insured against for property similar to the Individual Property located in or around the region in which the Individual Property is located. (b) All insurance provided for in Section 6.1(a) shall be obtained under valid and enforceable policies (collectively, the "Policies" or, in the singular, the "Policy"), and shall be subject to the reasonable approval of Lender as to insurance companies, amounts, deductibles, loss payees and insureds. The Policies shall be issued by financially sound and responsible insurance companies authorized to do business in the State and having a claims paying ability rating of "AA" or better (and the equivalent thereof) by at least two (2) of the Rating Agencies rating the Securities (one of which shall be Standard & Poor's Ratings Group if they are rating the Securities and one of which will be Moody's Investors Service, Inc. if they are rating the Securities), or if only one Rating Agency is rating the Securities, then only by such Rating Agency. The Policies described in Section 6.1(a) (other than those strictly limited to liability protection) shall designate Lender as loss payee. Not less than ten (10) days prior to the expiration dates of the Policies theretofore furnished to Lender, certificates of insurance evidencing the Policies accompanied by evidence satisfactory to Lender of payment of the premiums due thereunder (the "Insurance Premiums"), shall be delivered by Borrower to Lender. (c) Any blanket insurance Policy shall specifically allocate to the Individual Property the amount of coverage from time to time required hereunder and shall otherwise provide the same protection as would a separate Policy insuring only the Properties in compliance with the provisions of Section 6.1(a). (d) All Policies provided for or contemplated by Section 6.1(a), except for the Policy referenced in Section 6.1(a)(v), shall name Borrower as the insured and Lender as the additional insured, as its interests may appear, and in the case of property damage, boiler and machinery, flood and earthquake insurance, shall contain a so-called New York standard non-contributing mortgagee clause in favor of Lender providing that the loss thereunder shall be payable to Lender. (e) All Policies provided for in Section 6.1(a) shall contain clauses or endorsements to the effect that: (i) no act or negligence of Borrower, or anyone acting for Borrower, or of any Tenant or other occupant, or failure to comply with the provisions of any Policy, which might otherwise result in a forfeiture of the insurance or any part thereof, shall in any way affect the validity or enforceability of the insurance insofar as Lender is concerned; 63 (ii) the Policy shall not be materially changed (other than to increase the coverage provided thereby) or canceled without at least thirty (30) days' written notice to Lender and any other party named therein as an additional insured; (iii) the issuers thereof shall give written notice to Lender if the Policy has not been renewed fifteen (15) days prior to its expiration; and (iv) Lender shall not be liable for any Insurance Premiums thereon or subject to any assessments thereunder. (f) If at any time Lender is not in receipt of written evidence that all insurance required hereunder is in full force and effect, Lender shall have the right, without notice to Borrower, to take such action as Lender deems reasonably necessary to protect its interest in the Properties, including, without limitation, the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate. All premiums incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, shall be secured by the Mortgage and shall bear interest at the Default Rate. Section 6.2. Casualty. If the Individual Property shall be damaged or destroyed, in whole or in part, by fire or other casualty (a "Casualty"), Borrower shall give prompt notice of such damage to Lender and shall promptly commence and diligently prosecute the completion of the Restoration of the Individual Property as nearly as possible to the condition the Individual Property was in immediately prior to such fire or other casualty, with such alterations as may be reasonably approved by Lender and otherwise in accordance with Section 6.4; provided, however, that in the event that the Net Proceeds are not made available to Borrower for Restoration pursuant to Section 6.4 and Borrower satisfies the condition of Section 2.5.1 (a)-(e) for the release of an Individual Property, Lender agrees upon request by Borrower to apply the Net Proceeds to pay the Release Amount. Borrower shall pay all costs of such Restoration whether or not such costs are covered by insurance. Lender may, but shall not be obligated to make proof of loss if not made promptly by Borrower. In addition, Lender may participate in any settlement discussions with any insurance companies with respect to any Casualty in which the Net Proceeds or the costs of completing the Restoration are equal to or greater than Five Hundred Thousand and No/100 Dollars ($500,000) and Borrower shall deliver to Lender all instruments required by Lender to permit such participation. Section 6.3. Condemnation. Borrower shall promptly give Lender notice of the actual or, if Borrower has knowledge of any, threatened commencement of any proceeding for the Condemnation of any Individual Property and shall deliver to Lender copies of any and all papers served in connection with such proceedings. Lender may participate in any such proceedings, and Borrower shall from time to time deliver to Lender all instruments requested by it to permit such participation. Borrower shall, at its expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying on or defense of any such proceedings. Notwithstanding any taking 64 by any public or quasi-public authority through Condemnation or otherwise (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of such taking), Borrower shall continue to pay the Debt at the time and in the manner provided for its payment in the Note and in this Agreement and the Debt shall not be reduced until any Award shall have been actually received and applied by Lender, after the deduction of reasonable expenses of collection, to the reduction or discharge of the Debt. Lender shall not be limited to the interest paid on the Award by the condemning authority but shall be entitled to receive out of the Award interest at the rate or rates provided herein or in the Note. If any Individual Property or any portion thereof is taken by a condemning authority, Borrower shall promptly commence and diligently prosecute the Restoration of the applicable Individual Property and otherwise comply with the provisions of Section 6.4. If any Individual Property is sold, through foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender shall have the right, whether or not a deficiency judgment on the Note shall have been sought, recovered or denied, to receive the Award, or a portion thereof sufficient to pay the Debt. Section 6.4. Restoration. The following provisions shall apply in connection with the Restoration of any Individual Property: (a) If the Net Proceeds shall be less than Five Hundred Thousand and No/100 Dollars ($500,000) and the costs of completing the Restoration shall be less than Five Hundred Thousand and No/100 Dollars ($500,000), the Net Proceeds will be disbursed by Lender to Borrower upon receipt, provided that all of the conditions set forth in Section 6.4(b)(i) are met and Borrower delivers to Lender a written undertaking to expeditiously commence and to satisfactorily complete with due diligence the Restoration in accordance with the terms of this Agreement. (b) If the Net Proceeds are equal to or greater than Five Hundred Thousand and No/100 Dollars ($500,000) or the costs of completing the Restoration is equal to or greater than Five Hundred Thousand and No/100 Dollars ($500,000) Lender shall make the Net Proceeds available for the Restoration in accordance with the provisions of this Section 6.4. The term "Net Proceeds" shall mean: (i) the net amount of all insurance proceeds received by Lender pursuant to Sections 6.1 (a)(i), (iv), (vi), (ix) and (x) as a result of such damage or destruction, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Insurance Proceeds"), or (ii) the net amount of the Award, after deduction of its reasonable costs and expenses (including, but not limited to, reasonable counsel fees), if any, in collecting same ("Condemnation Proceeds"), whichever the case may be. (i) The Net Proceeds shall be made available to Borrower for Restoration, provided that each of the following conditions are met: (A) no Event of Default shall have occurred and be continuing; (B) (1) in the event the Net Proceeds are Insurance Proceeds, less than thirty-five percent (35%) of the total floor area of the Improvements on the Individual Property has been damaged, destroyed or rendered unusable as a result of such fire or other casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less than ten percent (10%) of the land constituting the Individual Property is taken, and such land is located along the perimeter or periphery of the Individual Property, and no portion of the Improvements is located on such land; 65 (C) Leases demising in the aggregate a percentage amount equal to or greater than the Rentable Space Percentage of the total rentable space in the Individual Property which has been demised under executed and delivered Leases in effect as of the date of the occurrence of such fire or other casualty or taking, whichever the case may be, shall remain in full force and effect during and after the completion of the Restoration, notwithstanding the occurrence of any such fire or other casualty or taking, whichever the case may be, and will make all necessary repairs and restorations thereto at their sole cost and expense. The term "Rentable Space Percentage" shall mean (1) in the event the Net Proceeds are Insurance Proceeds, a percentage amount equal to seventy-five percent (75%) and (2) in the event the Net Proceeds are Condemnation Proceeds, a percentage amount equal to seventy-five percent (75%); (D) Borrower shall commence the Restoration as soon as reasonably practicable (but in no event later than sixty (60) days after such Casualty or Condemnation, whichever the case may be, occurs) and shall diligently pursue the same to satisfactory completion; (E) Lender shall be reasonably satisfied that any operating deficits, including all scheduled payments of principal and interest under the Note, which will be incurred with respect to the Individual Property as a result of the occurrence of any such Casualty or Condemnation, whichever the case may be, will be covered out of (1) the Net Proceeds, (2) the insurance coverage referred to in Section 6.1(a)(iii), if applicable, or (3) by other funds of Borrower; (F) Lender shall be reasonably satisfied that the Restoration will be completed on or before the earliest to occur of (1) the Maturity Date, (2) the earliest date required for such completion under the terms of Leases making up the Rentable Space Percentage, (3) such time as may be required under applicable zoning law, ordinance, rule or regulation in order to repair and restore the applicable Individual Property to the condition it was in immediately prior to such Casualty or to as nearly as possible the condition it was in immediately prior to such Condemnation, as applicable or (4) the expiration of the insurance coverage referred to in Section 6.1(a)(iii); (G) the Individual Property and the use thereof after the Restoration will be in compliance with and permitted under all applicable zoning laws, ordinances, rules and regulations; 66 (H) the Restoration shall be done and completed by Borrower in an expeditious and diligent fashion and in compliance with all applicable governmental laws, rules and regulations (including, without limitation, all applicable environmental laws); (I) such Casualty or Condemnation, as applicable, does not result in the loss of access to the Individual Property or the related Improvements; (J) the Net Operating Income for the affected Individual Property, after giving effect to the Restoration, shall be equal to or greater than the Net Operating Income for such Individual Property immediately prior to the Restoration; (K) Borrower shall deliver, or cause to be delivered, to Lender a signed detailed budget approved in writing by Borrower's architect or engineer stating the entire cost of completing the Restoration, which budget shall be reasonably acceptable to Lender; and (L) the Net Proceeds together with any cash or cash equivalent deposited by Borrower with Lender are sufficient in Lender's reasonable discretion to cover the cost of the Restoration. (ii) The Net Proceeds shall be held by Lender in an interest-bearing account and, until disbursed in accordance with the provisions of this Section 6.4(b), shall constitute additional security for the Debt and other obligations under the Loan Documents. The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower from time to time during the course of the Restoration, upon receipt of evidence reasonably satisfactory to Lender that (A) all materials installed and work and labor performed (except to the extent that they are to be paid for out of the requested disbursement) in connection with the Restoration have been paid for in full, and (B) there exist no notices of pendency, stop orders, mechanic's or materialman's liens or notices of intention to file same, or any other liens or encumbrances of any nature whatsoever on the Individual Property which have not either been fully bonded to the satisfaction of Lender and discharged of record or in the alternative fully insured to the satisfaction of Lender by the title company issuing the Title Insurance Policy. (iii) All plans and specifications required in connection with the Restoration shall be subject to prior review and acceptance in all respects by Lender and by an independent consulting engineer selected by Lender (the "Casualty Consultant"), which review and acceptance shall not be unreasonably withheld. If an Event of Default occurs and is continuing, Lender shall have the use of the plans and specifications and all permits, licenses and approvals required or obtained in connection with the Restoration. The identity of the contractors, subcontractors and materialmen engaged in the Restoration, as well as the contracts under which they have been engaged, shall be subject to prior review and acceptance by Lender and the Casualty Consultant, 67 which review and acceptance shall not be unreasonably withheld. All costs and expenses incurred by Lender in connection with making the Net Proceeds available for the Restoration including, without limitation, reasonable counsel fees and disbursements and the Casualty Consultant's fees, shall be paid by Borrower. (iv) In no event shall Lender be obligated to make disbursements of the Net Proceeds in excess of an amount equal to the costs actually incurred from time to time for work in place as part of the Restoration, as certified by the Casualty Consultant, minus the Casualty Retainage. The term "Casualty Retainage" shall mean an amount equal to ten percent (10%) of the costs actually incurred for work in place as part of the Restoration, as certified by the Casualty Consultant, until the Restoration has been completed. The Casualty Retainage shall in no event, and notwithstanding anything to the contrary set forth above in this Section 6.4(b), be less than the amount actually held back by Borrower from contractors, subcontractors and materialmen engaged in the Restoration. The Casualty Retainage shall not be released until the Casualty Consultant certifies to Lender that the Restoration has been completed substantially in accordance with the provisions of this Section 6.4(b) and that all approvals necessary for the re-occupancy and use of the Individual Property have been obtained from all appropriate governmental and quasi-governmental authorities, and Lender receives evidence reasonably satisfactory to Lender that the costs of the Restoration have been paid in full or will be paid in full out of the Casualty Retainage; provided, however, that Lender will release the portion of the Casualty Retainage being held with respect to any contractor, subcontractor or materialman engaged in the Restoration as of the date upon which the Casualty Consultant certifies to Lender that the contractor, subcontractor or materialman has satisfactorily completed all work and has supplied all materials in accordance with the provisions of the contractor's, subcontractor's or materialman's contract, the contractor, subcontractor or materialman delivers the lien waivers and evidence of payment in full of all sums due to the contractor, subcontractor or materialman as may be reasonably requested by Lender or by the title company issuing the Title Insurance Policy, and Lender receives an endorsement to the Title Insurance Policy insuring the continued priority of the lien of the related Mortgage and evidence of payment of any premium payable for such endorsement. If required by Lender, the release of any such portion of the Casualty Retainage shall be approved by the surety company, if any, which has issued a payment or performance bond with respect to the contractor, subcontractor or materialman. (v) Lender shall not be obligated to make disbursements of the Net Proceeds more frequently than once every calendar month. (vi) If at any time the Net Proceeds or the undisbursed balance thereof shall not, in the reasonable opinion of Lender in consultation with the Casualty Consultant, be sufficient to pay in full the balance of the costs which are estimated by the Casualty Consultant to be incurred in connection with the completion of the Restoration, Borrower shall deposit the deficiency with Lender or provide evidence reasonably satisfactory to Lender of the availability of funds sufficient to cover the deficiency (the "Net Proceeds Deficiency") before any further disbursement of the Net Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall be held by Lender and shall be disbursed for costs actually incurred in connection with the Restoration on the same conditions applicable to the disbursement of the Net Proceeds, and until so disbursed pursuant to this Section 6.4(b) shall constitute additional security for the Debt and other obligations under the Loan Documents. 68 (vii) The excess, if any, of the Net Proceeds and interest thereon and the remaining balance, if any, of the Net Proceeds Deficiency deposited with Lender after the Casualty Consultant certifies to Lender that the Restoration has been completed in accordance with the provisions of this Section 6.4(b), and the receipt by Lender of evidence reasonably satisfactory to Lender that all costs incurred in connection with the Restoration have been paid in full, shall be remitted by Lender to Borrower, provided no Event of Default shall have occurred and shall be continuing under the Note, this Agreement or any of the other Loan Documents. (c) All Net Proceeds and interest thereon not required (i) to be made available for the Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant to Section 6.4(b)(vii) may be retained and applied by Lender toward the payment of the Debt whether or not then due and payable in such order, priority and proportions as Lender in its sole discretion shall deem proper, or, at the discretion of Lender, the same may be paid, either in whole or in part, to Borrower for such purposes as Lender shall approve, in its discretion. (d) In the event of foreclosure of the Mortgage with respect to the Individual Property, or other transfer of title to the Individual Property in extinguishment in whole or in part of the Debt all right, title and interest of Borrower in and to the Policies that are not blanket Policies then in force concerning the Individual Property and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or Lender or other transferee in the event of such other transfer of title. VII. RESERVE FUNDS SECTION 7.1. Required Repair Funds. 7.1.1 Deposits. Borrower shall perform the repairs at the Properties, as more particularly set forth on Schedule III hereto (such repairs hereinafter referred to as "Required Repairs"). Except as a result of a force majeure, Borrower shall complete the Required Repairs on or before the required deadline for each repair as set forth on Schedule III. It shall be an Event of Default under this Agreement if (a) Borrower does not substantially complete the Required Repairs at each Individual Property by the required deadline for each repair as set forth on Schedule III, or (b) Borrower does not satisfy each condition contained in Section 7.1.2 hereof. Upon the occurrence of such an 69 Event of Default, Lender, at its option, may withdraw all Required Repair Funds from the Required Repair Account and Lender may apply such funds either to completion of the Required Repairs at one or more of the Properties or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lender's right to withdraw and apply Required Repair Funds shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents. On the Closing Date, Borrower shall deposit with Lender the amount for each Individual Property set forth on such Schedule III hereto to perform the Required Repairs for such Individual Property. Amounts so deposited with Lender shall be held by Lender in accordance with Section 7.7 hereof. Amounts so deposited shall hereinafter be referred to as Borrower's "Required Repair Fund" and the account in which such amounts are held shall hereinafter be referred to as Borrower's "Required Repair Account". 7.1.2 Release of Required Repair Funds. Lender shall disburse to Borrower the Required Repair Funds from the Required Repair Account from time to time upon satisfaction by Borrower of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the Required Repairs to be paid, (b) on the date such request is received by Lender and on the date such payment is to be made, no Default or Event of Default shall exist and remain uncured, (c) Lender shall have received an Officers' Certificate (i) stating that all Required Repairs at the applicable Individual Property to be funded by the requested disbursement have been completed in good and workmanlike manner and in accordance with all applicable federal, state and local laws, rules and regulations, such certificate to be accompanied by a copy of any license, permit or other approval by any Governmental Authority required to commence and/or complete the Required Repairs, (ii) identifying each Person that supplied materials or labor in connection with the Required Repairs performed at such Individual Property to be funded by the requested disbursement, and (iii) stating that each such Person has been paid in full or will be paid in full upon such disbursement, such Officers' Certificate to be accompanied by lien waivers or other evidence of payment reasonably satisfactory to Lender, (d) at Lender's option, a title search for such Individual Property indicating that such Individual Property is free from all liens, claims and other encumbrances not previously approved by Lender, and (e) Lender shall have received such other evidence as Lender shall reasonably request that the Required Repairs at such Individual Property to be funded by the requested disbursement have been substantially completed and are paid for or will be paid upon such disbursement to Borrower. Lender shall not be required to make disbursements from the Required Repair Account unless such requested disbursement is in an amount greater than $25,000 (or a lesser amount if the total amount in the Required Repair Account is less than $25,000, in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.1.2. Section 7.2. Tax and Insurance Escrow Fund. Borrower shall pay to Lender on each Payment Date (a) one-twelfth of the Taxes that Lender estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lender sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due dates, and (b) one-twelfth of the Insurance Premiums that Lender estimates will be payable for the renewal of the coverage afforded by the Policies upon the expiration thereof in order to accumulate with Lender sufficient funds to pay all such Insurance Premiums at least thirty (30) days prior to the expiration of the Policies (said amounts in (a) and (b) above hereinafter called the "Tax and Insurance Escrow Fund"). Notwithstanding the 70 foregoing, Borrower shall not be required to make monthly deposits for Insurance Premiums as set forth in (b) above for so long as (a) Borrower maintains blanket insurance Policies for the Properties and (b) a Trigger Period is not in existence. The Tax and Insurance Escrow Fund and the payments of interest or principal or both, payable pursuant to the Note, shall be added together and shall be paid as an aggregate sum by Borrower to Lender. Lender will apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and under the Mortgage. In making any payment relating to the Tax and Insurance Escrow Fund, Lender may do so according to any bill, statement or estimate procured from the appropriate public office (with respect to Taxes) or insurer or agent (with respect to Insurance Premiums), without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof. If the amount of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance Premiums pursuant to Section 5.1.2 hereof, Lender shall, in its sole discretion, return any excess to Borrower or credit such excess against future payments to be made to the Tax and Insurance Escrow Fund. Any amount remaining in the Tax and Insurance Escrow Fund after the Debt has been paid in full shall be promptly returned to Borrower. In allocating such excess, Lender may deal with the Person shown on the records of Lender to be the owner of the Properties. If at any time Lender reasonably determines that the Tax and Insurance Escrow Fund is not or will not be sufficient to pay Taxes and Insurance Premiums by the dates set forth in (a) and (b) above, Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to Lender by the amount that Lender estimates is sufficient to make up the deficiency at least thirty (30) days prior to delinquency of the Taxes and/or thirty (30) days prior to expiration of the Policies, as the case may be. Section 7.3. Replacements and Replacement Reserve. 7.3.1 Replacement Reserve Fund. Borrower shall pay to Lender on each Payment Date the amount equal to $17,764 (as such amount may be adjusted from time to time as herein provided) (the "Replacement Reserve Monthly Deposit"), which amount shall be deposited with and held by Lender to be used for replacements and repairs required to be made to the Properties during the calendar year pursuant to the Approved Budget (collectively, the "Replacements"). From and after the time that any Individual Property is released hereunder, the then amount of the Rollover Reserve Monthly Deposit shall be reduced by the amount set forth in the Replacement Reserve column on Schedule I. Amounts so deposited shall hereinafter be referred to as Borrower's "Replacement Reserve Fund" and the account in which such amounts are held shall hereinafter be referred to as Borrower's "Replacement Reserve Account". Any amount held in the Replacement Reserve Account and allocated for an Individual Property shall be retained by Lender and credited toward the future Replacement Reserves Monthly Deposits required by Lender hereunder in the event such Individual Property is released from the Lien of its related Mortgage in accordance with Section 2.5 hereof. 7.3.2 Disbursements from Replacement Reserve Account. Lender shall make disbursements from the Replacement Reserve Fund as requested by Borrower, and approved by Lender in its reasonable discretion, no more frequently than once in any thirty (30) day period of no less than $5,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender for requests in excess of 71 $10,000.00 for a single item, lien waivers and releases or other evidence of payment reasonably satisfactory to Lender from all parties furnishing materials and/or services in connection with the requested payment. Lender may require an inspection of the Property at Borrower's expense prior to making a monthly disbursement in order to verify completion of replacements and repairs of items in excess of $25,000.00 for which reimbursement is sought. 7.3.3 Balance in the Replacement Reserve Account. The insufficiency of any balance in the Replacement Reserve Account shall not relieve Borrower from its obligation to fulfill all preservation and maintenance covenants in the Loan Documents. Section 7.4. Rollover Reserve. 7.4.1 Deposits to Rollover Reserve Fund. Borrower shall deposit with Lender (a) on the Closing Date, the amount of $6,476,000 (the "Initial Rollover Reserve Deposit") in the form of cash and/or a Letter of Credit (or any combination thereof) in accordance with Section 7.6 hereof and (b) on each Payment Date commencing on January 10, 2003, up to the Payment Date immediately preceding the Maturity Date the sum of $64,749 (as such amount may be adjusted from time to time as herein provided, including but not limited to additional deposits required for, if applicable, the Additional Rollover Reserve Monthly Deposit as set forth in Section 2.7(a) hereof) (the "Rollover Reserve Monthly Deposit"), such funds shall be deposited with and held by Lender for tenant improvement and leasing commission obligations incurred following the date hereof. From and after the time that any Individual Property is released hereunder, the then amount of the Rollover Reserve Monthly Deposit shall be reduced by the amount set forth in the Rollover Reserve column on Schedule I. In addition, Borrower shall pay to Lender for deposit with Lender all funds received by Borrower in connection with any cancellation, termination or surrender of any Lease, including, but not limited to, any surrender or cancellation fees, buy-out fees, or reimbursements for tenant improvements and leasing commissions (provided that the funds received by Lender shall be held for tenant improvement and leasing commission obligations for the space in which such funds were received). In the event that Borrower shows Lender evidence that the space for which such fees or reimbursements (set forth in the preceding sentence) were received by Borrower is rented (i) without payment by Borrower of any tenant improvement allowance or leasing commission in connection with such space or (ii) by Borrower for less costs for tenant improvement and leasing obligations than the amount of the fees or reimbursements received by Lender, Lender shall (x) remit all funds to Borrower in the event of (i) above or (y) such excess funds to Borrower in the event of (ii) above. All such amounts so deposited shall hereinafter be referred to as the "Rollover Reserve Fund" and the account to which such amounts are held shall hereinafter be referred to as the "Rollover Reserve Account". Section 7.5. Withdrawal of Rollover Reserve Funds. Lender shall make disbursements from the Rollover Escrow Fund for tenant improvement and leasing commission obligations incurred by Borrower. All such expenses shall be approved by Lender in its reasonable discretion, based on commercially reasonable standards. Lender shall make disbursements as requested by Borrower on a monthly basis in increments of no less than $5,000.00 upon delivery by Borrower of Lender's standard form of draw request accompanied by copies of paid invoices for the amounts requested and, if required by Lender, lien waivers and releases or other evidence of payment reasonably satisfactory to Lender from all parties furnishing materials and/or services in connection with the requested payment. 72 Lender may require an inspection of the Properties at Borrower's expense prior to making a monthly disbursement in excess of $50,000 in order to verify completion of improvements for which reimbursement is sought. All earnings or interest on the Rollover Escrow Fund shall be and become part of such Rollover Escrow Fund and shall be disbursed as provided in this Section 7.5. Section 7.6. Aesthetic Repair Funds. 7.6.1 Deposits. Borrower shall perform the repairs at the Properties, as more particularly set forth on Schedule VI hereto (such repairs hereinafter referred to as "Aesthetic Repairs"). Except as a result of a force majeure, Borrower shall complete the Aesthetic Repairs on or before the required deadline for each repair as set forth on Schedule VI. Upon the occurrence of such an Event of Default, Lender, at its option, may withdraw all Aesthetic Repair Funds from the Aesthetic Repair Account and Lender may apply such funds either to completion of the Aesthetic Repairs at one or more of the Properties or toward payment of the Debt in such order, proportion and priority as Lender may determine in its sole discretion. Lender's right to withdraw and apply Aesthetic Repair Funds shall be in addition to all other rights and remedies provided to Lender under this Agreement and the other Loan Documents. On the Closing Date, Borrower shall deposit with Lender the amount for each Individual Property set forth on such Schedule VI hereto to perform the Aesthetic Repairs for such Individual Property. Amounts so deposited with Lender shall be held by Lender in accordance with Section 7.7 hereof. Amounts so deposited shall hereinafter be referred to as Borrower's "Aesthetic Repair Fund" and the account in which such amounts are held shall hereinafter be referred to as Borrower's "Aesthetic Repair Account". 7.6.2 Release of Aesthetic Repair Funds. Lender shall disburse to Borrower the Aesthetic Repair Funds from the Aesthetic Repair Account from time to time upon satisfaction by Borrower of each of the following conditions: (a) Borrower shall submit a written request for payment to Lender at least thirty (30) days prior to the date on which Borrower requests such payment be made and specifies the Aesthetic Repairs to be paid, (b) on the date such request is received by Lender and on the date such payment is to be made, no Default or Event of Default shall exist and remain uncured, and (c) Lender shall have received an Officers' Certificate stating that each such Person has been paid in full or will be paid in full upon such disbursement, such Officers' Certificate to be accompanied by evidence of payment reasonably satisfactory to Lender, provided that a bill marked "paid" shall in all events be considered evidence of payment. Lender shall not be required to make disbursements from the Aesthetic Repair Account unless such requested disbursement is in an amount greater than $25,000 (or a lesser amount if the total amount in the Aesthetic Repair Account is less than $25,000, in which case only one disbursement of the amount remaining in the account shall be made) and such disbursement shall be made only upon satisfaction of each condition contained in this Section 7.6.2. Section 7.7. Unfunded Obligations Reserve. On the Closing Date Borrower shall deposit with Lender an aggregate amount of $2,547,644.09 to be held by Lender for the future obligations of Borrower under those Leases more particularly described in Schedule VII hereto. The amount so deposited shall 73 hereinafter be referred to as the "Unfunded Obligation Reserve Fund" and the account in which such amount is held shall hereinafter be referred to as the "Unfunded Obligations Reserve Account". Upon Borrower's written request, Lender shall make disbursements from the Unfunded Obligations Reserve up to the amount set forth on Schedule VII hereto for the respective Lease to reimburse Borrower, or to pay the tenant, for any amounts due by Borrower to such tenant under such Lease (the "Unfunded Obligation"), provided that Borrower delivers such written request with an Officer's Certificate stating that such amounts are due pursuant to such Lease; it being agreed that Borrower shall have no obligation to deliver to Lender any additional evidence that such Unfunded Obligation is due. Upon delivery to Lender of an Officer's Certificate stating that an Unfunded Obligation has been paid in full, provided no Event of Default shall have occurred and be continuing, Lender shall, within three (3) Business Days after receipt of such Officer's Certificate, remit to Borrower any excess funds in respect of such Unfunded Obligation. Section 7.8. Reserve Funds, Generally. 7.8.1 Borrower grants to Lender a first-priority perfected security interest in each of the Reserve Funds and any and all monies now or hereafter deposited in each Reserve Fund as additional security for payment of the Debt. Until expended or applied in accordance herewith, the Reserve Funds shall constitute additional security for the Debt. 7.8.2 Upon the occurrence of an Event of Default, Lender may, in addition to any and all other rights and remedies available to Lender, apply any sums then present in any or all of the Reserve Funds to the payment of the Debt in any order in its sole discretion. 7.8.3 The Reserve Funds shall not constitute trust funds and may be commingled with other monies held by Lender. 7.8.4 The Reserve Funds shall be held in an Eligible Account and shall bear interest at a money market rate selected by Lender. All interest on a Reserve Fund shall be added to and become a part of such Reserve Fund and shall be disbursed in the same manner as other monies deposited in such Reserve Fund, except that interest on the Tax and Insurance Escrow Fund shall not be added to or become a part thereof and shall be the sole property of and shall be paid to Lender. Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to the interest earned by Borrower on the Reserve Funds. 7.8.5 Borrower shall not, without obtaining the prior written consent of Lender, further pledge, assign or grant any security interest in any Reserve Fund or the monies deposited therein or permit any lien or encumbrance to attach thereto, or any levy to be made thereon, or any UCC-1 Financing Statements, except those naming Lender as the secured party, to be filed with respect thereto. 7.8.6 Lender shall not be liable for any loss sustained on the investment of any funds constituting the Reserve Funds. 7.8.7 Borrower shall indemnify Lender and hold Lender harmless from and against any and all actions, suits, claims, demands, liabilities, losses, damages, obligations and costs and expenses (including litigation costs and reasonable attorneys fees and expenses) arising from or in any way connected with the Reserve Funds or the performance of the obligations for which the Reserve Funds were established, except for such losses, damages, costs and expenses resulting from the gross negligence or willful misconduct of Lender, its agents, employees and contractors. Borrower shall assign to Lender all rights and claims Borrower may have against all persons or entities supplying labor, materials or other services which are to be paid from or secured by the Reserve Funds; provided, however, that Lender may not pursue any such right or claim unless an Event of Default has occurred and remains uncured. 74 7.8.8 If any Individual Property is released hereunder, any amounts held in the Required Repair Fund, Aesthetic Repair Fund, Unfunded Obligations Reserve Fund, Tax and Insurance Escrow Fund or any other Reserve Fund, other than the Rollover Reserve Fund and Replacement Reserve Fund, with respect to such Individual Property shall be disbursed to Borrower upon Borrower's request. If an Individual Property is released hereunder and there is an Unused Amount in either the Replacement Reserve Fund and Rollover Reserve Fund with respect to such Individual Property, the Unused Amount with respect to such Individual Property in such fund(s) shall be disbursed to Borrower upon Borrower's request. Section 7.9. Delivery of Letters of Credit. (a) In lieu of making all or any portion of the Rollover Reserve Deposit to the Rollover Reserve Fund, Borrower may deliver to Lender one (1) or more Letters of Credit in accordance with the provisions of this Section 7.9. Additionally, Borrower may deliver to Lender one (1) or more Letters of Credit in accordance with the provisions of this Section 7.9 in lieu of deposits previously made to the Rollover Reserve Fund with respect to a Rollover Reserve Deposit. The aggregate amount of any Letter of Credit and cash on deposit with respect to the Rollover Reserve Deposit in the Rollover Reserve Fund shall at all times be at least equal to the aggregate amount which Borrower is required to have on deposit in the Rollover Reserve Fund with respect to the Rollover Reserve Deposit pursuant to this Agreement. Lender shall have the right to draw down the Letter of Credit in full or in part in accordance with the applicable provisions hereof in the same manner as if Borrower has deposited cash hereunder. Borrower hereby agrees to pay any transfer fee in connection with a Letter of Credit required by the issuer of such Letter of Credit within five (5) days after demand by Lender. (b) Borrower shall give Lender no less than five (5) days notice of Borrower's election to deliver a Letter of Credit and Borrower shall pay to Lender all of Lender's reasonable out-of-pocket costs and expenses in connection therewith. Borrower shall not be entitled to draw from any such Letter of Credit. Upon thirty (30) days notice to Lender, Borrower may from time to time replace all or any portion of a Letter of Credit with a cash deposit to the Rollover Reserve Fund. Prior to the return of a Letter of Credit, Borrower shall deposit cash in an amount equal in the aggregate to the amount that would have been required to have been deposited in the Rollover Reserve Fund and not been disbursed in accordance with this Agreement if such Letter of Credit had not been delivered (provided that Borrower shall not be required to deposit the amount of interest that would have accrued in the Rollover Reserve Fund had a cash deposit been made in lieu of a Letter of Credit). (c) Each Letter of Credit delivered under this Agreement shall be additional security for the payment of the Debt. Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right, at its option, to draw on any Letter of Credit and to apply 75 all or any part thereof to the payment of the items for which such Letter of Credit was established or to apply each such Letter of Credit to payment of the Debt in such order, proportion or priority as Lender may determine. On the Maturity Date, any such Letter of Credit may be applied to reduce the Debt. (d) In addition to any other right Lender may have to draw upon a Letter of Credit pursuant to the terms and conditions of this Agreement, Lender shall have the additional rights to draw in full any Letter of Credit: (a) with respect to any evergreen Letter of Credit, if Lender has received a notice from the issuing bank that the Letter of Credit will not be renewed and a substitute Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (b) with respect to any Letter of Credit with a stated expiration date, if Lender has not received a notice from the issuing bank that it has renewed the Letter of Credit at least thirty (30) days prior to the date on which such Letter of Credit is scheduled to expire and a substitute Letter of Credit is not provided at least thirty (30) days prior to the date on which the outstanding Letter of Credit is scheduled to expire; (c) upon receipt of notice from the issuing bank that the Letter of Credit will be terminated (except if the termination of such Letter of Credit is permitted pursuant to the terms and conditions of this Agreement or a substitute Letter of Credit is provided); or (d) if Lender has received notice that the bank issuing the Letter of Credit shall cease to be an Approved Bank and Borrower shall not have replaced such bank with an Approved Bank within ten (10) Business Days after notice thereof. In the event that Lender draws down on any Letter of Credit in accordance with the terms of Section 7.9(d), the proceeds of such draw down shall be held by Lender as if Borrower has deposited cash hereunder. Notwithstanding anything to the contrary contained in the above, Lender is not obligated to draw any Letter of Credit upon the happening of an event specified in (a), (b), (c) or (d) above and shall not be liable for any losses sustained by Borrower due to the insolvency of the bank issuing the Letter of Credit if Lender has not drawn the Letter of Credit. VIII. DEFAULTS SECTION 8.1. Event of Default. (a) Each of the following events shall constitute an event of default hereunder (an "Event of Default"): (i) if any portion of the Debt is not paid when due; (ii) if any of the Taxes or Other Charges are not paid by Borrower when the same are due and payable, if Borrower is obligated pursuant to the terms herein to make such payments directly; (iii) if the Policies are not kept in full force and effect, or if certified copies of the Policies are not delivered to Lender upon request, if Borrower is obligated pursuant to the terms hereof to pay the Insurance Premiums directly to the insurance company; (iv) if Borrower transfers or encumbers any portion of the Properties without Lender's prior written consent in violation of the provisions of this Agreement and Article 6 of any Mortgage; 76 (v) if any representation or warranty made by Borrower herein or in any other Loan Document, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect as of the date the representation or warranty was made; (vi) if Borrower, Principal or any guarantor under any guaranty issued in connection with the Loan shall make an assignment for the benefit of creditors; (vii) if a receiver, liquidator or trustee shall be appointed for Borrower, Principal or any guarantor under any guarantee issued in connection with the Loan or if Borrower, Principal or such guarantor shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy, reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state law, shall be filed by or against, consented to, or acquiesced in by, Borrower, Principal or such guarantor, or if any proceeding for the dissolution or liquidation of Borrower, Principal or such guarantor shall be instituted; provided, however, if such appointment, adjudication, petition or proceeding was involuntary and not consented to by Borrower, Principal or such guarantor, upon the same not being discharged, stayed or dismissed within ninety 90 days; (viii) if Borrower attempts to assign its rights under this Agreement or any of the other Loan Documents or any interest herein or therein in contravention of the Loan Documents; (ix) if Borrower breaches any of its respective negative covenants contained in Section 5.2 or any covenant contained in Section 4.1.30 or Section 5.1.11 hereof; (x) with respect to any term, covenant or provision set forth herein which specifically contains a notice requirement or grace period, if Borrower shall be in default under such term, covenant or condition after the giving of such notice or the expiration of such grace period; (xi) if any of the assumptions contained in the Insolvency Opinion delivered to Lender in connection with the Loan, or in the Additional Insolvency Opinion delivered subsequent to the closing of the Loan, is or shall become untrue in any material respect; (xii) if a material default has occurred and continues beyond any applicable notice and/or cure period under the Management Agreement (or any Replacement Management Agreement) which default permits the Manager thereunder to terminate or cancel the Management Agreement (or any Replacement Management Agreement); (xiii) if Borrower shall continue to be in Default under any of the other terms, covenants or conditions of this Agreement not specified in subsections (i) to (xii) above, for ten (10) days after notice to Borrower from Lender, in the case of any Default which can only be cured by the payment of a sum of money, or for thirty (30) days after notice from Lender in the case of any other Default; provided, however, that if such non-monetary Default is susceptible of cure but cannot reasonably be cured within such 30-day period, and provided further that Borrower shall have commenced to cure such Default within such 30-day period and thereafter diligently and expeditiously proceeds to cure the same, such 30-day period shall be extended for such time as is reasonably necessary for Borrower in the exercise of due diligence to cure such Default, such additional period not to exceed one hundred twenty (120) days; or 77 (xiv) if there shall be default under any of the other Loan Documents beyond any applicable notice and/or cure periods contained in such documents, whether as to Borrower or any Individual Property, which has the effect of permitting Lender to accelerate the maturity of any portion of the Debt or to permit Lender to accelerate the maturity of all or any portion of the Debt. (b) Upon the occurrence of an Event of Default (other than an Event of Default described in clause (vi), (vii) or (viii) above) and at any time thereafter, in addition to any other rights or remedies available to it pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may take such action, without notice or demand, that Lender deems reasonably advisable to protect and enforce its rights against Borrower and in and to all or any Individual Property, including, without limitation, declaring the Debt to be immediately due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and any or all of the Properties, including, without limitation, all rights or remedies available at law or in equity; and upon any Event of Default described in clause (vi), (vii) or (viii) above, the Debt and all other obligations of Borrower hereunder and under the other Loan Documents shall immediately and automatically become due and payable, without notice or demand, and Borrower hereby expressly waives any such notice or demand, anything contained herein or in any other Loan Document to the contrary notwithstanding. Section 8.2. Remedies. (a) Upon the occurrence of an Event of Default, all or any one or more of the rights, powers, privileges and other remedies available to Lender against Borrower under this Agreement or any of the other Loan Documents executed and delivered by, or applicable to, Borrower or at law or in equity may be exercised by Lender at any time and from time to time, whether or not all or any of the Debt shall be declared due and payable, and whether or not Lender shall have commenced any foreclosure proceeding or other action for the enforcement of its rights and remedies under any of the Loan Documents with respect to all or any Individual Property. Any such actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singularly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the other rights and remedies of Lender permitted by law, equity or contract or as set forth herein or in the other Loan Documents. Without limiting the generality of the foregoing, Borrower agrees that if an Event of Default is continuing (i) Lender is not subject to any "one action" or "election of remedies" law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lender shall remain in full force and effect until Lender has exhausted all of its remedies against the Properties and each Mortgage has been foreclosed, sold and/or otherwise realized upon in satisfaction of the Debt or the Debt has been paid in full. 78 (b) With respect to Borrower and the Properties, nothing contained herein or in any other Loan Document shall be construed as requiring Lender to resort to any Individual Property for the satisfaction of any of the Debt in preference or priority to any other Individual Property, and Lender may seek satisfaction out of all of the Properties or any part thereof, in its absolute discretion in respect of the Debt. In addition, Lender shall have the right from time to time to partially foreclose the Mortgage in any manner and for any amounts secured by the Mortgage then due and payable as determined by Lender in its sole discretion including, without limitation, the following circumstances: (i) in the event Borrower defaults beyond any applicable grace period in the payment of one or more scheduled payments of principal and interest, Lender may foreclose the Mortgage to recover such delinquent payments, or (ii) in the event Lender elects to accelerate less than the entire outstanding principal balance of the Loan, Lender may foreclose the Mortgage to recover so much of the principal balance of the Loan as Lender may accelerate and such other sums secured by the Mortgage as Lender may elect. Notwithstanding one or more partial foreclosures, the Properties shall remain subject to the Mortgage to secure payment of sums secured by the Mortgage and not previously recovered. (c) Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents (the "Severed Loan Documents") in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder. Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to make and execute all documents necessary or desirable to effect the aforesaid severance, Borrower ratifying all that its said attorney shall do by virtue thereof; provided, however, Lender shall not make or execute any such documents under such power until three (3) days after notice has been given to Borrower by Lender of Lender's intent to exercise its rights under such power. Except as may be required in connection with a securitization pursuant to Section 9.1 hereof, (i) Borrower shall not be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents, and (ii) the Severed Loan Documents shall not contain any representations, warranties or covenants not contained in the Loan Documents and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date. (d) Remedies Cumulative; Waivers. The rights, powers and remedies of Lender under this Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender may have against Borrower pursuant to this Agreement or the other Loan Documents, or existing at law or in equity or otherwise. Lender's rights, powers and remedies may be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may determine in Lender's sole discretion. No delay or omission to exercise any remedy, right or power accruing upon an Event of Default shall impair any such remedy, right or power or shall be construed as a waiver thereof, but any such remedy, right or power may be exercised from time to time and as often as may be deemed expedient. A waiver of one Default or Event of Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or Event of Default by Borrower or to impair any remedy, right or power consequent thereon. 79 IX. SPECIAL PROVISIONS SECTION 9.1. Sale of Notes and Securitization. Borrower acknowledges and agrees that the Lender may sell all or any portion of the Loan and the Loan Documents, or issue one or more participations therein, or consummate one or more private or public securitizations of rated single- or multi-class securities (the "Securities") secured by or evidencing ownership interests in all or any portion of the Loan and the Loan Documents or a pool of assets that include the Loan and the Loan Documents (such sales, participations and/or securitizations, collectively, a "Securitization"). At the request of Lender, and to the extent not already required to be provided by Borrower under this Agreement, Borrower shall use reasonable efforts to provide information not in the possession of Lender or which may be reasonably required by Lender in order 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 such Securitization including, without limitation, to: (a) (i) provide reasonable additional financial and other information with respect to the Property, Borrower, the Principal and the Manager, and (ii) provide budgets relating to the Property (the "Provided Information"), together with appropriate verification and/or consents of the Provided Information through letters of auditors or opinions of counsel of independent attorneys reasonably acceptable to Lender and the Rating Agencies; (b) assist in preparing descriptive materials for presentations to any or all of the Rating Agencies, and work with, and if requested, supervise, third-party service providers engaged by Borrower, the Principal and their respective affiliates to obtain, collect, and deliver information reasonably requested or required by Lender or the Rating Agencies; (c) deliver (i) revised opinions of counsel as to non-consolidation, due execution and enforceability with respect to the Property, Borrower, the Principal and their respective affiliates and the Loan Documents, and (ii) revised organizational documents for Borrower, which counsel opinions and organizational documents shall be reasonably satisfactory to Lender, Borrower and the Rating Agencies; (d) if required by any Rating Agency, use commercially reasonable efforts to deliver such additional tenant estoppel letters, subordination agreements or other agreements from parties to agreements that affect the Property, which estoppel letters, subordination agreements or other agreements shall be reasonably satisfactory to Lender and the Rating Agencies; (e) make the representations and warranties made in the Loan Documents as of the closing date of the Securitization with respect to the Property, Borrower, the Principal and the Loan Documents as may be reasonably requested by Lender or the Rating Agencies and consistent with the facts covered by such representations and warranties as they exist on the date thereof; 80 (f) execute such amendments to the Loan Documents as may be reasonably requested by Lender or the Rating Agencies to effect the Securitization and/or deliver one or more new component notes to replace the original note or modify the original note to reflect multiple components of the Loan (and such new notes or modified note shall have the same initial weighted average coupon of the original note, but such new notes or modified note may change the interest rate of the Loan), and modify the cash management agreement with respect to the newly created components such that the pricing and marketability of the Securities and the size of each class of Securities and the rating assigned to each such class by the Rating Agencies shall provide the most favorable rating levels and achieve the optimum rating levels for the Loan provided, however, that Borrower shall not be required to modify any document evidencing or securing the Loan which would (A) modify (i) the interest rate payable under the Note, (ii) the stated maturity of the Note, (iii) any other material economic terms of the Loan or (iv) decrease the time period during which Borrower is permitted to perform its obligations under this Agreement or any of the other Loan Documents or (B) increase its obligations or decrease its rights, in each case in any material respect; (g) if requested by Lender, review any information regarding the Property, Borrower, Principal, the Manager and the Loan which is contained in a private placement memorandum, prospectus, prospectus supplement (including any amendment or supplement to either thereof), or other disclosure document to be used by Lender or any affiliate thereof; and (h) to the extent within the Borrower's or Guarantor's power to do so, supply to Lender such reasonable documentation, financial statements and reports in form and substance required in order to comply with any applicable securities laws. All reasonable third party costs and expenses incurred by Borrower or Lender in connection with Borrower's compliance with requests made under this Section 9.1 (including, without limitation, the fees and expenses of counsel, service providers and the Rating Agencies) shall be paid by Lender. Section 9.2. Securitization Indemnification. (a) Borrower understands that certain of the Provided Information may be included in Disclosure Documents in connection with the Securitization and may also be included in filings with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended (the "Securities Act"), or the Securities and Exchange Act of 1934, as amended (the "Exchange Act"), or provided or made available to investors or prospective investors in the Securities, the Rating Agencies, and service providers relating to the Securitization. In the event that the Disclosure Document is required to be revised prior to the sale of all Securities, Borrower will cooperate with the holder of the Note, in all reasonable respects and at the holder of the Note's expense, in updating the Disclosure Document by providing all current information necessary to keep the Disclosure Document accurate and complete in all material respects. 81 (b) Borrower, Principal and Guarantor agree to provide in connection with each of (i) a preliminary and a final private placement memorandum, (ii) a preliminary and final prospectus or prospectus supplement, (iii) such other offering materials as may be used for the securitization of the Loan (such materials described in clause (i), (ii) or (iii), as applicable, being hereinafter referred to collectively as the "Offering Materials"), an indemnification certificate (A) certifying that Borrower, Principal and Guarantor, as applicable, has carefully examined the portions of, and only the portions of, the Offering Materials relating to Borrower, Manager, the Properties, Guarantor and Principal specifically, including, without limitation, the sections entitled "Description of the Mortgage Loans and Mortgaged Property," "The Manager" and "The Borrower" (collectively, the "Borrower Sections"), and such Borrower Sections as they relate to or include any Provided Information, and as they relate to the Properties, do not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, (B) indemnifying Lender (and for purposes of this Section 9.2, Lender hereunder shall include its officers and directors), the Affiliate of Lender ("Credit Suisse First Boston") that has filed the registration statement relating to the securitization (the "Registration Statement"), each of its directors, each of its officers who have signed the Registration Statement and each Person or entity who controls the Affiliate within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively, the "Credit Suisse First Boston Group"), and Credit Suisse First Boston, each of its directors and each Person who controls Credit Suisse First Boston within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act (collectively, the "Underwriter Group") for any losses, claims, damages or liabilities (collectively, the "Liabilities") to which Credit Suisse First Boston, the Credit Suisse First Boston Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in such Borrower Sections or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated in such sections or necessary in order to make the statements in such Borrower Sections or in light of the circumstances under which they were made, not misleading and (C) agreeing to reimburse Lender, the Credit Suisse First Boston Group and the Underwriter Group for any legal or other expenses reasonably incurred by Lender and Credit Suisse First Boston in connection with investigating or defending the Liabilities; provided, however, that Borrower will be liable in any such case under clause (B) or (C) above only to the extent that any such loss claim, damage or liability arises out of or is based upon any such untrue statement or omission made therein in reliance upon and in conformity with information furnished to Lender by or on behalf of Borrower in connection with the preparation of the memorandum or prospectus or in connection with the underwriting of the debt, including, without limitation, financial statements of Borrower, operating statements, rent rolls, environmental site assessment reports and property condition reports with respect to the Properties. This indemnity agreement will be in addition to any liability which Borrower may otherwise have. Moreover, the indemnification provided for in clauses (B) and (C) above shall be effective whether or not an indemnification certificate described in (A) above is provided and shall be applicable based on information previously provided by Borrower or its Affiliates if Borrower does not provide the indemnification certificate. 82 (c) In connection with filings under the Exchange Act, Borrower and Guarantor agree to indemnify (i) Lender, the Credit Suisse First Boston Group and the Underwriter Group for Liabilities to which Lender, the Credit Suisse First Boston Group or the Underwriter Group may become subject insofar as the Liabilities arise out of or are based upon any untrue statement or misstatement of any material factor, the omission or alleged omission to state in the Provided Information a material fact required to be stated in the Provided Information in order to make the statements in the Provided Information, in light of the circumstances under which they were made not misleading and (ii) reimburse Lender, the Credit Suisse First Boston Group or the Underwriter Group for any legal or other expenses reasonably incurred by Lender, the Credit Suisse First Boston Group or the Underwriter Group in connection with defending or investigating the Liabilities. (d) Borrower agrees that no Indemnified Person shall have any liability to Borrower for or in connection with the Loan unless and to the extent that it is finally judicially determined that liability for losses, claims, damages, liabilities or expenses incurred by Borrower resulted directly from the fraud, illegal acts, gross negligence or willful misconduct of such Indemnified Person. (e) Promptly after receipt by an Indemnified Person of notice of any claim or the commencement of any action, the Indemnified Person shall, if a claim in respect thereof is to be made against Borrower, notify Borrower in writing of the claim or the commencement of that action; provided, however, that the failure to notify Borrower shall not relieve it from any liability which it may have under the indemnification provisions of this Section 9.2, except to the extent that it has been materially prejudiced by such failure and, provided further that the failure to notify Borrower shall not relieve it from any liability which it may have to an Indemnified Person otherwise than under the provisions of this Section 9.2. If any such claim or action shall be brought against an Indemnified Person, and it shall notify Borrower thereof, Borrower shall be entitled to participate therein and, to the extent that it wishes, assume the defense thereof with counsel reasonably satisfactory to the Indemnified Person. After notice from Borrower to the Indemnified Person of its or their election to assume the defense of such claim or action, such entity shall not be liable to the Indemnified Person for any legal or other expenses subsequently incurred by the Indemnified Person in connection with the defense thereof except as provided in the following sentence; provided, however, if the defendants in any such action include both Borrower, on the one hand, and one or more Indemnified Persons on the other hand, and independent counsel to an Indemnified Person shall have reasonably concluded that there are any legal defenses available to such Indemnified Person and/or other Indemnified Persons that are different or in addition to those available to Borrower, the Indemnified Person or Persons shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Person or Persons. The Indemnified Person shall instruct its counsel to maintain reasonably detailed billing records for fees and disbursements for which such Indemnified Person is seeking reimbursement hereunder and shall submit copies of such detailed billing records to substantiate that such counsel's fees and disbursements are solely related to the defense of a claim for which Borrower is required hereunder to indemnify such Indemnified Person. Borrower shall not be liable for the expenses of more than one (1) such separate counsel. 83 (f) Without the prior written consent of Lender (which consent shall not be unreasonably withheld or delayed), Borrower will not settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not any Indemnified Person is an actual or potential party to such claim, action, suit or proceeding) unless (A) Borrower shall have given Lender reasonable prior written notice thereof and shall have obtained an unconditional release of Lender and each other Indemnified Person hereunder from all liability arising out of such claim, action, suit or proceedings, or (B) Borrower reaffirms in writing its indemnity and contribution obligations hereunder regardless of any common, federal, state or commonwealth statutory law to the contrary. As long as Borrower has complied with its obligations to defend and indemnify hereunder, Borrower shall not be liable for any settlement made by Lender or any other Indemnified Person without the consent of Borrower (which consent shall not be unreasonably withheld or delayed). (g) Borrower agrees that if any indemnification or reimbursement sought pursuant to this Section 9.2 is finally judicially determined to be unavailable for a reason other than the fraud, illegal acts, gross negligence or willful misconduct of an Indemnified Person or is insufficient to hold an Indemnified Person harmless (with respect only to the losses, claims, damages, liabilities or expenses that are the subject of this Section 9.2), then Borrower and such Indemnified Person shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is held unavailable or is insufficient: (x) in such proportion as is appropriate to reflect the relative benefits to Borrower on the one hand, and such Indemnified Person on the other hand, from the transactions to which such indemnification or reimbursement relates; or (y) if the allocation provided by clause (x) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (x) but also the relative faults of Borrower on the one hand, and all Indemnified Persons on the other hand, as well as any other equitable considerations. Notwithstanding the provisions of this Section 9.2, (A) no party found liable for a fraudulent misrepresentation shall be entitled to contribution from any other party who is not also found liable for such fraudulent misrepresentation, and (B) Borrower and Lender agree that in no event shall the amount to be contributed by the Indemnified Persons collectively pursuant to this paragraph exceed the amount of the fees and interest (by underwriting discount or otherwise) actually received by the Credit Suisse First Boston Group and the Underwriter Group in connection with the closing of the Loan or the Securitization. (h) Borrower agrees that the indemnification, contribution and reimbursement obligations set forth in this Section 9.2 shall apply whether or not Lender, any other Indemnified Person, the Credit Suisse First Boston Group or the Underwriter Group is a formal party to any such lawsuits, claims or other proceedings, and that such obligations shall extend upon the terms set forth in this Section 9.2 to any controlling person, director, partner, officer, employee, representative or agent of Lender, the Credit Suisse First Boston Group and the Underwriter Group (each, an "Indemnified Person"). Borrower further agrees that their indemnification, contribution and reimbursement obligations shall be in addition to any liability which they may otherwise have and shall extend, upon the same terms and conditions, to each Person, if any, who controls any Indemnified Persons within the meaning of the Securities Act. (i) The liabilities and obligations of both Borrower and Lender under this Section 9.2 shall survive the termination of this Agreement and the satisfaction and discharge of the Debt. 84 (j) Notwithstanding anything to the contrary contained herein, Borrower shall have no obligation to act as depositor with respect to the Loan or an issuer or registrant with respect to the Securities issued in any Securitization. Section 9.3. [INTENTIONALLY DELETED] Section 9.4. Exculpation. Subject to the qualifications below, Lender shall not enforce the liability and obligation of Borrower to perform and observe the obligations contained in the Note, this Agreement, the Mortgage or the other Loan Documents by any action or proceeding wherein a money judgment shall be sought against Borrower, except that Lender may bring a foreclosure action, an action for specific performance or any other appropriate action or proceeding to enable Lender to enforce and realize upon its interest under the Note, this Agreement, the Mortgage and the other Loan Documents, or in the Properties, the Rents, or any other collateral given to Lender pursuant to the Loan Documents; provided, however, that, except as specifically provided herein, any judgment in any such action or proceeding shall be enforceable against Borrower only to the extent of Borrower's interest in the Properties, in the Rents and in any other collateral given to Lender, and Lender, by accepting the Note, this Agreement, the Mortgage and the other Loan Documents, agrees that it shall not sue for, seek or demand any deficiency judgment against Borrower in any such action or proceeding under or by reason of or under or in connection with the Note, this Agreement, the Mortgage or the other Loan Documents. The provisions of this Section shall not, however, (a) constitute a waiver, release or impairment of any obligation evidenced or secured by any of the Loan Documents; (b) impair the right of Lender to name Borrower as a party defendant in any action or suit for foreclosure and sale under the Mortgage; (c) affect the validity or enforceability of or any guaranty made in connection with the Loan or any of the rights and remedies of Lender thereunder; (d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement of the Assignment of Leases; (f) constitute a prohibition against Lender to seek a deficiency judgment against Borrower in order to fully realize the security granted by the Mortgage or to commence any other appropriate action or proceeding in order for Lender to exercise its remedies against all of the Properties; or (g) constitute a waiver of the right of Lender to enforce the liability and obligation of Borrower, by money judgment or otherwise, to the extent of any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including attorneys' fees and costs reasonably incurred) arising out of or in connection with the following: (i) fraud or intentional misrepresentation by Borrower or any guarantor in connection with the Loan; (ii) the gross negligence or willful misconduct of Borrower; (iii) the breach of any representation, warranty, covenant or indemnification provision in the Environmental Indemnity Agreement or in the Mortgage concerning environmental laws, hazardous substances and asbestos and any indemnification of Lender with respect thereto in either document; (iv) the removal or disposal of any portion of the Properties after an Event of Default or the causing of physical waste on any portion of the Properties; 85 (v) the misapplication or conversion by Borrower of (A) any Insurance Proceeds paid by reason of any loss, damage or destruction to the Properties, (B) any Awards received in connection with a condemnation of all or a portion of the Properties, (C) any Rents following an Event of Default, (D) any Rents paid more than one month in advance; (vi) failure by Borrower to pay charges for labor or materials or other charges that can create Liens on any portion of the Properties unless due to Lender's failure to disburse funds held therefor in escrow pursuant to the terms and provisions of this Agreement; (vii) any security deposits, advance deposits or any other deposits collected with respect to the Properties which are not delivered to Lender upon a foreclosure of the Properties or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof; and (viii) Personal Property taken from the Property and not replaced with Personal Property of the same utility and of the same or greater value. Notwithstanding anything to the contrary in this Agreement, the Note or any of the Loan Documents, (A) Lender shall not be deemed to have waived any right which Lender may have under Section 506(a), 506(b), 1111(b) or any other provisions of the U.S. Bankruptcy Code to file a claim for the full amount of the Debt secured by the Mortgage or to require that all collateral shall continue to secure all of the Debt owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be fully recourse to Borrower (i) in the event of: (a) Borrower filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (b) the filing of an involuntary petition against Borrower under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition against Borrower from any Person; (c) Borrower filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or causing to be solicited petitioning creditors for any involuntary petition from any Person; (d) Borrower consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; and (e) Borrower making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; (ii) if the first full monthly payment of interest on the Note is not paid when due; (iii) if Borrower fails to permit on-site inspections of the Properties, fails to provide financial information, fails to maintain its status as a Single Purpose Entity or fails to appoint a new property manager upon the request of Lender as permitted under the Loan Agreement, each as required by, and in accordance with, the terms and provisions of the Loan Agreement or the Mortgage; (iv) if Borrower fails to obtain Lender's prior written consent to any subordinate financing or other voluntary lien encumbering the Properties; or (v) if Borrower fails to obtain Lender's prior written consent to any assignment, transfer, or conveyance of the Properties or any interest therein as required by the Loan Agreement or the Mortgage. 86 Section 9.5. Matters Concerning Manager. (a) If (i) an Event of Default is continuing beyond any applicable notice and cure period, (ii) the Debt has been accelerated pursuant to Section 8.1(b) hereof, (iii) the Manager is in default under any of its obligations under the Management Agreement beyond any applicable notice and cure period, or (iv) the Manager shall become bankrupt or insolvent, Borrower shall, at the request of Lender, terminate the Management Agreement and replace the Manager with a manager approved by Lender on terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed the greater of (i) exceed then prevailing market rates or (ii) four percent (4%). Section 9.6. Servicer. At the option of Lender, the Loan may be serviced by a servicer/trustee (the "Servicer") selected by Lender and Lender may delegate all or any portion of its responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a servicing agreement (the "Servicing Agreement") between Lender and Servicer. Borrower shall be responsible for any reasonable set-up fees or any other initial costs relating to or arising under the Servicing Agreement; provided, however, that Borrower shall not be responsible for payment of the monthly servicing fee due to the Servicer under the Servicing Agreement. Section 9.7. Severance Documentation. Lender shall have the right, at any time (whether prior to or after any sale, participation or Securitization of all or any portion of the Loan), to modify the Loan in order to create one or more senior and subordinate notes (i.e., an A/B or A/B/C structure) and/or one or more components of the Note or notes, reduce the number of components of the Note or notes, revise the interest rate for each component, reallocate the principal balances of the notes and/or the components created pursuant to this Section 9.7, increase or decrease the monthly debt service payments for each such component or eliminate any component structure and/or the multiple note structure of the Loan (including the elimination of the related allocations of principal and interest payments), provided that (a) the principal balance of all notes and/or components immediately after the effective date of such modification equals the principal balance of the Loan immediately prior to such modification and the weighted average of the interest rates for all notes and/or components immediately after the effective date of such modification equals the interest rate of the original Note immediately prior to such modification and (b) such modification does not otherwise increase the economic obligations of Borrower under the Loan Documents. At Lender's election, each note evidencing the Loan may be subject to one or more Securitizations. Lender shall have the right to modify the Note and/or notes and any components in accordance with this Section 9.7 and, provided that such modification shall comply with the terms of this Section 9.7, it shall become immediately effective. If requested by Lender, Borrower shall promptly execute an amendment to the Loan Documents to evidence any such modification. X. MISCELLANEOUS SECTION 10.1. Survival. This Agreement and all covenants, agreements, representations and warranties made herein and in the certificates delivered 87 pursuant hereto shall survive the making by Lender of the Loan and the execution and delivery to Lender of the Note, and shall continue in full force and effect so long as all or any of the Debt is outstanding and unpaid unless a longer period is expressly set forth herein or in the other Loan Documents. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the legal representatives, successors and assigns of such party. All covenants, promises and agreements in this Agreement, by or on behalf of Borrower, shall inure to the benefit of the legal representatives, successors and assigns of Lender. Section 10.2. Lender's Discretion. Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender to approve or disapprove or to decide whether arrangements or terms are satisfactory or not satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion of Lender and shall be final and conclusive. Section 10.3. Governing Law. (A) THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW YORK, AND THE PROCEEDS OF THE NOTE DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE (WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE APPLICABLE INDIVIDUAL PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW. 88 (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS AGREEMENT MAY AT LENDER'S OPTION BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES HEREBY DESIGNATE AND APPOINT: CORPORATION SERVICE COMPANY 80 STATE STREET ALBANY, NEW YORK 12207 AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR. Section 10.4. Modification, Waiver in Writing. No modification, amendment, extension, discharge, termination or waiver of any provision of this Agreement, or of the Note, or of any other Loan Document, nor consent to any departure by Borrower therefrom, shall in any event be effective unless the same shall be in a writing signed by the party against whom enforcement is sought, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which given. Except as otherwise expressly provided herein, no notice to, or demand on Borrower, shall entitle Borrower to any other or future notice or demand in the same, similar or other circumstances. Section 10.5. Delay Not a Waiver. Neither any failure nor any delay on the part of Lender or Borrower in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, or under the Note or under any other Loan Document, or any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege. In particular, and not by way of limitation, by accepting payment after the due date of any amount payable under this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount. 89 Section 10.6. Notices. All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing and shall be effective for all purposes if hand delivered or sent by (a) certified or registered United States mail, postage prepaid, return receipt requested or (b) expedited prepaid delivery service, either commercial or United States Postal Service, with proof of attempted delivery, and by telecopier (with answer back acknowledged), addressed as follows (or at such other address and Person as shall be designated from time to time by any party hereto, as the case may be, in a written notice to the other parties hereto in the manner provided for in this Section): If to Lender: Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Attention: Edmund Taylor Facsimile No. (212) 325-8106 with a copy to: Column Financial, Inc. One Madison Avenue New York, New York 10010 Legal and Compliance Department Attention: Pamela McCormack, Esq. Facsimile No. (917) 326-7805 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Fredric L. Altschuler, Esq. Facsimile No. (212) 504-6666 If to Borrower: Koger Post Oak Limited Partnership 433 Plaza Real, Suite 335 Boca Raton, Florida 33432 Attention: Tom Brockwell Facsimile No. (561) 394-7712 With a copy to: White & Case LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Attention: William Walker, Esq. Facsimile No. (305) 348-5744 90 A notice shall be deemed to have been given: in the case of hand delivery, at the time of delivery; in the case of registered or certified mail, when delivered or the first attempted delivery on a Business Day; or in the case of expedited prepaid delivery and telecopy, upon the first attempted delivery on a Business Day; or in the case of telecopy, upon sender's receipt of a machine-generated confirmation of successful transmission after advice by telephone to recipient that a telecopy notice is forthcoming. Section 10.7. Trial by Jury. BORROWER AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER OR BORROWER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER. Section 10.8. Headings. The Article and/or Section headings and the Table of Contents in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. Section 10.9. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. Section 10.10. Preferences. Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder. To the extent Borrower makes a payment or payments to Lender, which payment or proceeds or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then, to the extent of such payment or proceeds received, the obligations hereunder or part thereof intended to be satisfied shall be revived and continue in full force and effect, as if such payment or proceeds had not been received by Lender. Section 10.11. Waiver of Notice. Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with respect to matters for which this Agreement or the other Loan Documents specifically and expressly provide for the giving of notice by Lender to Borrower and except with respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect to any matter for which this Agreement or the other Loan Documents do not specifically and expressly provide for the giving of notice by Lender to Borrower. 91 Section 10.12. Remedies of Borrower. In the event that a claim or adjudication is made that Lender or its agents have acted unreasonably or unreasonably delayed acting in any case where by law or under this Agreement or the other Loan Documents, Lender or such agent, as the case may be, has an obligation to act reasonably or promptly, Borrower agrees that neither Lender nor its agents shall be liable for any monetary damages, and Borrower's sole remedies shall be limited to commencing an action seeking injunctive relief or declaratory judgment. The parties hereto agree that any action or proceeding to determine whether Lender has acted reasonably shall be determined by an action seeking declaratory judgment. Section 10.13. Expenses; Indemnity. (a) Except as otherwise specifically provided herein, Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse, Lender upon receipt of written notice from Lender for all reasonable costs and expenses (including reasonable attorneys' fees and disbursements) incurred by Lender in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Loan Documents and the consummation of the transactions contemplated hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower (including without limitation any opinions requested by Lender as to any legal matters arising under this Agreement or the other Loan Documents with respect to the Properties); (ii) Borrower's ongoing performance of and compliance with Borrower's respective agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including, without limitation, confirming compliance with environmental and insurance requirements; (iii) Lender's ongoing performance and compliance with all agreements and conditions contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date; (iv) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters required in the Loan Documents (unless the applicable provision in such Loan Documents provides Borrower shall have no such obligation); (v) securing Borrower's compliance with any requests made pursuant to the provisions of this Agreement; (vi) the filing and recording fees and expenses, title insurance and reasonable fees and expenses of counsel for providing to Lender all required legal opinions, and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents, the Properties, or any other security given for the Loan; and (viii) enforcing any obligations of or collecting any payments due from Borrower under this Agreement, the other Loan Documents or with respect to the Properties or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a "work-out" or of any insolvency or bankruptcy proceedings; provided, however, that Borrower shall not be liable for the payment of any such costs and expenses to the extent the same arise by reason of the gross negligence, illegal acts, fraud or willful misconduct of Lender. Any cost and expenses due and payable to Lender may be paid from any amounts in the Lockbox Account. 