Contract

EXHIBIT 10.5 LOAN AGREEMENT Loan No. 754055/754056/752507 THIS LOAN AGREEMENT, made as of September 3, 2004, is by and betweenPRINCIPAL COMMERCIAL FUNDING, LLC, a Delaware limited liability company, asinitial holder of Note A and Note B (each defined below), and PRINCIPAL LIFEINSURANCE COMPANY, an Iowa corporation, as initial holder of Note C (definedbelow), with an address at 801 Grand Avenue, Des Moines, Iowa 50392-1360(together with their respective successors and assigns, the “Lender”), and NNNCONGRESS CENTER, LLC, NNN CONGRESS CENTER 1, LLC, NNN CONGRESS CENTER 2, LLC,NNN CONGRESS CENTER 3, LLC, NNN CONGRESS CENTER 4, LLC, NNN CONGRESS CENTER 5,LLC, NNN CONGRESS CENTER 6, LLC, NNN CONGRESS CENTER 7, LLC, NNN CONGRESS CENTER8, LLC, NNN CONGRESS CENTER 10, LLC, NNN CONGRESS CENTER 11, LLC, NNN CONGRESSCENTER 12, LLC, NNN CONGRESS CENTER 13, LLC, NNN CONGRESS CENTER 14, LLC, NNNCONGRESS CENTER 15, LLC, NNN CONGRESS CENTER 16, LLC, NNN CONGRESS CENTER 17,LLC, and GREIT – CONGRESS CENTER, LLC each a Delaware limited liability companyand tenant in common, with an address at 1551 N. Tustin Avenue, Suite 200, SantaAna, California 92705 (“Borrower” to be construed as “each and every Borrower”or collectively, the “Borrowers” as the context so requires). RECITALS A. The Borrowers desire to obtain a loan (the “Loan”) from Lender in theoriginal principal amount of Ninety Seven Million Five Hundred Thousand Dollars($97,500,000.00) (the “Loan Amount”); B. The Loan will be evidenced initially by three secured promissory notesissued by the Borrowers to each Lender (as its name appears thereon); Note Awill be issued in the original principal amount of Eighty Million Dollars($80,000,000.00), Note B will be issued in the original principal amount ofFifteen Million Dollars ($15,000,000.00), and Note C will be issued in theoriginal principal amount of Two Million Five Hundred Thousand Dollars($2,500,000.00); C. Lender is willing to make the Loan on the condition that the Borrowers,among other things, joins in the execution and delivery of this Agreement; and D. Lender and the Borrowers contemplate that all or any portion ofLender’s interest in the Loan, the Loan Documents and the EnvironmentalIndemnity may be assigned, in whole or in part, by Lender, including withoutlimitation, in connection with one or more Securitization Transactions. 1 NOW, THEREFORE, in consideration of the making of the Loan by Lender, andthe covenants, agreements, representations and warranties set forth in thisAgreement, the parties hereby covenant, agree, represent and warrant as follows: ARTICLE I CERTAIN DEFINITIONS “Acceptable Delaware LLC” shall mean a limited liability company formedunder Delaware law which (i) has at least one springing member, which, upon thedissolution of all of the members or the withdrawal or the disassociation of allof the members from such limited liability, shall immediately become the solemembers of such limited liability company, and (ii) otherwise meets the RatingAgency criteria then applicable to such entities. “Account Collateral” has the meaning set forth in Section 5.3(A) of thisAgreement. “Affiliate(s)” means any person or Entity directly or indirectlycontrolling, controlled by, or under common control with the Borrowers or anyperson or Entity owning a material interest in the Borrowers, either directly orindirectly, and shall include without limitation, Interest Owners and SPE EquityOwners. “Agent” means NNN Congress Center, LLC, as such person or Entity has beenauthorized by the Borrowers (as evidenced by the Borrowers’ execution of thisLoan Agreement) to receive service of process with respect this Agreement andany other Loan Document for and on behalf of each of the Borrowers hereunder. “Agreement” means this Loan Agreement, as the same may from time to timehereafter be modified, supplemented or amended. “Approved Accounting Method” has the meaning set forth in Section 5.1 ofthis Agreement. “Assignment of Leases” means that certain Assignment of Leases and Rentsdated as of the date hereof executed by the Borrowers and delivered to Lender assecurity for the Loan, as the same may be modified, supplemented or amended. “Authorized Representative” means (a) the Chief Financial Officer(currently Richard Hutton) of Triple Net Properties, LLC, proved that at allrelevant times, Triple Net Properties, LLC is the manager, special member,and/or vice president of each of the Borrowers, or (b) such other representativeof the Borrowers approved in writing by the Lender. “Cash Flow Available for Debt Service” means for any twelve (12) monthperiod, as specified by Lender, an amount equal to: (a) the sum of OperatingIncome less (b) the sum of Operating Expenses adjusted to deduct anyunderwritten reserves for Tenant Improvements, 2Leasing Commissions, and Replacement Reserves, as determined by Lender, and anyother underwriting adjustments deemed necessary by Lender. “Closing Date” means September 3, 2004. “Code” has the meaning set forth in Section 3.1(F) of this Agreement. “Collateral” means, collectively, the Premises, the Account Collateral andall proceeds and products of the foregoing, all whether now owned or hereafteracquired, and all other property and other rights (whether by contract orotherwise) which is or hereafter may become subject to a lien in favor ofLender. “Collateral Release” means a release of the Premises in accordance withSection 2.1(D) of this Agreement. “Collateral Release Deposit” has the meaning set forth in Section 2.1(D)of this Agreement. “Collection Account” has the meaning set forth in Section 5.2(C) of thisAgreement. “Collection Account Agreement” means the collection account agreementexecuted by the Borrowers, Property Manager, Lender and the Collection AccountBank in connection with the Loan, as the same may from time to time hereafter bemodified, supplemented or amended. “Collection Account Bank” means LaSalle Bank National Association. “Debt Service” means, for any twelve (12) month period, as specified byLender, the sum of interest and principal, as applicable, due and payable under:(a) the Notes, (b) and if the context requires, any proposed Note C Advance,and/or (c) any Mezzanine Financing. “Debt Service Coverage Ratio” means the ratio obtained by dividing (a)Cash Flow Available for Debt Service by (b) Debt Service. “Default Rate” has the meaning as set forth in the Mortgage. “Entity” means a (a) corporation, (b) limited or general partnership, (c)limited liability company, or (d) trust. “ERISA” has the meaning set forth in Section 3.1(G) of this Agreement. “Event of Default” or “Events of Default” has the meaning set forth in theMortgage. “Governmental Authority” means any national, federal, state, regional orlocal government, or any other political subdivision of any of the foregoing, ineach case with 3jurisdiction over any Borrowers, the Premises, or any SPE Equity Owner, or anyPerson with jurisdiction over any Borrowers, the Premises or any SPE EquityOwner, exercising executive, legislative, judicial, regulatory or administrativefunctions of or pertaining to government. “Guarantor” means, individually and collectively, Triple Net Properties,LLC, a Virginia limited liability company, G REIT, Inc., a Virginia corporation,T REIT, Inc., a Virginia corporation, and NNN 2002 Value Fund, LLC, a Virginialimited liability company. “Improvements” has the meaning set forth in the Mortgage. “Indebtedness” has the meaning set forth in the Mortgage. “Independent” “Independent” means, when used with respect to any Person, aPerson who: (i) does not have any direct financial interest or any materialindirect financial interest in the Company or in any Affiliate of the Company(including, without limitation, the Member), (ii) is not connected with theCompany or any Affiliate of the Company (including, without limitation, theMember), as an officer, employee, promoter, underwriter, trustee, partner,member, manager, creditor, director or person performing similar functions, and(iii) is not a member of the immediate family of a Person defined in (i) or (ii)above. “Independent Director” means a duly appointed member of the board ofdirectors of the relevant entity who shall not have been, at the time of suchappointment, at any time after appointment, or at any time in the preceding five(5) years, (i) a direct or indirect legal or beneficial owner in such entity orany of its Affiliates, (ii) a creditor (provided that the Independent Directormay be a creditor by virtue of reasonable fees charged for its services asIndependent Director of such entity), supplier, employee, officer, director,manager or contractor of such entity or any of its Affiliates, (iii) a personwho controls such entity or any of its Affiliates, or (iv) a member of theimmediate family of a person defined in (i), (ii) or (iii) above, providedhowever, that notwithstanding the foregoing, an entity may have the sameIndependent Director as an Affiliate of the entity provided that suchIndependent Director is (A) obtained through a third party service and (B) wouldotherwise satisfy the criteria set forth herein relating to IndependentDirectors. “Independent Eligible Trustee” means an Independent bank (within themeaning of Section 2(a)(5) of the Investment Company Act of 1940 and meets therequirements of Section 26(a)(l) thereof), organized and doing business underthe laws of any state or the United States of America, which is organized undersuch laws to exercise corporate trust powers, and is otherwise reasonablyacceptable to Lender. “Independent Manager” means a duly appointed member of the board ofmanagers (or a duly appointed independent manager) of the relevant entity whoshall not have been, at the time of such appointment, at anytime afterappointment, or at any time in the preceding five (5) years, (i) a direct orindirect legal or beneficial owner in such entity or any of its Affiliates, (ii)a creditor (provided that the Independent Director may be a creditor by virtueof reasonable fees 4charged for its services as Independent Director of such entity), supplier,employee, officer, director, manager or contractor of such entity or any of itsAffiliates, (iii) a person who controls such entity or any of its Affiliates, or(iv) a member of the immediate family of a person defined in (i), (ii) or (iii)above, provided however, that notwithstanding the foregoing, an entity may havethe same Independent Manager as an Affiliate of the entity provided that suchIndependent Manager is (A) obtained through a third party service and (B) wouldotherwise satisfy the criteria set forth herein relating to IndependentManagers. “Interest Owner(s)” means any person or entity owning an interest(directly or indirectly) in any Borrower. “Investor” has the meaning set forth in Section 5.5(A) of this Agreement. “Late Charges” has the meaning as set forth in the Mortgage, “Legal Requirements” has the meaning set forth in the Mortgage. “Loan to Value Ratio” means the ratio obtained by dividing (a) theaggregate outstanding principal balance under the Notes and any, if the contextrequires, proposed Note C Advance or Mezzanine Financing by (b) either the”as-is” or “as-stabilized” value of the Premises, as selected by Lender inLender’s sole discretion, as set forth in either (i) the appraisal obtained inconnection with its underwriting of the Loan or any update thereto or (ii) anysuch new appraisal required by Lender, in Lender’s sole discretion, inconnection with a request by the Borrowers for the Note C Advance or anyMezzanine Financing. Any such appraisal of the Premises shall be obtained byLender at the Borrowers’ expense and acceptable to Lender in all materialrespects. “Leases” has the meaning provided in the Assignment of Leases. “Leasing Commissions” means leasing commissions incurred by or on behalfof the Borrowers in connection with the leasing of the Premises or any portionthereof (including any so-called “override” leasing commissions which may be dueto any leasing or rental agent engaged by or on behalf of the Borrowers for thePremises if an agent other than such agent also is entitled to a leasingcommission, provided that (a) such leasing commissions and “override” leasingcommissions are reasonable and customary for properties similar to the Premisesand the portion of the Premises leased for which a commission is due and, unlessotherwise agreed by Lender, do not exceed the amounts of the leasing commissionspayable to the Property Manager pursuant to Section 9.2 of the ManagementAgreement; (b) the amount of such leasing commissions and “override” leasingcommissions are determined pursuant to arms length transactions between theBorrowers and such any leasing agent to which a commission is due; (c) the Leasehas been approved by Lender in accordance with this Agreement; (d) unlessotherwise agreed by Lender, the tenant under the Lease for which such LeasingCommission is claimed has taken occupancy of the leased space and commencedpaying rent; and (e) unless 5otherwise agreed by Lender, the related Lease has an effective rental rate, netof any concessions, of at least 95% of the pro forma rents at the Premises. “Loan Documents” means this Agreement, Note A, Note B, Note C, theMortgage, the Assignment of Leases, the Collection Account Agreement, theProperty Reserves Agreement, each guaranty executed by a Guarantor, theAssignment of Management Agreement and Subordination of Management FeesAgreement executed