92 (b) Borrower shall indemnify, defend and hold harmless Lender from and against any and all other liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for Lender in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not Lender shall be designated a party thereto), that may be imposed on, incurred by, or asserted against Lender in any manner relating to or arising out of (i) any breach by Borrower of its obligations under, or any material misrepresentation by Borrower contained in, this Agreement or the other Loan Documents, or (ii) the use or intended use of the proceeds of the Loan (collectively, the "Indemnified Liabilities"); provided, however, that Borrower shall not have any obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from the gross negligence, illegal acts, fraud or willful misconduct of Lender. To the extent that the undertaking to indemnify, defend and hold harmless set forth in the preceding sentence may be unenforceable because it violates any law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and satisfy under applicable law to the payment and satisfaction of all Indemnified Liabilities incurred by Lender. Section 10.14. Schedules Incorporated. The Schedules annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof. Section 10.15. Offsets, Counterclaims and Defenses. Any assignee of Lender's interest in and to this Agreement, the Note and the other Loan Documents shall take the same free and clear of all offsets, counterclaims or defenses which are unrelated to such documents which Borrower may otherwise have against any assignor of such documents, and no such unrelated counterclaim or defense shall be interposed or asserted by Borrower in any action or proceeding brought by any such assignee upon such documents and any such right to interpose or assert any such unrelated offset, counterclaim or defense in any such action or proceeding is hereby expressly waived by Borrower. Section 10.16. No Joint Venture or Partnership; No Third Party Beneficiaries. (a) Borrower and Lender intend that the relationships created hereunder and under the other Loan Documents be solely that of borrower and lender. Nothing herein or therein is intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to grant Lender any interest in the Properties other than that of mortgagee, beneficiary or lender. (b) This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein. All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender's sole discretion, Lender deems it advisable or desirable to do so. 93 Section 10.17. Publicity. All news releases, publicity or advertising by Borrower or their Affiliates through any media intended to reach the general public which refers to the Loan Documents or the financing evidenced by the Loan Documents, to Lender, Credit Suisse First Boston, or any of their Affiliates shall be subject to the prior written approval of Lender. Section 10.18. Cross-Default; Cross-Collateralization; Waiver of Marshalling of Assets. (a) Borrower acknowledges that Lender has made the Loan to Borrower upon the security of its collective interest in the Properties and in reliance upon the aggregate of the Properties taken together being of greater value as collateral security than the sum of each Individual Property taken separately. (b) To the fullest extent permitted by law, Borrower, for itself and its successors and assigns, waives all rights to a marshalling of the assets of Borrower, Borrower's partners and others with interests in Borrower, and of the Properties, or to a sale in inverse order of alienation in the event of foreclosure of the Mortgage, and agrees not to assert any right under any laws pertaining to the marshalling of assets, the sale in inverse order of alienation, homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Properties for the collection of the Debt without any prior or different resort for collection or of the right of Lender to the payment of the Debt out of the net proceeds of the Properties in preference to every other claimant whatsoever. In addition, Borrower, for itself and its successors and assigns, waives in the event of foreclosure of the Mortgage, any equitable right otherwise available to Borrower which would require the separate sale of the Properties or require Lender to exhaust its remedies against any Individual Property or any combination of the Properties before proceeding against any other Individual Property or combination of Properties; and further in the event of such foreclosure Borrower does hereby expressly consents to and authorizes, at the option of Lender, the foreclosure and sale either separately or together of any combination of the Properties. Section 10.19. Waiver of Counterclaim. Borrower hereby waives the right to assert a counterclaim, other than a compulsory counterclaim, in any action or proceeding brought against it by Lender or its agents. Section 10.20. Conflict; Construction of Documents; Reliance. In the event of any conflict between the provisions of this Loan Agreement and any of the other Loan Documents, the provisions of this Loan Agreement shall control. The parties hereto acknowledge that they were represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that such Loan Documents shall not be subject to the principle of construing their meaning against the party which drafted same. Borrower acknowledges that, with respect to the Loan, Borrower shall rely solely on its own judgment and advisors in entering into the Loan without relying in any manner on any statements, representations or recommendations of Lender or any parent, subsidiary or Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in the exercise of any rights or remedies available to it under any of the Loan Documents or any other agreements or instruments which govern the 94 Loan by virtue of the ownership by it or any parent, subsidiary or Affiliate of Lender of any equity interest any of them may acquire in Borrower, and Borrower hereby irrevocably waives the right to raise any defense or take any action on the basis of the foregoing with respect to Lender's exercise of any such rights or remedies. Borrower acknowledges that Lender engages in the business of real estate financings and other real estate transactions and investments which may be viewed as adverse to or competitive with the business of Borrower or its Affiliates. Section 10.21. Brokers and Financial Advisors. Borrower hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Borrower hereby agrees to indemnify, defend and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind (including Lender's attorneys' fees and expenses) in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated herein. The provisions of this Section 10.21 shall survive the expiration and termination of this Agreement and the payment of the Debt. Lender hereby represents that it has dealt with no financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement. Section 10.22. Prior Agreements. This Agreement and the other Loan Documents contain the entire agreement of the parties hereto and thereto in respect of the transactions contemplated hereby and thereby, and all prior agreements among or between such parties, whether oral or written are superseded by the terms of this Agreement and the other Loan Documents. 95 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their duly authorized representatives, all as of the day and year first above written. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware corporation By: KOGER POST OAK, INC., a Delaware corporation By: /S/ Thomas C. Brockwell ---------------------------------- Name: Thomas C. Brockwell Title: Vice President LENDER: COLUMN FINANCIAL, INC. By: /S/ Priscilla Horning ------------------------ Name: Priscilla Horning Title: Vice President 96 SCHEDULE I (Property - Information) SCH. 1 - 1 SCHEDULE II (Rent Roll) SCH. 2 - 1 SCHEDULE III (Required Repairs Deadlines For Completion) SCH. 3 - 1 SCHEDULE IV (Organization Chart) SCH. 4 - 1 SCHEDULE V (Intentionally Deleted) SCH. 5 - 1 SCHEDULE VI (Aesthetic Repairs) 2 SCHEDULE VII (Unfunded Obligations) 3 SCHEDULE 4.1.4 (Litigation) SCH. 5 - 1 SCHEDULE 4.1.5 (Agreements) SCH. 5 - 1 SCHEDULE 4.1.24 (Physical Condition) SCH. 5 - 1 SCHEDULE 4.1.26 (Leases) SCH. 5 - 1 EXHIBIT A (Approved Management Agreement) EX-10 5 a4339684-ex10c.txt KOGER EXHIBIT 10(C) EXHIBIT 10(c) KOGER POST OAK LIMITED PARTNERSHIP, as Grantor to DAVID PARNELL, as Trustee for the benefit of COLUMN FINANCIAL, INC., as Beneficiary -------------------------------------------------------- DEED OF TRUST AND SECURITY AGREEMENT -------------------------------------------------------- Dated: As of December 6, 2002 Location: 3000 Post Oak Boulevard 3040 Post Oak Boulevard and 3050 Post Oak Boulevard Houston, Texas County: Harris PREPARED BY AND UPON RECORDATION RETURN TO: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Fredric L. Altschuler, Esq. DEED OF TRUST AND SECURITY AGREEMENT THIS DEED OF TRUST AND SECURITY AGREEMENT (this "Security Instrument") is made as of this 6th day of December, 2002, by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place of business at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432, as grantor ("Borrower") to DAVID PARNELL, having an address at 7557 Rambler Road, Suite 1200, Dallas, Texas 75231, as trustee ("Trustee"), for the benefit of COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010, as beneficiary ("Lender"). W I T N E S S E T H: WHEREAS, this Security Instrument is given to secure a loan (the "Loan") in the principal sum of SEVENTY SEVEN MILLION AND NO/100 DOLLARS ($77,000,000.00) advanced pursuant to that certain Loan Agreement, dated as of the date hereof, between Borrower and Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement") and evidenced by that certain Promissory Note, dated the date hereof, made by Borrower in favor of Lender (such Promissory Note, together with all extensions, renewals, replacements, restatements or modifications thereof being hereinafter referred to as the "Note"); WHEREAS, Borrower desires to secure the payment of the Debt (as defined in the Loan Agreement) and the performance of all of its obligations under the Note, the Loan Agreement and the other Loan Documents (as herein defined); and WHEREAS, this Security Instrument is given pursuant to the Loan Agreement, and payment, fulfillment, and performance by Borrower of its obligations thereunder and under the other Loan Documents are secured hereby, and each and every term and provision of the Loan Agreement, the Note, and that certain Assignment of Leases and Rents of even date herewith made by Borrower in favor of Lender delivered in connection with this Security Agreement (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Assignment of Leases"), including the rights, remedies, obligations, covenants, conditions, agreements, indemnities, representations and warranties of the parties therein, are hereby incorporated by reference herein as though set forth in full and shall be considered a part of this Security Instrument (the Loan Agreement, the Note, this Security Instrument, the Assignment of Leases and Rents and all other documents evidencing or securing the Debt (including all additional mortgages, deeds to secure debt and assignments of leases and rents) or executed or delivered in connection therewith, are hereinafter referred to collectively as the "Loan Documents"). NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Security Instrument: 1 ARTICLE 1 - GRANTS OF SECURITY Section 1.1 Property Conveyed. Borrower does hereby irrevocably grant, bargain, sell, pledge, assign, warrant, transfer and convey to Trustee and its successors and assigns, in trust, with Power of Sale for the benefit of Lender as beneficiary in trust, all of Borrower's right, title and interest, if any, in and to the following property, rights, interests and estates now owned, or hereafter acquired by Borrower (each only to the extent permitted by applicable law and the instrument or document creating Borrower's interest thereunder, if applicable) (collectively, the "Property"): (a) Land. The real property described in Exhibit A attached hereto and made a part hereof (the "Land"); (b) Additional Land. All additional lands, estates and development rights hereafter acquired by Borrower for use in connection with the Land and the development of the Land and all additional lands and estates therein which may, from time to time, by supplemental mortgage or otherwise be expressly made subject to the lien of this Security Instrument; (c) Improvements. The buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter erected or located on the Land (collectively, the "Improvements"); (d) Easements. All easements, rights-of-way or use, rights, strips and gores of land, streets, ways, alleys, passages, sewer rights, water, water courses, water rights and powers, air rights and development rights, and all estates, rights, titles, interests, privileges, liberties, servitudes, tenements, hereditaments and appurtenances of any nature whatsoever, in any way now or hereafter belonging, relating or pertaining to the Land and the Improvements and the reversions and remainders, and all land lying in the bed of any street, road or avenue, opened or proposed, in front of or adjoining the Land, to the center line thereof and all the estates, rights, titles, interests, rights of dower, rights of curtesy, property, possession, claim and demand whatsoever, both at law and in equity, of Borrower of, in and to the Land and the Improvements and every part and parcel thereof, with the appurtenances thereto; (e) Equipment. All "equipment," as such term is defined in Article 9 of the Uniform Commercial Code (as hereinafter defined), now owned or hereafter acquired by Borrower, which is used at or in connection with the Improvements or the Land or is located thereon or therein (including, but not limited to, all machinery, equipment, furnishings, and electronic data-processing and other office equipment now owned or hereafter acquired by Borrower and any and all additions, substitutions and replacements of any of the foregoing), together with all attachments, components, parts, equipment and accessories installed thereon or affixed thereto (collectively, the "Equipment"). Notwithstanding the foregoing, Equipment shall not include any property belonging to tenants under leases except to the extent that Borrower shall have any right or interest therein; 2 (f) Fixtures. All Equipment now owned, or the ownership of which is hereafter acquired, by Borrower which is so related to the Land and Improvements forming part of the Property that it is deemed fixtures or real property under the law of the particular state in which the Equipment is located, including, without limitation, all building or construction materials intended for construction, reconstruction, alteration or repair of or installation on the Property, construction equipment, appliances, machinery, plant equipment, fittings, apparatuses, fixtures and other items now or hereafter attached to, installed in or used in connection with (temporarily or permanently) any of the Improvements or the Land, including, but not limited to, engines, devices for the operation of pumps, pipes, plumbing, call and sprinkler systems, fire extinguishing apparatuses and equipment, heating, ventilating, incinerating, electrical, air conditioning and air cooling equipment and systems, gas and electric machinery, appurtenances and equipment, pollution control equipment, security systems, disposals, dishwashers, refrigerators and ranges, recreational equipment and facilities of all kinds, and water, gas, electrical, storm and sanitary sewer facilities, utility lines and equipment (whether owned individually or jointly with others, and, if owned jointly, to the extent of Borrower's interest therein) and all other utilities whether or not situated in easements, all water tanks, water supply, water power sites, fuel stations, fuel tanks, fuel supply, and all other structures, together with all accessions, appurtenances, additions, replacements, betterments and substitutions for any of the foregoing and the proceeds thereof (collectively, the "Fixtures"). Notwithstanding the foregoing, "Fixtures" shall not include any property which tenants are entitled to remove pursuant to leases except to the extent that Borrower shall have any right or interest therein; (g) Personal Property. All furniture, furnishings, objects of art, machinery, goods, tools, supplies, appliances, general intangibles, contract rights, accounts, accounts receivable, franchises, licenses, certificates and permits, and all other personal property of any kind or character whatsoever as defined in and subject to the provisions of the Uniform Commercial Code, whether tangible or intangible, other than Fixtures, which are now or hereafter owned by Borrower and which are located within or about the Land and the Improvements, together with all accessories, replacements and substitutions thereto or therefor and the proceeds thereof (collectively, the "Personal Property"), and the right, title and interest of Borrower in and to any of the Personal Property which may be subject to any security interests, as defined in the Uniform Commercial Code, as adopted and enacted by the state or states where any of the Property is located (the "Uniform Commercial Code"), superior in lien to the lien of this Security Instrument and all proceeds and products of the above; (h) Leases and Rents. All leases, subleases or subsubleases, lettings, licenses, concessions or other agreements (whether written or oral) pursuant to which any Person is granted a possessory interest in, or 3 right to use or occupy all or any portion of the Land and the Improvements, and every modification, amendment or other agreement relating to such leases, subleases, subsubleases, or other agreements entered into in connection with such leases, subleases, subsubleases, or other agreements and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, heretofore or hereafter entered into (collectively, the "Leases"), whether before or after the filing by or against Borrower of any petition for relief under 11 U.S.C. 101 et seq., as the same may be amended from time to time (the "Bankruptcy Code") and all right, title and interest of Borrower, its successors and assigns therein and thereunder, including, without limitation, cash or securities deposited thereunder to secure the performance by the lessees of their obligations thereunder and all rents, additional rents, revenues, issues and profits (including all oil and gas or other mineral royalties and bonuses) from the Land and the Improvements whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (collectively, the "Rents") and all proceeds from the sale or other disposition of the Leases and the right to receive and apply the Rents to the payment of the Debt; (i) Condemnation Awards. All awards or payments, including interest thereon, which may heretofore and hereafter be made with respect to the Property, whether from the exercise of the right of eminent domain (including, but not limited to, any transfer made in lieu of or in anticipation of the exercise of the right), or for a change of grade, or for any other injury to or decrease in the value of the Property; (j) Insurance Proceeds. All proceeds in respect of the Property under any insurance policies covering the Property, including, without limitation, the right to receive and apply the proceeds of any insurance, judgments, or settlements made in lieu thereof, for damage to the Property; (k) Tax Appeal. All refunds, rebates or credits in connection with reduction in real estate taxes and assessments charged against the Property as a result of tax appeal or any applications or proceedings for reduction; (l) Conversion. All proceeds of the conversion, voluntary or involuntary, of any of the foregoing including, without limitation, proceeds of insurance and condemnation awards, into cash or liquidation claims; (m) Rights. The right, in the name and on behalf of Borrower, to appear in and defend any action or proceeding brought with respect to the Property and to commence any action or proceeding to protect the interest of Lender in the Property; (n) Agreements. All agreements, contracts, certificates, instruments, franchises, permits, licenses, plans, specifications and other documents, now or hereafter entered into, and all rights therein and thereto, respecting or pertaining to the use, occupation, 4 construction, management or operation of the Land and any part thereof and any Improvements or any business or activity conducted on the Land and any part thereof and all right, title and interest of Borrower therein and thereunder, including, without limitation, the right, upon the happening of any default hereunder, to receive and collect any sums payable to Borrower thereunder; (o) Trademarks. All tradenames, trademarks, servicemarks, logos, copyrights, goodwill, books and records and all other general intangibles relating to or used in connection with the operation of the Property; (p) Accounts. All reserves, escrows and deposit accounts maintained by Borrower with respect to the Property, including, without limitation, all accounts established pursuant to the Cash Management Agreement; together with all deposits or wire transfers made to the Lockbox Account and all cash, checks, drafts, certificates, securities, investment property, financial assets, instruments and other property held therein from time to time and all proceeds, products, distributions or dividends or substitutions thereon and thereof; and (q) Other Rights. Any and all other rights of Borrower in and to the items set forth in Subsections (a) through (p) above. AND without limiting any of the other provisions of this Security Instrument, to the extent permitted by applicable law, Borrower expressly grants to Lender, as secured party, a security interest in the portion of the Property which is or may be subject to the provisions of the Uniform Commercial Code which are applicable to secured transactions; it being understood and agreed that the Improvements and Fixtures are part and parcel of the Land (the Land, the Improvements and the Fixtures collectively referred to as the "Real Property") appropriated to the use thereof and, whether affixed or annexed to the Real Property or not, shall for the purposes of this Security Instrument be deemed conclusively to be real estate and mortgaged hereby. Section 1.2 Assignment of Rents. Borrower hereby absolutely and unconditionally assigns to Lender all of Borrower's right, title and interest in and to all current and future Leases and Rents; it being intended by Borrower that this assignment constitutes a present, absolute assignment and not an assignment for additional security only. Nevertheless, subject to the terms of the Assignment of Leases, the Cash Management Agreement and Section 7.1(h) of this Security Instrument, Lender grants to Borrower a revocable license to collect, receive, use and enjoy the Rents and Borrower shall hold the Rents, or a portion thereof sufficient to discharge all current sums due on the Debt, for use in the payment of such sums. Section 1.3 Security Agreement. This Security Instrument is both a real property mortgage and a "security agreement" within the meaning of the Uniform Commercial Code. The Property includes both real and personal property and all other rights and interests, whether tangible or intangible in nature, of Borrower in the Property. By executing and delivering this Security Instrument, Borrower hereby grants to Lender, as security for the Obligations (hereinafter defined), a security interest in the Fixtures, the Equipment and the Personal Property to the full extent that the Fixtures, the Equipment and the Personal Property may be subject to the Uniform Commercial Code (said portion of the Property so subject to the Uniform Commercial Code being called the 5 "Collateral"). If an Event of Default shall occur and be continuing, Lender, in addition to any other rights and remedies which it may have, shall have and may exercise immediately and without demand, any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing, the right to take possession of the Collateral or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Collateral. Upon request or demand of Lender after the occurrence and during the continuance of an Event of Default, Borrower shall, at its expense, assemble the Collateral and make it available to Lender at a convenient place (at the Land if tangible property) reasonably acceptable to Lender. Borrower shall pay to Lender on demand any and all expenses, including reasonable legal expenses and attorneys' fees, incurred or paid by Lender in protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the Collateral after the occurrence and during the continuance of an Event of Default. Any notice of sale, disposition or other intended action by Lender with respect to the Collateral sent to Borrower in accordance with the provisions hereof at least ten (10) business days prior to such action, shall, except as otherwise provided by applicable law, constitute reasonable notice to Borrower. The proceeds of any disposition of the Collateral, or any part thereof, may, except as otherwise required by applicable law, be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. Borrower's (debtor's) principal place of business is as set forth on page one hereof and the address of Lender (secured party) is as set forth on page one hereof. Section 1.4 Fixture Filing. Certain of the Property is or will become "fixtures" (as that term is defined in the Uniform Commercial Code) on the Land, and this Security Instrument, upon being filed for record in the real estate records of the city or county wherein such fixtures are situated, shall operate also as a financing statement filed as a fixture filing in accordance with the applicable provisions of said Uniform Commercial Code upon such of the Property that is or may become fixtures. Section 1.5 Pledges of Monies Held. Borrower hereby pledges to Lender any and all monies now or hereafter held by Lender or on behalf of Lender, including, without limitation, any sums deposited in the Lockbox Account, the Reserve Funds and Net Proceeds, as additional security for the Obligations until expended or applied as provided in this Security Instrument. CONDITIONS TO GRANT TO HAVE AND TO HOLD the above granted and described Property unto and to the use and benefit of Trustee and its successors and assigns, forever; IN TRUST, WITH POWER OF SALE, to secure payment to Lender of the Obligations at the time and in the manner provided for its payment in the Note and in this Security Instrument. 6 PROVIDED, HOWEVER, these presents are upon the express condition that, if Borrower shall well and truly pay to Lender the Debt at the time and in the manner provided in the Note, the Loan Agreement and this Security Instrument, shall well and truly perform the Other Obligations as set forth in this Security Instrument and shall well and truly abide by and comply with each and every covenant and condition set forth herein and in the Note, the Loan Agreement and the other Loan Documents, these presents and the estate hereby granted shall cease, terminate and be void and, upon request of Borrower, Lender shall execute a release of this Security Instrument evidencing the same; provided, however, that Borrower's obligation to indemnify and hold harmless Lender pursuant to the provisions hereof shall survive any such payment or release. ARTICLE 2 - DEBT AND OBLIGATIONS SECURED Section 2.1 Debt. This Security Instrument and the grants, assignments and transfers made in Article 1 are given for the purpose of securing the Debt. Section 2.2 Other Obligations. This Security Instrument and the grants, assignments and transfers made in Article 1 are also given for the purpose of securing the following (the "Other Obligations"): (a) the performance of all other obligations of Borrower contained herein; (b) the performance of each obligation of Borrower contained in the Loan Agreement and any other Loan Document; and (c) the performance of each obligation of Borrower contained in any renewal, extension, amendment, modification, consolidation, change of, or substitution or replacement for, all or any part of the Note, the Loan Agreement or any other Loan Document. Section 2.3 Debt and Other Obligations. Borrower's obligations for the payment of the Debt and the performance of the Other Obligations shall be referred to collectively herein as the "Obligations." ARTICLE 3 - BORROWER COVENANTS Borrower covenants and agrees that: Section 3.1 Payment of Debt. Borrower will pay the Debt at the time and in the manner provided in the Loan Agreement, the Note and this Security Instrument. Section 3.2 Incorporation by Reference. All the covenants, conditions and agreements contained in (a) the Loan Agreement, (b) the Note and (c) all and any of the other Loan Documents, are hereby made a part of this Security Instrument to the same extent and with the same force as if fully set forth herein. 7 Section 3.3 Insurance. Borrower shall obtain and maintain, or cause to be maintained, in full force and effect at all times insurance with respect to Borrower and the Property as required pursuant to the Loan Agreement. Section 3.4 Maintenance of Property. Borrower shall cause the Property to be maintained in a good and safe condition and repair. The Improvements, the Fixtures, the Equipment and the Personal Property shall not be removed, demolished or materially altered (except for normal replacement of the Fixtures, the Equipment or the Personal Property, tenant finish and refurbishment of the Improvements and otherwise as permitted by the Loan Documents) without the consent of Lender, which consent shall not be unreasonably withheld or delayed. Subject to the terms and conditions of the Loan Agreement, Borrower shall promptly repair, replace or rebuild any part of the Property which may be destroyed by any Casualty or become damaged, worn or dilapidated or which may be affected by any Condemnation, and shall complete and pay for any structure at any time in the process of construction or repair on the Land. Section 3.5 Waste. Borrower shall not commit or suffer any waste of the Property or make any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take any action that might invalidate or allow the cancellation of any Policy, or do or permit to be done thereon anything that may in any way materially and adversely impair the value of the Property or the security of this Security Instrument. Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Land, regardless of the depth thereof or the method of mining or extraction thereof. Section 3.6 Payment for Labor and Materials. (a) Borrower will promptly pay, bond or make other arrangements for payment otherwise acceptable to Lender in all respects when due all bills and costs for labor, materials, and specifically fabricated materials ("Labor and Material Costs") incurred in connection with the Property and never permit to exist beyond the due date thereof in respect of the Property or any part thereof any lien or security interest, even though inferior to the liens and the security interests hereof, and in any event never permit to be created or exist in respect of the Property or any part thereof any other or additional lien or security interest other than the liens or security interests hereof except for the Permitted Encumbrances; provided, however, in the event Borrower receives notice of any such lien or security interest Borrower shall have thirty (30) days to discharge, bond or otherwise remove the same of record. (b) After prior written notice to Lender, Borrower, at its own expense, may contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any of the Labor and Material Costs, provided that (i) no Event of Default has occurred and is continuing under the Loan Agreement, the Note, this Security Instrument or any of the other Loan Documents, (ii) Borrower is permitted to do so under the provisions of any other mortgage, deed of trust or deed to secure debt affecting the Property, (iii) such proceeding shall suspend the collection of the Labor and Material Costs from Borrower and from the Property or Borrower shall have paid all of the Labor and Material Costs under protest, (iv) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject and shall not constitute a default thereunder, (v) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost, and (vi) Borrower shall have furnished the security as may be required in the proceeding, or as may be reasonably requested by Lender to insure the payment of any contested Labor and Material Costs, together with all interest and penalties thereon. 8 Section 3.7 Performance of Other Agreements. Borrower shall observe and perform each and every term, covenant and provision to be observed or performed by Borrower pursuant to the Loan Agreement, any other Loan Document and any other agreement or recorded instrument affecting or pertaining to the Property and any amendments, modifications or changes thereto. Section 3.8 Change of Name, Identity or Structure. Borrower shall not change Borrower's name, identity (including its trade name or names) or, if not an individual, Borrower's corporate, partnership or other structure without notifying Lender of such change in writing at least fifteen (15) days prior to the effective date of such change and, in the case of a change in Borrower's structure, without first obtaining the prior written consent of Lender, which consent shall not be unreasonably withheld or delayed. Borrower shall execute and deliver to Lender, prior to or contemporaneously with the effective date of any such change, any financing statement or financing statement change required by Lender to establish or maintain the validity, perfection and priority of the security interest granted herein. At the request of Lender, Borrower shall execute a certificate in form reasonably satisfactory to Lender listing the trade names under which Borrower intends to operate the Property, and representing and warranting that Borrower does business under no other trade name with respect to the Property. Section 3.9 Title. Borrower has good and insurable fee simple title to the real property comprising part of the Property and good title to the balance of such Property, free and clear all Liens (as defined in the Loan Agreement) whatsoever except the Permitted Encumbrances (as defined in the Loan Agreement), such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents. The Permitted Encumbrances in the aggregate do not materially and adversely affect the value, operation or use of the Property or Borrower's ability to repay the Loan. This Security Instrument, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (a) a valid, perfected first priority lien on the Property, subject only to Permitted Encumbrances, other Liens permitted by the Loan Documents and the Liens created by the Loan Documents and (b) perfected security interests in and to, and perfected collateral assignments of, all personalty (including the Leases), all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances, such other Liens as are permitted pursuant to the Loan Documents and the Liens created by the Loan Documents to the extent the same may be perfected by filing a financing statement. There are 9 no claims for payment for work, labor or materials affecting the Property which are past due and are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents unless such claims for payments are being contested in accordance with the terms and conditions of this Security Instrument. ARTICLE 4 - OBLIGATIONS AND RELIANCES Section 4.1 Relationship of Borrower and Lender. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower, and no term or condition of any of the Loan Agreement, the Note, this Security Instrument and the other Loan Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtor and creditor. Section 4.2 No Reliance on Lender. The general partners, members, principals and (if Borrower is a trust) beneficial owners of Borrower are experienced in the ownership and operation of properties similar to the Property, and Borrower and Lender are relying solely upon such expertise and business plan in connection with the ownership and operation of the Property. Borrower is not relying on Lender's expertise, business acumen or advice in connection with the Property. Section 4.3 No Lender Obligations. (a) Notwithstanding the provisions of Subsections 1.1(h) and (n) or Section 1.2, Lender is not undertaking the performance of (i) any obligations under the Leases; or (ii) any obligations with respect to such agreements, contracts, certificates, instruments, franchises, permits, trademarks, licenses and other documents. (b) By accepting or approving anything required to be observed, performed or fulfilled or to be given to Lender pursuant to this Security Instrument, the Loan Agreement, the Note or the other Loan Documents, including, without limitation, any officer's certificate, balance sheet, statement of profit and loss or other financial statement, survey, appraisal, or insurance policy, Lender shall not be deemed to have warranted, consented to, or affirmed the sufficiency, the legality or effectiveness of same, and such acceptance or approval thereof shall not constitute any warranty or affirmation with respect thereto by Lender. Section 4.4 Reliance. Borrower recognizes and acknowledges that in accepting the Loan Agreement, the Note, this Security Instrument and the other Loan Documents, Lender is expressly and primarily relying on the truth and accuracy of the warranties and representations set forth in Section 4.1 of the Loan Agreement without any obligation to investigate the Property and notwithstanding any investigation of the Property by Lender; that such reliance existed on the part of Lender prior to the date hereof, that the warranties and representations are a material inducement to Lender in making the Loan; and that Lender would not be willing to make the Loan and accept this Security Instrument in the absence of the warranties and representations as set forth in Section 4.1 of the Loan Agreement. ARTICLE 5 - FURTHER ASSURANCES 10 Section 5.1 Recording of Security Instrument, etc. Borrower forthwith upon the execution and delivery of this Security Instrument and thereafter, from time to time, will cause this Security Instrument and any of the other Loan Documents creating a lien or security interest or evidencing the lien hereof upon the Property and each instrument of further assurance to be filed, registered or recorded in such manner and in such places as may be required by any present or future law in order to publish notice of and fully to protect and perfect the lien or security interest hereof upon, and the interest of Lender in, the Property. Borrower will pay all taxes, filing, registration or recording fees, and all expenses incident to the preparation, execution, acknowledgment and/or recording of the Note, this Security Instrument, the other Loan Documents, any note, deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property and any instrument of further assurance, and any modification or amendment of the foregoing documents, and all federal, state, county and municipal taxes, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of this Security Instrument, any deed of trust or mortgage supplemental hereto, any security instrument with respect to the Property or any instrument of further assurance, and any modification or amendment of the foregoing documents, except where prohibited by law so to do. Section 5.2 Further Acts, etc. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every further acts, deeds, conveyances, deeds of trust, mortgages, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, reasonably require, for the purpose of assuring, conveying, assigning, transferring, and confirming unto Lender and Trustee the property and rights hereby deeded, granted, bargained, sold, conveyed, confirmed, pledged, assigned, warranted and transferred or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Security Instrument or for filing, registering or recording this Security Instrument, or for complying with all Legal Requirements. Borrower, promptly on demand, will execute and deliver, and in the event it shall fail to so execute and deliver, hereby authorizes Lender to execute in the name of Borrower or without the signature of Borrower to the extent Lender may lawfully do so, one or more financing statements to evidence more effectively the security interest of Lender in the Property. Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose of exercising and perfecting any and all rights and remedies available to Lender at law and in equity, including without limitation, such rights and remedies available to Lender pursuant to this Section 5.2; provided, however, Lender will not exercise the same without giving Borrower three (3) days advance written notice so long as such notice does not materially effect Lender's ability to exercise its rights and remedies. Section 5.3 Changes in Tax, Debt, Credit and Documentary Stamp Laws. (a) If any law is enacted or adopted or amended after the date of this Security Instrument which deducts the Debt from the value of the Property for the purpose of taxation or which imposes a tax, either directly or indirectly, on the Debt or Lender's interest in the Property, Borrower will pay the tax, with interest and penalties thereon, if any. If Lender is advised by counsel chosen by it that the payment of tax by Borrower would be unlawful or taxable to Lender or unenforceable or provide the basis for a defense of usury then Lender shall have the option by written notice of not less than one hundred twenty (120) days to declare the Debt immediately due and payable. 11 (b) Borrower will not claim or demand or be entitled to any credit or credits on account of the Debt for any part of the Taxes or Other Charges assessed against the Property, or any part thereof, and no deduction shall otherwise be made or claimed from the assessed value of the Property, or any part thereof, for real estate tax purposes by reason of this Security Instrument or the Debt. If such claim, credit or deduction shall be required by law, Lender shall have the option, by written notice of not less than one hundred twenty (120) days, to declare the Debt immediately due and payable. (c) If at any time the United States of America, any State thereof or any subdivision of any such State shall require revenue or other stamps to be affixed to the Note, this Security Instrument, or any of the other Loan Documents or impose any other tax or charge on the same, Borrower will pay for the same, with interest and penalties thereon, if any. Section 5.4 Splitting of Deed of Trust. This Security Instrument and the Note shall, at any time until the same shall be fully paid and satisfied, at the sole election of Lender, be severed into two or more notes and two or more security instruments in such denominations as Lender shall determine in its sole discretion, each of which shall cover all or a portion of the Property to be more particularly described therein. To that end, Borrower, upon written request of Lender, shall execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered by the then owner of the Property, to Lender and/or its designee or designees substitute notes and security instruments in such principal amounts, aggregating not more than the then unpaid principal amount of this Security Instrument, and containing terms, provisions and clauses similar to those contained herein and in the Note, and such other documents and instruments as may be reasonably required by Lender, provided that the costs incurred herewith shall be at Lender's sole cost and expense. As a condition hereto, Lender shall contemporaneously with the execution of the substitute documents, return the old documents to Borrower "marked" VOID or CANCELED or such documents shall otherwise be satisfied or released to Borrower's reasonable satisfaction. Section 5.5 Replacement Documents. Upon receipt of an affidavit of an officer of Lender as to the loss, theft, destruction or mutilation of the Note or any other Loan Document which is not of public record, and, in the case of any such mutilation, upon surrender and cancellation of such Note or other Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other Loan Document, dated the date of such lost, stolen, destroyed or mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like tenor. ARTICLE 6 - DUE ON SALE/ENCUMBRANCE Section 6.1 Lender Reliance. Borrower acknowledges that Lender has examined and relied on the experience of Borrower and its general partners, members, principals and (if Borrower is a trust) beneficial owners in owning and operating properties such as the Property in agreeing to make the Loan, and will continue to rely on Borrower's ownership of the Property as a means of maintaining the value of the Property as security for repayment of the Debt and the performance of the Other Obligations. Borrower acknowledges that Lender has a valid interest in maintaining the value of the Property so as to ensure that, should Borrower default in the repayment of the Debt or the performance of the Other Obligations, Lender can recover the Debt by a sale of the Property. 