by Lender, the Borrowers and Property Manager, and all otherdocuments, instruments and agreements evidencing or securing the Loan. “Lockout Date” means the earlier of: (i) the date which is two (2) yearsafter the date of the then most recent Securitization Transaction; or (ii) thedate which is four (4) years after the date of the first full debt servicepayment under the Notes. “Make Whole Premium” has the meaning set forth in Section 2. l(D)(iv) ofthis Agreement. “Management Agreement” means that certain Management Agreement, datedFebruary 6, 2003, by and between the Property Manager and the Borrowers. “Material Adverse Effect” means a material adverse effect upon (i) thebusiness or the financial position or results of operation of the Borrowers,(ii) the ability of any Borrower to perform, or of Lender to enforce, any of theLoan Documents or Environmental Indemnity or (iii) the value of (x) theCollateral taken as a whole or (y) the Premises. “Maturity Date” means October 1, 2014 “Mezzanine Financing” has the meaning set forth in Section 2.1(H) of thisAgreement. “Mortgage” means the mortgage, deed of trust, trust deed or deed to securedebt as applicable, dated the date hereof, executed by the Borrowers anddelivered to Lender as security for the Loan, as the same may be modified,supplemented or amended. “Notes” means and refers collectively to Note A, Note B, and Note C, and a”Note” shall mean any of Note A, Note B, or Note C, as the context so requires. “Note A” means the secured promissory note (Note A) in the originalprincipal amount of Eighty Million Dollars ($80,000,000.00) evidencing a portionof the Loan, dated as of the date hereof, made by the Borrowers to the Lendernamed thereon, as such promissory note may be modified, amended, supplemented,extended, split or consolidated in writing, and any note(s) issued in exchangetherefore or in replacement thereof. “Note B” means the secured promissory note (Note B) in the originalprincipal amount of Fifteen Million Dollars ($15,000,000.00) evidencing aportion of the Loan, dated as of the date hereof, made by the Borrowers to theLender named thereon, as such promissory note may be 6modified, amended, supplemented, extended, split or consolidated in writing, andany note(s) issued in exchange therefore or in replacement thereof. “Note C” means the secured promissory note (Note C) in the originalprincipal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00)evidencing a portion of the Loan, dated as of the date hereof, made by theBorrowers to the Lender named thereon, as such promissory note may be modified,amended, supplemented, extended, split or consolidated in writing, and anynote(s) issued in exchange therefore or in replacement thereof. “Note C Advance” means any advance made by the holder of the Note C (inits sole and absolute discretion) under the Note C in accordance with the termsof Section 2.1(B) of this Agreement. “Operating Account” means that certain deposit account maintained by theBorrowers with the Collection Account Bank, from which the Borrowers will payall amounts due to Lender under the Loan Documents and all other costs andexpenses of operating and managing the Premises. “Operating Income” means the sum of gross cash income, revenues andconsideration received or paid to or for the account or benefit of the Borrowersresulting from or attributable to the operation or leasing of the Premisesdetermined in accordance with GAAP derived from (a) rents paid under QualifiedLeases and (b) amounts (to the extent included in Operating Expenses) payable bytenants to the Borrowers on account of maintenance or service charges, taxes,assessments, utilities and maintenance of the Premises; but excluding any incomeor revenues from a sale, refinancing, casualty or condemnation, payment of rentsmore than one (1) month in advance, lease termination payments, or payments fromany other events not related to the ordinary course of operations of thePremises. Operating Income may be adjusted by Lender to normalize income atmarket levels in accordance with Lender’s customary underwriting procedures,which adjustments may include, without limitation, any adjustment to reflectvacancy rates at the higher of (A) the actual vacancy rate or (B) the marketvacancy rate for comparable properties, along with adjustments of rental incometo reflect then-current market characteristics. “Operating Expenses” means all cash expenses actually incurred by orcharged to the Borrowers (appropriately pro-rated for any expenses that,although actually incurred in a particular period, also relate to otherperiods), with respect to the ownership, operation, leasing and management ofthe Premises in the ordinary course of business, determined in accordance withGAAP, including, without limitation: (a) personal property taxes and real estatetaxes; (b) sales taxes or any tax on rents; (c) wages, salaries, payroll taxesand employee benefits; (d) costs of utility services; (e) maintenance, repairand custodial costs; (f) premiums payable for insurance carried on or withrespect to the Premises; (g) office supplies, other administrative expenses andprofessional fees; (h) costs of advertising and marketing for the Premises; (i)costs of telephone service; (j) costs of garbage removal; (k) an allowance forincome items that are determined to be uncollectible; (1) any compensation, feesor reimbursements paid to the 7property manager of the Premises which such fee shall be limited to threepercent (3%) of gross rental income per annum; and (m) and an annual replacementreserve of $.25 per square feet. Notwithstanding the foregoing, OperatingExpenses specifically exclude (1) costs of Tenant Improvements and LeasingCommissions, (2) capital expenditures, (3) depreciation, (4) payments made inconnection with the payment of the outstanding principal balance of the Loan,(5) costs of restoration following a casualty or condemnation, (6) fundsdisbursed from any reserve account, and (7) any other non-cash items. OperatingExpenses may be adjusted by Lender in accordance with Lender’s customaryunderwriting procedures. “Permitted Encumbrances” has that meaning set forth in the Mortgage. “Person” means any individual, corporation, limited liability company,partnership, joint venture, estate, trust, unincorporated association, or anyother Entity, any federal, state, county or municipal government or any bureau,department or agency thereof and any fiduciary acting in such capacity on behalfof any of the foregoing. “Pledge Agreement” has the meaning set forth in Section 2.1(D) of thisAgreement. “Premises” has the meaning set forth in the Mortgage. “Property Manager” has the meaning set forth in the Collection AccountAgreement. “Property Reserves” has the meaning set forth in Section 5.2(B) of thisAgreement. “Pro Rata Share” means: (i) with respect to Note A, a fraction (expressedas a percentage), the numerator of which is the outstanding principal balance ofNote A as of the date of determination, and the denominator of which is the sumof (x) the outstanding principal balance of the Note A on such date ofdetermination, (y) the outstanding principal balance of the Note B on such dateof determination, and (z) the outstanding principal balance of the Note C onsuch date of determination; and (ii) with respect to Note B, a fraction(expressed as a percentage), the numerator of which is the outstanding principalbalance of Note B as of the date of determination, and the denominator of whichis the sum of (x) the outstanding principal balance of the Note A on such dateof determination, (y) the outstanding principal balance of the Note B on suchdate of determination, and (z) the outstanding principal balance of the Note Con such date of determination; and (iii) with respect to Note C, a fraction(expressed as a percentage), the numerator of which is the outstanding principalbalance of Note C as of the date of determination, and the denominator of whichis the sum of (x) the outstanding principal balance of the Note A on such dateof determination, (y) the outstanding principal balance of the Note B on suchdate of determination, and (z) the outstanding principal balance of the Note Con such date of determination. “Qualified Lease” means any fully executed Lease, which is in full forceand effect, that has been approved by Lender as required under this Agreement,with a remaining term of no less than three (3) years, under which the tenant isin occupancy pursuant to the terms of the Lease, 8and for which no uncured defaults exist under such Lease. In order for a Leaseto be a Qualified Lease, the tenant under such Lease must not have providedwritten or verbal notice of termination, vacancy or the intention to go dark. “Qualified Institutional Lender” shall mean either a mezzanine lenderapproved in writing by Lender, in its reasonable discretion, or: (a) any of thefollowing (i) a bank, banking association, savings and loan association,investment bank, insurance company, real estate investment trust, trust company,commercial credit corporation, pension plan, pension fund or pension advisoryfirm, mutual fund, government entity or plan that (A) has total assets (in nameor under management) in excess of $600,000,000 and (except with respect to apension advisory firm or similar fiduciary) capital surplus, statutory surplusor shareholder’s equity of at least $200,000,000, and (B) is regularly engagedin the business of making or owning commercial loans, (ii) an investmentcompany, money management firm or “qualified institutional buyer” within themeaning of Rule 144A under the Securities Act of 1933, as amended, that (A) hastotal assets in excess of $600,000,000 and capital surplus, statutory surplus orshareholders’ equity of at least $200,000,000 and (B) is regularly engaged inthe business of making or owning loans of similar types to the Loan, or (iii) aninstitution substantially similar to any of the foregoing described in clauses(a)(i), or (a)(ii) of this definition; or (b) any entity controlled by any ofthe entities described in clause (a)(i) above. For purposes of this definitiononly, “control” means the ownership, directly or indirectly, in the aggregate ofmore than 50% of the beneficial ownership interests of an entity and thepossession, directly or indirectly, of the power to direct or cause thedirection of the management or policies of such entity, whether through theability to exercise voting power, by contract or otherwise. “Controlled” has themeaning correlative thereto. “Rating Agency(ies)” shall mean each statistical rating agency that hasassigned a rating to any participation interest, certificate or security issuedin connection with a Securitization Transaction. “Release Date” has the meaning set forth in Section 2.1(D) of thisAgreement. “Rents” has the meaning provided in the Assignment of Leases. “Scheduled Collateral Release Payments” has the meaning set forth inSection 2.1 (D) of this Agreement. “Security Deposit” means all security deposits held or to be held withrespect to the Premises, pursuant to the applicable Leases. “Securitization Transaction” has the meaning set forth in Section 5.5(A)of this Agreement. “Single-Purpose Entity” has the meaning set forth in the Mortgage. 9 “SPE Equity Owner” means, the sole managing member of each and any of theBorrowers. “State” means the slate or commonwealth where the Premises is located. “Successor Borrower” has the meaning set forth in Section 2.1(D) of thisAgreement. “Taking” has the meaning provided in the Mortgage. “Tax and Insurance Escrows” has the meaning set forth in Section 5.2(A) ofthis Agreement. “Tenant Improvements” means improvements made to the Premises to preparethe same for tenant occupancy in connection with each Lease and made by or onbehalf of the Borrowers in conformity with the terms of the related Lease andthis Agreement. “TIC Agreement” mean that certain Amended and Restated Tenants in CommonAgreement, by and among the Borrowers, effective as of the date of the recordingof such agreement. “Title insurance Policy” means a loan policy of title insurance for thePremises issued by Title Insurance Company with respect to the Premises in anamount (not less than the Loan Amount) acceptable to Lender and insuring thefirst priority lien in favor of Lender created by the Mortgage, in each caseacceptable to Lender in Lender’s discretion. “Transfer” has the meaning set forth in the Mortgage. “UCC” means, with respect to any Collateral, the Uniform Commercial Codein effect in the jurisdiction in which the relevant Collateral is located. “U.S. Obligations” has the meaning set forth in Section 2.1(D) of thisAgreement. ARTICLE II GENERAL TERMS Section 2.1 Loan Commitment: Disbursement to Borrowers; Prepayment. (A) The Loan. Subject to, and upon the terms and conditions setforth herein, Lender hereby agrees to make the Loan to the Borrowers on theClosing Date, in the Loan Amount, which Loan will mature on the Maturity Date. (B) Advances of the Loan Amount. The Borrowers shall have the rightto request and receive only one borrowing in respect of the Loan, which will notbe subject to 10future advances and any amount borrowed and repaid in respect of the Loan maynot be reborrowed. Borrower shall, on the Closing Date, receive the Loan Amount,subject to the direction given by Borrower as to the application of Loanproceeds. Subject to the applicable provisions of this Agreement, Note C and theother Loan Documents, the Borrowers may request the holder of Note C to make theNote C Advance; it being agreed and understood by the parties hereto that theholder of the Note C has no obligation whatsoever to accept or consider arequest for a Note C Advance. (i) Note C Advance. On or before October 1, 2006, providedthat no Event of Default has occurred and is continuing, the Borrowers maysubmit to the holder of Note C, a written request for an additional advance fromthe holder of Note C to the Borrowers in an amount not to exceed the lesser of(a) Seven Million Five Hundred Thousand Dollars ($7,500,000.00); (b) an amountsuch that the resulting Loan to Value Ratio will be less than or equal to 75%,or (c) an amount such that the resulting projected Debt Service Coverage Ratiofor the twelve month period commencing on November 1, 2006, as determined byLender, will not be less than 1.25:1.00 (the “Note C Advance”). The holder ofNote C shall have no obligation to make a requested Note C Advance and anydecision to consider or make such a Note C Advance shall be in the Note Cholder’s sole and absolute discretion. (ii) Event of Default; No Waiver; Additional Conditions. Themaking of any Note C Advance by Lender at the time when a default or Event ofDefault has occurred and is then continuing shall not be deemed a waiver or cureby Lender of that default or Event of Default, nor shall Lender’s rights andremedies by prejudiced in any manner thereby. In addition to conditions setforth above in this Section 2.1(B), and any other condition that the Note Cholder might require in connection with a possible Note C Advance, the Borrowersshall satisfy customary conditions that are standard for prudent, institutionalcommercial mortgage lenders prior to any Note C Advance, including, withoutlimitation amending the Loan Documents to reflect the Note C Advance; thedelivery of a title insurance policy or endorsement with respect to suchadvance; insuring the lien of the Mortgage subject only to PermittedEncumbrances; delivery of necessary legal opinions and financial informationregarding the Borrowers, Guarantors and Premises; if required by any RatingAgency(ies) associated with a Securitization Transaction, evidence in writingfrom the applicable Rating Agencies to the effect that such Note C Advance willnot result in a re-qualification, reduction or withdrawal of any rating ineffect immediately prior to such defeasance issued in connection with theapplicable Securitization Transaction; execution and delivery of such otherdocuments, instruments and agreement as may be requested by the Note C holderand/or Lender, in its sole and absolute discretion; and payment for all ofLender’s costs and expenses in connection with such advance. Any amountsadvanced pursuant to the Note C Advance and repaid cannot be re-borrowed. (iii) Separate Contract for Note C Advances. The Note Cholder’s obligations to perform in accordance with this Section 2.1(B) and, ifagreed to by the Note C holder (in its sole and absolute discretion) to make anyNote C Advance in accordance with the terms and provisions of this Agreement arean independent contract made by Note C holder to the Borrowers separate andapart from any other obligation of the Note A holder, the Note B 11holder, and/or Lender to the Borrowers under the other provisions of thisAgreement and the other Loan Documents. The obligations of the Borrowers, underthis Agreement and the other Loan Documents shall not be reduced, discharged orreleased because or by reason of any existing or future offset, claim or defenseof the Borrowers, or any other party, against the Note A holder, the Note Bholder, and/or Lender by reason of the Note C Holder’s failure to perform itsobligations, if any, under this Section 2.1(B). Notwithstanding anything to thecontrary contained herein and for the avoidance of doubt, neither the holder ofNote A nor the holder of Note B shall have any obligation or liabilitieshereunder with respect to the provisions of this Section 2.1(B). (C) The Notes and Other Loan Documents. The Loan shall be evidencedby the Notes (made, in the aggregate, in the Loan Amount) and evidenced orsecured by the other Loan Documents executed and delivered in connection withthe Loan. Each of the Notes shall bear interest as provided in each such Note,and shall be subject to the payment of interest and the repayment and prepaymentof the Indebtedness as provided for herein. Each of the Notes shall be entitledto the benefits of this Agreement and shall be secured by the Mortgage and theother Loan Documents given to further secure the Loan. (D) Early Release of the Premises. (i) Collateral Release Requirements. At any time from andafter the Lockout Date and provided no Event of Default has occurred and iscontinuing, the Borrowers may obtain a Collateral Release upon satisfaction ofthe following conditions precedent: (a) the Borrowers shall have provided Lenderwith not less than thirty (30) days and not more than sixty (60) days priorwritten Notice specifying the date which shall be a date upon which a scheduleddebt service payment installment is due (the “Release Date”) on which theCollateral Release is to be made; (b) the Borrowers shall have paid to Lenderall interest accrued and unpaid on the principal balance of Note A, Note B andNote C to and including the Release Date; (c) the Borrowers shall have paid toLender all other Indebtedness due and payable under the Loan Documents throughand including the Release Date; (d) the Borrowers shall have paid to Lender theCollateral Release Deposit (hereinafter defined); and (e) the Borrowers shallhave delivered to Lender the following: (1) a security agreement, in form and substancesatisfactory to Lender, creating a first priority lien on the Collateral ReleaseDeposit and the U.S. Obligations (hereinafter defined) purchased on behalf ofthe Borrowers with the Collateral Release Deposit in accordance with thisSection 2.1(D) (the “Pledge Agreement”), which Pledge Agreement shall provide,among other things, that any excess payments of principal and interest receivedby Lender under the U.S. Obligations over the amount needed to make payments ofprincipal, interest, all other Indebtedness and other sums due from theBorrowers under the Notes shall be refunded to the Borrowers; 12 (2) a release of the Premises from the lien of theMortgage (for execution by Lender) in a form satisfactory to Lender andappropriate for the jurisdiction in which the Premises is located; (3) an officer’s certificate of the Borrowers certifyingthat the requirements set forth in this Section 2.1(D) have been satisfied; (4) an opinion of counsel for the Borrowers in formsatisfactory to Lender stating that: (i) the Successor Borrower (as hereinafterdefined) has been duly formed and is authorized to enter into and has properlyexecuted the Pledge Agreement; and (ii) Lender has a perfected first prioritysecurity interest in the Collateral Release Deposit and the U.S. Obligationspurchased by Lender on behalf of the Borrowers; (5) if required by any rating agency(s) associated with aSecuritization Transaction, evidence in writing from the applicable RatingAgencies to the effect that such release will not result in a re-qualification,reduction or withdrawal of any rating in effect immediately prior to suchdefeasance issued in connection with the applicable Securitization Transaction; (6) an independent accountant’s mathematical verificationreport in form and substance reasonably acceptable to Lender; (7) such other certificates, documents or instruments as aprudent, institutional, commercial lender may reasonably request, and; (8) a reasonable fee for the handling and processing ofthe Collateral Release. (ii) Lender as Agent/Attorney-in-Fact. the Borrowers herebyappoint Lender as their agent and attorney-in-fact for the purpose of using theCollateral Release Deposit to purchase U.S. Obligations which provide paymentswhich are (a) payable on or prior to, but as close as possible to, allsuccessive scheduled dates upon which principal and interest are due and payableunder each of Note A, Note B, and Note C after the Release Date to and includingthe Maturity Date and (b) in amounts necessary to meet the scheduled payments ofprincipal and interest due under each of Note A, Note B, and Note C on suchdates (the “Scheduled Collateral Release Payments”). The Borrowers, pursuant tothe Pledge Agreement or other appropriate documents, shall authorize and directthat the payments received from the U.S. Obligations be made directly to Lenderand applied to satisfy the obligations of the Borrowers under each of the Notes. (iii) Successor Borrower Requirements. Upon compliance withthe requirements of this Section 2.1(D), the Premises shall be released from thelien of the Mortgage and the pledged Collateral Release Deposit and the U.S.Obligations purchased therewith shall be the sole source of collateral securingNote A, Note B, and Note C. In connection with such release, Lender, or itsdesignee, shall establish or designate a successor entity (the “SuccessorBorrower”) 13and the Borrowers shall transfer and assign all obligations, rights and dutiesunder and to the Notes together with the pledged Collateral Release Depositand/or U.S. Obligations to such Successor Borrower. Such Successor Borrowershall assume the obligations of the Borrowers under the Notes and the PledgeAgreement and the Borrowers shall be relieved of their obligations thereunder.The Borrowers shall pay $1,000 to any such Successor Borrower on the ReleaseDate as consideration for assuming the obligations under the Notes and thePledge Agreement. Notwithstanding anything in the Loan Documents to thecontrary, no other assumption fee shall be payable upon a transfer of the Notesin accordance with this Section 2.1(D)(iii), but the Borrowers shall pay the feeset forth in item (8) of this Section 2.1(D) above and all costs and expensesincurred by Lender, including Lender’s attorneys’ fees and expenses, incurred inconnection with this Section 2.1(D). Following the delivery of the CollateralRelease Deposit to Lender, the Borrowers shall not have any right to prepay anyof the Notes. (iv) Make Whole Premium. In the event an Event of Default andacceleration occur, the Borrowers shall pay to Lender a “Make Whole Premium.”The Make Whole Premium (for the Loan, or for each of the Notes, as applicable)shall be an amount equal to the greater of one percent (1%) of the outstandingprincipal amount of the Loan or a premium calculated as provided insubparagraphs (l)-(3) below: (1) Determine the “Reinvestment Yield.” The ReinvestmentYield will be equal to the yield on the U.S. Treasury Issue* (“Primary Issue”)published one week prior to the date of prepayment and converted to anequivalent monthly compounded nominal yield. In the event there is no marketactivity involving the Primary Issue at the time of prepayment, the Lender shallchoose a comparable Treasury Bond, Note or Bill (“Secondary Issue”) which theLender reasonably deems to be similar to the Primary Issue’s characteristics(i.e., rate, remaining time to maturity, yield). * At this time there is not aU.S. Treasury Issue for this prepayment period. At the time of prepayment,Lender shall select in its sole and absolute discretion a U.S. Treasury Issuewith similar remaining time to maturity as each of the Notes. (2) Calculate the “Present Value of the Loan.” The PresentValue of the Loan is the present value of the payments to be made in accordancewith Note A and/or Note B and/or Note C, as applicable (all installment paymentsand any remaining payment due on the Maturity Date) discounted at theReinvestment Yield for the number of months remaining from the date ofprepayment to the Maturity Date. In the event of a partial prepayment as aresult of the aforementioned application of proceeds, the Present Value of theLoan shall be calculated in accordance with the preceding sentence multiplied bythe fraction which results from dividing the amount of the prepaid proceeds bythe principal balance immediately prior to prepayment. (3) Subtract the amount of the prepaid proceeds from thePresent Value of the Loan as of the date of prepayment. Any resulting positivedifferential shall be the premium. 