12 Section 6.2 No Sale/Encumbrance. Neither Borrower nor any Restricted Party shall Transfer the Property or any part thereof or any interest therein or permit or suffer the Property or any part thereof or any interest therein to be Transferred other than as expressly permitted pursuant to the terms of the Loan Agreement. ARTICLE 7 - RIGHTS AND REMEDIES UPON DEFAULT Section 7.1 Remedies. Upon the occurrence and during the continuance of any Event of Default, Borrower agrees that Lender or Trustee, or both may take such action, without notice or demand, as it deems advisable to protect and enforce its rights against Borrower and in and to the Property, including, but not limited to, the following actions, each of which may be pursued concurrently or otherwise, at such time and in such order as Lender or Trustee may determine, in their sole discretion, without impairing or otherwise affecting the other rights and remedies of Lender or Trustee: (a) declare the entire unpaid Debt to be immediately due and payable; (b) institute proceedings, judicial or otherwise, for the complete foreclosure of this Security Instrument under any applicable provision of law, in which case the Property or any interest therein may be sold for cash or upon credit in one or more parcels or in several interests or portions and in any order or manner; (c) with or without entry, to the extent permitted and pursuant to the procedures provided by applicable law, institute proceedings for the partial foreclosure of this Security Instrument for the portion of the Debt then due and payable, subject to the continuing lien and security interest of this Security Instrument for the balance of the Debt not then due, unimpaired and without loss of priority; (d) to the extent permitted by applicable law, sell for cash or upon credit the Property or any part thereof and all estate, claim, demand, right, title and interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or otherwise, at one or more sales, as an entirety or in parcels, at such time and place, upon such terms and after such notice thereof as may be required or permitted by law; (e) institute an action, suit or proceeding in equity for the specific performance of any covenant, condition or agreement contained herein, in the Note, the Loan Agreement or in the other Loan Documents; 13 (f) recover judgment on the Note either before, during or after any proceedings for the enforcement of this Security Instrument or the other Loan Documents; (g) apply for the appointment of a receiver, trustee, liquidator or conservator of the Property, without notice and without regard for the adequacy of the security for the Debt and without regard for the solvency of Borrower, any guarantor, indemnitor with respect to the Loan or of any Person liable for the payment of the Debt; (h) revoke the license granted to Borrower under Section 1.2 hereof and Lender may enter into or upon the Property, either personally or by their agents, nominees or attorneys and dispossess Borrower and its agents and servants therefrom, without liability for trespass, damages or otherwise and exclude Borrower and its agents or servants wholly therefrom, and take possession of all books, records and accounts relating thereto and Borrower agrees to surrender possession of the Property and of such books, records and accounts to Lender upon demand, and thereupon Lender may (i) use, operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every part of the Property and conduct the business thereat; (ii) complete any construction on the Property in such manner and form as Lender deems advisable; (iii) make alterations, additions, renewals, replacements and improvements to or on the Property; (iv) exercise all rights and powers of Borrower with respect to the Property, whether in the name of Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents of the Property and every part thereof; (v) require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of such part of the Property as may be occupied by Borrower; (vi) require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise; and (vii) apply the receipts from the Property to the payment of the Debt, in such order, priority and proportions as Lender shall deem appropriate in its sole discretion after deducting therefrom all expenses (including reasonable attorneys' fees) incurred in connection with the aforesaid operations and all amounts necessary to pay the Taxes, Other Charges, insurance and other expenses in connection with the Property, as well as just and reasonable compensation for the services of Lender, its counsel, agents and employees; (i) exercise any and all rights and remedies granted to a secured party upon default under the Uniform Commercial Code, including, without limiting the generality of the foregoing: (i) the right to take possession of the Fixtures, the Equipment, the Personal Property or any part thereof, and to take such other measures as Lender may deem necessary for the care, protection and preservation of the Fixtures, the Equipment, the Personal Property, and (ii) request Borrower at its expense to assemble the Fixtures, the Equipment, the Personal Property and make it available to Lender at the Real Property or such other convenient place acceptable to Lender. Any notice of sale, disposition or other intended action by Lender with respect to the Fixtures, the Equipment, the Personal Property sent to Borrower in accordance with the provisions hereof at least ten (10) days prior to such action, shall constitute commercially reasonable notice to Borrower; 14 (j) apply any sums then deposited or held in escrow or otherwise by or on behalf of Lender in accordance with the terms of the Loan Agreement, this Security Instrument or any other Loan Document to the payment of the following items in any order in its uncontrolled discretion: (i) Taxes and Other Charges; (ii) Insurance Premiums; (iii) Interest on the unpaid principal balance of the Note; (iv) Amortization of the unpaid principal balance of the Note; (v) All other sums payable pursuant to the Note, the Loan Agreement, this Security Instrument and the other Loan Documents, including without limitation advances made by Lender pursuant to the terms of this Security Instrument; (k) pursue such other remedies as Lender may have under applicable law; or (l) apply the undisbursed balance of any Net Proceeds Deficiency deposit, together with interest thereon, to the payment of the Debt in such order, priority and proportions as Lender shall deem to be appropriate in its discretion. In the event of a sale, by foreclosure, power of sale or otherwise, of less than all of Property, this Security Instrument shall continue as a lien and security interest on the remaining portion of the Property unimpaired and without loss of priority. Section 7.2 Application of Proceeds. The purchase money, proceeds and avails of any disposition of the Property, and or any part thereof, or any other sums collected by Lender pursuant to the Note, this Security Instrument or the other Loan Documents, may be applied by Lender to the payment of the Debt in such priority and proportions as Lender in its discretion shall deem proper. Section 7.3 Right to Cure Defaults. Upon the occurrence and during the continuance of any Event of Default, Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, make any payment or do any act required of Borrower hereunder in such manner and to such extent as Lender may deem necessary to protect the security hereof. Lender is authorized to enter upon the Property for such purposes, or appear in, defend, or bring any action or proceeding to protect its interest in the Property or to foreclose this Security 15 Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys' fees to the extent permitted by law), with interest as provided in this Section 7.3, shall constitute a portion of the Debt and shall be due and payable to Lender upon demand. All such costs and expenses incurred by Lender in remedying such Event of Default or such failed payment or act or in appearing in, defending, or bringing any such action or proceeding shall bear interest at the Default Rate, for the period after notice from Lender that such cost or expense was incurred to the date of payment to Lender. All such costs and expenses incurred by Lender together with interest thereon calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured by this Security Instrument and the other Loan Documents and shall be immediately due and payable upon demand by Lender therefor. Section 7.4 Actions and Proceedings. Lender or Trustee has the right to appear in and defend any action or proceeding brought with respect to the Property and to bring any action or proceeding, in the name and on behalf of Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the Property. Section 7.5 Recovery of Sums Required To Be Paid. Lender shall have the right from time to time to take action to recover any sum or sums which constitute a part of the Debt as the same become due, without regard to whether or not the balance of the Debt shall be due, and without prejudice to the right of Lender or Trustee thereafter to bring an action of foreclosure, or any other action, for a default or defaults by Borrower existing at the time such earlier action was commenced. Section 7.6 Examination of Books and Records. At reasonable times and upon reasonable notice, Lender, its agents, accountants and attorneys shall have the right to examine the records, books, management and other papers of Borrower which reflect upon their financial condition, at the Property or at any office regularly maintained by Borrower where the books and records are located. Lender and its agents shall have the right to make copies and extracts from the foregoing records and other papers. In addition, at reasonable times and upon reasonable notice, Lender, its agents, accountants and attorneys shall have the right to examine and audit the books and records of Borrower pertaining to the income, expenses and operation of the Property during reasonable business hours at any office of Borrower where the books and records are located. This Section 7.6 shall apply throughout the term of the Note and without regard to whether an Event of Default has occurred or is continuing. Section 7.7 Other Rights, etc. (a) The failure of Lender or Trustee to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Security Instrument. Borrower shall not be relieved of Borrower's obligations hereunder by reason of (i) the failure of Lender or Trustee to comply with any request of Borrower or any guarantor or indemnitor with respect to the Loan to take any action to foreclose this Security Instrument or otherwise enforce any of the provisions hereof or of the Note or the other Loan Documents, (ii) the release, regardless of consideration, of the whole or any part of the Property, or of any person liable for the Debt or any portion thereof, or (iii) any agreement or stipulation by Lender extending the time of payment or otherwise modifying or supplementing the terms of the Note, this Security Instrument or the other Loan Documents. 16 (b) It is agreed that the risk of loss or damage to the Property is on Borrower, and Lender shall have no liability whatsoever for decline in value of the Property, for failure to maintain the Policies, or for failure to determine whether insurance in force is adequate as to the amount of risks insured. Possession by Lender shall not be deemed an election of judicial relief if any such possession is requested or obtained with respect to any Property or collateral not in Lender's possession. (c) Lender may resort for the payment of the Debt to any other security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender or Trustee may take action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Lender or Trustee thereafter to foreclose this Security Instrument. The rights of Lender or Trustee under this Security Instrument shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender or Trustee shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Neither Lender nor Trustee shall be limited exclusively to the rights and remedies herein stated but shall be entitled to every right and remedy now or hereafter afforded at law or in equity. Section 7.8 Right to Release Any Portion of the Property. Lender may release any portion of the Property for such consideration as Lender may require without, as to the remainder of the Property, in any way impairing or affecting the lien or priority of this Security Instrument, or improving the position of any subordinate lienholder with respect thereto, except to the extent that the obligations hereunder shall have been reduced by the actual monetary consideration, if any, received by Lender for such release, and may accept by assignment, pledge or otherwise any other property in place thereof as Lender may require without being accountable for so doing to any other lienholder. This Security Instrument shall continue as a lien and security interest in the remaining portion of the Property. Section 7.9 Violation of Laws. If the Property is not in material compliance with Legal Requirements, Lender may impose additional requirements upon Borrower in connection herewith including, without limitation, monetary reserves or financial equivalents. Section 7.10 Recourse and Choice of Remedies. Notwithstanding any other provision of this Security Instrument or the Loan Agreement, including, without limitation, Section 9.4 of the Loan Agreement, Lender and other Indemnified Parties (as hereinafter defined) are entitled to enforce the obligations of Borrower, any guarantor and indemnitor contained in Sections 9.2, 9.3 and 9.4 herein without first resorting to or exhausting any security or collateral and without first having recourse to the Note or any of the Property, through foreclosure or acceptance of a deed in lieu of foreclosure or otherwise, and in the event Lender commences a foreclosure action against the Property, or otherwise causes Trustee to exercise the power of sale pursuant to this Security Instrument, Lender is entitled to pursue a deficiency judgment with respect to such obligations against Borrower and any guarantor or indemnitor with respect to the Loan. The provisions of Sections 9.2, 9.3 and 9.4 herein are exceptions to any non-recourse or exculpation provisions in the Loan Agreement, the Note, this Security Instrument or the other Loan Documents, and Borrower and any guarantor or indemnitor with respect to the Loan are fully and personally liable for the obligations pursuant to Sections 9.2, 9.3 and 9.4 herein. The liability 17 of Borrower and any guarantor or indemnitor with respect to the Loan pursuant to Sections 9.2, 9.3 and 9.4 herein is not limited to the original principal amount of the Note. Notwithstanding the foregoing, nothing herein shall inhibit or prevent Lender or Trustee from foreclosing or exercising a power of sale pursuant to this Security Instrument or exercising any other rights and remedies pursuant to the Loan Agreement, the Note, this Security Instrument and the other Loan Documents, whether simultaneously with foreclosure proceedings or in any other sequence. A separate action or actions may be brought and prosecuted against Borrower pursuant to Sections 9.2, 9.3 and 9.4 herein whether or not action is brought against any other Person or whether or not any other Person is joined in the action or actions. In addition, Lender shall have the right but not the obligation to join and participate in, as a party if it so elects, any administrative or judicial proceedings or actions initiated in connection with any matter addressed in Article 8 or Section 9.4 herein. Section 7.11 Right of Entry. Upon reasonable notice to Borrower, Lender and its agents shall have the right to enter and inspect the Property at all reasonable times. ARTICLE 8 - ENVIRONMENTAL HAZARDS Section 8.1 Environmental Representations and Warranties. Except as otherwise disclosed by that certainPhase I environmental report (or Phase II environmental report, if required) delivered to Beneficiary by Grantor in connection with the origination of the Loan (such report is referred to below as the "Environmental Report"), (a) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Secured Property, except those that are both (i) in compliance with Environmental Laws (defined below) and with permits issued pursuant thereto and (ii) fully disclosed to Beneficiary in writing pursuant the Environmental Report; (b) there are no past, present or to Borrower's knowledge, threatened Releases (defined below) of Hazardous Substances in, on, under or from the Secured Property which has not been fully remediated in accordance with Environmental Law; (c) to Borrower's knowledge there is no threat of any Release of Hazardous Substances migrating to the Secured Property; (d) to Borrower's knowledge there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Secured Property which has not been fully remediated in accordance with Environmental Law; (e) Grantor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a Governmental Authority) relating to Hazardous Substances or Remediation (defined below) thereof, of possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Secured Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Grantor has truthfully and fully provided to Beneficiary, in writing, any and all information relating to conditions in, on, under or from the Secured Property that is known to Grantor and all information that is contained in Grantor's files and records, including, but not limited to, any reports relating to Hazardous Substances in, on, under or from the Secured Property and/or to the environmental condition of the Secured Property. 18 "Environmental Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of Remediation or prevention of Releases of Hazardous Substances or relating to liability for or costs of other actual or threatened danger to human health or the environment. Environmental Law includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. Environmental Law also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law: conditioning transfer of property upon a negative declaration or other approval of a governmental authority of the environmental condition of the Secured Property; requiring notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Secured Property to any governmental authority or other Person, whether or not in connection with transfer of title to or interest in property; imposing conditions or requirements in connection with permits or other authorization for lawful activity; relating to nuisance, trespass or other causes of action related to the Secured Property; or relating to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Secured Property. "Hazardous Substances" include but are not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purpose of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws. "Release" of any Hazardous Substance includes but is not limited to any release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances. "Remediation" includes but is not limited to any response, remedial, removal, or corrective action, any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance, any actions to prevent, cure or mitigate any Release of any Hazardous Substance, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to in Article 8. 19 Section 8.2 Environmental Covenants. Grantor covenants and agrees that: (a) all uses and operations on or of the Secured Property, whether by Grantor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (b) except in compliance with Environmental Law, there shall be no Releases of Hazardous Substances in, on, under or from the Secured Property; (c) there shall be no Hazardous Substances in, on, or under the Secured Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto and (ii) fully disclosed to Beneficiary in writing; (d) Grantor shall keep the Secured Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Grantor or any other Person (the "Environmental Liens"); (e) Grantor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Section 8.3 below, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Grantor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Secured Property, pursuant to any reasonable written request of Beneficiary made in the event that Beneficiary has reason to believe that an environmental hazard exists on the Secured Property (including but not limited to sampling, testing and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas provided that Grantor shall only make such request if Beneficiary has good faith reason to believe that an undisclosed Release of Hazardous Substance has occurred and/or that any provision of this Security Deed has been breached), and share with Beneficiary the reports and other results thereof, and Beneficiary and other Indemnified Parties shall be entitled to rely on such reports and other results thereof to the extent permitted by the Person preparing the same; (g) Grantor shall, at its sole cost and expense, comply with all reasonable written requests of Beneficiary made in the event that Beneficiary has reason to believe that an environmental hazard exists on the Secured Property (i) reasonably effectuate Remediation of any adverse environmental condition (including but not limited to a Release of a Hazardous Substance other than a Release in compliance with Environmental Law) in, on, under or from the Secured Property; (ii) comply with any Environmental Law; (iii) comply with any directive from any Governmental Authority; and (iv) take any other reasonable action necessary or appropriate for protection of human health or the environment; (h) with respect to the existence of Hazardous Substances on the Property, Grantor shall not do or allow any tenant or other user of the Secured Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Secured Property), impairs or may impair the value of the Secured Property, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Secured Property; and (i) Grantor shall immediately notify Beneficiary in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Secured Property; (B) any non-compliance with any Environmental Laws related in any way to the Secured Property; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Secured Property; and (E) any written or oral notice or other communication of which Grantor becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Secured Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Article 8. 20 Section 8.3 Beneficiary's Rights. In the event that Beneficiary has reason to believe that an environmental hazard exists on the Secured Property that does not, in Beneficiary's sole discretion, endanger any tenants or other occupants of the Secured Property or their guests or the general public or materially and adversely affect the value of the Secured Property, upon reasonable notice from Beneficiary, Grantor shall, at Grantor's expense, promptly cause an engineer or consultant satisfactory to Beneficiary to conduct any environmental assessment or audit (the scope of which shall be determined in Beneficiary's sole and absolute discretion) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Beneficiary and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to Beneficiary within a reasonable period or if Beneficiary has reason to believe that an environmental hazard exists on the Secured Property that, in Beneficiary's sole judgment, endangers any tenant or other occupant of the Secured Property or their guests or the general public or may materially and adversely affect the value of the Secured Property, upon reasonable notice to Grantor, Beneficiary and any other Person designated by Beneficiary, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Secured Property at all reasonable times to assess any and all aspects of the environmental condition of the Secured Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in Beneficiary's sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Grantor shall cooperate with and provide Beneficiary and any such Person designated by Beneficiary with access to the Secured Property. ARTICLE 9 - INDEMNIFICATION Section 9.1 General Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement, punitive damages, foreseeable and unforeseeable consequential damages, of whatever kind or nature (including but not limited to reasonable attorneys' fees and other costs of defense) (collectively, the "Losses") imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) ownership of this Security Instrument, the Property or any interest therein or receipt of any Rents; (b) any amendment to, or restructuring of, the Debt, the Note, the Loan Agreement, this Security Instrument, or any other Loan Documents; (c) any and all lawful action that may be taken by Lender in connection with the enforcement of the provisions of this Security Instrument, the Loan Agreement, the Note or any of the other Loan Documents, whether or not suit is filed in connection with same, or in connection with Borrower, any guarantor or indemnitor and/or any partner, joint venturer or shareholder thereof becoming a party to a voluntary or involuntary federal or state bankruptcy, insolvency or similar proceeding; 21 (d) any accident, injury to or death of persons or loss of or damage to property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (e) any use, nonuse or condition in, on or about the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways; (f) any failure on the part of Borrower to perform or be in compliance with any of the terms of this Security Instrument, the Note, the Loan Agreement or any of the other Loan Documents; (g) performance of any labor or services or the furnishing of any materials or other property in respect of the Property or any part thereof; (h) the failure of any person to file timely with the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which may be required in connection with this Security Instrument, or to supply a copy thereof in a timely fashion to the recipient of the proceeds of the transaction in connection with which this Security Instrument is made; (i) any failure of the Property to be in compliance with any Legal Requirements; (j) the enforcement by any Indemnified Party of the provisions of this Article 9; (k) any and all claims and demands whatsoever which may be asserted against Lender by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants, or agreements contained in any Lease; (l) the payment of any commission, charge or brokerage fee to anyone claiming through Borrower which may be payable in connection with the funding of the Loan; or (m) any misrepresentation made by Borrower in this Security Instrument or any other Loan Document. Any amounts payable to Lender by reason of the application of this Section 9.1 shall become immediately due and payable and shall bear interest at the Default Rate from the date ten (10) days after Borrower receives written notice from Lender of the existence and amount of such Losses by Lender until paid. For purposes of this Article 9, the term "Indemnified Parties" means Lender and any Person in whose name the encumbrance created by this Security Instrument is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan secured hereby (including, but not limited to, investors or prospective investors in the Securities, as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan secured hereby for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other Person who holds or acquires or will have held a participation or other full or partial interest in the Loan, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and any successors by merger, consolidation or acquisition of all or a substantial portion of Lender's assets and business). Notwithstanding anything contained herein to the contrary, Borrower's obligations to indemnify the Indemnified Parties in this Section 9.1 shall not include any Losses (i) incurred as a result of the gross negligence or willful misconduct of any Indemnified Party, or (ii) accruing after any Indemnified Party obtains possession of the Property or exercises its rights hereunder with respect to the Leases. 22 Section 9.2 Mortgage and/or Intangible Tax. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any tax on the making and/or recording of this Security Instrument, the Note or any of the other Loan Documents, but excluding any income, franchise or other similar taxes. Section 9.3 ERISA Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses (including, without limitation, reasonable attorneys' fees and costs incurred in the investigation, defense, and settlement of 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 discretion) that Lender may incur, directly or indirectly, as a result of a default under Sections 4.1.9 or 5.2.9 of the Loan Agreement. Section 9.4 Environmental Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless the Indemnified Parties from and against any and all Losses and costs of Remediation (whether or not performed voluntarily), engineers' fees, environmental consultants' fees, and costs of investigation (including but not limited to sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposed upon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Property; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property; (c) any activity by Borrower, any Person affiliated with Borrower or any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any tine located in, under, on or above the Property; (d) any activity by Borrower, any Person affiliated with Borrower or any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (e) any past or present non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by Borrower, any Affiliate of Borrower or any tenant or other user of the Property to comply with any order of any Governmental Authority in connection with any Environmental Laws; (f) the imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in Article 8 and this Section 9.4; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including but not limited to costs to investigate and assess such injury, destruction or loss; 23 (i) any acts of Borrower or other users of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances owned or possessed by such Borrower or other users, at any facility or incineration vessel owned or operated by another Person and containing such or any similar Hazardous Substance; (j) any acts of Borrower or other users of the Property, in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites selected by Borrower or such other users, from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for the maintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property; and (1) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to Article 8. This indemnity shall survive any termination, satisfaction or foreclosure of this Security Instrument, subject to the provisions of Section 10.5. Section 9.5 Duty to Defend; Attorneys' Fees and Other Fees and Expenses. Upon written request by any Indemnified Party, Borrower shall defend such Indemnified Party (if requested by any Indemnified Party, in the name of the Indemnified Party), with respect to a claim covered by this Security Instrument and/or any of the other Loan Documents, by attorneys and other professionals approved by the Indemnified Parties, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, if the defendants in any such claim or proceeding include both Borrower and any Indemnified Party and Borrower and such Indemnified Party shall have reasonably concluded that there are any legal defenses available to it and/or other Indemnified Parties that are different from or additional to those available to Borrower, such Indemnified Party shall have the right to select separate counsel to assert such legal defenses and to otherwise participate in the defense of such action on behalf of such Indemnified Party, provided that no compromise or settlement shall be entered without Borrower's consent, which consent shall not be unreasonably withheld. Upon demand, Borrower shall pay or, in the sole and absolute discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith. ARTICLE 10 - WAIVERS Section 10.1 Waiver of Counterclaim. To the extent permitted by applicable law, Borrower hereby waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with this Security Instrument, the Loan Agreement, the Note, any of the other Loan Documents, or the Obligations. Section 10.2 Marshalling and Other Matters. To the extent permitted by applicable law, Borrower hereby waives the benefit of all appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale hereunder of the Property or any part thereof or any interest therein. Further, Borrower hereby expressly waives any and all rights of redemption from sale under any order or decree of foreclosure of this Security Instrument on behalf of Borrower, and on behalf of each and every person acquiring any interest in or title to the Property subsequent to the date of this Security Instrument and on behalf of all persons to the extent permitted by applicable law. Section 10.3 Waiver of Notice. To the extent permitted by applicable law, Borrower shall not be entitled to any notices of any nature whatsoever from Lender or Trustee except with respect to matters for which this Security Instrument specifically and expressly provides for the giving of notice by Lender or Trustee to Borrower and except with respect to matters for which Lender or Trustee is required by applicable law to give notice, and Borrower hereby expressly waives the right to receive any notice from Lender or Trustee with respect to any matter for which this Security Instrument does not specifically and expressly provide for the giving of notice by Lender or Trustee to Borrower. 24 Section 10.4 Waiver of Statute of Limitations. To the extent permitted by applicable law, Borrower hereby expressly waives and releases to the fullest extent permitted by law, the pleading of any statute of limitations as a defense to payment of the Debt or performance of its Other Obligations. Section 10.5 Survival. The indemnifications made pursuant to Sections 9.3 and 9.4 herein and the representations and warranties, covenants, and other obligations arising under Article 8, shall continue indefinitely in full force and effect and shall survive and shall in no way be impaired by any of the following: any satisfaction or other termination of this Security Instrument, any assignment or other transfer of all or any portion of this Security Instrument or Lender's interest in the Property (but, in such case, shall benefit both Indemnified Parties and any assignee or transferee; provided that in the event of a sale to a third party purchaser of the Property that is not an Affiliate of Lender this indemnification shall not benefit such purchaser), any exercise of Lender's rights and remedies pursuant hereto including, but not limited to, foreclosure or acceptance of a deed in lieu of foreclosure, any exercise of any rights and remedies pursuant to the Loan Agreement, the Note or any of the other Loan Documents, any transfer of all or any portion of the Property (whether by Borrower or by Lender following foreclosure or acceptance of a deed in lieu of foreclosure or at any other time), any amendment to this Security Instrument, the Loan Agreement, the Note or the other Loan Documents, and any act or omission that might otherwise be construed as a release or discharge of Borrower from the obligations pursuant hereto. ARTICLE 11 - EXCULPATION The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by reference into this Security Instrument to the same extent and with the same force as if fully set forth herein. ARTICLE 12 - NOTICES All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement. ARTICLE 13 - APPLICABLE LAW Section 13.1 Governing Law. This security instrument shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. 25 Section 13.2 Usury Laws. Notwithstanding anything to the contrary, (a) all agreements and communications between Borrower and Lender are hereby and shall automatically be limited so that, after taking into account all amounts deemed interest, the interest contracted for, charged or received by Lender shall never exceed the maximum lawful rate or amount, (b) in calculating whether any interest exceeds the lawful maximum, all such interest shall be amortized, prorated, allocated and spread over the full amount and term of all principal indebtedness of Borrower to Lender, and (c) if through any contingency or event, Lender receives or is deemed to receive interest in excess of the lawful maximum, any such excess shall be deemed to have been applied toward payment of the principal of any and all then outstanding indebtedness of Borrower to Lender, or if there is no such indebtedness, shall immediately be returned to Borrower. Section 13.3 Provisions Subject to Applicable Law. All rights, powers and remedies provided in this Security Instrument may be exercised only to the extent that the exercise thereof does not violate any applicable provisions of law and are intended to be limited to the extent necessary so that they will not render this Security Instrument invalid, unenforceable or not entitled to be recorded, registered or filed under the provisions of any applicable law. If any term of this Security Instrument or any application thereof shall be invalid or unenforceable, the remainder of this Security Instrument and any other application of the term shall not be affected thereby. ARTICLE 14 - DEFINITIONS All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Security Instrument may be used interchangeably in singular or plural form and the word "Borrower" shall mean "each Borrower and any subsequent owner or owners of the Property or any part thereof or any interest therein (provided that in the event of a subsequent owner such owner assumes the Loan in accordance with the terms and conditions of the Loan Agreement)," the word "Lender" shall mean "Lender and any subsequent holder of the Note," the word "Note" shall mean "the Note and any other evidence of indebtedness secured by this Security Instrument," the word "Property" shall include any portion of the Property and any interest therein, and the phrases "attorneys' fees", "legal fees" and "counsel fees" shall include any and all attorneys', paralegal and law clerk fees and disbursements, including, but not limited to, fees and disbursements at the pre-trial, trial and appellate levels incurred or paid by Lender in protecting its interest in the Property, the Leases and the Rents and enforcing its rights hereunder. ARTICLE 15 - MISCELLANEOUS PROVISIONS Section 15.1 No Oral Change. This Security Instrument, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 26 Section 15.2 Successors and Assigns. This Security Instrument shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. Section 15.3 Inapplicable Provisions. If any term, covenant or condition of the Loan Agreement, the Note or this Security Instrument is held to be invalid, illegal or unenforceable in any respect, the Loan Agreement, the Note and this Security Instrument shall be construed without such provision. Section 15.4 Headings, etc. The headings and captions of various Sections of this Security Instrument are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. Section 15.5 Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Section 15.6 Subrogation. If any or all of the proceeds of the Note have been used to extinguish, extend or renew any indebtedness heretofore existing against the Property, then, to the extent of the funds so used, Lender shall be subrogated to all of the rights, claims, liens, titles, and interests existing against the Property heretofore held by, or in favor of, the holder of such indebtedness and such former rights, claims, liens, titles, and interests, if any, are not waived but rather are continued in full force and effect in favor of Lender and are merged with the lien and security interest created herein as cumulative security for the repayment of the Debt, the performance and discharge of Borrower's obligations hereunder, under the Loan Agreement, the Note and the other Loan Documents and the performance and discharge of the Other Obligations. Section 15.7 Entire Agreement. The Note, the Loan Agreement, this Security Instrument and the other Loan Documents constitute the entire understanding and agreement between Borrower and Lender with respect to the transactions arising in connection with the Debt and supersede all prior written or oral understandings and agreements between Borrower and Lender with respect thereto. Borrower hereby acknowledges that, except as incorporated in writing in the Note, the Loan Agreement, this Security Instrument and the other Loan Documents, there are not, and were not, and no persons are or were authorized by Lender to make, any representations, understandings, stipulations, agreements or promises, oral or written, with respect to the transaction which is the subject of the Note, the Loan Agreement, this Security Instrument and the other Loan Documents. Section 15.8 Limitation on Lender's Responsibility. No provision of this Security Instrument shall operate to place any obligation or liability for the control, care, management or repair of the Property upon Lender, nor shall it operate to make Lender responsible or liable for any waste committed on the Property by the tenants or any other Person, or for any dangerous or defective condition of the Property, or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. Nothing herein contained shall be construed as constituting Lender a "mortgagee in possession." 27 ARTICLE 16 - DEED OF TRUST PROVISIONS Section 16.1 Concerning the Trustee. Trustee shall be under no duty to take any action hereunder except as expressly required hereunder or by law, or to perform any act which would involve Trustee in any material expense or liability or to institute or defend any suit in respect hereof, unless properly indemnified to Trustee's reasonable satisfaction. Trustee, by acceptance of this Security Instrument, covenants to perform and fulfill the trusts herein created, being liable, however, only for negligence or willful misconduct, and hereby waives any statutory fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by Trustee in accordance with the terms hereof. Trustee may resign at any time upon giving thirty (30) days' notice to Borrower and to Lender. Lender may remove Trustee at any time or from time to time and select a successor trustee. In the event of the death, removal, resignation, refusal to act, or inability to act of Trustee, or in its sole discretion for any reason whatsoever Lender may, without notice and without specifying any reason therefor and without applying to any court, select and appoint a successor trustee, by an instrument recorded wherever this Security Instrument is recorded and all powers, rights, duties and authority of Trustee, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall not be required to give bond for the faithful performance of the duties of Trustee hereunder unless required by Lender. The procedure provided for in this paragraph for substitution of Trustee shall be in addition to and not in exclusion of any other provisions for substitution, by law or otherwise. Section 16.2 Trustee's Fees. Borrower shall pay all reasonable costs, fees and expenses incurred by Trustee and Trustee's agents and counsel in connection with the performance by Trustee of Trustee's duties hereunder and all such costs, fees and expenses shall be secured by this Security Instrument. Section 16.3 Certain Rights. With the approval of Lender, Trustee shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Lender) upon any matters arising hereunder, including the preparation, execution, and interpretation of the Loan Agreement, the Note, this Security Instrument or the other Loan Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his agents or attorneys, (iii) to select and employ, in and about the execution of his duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Trustee, and Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Trustee's gross negligence or bad faith, and (iv) any and all other lawful action as Lender may instruct Trustee to take to protect or enforce Lender's rights hereunder. Trustee shall not be personally liable in case of entry by Trustee, or anyone entering by virtue of the powers herein granted to Trustee, upon the Property for debts contracted for or liability or damages incurred in the management or operation of the Property. Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting an action taken or proposed to be taken by Trustee hereunder, believed by Trustee in good faith to be genuine. Trustee shall be entitled to reimbursement for actual expenses incurred by Trustee in the performance of Trustee's duties hereunder and to reasonable compensation for such of Trustee's services hereunder as shall be rendered. 28 Section 16.4 Retention of Money. All moneys received by Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by applicable law) and Trustee shall be under no liability for interest on any moneys received by Trustee hereunder. Section 16.5 Perfection of Appointment. Should any deed, conveyance, or instrument of any nature be required from Borrower by any Trustee or substitute trustee to more fully and certainly vest in and confirm to the Trustee or substitute trustee such estates rights, powers, and duties, then, upon written request by the Trustee or substitute trustee, any and all such deeds, conveyances and instruments reasonably requested shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Borrower. Section 16.6 Succession Instruments. Any substitute trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed, or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its or his predecessor in the rights hereunder with like effect as if originally named as Trustee herein; but nevertheless, upon the written request of Lender or of the substitute trustee, the Trustee ceasing to act shall execute and deliver any instrument transferring to such substitute trustee, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and moneys held by such Trustee to the substitute trustee so appointed in the Trustee's place. ARTICLE 17 - SPECIAL TEXAS PROVISIONS Section 17.1 Principles of Construction. In the event of any inconsistencies between the terms and provisions of this Article 17 and the terms and provisions of any other Article of this Deed of Trust, the terms and provisions of this Article 17 shall govern and control. Section 17.2 Warranty of Title. Borrower warrants that Borrower has good, insurable and fee simple indefeasible title to the Property and has the full power, authority and right to execute, deliver and perform its obligations under this Security Instrument and to deed, encumber, mortgage, give, grant, bargain, sell, alienate, enfeoff, convey, confirm, pledge, assign and hypothecate the same and that Borrower possesses an unencumbered fee simple indefeasible estate in the Property and the Improvements, subject to those exceptions and encumbrances shown in the title insurance policy insuring the lien of this Security Instrument, and that it owns the Property free and clear of all liens, encumbrances and charges whatsoever except for those exceptions shown in the title insurance policy insuring the lien of this Security Instrument and that this Security Instrument is and will remain a valid and enforceable first lien on and security interest in the Property, subject only to said exceptions. Borrower shall forever warrant, defend and preserve such title and the validity and priority of the lien of this Security Instrument and shall forever warrant and defend the same to Lender against the claims of all persons whomsoever. 29 Section 17.3 Instrument. This Security Instrument shall be deemed and shall be enforceable as a deed of trust and financing statement. Section 17.4 Foreclosure. Upon the occurrence of any Event of Default, Lender may request Trustee to proceed with foreclosure under the power of sale which is hereby conferred, such foreclosure to be accomplished in accordance with the following provisions: (a) Public Sale. Trustee is hereby authorized and empowered, and it shall be Trustee's special duty, upon such request of Lender, to sell the Property, or any part thereof, at public auction to the highest bidder for cash, with or without having taken possession of same. Any such sale (including notice thereof) shall comply with the applicable requirements, at the time of the sale, of Section 51.002 of the Texas Property Code or, if and to the extent such statute is not then in force, with the applicable requirements, at the time of the sale, of the successor statute or statutes, if any, governing sales of Texas real property under powers of sale conferred by deeds of trust. If there is no statute in force at the time of the sale governing sales of Texas real property under powers of sale conferred by deeds of trust, such sale shall comply with applicable law, at the time of the sale, governing sales of Texas real property under powers of sale conferred by deeds of trust. Trustee or his successor or substitute may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale held by Trustee, including the posting of notices, and the conduct of sale, but in the name and on behalf of Trustee, his successor or substitute. (b) Right to Require Proof of Financial Ability and/or Cash Bid. At any time during the bidding, the Trustee may require a bidding party (A) to disclose its full name, state and city of residence, occupation, and specific business office location, and the name and address of the principal the bidding party is representing (if applicable), and (B) to demonstrate reasonable evidence of the bidding party's financial ability (or, if applicable, the financial ability of the principal of such bidding party), as a condition to the bidding party submitting bids at the foreclosure sale. If any such bidding party (the "Questioned Bidder") declines to comply with the Trustee's requirement in this regard, or if such Questioned Bidder does respond but the Trustee, in Trustee's sole and absolute discretion, deems the information or the evidence of the financial ability of the Questioned Bidder (or, if applicable, the principal of such bidding party) to be inadequate, then the Trustee may continue the bidding with reservation; and in such event (1) the Trustee shall be authorized to caution the Questioned Bidder concerning the legal obligations to be incurred in submitting bids, and (2) if the Questioned Bidder is not the highest bidder at the sale, or if having been the highest bidder the Questioned Bidder fails to deliver the cash purchase price payment promptly to the Trustee, all bids by the Questioned Bidder shall be null and void. The Trustee may, in Trustee's sole and absolute discretion, determine that a credit bid may be in the best interest of the Borrower and Lender, and elect to sell the Property for credit or for a combination of cash and credit; provided, however, that the Trustee shall have no obligation to accept any bid except an all cash bid. In the event the Trustee requires a cash bid and cash is not delivered within a reasonable time after conclusion of the bidding process, as specified by the Trustee, but in no event later than 3:45 p.m. local time on the day of sale, then said contingent sale shall be null and void, the bidding process may be recommenced, and any subsequent bids or sale shall be made as if no prior bids were made or accepted. 30 (c) Sale Subject to Unmatured Debt. In addition to the rights and powers of sale granted under the preceding provisions of this subsection, if default is made in the payment of any installment of the Debt, Lender may, at Lender's option, at once or at any time thereafter while any matured installment remains unpaid, without declaring the entire Debt to be due and payable, orally or in writing direct Trustee to enforce this Security Instrument and to sell the Property subject to such unmatured Debt and to the rights, powers, liens, security interests, and assignments securing or providing recourse for payment of such unmatured Debt, in the same manner, all as provided in the preceding provisions of this subsection. Sales made without maturing the Debt may be made hereunder whenever there is a default in the payment of any installment of the Debt, without exhausting the power of sale granted hereby, and without affecting in any way the power of sale granted under this subsection, the unmatured balance of the Debt or the rights, powers, liens, security interests, and assignments securing or providing recourse for payment of the Debt. (d) Partial Foreclosure. Sale of a part of the Property shall not exhaust the power of sale, but sales may be made from time to time until the Debt is paid in full. It is intended by each of the foregoing provisions of this subsection that Trustee may, after any request or direction by Lender, sell not only the Property and the Improvements, but also the Equipment and other interests constituting a part of the Property or any part thereof, along with the Property and the Improvements or any part thereof, as a unit and as a part of a single sale, or may sell at any time or from time to time any part or parts of the Property separately from the remainder of the Property. It shall not be necessary to have present or to exhibit at any sale any of the Property. Any sale of personal property made hereunder shall be deemed to have been a public sale conducted in a commercially reasonable manner if held contemporaneously with, or as part of, and upon the same notice as required for the sale of real property under the power of sale granted herein. (e) Trustee's Deeds. After any sale under this subsection, Trustee shall make good and sufficient deeds, assignments, and other conveyances to the purchaser or purchasers thereunder in the name of Borrower, conveying the Property or any part thereof so sold to the purchaser or purchasers with general warranty of title by Borrower. It is agreed that in any deeds, assignments or other conveyances given by Trustee, any and all statements of fact or other recitals therein made as to the identity of Lender, the occurrence or existence of any Event of Default, the notice of intention to accelerate, or acceleration of, the maturity of the Debt, the request to sell, notice of sale, time, place, terms and manner of sale, and receipt, distribution, and application of the money realized therefrom, the due and proper appointment of a substitute trustee, and without being limited by the foregoing, any other act or thing having been duly done by or on behalf of Lender or by or on behalf of Trustee, shall be taken by all courts of law and equity as prima facie evidence that such statements or recitals state true, correct, and complete facts and are without further question to be so accepted, and Borrower does hereby ratify and confirm any and all acts that Trustee may lawfully do in the Property by virtue hereof. Section 17.5 Receiver. Lender, as a matter of right and without regard to the sufficiency of the security for repayment of the Debt and performance and discharge of the obligations hereunder, without notice to Borrower and without any showing of insolvency, fraud, or mismanagement on the part of Borrower, and without the necessity of filing any judicial or other proceeding other than the proceeding for appointment of a receiver, shall be entitled to the appointment of a receiver or receivers of the Property or any part thereof, and of the Rents, and Borrower hereby irrevocably consents to the appointment of a receiver or receivers. Any receiver appointed pursuant to the provisions of this subsection shall have the usual powers and duties of receivers in such matters. 31 Section 17.6 Inapplicability of Credit Code. In no event shall the provisions of Article 5069, ch. 15 of the Revised Civil Statutes of Texas (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the loan evidenced by the Loan Documents and/or secured hereby. Section 17.7 Maturity Date. The Maturity date of the Note secured hereby is December 9, 2004, as such Maturity Date may be extended pursuant to the terms of the Loan Documents. Section 17.8 Notice of Indemnification. BORROWER ACKNOWLEDGES THAT THIS SECURITY INSTRUMENT PROVIDES FOR INDEMNIFICATION OF LENDER AND TRUSTEE BY BORROWER. IT IS SPECIFICALLY INTENDED BY BORROWER, LENDER, AND TRUSTEE THAT ALL INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY BORROWER HEREUNDER BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF (INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING LENDER AND TRUSTEE) WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT LENDER AND TRUSTEE ARE TO BE INDEMNIFIED AGAINST THEIR OWN NEGLIGENCE. Section 17.9 THE BORROWER HEREBY DECLARES AND ACKNOWLEDGES THAT THE BORROWER HAS RECEIVED, WITHOUT CHARGE, A TRUE COPY OF THIS SECURITY INSTRUMENT. 32 IN WITNESS WHEREOF, the party hereto has caused this Security Instrument to be duly executed by its duly authorized representative, as of the day and year first above written. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell ------------------------------ Name: Thomas C. Brockwell Title: Vice President 33 STATE OF FLORIDA ) ) ss. COUNTY OF PALM BEACH ) This instrument was acknowledged before me on the 6th day of December, 2002, by Thomas C. Brockwell, the Vice President of Koger Post Oak, Inc., a Delaware corporation, the general partner of Koger Post Oak Limited Partnership, a Delaware limited partnership. (SEAL) /S/ Vicki P. Cervasio ---------------------------------- My commission Expires: Print Name of Notary: 34 EXHIBIT A (Legal Description) EX-10 6 a4339684-10d.txt KOGER EXHIBIT 10-D EXHIBIT 10(d) PROMISSORY NOTE $77,000,000.00 New York, New York December 6, 2002 FOR VALUE RECEIVED KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, as maker, having its principal place of business at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Borrower"), hereby unconditionally promises to pay to the order of COLUMN FINANCIAL, INC., as lender, having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"), or at such other place as the holder hereof may from time to time designate in writing, the principal sum of SEVENTY SEVEN MILLION AND NO/100 DOLLARS ($77,000,000.00), in lawful money of the United States of America with interest thereon to be computed from the date of this Note at the Applicable Interest Rate, and to be paid in accordance with the terms of this Note and that certain Loan Agreement, dated the date hereof, between Borrower and Lender (the "Loan Agreement"). All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. ARTICLE 1 : PAYMENT TERMS Borrower agrees to pay the principal sum of this Note and interest on the unpaid principal sum of this Note from time to time outstanding at the rates and at the times specified in Article 2 of the Loan Agreement and the outstanding balance of the principal sum of this Note and all accrued and unpaid interest thereon shall be due and payable on the Maturity Date. ARTICLE 2 DEFAULT AND ACCELERATION The Debt s: hall without notice become immediately due and payable at the option of Lender if any payment required in this Note is not paid on or prior to the date when due or if not paid on the Maturity Date or on the happening of any other Event of Default. ARTICLE 3 : LOAN DOCUMENTS This Note is secured by the Mortgage and the other Loan Documents. All of the terms, covenants and conditions contained in the Loan Agreement, the Mortgage and the other Loan Documents are hereby made part of this Note to the same extent and with the same force as if they were fully set forth herein. In the event of a conflict or inconsistency between the terms of this Note and the Loan Agreement, the terms and provisions of the Loan Agreement shall govern. ARTICLE 4 : SAVINGS CLAUSE Notwithstanding anything to the contrary, (a) all agreements and communications between Borrower and Lender are hereby and shall automatically be limited so that, after taking into account all amounts deemed interest, the interest contracted for, charged or received by Lender shall never exceed the maximum lawful rate or amount, (b) in calculating whether any interest exceeds the lawful maximum, all such interest shall be amortized, prorated, allocated and spread over the full amount and term of all principal indebtedness of Borrower to Lender and (c) if through any contingency or event Lender receives or is deemed to receive interest in excess of the lawful maximum, any such excess shall be deemed to have been applied toward payment of the principal of any and all then outstanding indebtedness of Borrower to Lender. ARTICLE 5 : NO ORAL CHANGE This Note may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. ARTICLE 6 : WAIVERS Borrower and all others who may become liable for the payment of all or any part of the Debt do hereby severally waive presentment and demand for payment, notice of dishonor, notice of intention to accelerate, notice of acceleration, protest and notice of protest and non-payment and all other notices of any kind. No release of any security for the Debt or extension of time for payment of this Note or any installment hereof, and no alteration, amendment or waiver of any provision of this Note, the Loan Agreement or the other Loan Documents made by agreement between Lender or any other Person shall release, modify, amend, waive, extend, change, discharge, terminate or affect the liability of Borrower, and any other Person who may become liable for the payment of all or any part of the Debt, under this Note, the Loan Agreement or the other Loan Documents. No notice to or demand on Borrower shall be deemed to be a waiver of the obligation of Borrower or of the right of Lender to take further action without further notice or demand as provided for in this Note, the Loan Agreement or the other Loan Documents. If Borrower is a partnership, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the individuals or entities comprising the partnership, and the term "Borrower," as used herein, shall include any alternate or successor partnership, but any predecessor partnership shall not thereby be released from any liability. If Borrower is a corporation, the agreements contained herein shall remain in full force and be applicable notwithstanding any changes in the shareholders comprising, or the officers and directors relating to, the corporation, and the term "Borrower" as used herein, shall include any alternative or successor corporation, but any predecessor corporation shall not be relieved of liability hereunder. If any Borrower is a limited liability company, the agreements herein contained shall remain in force and be applicable, notwithstanding any changes in the members comprising the limited liability company, and the term "Borrower" as used herein, shall include any alternate or successor limited liability company, but any predecessor limited liability company shall not thereby be released from any liability. (Nothing in the foregoing sentence shall be construed as a consent to, or a waiver of, any prohibition or restriction on transfers of interests in such partnership, corporation or limited liability company which may be set forth in the Loan Agreement, the Mortgage or any other Loan Document.) ARTICLE 7 : TRANSFER Upon the transfer of this Note, Borrower hereby waiving notice of any such transfer, Lender may deliver all the collateral mortgaged, granted, pledged or assigned pursuant to the Loan Documents, or any part thereof, to the transferee who shall thereupon become vested with all the rights herein or under applicable law given to Lender with respect thereto, and Lender shall thereafter forever be relieved and fully discharged from any liability or responsibility in the matter; but Lender shall retain all rights hereby given to it with respect to any liabilities and the collateral not so transferred. ARTICLE 8 : EXCULPATION The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by reference into this Note to the same extent and with the same force as if fully set forth herein. ARTICLE 9 : GOVERNING LAW This Note shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. ARTICLE 10 : NOTICES All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement. [NO FURTHER TEXT ON THIS PAGE] IN WITNESS WHEREOF, Borrower has duly executed this Note as of the day and year first above written. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Christopher L. Becker ---------------------------------------- Name: Christopher L. Becker Title: Vice President EX-10 7 a4339684-10e.txt KOGER EXHIBIT 10-E EXHIBIT 10(e) KOGER POST OAK LIMITED PARTNERSHIP, as Borrower (Borrower) to COLUMN FINANCIAL, INC., as Lender (Lender) -------------------------------------------------------- ASSIGNMENT OF LEASES AND RENTS -------------------------------------------------------- Dated: As of December 6, 2002 Location: 3000 Post Oak Boulevard 3040 Post Oak Boulevard and 3050 Post Oak Boulevard Houston, Texas County: Harris PREPARED BY AND UPON RECORDATION RETURN TO: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Fredric L. Altschuler, Esq. ASSIGNMENT OF LEASES AND RENTS THIS ASSIGNMENT OF LEASES AND RENTS (this "Assignment") made as of the 6th day of December, 2002, by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, as assignor, having its principal place of business at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Borrower") to COLUMN FINANCIAL, INC. as assignee, having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"). W I T N E S S E T H: WHEREAS, this Assignment is given in connection with a loan in the principal sum of SEVENTY SEVEN MILLION AND NO/100 DOLLARS ($77,000,000.00) (the "Loan") made by Lender to Borrower pursuant to that certain Loan Agreement, dated as of the date hereof (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement") and evidenced by that certain Promissory Note, dated the date hereof, given by Borrower to Lender (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Note"); WHEREAS, Borrower desires to secure the payment of the Debt (as defined in the Loan Agreement) and the performance of all of its obligations under the Note, the Loan Agreement and the other Loan Documents; and WHEREAS, this Assignment is given pursuant to the Loan Agreement, and payment, fulfillment, and performance by Borrower of its obligations thereunder and under the other Loan Documents is secured hereby, and each and every term and provision of the Loan Agreement and the Note, including the rights, remedies, obligations, covenants, conditions, agreements, indemnities, representations and warranties therein, are hereby incorporated by reference herein as though set forth in full and shall be considered a part of this Assignment. NOW THEREFORE, in consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Assignment: ARTICLE 1 - ASSIGNMENT Section 1.1 Property Assigned. Borrower hereby absolutely and unconditionally assigns and grants to Lender all of Borrower's right, title and interest, if any, in and to the following property, rights, interests and estates, now owned, or hereafter acquired by Borrower (each only to the extent permitted by applicable law and the instrument or document creating Borrower's interest thereunder, if applicable) (collectively, the "Collateral"): (a) Leases. All leases, subleases or subsubleases, lettings, licenses, concessions or other agreements made a part hereof (whether written or oral and whether now or hereafter in effect), pursuant to which any Person is granted a possessory interest in, 1 or a right to use or occupy, all or any portion of any space in that certain lot or piece of land, more particularly described in Exhibit A annexed hereto and made a part hereof, together with the buildings, structures, fixtures, additions, enlargements, extensions, modifications, repairs, replacements and improvements now or hereafter located thereon (collectively, the "Property") and every modification, amendment or other agreement relating to such leases, subleases, subsubleases, or other agreements entered into in connection with such leases, subleases, subsubleases, or other agreements and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, and the right, title and interest of Borrower, its successors and assigns, therein and thereunder. (b) Other Leases and Agreements. All other leases and other agreements, whether or not in writing, affecting the use, enjoyment or occupancy of the Property or any portion thereof now or hereafter made, whether made before or after the filing by or against Borrower of any petition for relief under 11 U.S.C. 101 et seq., as the same may be amended from time to time (the "Bankruptcy Code") together with any extension, renewal or replacement of the same. This Assignment of other present and future leases and present and future agreements being effective without further or supplemental assignment. The "leases" described in Subsection 1.1(a) and the leases and other agreements described in this Subsection 1.1(b) are collectively referred to as the "Leases". (c) Rents. All rents, rent equivalents, income, receivables, revenues, receipts, insurance proceeds, deposits and profits arising from the Leases and renewals thereof together with all rents, rent equivalents, income, fees, receivables, accounts, profits (including, but not limited to, all oil and gas or other mineral royalties and bonuses), charges for services rendered and any and all payment and consideration of whatever form or nature received by Borrower or its agents or employees from any and all sources relating to the use, enjoyment and occupancy of the Property whether paid or accruing before or after the filing by or against Borrower of any petition for relief under the Bankruptcy Code (collectively, the "Rents"). (d) Bankruptcy Claims. All of Borrower's claims and rights (the "Bankruptcy Claims") to the payment of damages arising from any rejection by a lessee of any Lease under the Bankruptcy Code. (e) Lease Guaranties. All of Borrower's right, title and interest in and claims under any and all lease guaranties, letters of credit and any other credit support (individually, a "Lease Guaranty", collectively, the "Lease Guaranties") given by any guarantor in connection with any of the Leases or leasing commissions (individually, a "Lease Guarantor", collectively, the "Lease Guarantors") to Borrower. (f) Proceeds. All proceeds from the sale or other disposition of the Leases, the Rents, the Lease Guaranties and the Bankruptcy Claims. (g) Other. All rights, powers, privileges, options and other benefits of Borrower as lessor under the Leases and beneficiary under the Lease Guaranties, including without limitation the immediate and continuing right to make claim for, receive and collect all Rents payable or receivable under the Leases and all sums payable under the Lease Guaranties or pursuant thereto (and to apply the same to the payment of the Debt or the Other Obligations), and to do all other things which Borrower or any lessor is or may become entitled to do under the Leases or the Lease Guaranties. 2 (h) Entry. The right, at Lender's option, upon revocation of the license granted herein, to enter upon the Property in person, by agent or by court-appointed receiver, to collect the Rents. (i) Power of Attorney. Borrower's irrevocable power of attorney, coupled with an interest, to take any and all of the actions set forth in Section 3.1 of this Assignment and any or all other actions designated by Lender for the proper management and preservation of the Property. (j) Other Rights and Agreements. Any and all other rights of Borrower in and to the items set forth in subsections (a) through (i) above, and all amendments, modifications, replacements, renewals and substitutions thereof. ARTICLE 2 - TERMS OF ASSIGNMENT Section 2.1 Present Assignment And License Back. It is intended by Borrower that this Assignment constitute a present, absolute assignment of the Collateral, and not an assignment for additional security only. Nevertheless, subject to the terms of this Section 2.1 and the Cash Management Agreement, Lender grants to Borrower a revocable license to collect, receive, use and enjoy the Rents and other sums due under the Lease Guaranties and Borrower shall hold such Rents and all sums received pursuant to any Lease Guaranty, or a portion thereof sufficient to discharge all current sums due on the Debt, in trust for the benefit of Lender for use in the payment of such sums. Section 2.2 Notice To Lessees. Borrower hereby authorizes and directs the lessees named in the Leases or any other future lessees or occupants of the Property and all Lease Guarantors to pay over to Lender or to such other party as Lender directs all Rents and all sums due under any Lease Guaranties upon receipt from Lender of written notice to the effect that Lender is then the holder of this Assignment and that an Event of Default (as defined in the Loan Agreement) exists, and to continue so to do until otherwise notified by Lender. Section 2.3 Incorporation By Reference. All representations, warranties, covenants, conditions and agreements contained in the Loan Agreement and the other Loan Documents as same may be modified, renewed, substituted or extended are hereby made a part of this Assignment to the same extent and with the same force as if fully set forth herein. ARTICLE 3 - REMEDIES Section 3.1 Remedies of Lender. Upon or at any time after the occurrence of an Event of Default, the license granted to Borrower in Section 2.1 of this Assignment shall automatically be revoked, and Lender shall immediately be entitled to possession of all Rents and sums due under any Lease Guaranties, whether or not Lender enters upon or takes control of the Property. In addition, Lender may, to the extent permitted by applicable law, at its option, without waiving such Event of Default, without regard to the adequacy of the security for the Debt, either in person or by agent, nominee or attorney, with or without bringing any action or proceeding, or by a receiver appointed by a court, dispossess Borrower and its agents and servants from the Property, without liability for trespass, damages or otherwise and exclude Borrower and its agents or servants wholly therefrom, and take possession of the Property and all books, 3 records and accounts relating thereto and have, hold, manage, lease and operate the Property on such terms and for such period of time as Lender may deem reasonably necessary and either with or without taking possession of the Property in its own name, demand, sue for or otherwise collect and receive all Rents and sums due under all Lease Guaranties, including those past due and unpaid with full power to make from time to time all alterations, renovations, repairs or replacements thereto or thereof as Lender may deem proper and may apply the Rents and sums received pursuant to any Lease Guaranties to the payment of the following in such order and proportion as Lender in its reasonable discretion may determine, any law, custom or use to the contrary notwithstanding: (a) all expenses of managing and securing the Property, including, without being limited thereto, the salaries, fees and wages of a managing agent and such other employees or agents as Lender may deem reasonably necessary and all expenses of operating and maintaining the Property, including, without being limited thereto, all taxes, charges, claims, assessments, water charges, sewer rents and any other liens, and premiums for all insurance which Lender may deem reasonably necessary, and the cost of all alterations, renovations, repairs or replacements, and all expenses incident to taking and retaining possession of the Property; and (b) the Debt, together with all costs and reasonable attorneys' fees. In addition, upon the occurrence and during the continuance of an Event of Default, Lender, at its option, may (1) complete any construction on the Property in such manner and form as Lender deems reasonably necessary, (2) exercise all rights and powers of Borrower, including, without limitation, the right to negotiate, execute, cancel, enforce or modify any Leases, obtain and evict tenants, and demand, sue for, collect and receive all Rents from the Property and all sums due under any Lease Guaranties, (3) require Borrower to pay monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and reasonable rental value for the use and occupancy of such part of the Property as may be in possession of Borrower or (4) require Borrower to vacate and surrender possession of the Property to Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings or otherwise. Section 3.2 Other Remedies. Nothing contained in this Assignment and no act done or omitted by Lender pursuant to the power and rights granted to Lender hereunder shall be deemed to be a waiver by Lender of its rights and remedies under the Loan Agreement, the Note, or the other Loan Documents and this Assignment is made and accepted without prejudice to any of the rights and remedies possessed by Lender under the terms thereof. The right of Lender to collect the Debt and to enforce any other security therefor held by it may be exercised by Lender either prior to, simultaneously with, or subsequent to any action taken by it hereunder. Borrower hereby absolutely, unconditionally and irrevocably waives any and all rights to assert any setoff, counterclaim or crossclaim of any nature whatsoever with respect to the obligations of Borrower under this Assignment, the Loan Agreement, the Note, the other Loan Documents or otherwise with respect to the Loan in any action or proceeding brought by Lender to collect same, or any portion thereof, or to enforce and realize upon the lien and security interest created by this Assignment, the Loan Agreement, the Note, or any of the other Loan Documents (provided, however, that the foregoing shall not be deemed a waiver of Borrower's right to assert any compulsory counterclaim if such counterclaim is compelled under local law or rule of procedure, nor shall the foregoing be deemed a waiver of Borrower's right to assert any claim which would constitute a defense, setoff, counterclaim or crossclaim of any nature whatsoever against Lender in any separate action or proceeding). 4 Section 3.3 Other Security. Lender may take or release other security for the payment of the Debt, may release any party primarily or secondarily liable therefor and may apply any other security held by it to the reduction or satisfaction of the Debt without prejudice to any of its rights under this Assignment. Section 3.4 Non-Waiver. The exercise by Lender of the option granted it in Section 3.1 of this Assignment and the collection of the Rents and sums due under the Lease Guaranties and the application thereof as herein provided shall not be considered a waiver of any default by Borrower under the Note, the Loan Agreement, the Leases, this Assignment or the other Loan Documents. The failure of Lender to insist upon strict performance of any term hereof shall not be deemed to be a waiver of any term of this Assignment. Borrower shall not be relieved of Borrower's obligations hereunder by reason of (a) the failure of Lender to comply with any request of Borrower or any other party to take any action to enforce any of the provisions hereof or of the Loan Agreement, the Note or the other Loan Documents, (b) the release regardless of consideration, of the whole or any part of the Property, or (c) any agreement or stipulation by Lender extending the time of payment or otherwise modifying or supplementing the terms of this Assignment, the Loan Agreement, the Note, or the other Loan Documents. Lender may resort for the payment of the Debt to any other security held by Lender in such order and manner as Lender, in its discretion, may elect. Lender may take any action to recover the Debt, or any portion thereof, or to enforce any covenant hereof without prejudice to the right of Lender thereafter to enforce its rights under this Assignment. The rights of Lender under this Assignment shall be separate, distinct and cumulative and none shall be given effect to the exclusion of the others. No act of Lender shall be construed as an election to proceed under any one provision herein to the exclusion of any other provision. Section 3.5 Bankruptcy. (a) Upon or at any time after the occurrence of an Event of Default, Lender shall have the right to proceed in its own name or in the name of Borrower in respect of any claim, suit, action or proceeding relating to the rejection of any Lease, including, without limitation, the right to file and prosecute, to the exclusion of Borrower, any proofs of claim, complaints, motions, applications, notices and other documents, in any case in respect of the lessee under such Lease under the Bankruptcy Code. (b) If there shall be filed by or against Borrower a petition under the Bankruptcy Code, and Borrower, as lessor under any Lease, shall determine to reject such Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall give Lender not less than ten (10) days' prior notice of the date on which Borrower shall apply to the bankruptcy court for authority to reject the Lease. Lender shall have the right, but not the obligation, to serve upon Borrower within such ten-day period a notice stating that (i) Lender demands that Borrower assume and assign the Lease to Lender pursuant to Section 365 of the Bankruptcy Code and (ii) Lender covenants to cure or provide adequate assurance of future performance under the Lease. If Lender serves upon Borrower the notice described in the preceding sentence, Borrower shall not seek to reject the Lease and shall comply with the demand provided for in clause (i) of the preceding sentence within thirty (30) days after the notice shall have been given, subject to the performance by Lender of the covenant provided for in clause (ii) of the preceding sentence. 5 ARTICLE 4 - NO LIABILITY, FURTHER ASSURANCES Section 4.1 No Liability of Lender. This Assignment shall not be construed to bind Lender to the performance of any of the covenants, conditions or provisions contained in any Lease or Lease Guaranty or otherwise impose any obligation upon Lender prior to Lender exercising its rights with respect thereto and/or taking actual possession of the Collateral. Lender shall not be liable for any loss sustained by Borrower resulting from Lender's failure to let the Property after an Event of Default or from any other act or omission of Lender in managing the Property after an Event of Default unless such loss is caused by the willful misconduct and bad faith of Lender. Lender shall not be obligated to perform or discharge any obligation, duty or liability under the Leases or any Lease Guaranties or under or by reason of this Assignment prior to Lender exercising its rights with respect thereto and/or taking actual possession of the Collateral and Borrower shall, and hereby agrees to, indemnify Lender for, and to hold Lender harmless from, any and all liability, loss or damage which may or might be incurred under the Leases, any Lease Guaranties or under or by reason of this Assignment and from any and all claims and demands whatsoever prior to Lender exercising its rights with respect thereto and/or taking actual possession of the Collateral, including the defense of any such claims or demands which may be asserted against Lender by reason of any alleged obligations and undertakings on its part to perform or discharge any of the terms, covenants or agreements contained in the Leases or any Lease Guaranties. Should Lender incur any such liability, the amount thereof, including costs, expenses and reasonable attorneys' fees, shall be secured by this Assignment, the Mortgage and the other Loan Documents and Borrower shall reimburse Lender therefor immediately upon demand and upon the failure of Borrower so to do Lender may, at its option, declare all sums secured by this Assignment, the Mortgage and the other Loan Documents immediately due and payable. Prior to Lender exercising its rights with respect thereto and/or taking actual possession of the Collateral, this Assignment shall not operate to place any obligation or liability for the control, care, management or repair of the Property upon Lender, nor for the carrying out of any of the terms and conditions of the Leases or any Lease Guaranties; nor shall it operate to make Lender responsible or liable for any waste committed on the Property by the tenants or any other parties, or for any dangerous or defective condition of the Property including, without limitation, the presence of any Hazardous Substances (as defined in the Mortgage), or for any negligence in the management, upkeep, repair or control of the Property resulting in loss or injury or death to any tenant, licensee, employee or stranger. Section 4.2 No Mortgagee in Possession. Nothing herein contained shall be construed as constituting Lender a "mortgagee in possession" in the absence of the taking of actual possession of the Property by Lender. Except as set forth herein or under applicable law, in the exercise of the powers herein granted Lender, no liability shall be asserted or enforced against Lender, all such liability being expressly waived and released by Borrower. Section 4.3 Further Assurances. Borrower will, at the cost of Borrower, and without expense to Lender, do, execute, acknowledge and deliver all and every such further acts, conveyances, assignments, notices of assignments, transfers and assurances as Lender shall, from time to time, require for the purpose of assuring, conveying, assigning, transferring and confirming unto Lender the property and rights hereby assigned or intended now or hereafter so to be, or which Borrower may be or may hereafter become bound to convey or assign to Lender, or for carrying out the intention or facilitating the performance of the terms of this Assignment or for filing, registering or recording this Assignment and, on demand, will execute and deliver and hereby authorizes Lender to execute in the name of Borrower to the extent Lender may lawfully do so, one or more financing statements, chattel mortgages or comparable security instruments, to evidence more effectively the lien and security interest hereof in and upon the Leases. 6 ARTICLE 5 - MISCELLANEOUS PROVISIONS Section 5.1 Conflict of Terms. In case of any conflict between the terms of this Assignment and the terms of the Loan Agreement, the terms of the Loan Agreement shall prevail. Section 5.2 No Oral Change. This Assignment and any provisions hereof may not be modified, amended, waived, extended, changed, discharged or terminated orally, or by any act or failure to act on the part of Borrower or Lender, but only by an agreement in writing signed by the party against whom the enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. Section 5.3 General Definitions. All capitalized terms not defined herein shall have the respective meanings set forth in the Loan Agreement. Unless the context clearly indicates a contrary intent or unless otherwise specifically provided herein, words used in this Assignment may be used interchangeably in singular or plural form and the word "Borrower" shall mean "each Borrower and any subsequent owner or owners of the Property or any part thereof or interest therein," the word "Lender" shall mean "Lender and any subsequent holder of the Note, the word "Note" shall mean "the Note and any other evidence of indebtedness secured by the Loan Agreement, the word "Property" shall include any portion of the Property and any interest therein, the phrases "attorneys' fees", "legal fees" and "counsel fees" shall include any and all attorney's, paralegal and law clerk fees and disbursements, including, but not limited to, fees and disbursements at the pre-trial, trial and appellate levels incurred or paid by Lender in protecting its interest in the Property, the Leases and the Rents and enforcing its rights hereunder; whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. Section 5.4 Inapplicable Provisions. If any term, covenant or condition of this Assignment is held to be invalid, illegal or unenforceable in any respect, this Assignment shall be construed without such provision. Section 5.5 Governing Law. This Assignment shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. Section 5.6 Termination of Assignment. Upon payment in full of the Debt, this Assignment shall become and be void and of no effect and Lender shall, upon request of Borrower, execute a termination thereof in form and substance acceptable to Lender in all respects. 7 Section 5.7 Notices. All notices or other written communications hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement. Section 5.8 WAIVER OF TRIAL BY JURY. BORROWER AND LENDER HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THIS ASSIGNMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OR THEIR OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH. Section 5.9 Exculpation. The provisions of Section 9.4 of the Loan Agreement are hereby incorporated by reference into this Assignment to the same extent and with the same force as if fully set forth herein. Section 5.10 Successors and Assigns. This Assignment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. Section 5.11 Headings, Etc. The headings and captions of various paragraphs of this Assignment are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. ARTICLE 6 - STATE-SPECIFIC PROVISIONS Section 6.1 In the event of any inconsistencies between the other terms and conditions of this Assignment and this Article 6, the terms and conditions of Article 6 shall control and be binding. In the event of any inconsistencies between this Assignment and the Loan Agreement, the terms and conditions of the Loan Agreement shall govern. (a) The assignments set forth in this Assignment are intended to constitute payment to Lender only to the extent that the Rents are actually received by Lender (as opposed to constituting a portion of the voluntary payments of principal and interest on the Note) and are not used for the operation or maintenance of the Property or for the payment of costs and expenses in connection therewith, taxes, assessments, water charges, sewer rents, and other charges levied, assessed or imposed against the Property, insurance premiums, costs and expenses with respect to any litigation affecting the Property, the leases, the concessions, and the rent, any wages and salaries of employees, commissions of agents and attorneys fees. It is further the intent of Borrower and Lender that the Rents hereby absolutely assigned are no longer, during the term of this Assignment, property of Borrower or property of any estate of Borrower as defined in 11 U.S.C. 541 and shall not constitute collateral, cash or otherwise, of Borrower. The term Rents as used herein shall mean the gross rents without deduction or offset of any kind. 8 IT IS SPECIFICALLY INTENDED BY BORROWER AND LENDER THAT ALL INDEMNITY OBLIGATIONS AND LIABILITIES ASSUMED BY BORROWER HEREUNDER BE WITHOUT LIMIT AND WITHOUT REGARD TO THE CAUSE OR CAUSES THEREOF (INCLUDING PREEXISTING CONDITIONS), STRICT LIABILITY, OR THE NEGLIGENCE OF ANY PARTY OR PARTIES (INCLUDING LENDER) WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, ACTIVE OR PASSIVE. THE PARTIES SPECIFICALLY INTEND THAT LENDER IS TO BE INDEMNIFIED AGAINST LENDER'S OWN NEGLIGENCE. NO FURTHER TEXT ON THIS PAGE 9 IN WITNESS WHEREOF, the party hereto has caused this Assignment to be duly executed by its duly authorized representative, as of the day and year first above written. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell -------------------------------- Name: Thomas C. Brockwell Title: Vice President 10 STATE OF FLORIDA ) ) ss. COUNTY OF PALM BEACH ) This instrument was acknowledged before me on the 6th day of December, 2002, by Thomas C. Brockwell, the Vice President of Koger Post Oak, Inc., a Delaware corporation, the general partner of Koger Post Oak Limited Partnership, a Delaware limited partnership. (SEAL) /S/ Vicki P. Cervasio ------------------------------- My commission Expires: Print Name of Notary: 11 EXHIBIT A (Legal Description of Property) EX-10 8 a4339684-10f.txt KOGER EXHIBIT 10-F EXHIBIT 10(f) GUARANTY AGREEMENT THIS GUARANTY AGREEMENT (the "Guaranty") is executed as of December 6, 2002, by KOGER EQUITY, INC., a Florida corporation, having an address at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 (whether one or more collectively referred to as "Guarantor"), for the benefit of COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"). W I T N E S S E T H : WHEREAS, pursuant to that certain Promissory Note, dated of even date herewith, executed by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Borrower"), and payable to the order of Lender in the original principal amount of Seventy Seven Million and No/100 Dollars ($77,000,000.00) (together with all renewals, modifications, increases and extensions thereof, the "Note"), Borrower has become indebted, and may from time to time be further indebted, to Lender with respect to a loan ("Loan") which is secured by the lien and security interests of a certain deed of trust of even date herewith (the "Mortgage"), and is further evidenced by that certain Loan Agreement, of even date herewith between Borrower and Lender (as the same may hereinafter be amended, modified, restated, renewed or replaced the "Loan Agreement") and further evidenced, secured or governed by other instruments and documents executed in connection with the Loan (together with the Note, the Loan Agreement and Mortgage, the "Loan Documents"); and WHEREAS, Lender is not willing to make the Loan, or otherwise extend credit, to Borrower unless Guarantor unconditionally guarantees payment and performance to Lender of the Guaranteed Obligations (as herein defined); and WHEREAS, Guarantor is the owner of a direct or indirect interest in Borrower, and Guarantor will directly benefit from Lender's making the Loan to Borrower. NOW, THEREFORE, as an inducement to Lender to make the Loan to Borrower, and to extend such additional credit as Lender may from time to time agree to extend under the Loan Documents, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, the parties do hereby agree as follows: ARTICLE I NATURE AND SCOPE OF GUARANTY 1.1 Guaranty of Obligation. Guarantor hereby irrevocably and unconditionally guarantees to Lender and its successors and assigns the payment and performance of the Guaranteed Obligations as and when the same shall be due and payable, whether by lapse of time, by acceleration of maturity or otherwise. Guarantor hereby irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Obligations as a primary obligor. 