14Notwithstanding anything in this Section 2.1(D)(iv) to the contrary, during theperiod commencing after July 1, 2014 and ending on the Maturity Date, the MakeWhole Premium shall not be subject to the one percent (1%) minimum and shall becalculated only as provided in (1) through (3) above. The amount of any MakeWhole Premium received from the Borrowers shall be applied by Lender in respectof Note A, Note B, and Note C, pro rata based on the principal amount of Note A,Note B or Note C prepaid (as applicable); provided, however, that upon theoccurrence of an Event of Default or any monetary default under the LoanDocuments, such Make Whole Premium shall be applied in accordance with Section2.1 (G) hereof. (v) Additional Defined Terms. For purposes hereof, thefollowing terms shall have the following meanings: (a) The term “Collateral Release Deposit” shall mean anamount equal to the sum of (1) the amount which will be sufficient to purchaseU.S. Obligations necessary to meet the Scheduled Collateral Release Payments and(2) any revenue, documentary stamp or intangible taxes or any other tax orcharge due in connection with the transfer of the Notes or otherwise required toaccomplish the agreements of this Section 2.1(D), all fees, costs and expensesincurred or to be incurred by Lender in the purchase of such U.S. Obligationsand the assumption payments referred to above; (b) The term “U.S. Obligations” shall mean directnon-callable obligations of the United States of America. (E) Loan Prepayment. (i) The Borrowers shall not have the right or privilege toprepay all or any portion of the unpaid principal balance of any of Note A, NoteB, or Note C until after July 1, 2014, provided that if there is no Event ofDefault, the aggregate principal balance of the Notes may be prepaid, at par, inwhole but not in part, upon not less than thirty (30) days prior written noticeto Lender specifying the date on which prepayment is to be made, whichprepayment must occur only on a date that monthly debt service is otherwise dueand payable unless the Borrowers pay to Lender all interest that would haveaccrued for the entire month in which Note A, Note B, and Note C are all prepaidabsent such prepayment. If prepayment occurs on a date other than a scheduledmonthly payment date, (a) the Borrowers shall make the scheduled monthly paymentin accordance with the terms of the Notes, regardless of any prepayment; (b)payment of all accrued and unpaid interest on the aggregate outstandingprincipal balance of the Notes to and including the date on which prepayment isto be made; and (c) payment of all other Indebtedness then due under the LoanDocuments. Lender shall not be obligated to accept any prepayment of theprincipal balance of the Notes unless it is accompanied by all sums due inconnection therewith. (F) Application of Principal .and Interest Prior to an Event ofDefault. Notwithstanding anything to the contrary contained herein or in anyother Loan Document, but 15subject nevertheless to Section 2.1(G) hereof, at all times prior to theoccurrence of an Event of Default and provided that no monetary default underthe Loan Documents exists: (i) all scheduled and unscheduled payments of principal(including, without limitation, the principal portion of the amount of anyprepayments) on the Loan received from or on behalf of the Borrowers shall beapplied by Lender to the payment of principal on Note A, Note B, and Note C prorata (not to exceed the unpaid principal balance of Note A, Note B, or Note C,as applicable), in accordance with the applicable Pro Rata Share of principalallocable to Note A, Note B, and Note C; (ii) all payments in respect of accrued and unpaidinterest on the Loan (including, without limitation, the interest portion of theamount of any prepayments) received from or on behalf of the Borrowers shall beapplied by Lender pro rata to (x) the payment of all accrued and unpaid intereston the outstanding principal amount of Note A at the then-applicable rate ofinterest set forth in Note A, (y) the payment of all accrued and unpaid intereston the outstanding principal amount of Note B at the then-applicable rate ofinterest set forth in Note B, and (z) the payment of all accrued and unpaidinterest on the outstanding principal amount of Note C at the then-applicablerate of interest set forth in Note C; (iii) all amounts other than the amounts described inclauses (i) and (ii) of this Section 2.1(F) shall be applied by Lender to NoteA, Note B, and Note C, in each case, in accordance with the terms and provisionsof this Agreement and the other Loan Documents, or otherwise in the sole andabsolute discretion of Lender. (G) Application of Amounts Following an Event Of Default. (i) Notwithstanding anything to the contrary containedherein or in any other Loan Document, upon the occurrence of an Event of Defaultor monetary default, Lender shall be entitled (but shall not be required) toapply (1) all payments in respect of accrued and unpaid interest (including,without limitation, the interest portion of the amount of any prepayment and anyinterest at the Default Rate) on the Loan, (2) Late Charges in respect of theLoan, (3) all scheduled and unscheduled payments of principal (including,without limitation, the principal portion of the amount of any prepayments) onthe Loan, (4) any Make Whole Premium received in connection with a prepayment ofthe Loan, (5) Rents and (6) any other amounts of any nature received from theBorrowers in respect of the Loan (“Default Collections”) to Note A and/or Note Band/or Note C, and/or any other Indebtedness, in any order determined by Lenderin Lender’s sole and absolute discretion. (ii) Each of the Borrowers acknowledges and agrees that,not in limitation of Lender’s rights and remedies set forth in Section 2.1(G)(i), (1) Lender may apply Default Collections to (among other things) theoutstanding principal amount of Note A first and fully, prior to application ofany such amounts to the outstanding principal amounts of Note B and Note C, andmay apply Default Collections to (among other things) the outstanding principalamount of Note B. fully, prior to application of any such amounts to theoutstanding principal amount of Note C, (2) each such application of DefaultCollections may result in (among other 16things) an increase in the weighted average interest rate of Note A, Note B andNote C (as a collective whole) from the weighted average interest rate of NoteA, Note B and Note C (as a collective whole) in effect immediately prior to suchapplication of Default Collections and (3) subject to the limitations in Section6 of the Notes, the Borrowers shall be responsible for payment of all suchincreases in the weighted average interest rate of Note A, Note B and Note C (asa collective whole). (H) Mezzanine Financing. In the event that the Borrowers request theNote C Advance as provided for in Section 2.1(B) hereof, and the Note C Holderdeclines to make such Note C Advance or the Note C holder and the Borrowerscannot mutually agree upon the term and conditions for such Note C Advance,Lender shall permit the Borrowers to obtain mezzanine financing (“MezzanineFinancing”) provided, that, all the following terms and conditions aresatisfied: (i) no Event of Default shall have occurred and becontinuing; (ii) Lender shall have received at least thirty (30) daysand no more than ninety (90) days prior written notice; (iii) if the interest rate on the Mezzanine Financingshall be a floating rate, the borrower under such Mezzanine Financing isrequired to enter into and maintain during the term of the Mezzanine Financingan interest rate cap agreement; (iv) the term of the Mezzanine Financing (including anyextension options) shall be co-terminus with the term of the Loan; (v) the borrower of such Mezzanine Financing may not beany of the same Borrowers hereunder; (vi) the Loan to Value Ratio (taking into account theMezzanine Financing) for the twelve month period commencing on November 1, 2006,as determined by Lender at the time of the funding of such Mezzanine Financing,shall not exceed 75% provided that in no case shall the principal amount of theMezzanine Financing (including but not limited to all earn-outs or otheradvances) exceed Seven Million Five Hundred Thousand Dollars ($7,500,000.00); (vii) the Debt Service Coverage Ratio (taking into accountthe Mezzanine Financing) for the twelve month period commencing on November 1,2006, as determined by Lender, shall be greater than or equal to 1.25:1.00; (viii) such Mezzanine Financing shall be secured by only apledge of direct or indirect ownership interest in each of the Borrowers and inany such case such Mezzanine Financing shall not encumber nor result in any lienor charge upon or against the Premises or the Rents; 17 (ix) the mezzanine lender shall (a) be a QualifiedInstitutional Lender and shall be approved by Lender with such approval not tobe unreasonably withheld, (b) represent and warrant to Lender that, as of thedate of the funding of the Mezzanine Financing, it is solvent and not involvedin any voluntary or involuntary action or proceeding as debtor under anyapplicable federal bankruptcy law, or any similar federal or state law, and (c)agree in the Mezzanine Intercreditor Agreement (defined below) that anysubsequent transfer of the Mezzanine Financing shall be to a QualifiedInstitutional Lender; (x) the loan documents evidencing the Mezzanine Financingshall be approved by Lender with such approval not be unreasonable withheld; (xi) the mezzanine lender shall enter into a intercreditoragreement with Lender (the “Mezzanine Intercreditor Agreement”) in form andsubstance reasonably acceptable to Lender and the Rating Agencies; (xii) the Borrowers may not assume or guarantee theMezzanine Financing; (xiii) at Lender’s option, if required by any RatingAgency(ies) associated with a Securitization Transaction, evidence in writingfrom the applicable Rating Agencies to the effect that such Mezzanine Financingwill not result in a re-qualification, reduction or withdrawal of any rating ineffect immediately prior to obtaining such Mezzanine Financing issued inconnection with the applicable Securitization Transaction; (xiv) the Borrowers shall pay or cause to be paid toLender a fee in the amount of $10,000.00 for the handling and processing of suchMezzanine Financing and shall reimburse Lender for all reasonable out-of-pocketcosts and expenses incurred by Lender (including, without limitation reasonableattorneys’ fees and disbursements) in connection with the request for suchMezzanine Financing and the Borrowers shall pay or cause to be paid to Lenderany title premiums, recording charges, filing fees, taxes or other expensespayable in connection with the Mezzanine Financing, as applicable; (xv) the Borrowers shall deliver or cause to be deliveredto Lender, at the Borrowers’ sole cost and expense, revised and/or up-datedversions of the opinions of counsel given in connection with the closing of theLoan (including without limitation, a new non-consolidation opinion) acceptableto Lender reflecting the Mezzanine Financing; (xvi) the Borrowers shall provide or cause to be providedto Lender, at Borrowers’ sole cost and expense, satisfactory UCC searches,together with tax lien, bankruptcy, judgment and litigation searches withrespect to the Premises and the Borrowers in the state of Illinois and in thejurisdiction where each of the Borrowers are formed and where each of theBorrowers have their principal place of business; (xvii) the Borrowers shall deliver or cause to bedelivered such amendments or modifications to the Loan Documents as may berequired by Lender or the 18Rating Agencies, including without limitation, an amendment to the CollectionAccount Agreement; (xviii) the Borrowers shall deliver or cause to bedelivered to Lender an officers’ certificate certifying that the requirementsset forth in this Section 2.1(H) have been satisfied; (xix) the right to obtain such Mezzanine Financing ispersonal to the Borrowers, as a collective whole, and may not be exercised byany successors or assigns or individual Interest Owners; and (xx) the Mezzanine Financing shall have closed and befully funded on or before January 1, 2007. ARTICLE III REPRESENTATIONS AND WARRANTIES In order to induce Lender to make the Loan to the Borrowers and inconsideration of Lender’s reliance thereon, the Borrowers hereby represent,warrant and covenant, as follows: Section 3.1. Representations, Warranties and Covenants Relating to Borrowers. (A) Organization. (i) Each of the Borrowers is and, until the Indebtedness ispaid in full, will continue to (a) be a duly organized and validly existingEntity in good standing under the laws of the state of its formation, (b) ifapplicable, be duly qualified as a foreign Entity in each jurisdiction in whichthe nature of its business, the Premises or any of the other Collateral makessuch qualification necessary or desirable, (c) have the requisite Entity powerand authority to carry on its business as now being conducted, (d) have therequisite Entity power to execute, deliver and perform its obligations under theLoan Documents and Environmental Indemnity, and (e) comply with the provisionsof all of its organizational documents and the Legal Requirements of the stateof its formation. (ii) Each of the Borrowers, at all times since its formationhas been and until the Indebtedness is paid in full, will continue to be aSingle-Purpose Entity. (iii) The SPE Equity Owner, if any, is and, until theIndebtedness is paid in full, will continue to (a) be a duly organized andvalidly existing Entity in good standing under the laws of the state of itsformation, (b) be duly qualified as a foreign Entity in each jurisdiction inwhich the nature of its business, the Premises or any of the Collateral makessuch qualification necessary or desirable, (c) have the requisite Entity powerand authority to carry on its business as now being conducted, (d) have therequisite Entity power to execute, deliver and perform its 19obligations under the Loan Documents and Environmental Indemnity, and (e) complywith the provisions of all of its organizational documents and the LegalRequirements of the state of its formation. (B) Authorization. The execution, delivery and performance of theLoan Documents and Environmental Indemnity and the borrowing evidenced by theNotes (i) are within the applicable powers of each of the Borrowers and eachother party to the Loan Documents and Environmental Indemnity (other thanLender); (ii) have been authorized by all requisite action; (iii) have receivedall necessary approvals and consents, corporate, governmental or otherwise; (iv)will not violate, conflict