1 1.2 Definition of Guaranteed Obligations. As used herein, the term "Guaranteed Obligations" means (a) the obligations or liabilities of Borrower to Lender for any loss, damage, cost, expense, liability, claim or other obligation incurred by Lender (including reasonable attorneys' fees and costs reasonably incurred) arising out of or in connection with the following: (i) fraud or intentional misrepresentation by Borrower in connection with the Loan; (ii) the gross negligence or willful misconduct of Borrower; (iii) the breach of any representation, warranty, covenant or indemnification provision in the Environmental Indemnity Agreement or in the Mortgage concerning environmental laws, hazardous substances and asbestos and any indemnification of Lender with respect thereto in either document; (iv) the removal or disposal of any portion of the Properties after an Event of Default or the causing of waste on any portion of the Properties; (v) the misapplication or conversion by Borrower of (A) any insurance proceeds paid by reason of any loss, damage or destruction to the Properties, (B) any Awards received in connection with the condemnation of all or a portion of the Properties, (C) any Rents following an Event of Default, or (D) any Rents paid more than one month in advance; (vi) failure to pay charges for labor or materials or other charges that can create liens on any portion of the Properties unless due to Lender's failure to disburse funds held in the Reserve Funds, pursuant to the terms and conditions of the Loan Documents; (vii) any security deposits, advance deposits or any other deposits collected with respect to the Properties which are not delivered to Lender upon a foreclosure of the Properties or action in lieu thereof, except to the extent any such security deposits were applied in accordance with the terms and conditions of any of the Leases prior to the occurrence of the Event of Default that gave rise to such foreclosure or action in lieu thereof; or (viii) Personal Property taken from any of the Properties and not replaced with Personal Property of the same utility and of the same or greater value; and (b) the entire amount of the Debt (i) in the event of: (A) Borrower filing a voluntary petition under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law; (B) soliciting or causing to be solicited petitioning creditors for any involuntary petition against Borrower from any Person which is not discharged within ninety (90) days from the date of filing, (C) Borrower filing an answer consenting to or otherwise acquiescing in or joining in any involuntary petition filed against it, by any other Person under the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law, or soliciting or 2 causing to be solicited petitioning creditors for any involuntary petition from any Person; (D) Borrower consenting to or acquiescing in or joining in an application for the appointment of a custodian, receiver, trustee, or examiner for Borrower or any portion of the Property; (E) Borrower making an assignment for the benefit of creditors, or admitting, in writing or in any legal proceeding, its insolvency or inability to pay its debts as they become due; (ii) if Borrower fails to maintain its status as a Single Purpose Entity, as required by, and in accordance with, the terms and provisions of the Loan Agreement or the Mortgage; (iii) if Borrower fails to obtain Lender's prior written consent to any subordinate financing or other voluntary lien encumbering the Properties; or (iv) if Borrower fails to obtain Lender's prior written consent to any assignment, transfer, or conveyance of the Properties or any interest therein as required by the Loan Agreement or the Mortgage. 1.3 Nature of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty of payment and performance and not a guaranty of collection. This Guaranty may not be revoked by Guarantor and shall continue to be effective with respect to any Guaranteed Obligations arising or created after any attempted revocation by Guarantor. The fact that at any time or from time to time the Guaranteed Obligations may be increased or reduced shall not release or discharge the obligation of Guarantor to Lender with respect to the Guaranteed Obligations. This Guaranty may be enforced by Lender and any subsequent holder of the Note and shall not be discharged by the assignment or negotiation of all or part of the Note. 1.4 Guaranteed Obligations Not Reduced by Offset. The Guaranteed Obligations and the liabilities and obligations of Guarantor to Lender hereunder, shall not be reduced, discharged or released because or by reason of any existing or future offset, claim or defense of Borrower, or any other party, against Lender or against payment of the Guaranteed Obligations, whether such offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise. 1.5 Payment By Guarantor. If all or any part of the Guaranteed Obligations shall not be punctually paid when due, whether at demand, maturity, acceleration or otherwise, Guarantor shall, immediately upon demand by Lender, and without presentment, protest, notice of protest, notice of non-payment, notice of intention to accelerate the maturity, notice of acceleration of the maturity, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Obligations to Lender at Lender's address as set forth herein. Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Obligations, and may be made from time to time with respect to the same or different items of Guaranteed Obligations. Such demand shall be deemed made, given and received in accordance with the notice provisions hereof. 1.6 No Duty To Pursue Others. It shall not be necessary for Lender (and Guarantor hereby waives any rights which Guarantor may have to require Lender), in order to enforce the obligations of Guarantor hereunder, first to (i) institute suit or exhaust its remedies against Borrower or others liable on the Loan or the Guaranteed Obligations or any other person, (ii) enforce Lender's rights against any collateral which shall ever have been given to secure the Loan, (iii) enforce Lender's rights against any other guarantors of the Guaranteed Obligations, (iv) join Borrower or any others liable on the Guaranteed Obligations in any action seeking to enforce this Guaranty, (v) exhaust any remedies available to Lender against any collateral which shall ever have been given to secure the Loan, or (vi) resort to any other means of obtaining payment of the Guaranteed Obligations. Lender shall not be required to mitigate damages or take any other action to reduce, collect or enforce the Guaranteed Obligations. 3 1.7 Waivers. Guarantor agrees to the provisions of the Loan Documents, and hereby waives notice of (i) any loans or advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii) any amendment or extension of the Note, the Loan Agreement or of any other Loan Documents, (iv) the execution and delivery by Borrower and Lender of any other loan or credit agreement or of Borrower's execution and delivery of any promissory notes or other documents arising under the Loan Documents or in connection with the Properties, (v) the occurrence of any breach by Borrower or an Event of Default, (vi) Lender's transfer or disposition of the Guaranteed Obligations, or any part thereof, (vii) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii) protest, proof of non-payment or default by Borrower, or (ix) any other action at any time taken or omitted by Lender, and, generally, all demands and notices of every kind in connection with this Guaranty, the Loan Documents, any documents or agreements evidencing, securing or relating to any of the Guaranteed Obligations and the obligations hereby guaranteed. 1.8 Payment of Expenses. In the event that Guarantor should breach or fail to timely perform any provisions of this Guaranty, Guarantor shall, immediately upon demand by Lender, pay Lender all costs and expenses (including court costs and reasonable attorneys' fees) incurred by Lender in the enforcement hereof or the preservation of Lender's rights hereunder. The covenant contained in this Section shall survive the payment and performance of the Guaranteed Obligations. 1.9 Effect of Bankruptcy. In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership or other debtor relief law, or any judgment, order or decision thereunder, Lender must rescind or restore any payment, or any part thereof, received by Lender in satisfaction of the Guaranteed Obligations, as set forth herein, any prior release or discharge from the terms of this Guaranty given to Guarantor by Lender shall be without effect, and this Guaranty shall remain in full force and effect. It is the intention of Borrower and Guarantor that Guarantor's obligations hereunder shall not be discharged except by Guarantor's performance of such obligations and then only to the extent of such performance. 1.10 Waiver of Subrogation, Reimbursement and Contribution. Notwithstanding anything to the contrary contained in this Guaranty, Guarantor hereby unconditionally and irrevocably waives, releases and abrogates during the term of the Loan any and all rights it may now or hereafter have under any agreement, at law or in equity (including, without limitation, any law subrogating the Guarantor to the rights of Lender), to assert any claim against or seek contribution, indemnification or any other form of reimbursement from Borrower or any other party liable for payment of any or all of the Guaranteed Obligations for any payment made by Guarantor under or in connection with this Guaranty or otherwise. 1.11 Borrower. The term "Borrower" as used herein shall include any new or successor corporation, association, partnership (general or limited), joint venture, trust or other individual or organization formed as a result of any merger, reorganization, sale, transfer, devise, gift or bequest of Borrower or any interest in Borrower. 4 ARTICLE II EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTOR'S OBLIGATIONS Guarantor hereby consents and agrees to each of the following, and agrees that Guarantor's obligations under this Guaranty shall not be released, diminished, impaired, reduced or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which Guarantor might otherwise have as a result of or in connection with any of the following: 2.1 Modifications. Any renewal, extension, increase, modification, alteration or rearrangement of all or any part of the Guaranteed Obligations, the Note, the Loan Agreement, the other Loan Documents, or any other document, instrument, contract or understanding between Borrower and Lender, or any other parties, pertaining to the Guaranteed Obligations or any failure of Lender to notify Guarantor of any such action. 2.2 Adjustment. Any adjustment, indulgence, forbearance or compromise that might be granted or given by Lender to Borrower or any Guarantor. 2.3 Condition of Borrower or Guarantor. The insolvency, bankruptcy, arrangement, adjustment, composition, liquidation, disability, dissolution or lack of power of Borrower, Guarantor or any other party at any time liable for the payment of all or part of the Guaranteed Obligations; or any dissolution of Borrower or Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or Guarantor, or any changes in the shareholders, partners or members of Borrower or Guarantor; or any reorganization of Borrower or Guarantor. 2.4 Invalidity of Guaranteed Obligations. The invalidity, illegality or unenforceability of all or any part of the Guaranteed Obligations, or any document or agreement executed in connection with the Guaranteed Obligations, for any reason whatsoever, including without limitation the fact that (i) the Guaranteed Obligations, or any part thereof, exceeds the amount permitted by law, (ii) the act of creating the Guaranteed Obligations or any part thereof is ultra vires, (iii) the officers or representatives executing the Note, the Loan Agreement or the other Loan Documents or otherwise creating the Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed Obligations violate applicable usury laws, (v) the Borrower has valid defenses, claims or offsets (whether at law, in equity or by agreement) which render the Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi) the creation, performance or repayment of the Guaranteed Obligations (or the execution, delivery and performance of any document or instrument representing part of the Guaranteed Obligations or executed in connection with the Guaranteed Obligations, or given to secure the repayment of the Guaranteed Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note, the Loan Agreement or any of the other Loan Documents have been forged or otherwise are irregular or not genuine or authentic, it being agreed that Guarantor shall remain liable hereon regardless of whether Borrower or any other person be found not liable on the Guaranteed Obligations or any part thereof for any reason. 5 2.5 Release of Obligors. Any full or partial release of the liability of Borrower on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee or assure the payment of the Guaranteed Obligations, or any part thereof, it being recognized, acknowledged and agreed by Guarantor that Guarantor may be required to pay the Guaranteed Obligations in full without assistance or support of any other party, and Guarantor has not been induced to enter into this Guaranty on the basis of a contemplation, belief, understanding or agreement that other parties will be liable to pay or perform the Guaranteed Obligations, or that Lender will look to other parties to pay or perform the Guaranteed Obligations. 2.6 Other Collateral. The taking or accepting of any other security, collateral or guaranty, or other assurance of payment, for all or any part of the Guaranteed Obligations. 2.7 Release of Collateral. Any release, surrender, exchange, subordination, deterioration, waste, loss or impairment (including without limitation negligent, willful, unreasonable or unjustifiable impairment) of any collateral, property or security at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Obligations. 2.8 Care and Diligence. The failure of Lender or any other party to exercise diligence or reasonable care in the preservation, protection, enforcement, sale or other handling or treatment of all or any part of such collateral, property or security, including but not limited to any neglect, delay, omission, failure or refusal of Lender (i) to take or prosecute any action for the collection of any of the Guaranteed Obligations or (ii) to foreclose, or initiate any action to foreclose, or, once commenced, prosecute to completion any action to foreclose upon any security therefor, or (iii) to take or prosecute any action in connection with any instrument or agreement evidencing or securing all or any part of the Guaranteed Obligations. 2.9 Unenforceability. The fact that any collateral, security, security interest or lien contemplated or intended to be given, created or granted as security for the repayment of the Guaranteed Obligations, or any part thereof, shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by Guarantor that Guarantor is not entering into this Guaranty in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility or value of any of the collateral for the Guaranteed Obligations. 2.10 Offset. The Note, the Loan Agreement, the Guaranteed Obligations and the liabilities and obligations of the Guarantor to Lender hereunder shall not be reduced, discharged or released because of or by reason of any existing or future right of offset, claim or defense of Borrower against Lender, or any other party, or against payment of the Guaranteed Obligations, whether such right of offset, claim or defense arises in connection with the Guaranteed Obligations (or the transactions creating the Guaranteed Obligations) or otherwise. 6 2.11 Merger. The reorganization, merger or consolidation of Borrower into or with any other corporation or entity. 2.12 Preference. Any payment by Borrower to Lender is held to constitute a preference under bankruptcy laws, or for any reason Lender is required to refund such payment or pay such amount to Borrower or someone else. 2.13 Other Actions Taken or Omitted. Any other action taken or omitted to be taken with respect to the Loan Documents, the Guaranteed Obligations, or the security and collateral therefor, whether or not such action or omission prejudices Guarantor or increases the likelihood that Guarantor will be required to pay the Guaranteed Obligations pursuant to the terms hereof, it is the unambiguous and unequivocal intention of Guarantor that Guarantor shall be obligated to pay the Guaranteed Obligations when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, which obligation shall be deemed satisfied only upon the full and final payment and satisfaction of the Guaranteed Obligations. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce Lender to enter into the Loan Documents and extend credit to Borrower, Guarantor represents and warrants to Lender as follows: 3.1 Benefit. Guarantor is an affiliate of Borrower, is the owner of a direct or indirect interest in Borrower, and has received, or will receive, direct or indirect benefit from the making of this Guaranty with respect to the Guaranteed Obligations. 3.2 Familiarity and Reliance. Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of the Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Note or Guaranteed Obligations; however, Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty. 3.3 No Representation By Lender. Neither Lender nor any other party has made any representation, warranty or statement to Guarantor in order to induce the Guarantor to execute this Guaranty. 3.4 Guarantor's Financial Condition. As of the date hereof, and after giving effect to this Guaranty and the contingent obligation evidenced hereby, Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities (including contingent liabilities) and debts, and has and will have property and assets sufficient to satisfy and repay its obligations and liabilities. 3.5 Legality. The execution, delivery and performance by Guarantor of this Guaranty and the consummation of the transactions contemplated hereunder do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or other instrument to which Guarantor is a party or which may be applicable to Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights. 7 3.6 Survival. All representations and warranties made by Guarantor herein shall survive the execution hereof. ARTICLE IV SUBORDINATION OF CERTAIN INDEBTEDNESS 4.1 Subordination of All Guarantor Claims. As used herein, the term "Guarantor Claims" shall mean all debts and liabilities of Borrower to Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by Guarantor. The Guarantor Claims shall include without limitation all rights and claims of Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of Guarantor's payment of all or a portion of the Guaranteed Obligations. Upon the occurrence of an Event of Default or the occurrence of an event which would, with the giving of notice or the passage of time, or both, constitute an Event of Default, Guarantor shall not receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims. 4.2 Claims in Bankruptcy. In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Guarantor as debtor, Lender shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Guarantor hereby assigns such dividends and payments to Lender. Should Lender receive, for application upon the Guaranteed Obligations, any such dividend or payment which is otherwise payable to Guarantor, and which, as between Borrower and Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment to Lender in full of the Guaranteed Obligations, Guarantor shall become subrogated to the rights of Lender to the extent that such payments to Lender on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Obligations, and such subrogation shall be with respect to that proportion of the Guaranteed Obligations which would have been unpaid if Lender had not received dividends or payments upon the Guarantor Claims. 8 4.3 Payments Held in Trust. In the event that, notwithstanding anything to the contrary in this Guaranty, Guarantor should receive any funds, payment, claim or distribution which is prohibited by this Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the amount of all funds, payments, claims or distributions so received, and agrees that it shall have absolutely no dominion over the amount of such funds, payments, claims or distributions so received except to pay them promptly to Lender, and Guarantor covenants promptly to pay the same to Lender. 4.4 Liens Subordinate. Guarantor agrees that any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgment liens, charges or other encumbrances upon Borrower's assets securing payment of the Guaranteed Obligations, regardless of whether such encumbrances in favor of Guarantor or Lender presently exist or are hereafter created or attach. Without the prior written consent of Lender, Guarantor shall not (i) exercise or enforce any creditor's right it may have against Borrower, or (ii) foreclose, repossess, sequester or otherwise take steps or institute any action or proceedings (judicial or otherwise, including without limitation the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to enforce any liens, mortgage, deeds of trust, security interests, collateral rights, judgments or other encumbrances on assets of Borrower held by Guarantor. ARTICLE V MISCELLANEOUS 5.1 Waiver. No failure to exercise, and no delay in exercising, on the part of Lender, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of Lender hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand. 5.2 Notices. Any notice, demand, statement, request or consent made hereunder shall be in writing and shall be deemed to be received by the addressee on the third day following the day such notice is deposited with the United States Postal Service first class certified mail, return receipt requested, addressed to the address, as set forth below, of the party to whom such notice is to be given, or to such other address as either party shall in like manner designate in writing. The addresses of the parties hereto are as follows: Guarantor: ---------- Koger Equity, Inc. 433 Plaza Real, Suite 335 Boca Raton, Florida 33432 Attention: Tom Brockwell Facsimile No. (561) 394-7712 9 with a copy to: White & Case LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Attention: William Walker, Esq. Facsimile No. (305) 348-5744 Lender: Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Attention: Edmund Taylor Facsimile No.: (212) 325-8106 with a copy to: Column Financial, Inc. One Madison Avenue New York, New York 10010 Legal and Compliance Department Attention: Pamela McCormack Facsimile No. (917) 326-7805 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Fredric L. Altschuler, Esq. Facsimile No. (212) 504-6666 5.3 Governing Law. This Guaranty shall be governed in accordance with the State of New York and the applicable law of the United States of America. 5.4 Invalid Provisions. If any provision of this Guaranty is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty, such provision shall be fully severable and this Guaranty shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part of this Guaranty, and the remaining provisions of this Guaranty shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty, unless such continued effectiveness of this Guaranty, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein. 5.5 Amendments. This Guaranty may be amended only by an instrument in writing executed by the party or an authorized representative of the party against whom such amendment is sought to be enforced. 5.6 Parties Bound; Assignment; Joint and Several. This Guaranty shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that Guarantor may not, without the prior written consent of Lender, assign any of its rights, powers, duties or obligations hereunder. If Guarantor consists of more than one person or party, the obligations and liabilities of each such person or party shall be joint and several. 10 5.7 Headings. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty. 5.8 Recitals. The recital and introductory paragraphs hereof are a part hereof, form a basis for this Guaranty and shall be considered prima facie evidence of the facts and documents referred to therein. 5.9 Counterparts. To facilitate execution, this Guaranty may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single instrument. It shall not be necessary in making proof of this Guaranty to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages. 5.10 Rights and Remedies. If Guarantor becomes liable for any indebtedness owing by Borrower to Lender, by endorsement or otherwise, other than under this Guaranty, such liability shall not be in any manner impaired or affected hereby and the rights of Lender hereunder shall be cumulative of any and all other rights that Lender may ever have against Guarantor. The exercise by Lender of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. 5.11 Other Defined Terms. Any capitalized term utilized herein shall have the meaning as specified in the Loan Agreement, unless such term is otherwise specifically defined herein. 5.12 Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER. 11 5.13 Waiver of Right To Trial By Jury. GUARANTOR AND LENDER HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE NOTE, THE LOAN AGREEMENT, THE MORTGAGE, OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY GUARANTOR AND LENDER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER OR GUARANTOR IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY GUARANTOR. 5.14 Reinstatement in Certain Circumstances. If at any time any payment of the principal of or interest under the Note or any other amount payable by the Borrower under the Loan Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or otherwise, the Guarantor's obligations hereunder with respect to such payment shall be reinstated as though such payment has been due but not made at such time. 12 EXECUTED as of the day and year first above written. GUARANTOR: KOGER EQUITY, INC., a Florida corporation By: /S/ Thomas C. Brockwell ----------------------------------- Name: Thomas C. Brockwell Title: Vice President EX-10 9 a4339684-10g.txt KOGER EXHIBIT 10-G EXHIBIT 10(g) ASSIGNMENT OF MANAGEMENT AGREEMENT AND SUBORDINATION OF MANAGEMENT FEES ------------------------------------ THIS ASSIGNMENT OF MANAGEMENT AGREEMENT AND SUBORDINATION OF MANAGEMENT FEES (this "Assignment") is made as of the 6th day of December, 2002, by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place of business at 443 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Borrower"), to COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"), and is consented and agreed to by COTTONWOOD PARTNERS MANAGEMENT LTD., a Utah limited partnership, having its principal place of business at 5956 Sherry Lane, Suite 850 Dallas, Texas 75225 ("Manager"). RECITALS: A. Borrower by its Promissory Note of even date herewith given to Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "Note") is indebted to Lender in the principal sum of Seventy Seven Million and No/100 Dollars ($77,000,000.00) (the "Loan") advanced pursuant to that certain Loan Agreement of even date herewith between Borrower and Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "Loan Agreement"). B. The Loan is secured by, among other things, certain mortgages, deeds of trust and deeds to secure debt (collectively, the "Mortgage"), dated as of the date hereof, which grants Lender a first lien on the Properties. The Note, the Loan Agreement, the Mortgage, this Assignment and any of the other documents evidencing or securing the Loan or executed or delivered in connection therewith are collectively referred to as the "Loan Documents". C. Pursuant to that certain Management and Leasing Agreement, dated December 6, 2002, between Borrower and Manager (the "Management Agreement") (a true and correct copy of which Management Agreement is attached hereto as Exhibit A), Borrower employed Manager exclusively to rent, lease, operate and manage the Properties and Manager is entitled to certain management fees (the "Management Fees") thereunder. D. Lender requires as a condition to the making of the Loan that Borrower assign the Management Agreement and that Manager subordinate its interest under the Management Agreement in lien and payment to the Loan Agreement and other Loan Documents as set forth below. AGREEMENT For good and valuable consideration the parties hereto agree as follows: 1. Assignment of Management Agreement. As additional collateral security for the Loan, Borrower hereby conditionally transfers, sets over and assigns to Lender all of Borrower's right, title and interest in and to the Management Agreement, said transfer and assignment to automatically become a present, unconditional assignment, at Lender's option, upon and during the continuance of an Event of Default by Borrower under the Loan Agreement or any of the other Loan Documents. 2. Subordination of Management Agreement. The Management Agreement and any and all liens, rights and interests (whether choate or inchoate and including, without limitation, all mechanic's and materialmen's liens under applicable law) owed, claimed or held, by Manager in and to the Properties, are and shall be in all respects subordinate and inferior to the liens and security interests created or to be created for the benefit of Lender, and securing the repayment of the Note and the obligations under the Loan Agreement including, without limitation, those created under the Mortgage covering, among other things, the Properties, and filed or to be filed of record in the public records maintained for the recording of mortgages in the jurisdiction where the Properties are located, and all renewals, extensions, increases, supplements, amendments, modifications or replacements thereof. 3. Termination. At such time as the Loan is paid in full and the Mortgage is released or assigned of record, this Assignment and all of Lender's right, title and interest hereunder with respect to the Management Agreement shall terminate and Lender agrees to execute a termination reflecting the same in form and substance acceptable to Lender in all respects). 4. Estoppel. Manager represents and warrants that (a) the Management Agreement is in full force and effect and has not been modified, amended or assigned other than pursuant to this Assignment, (b) neither Manager nor Borrower is in default under any of the terms, covenants or provisions of the Management Agreement and Manager knows of no event which, but for the passage of time or the giving of notice or both, would constitute an event of default under the Management Agreement, (c) neither Manager nor Borrower has commenced any action or given or received any notice for the purpose of terminating the Management Agreement and (d) the Management Fees and all other sums due and payable to the Manager under the Management Agreement as of the date hereof have been paid in full. 5. Agreement by Borrower and Manager. Borrower and Manager hereby agree that upon the occurrence of an Event of Default under the Loan Documents during the term of this Assignment or upon the occurrence of any event which would entitle Lender to terminate, or cause the termination of, the Management Agreement in accordance with the terms of the Loan Documents, (a) Manager shall, at the request of Lender, continue to perform all of Manager's obligations under the terms of the Management Agreement with respect to the Properties so long as Manager receives compensation therefor pursuant to the Management Agreement from Borrower or Lender, or (b) at the option of Lender exercised by written notice to Borrower and Manager, Borrower and Manager shall immediately terminate the Management Agreement and Manager shall transfer its responsibility for the management of the Properties to a Qualified Manager selected by Lender. 6. Receipt of Management Fees. Except as otherwise provided in Paragraph 5(a) hereof, Borrower and Manager hereby agree that Manager shall not be entitled to receive any Management Fees or other fee, commission or other amount payable to Manager under the Management Agreement for and during any period of time that any Event of Default -2- has occurred and is continuing; provided, however, that notwithstanding anything to the contrary, (a) Manager shall not be obligated to return or refund to Lender any Management Fee or other fee, commission or other amount already received by Manager prior to the occurrence of the Event of Default, and to which Manager was entitled under this Assignment, and (b) in the event Borrower loses possession of the Properties in connection with exercise by Lender of its rights or remedies pursuant to this Assignment, the Note, the Mortgage, the Loan Agreement or the other Loan Documents, Manager shall be entitled to collect any Management Fee or other fee, commission or other amount accrued but unpaid prior to the occurrence of the Event of Default, and to which Manager was entitled under this Assignment. 7. Consent and Agreement by Manager. Manager hereby acknowledges and consents to this Assignment and the terms and provisions of Section 9.5 of the Loan Agreement. Manager agrees that it will act in conformity with the provisions of this Assignment, such provisions of the Loan Agreement and Lender's rights hereunder or otherwise related to the Management Agreement. In the event that the responsibility for the management of the Properties is transferred from Manager in accordance with the provisions hereof, Manager shall, and hereby agrees to, fully cooperate in transferring its responsibility to a new management company and effectuate such transfer no later than thirty (30) days from the date the Management Agreement is terminated. Further, Manager hereby agrees (a) not to contest or impede the exercise by Lender of any right it has under or in connection with this Assignment; and (b) that it shall, in the manner provided for in this Assignment, give at least thirty (30) days prior written notice to Lender of its intention to terminate the Management Agreement or otherwise discontinue its management of the Properties. 8. Lender's Agreement. So long as Borrower is not in default (continuing beyond any applicable grace period) under this Assignment, the Note, the Loan Agreement, the Mortgage or the other Loan Documents, Lender agrees to permit any sums due to Borrower under the Management Agreement to be paid directly to Borrower. Lender agrees to provide written notice to Manager of the occurrence of any Event of Default by Borrower under the Loan Documents. 9. Further Assurances. Manager further agrees, so long as it does not incur a material expense that is not reimbursed by Borrower, to (a) execute such affidavits and certificates as Lender shall reasonably require to further evidence the agreements herein contained, (b) on request from Lender, furnish Lender with copies of such information as Borrower is entitled to receive under the Management Agreement and (c) cooperate with Lender's representative in any inspection of all or any portion of the Properties. Borrower hereby agrees to reimburse Manager with respect to any costs and expenses Manager incurs pursuant to this Section 9. Manager hereby acknowledges that some, or all, permits, licenses and authorizations necessary for the use, operation and maintenance of the Properties (the "Permits") may be held by, or on behalf of, the Manager. By executing this Agreement, Manager (i) agrees that it is holding or providing all such Permits for the benefit of Borrower and (ii) hereby agrees that as security for the repayment of the Debt by Borrower in accordance with the Loan Agreement, to the extent permitted by applicable law, Manager hereby grants to Lender a security interest in and to the Permits. Moreover, Manager hereby agrees that, upon an Event of Default, it will assign the Permits to Lender if such Permits are assignable or otherwise -3- continue to hold such Permits for the benefit of Lender until such time as Lender can obtain such Permits in its own name or the name of a nominee. 10. Assignment of Proceeds. Manager acknowledges that, as further security for the Note, (i) Borrower has executed and delivered to Lender an Assignment of Leases and Rents, dated as of the date hereof (the "Assignment of Leases"), assigning to Lender, among other things, all of Borrower's right, title and interest in and to all of the revenues of the Properties and (ii) Borrower and Lender, among others, have entered into that certain Cash Management Agreement pursuant to which Borrower has agreed that any Rents, and other income and proceeds from the Properties are to be deposited directly into an account of the Lender established pursuant to the Cash Management Agreement. 11. Manager Not Entitled to Rents. Manager acknowledges and agrees that it is collecting and processing the Rents solely as the agent for the Borrower and Manager has no right to, or title in, the Rents. Notwithstanding anything to the contrary in the Management Agreement, the Manager acknowledges and agrees that the Rents are the sole property of the Borrower, encumbered by the lien of the Security Instrument and other Loan Documents in favor of Lender. In any bankruptcy, insolvency or similar proceeding the Manager, or any trustee acting on behalf of the Manager, waives any claim to the Rents other than as such Rents may be used to pay the fees and compensation of the Manager pursuant to the terms and conditions of the Management Agreement. 12. Governing Law. This Assignment shall be governed, construed, applied and enforced in accordance with Section 10.3 of the Loan Agreement. 13. Notices. All notices, consents, approvals and requests required or permitted hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement and the following: If to Manager: Cottonwood Partners Management, Ltd. 5956 Sherry Lane, Suite 850 Dallas, Texas 75225 Attn: Robert J. Axley Facsimile No. 214-691-5299 With a copy to: Cottonwood Partners 2855 E. Cottonwood Parkway, Suite 560 Salt Lake City, Utah 84121 Attn: John L. West Facsimile No. 801-365-6223 14. No Oral Change. This Assignment, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower, Lender or Manager, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. -4- 15. Liability. This Assignment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. 16. Inapplicable Provisions. If any term, covenant or condition of this Assignment is held to be invalid, illegal or unenforceable in any respect, this Assignment shall be construed without such provision. 17. Headings, etc. The headings and captions of various paragraphs of this Assignment are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 18. Duplicate Originals, Counterparts. This Assignment may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Assignment may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Assignment. The failure of any party hereto to execute this Assignment, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 19. Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 20. Miscellaneous. (a) Wherever pursuant to this Assignment (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. (b) Wherever pursuant to this Assignment it is provided that Borrower shall pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Lender, whether retained firms, the reimbursement for the expenses of in-house staff or otherwise. 21. Defined Terms. Any capitalized terms not otherwise defined herein shall be defined as set forth in the Loan Agreement. [NO FURTHER TEXT ON THIS PAGE] -5- IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date and year first written above. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell ------------------------------------- Name: Thomas C. Brockwell Title: Senior Vice President LENDER: COLUMN FINANCIAL, INC. By: /S/ Priscilla Horning -------------------------------------------- Name: Priscilla Horning Title: Vice President MANAGER: COTTONWOOD PARTNERS MANAGEMENT, LTD., a Utah limited partnership By: /S/ Robert J. Axley --------------------------------------------- Name: Robert J. Axley Title: Chairman EXHIBIT A (Management Agreement) EXH. A-1 EX-10 10 a4339684-10h.txt KOGER EXHIBIT 10-H EXHIBIT 10(h) ASSIGNMENT OF MANAGEMENT AGREEMENT AND SUBORDINATION OF MANAGEMENT FEES ------------------------------------ THIS ASSIGNMENT OF MANAGEMENT AGREEMENT AND SUBORDINATION OF MANAGEMENT FEES (this "Assignment") is made as of the 6th day of December, 2002, by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place of business at 443 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Borrower"), to COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010 ("Lender"), and is consented and agreed to by HINES INTERESTS LIMITED PARTNERSHIP, a Delaware limited partnership, having its principal place of business at 2800 Post Oak Blvd., Suite 5000 Houston, Texas 77056 ("Manager"). RECITALS: A. Borrower by its Promissory Note of even date herewith given to Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "Note") is indebted to Lender in the principal sum of Seventy Seven Million and No/100 Dollars ($77,000,000.00) (the "Loan") advanced pursuant to that certain Loan Agreement of even date herewith between Borrower and Lender (together with all extensions, renewals, modifications, substitutions and amendments thereof, the "Loan Agreement"). B. The Loan is secured by, among other things, certain mortgages, deeds of trust and deeds to secure debt (collectively, the "Mortgage"), dated as of the date hereof, which grants Lender a first lien on the Properties. The Note, the Loan Agreement, the Mortgage, this Assignment and any of the other documents evidencing or securing the Loan or executed or delivered in connection therewith are collectively referred to as the "Loan Documents". C. Pursuant to that certain Letter Agreement between Borrower and Manager, dated November 25, 2002 (collectively, the "Management Agreement") (a true and correct copy of which Management Agreement is attached hereto as Exhibit A), Borrower employed Manager exclusively to rent, lease, operate and manage the Properties and Manager is entitled to certain management fees (the "Management Fees") thereunder. D. Lender requires as a condition to the making of the Loan that Borrower assign the Management Agreement and that Manager subordinate its interest under the Management Agreement to the Loan Agreement and other Loan Documents as set forth below. AGREEMENT For good and valuable consideration the parties hereto agree as follows: 1. Assignment of Management Agreement. As additional collateral security for the Loan, Borrower hereby conditionally transfers, sets over and assigns to Lender all of Borrower's right, title and interest in and to the Management Agreement, said transfer and assignment to automatically become a present, unconditional assignment, at Lender's option, upon and during the continuance of an Event of Default by Borrower under the Loan Agreement or any of the other Loan Documents. 2. Subordination of Management Agreement. The Management Agreement and any and all liens, rights and interests (whether choate or inchoate and including, without limitation, all mechanic's and materialmen's liens under applicable law) owed, claimed or held, by Manager in and to the Properties, are and shall be in all respects subordinate and inferior to the liens and security interests created or to be created for the benefit of Lender, and securing the repayment of the Note and the obligations under the Loan Agreement including, without limitation, those created under the Mortgage covering, among other things, the Properties, and filed or to be filed of record in the public records maintained for the recording of mortgages in the jurisdiction where the Properties are located, and all renewals, extensions, increases, supplements, amendments, modifications or replacements thereof. 3. Termination. At such time as the Loan is paid in full and the Mortgage is released or assigned of record, this Assignment and all of Lender's right, title and interest hereunder with respect to the Management Agreement shall terminate and Lender agrees to execute a termination reflecting the same in form and substance acceptable to Lender in all respects). 4. Estoppel. Manager represents and warrants that (a) the Letter Agreement is in full force and effect and has not been modified, amended or assigned other than pursuant to this Assignment, (b) neither Manager nor Borrower is in default under any of the terms, covenants or provisions of the Letter Agreement and Manager knows of no event which, but for the passage of time or the giving of notice or both, would constitute an event of default under the Letter Agreement, (c) neither Manager nor Borrower has commenced any action or given or received any notice for the purpose of terminating the Letter Agreement and (d) the Management Fees and all other sums due and payable to the Manager under the Letter Agreement as of the date hereof have been paid in full. 5. Agreement by Borrower and Manager. Borrower and Manager hereby agree that upon the occurrence of an Event of Default under the Loan Documents during the term of this Assignment or upon the occurrence of any event which would entitle Lender to terminate, or cause the termination of, the Management Agreement in accordance with the terms of the Loan Documents, (a) Manager shall, at the request of Lender, continue to perform all of Manager's obligations under the terms of the Management Agreement with respect to the Properties for the remainder of the term thereof so long as Manager receives compensation therefor from Borrower or Lender, or (b) at the option of Lender exercised by written notice to Borrower and Manager, Borrower and Manager shall immediately terminate the Management -2- Agreement and Manager shall transfer its responsibility for the management of the Properties to a Qualified Manager selected by Lender; provided that any such termination will not release Borrower from any obligation accruing to Manager under the terms of the Management Agreement prior to such termination. 6. INTENTIONALLY DELETED. 7. Consent and Agreement by Manager. Manager hereby acknowledges and consents to this Assignment and the terms and provisions of Section 9.5 of the Loan Agreement. Manager agrees that it will act in conformity with the provisions of this Assignment, such provisions of the Loan Agreement and Lender's rights hereunder or otherwise related to the Management Agreement. In the event that the responsibility for the management of the Properties is transferred from Manager in accordance with the provisions hereof, Manager shall, and hereby agrees to, fully cooperate in transferring its responsibility to a new management company and effectuate such transfer no later than thirty (30) days from the date the Management Agreement is terminated. Further, Manager hereby agrees (a) not to contest or impede the exercise by Lender of any right it has under or in connection with this Assignment; and (b) that it shall, in the manner provided for in this Assignment, give at least thirty (30) days prior written notice to Lender of its intention to terminate the Management Agreement or otherwise discontinue its management of the Properties. 