with, result in a breach of or constitute (withnotice or lapse of time or both) a default under any provision of law, any orderor judgment of any court or Governmental Authority, the articles ofincorporation, by-laws, partnership, operating or trust agreement, or othergoverning instrument of the Borrowers or any other party to the Loan Documentsor the Environmental Indemnity (other than Lender), or any indenture, agreementor other instrument to which any of the Borrowers or any other party to the LoanDocuments and Environmental Indemnity (other than Lender) is a party or by whicheach such party or any of their respective assets or the Premises is or may bebound or affected; (v) will not result in the creation or imposition of anylien, charge or encumbrance whatsoever upon any of such party’s assets, exceptthe liens and security interests created by the Loan Documents; and (vi) willnot require any authorization or license from, or any filing with, anyGovernmental Authority or other body (except for the recordation of the Mortgageand any other Loan Document intended to be recorded in the appropriate landrecords in the State and except for UCC filings relating to the securityinterest created hereby). (C) Enforceability. The Loan Documents and Environmental Indemnityconstitute the legal, valid and binding obligations of each of the Borrowers andthe other parties to the Loan Documents and Environmental Indemnity (other thanLender), enforceable against each such party in accordance with their respectiveterms, except as may be limited by (i) bankruptcy, insolvency, reorganization orother similar laws affecting the rights of creditors generally, and (ii) generalprinciples of equity (regardless of whether considered in a proceeding in equityor at law). Such Loan Documents and Environmental Indemnity are, as of the datehereof, not subject to any right of rescission, set-off, counterclaim or defenseby any of the Borrowers or any other party to the Loan Documents andEnvironmental Indemnity (other than Lender), including the defense of usury, norwill the operation of any of the terms of any of the Notes, the Mortgage, orsuch other Loan Documents and Environmental Indemnity, or the exercise of anyright thereunder, render the Mortgage unenforceable against any of theBorrowers, in whole or in part, or subject to any right of rescission, set-off,counterclaim or defense by any of the Borrowers, including the defense of usury,and none of the Borrowers nor any other party to the Loan Documents andEnvironmental Indemnity (other than Lender) have asserted any right ofrescission, set-off, counterclaim or defense with respect thereto. (D) Financial Condition. (i) Each of the Borrowers and the SPEEquity Owner, if any, are each solvent and no bankruptcy, reorganization,insolvency or similar proceeding under any state or federal law with respect toany of the Borrowers or the SPE Equity Owner, if any, has 20been initiated, (ii) no Borrower has entered into this Loan transaction with theintent to hinder, delay or defraud any creditor, (iii) each of the Borrowers hasreceived reasonably equivalent value for the making of the Loan and (iv) noBorrower has any known contingent liabilities except as may be created byexecution of the Loan Documents or Environmental Indemnity, as applicable. (E) Litigation. There are no actions, suits or proceedings at law orin equity by or before any Governmental Authority now pending and served or, tothe knowledge of any of the Borrowers, threatened against any of the Borrowersor the Premises or the SPE Equity Owner, if any, that would have a MaterialAdverse Effect. (F) Not Foreign Person. No Borrower is a “foreign person” within themeaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended,and as it may be further amended from time to time, any successor statutesthereto, together with applicable U.S. Department of Treasury regulations issuedpursuant thereto in temporary or final form (the “Code”). (G) ERISA. As of the date hereof and until the Indebtedness is paidin full: (i) no Borrower is or will be an “employee benefit plan” as defined inSection 3(3) of the Employee Retirement Income Security Act of 1974, as amended(“ERISA”), which is subject to Title I of ERISA, (ii) no assets of any of theBorrowers constitute or will constitute “plan assets” of one or more such plansfor purposes of Title I of ERISA, (iii) none of the Borrowers is or will be a”governmental plan” within the meaning of Section 3(32) of ERISA, (iv)transactions by or with any of the Borrowers are not and will not be subject tostate statutes applicable to the Borrowers regulating investments of andfiduciary obligations with respect to governmental plans, (v) each of theBorrowers have made and will continue to make all required contributions to allemployee benefit plans, if any, established for or on behalf of any of theBorrowers or to which any of the Borrowers is required to contribute (vi) eachof the Borrowers have and will continue to administer each such plan, if any, inaccordance with its terms and the applicable provisions of ERISA and any otherfederal or state law; and (vii) none of the Borrowers have or will permit anyliability under Sections 4201, 4243, 4062 or 4069 of Title IV of ERISA or taxesor penalties relating to any employee benefit plan or multi-employer plan tobecome delinquent or assessed, respectively, which would have a Material AdverseEffect. (H) Investment Company Act; Public Utility Holding Company Act. NoBorrower is and, until the Indebtedness is paid in full, no Borrower will be (i)an “investment company” or a company “controlled” by an “investment company,”within the meaning of the Investment Company Act of 1940, as amended, (ii) a”holding company” or a “subsidiary company” of a “holding company” or an”affiliate” of either a “holding company” or a “subsidiary company” within themeaning of the Public Utility Holding Company Act of 1935, as amended, or (iii)subject to any other federal or state law or regulation which purports torestrict or regulate its ability to borrow money. (I) Agreements. No Borrower is a party to any agreement orinstrument or subject to any restriction which is likely to have a MaterialAdverse Effect. No Borrower is in default in any respect in the performance,observance or fulfillment of any of the material 21obligations, covenants or conditions contained in any indenture, agreement orinstrument to which it is a party or by which such Borrower or the Premises isbound. (J) Location of Chief Executive Offices and Borrowers’ Trade Names.The location of each of the Borrower’s principal place of business and chiefexecutive office is 1551 N. Tustin Avenue, Suite 200, Santa Ana, California92705, and no Borrower has any other place of business. No Borrower conducts itsbusiness “also known as”, “doing business as” or under any other name. NoBorrower shall change its principal place of business or chief executive officeor conduct its business under any other name, without first notifying Lender inwriting at least thirty (30) days prior to any such change. (K) No Defaults. No default or Event of Default exists under or withrespect to any Loan Documents. (L) Labor Matters. No Borrower is a party to any collectivebargaining agreements. (M) Intellectual Property. All trademarks, trade names and servicemarks that any of the Borrowers owns or has pending, if any, or under which anyof the Borrowers is licensed, if any, are in good standing and uncontested.There is no right under any trademark, trade name or service mark necessary tothe business of any of the Borrowers as presently conducted or as any of theBorrowers contemplates conducting its business. To the best of the Borrowers’knowledge, no Borrower has infringed, is infringing, or has received notice ofinfringement with respect to asserted trademarks, trade names and service marksof others. To the Borrowers’ knowledge, there is no infringement by others oftrademarks, trade names and service marks of any of the Borrowers. Section 3.2. Representations, Warranties and Covenants Relating toThe Premises. (A) Title Issues. (i) The Borrowers own good, indefeasible, marketable andinsurable fee simple title to the Premises (or tenant-in-common interesttherein), free and clear of all liens, other than the Permitted Encumbrancesapplicable to the Premises, and until the Indebtedness is paid in full theBorrowers shall not permit any liens (other than the Permitted Encumbrances, anytitle matters or exceptions approved in writing by Lender subsequent to the datehereof, taxes which are not yet due or delinquent, or any lien that is contestedby the Borrowers in accordance with and subject to paragraph 1(e) of theMortgage) to attach to the Premises. The Borrowers have the right to mortgage,grant, bargain, sell, pledge, assign, warrant, transfer and convey the same.There are not now, and until the Indebtedness is paid in full, there will not beany outstanding options or agreements to purchase or rights of first refusalaffecting the Premises[, except those explicitly set forth in the current Leasesfor the Premises relating solely to the rights of the applicable tenants tolease additional space in the Premises. The Permitted Encumbrances do not and,until the Indebtedness is paid in full, will not materially and adversely affect(a) the ability of the Borrowers 22to pay in full all sums due under all of the Notes or any of its otherobligations in a timely manner (b) the use of the Premises for the use currentlybeing made thereof, the operation of the Premises as currently being operated orthe value of the Premises, or (c) the value or marketability of the Premises. (ii) No Taking has been commenced or, to the Borrowers’knowledge, is contemplated with respect to all or any portion of the Premises orfor the relocation of roadways providing access to the Premises. (iii) All costs and expenses of any and all labor, materials,supplies and equipment used in the construction of the Improvements have beenpaid in full. The Borrowers have paid in full for, and are the owner of, allfurnishings, fixtures and equipment (other than tenants’ property) used inconnection with the operation of the Premises, free and clear of any and allsecurity interests, liens or encumbrances, except the lien and security interestcreated by the Loan Documents securing the Loan. (iv) The Premises is and, until the indebtedness is paid infull, will be assessed for real estate tax purposes as one or more whollyindependent tax lot or lots, separate from any adjoining land or improvementsnot constituting a part of such lot or lots, and no other land or improvementsis and, until the Indebtedness is paid in full, will be assessed and taxedtogether with the Premises or any portion thereof. (v) Except as disclosed in the Title Insurance Policy, thereare no pending or, to the knowledge of the Borrowers, proposed special or otherassessments for public improvements or otherwise affecting the Premises, nor, tothe knowledge of the Borrowers, are there any contemplated improvements to thePremises that may result in such special or other assessments and until theIndebtedness is paid in full, the Borrowers shall not permit any taxes,assessments, fees, water, sewer or other charges by Governmental Authoritiesrelating to the Premises to become delinquent. (vi) The Mortgage creates a valid and enforceable firstmortgage lien on the Premises as security for the repayment of the Indebtedness,subject only to the Permitted Encumbrances, any title matters or exceptionsapproved in writing by Lender subsequent to the date hereof, and taxes which arenot yet due or delinquent. Each Loan Document securing the Loan establishes andcreates a valid, effective, and enforceable lien on and a security interest in,or claim to, the rights and property described therein. All personal propertyand fixtures covered by each such Loan Document are subject to a UCC financingstatement filed and/or recorded, as appropriate, or irrevocably delivered to anauthorized agent of the company issuing the Title Insurance Policy for suchrecordation or filing in all places necessary to perfect a valid first prioritylien with respect to the rights and property that are the subject of each suchLoan Document to the extent governed by the UCC. 23 (B) Status of the Premises. (i) No portion of the Improvements is located in an areaidentified by the Secretary of Housing and Urban Development or the FederalEmergency Management Agency or any successor thereto as an area having specialflood or seismic hazards, or, if now or hereafter located within any such area,Borrower has obtained and will maintain the applicable flood hazard and/orearthquake insurance prescribed in the Mortgage. (ii) The Borrowers have obtained and, until the Indebtednessis paid in full, will maintain all necessary certificates, licenses, permits andother approvals, governmental and otherwise, necessary for the operation of thePremises; and the conduct of their business and all required zoning, buildingcode, land use, environmental and other similar permits or approvals, all ofwhich are and, until the Indebtedness is paid in full, will remain in full forceand effect and not subject to revocation, suspension, forfeiture ormodification. (iii) As of the date hereof, and until the Indebtedness ispaid in full: (a) the Premises and the present and contemplated use, occupancy,operation and construction thereof are and will remain in full compliance withall covenants and restrictions and all applicable licenses, permits and otherapprovals and all zoning ordinances, building codes, land use and environmentallaws and other similar laws, (b) none of the Improvements lie or will lieoutside of the boundaries of the Land or the applicable building restrictionlines to the extent that such would have a Material Adverse Effect, and (c) noimprovements on adjoining properties materially encroach upon the Land. (iv) The Premises is served by all utilities required for thecurrent or contemplated use thereof. All utility service is provided by publicutilities and the Premises has accepted or is equipped to accept such utilityservice. The Premises is served by public water and sewer systems. All of theforegoing utilities are located in the public right-of-way abutting thePremises, and all such utilities are connected so as to serve the Premiseseither (a) without passing over other property or, (b) if such utilities passover other property, they do so pursuant to valid easements. (v) All public roads and streets necessary for service of andaccess to the Premises for the current or contemplated use thereof have beencompleted, are serviceable and all-weather and are physically and legally openfor use by the public. (vi) The Premises is free from (a) damage caused by fire orother casualty; and (b) material structural defects; and all building systemscontained therein are in good working order in all material respects, subject toordinary wear and tear. (vii) Any and all liquid and solid waste disposal, septic andsewer systems located on the Premises are in a good and safe condition andrepair and in compliance with all Legal Requirements. 