8. Lender's Agreement. So long as Borrower is not in default (continuing beyond any applicable grace period) under this Assignment, the Note, the Loan Agreement, the Mortgage or the other Loan Documents, Lender agrees to permit any sums due to Borrower under the Management Agreement to be paid directly to Borrower. 9. Further Assurances. Manager further agrees, so long as it does not incur a material expense that is not reimbursed by Borrower, to (a) execute such affidavits and certificates (in a form reasonably satisfactory to Manager) as Lender shall reasonably require to further evidence the agreements herein contained, (b) on request from Lender, furnish Lender with copies of such information as Borrower is entitled to receive under the Management Agreement and (c) cooperate with Lender's representative in any inspection of all or any portion of the Properties. Borrower hereby agrees to reimburse Manager with respect to any costs and expenses Manager incurs pursuant to this Section 9. Manager hereby acknowledges that some, or all, permits, licenses and authorizations necessary for the use, operation and maintenance of the Properties (the "Permits") may be held by, or on behalf of, the Manager. By executing this Agreement, Manager (i) agrees that it is holding or providing all such Permits for the benefit of Borrower and (ii) hereby agrees that as security for the repayment of the Debt by Borrower in accordance with the Loan Agreement, to the extent permitted by applicable law, Manager hereby grants to Lender a security interest in and to the Permits. Moreover, Manager hereby agrees that, upon an Event of Default, it will assign the Permits to Lender if such Permits are assignable or otherwise continue to hold such Permits for the benefit of Lender until such time as Lender can obtain such Permits in its own name or the name of a nominee. 10. Assignment of Proceeds. Manager acknowledges that, as further security for the Note, Borrower has executed and delivered to Lender an Assignment of Leases and Rents, dated as of the date hereof (the "Assignment of Leases"), assigning to Lender, among -3- other things, all of Borrower's right, title and interest in and to all of the revenues of the Properties. 11. Manager Not Entitled to Rents. Manager acknowledges and agrees that it is collecting and processing the Rents solely as the agent for the Borrower and Manager has no right to, or title in, the Rents. Notwithstanding anything to the contrary in the Management Agreement, the Manager acknowledges and agrees that the Rents are the sole property of the Borrower, encumbered by the lien of the Security Instrument and other Loan Documents in favor of Lender. In any bankruptcy, insolvency or similar proceeding the Manager, or any trustee acting on behalf of the Manager, waives any claim to the Rents other than as such Rents may be used to pay the fees and compensation of the Manager pursuant to the terms and conditions of the Management Agreement. 12. Governing Law. This Assignment shall be governed, construed, applied and enforced in accordance with Section 10.3 of the Loan Agreement. 13. Notices. All notices, consents, approvals and requests required or permitted hereunder shall be delivered in accordance with Section 10.6 of the Loan Agreement and the following: If to Manager: Hines Interest Limited Partnership 2800 Post Oak Blvd. Suite 5000 Houston, Texas 77056 Attn: Clayton Elliott Facsimile No. 713-966-2053 14. No Oral Change. This Assignment, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Borrower, Lender or Manager, but only by an agreement in writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 15. Liability. This Assignment shall be binding upon and inure to the benefit of Borrower and Lender and their respective successors and assigns forever. 16. Inapplicable Provisions. If any term, covenant or condition of this Assignment is held to be invalid, illegal or unenforceable in any respect, this Assignment shall be construed without such provision. 17. Headings, etc. The headings and captions of various paragraphs of this Assignment are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 18. Duplicate Originals, Counterparts. This Assignment may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Assignment may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single -4- Assignment. The failure of any party hereto to execute this Assignment, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 19. Number and Gender. Whenever the context may require, any pronouns used herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural and vice versa. 20. Miscellaneous. (a) Wherever pursuant to this Assignment (i) Lender exercises any right given to it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Lender, or (iii) any other decision or determination is to be made by Lender, the decision of Lender to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Lender, shall be in the sole and absolute discretion of Lender and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. (b) Wherever pursuant to this Assignment it is provided that Borrower shall pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Lender, whether retained firms, the reimbursement for the expenses of in-house staff or otherwise. 21. Defined Terms. Any capitalized terms not otherwise defined herein shall be defined as set forth in the Loan Agreement. [NO FURTHER TEXT ON THIS PAGE] -5- IN WITNESS WHEREOF, the undersigned have executed this Assignment as of the date and year first written above. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell ----------------------------------------- Name: Thomas C. Brockwell Title: Vice President LENDER: COLUMN FINANCIAL, INC. By: /S/ Priscilla Horning ----------------------------------------------- Name: Priscilla Horning --------------------------------------------- Title: Vice President -------------------------------------------- MANAGER: HINES INTERESTS LIMITED PARTNERSHIP, a Delaware limited partnership By: /S/ Staman Ogilvie ----------------------------------------------- Name: Staman Ogilvie --------------------------------------------- Title: Executive Vice President -------------------------------------------- -6- EXHIBIT A --------- (Management Agreement) EX-10 11 a4339684-10i.txt EXHIBIT 10-I EXHIBIT 10(i) COLLATERAL ASSIGNMENT OF INTEREST RATE PROTECTION AGREEMENT This Collateral Assignment of Interest Rate Protection Agreement (this "Assignment"), made as of December 6, 2002, by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Assignor"), in favor of COLUMN FINANCIAL, INC., a Delaware corporation ("Assignee"). WHEREAS, Assignor and Assignee have entered into that certain Loan Agreement of even date herewith (as amended, modified or supplemented and in effect from time to time, the "Loan Agreement"); and WHEREAS, the parties wish to set forth certain understandings with respect to the Collateral (as defined below); NOW, THEREFORE, the parties agree as follows: 1. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor has assigned, as collateral, to Assignee, all of its right, title and interest in, to and under the [Confirmation], dated as of December 6, 2002, attached as Exhibit A hereto (collectively, the "Agreement"), by and between Assignor and CDC Financial Products Inc., as counterparty ("Counterparty"), and all of Assignor's right, title and interest in, to and under all other documents executed and/or delivered in connection with and/or secured by the Agreement, including, without limitation, all of Assignor's right, title and interest in any collateral, demands, causes of action, bank accounts, other accounts, investment property, general intangibles and supporting obligations, and any other collateral or documents arising out of and/or executed and/or delivered with respect to the Agreement, all rights and benefits of Assignor related to the Agreement, and such claims and choses in action related to the Agreement and such documents, and all of Assignor's rights, title and interests therein and thereto, and the Assignor hereby grants to Assignee a security interest in and to the Agreement and the foregoing and all proceeds (as defined in Section 9-306 of the Uniform Commercial Code adopted in the State of New York) thereof (the "Collateral"), to have and to hold the same, unto Assignee, its successors and assigns. 2. Each party to the Agreement, by its execution of this Assignment, hereby consents to the assignment of the Collateral and the other terms hereof (including, without limitation, the second sentence of Paragraph 3 hereof), and Assignor and Counterparty agree that Counterparty will make any payments to become payable under or pursuant to the Agreement directly to the Assignee until such time as this Assignment is terminated or otherwise canceled, at which time the Counterparty will be instructed by Assignee to make payments to or on behalf of Assignor. All such payments by Counterparty to Assignee shall discharge any obligation Counterparty would otherwise have to Assignor with respect thereto. 3. Assignor hereby covenants and agrees that Assignor shall not, without first obtaining Assignee's or its successor's or assign's written consent, convey, assign, sell, mortgage, encumber, pledge, hypothecate, grant a security interest in, grant an option or options with respect to, or otherwise dispose of (directly or indirectly, voluntarily or involuntarily, by operations of law or otherwise, and whether or not for consideration) the Agreement except in connection with transfers permitted without Assignee's consent or approved by Assignee pursuant to the Loan Agreement. Except with respect to a termination resulting from an Event of Default under Section 5(a)(vii) of the Agreement, Assignor and Counterparty hereby covenant and agree that until such time as this Assignment is terminated or otherwise canceled pursuant to Paragraph 4 hereof, Assignor and Counterparty shall not, without first obtaining Assignee's or its successor's or assign's written consent, amend, modify, cancel or terminate the Agreement. 4. This Assignment shall terminate upon the payment in full of all obligations under the Loan Agreement. 5. In consideration of the foregoing agreements by Counterparty, Assignor and Assignee agree that (i) Counterparty shall be entitled to conclusively rely (without any independent investigation) on any notice or instructions from Assignee in respect of this Assignment, (ii) without limitation on the immediately preceding clause, in the event of any inconsistency between any notice or instructions from Assignee and any notice or instructions from Assignor, Counterparty shall be entitled to conclusively rely (without any independent investigation) on those from Assignee and (iii) Counterparty shall be held harmless and shall be fully indemnified by Assignor from and against any and all claims, other than those ultimately determined to be proximately caused by the gross negligence or willful misconduct of Counterparty, and from and against any damages, penalties, judgments, liabilities, losses or expenses (including reasonable attorneys' fees and disbursements) incurred by Counterparty as a result of the assertion of any claim, by any person or entity, arising out of, or otherwise related to, any actions taken or omitted to be taken by Counterparty in reliance upon any such instructions or notice provided by Assignee. 6. The Counterparty shall be entitled to conclusively, without liability, rely, without investigation, on any notice or instructions (including, without limitation, with respect to the Payments) received by the Counterparty from Assignee, or Assignee's successors and/or assigns. In consideration of the foregoing agreements by Counterparty without limitation on the immediately preceding clause, in the event of any inconsistency between any notice or instructions from Assignee and any notice or instructions from Assignor, Counterparty shall be entitled to conclusively rely (without any independent investigation) on those from Assignee and Counterparty shall be held harmless and shall be fully indemnified by Assignor from and against any and all claims, other than those ultimately determined to be proximately caused by the gross negligence or willful misconduct of Counterparty, and from and against any damages, penalties, judgments, liabilities, losses or expenses (including reasonable attorneys' fees and disbursements) incurred by Counterparty as a result of the assertion of any claim, by any person or entity, arising out of, or otherwise related to, any actions taken or omitted to be taken by Counterparty in reliance upon any such instructions or notice provided by Assignee. 7. This Assignment shall be governed by and construed in accordance with the laws of the State of New York, without reference to choice of law doctrine. 8. This Assignment shall be binding upon and shall inure to the benefit of Assignor and Assignee and their respective successors and assigns. -2- 9. This Assignment may be amended or modified only by a written instrument signed by the parties hereto. 10. This Assignment may be executed in any number of counterparts, each of which shall be an original but all of which shall constitute one instrument. [Signature page follows] -3- IN WITNESS WHEREOF, Assignor and Assignee have caused this instrument to be executed and delivered as of the date set forth above. ASSIGNOR: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell --------------------------------- Name: Thomas C. Brockwell Title: Vice President ASSIGNEE: COLUMN FINANCIAL, INC. By: /S/ Priscilla Horning ---------------------------------------- Name: Priscilla Horning Title: Vice President ACKNOWLEDGED AND AGREED: COUNTERPARTY CDC FINANCIAL PRODUCTS INC. By: /S/ William Branagh -------------------------------------- Name: William Branagh Title: Director By: --------------------------------------- Name: Title: EXHIBIT A Confirmation EX-10 12 a4339684-10j.txt KOGER EXHIBIT 10-J EXHIBIT 10(j) DEPOSIT ACCOUNT AGREEMENT Dated: As of December 6, 2002 among KOGER POST OAK LIMITED PARTNERSHIP, as Borrower and COLUMN FINANCIAL, INC., as Lender
TABLE OF CONTENTS Page I. DEFINITIONS.................................................................................................2 SECTION 1.1 GENERAL. AS USED HEREIN, THE FOLLOWING TERMS SHALL HAVE THE FOLLOWING DEFINITIONS:.........2 SECTION 1.2 OTHER CAPITALIZED TERMS.....................................................................7 II. THE ACCOUNTS................................................................................................7 SECTION 2.1 ESTABLISHMENT OF ACCOUNTS...................................................................7 SECTION 2.2 ACCOUNT NAME ...............................................................................8 SECTION 2.3 ELIGIBLE ACCOUNTS...........................................................................8 SECTION 2.4 PERMITTED INVESTMENTS.......................................................................8 III. DEPOSITS....................................................................................................9 SECTION 3.1 DEPOSITS INTO DEPOSIT ACCOUNT...............................................................9 SECTION 3.2 DISBURSEMENTS FROM THE DEPOSIT ACCOUNT......................................................9 IV. WITHDRAWALS................................................................................................10 SECTION 4.1 WITHDRAWALS FROM TAX AND INSURANCE ACCOUNT, DEBT SERVICE RESERVE ACCOUNT AND OPERATING EXPENSE ACCOUNT..................................................................10 SECTION 4.2 REQUESTS FOR WITHDRAWALS FROM THE ROLLOVER RESERVE ACCOUNT, EXTRAORDINARY EXPENSE ACCOUNT AND REPLACEMENT RESERVE ACCOUNTS...................................................10 SECTION 4.3 SOLE DOMINION AND CONTROL..................................................................10 V. PLEDGE OF ACCOUNTS.........................................................................................10 SECTION 5.1 SECURITY FOR OBLIGATIONS...................................................................10 SECTION 5.2 FINANCING STATEMENT; FURTHER ASSURANCES....................................................11 SECTION 5.3 TERMINATION OF AGREEMENT...................................................................11 VI. RIGHTS AND DUTIES OF LENDER AND AGENT........................................................................12 SECTION 6.1 REASONABLE CARE............................................................................12 SECTION 6.2 INDEMNITY..................................................................................12 SECTION 6.3 RELIANCE...................................................................................12 SECTION 6.4 RESIGNATION OF AGENT.......................................................................12 SECTION 6.5 LENDER APPOINTED ATTORNEY-IN-FACT..........................................................13 SECTION 6.6 ACKNOWLEDGMENT OF LIEN/OFFSET RIGHTS.......................................................13 VII. REMEDIES....................................................................................................13 SECTION 7.1 REMEDIES...................................................................................13 SECTION 7.2 WAIVER.....................................................................................14 VIII. MISCELLANEOUS..............................................................................................14 SECTION 8.1 TRANSFERS AND OTHER LIENS..................................................................14 SECTION 8.2 LENDER'S RIGHT TO PERFORM BORROWER'S OBLIGATIONS; NO LIABILITY OF LENDER...................14 SECTION 8.3 NO WAIVER..................................................................................14 SECTION 8.4 EXPENSES...................................................................................15 SECTION 8.5 ENTIRE AGREEMENT...........................................................................15 SECTION 8.6 NO WAIVER..................................................................................15 -i-
SECTION 8.7 SUCCESSORS AND ASSIGNS.....................................................................15 SECTION 8.8 NOTICES....................................................................................15 SECTION 8.9 CAPTIONS...................................................................................16 SECTION 8.10 GOVERNING LAW..............................................................................16 SECTION 8.11 COUNTERPARTS...............................................................................16
-ii- DEPOSIT ACCOUNT AGREEMENT ------------------------- DEPOSIT ACCOUNT AGREEMENT (this "Agreement"), dated as of December 6, 2002, by and among KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership ("Borrower") and COLUMN FINANCIAL, INC., a Delaware corporation ("Lender"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, pursuant to a certain Loan Agreement (the "Loan Agreement") dated the date hereof between Borrower and Lender, Lender has made a loan (the "Loan") to Borrower in the principal amount of $77,000,000.00; WHEREAS, pursuant to the Mortgages and the Assignments of Leases, Borrower has granted to Lender a security interest in all of Borrower's right, title and interest in, to and under the Rents (as defined in the Loan Agreement) and other revenues derived from or otherwise attributable or allocable to the Properties, and has assigned and conveyed to Lender all of Borrower's right, title and interest in, to and under the Rents due and to become due to Borrower or to which Borrower is now or may hereafter become entitled, arising out of the Properties or any part or parts thereof; and WHEREAS, pursuant to the Clearing Account Agreement, Lockbox Bank shall receive and process Rents and shall, after the occurrence and during the continuance of a Trigger Period, transfer on each Business Day by wire transfer or ACH System to the Deposit Account all amounts constituting available funds on deposit in the Lockbox Account; NOW, THEREFORE, in consideration of the covenants herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: I. DEFINITIONS Section 1.1 General. As used herein, the following terms shall have the following definitions: "Accounts": means, collectively, the Deposit Account, the Tax and Insurance Account, the Debt Service Reserve Account, the Rollover Reserve Account, the Replacement Reserve Account, the Operating Expense Account and the Extraordinary Expense Account. "Additional Operating Expenses" as defined in Section 4.1. "Agent": an Eligible Institution designated by Lender. "Agreement": this Deposit Account Agreement, among Borrower, Agent and Lender, as amended, supplemented or otherwise modified from time to time. -2- "Annual Budget": as defined in the Loan Agreement. "Borrower": shall mean Koger Post Oak Limited Partnership, a Delaware limited partnership, together with its successors and permitted assigns. "Business Day": as defined in the Loan Agreement. "Clearing Account Agreement": shall mean that certain Clearing Account Agreement dated as of December 6, 2002, by and among Borrower, Lender and Lockbox Bank, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time. "Debt Service Reserve Account": as defined in Section 2.1(d). "Deposit Account": as defined in Section 2.1.(a) "Eligible Account": shall mean an identifiable interest-bearing account which is separate from all other funds held by the holding institution that is either (a) an account or accounts maintained with a federal or state-chartered depository institution or trust company which complies with the definition of Eligible Institution or (b) 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. ss.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": shall mean a federal or state chartered depository institution or trust company insured by the Federal Deposit Insurance Corporation the short-term unsecured debt obligations of which are rated at least A-1+ by S&P and P-1 by Moody's in the case of accounts in which funds are held for 30 days or less (or, in the case of accounts in which funds are held for more than 30 days, the long term unsecured debt obligations of which are rated at least "AA" by S&P or "A2" by Moody's), or such other account or accounts with respect to which the Rating Agencies shall have confirmed in writing that the then current rating assigned in any Securitization will not be qualified, downgraded or withdrawn by reason thereof. "Event of Default": as defined in the Loan Agreement. "Extraordinary Expense Account": as defined in Section 2.1(g). "Extraordinary Expenses": as defined in the Loan Agreement. "Insurance Premiums": as defined in the Loan Agreement. "Interest Period": as defined in the Loan Agreement. "Lender": Column Financial, Inc., together with its successors and assigns. "Loan": as defined in the Loan Agreement. -3- "Loan Agreement": as defined in the Recitals hereto. "Loan Documents": as defined in the Loan Agreement. "Lockbox Account": as defined in the Loan Agreement. "Lockbox Bank": as defined in the Loan Agreement. "Obligations": as defined in Section 5.1. "Operating Expense Account": as defined in Section 2.1(c). "Operating Expenses": as defined in the Loan Agreement. "Payment Date": as defined in the Loan Agreement. "Permitted Investments": shall mean any one or more of the following obligations or securities acquired at a purchase price of not greater than par, including those issued by the Servicer, the trustee under any Securitization or any of their respective Affiliates (to the extent satisfying the applicable requirements of this definition), payable on demand or having a scheduled maturity date not later than the Business Day immediately prior to the first Payment Date following the date of acquiring such investment (or, if earlier, the date on which the proceeds of such Permitted Investments are necessary to fulfill the purposes of the applicable Account), having a scheduled maturity date not later than 365 days after the date of origination thereof, and meeting one of the appropriate standards set forth below: (i) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home Administration (certificate of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause (i) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; (ii) Federal Housing Administration debentures; -4- (iii) obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); provided, however, that the investments described in this clause (iii) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; (iv) federal funds, unsecured certificates of deposit, time deposits, bankers' acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated A-1+ by S&P and P-1 by Moody's (or, if not rated by all Rating Agencies, otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause (iv) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; (v) fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers' acceptances issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause (v) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; (vi) debt obligations with maturities of not more than 365 days and at all times rated AA-or higher by S&P and Aa3 by Moody's (or, if not rated by all Rating Agencies, otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause (vi) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; -5- (vii) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated A-1+ by S&P and P-1 by Moody's (or, if not rated by all Rating Agencies, otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause (vii) (A) must have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (B) if rated by S&P, must not have an "r" highlighter affixed to such rating, (C) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (D) such investments must not be subject to liquidation prior to their maturity; (viii) units of taxable money market funds or mutual funds, which funds are regulated investment companies, seek to maintain a constant net asset value per share, which funds are rated AAAm or AAAm-G by S&P and have the highest rating available from each other Rating Agency (or, if not rated by all Rating Agencies, rated by at least S&P as aforesaid and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities) for money market funds or mutual funds; and (ix) any other security, obligation or investment which has been approved as a Permitted Investment in writing by (a) Lender and (b) each Rating Agency, as evidenced by confirmation in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or if higher, then current ratings assigned to the Securities; provided, however, that, in the reasonable judgment of the Servicer, such instrument continues to qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) earning a passive return in the nature of interest and that no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments or (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of 120% of the yield to maturity at par of such underlying investment. "Person": as defined in the Loan Agreement. "Properties": as defined in the Loan Agreement. -6- "Rents": as defined in the Loan Agreement. "Replacement Reserve Account": as defined in Section 2.1(e). "Replacement Reserve Fund": as defined in the Loan Agreement. "Rollover Reserve Account": as defined in Section 2.1(f). "Rollover Reserve Fund": as defined in the Loan Agreement. "Servicer": as defined in the Loan Agreement. "Tax and Insurance Account": as defined in Section 2.1(b). "Tax and Insurance Escrow Fund": as defined in the Loan Agreement. "Taxes": as defined in the Loan Agreement. "Trigger Period": as defined in the Loan Agreement. "UCC": as defined in Section 5.1(a)(iv). Section 1.2 Other Capitalized Terms. All other capitalized terms set forth in this Agreement not defined herein shall have the meanings set forth in the Loan Agreement. II. THE ACCOUNTS Section 2.1 Establishment of Accounts. Borrower acknowledges and confirms that Borrower has established the following accounts with Agent: (a) An account into which the Lockbox Bank shall, after the occurrence and during the continuance of a Trigger Period, transfer on each Business Day by wire or ACH System all amounts constituting available funds on deposit in the Lockbox Account (the "Deposit Account"); (b) An account into which Borrower shall deposit, or cause to be deposited, the sums required to be deposited pursuant to Section 3.2(a)(i) hereof (the "Tax and Insurance Account"). (c) An account into which Borrower shall deposit, or cause to be deposited, the sums required for the payment of Operating Expenses pursuant to the Annual Budget in accordance with Section 3.2(a)(ii) hereof (the "Operating Expense Account"); (d) An account into which Borrower shall deposit, or cause to be deposited, the sums required to be deposited hereunder pursuant to Sections 3.2(a)(iii) and (iv) hereof (the "Debt Service Reserve Account"); -7- (e) An account into which Borrower shall deposit, or cause to be deposited, the sums required to be deposited hereunder pursuant to Section 3.2(a)(v) hereof (the "Replacement Reserve Account"); (f) An account into which Borrower shall deposit, or cause to be deposited, the sums required to be deposited hereunder pursuant to Section 3.2(a)(vi) hereof (the "Rollover Reserve Account"); (g) An account into which Borrower shall deposit, or cause to be deposited, the sums required for the payment of Extraordinary Expenses which have been approved by Lender pursuant to Section 5.1.11(e) of the Loan Agreement (the "Extraordinary Expense Account"); and Section 2.2 Account Name . The Accounts shall each be in the name of Lender; provided, however, that in the event Lender transfers or assigns the Loan, Agent, at Lender's request (which notice of such request shall also be delivered to Borrower and Beneficiary), shall change the name of each account to the name of such transferee or assignee. In the event Lender retains a servicer to service the Loan, Agent, at Lender's request, shall change the name of each account to the name of such servicer, as agent for Lender. Section 2.3 Eligible Accounts. Each Account shall be maintained as an Eligible Account. Each Account is and shall be treated as a "securities account" as such term is defined in Section 8.501(a) of the UCC. Each item of property (whether investment property, financial asset, securities, instrument, cash or other property) credited to each Account shall be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. Subject to the terms of this Agreement, Lender shall be treated as having the right to exercise the rights that comprise any financial asset credited to each Account. All securities or other property underlying any financial assets credited to each Account shall be registered in the name of Lender, indorsed to Lender or in blank or credited to another securities account maintained in the name of Lender and in no case will any financial asset credited to any Account be registered in the name of Borrower, payable to the order of Borrower or specially indorsed to Borrower. Section 2.4 Permitted Investments. Sums on deposit in the Accounts shall not be invested except in Permitted Investments. Provided that an Event of Default shall not have occurred and be continuing, Borrower shall have the right to direct Agent to invest sums on deposit in the Accounts in Permitted Investments; provided, however, in no event shall Borrower direct Agent to make a Permitted Investment if the maturity date of that Permitted Investment is later than the date on which the invested sums are required for payment of an obligation for which the Account was created. Borrower hereby irrevocably authorizes and directs Agent to apply any income earned from Permitted Investments to the respective Accounts. The amount of actual losses sustained on a liquidation of a Permitted Investment shall be deposited into the Lockbox Account by Borrower no later than three (3) Business Day(s) following such liquidation. Borrower shall be responsible for payment of any federal, state or local income or other tax applicable to income earned from Permitted Investments. The Accounts shall be assigned the federal tax identification number of Borrower, which number is 59-2898045. -8- III. DEPOSITS Section 3.1 Deposits into Deposit Account. Borrower represents, warrants and covenants that it has instructed Lockbox Bank that, after the occurrence and during the continuance of a Trigger Period, all amounts constituting available funds in the Lockbox Account shall be transferred on each Business Day to the Deposit Account. Section 3.2 Disbursements from the Deposit Account. (a) During a Trigger Period provided that no Event of Default shall have occurred and be continuing, on each Business Day, Agent shall withdraw all funds in the Deposit Account and apply same in the following order of priority: (i) First, funds sufficient to pay the current calendar monthly deposit into the Tax and Insurance Escrow Fund, if required, shall be deposited in the Tax and Insurance Account; (ii) Second, funds sufficient to pay the Operating Expenses for the current calendar month, as per the Annual Budget then in effect, (including, without limitation, management fees to a Person that is not an Affiliate of the Borrower under a Management Agreement;) and Additional Operating Expenses, if any, for the current calendar month shall be deposited in the Operating Expense Account; (iii) Third, funds sufficient to pay, pursuant to Section 2.2.1 of the Loan Agreement, interest payments on the outstanding principal balance of the Loan for the current preceding month shall be deposited in the Debt Service Reserve Account; (iv) Fourth, funds sufficient to pay any interest accruing at the Default Rate and late payment charges, if any, and other amounts then due to Lender under the Loan Documents including any miscellaneous fees and expenses, if any, shall be deposited in the Debt Service Reserve Account; (v) Fifth, funds sufficient to pay the current calendar monthly deposit, if required, into the Replacement Reserve Fund shall be deposited in the Replacement Reserve Account; (vi) Sixth, funds sufficient to pay the current calendar monthly deposit, if required, into the Rollover Fund shall be deposited into the Rollover Account; (vii) Seventh, funds in an amount sufficient to pay Extraordinary Expenses approved by Lender, if any, for the current calendar month shall be deposited in the Extraordinary Expense Account; and (viii) Eighth, all amounts remaining in the Deposit Account after deposits for items (i)-(vii) shall be remitted to Borrower. (b) Event of Default. Upon the occurrence and during the continuance of an Event of Default, Lender shall promptly notify Agent in writing of such Event of Default and, without -9- notice from Agent or Lender, (a) Borrower shall have no further right in respect of (including, without limitation, the right to instruct Lender or Agent to transfer from) the Accounts, (b) Lender may direct Agent to liquidate and transfer any amounts then invested in Permitted Investments to the Accounts or reinvest such amounts in other Permitted Investments as Lender may reasonably determine is necessary to perfect or protect any security interest granted or purported to be granted hereby or to enable Agent, as agent for Lender, or Lender to exercise and enforce Lender's rights and remedies hereunder with respect to any Collateral, and (c) Lender may apply any funds in the Accounts to any Obligations in such order of priority as Lender may determine. IV. WITHDRAWALS Section 4.1 Withdrawals From Tax and Insurance Account, Debt Service Reserve Account and Operating Expense Account. Lender shall withdraw amounts on deposit in the Tax and Insurance Account to pay Taxes and Insurance Premiums in accordance with the terms of the Loan Agreement. Lender shall withdraw amounts from the Debt Service Reserve Account (a) to pay the interest payments due pursuant to Section 2.2.1 of the Loan Agreement on the date such payment is due and payable, and (b) to make the payments more particularly described in Section 3.2(a)(iv) above, if applicable. Section 4.2 Requests for Withdrawals from the Rollover Reserve Account, Extraordinary Expense Account and Replacement Reserve Accounts. Agent shall disburse funds on deposit in the Rollover Account, the Replacement Reserve Account and the Extraordinary Expense Account in accordance with the written instructions of Lender pursuant to the written request of Borrower, which request of Borrower shall be approved by Lender provided that all the procedures and requirements set forth in the Loan Agreement for such request have been complied with. Section 4.3.......Sole Dominion and Control. Borrower acknowledges and agrees that the Accounts are subject to the sole dominion, control and discretion of Lender, its authorized agents or designees, including Agent and Servicer, subject to the terms hereof and of the Loan Agreement. Except as set forth herein or in the Loan Agreement to the contrary, neither Borrower nor Manager shall have the right of withdrawal with respect to any Account except with the prior written consent of Lender, which consent shall be granted provided that all the procedures and requirements set forth in the Loan Agreement for such request have been satisfied. V. PLEDGE OF ACCOUNTS Section 5.1 Security for Obligations. (a) To secure the full and punctual payment and performance of all obligations of Borrower now or hereafter existing with respect to the Loan, whether for principal, interest, fees, expenses or otherwise, and all obligations of Borrower now or hereafter existing under the Loan Agreement, the Note, the Mortgage, this Agreement and all other Loan Documents (all such obligations, collectively, the "Obligations"), Borrower hereby grants to Lender a first priority continuing security interest in and to the following property of Borrower, whether now owned or existing or hereafter or arising and regardless of where located (all of the same, collectively, the "Collateral"): -10- (i) the Accounts, all financial assets (as defined in Section 8-102(a) of the UCC (hereinafter defined), cash, checks, drafts, certificates and instruments, if any, from time to time deposited or held in the Accounts from time to time including, without limitation, all deposits or wire transfers made to the Accounts; (ii) any and all amounts invested in Permitted Investments; (iii) all interest, dividends, cash, instruments and other property from time to time received, receivable or otherwise payable in respect of, or in exchange for, any or all of the foregoing; and (iv) to the extent not covered by clauses (i), (ii) or (iii) above, all "proceeds" (as defined under the Uniform Commercial Code as in effect in the State in which the Accounts are located (the "UCC")) of any or all of the foregoing. (b) Lender and Agent, as agent for Lender, shall have with respect to the Collateral, in addition to the rights and remedies herein set forth, all of the rights and remedies available to a secured party under the UCC, as if such rights and remedies were fully set forth herein. (c) If at any time Agent shall receive an "entitlement order" (within the meaning of Section 8-102(a)(8) of the Revised UCC) issued by Lender and relating to any Account, Agent shall comply with such entitlement order without further consent by Lender, Borrower, Beneficiary or any other Person. (d) In the event that Agent has or subsequently obtains by agreement, operation of law or otherwise a security interest in any Account or any security entitlement, financial asset, investment property (as such terms are defined in the UCC) or other asset credited thereto, Agent hereby agrees that such security interest shall be subordinate to the security interest of Lender. Section 5.2 Financing Statement; Further Assurances. Simultaneously herewith, Borrower shall execute and deliver to Lender for filing a financing statement or statements in connection with the Collateral in the form required by Lender to properly perfect Lender's security interest therein (to the extent the Collateral is the type that can be perfected by filing a financing statement). Borrower agrees that at any time and from time to time, at the expense of Borrower, Borrower will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary to perfect and protect any security interest granted or purported to be granted hereby (including, without limitation, any security interest in and to any Permitted Investments) or to enable Agent or Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Section 5.3 Termination of Agreement. This Agreement shall create a continuing security interest in the Collateral and shall remain in full force and effect until payment in full of the Obligations. Upon payment and performance in full of the Obligations, this Agreement shall terminate and Borrower shall be entitled to the return, upon its request and at its expense, of such of the Collateral as shall not have been sold or otherwise applied pursuant to the terms hereof, and Agent and/or Lender shall execute such instruments and documents as may be reasonably requested by Borrower to evidence such termination and the release of the lien hereof. -11- VI. RIGHTS AND DUTIES OF LENDER AND AGENT Section 6.1 Reasonable Care. Beyond the exercise of reasonable care in the custody thereof or as otherwise expressly provided herein, neither Agent nor Lender shall have any duty as to any Collateral in its possession or control as agent therefor or bailee thereof or any income thereon or the preservation of rights against any Person or otherwise with respect thereto. Agent and Lender each shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equal to that which Agent or Lender accords its own property, it being understood that Lender shall not be liable or responsible for any loss or damage to any of the Collateral, or for any diminution in value thereof, by reason of the act or omission of Agent or Lender, its Affiliates, agents, employees or bailees, except to the extent that such loss or damage results from Agent's or Lender's gross negligence or willful misconduct, provided that nothing in this Article VI shall be deemed to relieve Agent from the duties and standard of care which, as a commercial bank, it generally owes to depositors. Neither Lender nor Agent shall have any liability for any loss resulting from the investment of funds in Permitted Investments in accordance with the terms and conditions of this Agreement, except for damages resulting from the gross negligence or willful misconduct of such parties. Section 6.2 Indemnity. Agent, in its capacity as agent hereunder, shall be responsible for the performance only of such duties as are specifically set forth herein, and no duty shall be implied from any provision hereof. Agent shall not be under any obligation or duty to perform any act which would involve it in expense or liability or to institute or defend any suit in respect hereof, or to advance any of its own monies. Borrower shall indemnify and hold Agent and Lender, their respective employees and officers harmless from and against any loss, cost or damage (including, without limitation, reasonable attorneys' fees and disbursements) incurred by Agent or Lender in connection with the transactions contemplated hereby, except to the extent that such loss or damage results from Agent's or Lender's gross negligence or willful misconduct or a breach of Section 6.1 hereof. Section 6.3 Reliance. Agent shall be protected in acting upon any notice, resolution, request, consent, order, certificate, report, opinion, bond or other paper, document or signature believed by it in the exercise of reasonable judgment to be genuine, and it may be assumed in the exercise of reasonable judgment that any person purporting to act on behalf of any Person giving any of the foregoing in connection with the provisions hereof has been duly authorized to do so. Agent may consult with counsel, and the opinion of such counsel shall be full and complete authorization and protection in respect of any action taken or suffered by it hereunder and in good faith in accordance therewith. Agent shall not be liable for any act or omission done or omitted to be done by Agent in the exercise of reasonable judgment in reliance upon any instruction, direction or certification received by Agent and without gross negligence or willful or reckless misconduct. Section 6.4 Resignation of Agent. (a) Agent shall have the right to resign as Agent hereunder upon thirty (30) days' prior written notice to Borrower and Lender, and in the event of such resignation, Lender shall appoint a successor Agent which must be an Eligible Institution. No such resignation by Agent shall become effective until a successor Agent shall have accepted such appointment and executed an instrument by which it shall have assumed all of the rights and -12- obligations of Agent hereunder. If no such successor Agent is appointed within sixty (60) days after receipt of the resigning Agent's notice of resignation, the resigning Agent may petition a court for the appointment of a successor Agent. (b) In connection with any resignation by Agent, (i) the resigning Agent shall, at the sole cost of Borrower, (A) duly assign, transfer and deliver to the successor Agent this Agreement and all cash and Permitted Investments held by it hereunder, (B) execute such financing statements and other instruments as may be necessary to assign to the successor Agent the security interest in the Collateral existing in favor of the retiring Agent hereunder and to otherwise give effect to such succession and (C) take such other actions as may be reasonably required by Lender, Borrower or the successor Agent in connection with the foregoing and (ii) the successor Agent shall establish in its name, as secured party, cash collateral accounts, which