24 (C) Status of the Leases and Rents. (i) No Prior Assignment. As of the date hereof, (i) Lender isthe assignee of the Borrowers’ interest under the Leases, and (ii) there are noprior assignments of the Leases or any portion of the Rents due and payable orto become due and payable which are presently outstanding. (ii) Security Deposits. As of the date hereof, the Borrowersare in compliance with all applicable Legal Requirements relating to allSecurity Deposits. (iii) Leases. (a) the Borrowers are the sole owners of theentire lessor’s interest in the Leases; (b) the Leases are the valid, bindingand enforceable obligations of the Borrowers and, to the best of each Borrower’sknowledge, the applicable tenant or lessee thereunder; (c) the terms of allalterations, modifications and amendments to the Leases are reflected in thecertified rent roll delivered to and approved by Lender, (d) none of the Rentsreserved in the Leases have been assigned or otherwise pledged or hypothecatedother than to Lender; (e) none of the Rents have been collected for more thanone (1) month in advance; (f) the premises demised under the Leases have beencompleted and the tenants under the Leases have accepted the same and have takenpossession of the same on a rent-paying basis; (g) there exists no offset ordefense to the payment of any portion of the Rents; (h) no Lease contains anoption to purchase, right of first refusal to purchase, expansion right, or anyother similar provision; and (i) no Person has any possessory interest in, orright to occupy the Premises, except under and pursuant to a Lease; and (j) allleasing broker fees and commissions payable by the Borrowers with respect to theLease(s) have been paid in full, in cash or other form of immediately availablefunds. (D) Tenancy in Common: (i) The TIC Agreement is in full force and effect and thereare no defaults under such agreement, nor have events occurred that with thepassage of time, the giving of notice or both would result in such a default; (ii) No Borrower has filed (nor intends to file) an action topartition ownership of the Premises nor has any Borrower exercised or attemptedto exercise the buy/sell procedures set forth in Section 10 of the TIC Agreementnor has the Property Manager nor any Affiliate of the Property Manager exercisedor attempted to exercise the purchase option described in Section 11 of the TICAgreement. Section 3.3 Full and Accurate Disclosure. No statement of fact madeby or on behalf of the Borrowers in the Loan Documents, the EnvironmentalIndemnity or in any other document or certificate delivered to Lender by theBorrowers contains any untrue statement of a material fact or omits to state anymaterial fact necessary to make statements contained herein or therein notmisleading. There is no fact presently known to the Borrowers which has not beendisclosed to Lender which will have a Material Adverse Effect, nor as far as theBorrowers can foresee, might have a Material Adverse Effect. 25 Section 3.4. Survival of Representations and Warranties. TheBorrowers agree that (A) all of the representations and warranties of theBorrowers set forth in this Agreement, in the other Loan Documents andEnvironmental Indemnity delivered as of the date hereof are made as of the datehereof (except as expressly otherwise provided) and (B) all representations,warranties and covenants made by the Borrowers shall survive the delivery ofeach of Note A, Note B, and Note C, and continue for so long as any Indebtednessremains owing, provided, however, that the representations and warranties setforth in the Environmental Indemnity shall survive in perpetuity and shall notbe subject to the limitation of liability provisions set forth in Section 6.16of this Agreement. All representations, warranties, covenants and agreementsmade in this Agreement or in the other Loan Documents shall be deemed to havebeen relied upon by Lender notwithstanding any investigation heretofore orhereafter made by Lender or on its behalf. ARTICLE IV DEFAULTS AND REMEDIES Section 4.1. Remedies. Upon the occurrence of an Event of Default,all or any one or more of the rights, powers and other remedies available toLender against the Borrowers under this Agreement, Note A, Note B, Note C, theMortgage or any of the other Loan Documents, or at law or in equity may beexercised by Lender at any time and from time to time, without notice or demand,whether or not all or any portion of the Indebtedness shall be declared due andpayable, and whether or not Lender shall have commenced any foreclosureproceeding or other action for the enforcement of its rights and remedies underany of the Loan Documents with respect to the Premises or all or any portion ofthe Collateral. Any such actions taken by Lender shall be cumulative andconcurrent and may be pursued independently, singly, successively, together orotherwise, at such time and in such order as Lender may determine in itsdiscretion, to the fullest extent permitted by law, without impairing orotherwise 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. ARTICLE V SPECIAL PROVISIONS Section 5.1. Financial Reporting. Each of the Borrowers shall keepadequate books and records of account in accordance with generally acceptedaccounting principles or in accordance with other methods of accountingacceptable to Lender in its sole discretion, consistently applied (“ApprovedAccounting Method”) and shall furnish to Lender the following, which shall beprepared, dated and certified by the Borrowers’ Authorized Representative astrue, correct and complete in the form required by Lender, unless otherwisespecified below: (A) (i) Within ninety (90) days after the end of each fiscal yearfor the Borrowers, detailed financial reports covering the full and completeoperation of the Premises, prepared in accordance with the Approved AccountingMethod, including, without limitation, 26income and expense statements, all prepared by an independent certified publicaccountant reasonably acceptable to Lender, and within ninety (90) days afterthe end of each fiscal year for each Guarantor, a fiscal year end balance sheetand income statement for each Guarantor, prepared in accordance with theApproved Accounting Method, by an independent certified public accountantreasonably acceptable to Lender, and (ii) within 120 days after the end of eachcalendar year, a copy of each of the Borrower’s and the Guarantor’s signedfederal income tax return for the immediately preceding calendar year; provided,however, that if a Borrower is treated as a so-called “disregarded entity” fortax purposes and does not file its own tax returns, such Borrower shall not berequired to deliver a federal income tax return to Lender as required hereunder; (B) Within thirty (30) days after the end of each fiscal quarter ofthe Borrowers, a detailed rent roll, certified as true, correct and complete byBorrowers’ Authorized Representative, of the leasing status of the Premises asof the end of such quarter identifying the lessee (and assignee, subtenants andlicensees, if any) and location of demised premises; square footage leased; baseand additional rental amounts including any increases; rental concessions,allowances, abatements and/or rental deferments; pass-through amounts; purchaseoptions; commencement and expiration dates; early termination dates; renewaloptions and annual renewal rents; total net rentable area of the Premises; theexistence of any affiliation between any Borrower and tenant; a detailed listingof tenant defaults; (C) Within thirty (30) days after the end of each fiscal quarter ofthe Borrowers, the reports described in Section 5.1 (A) above, prepared on botha quarterly and year-to-date basis. Said reports may be internally prepared bythe Borrowers; (D) Within fifteen (15) days following Lender’s request, (i) adetailed annual budget and operating plan for the current fiscal year, in formand content reasonably acceptable to Lender, to include, without limitation, acomparison showing corresponding information for the Borrowers’ preceding fiscalyear; (ii) detailed annual operating statements for the Premises and detailedannual financial reports for each of the Guarantors for the immediatelypreceding fiscal year; and (iii) an aged accounts receivable report; (E) At any time prior to a Securitization Transaction, within ten(10) days following Lender’s request, (i) a detailed rent roll certified byBorrowers’ Authorized Representative as true, correct and complete and (ii) astatement of monthly income amounts for the Premises, in each case, for each ofthe twelve months preceding such request; and (F) Such other financial statements, and such other information andreports as may, from time to time, be reasonably required by Lender. Section 5.2. Reserves and Cash Management. (A) Tax and Insurance Escrows. The Borrowers shall deposit with andpay to Lender, on the Closing Date $429,871.89 with respect to estimated taxesand assessments assess or 27levied against the Premises and $85,474.11 with respect to insurance premiumsand on each payment date specified in each of Note A, Note B, and Note C, sumscalculated by Lender for payment of: (i) the estimated taxes and assessmentsassessed or levied against the Premises and (ii) the estimated premiums forinsurance required by the Loan Documents (collectively, the “Tax and InsuranceEscrows”). Lender shall use the Tax and Insurance Escrows to pay the taxes,assessments and premiums when the same become due. The Borrowers agree they areliable for any taxes, assessments and/or insurance premiums identified as beingpaid for by the Borrowers on Lender’s written Tax and Insurance Escrow analysispreviously provided to the Borrowers and the Borrowers agree to make any suchpayments when the same become due. The Borrowers shall procure and deliver toLender, in advance, statements for such charges. Absent an Event of Default, ifthe total payments made by the Borrowers under this Section exceed the amount ofpayments actually made by Lender for taxes, assessments and insurance premiums,such excess shall be credited by Lender on subsequent deposits to be made by theBorrowers. If, however, the Tax and Insurance Escrows are insufficient to paythe taxes, assessments and insurance premiums when the same shall be due andpayable, Borrower will pay to Lender any amount necessary to make up thedeficiency, within three (3) business days after Lender has notified theBorrowers of such deficiency, but in all events prior to the date when paymentof such taxes, assessments and insurance premiums shall be delinquent. If at anytime the Borrowers shall tender to Lender, in accordance with the provisions ofNote A, Note B, Note C, and the other Loan Documents, full payment of the entireIndebtedness, Lender shall, in computing the amount of such Indebtedness, creditto the account of the Borrowers any balance remaining in the Tax and InsuranceEscrows. If there is an Event of Default resulting in a public sale of thePremises, or if Lender otherwise acquires the Premises after an Event ofDefault, Lender shall apply, at the time of commencement of such proceedings, orat the time the Premises is otherwise acquired, the then remaining balance inthe Tax and Insurance Escrows as a credit toward any delinquent or accrued taxesand then, in such priority as Lender elects, to the other Indebtedness. Any funds held under this Section 5.2(A) shall not constitute anydeposit or account of the Borrowers or moneys to which the Borrowers areentitled upon demand, or upon the mere passage of time, or sums to which theBorrowers are entitled to any interest or crediting of interest by virtue ofLender’s mere possession of such deposit. Lender shall not be required tosegregate such deposits and may hold such deposits in its general account or anyother account and may commingle such deposits with any other moneys of Lender ormoneys which Lender is holding on behalf of any other person or entity. (B) Property Reserves. The Borrowers shall deposit with Lendercertain funds to be held by Lender as required by and in accordance with theprovisions of the Property Reserves Agreement (collectively, the “PropertyReserves”). (C) The Borrowers acknowledge that they have opened a trust account(the “Collection Account”) at the Collection Account Bank, in the name ofLender, as described in the Collection Account Agreement. Borrower agrees tocause the Collection Account to be operated and maintained as required by and inaccordance with the provisions of the Collection Account Agreement, whichprovisions are incorporated herein by reference. In consideration of the 28establishment of and Lender’s continued administration and handling of theaccounts established under the Collection Account Agreement, the Borrowershereby agree that Lender shall be paid the following non-refundable fees: (i) aone-time Five Hundred and 00/100 Dollar ($500.00) fee for establishing theCollection Account Agreement, which Lender hereby acknowledges receipt of same;and (ii) a monthly fee of Twenty-five and 00/100 Dollars ($25.00) for Lender’scontinued administration and handling of the Collection Account Agreement, whichLender shall deduct from any funds received by Lender from the CollectionAccount. Section 5.3 Security Agreement. (A) Pledge of Accounts. To secure the full and punctual payment andperformance of all of the Indebtedness, Borrowers hereby assign, convey, pledgeand transfer to Lender and grant to Lender a first and continuing lien on andsecurity interest in and to all of Borrowers’ right, title and interest in (i)the Tax and Insurance Escrows; (ii) the Property Reserves, if any; (iii) allfunds from time to time deposited or held in any of the foregoing, allinvestments made with respect thereto and all interest, if any, earned thereon;(iv) all other amounts required under the Loan Documents to be deposited withand/or held by Lender, including but not limited to insurance proceeds andproceeds payable to the Borrowers pursuant to a Taking; (v) the CollectionAccount and all amounts on deposit therein; and (vi) to the extent not coveredby the foregoing clauses, all products and proceeds of any or all of theforegoing (collectively, the “Account Collateral”). The Borrowers agree that theAccount Collateral shall not constitute any deposit or account of the Borrowersor moneys to which the Borrowers are entitled upon demand, or upon the merepassage of time, or sums to which the Borrowers are entitled to any interest orcrediting of interest by virtue of Lender’s mere possession of such deposits.Lender shall not be required to segregate any Account Collateral and may holdsuch deposits in its general account or any other account and may commingle suchdeposits with any other moneys of Lender or moneys which Lender is holding onbehalf of any other person or entity. (B) Lender Appointed Attorney-In-Fact. The Borrowers herebyirrevocably constitute and appoint Lender as Borrowers’ true and lawfulattorney-in-fact, with full power of substitution, at any time after theoccurrence of an Event of Default to execute, acknowledge and deliver anyinstruments and to exercise and enforce every right, power, remedy, option andprivilege of the Borrowers with respect to the Account Collateral, and do in thename, place and stead of the Borrowers, all such acts, things and deeds for andon behalf of and in the name of the Borrowers with respect to the AccountCollateral, which the Borrowers could or might do or which Lender may deemnecessary or desirable to more fully vest in Lender the rights and remediesprovided for herein with respect to the Account Collateral and to accomplish thepurposes of this Agreement. The foregoing powers of attorney are irrevocable andcoupled with an interest. Beyond the exercise of reasonable care in the custodythereof, Lender shall not have any duty as to any Account Collateral or anyincome thereon in Lender’s possession or control or in the possession or controlof any agents for, or of Lender, or the preservation of rights against anyPerson or otherwise with respect thereto, it being understood that so long asLender exercises reasonable care, Lender shall not be liable or responsible forany loss, damage or diminution in value by reason of the act or omission ofLender, or Lender’s agents, employees or bailees. 29 Section 5.4 Assignment and Assumption of the Loan. The Borrowersshall not Transfer all or any portion of the Premises (or their tenant-in-commoninterest therein) nor shall any of the Interest Owners Transfer all or anyportion of their equity held in the Borrowers to another Person(s) except as maybe expressly permitted in the Mortgage. Section 5.5 Transfer of Loan by Lender. (A) Lender may, at any time, sell, transfer or assign Note A and/orNote B and/or Note C, the other Loan Documents and the Environmental Indemnity,and/or interests in the other Loan Documents and the Environmental Indemnityrelated to Note A and/or Note B and/or Note C, and any or all servicing rightswith respect thereto, or grant participations therein or issue mortgagepass-through certificates or other securities evidencing a beneficial interestin one or more rated or unrated public offerings or private placement (each, asdesignated by Lender, a “Securitization Transaction”); including, withoutlimitation, (i) allocate specific collateral given for the Loan as security forperformance of Note A, and/or Note B, and/or Note C, and/or (ii) at Lender’soption split Note A (or any portion thereof), and/or Note B (or any portionthereof), and/or Note C (or any portion thereof); provided, however, that theBorrowers shall not be required to execute and deliver any secured promissorynote resulting from the splitting of a Note if the effect is to increase theBorrowers’ payment obligations under such replacement Notes or change, in theaggregate, the Loan’s amortization schedule or the amount of the final paymentdue and payable on the Maturity Date; and/or (iii) consolidate Note A (or anyportion thereof) with Note B (or any portion thereof), and/or consolidate Note B(or any portion thereof) with Note C. Borrower agrees to cooperate with allrequests of Lender to accomplish the foregoing, including, without limitation,execution and prompt delivery to Lender of modifications to the Loan Documentsas Lender shall reasonably require. Borrower’s failure to deliver any of thedocuments required by Lender hereunder for a period of ten (10) business daysafter such notice by Lender shall, at Lender’s option, constitute an Event ofDefault hereunder. Lender may forward to each purchaser, transferee, assignee,servicer, participant, investor in such Securitization Transaction or any RatingAgency (as hereinafter defined) rating such Securitization Transaction(collectively, the “Investor”) and each prospective Investor and the advisor ofeach of the foregoing, all documents and information which Lender now has or mayhereafter acquire relating to the Indebtedness and to any of the Borrowers, anyguarantor, if any and the Premises, whether furnished by the Borrowers, anyguarantor, if any or otherwise, as Lender determines necessary or desirable. (B) The Borrowers agree that they shall cooperate with Lender anduse Borrowers’ reasonable efforts to facilitate the consummation of anySecuritization Transaction, including, without limitation, by: (i) promptly andreasonably providing such information as may be requested in connection with thepreparation of any documentation related to such Securitization Transaction;(ii) providing within ten (10) days of Lender’s request the reports described inSection 5.1.(B) above and monthly income information for each of the precedingtwelve (12) months; and (iii) permitting Lender, or its designees to inspect thePremises during normal business hours upon two (2) days’ advance notice fromLender requesting same and to discuss with the Borrowers or its agentsinformation and documentation with respect to the operation and management ofthe 30Premises. Lender shall make reasonable efforts to ensure that the lessees’business operations are not disrupted. (C) Lender agrees that any costs and expenses incurred by Lenderunder this Section 5.5 shall be the responsibility of and paid for by Lender;provided, however, that the Borrowers agree to pay to Lender upon demand, allcosts and expenses incurred by Lender (or by any trustee and servicers acting onLender’s behalf) under any the documents governing any SecuritizationTransaction in connection with an Event of Default, including, withoutlimitation, all amounts in the nature of special servicing compensation andwork-out fees and interest on property protective advances. Section 5.6 Insurance Requirements. The Borrowers shall at all timeskeep or cause to be kept in full force and effect the insurance required by theMortgage. Section 5.7 Management of Premises. Notwithstanding anything to thecontrary contained in the Management Agreement or the TIC Agreement, in theevent that (a) an Event of Default has occurred; (b) Property Manager engages inany act of fraud, gross negligence or willful misconduct; (c) Property Manageris in default under the Management Agreement; (d) the Debt Service CoverageRatio, as determined by Lender, at any time shall fall below 1.20:1.00(provided, however, if the Borrowers fail to deliver to Lender, when due anyfinancial reports required by Lender hereunder or under any of the LoanDocuments in order to calculate the Debt Service Coverage Ratio, upon theoccurrence of such failure, the Debt Service Coverage Ratio shall be deemedautomatically to have fallen below 1.20:1.00); or (e) the Property Manager shallbecome insolvent, Lender shall have the right to terminate the Property Managerupon thirty (30) days prior written notice to the Property Manager and/or mayotherwise direct the Borrowers to terminate the Management Agreement and replacethe Property Manager with a management company acceptable to Lender. If asuccessor manager is required pursuant hereto, the Borrowers shall immediatelyseek to appoint a successor manager acceptable to Lender in Lender’s reasonablediscretion which successor manager shall be a reputable management companyhaving at least seven (7) years’ experience in the management of commercialproperties with similar uses as the Premises and in the jurisdiction in whichthe Premises is located and shall not be paid management fees in excess of feeswhich are market fees in the surrounding geographic area. Section 5.8 Guarantor Financial Covenants. The Borrowers herebyacknowledge and agree that Triple Net Properties, LLC, in its capacity as aGuarantor, is required pursuant to the provisions of the guaranty it executedand delivered to Lender, on or about the date hereof, in connection with theLoan, to maintain certain financial covenants during the term of the Loan and inthe event that such covenants are breached (and such breach remains uncuredbeyond all applicable cure periods set forth in such guaranty) such breach shallbe an Event of Default hereunder and under the other Loan Documents. Theprovisions of the aforementioned guaranty are incorporated herein by reference,as if set forth in full herein. Section 5.9 Parking Requirements. As long as that certain leaseagreement, dated on or about May 1, 2001, with the United States of America (viathe General Services 31Administration on behalf of the United States Secret Service), as amended,remains in effect and requires Borrowers to provide off-site parking, theBorrowers shall cause that certain parking agreement, dated on or about April30, 2001, between Protected Parking Inc. and Borrowers’ predecessor-in-interest,as may be amended from time to time, to remain in effect and shall not defaultin their obligations thereunder. The Borrowers may replace such parking leasewith another parking lease acceptable to the GSA and reasonably acceptable toLender. ARTICLE VI MISCELLANEOUS Section 6.1 No Liability of Lender. The Borrowers acknowledge andagree that Lender’s acceptance or approval of any action of the Borrowers or anyother matter requiring Lender’s approval, satisfaction, acceptance or consentpursuant to this Agreement, the other Loan Documents or the EnvironmentalIndemnity, including any report certificate, financial statement, appraisal orinsurance policy, will not be deemed a warranty or representation by Lender ofthe sufficiency, legality, effectiveness or other import or effect of suchmatter. Section 6.2 No Third Parties Benefited. This Agreement is betweenand for the sole benefit of the Borrowers and Lender, and Lender’s successorsand assigns, and creates no rights whatsoever in favor of any other Person andno other Person will have any rights to rely hereon. Section 6.3 Time is of the Essence. Time is of the essence of eachof the Borrowers’ obligations under this Agreement. The waiver by Lender of anydefault or Event of Default under this Agreement will not be deemed a waiver ofany subsequent default or Event of Default. Section 6.4 Binding Effect; No Borrower Assignment This Agreementwill be binding upon and inure to the benefit of the Borrowers and Lender andtheir respective heirs, executors, administrators, successors and assigns,provided however the Borrowers may not assign its rights or