shall become the Accounts for purposes of this Agreement upon the succession of such Agent. (c) Lender at its sole discretion shall have the right, upon thirty (30) days notice to Agent, and, at its sole cost and expense, to substitute Agent with a successor Agent that satisfies the requirements of an Eligible Institution or to have one or more of the Accounts held by another Eligible Institution, provided that such successor Agent shall perform the duties of Agent pursuant to the terms of this Agreement. Section 6.5 Lender Appointed Attorney-In-Fact. Borrower hereby irrevocably constitutes and appoints Lender as Borrower's true and lawful attorney-in-fact, with full power of substitution, to execute, acknowledge and deliver any instruments and to exercise and enforce every right, power, remedy, option and privilege of Borrower with respect to the Collateral, and do in the name, place and stead of Borrower, all such acts, things and deeds for and on behalf of and in the name of Borrower, which Borrower could or might do or which Agent or Lender may deem reasonably necessary to more fully vest in Lender the rights and remedies provided for herein and to accomplish the purposes of this Agreement; provided, however, unless Lender deems the situation to be an emergency, Lender will not exercise such rights unless Borrower has failed to do so within three (3) days of notice thereof from Lender. The foregoing powers of attorney are irrevocable and coupled with an interest. Section 6.6 Acknowledgment of Lien/Offset Rights. Agent hereby acknowledges and agrees that (a) the Accounts shall be held by Agent in the name of Lender, (b) all funds held in the Accounts shall be held for the benefit of Lender, (c) Borrower has granted to Lender a first priority security interest in the Collateral, (d) Agent shall not disburse any funds from the Accounts except as provided herein, and (e) Agent shall invest and reinvest any balance of the Accounts in Permitted Investments. Agent hereby waives any right of offset, banker's lien or similar rights against, or any assignment, security interest or other interest in, the Collateral. VII. REMEDIES Section 7.1 Remedies. Upon the occurrence and during the continuance of an Event of Default, Lender or Agent, as agent for Lender, may: -13- (a) without notice to Borrower, except as required by law, and at any time or from time to time, charge, set-off and otherwise apply all or any part of the Collateral against the Obligations or any part thereof; (b) in its sole discretion, at any time and from time to time, exercise any and all rights and remedies available to it under this Agreement, and/or as a secured party under the UCC and/or under any other applicable law; and (c) demand, collect, take possession of, receive, settle, compromise, adjust, sue for, foreclose or realize upon the Collateral (or any portion thereof) as Lender may determine in its sole discretion. Section 7.2 Waiver. Borrower hereby expressly waives, to the fullest extent permitted by law, presentment, demand, protest or any notice of any kind in connection with this Agreement or the Collateral. Borrower acknowledges and agrees that ten (10) days' prior written notice of the time and place of any public sale of the Collateral or any other intended disposition thereof shall be reasonable and sufficient notice to Borrower within the meaning of the UCC. VIII. MISCELLANEOUS Section 8.1 Transfers and Other Liens. Except as permitted hereby or by the Loan Agreement, Borrower agrees that it will not (i) sell or otherwise dispose of any of the Collateral or (ii) create or permit to exist any Lien upon or with respect to all or any of the Collateral, except for the Lien granted under this Agreement. Section 8.2 Lender's Right to Perform Borrower's Obligations; No Liability of Lender. If Borrower fails to perform any of the covenants or obligations contained herein, and such failure shall continue for a period five (5) Business Days after Borrower's receipt of written notice thereof from Lender, Lender may itself perform, or cause performance of, such covenants or obligations, and the reasonable expenses of Lender incurred in connection therewith shall be payable by Borrower to Lender. Notwithstanding Lender's right to perform certain obligations of Borrower, it is acknowledged and agreed that Borrower retains control of the Properties and operation thereof and notwithstanding anything contained herein or Agent's or Lender's exercise of any of its rights or remedies hereunder, under the Loan Documents or otherwise at law or in equity, neither Agent nor Lender shall be deemed to be a mortgagee-in-possession nor shall Lender be subject to any liability with respect to the Properties or otherwise based upon any claim of lender liability. Section 8.3 No Waiver. The rights and remedies provided in this Agreement and the other Loan Documents are cumulative and may be exercised independently or concurrently, and are not exclusive of any other right or remedy provided at law or in equity. No failure to exercise or delay by Agent or Lender in exercising any right or remedy hereunder or under the Loan Documents shall impair or prohibit the exercise of any such rights or remedies in the future or be deemed to constitute a waiver or limitation of any such right or remedy or acquiescence therein. Every right and remedy granted to Agent and/or Lender hereunder or by law may be exercised by Agent and/or Lender at any time and from time to time, and as often as Agent -14- and/or Lender may deem it expedient. Any and all of Agent's and/or Lender's rights with respect to the lien and security interest granted hereunder shall continue unimpaired, and Borrower shall be and remain obligated in accordance with the terms hereof, notwithstanding (a) any proceeding of Borrower under the Federal Bankruptcy Code or any bankruptcy, insolvency or reorganization laws or statutes of any state, (b) the release or substitution of Collateral at any time, or of any rights or interests therein or (c) any delay, extension of time, renewal, compromise or other indulgence granted by the Agent and/or Lender in the event of any default, with respect to the Collateral or otherwise hereunder. No delay or extension of time by Agent and/or Lender in exercising any power of sale, option or other right or remedy hereunder, and no notice or demand which may be given to or made upon Borrower by Agent and/or Lender, shall constitute a waiver thereof, or limit, impair or prejudice Agent's and/or Lender's right, without notice or demand, to take any action against Borrower or to exercise any other power of sale, option or any other right or remedy. Section 8.4 Expenses. The Collateral shall secure, and Borrower shall pay to Agent and Lender and/or Agent's and Lender's counsel on demand, from time to time, all reasonable costs and expenses (including, but not limited to, reasonable attorneys' fees and disbursements, and transfer, recording and filing fees, taxes and other charges) of, or incidental to, the creation or perfection of any lien or security interest granted or intended to be granted hereby, the custody, care, sale, transfer, administration, collection of or realization on the Collateral, or in any way relating to the enforcement, protection or preservation of the rights or remedies of Agent and/or Lender under this Agreement, the Loan Agreement, the Note, the Mortgage, or the other Loan Documents. Standard and customary fees and charges associated with the Accounts shall be included on a monthly consolidated account analysis statement which Agent shall submit to Borrower for Borrower's payment. This statement shall set forth the fees and charges payable for such month, including, but not limited to reasonable fees and reasonable expenses incurred in connection with this Agreement and be accompanied by reasonably detailed supporting documentation. Agent shall be entitled to charge the Accounts for such fees and expenses as indicated by the analysis statement. Section 8.5 Entire Agreement. This Agreement constitutes the entire and final agreement between the parties with respect to the subject matter hereof and may not be changed, terminated or otherwise varied, except by a writing duly executed by the parties. Section 8.6 No Waiver. No waiver of any term or condition of this Agreement, whether by delay, omission or otherwise, shall be effective unless in writing and signed by the party sought to be charged, and then such waiver shall be effective only in the specific instance and for the purpose for which given. Section 8.7 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective successors and permitted assigns. Section 8.8 Notices. All notices, demands, requests, consents, approvals and other communications (any of the foregoing, a "Notice") required, permitted, or desired to be given hereunder shall be in writing sent by telefax or by registered or certified mail, postage prepaid, return receipt requested or delivered by hand or reputable overnight courier addressed to the party to be so notified at its address hereinafter set forth, or to such other address as such party -15- may hereafter specify in accordance with the provisions of this Section 8.8. Any such Notice shall be deemed to have been received three (3) days after the date such Notice is mailed or on the date of sending by telefax or delivery by hand or the next day if sent by an overnight commercial courier addressed to the parties as follows: If to Lender: Column Financial, Inc. One Madison Avenue New York, New York 10010 Attention: Edmund Taylor Facsimile No. (212) 325-8106 with a copy to: Column Financial, Inc. 11 Madison Avenue New York, New York 10010 Legal and Compliance Department Attention: Pamela McCormack, Esq. Facsimile No. (212) 325-6736 with a copy to: Cadwalader, Wickersham & Taft 100 Maiden Lane New York, New York 10038 Attention: Fredric L. Altschuler, Esq. Facsimile No. (212) 504-6666 If to Borrower: Koger Post Oak Limited Partnership 433 Plaza Real Suite 335 Boca Raton, Florida 33432 Attention: Thomas Brockwell Facsimile No.: (561) 276-4756 With a copy to: White & Case LLP 200 South Biscayne Blvd., Suite 4900 Miami, Florida 33131 Attention: William Walker, Esq. Facsimile No. (305) 348-5744 Section 8.9 Captions. All captions in this Agreement are included herein for convenience of reference only and shall not constitute part of this Agreement for any other purpose. Section 8.10 Governing Law. This Agreement shall be governed by and construed and enforced in all respects in accordance with the laws of the State of New York without regard to conflicts of law principles of such State. Section 8.11 Counterparts. This Agreement may be executed in any number of counterparts. -16- IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. BORROWER: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell ---------------------------- Name: Thomas C. Brockwell Title: Vice President LENDER: COLUMN FINANCIAL, INC. By: /S/ Priscilla Horning ------------------------- Name: Priscilla Horning Title: Vice President EXH. A-1 EX-10 13 a4339684-10k.txt KOGER EXHIBIT 10-K EXHIBIT 10(k) ENVIRONMENTAL INDEMNITY AGREEMENT --------------------------------- THIS ENVIRONMENTAL INDEMNITY AGREEMENT (the "Agreement") is made as of the 6th day of December, 2002 by KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership, having an address at 433 Plaza Real, Suite 335, Boca Raton, Florida 33432 ("Indemnitor"), in favor of COLUMN FINANCIAL, INC., having an address at 11 Madison Avenue, New York, New York 10010 ("Indemnitee") and other Indemnified Parties (defined below). RECITALS: A. Indemnitor is the owner of certain real property known as 3000 Post Oak Boulevard, 3040 Post Oak Boulevard and 3050 Post Oak Boulevard (said real property being referred to as the "Land"; the Land, together with all structures, buildings and improvements now or hereafter located on the Land, being collectively referred to as the "Property"). B. Indemnitee is prepared to make a loan (the "Loan") to Indemnitor in the principal amount of Seventy Seven Million and No/100 Dollars ($77,000,000.00) pursuant to a Loan Agreement of even date herewith between Indemnitor and Indemnitee (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, the "Loan Agreement"), which Loan shall be evidenced by that certain Promissory Note of even date herewith given by Indemnitor in favor of Indemnitee (as amended, restated, replaced, supplemented or otherwise modified from time to time, the "Note") and secured by, among other things, those certain deeds of trust of even date herewith given by Indemnitor to Indemnitee and encumbering the Property (as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time, collectively, the "Mortgage"). Capitalized terms used by not otherwise defined herein shall have the meaning provided in the Loan Agreement. C. Indemnitee is unwilling to make the Loan unless Indemnitor agrees to provide the indemnification, representations, warranties, covenants and other matters described in this Agreement for the benefit of the Indemnified Parties. D. Indemnitor is entering into this Agreement to induce Indemnitee to make the Loan. AGREEMENT: NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Indemnitor hereby represents, warrants, covenants and agrees for the benefit of the Indemnified Parties as follows: 1. Environmental Representations and Warranties. Except as otherwise disclosed by that certain Phase I environmental report (or Phase II environmental report, if required) with respect to the Property delivered to Indemnitee by Indemnitor in connection with the origination of the Loan (referred to below as the "Environmental Report"), a copy of which has been provided to Indemnitee, (a) there are no Hazardous Substances (defined below) or underground storage tanks in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws (defined below) and with permits issued pursuant thereto and (ii) fully disclosed to Indemnitee in writing pursuant to the Environmental Report; (b) there are no past, present or, to Indemnitor's knowledge, threatened Releases (defined below) of Hazardous Substances in, on, under or from the Property which have not been fully remediated in accordance with Environmental Law; (c) to Indemnitor's knowledge, there is no threat of any Release of Hazardous Substances migrating to the Property; (d) to Indemnitor's knowledge, there is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection with the Property which has not been fully remediated in accordance with Environmental Law; (e) Indemnitor does not know of, and has not received, any written or oral notice or other communication from any Person (including but not limited to a Governmental Authority) relating to Hazardous Substances or Remediation (defined below) thereof, of possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with any of the foregoing; and (f) Indemnitor has truthfully and fully provided to Indemnitee, in writing, any and all material information relating to conditions in, on, under or from the Property that is known to Indemnitor and all information that is contained in files and records of Indemnitor, including but not limited to any reports relating to Hazardous Substances in, on, under or from the Property and/or to the environmental condition of the Property. 2. Environmental Covenants. Indemnitor covenants and agrees that: (a) all uses and operations on or of the Property, whether by Indemnitor or any other Person, shall be in compliance with all Environmental Laws and permits issued pursuant thereto; (b) except in compliance with Environmental Law, there shall be no Releases of Hazardous Substances in, on, under or from the Property; (c) there shall be no Hazardous Substances in, on, or under the Property, except those that are both (i) in compliance with all Environmental Laws and with permits issued pursuant thereto and (ii) fully disclosed to Indemnitee in writing; (d) Indemnitor shall keep the Property free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law, whether due to any act or omission of Indemnitor or any other Person (the "Environmental Liens"); (e) Indemnitor shall, at its sole cost and expense, fully and expeditiously cooperate in all activities pursuant to Paragraph 3 of this Agreement, including but not limited to providing all relevant information and making knowledgeable persons available for interviews; (f) Indemnitor shall, at its sole cost and expense, perform any environmental site assessment or other investigation of environmental conditions in connection with the Property, pursuant to any reasonable written request of Indemnitee (including but not limited to sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas) (provided that Lender shall only make such request if Indemnitee has good faith reason to believe that an undisclosed Release of a Hazardous Substance has occurred and/or that any provision of this Agreement has been breached), and share with Indemnitee the reports and other results thereof, and Indemnitee and the other Indemnified Parties shall be entitled to rely on such reports and other results thereof to the extent permitted by the Person preparing the same; (g) Indemnitor shall, at its sole cost and expense, comply with all reasonable written requests of Indemnitee to (i) effectuate Remediation of any adverse environmental condition (including but not limited to a Release of a Hazardous Substance -2- other than a Release in compliance with Environmental Law) in, on, under or from the Property; (ii) comply with any Environmental Law; (iii) comply with any directive from any Governmental Authority; and (iv) take any other reasonable action necessary or appropriate for protection of human health or the environment; (h) with respect to the existence of Hazardous Substances on the Property, Indemnitor shall not do or allow any tenant or other user of the Property to do any act that materially increases the dangers to human health or the environment, poses an unreasonable risk of harm to any Person (whether on or off the Property), impairs or may impair the value of the Property in any material respect, is contrary to any requirement of any insurer, constitutes a public or private nuisance, constitutes waste, or violates any covenant, condition, agreement or easement applicable to the Property; and (i) Indemnitor shall immediately notify Indemnitee in writing of (A) any presence or Releases or threatened Releases of Hazardous Substances in, on, under, from or migrating towards the Property; (B) any non-compliance with any Environmental Laws related in any way to the Property; (C) any actual or potential Environmental Lien; (D) any required or proposed Remediation of environmental conditions relating to the Property; and (E) any written or oral notice or other communication of which any Indemnitor becomes aware from any source whatsoever (including but not limited to a governmental entity) relating in any way to Hazardous Substances or Remediation thereof, possible liability of any Person pursuant to any Environmental Law, other environmental conditions in connection with the Property, or any actual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement. 3. Indemnified Rights/Cooperation and Access. In the event the Indemnified Parties have reason to believe that an environmental hazard exists on the Property that does not, in the sole discretion of the Indemnified Parties, endanger any tenants or other occupants of the Property or their guests or the general public or materially and adversely affect the value of the Property, upon reasonable notice from the Indemnitee, Indemnitor shall, at Indemnitor's expense, promptly cause an engineer or consultant satisfactory to the Indemnified Parties to conduct any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Indemnified Parties) and take any samples of soil, groundwater or other water, air, or building materials or any other invasive testing requested by Indemnitee and promptly deliver the results of any such assessment, audit, sampling or other testing; provided, however, if such results are not delivered to the Indemnified Parties within a reasonable period or if the Indemnified Parties have reason to believe that an environmental hazard exists on the Property that, in the sole judgment of the Indemnified Parties, endangers any tenant or other occupant of the Property or their guests or the general public or may materially and adversely affect the value of the Property, upon reasonable notice to Borrower, the Indemnified Parties and any other Person designated by the Indemnified Parties, including but not limited to any receiver, any representative of a governmental entity, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Property at all reasonable times to assess any and all aspects of the environmental condition of the Property and its use, including but not limited to conducting any environmental assessment or audit (the scope of which shall be determined in the sole and absolute discretion of the Indemnified Parties) and taking samples of soil, groundwater or other water, air, or building materials, and reasonably conducting other invasive testing. Indemnitor shall cooperate with and provide the Indemnified Parties and any such Person designated by the Indemnified Parties with access to the Property. -3- 4. Indemnification. Indemnitor covenants and agrees, at its sole cost and expense, to protect, defend, indemnify, release and hold Indemnified Parties harmless from and against any and all Losses (defined below) imposed upon or incurred by or asserted against any Indemnified Parties and directly or indirectly arising out of or in any way relating to any one or more of the following: (a) any presence of any Hazardous Substances in, on, above, or under the Property; (b) any past, present or threatened Release of Hazardous Substances in, on, above, under or from the Property; (c) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Property of any Hazardous Substances at any time located in, under, on or above the Property; (d) any activity by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in connection with any actual or proposed Remediation of any Hazardous Substances at any time located in, under, on or above the Property, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (e) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any Environmental Law) in connection with the Property or operations thereon, including but not limited to any failure by Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property to comply with any order of any Governmental Authority in connection with any Environmental Laws; (f) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Property; (g) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement; (h) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Property, including but not limited to reasonable costs to investigate and assess such injury, destruction or loss; (i) any acts of Indemnitor, any Person affiliated with Indemnitor, and any tenant or other user of the Property in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Substances at any facility or incineration vessel containing such or similar hazardous materials; (j) any acts of Indemnitor, any Person affiliated with any Indemnitor, and any tenant or other user of the Property in accepting any Hazardous Substances for transport to disposal or treatment facilities, incineration vessels or sites from which there is a Release, or a threatened Release of any Hazardous Substance which causes the incurrence of costs for Remediation; (k) any personal injury, wrongful death, or property or other damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Property; and (l) any material misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement, the Loan Agreement or the Mortgage. Notwithstanding anything contained herein to the contrary Indemnitor's indemnification obligations set forth in this Section 4, shall not include any Losses (including attorneys' fees) (i) incurred as a result of any act or omission of, or breach of this Agreement by any Indemnified Party, (ii) accruing after any Indemnified Party obtains possession of the Property or exercises its rights with respect to the Leases. 5. Duty to Defend and Attorneys and Other Fees and Expenses. Upon written request by any Indemnified Party, Indemnitor shall defend same (if requested by any -4- Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals approved by the Indemnified Party, which approval shall not be unreasonably withheld or delayed. Notwithstanding the foregoing, any Indemnified Parties may, in their sole and absolute discretion, at their sole cost and expense, engage their own attorneys and other professionals to defend or assist them, and, at the option of Indemnified Parties, their attorneys shall control the resolution of any claim or proceeding, providing that no compromise or settlement shall be entered without Indemnitor's consent, which consent shall not be unreasonably withheld. Upon demand, Indemnitor shall pay or, in the sole and absolute discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals in connection therewith. 6. Definitions. Capitalized terms used herein and not specifically defined herein shall have the respective meanings ascribed to such terms in the Loan Agreement. As used in this Agreement, the following terms shall have the following meanings: The term "Environmental Law" means any present and future federal, state and local laws, statutes, ordinances, rules, regulations and the like, as well as common law, relating to protection of human health or the environment, relating to Hazardous Substances, relating to liability for or costs of other actual or threatened danger to human health or the environment. The term "Environmental Law" includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues: the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource Conservation and Recovery Act (including but not limited to Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act. The term "Environmental Law" also includes, but is not limited to, any present and future federal, state and local laws, statutes ordinances, rules, regulations, permits or authorizations and the like, as well as common law that (a) condition transfer of property upon a negative declaration or other approval of a Governmental Authority of the environmental condition of the Property; (b) require notification or disclosure of Releases of Hazardous Substances or other environmental condition of the Property to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property; or (c) impose conditions or requirements in connection with permits or other authorization for lawful activity; (d) relate to nuisance, trespass or other causes of action related to the Property; or (e) relate to wrongful death, personal injury, or property or other damage in connection with any physical condition or use of the Property. The term "Hazardous Substances" includes but is not limited to any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the environment, including but not limited -5- to petroleum and petroleum products, asbestos and asbestos-containing materials, polychlorinated biphenyls, lead, radon, radioactive materials, flammables and explosives, but excluding substances of kinds and in amounts ordinarily and customarily used or stored in similar properties for the purposes of cleaning or other maintenance or operations and otherwise in compliance with all Environmental Laws. The term "Indemnified Parties" includes Indemnitee, any Person in whose name the encumbrance created by the Mortgage is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan (including, but not limited to, Investors (defined below)), as well as custodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefit of third parties) as well as the respective directors, officers, shareholders, partners, employees, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other Person who holds or acquires, or will have held, a participation or other full or partial interest in the Loan or the Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion of Indemnitee's assets and business). The term "Investors" means collectively, any purchaser, transferee, assignee, servicer, participant or investor of or in the Loan or the Securities. The term "Legal Action" means any claim, suit or proceeding, whether administrative or judicial in nature. The term "Losses" includes any losses, damages, costs, fees, expenses, claims, suits, judgments, awards, liabilities (including but not limited to strict liabilities), obligations, debts, diminutions in value, fines, penalties, charges, costs of Remediation (whether or not performed voluntarily), amounts paid in settlement, foreseeable and unforeseeable consequential damages, litigation costs, reasonable attorneys' fees, engineers' fees, environmental consultants' fees, and investigation costs (including but not limited to costs for sampling, testing and analysis of soil, water, air, building materials, and other materials and substances whether solid, liquid or gas), of whatever kind or nature, and whether or not incurred in connection with any judicial or administrative proceedings, actions, claims, suits, judgments or awards. The term "Release" includes, but is not limited to, any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances other than in accordance with Environmental Law. The term "Remediation" includes, but is not limited to, any response, remedial, removal, or corrective action; any activity to clean up, detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance; any actions to prevent, cure or mitigate any Release of any Hazardous Substance; any action to comply with any Environmental Laws or with any permits issued pursuant thereto; any inspection, investigation, study, monitoring, assessment, audit, sampling and testing, laboratory or other analysis, or evaluation relating to any Hazardous Substances or to anything referred to herein. -6- 7. Unimpaired Liability. The liability of Indemnitor under this Agreement shall in no way be limited or impaired by, and Indemnitor hereby consents to and agrees to be bound by, any amendment or modification of the provisions of the Note, the Loan Agreement, the Mortgage or any other Loan Document to or with Indemnitee by Indemnitor or any Person who succeeds Indemnitor or any Person as owner of the Property. In addition, the liability of Indemnitor under this Agreement shall in no way be limited or impaired by (i) any extensions of time for performance required by the Note, the Loan Agreement, the Mortgage or any of the other Loan Documents, (ii) any sale or transfer of all or part of the Property, (iii) except as provided herein, any exculpatory provision in the Note, the Loan Agreement, the Mortgage, or any of the other Loan Documents limiting Indemnitee's recourse to the Property or to any other security for the Note, or limiting Indemnitee's rights to a deficiency judgment against Indemnitor, (iv) the accuracy or inaccuracy of the representations and warranties made by Indemnitor under the Note, the Loan Agreement, the Mortgage or any of the other Loan Documents or herein, (v) the release of Indemnitor or any other Person from performance or observance of any of the agreements, covenants, terms or condition contained in any of the other Loan Documents by operation of law, Indemnitee's voluntary act, or otherwise, (vi) the release or substitution in whole or in part of any security for the Note, or (vii) Indemnitee's failure to record the Mortgage or file any UCC financing statements (or Indemnitee's improper recording or filing of any thereof) or to otherwise perfect, protect, secure or insure any security interest or lien given as security for the Note; and, in any such case, whether with or without notice to Indemnitor and with or without consideration. 8. Enforcement. Indemnified Parties may enforce the obligations of Indemnitor without first resorting to or exhausting any security or collateral or without first having recourse to the Note, the Loan Agreement, the Mortgage, or any other Loan Documents or any of the Property, through foreclosure proceedings or otherwise, provided, however, that nothing herein shall inhibit or prevent Indemnitee from suing on the Note, foreclosing, or exercising any power of sale under, the Mortgage, or exercising any other rights and remedies thereunder. This Agreement is not collateral or security for the debt of Indemnitor pursuant to the Loan, unless Indemnitee expressly elects in writing to make this Agreement additional collateral or security for the debt of Indemnitor pursuant to the Loan, which Indemnitee is entitled to do in its sole and absolute discretion. It is not necessary for an Event of Default to have occurred for Indemnified Parties to exercise their rights pursuant to this Agreement. Notwithstanding any provision of the Loan Agreement, the obligations pursuant to this Agreement are exceptions to any non-recourse or exculpation provision of the Loan Agreement; Indemnitor is fully and personally liable for such obligations, and such liability is not limited to the original or amortized principal balance of the Loan or the value of the Property. 9. Survival. Except as set forth in Section 4 hereof, the obligations and liabilities of Indemnitor under this Agreement shall fully survive indefinitely notwithstanding any termination, satisfaction, assignment, entry of a judgment of foreclosure, exercise of any power of sale, or delivery of a deed in lieu of foreclosure of the Mortgage. Notwithstanding the provisions of this Agreement to the contrary, the liabilities and obligations of Indemnitor hereunder shall not apply to the extent that Indemnitor can prove that such liabilities and obligations arose solely from Hazardous Substances that: (a) were not present on or a threat to the Property prior to the date that Indemnitee or its nominee acquired title to the Property, -7- whether by foreclosure, exercise of power of sale or otherwise and (b) were not the result of any act or negligence of Indemnitor or any of Indemnitor's affiliates, agents or contractors. 10. Interest. Any amounts payable to any Indemnified Parties under this Agreement shall become immediately due and payable on demand and, if not paid within thirty (30) days of such demand therefor, shall bear interest at the lesser of (a) the Default Rate or (b) the maximum interest rate which Indemnitor may by law pay or Indemnified Parties may charge and collect, from the date payment was due, provided that the foregoing shall be subject to the provisions of Article 4 of the Note. 11. Waivers. (a) Indemnitor hereby waives (i) any right or claim of right to cause a marshaling of Indemnitor's assets or to cause Indemnitee or other Indemnified Parties to proceed against any of the security for the Loan before proceeding under this Agreement against Indemnitor; (ii) and relinquishes all rights and remedies accorded by applicable law to indemnitors or guarantors, except any rights of subrogation which Indemnitor may have, provided that the indemnity provided for hereunder shall neither be contingent upon the existence of any such rights of subrogation nor subject to any claims or defenses whatsoever which may be asserted in connection with the enforcement or attempted enforcement of such subrogation rights including, without limitation, any claim that such subrogation rights were abrogated by any acts of Indemnitee or other Indemnified Parties; (iii) the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against or by Indemnitee or other Indemnified Parties; (iv) notice of acceptance hereof and of any action taken or omitted in reliance hereon; (v) presentment for payment, demand of payment, protest or notice of nonpayment or failure to perform or observe, or other proof, or notice or demand; and (vi) all homestead exemption rights against the obligations hereunder and the benefits of any statutes of limitations or repose. Notwithstanding anything to the contrary contained herein, Indemnitor hereby agrees to postpone the exercise of any rights of subrogation with respect to any collateral securing the Loan until the Loan shall have been paid in full. (b) INDEMNITOR AND INDEMNITEE, ON BEHALF OF ITSELF AND THE OTHER INDEMNIFIED PARTIES (TO THE EXTENT SUCH WAIVER ON BEHALF OF SUCH PARTIES BY INDEMNITEE IS PERMITTED BY APPLICABLE LAW OR OTHERWISE), HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY ACTS OR OMISSIONS OF THE PARTIES IN CONNECTION THEREWITH. 12. Subrogation. Indemnitor shall take any and all reasonable actions, including institution of legal action against third parties, necessary or appropriate to obtain reimbursement, payment or compensation from such persons responsible for the presence of any Hazardous Substances at, in, on, under or near the Property or otherwise obligated by law to bear the cost. Indemnified Parties shall be and hereby are subrogated to all of Indemnitor's rights now or hereafter in such claims. -8- 13. Indemnitor's Representations and Warranties. Indemnitor represents and warrants that: (a) it has the full power and authority to execute and deliver this Agreement and to perform its obligations hereunder; the execution, delivery and performance of this Agreement by Indemnitor has been duly and validly authorized; and all requisite action has been taken by Indemnitor to make this Agreement valid and binding upon Indemnitor, enforceable in accordance with its terms; (b) its execution of, and compliance with, this Agreement is in the ordinary course of business of Indemnitor and will not result in the breach of any term or provision of the charter, by-laws, partnership or trust agreement, or other governing instrument of Indemnitor or result in the breach of any term or provision of, or conflict with or constitute a default under, or result in the acceleration of any obligation under, any agreement, indenture or loan or credit agreement or other instrument to which Indemnitor or the Property is subject, or result in the violation of any law, rule, regulation, order, judgment or decree to which Indemnitor or the Property is subject; (c) to the best of Indemnitor's knowledge, there is no action, suit, proceeding or investigation pending or threatened against it which, either in any one instance or in the aggregate, may result in any material adverse change in the business, operations, financial condition, properties or assets of Indemnitor, or in any material impairment of the right or ability of Indemnitor to carry on its business substantially as now conducted, or in any material liability on the part of Indemnitor, or which would draw into question the validity of this Agreement or of any action taken or to be taken in connection with the obligations of Indemnitor contemplated herein, or which would be likely to impair materially the ability of Indemnitor to perform under the terms of this Agreement; (d) it does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in this Agreement; (e) to the best of Indemnitor's knowledge, no approval, authorization, order, license or consent of, or registration or filing with, any governmental authority or other person, and no approval, authorization or consent of any other party is required in connection with this Agreement; and (f) this Agreement constitutes a valid, legal and binding obligation of Indemnitor, enforceable against it in accordance with the terms hereof. 14. No Waiver. No delay by any Indemnified Party in exercising any right, power or privilege under this Agreement shall operate as a waiver of any such privilege, power or right. 15. Notice of Legal Actions. Each party hereto shall, within five (5) business days of receipt thereof, give written notice to the other party hereto of (i) any notice, advice or other communication from any Governmental Authority or any source whatsoever with respect to Hazardous Substances on, from or affecting the Property, and (ii) any legal action brought -9- against such party or related to the Property, with respect to which Indemnitor may have liability under this Agreement. Such notice shall comply with the provisions of Section 19 hereof. 16. Examination of Books and Records. Indemnified Parties and their accountants shall have the right to examine the records, books, management and other papers of Indemnitor which reflect upon its financial condition, at the Property or at the office regularly maintained by Indemnitor where the books and records are located. Indemnified Parties and their accountants shall have the right to make copies and extracts from the foregoing records and other papers. 17. Transfer of Loan. Indemnitee may, at any time, sell, transfer or assign the Note, the Loan Agreement, the Mortgage, this Agreement and the other Loan Documents, and any or all servicing rights with respect thereto, or grant participations therein or issue mortgage pass-through certificates. Indemnitee may forward to each purchaser, transferee, assignee, servicer or participant (the foregoing entities hereinafter collectively referred to as the "Investor") and each prospective Investor, all documents and information which Indemnitee now has or may hereafter acquire relating to Indemnitor and the Property, whether furnished by Indemnitor, any guarantor or otherwise, as Indemnitee determines reasonably necessary. Indemnitor and any guarantor agree to cooperate with Indemnitee in connection with any transfer made pursuant to this Section, including, without limitation, the delivery of an estoppel certificate and such other documents as may be reasonably requested by Indemnitee. Indemnitor shall also furnish, and Indemnitor and any guarantor hereby consent to Indemnitee furnishing to such Investors or such prospective Investors, any and all information concerning the financial condition of the Indemnitor and any guarantor and any and all information concerning the Property and the Leases as may be requested by Indemnitee, any Investor or any prospective Investor in connection with any sale, transfer or participation interest. 18. Taxes. Indemnitor has filed all federal, state, county, municipal, and city income and other tax returns required to have been filed by it and has paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by it. Indemnitor has no knowledge of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years. 19. Notices. All notices or other written communications hereunder shall be made in accordance with Section 10.6 of the Loan Agreement. 20. Duplicate Originals; Counterparts. This Agreement may be executed in any number of duplicate originals and each duplicate original shall be deemed to be an original. This Agreement may be executed in several counterparts, each of which counterparts shall be deemed an original instrument and all of which together shall constitute a single Agreement. The failure of any party hereto to execute this Agreement, or any counterpart hereof, shall not relieve the other signatories from their obligations hereunder. 21. No Oral Change. This Agreement, and any provisions hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or by any act or failure to act on the part of Indemnitor or any Indemnified Party, but only by an agreement in -10- writing signed by the party against whom enforcement of any modification, amendment, waiver, extension, change, discharge or termination is sought. 22. Headings, Etc. The headings and captions of various paragraphs of this Agreement are for convenience of reference only and are not to be construed as defining or limiting, in any way, the scope or intent of the provisions hereof. 23. Number and Gender/Successors and Assigns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural as the identity of the person or persons referred to may require. Without limiting the effect of specific references in any provision of this Agreement, the term "Indemnitor" shall include the successors and assigns of Indemnitor, all of whom shall be bound by the provisions of this Agreement, provided that no obligation of Indemnitor may be assigned except with the written consent of Indemnitee. Each reference herein to Indemnitee shall be deemed to include its successors and assigns. 24. Release of Liability. Any one or more parties liable upon or in respect of this Agreement may be released without affecting the liability of any party not so released. 25. Rights Cumulative. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies which Indemnitee has under the Note, the Mortgage, the Loan Agreement or the other Loan Documents or would otherwise have at law or in equity. 26. Inapplicable Provisions. If any term, condition or covenant of this Agreement shall be held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such provision. 27. Governing Law. This Agreement shall be governed in accordance with the terms and provisions of Section 10.3 of the Loan Agreement. 28. Miscellaneous. (a) Wherever pursuant to this Agreement (i) Indemnitee exercises any right given to it approve or disapprove, (ii) any arrangement or term is to be satisfactory to Indemnitee, or (iii) any other decision or determination is to be made by Indemnitee, the decision of Indemnitee to approve or disapprove, all decisions that arrangements or terms are satisfactory or not satisfactory and all other decisions and determinations made by Indemnitee, shall be in the sole and absolute discretion of Indemnitee and shall be final and conclusive, except as may be otherwise expressly and specifically provided herein. Wherever pursuant to this Agreement it is provided that Indemnitor pay any costs and expenses, such costs and expenses shall include, but not be limited to, reasonable legal fees and disbursements of Indemnitee, whether retained firms, the reimbursements for the expenses of the in-house staff or otherwise. -11- IN WITNESS WHEREOF, this Agreement has been executed by Indemnitor and is effective as of the day and year first above written. INDEMNITOR: KOGER POST OAK LIMITED PARTNERSHIP, a Delaware limited partnership By: KOGER POST OAK, INC., a Delaware corporation, its general partner By: /S/ Thomas C. Brockwell --------------------------- Name: Thomas C. Brockwell Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----