interests in thisAgreement without the prior consent of Lender, which may be withheld in Lender’sdiscretion as provided in the Mortgage. Section 6.5 Execution in Counterparts. This Agreement may beexecuted in counterparts, each of which shall be deemed an original, and suchcounterparts when taken together shall constitute but one agreement. Section 6.6 Integration; Amendments; Consents. This Agreement,together with the other Loan Documents and the Environmental Indemnity,constitutes the entire agreement of the parties with respect to the Loan, andsupersedes any prior negotiations or agreements, and supersedes any loanapplication submitted by the Borrowers to Lender and any commitment letter forthe Loan delivered by Lender to the Borrowers. No modification, extension,discharge, termination or waiver of any provision of this Agreement or the otherLoan Documents will be 32effective unless in writing, signed by the Person against whom enforcement issought, and will be effective only in the specific instance for which it isgiven. Section 6.7 Governing Law. The Loan will be deemed to have been madein the State, and this Agreement, the other Loan Documents and the EnvironmentalIndemnity will be governed by and construed and enforced in accordance with thelaws of the State without regard to the State’s conflicts of laws principles.The Borrowers and Lender each unconditionally and irrevocably waives any rightto assert that the law of any other jurisdiction governs this Agreement, theother Loan Documents, and the Environmental Indemnity. Section 6.8 Jurisdiction. The Borrowers irrevocably (a) agrees thatany suit, action or other legal proceeding arising out of or relating to thisAgreement, Note A, Note B, Note C, the Mortgage, the other Loan Documents andthe Environmental Indemnity may be brought in a court of record in the State orin the Courts of the United States located in the State, (b) submits to thejurisdiction of each such court in any such suit, action or proceeding and (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 any claim that any such suit,action or proceeding has been brought in an inconvenient forum. Borrowerirrevocably consents to the service of any and all process in any such suit,action or proceeding by service of copies of such process to the Borrowers atits address provided in the Mortgage. Nothing in this Section 6.8 will affectthe right of Lender to serve legal process in any other manner permitted by lawor affect the right of Lender to bring any suit, action or proceeding againstBorrower or Borrower’s assets in the courts of any other jurisdiction. Section 6.9 Severability of Provisions. If a court of competentjurisdiction finds any provision of this Agreement, the other Loan Documents orthe Environmental Indemnity to be invalid or unenforceable as to any Person orcircumstance in any state, such finding will not render that provision invalidor unenforceable as to any other Person or circumstance or in any other state.Where permitted by Legal Requirements, any provision found invalid orunenforceable will be deemed modified to the extent necessary to be within thelimits of enforceability or validity; however, if such provision cannot bedeemed so modified, it will be deemed stricken and all other provisions of thisAgreement in all other respects will remain valid and enforceable. Section 6.10 Preferences. Lender will have no obligation to marshalany assets for the benefit of the Borrowers or any other Person or insatisfaction of any or all of the Indebtedness. Lender will have the continuingand exclusive right to apply or reverse and reapply any and all payments by theBorrowers to any portion of the Indebtedness. To the extent the Borrowers make apayment to Lender or Lender receives any proceeds from the Collateral, whichpayment or proceeds or any part thereof are subsequently invalidated, declaredto be fraudulent or preferential, set aside or required to be repaid to atrustee, receiver or any other Person under any bankruptcy, insolvency or otherlaw, or for equitable cause, then, to the extent of such payment or proceedsreleased by Lender, the Indebtedness will be revived and continue in full forceand effect, as if such payment or proceeds had not been received by Lender. 33 Section 6.11 Joint and Several Obligations. If this Agreement isexecuted by more than one Person as Borrower, the Indebtedness and all otherobligations of the Borrowers under the Loan Documents will be joint and severalobligations. Section 6.12 No Joint Venture or Partnership. The Borrowers andLender intend that the relationship created under this Agreement, the other LoanDocuments and the Environmental Indemnity be solely that of borrower and lender.Nothing is intended to create a joint venture, partnership, tenancy-in-common,or joint tenancy relationship between the Borrowers and Lender nor to grant toLender any interest in the Premises other than that of mortgagee or securedparty. Section 6.13 Waiver of Counterclaim. The Borrowers hereby waive, tothe extent permitted by applicable law, the right to assert any counterclaim,other than a compulsory counterclaim, in any action or proceeding broughtagainst the Borrowers by Lender under any of the Loan Documents or theEnvironmental Indemnity. Section 6.14 Headings, etc. The headings and captions of variousparagraphs of this Agreement are for convenience of reference only and are notto be construed as defining or limiting, in any way, the scope or intent of theprovisions hereof. Section 6.15 Capitalized Terms. Capitalized terms used herein andnot otherwise defined shall have those meanings given to them in the other LoanDocuments. Section 6.16 Liability. Notwithstanding any provision to the contrary in this Agreement,Note A, Note B, Note C, or the Loan Documents and except as otherwise providedfor below, the liability of the Borrowers under the Loan Documents shall belimited to the interest of the Borrowers in the Premises and the Rents. In theevent of foreclosure of the liens evidenced by the Loan Documents, no judgmentfor any deficiency upon the Indebtedness evidenced by the Loan Documents shallbe sought or obtained by Lender against the Borrowers. Nothing herein shall inany manner limit or impair (i) the lien or enforcement of the Loan Documentspursuant to the terms thereof or (ii) the obligations of any indemnitor orguarantor, if any. Notwithstanding any provision hereinabove to the contrary, theBorrowers shall be personally liable to Lender for: (a) any loss or damage to Lender arising from (i) the sale orforfeiture of the Premises resulting from the Borrowers’ failure to pay any ofthe taxes or (ii) the Borrowers’ failure to insure the Premises in compliancewith the provisions of the Loan Documents; (b) environmental loss or damage; (c) nonpayment of taxes, insurance premiums and utilities for thePremises and any penalty or late charge associated with nonpayment thereof; 34 (d) material failure to manage, operate, and maintain the Premisesin a commercially reasonable manner for similar property types in thesurrounding geographic area: (e) any sums paid by Lender in fulfilling the obligations of theBorrowers as lessor under any Lease of the Premises prior to a sale of thePremises pursuant to foreclosure or power of sale, a bona fide sale (permittedby the terms of paragraphs 2(f) and 2(m) of the Mortgage (it being agreed that”Mortgage” as used herein shall be construed to mean “mortgage” or “deed oftrust” or “trust deed” as the context so requires) or consented to in writing byLender) to an unrelated third party or upon conveyance to Lender of the Premisesby a deed acceptable to Lender in form and content (each of which shall bereferred to as a “Sale” for purposes of this paragraph) or expended by Lenderafter a Sale of the Premises for obligations of the Borrowers which arose priorto a Sale of the Premises; (f) any rents or other income regardless of type or source ofpayment or other considerations in lieu thereof (including, but not limited to,common area maintenance charges, lease termination payments, refunds of anytype, prepayment of rents, settlements of litigation, or settlements of past duerents) from the Premises which the Borrowers have received or will receive afteran Event of Default under the Loan Documents which are not applied to payment ofOperation Expenses provided that (x) the Borrowers have furnished Lender withevidence reasonably satisfactory to Lender of the Operation Expenses and paymentthereof and (y) any payments to parties related to the Borrowers shall beconsidered an Operation Expense only to the extent that the amount expended forthe Operation Expense does not exceed the then current market rate for suchOperation Expense; (g) any security deposits of tenants not otherwise applied inaccordance with the terms of the Lease(s), together with any interest on suchsecurity deposits required by law or the leases, not turned over to Lender uponconveyance of the Premises to Lender pursuant to foreclosure or power of sale orby a deed acceptable to Lender in form and content; (h) misapplication or misappropriation of any reserve accountincluding tax reserve accounts and tenant improvement reserve accounts, securitydeposits, prepaid rents or insurance or condemnation proceeds held by theBorrowers or any other entity or person in connection with the operation of thePremises; and (i) any loss or damage to Lender arising from any fraud or willfulmisrepresentation by or on behalf of the Borrowers, Interest Owners or anyguarantor regarding the Premises, the making or delivery of any of the LoanDocuments or in any materials or information provided by or on behalf of theBorrowers, Interest Owners or guarantor, if any, in connection with the Loan. The Borrowers’ personal liability for items specified in (c), (d)and (e) above shall be limited to the amount of rents, issues, proceeds andprofits from the Premises (“Rents and Profits”) received by the Borrowers forthe twenty-four (24) months preceding an Event of Default and thereafter; butless any such Rents and Profits applied to (A) payment of principal, interestand other charges when due under the Loan Documents, or (B) payment of expensesfor 35the operation, maintenance, taxes, assessments, utility charges and insurance ofthe Premises including sufficient reserves for the same or replacements orrenewals thereof (“Operation Expense(s)”) provided that (x) the Borrowers havefurnished Lender with evidence reasonably satisfactory to Lender of theOperation Expenses and payment thereof, and (y) any payments to parties relatedto the Borrowers shall be considered an Operation Expense only to the extentthat the amount expended for the Operation Expense does not exceed the thencurrent market rate for such Operation Expense. Notwithstanding anythingcontained in paragraphs 6.16(a)(i) and 6.16(c) hereinabove as it relates solelyto taxes, assessments and insurance premiums, to the extent Lender is impoundingfor taxes, assessments and insurance premiums in accordance with the LoanDocuments and the Borrowers have fully complied with all terms and conditions ofthe Loan Documents relating to impounding for the same, then the Borrowers shallnot be personally liable for Lender’s failure to apply any of said impoundamounts held by Lender in accordance with the Loan Documents. Notwithstanding anything to the contrary in the Loan Documents, thelimitation on liability contained in the first paragraph of this paragraph 6.16SHALL BECOME NULL AND VOID and shall be of no further force and effect in theevent: (w) of any breach or violation of paragraphs 2(f) and 2(m) (due onsale or encumbrance) of the Mortgage, other than (i) the filing of a nonmaterialmechanic’s lien affecting the Premises or a mechanic’s lien affecting thePremises for which the Borrowers have complied with the provisions of paragraphl(e) of the Mortgage, or (ii) the granting of any utility or other nonmaterialeasement or servitude burdening the Premises, or (iii) any transfer orencumbrance of a nonmaterial economic interest in the Premises not otherwise setforth in (i) or (ii); (x) of the failure of the Borrowers or the SPE Equity Owner, if any,to remain a Single-Purpose Entity; (y) of any filing by the Borrowers or the SPE Equity Owner, if any,of a petition in bankruptcy or insolvency or a petition or answer seeking anyreorganization, arrangement, composition, readjustment, liquidation, dissolutionor similar relief under the Bankruptcy laws of the United States or under anyother applicable federal, state or other statute or law; (z) the Management Agreement is modified, amended replaced,cancelled or terminated (either by affirmatively terminating or by failing notto annually renew), without Lender’s prior written consent; (aa) The Borrowers give any approval or consent for the substitutionfor or replacement of the Property Manager (it being understood and agreed thatany substitution for or replacement of the current Property Manager may onlyoccur with Lender’s consent and/or approval), without Lender’s prior writtenconsent; 36 IN WITNESS WHEREOF, the Borrowers and Lender have hereunto caused thisAgreement to be executed on the date first above written.LENDER:PRINCIPAL COMMERCIAL FUNDING, LLC,a Delaware limited liability company By: PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory By: /s/ Steven Traynor ————————– Counsel By: /s/ Stephen G. Skrivenet ———————— CounselPRINCIPAL LIFE INSURANCE COMPANY,an Iowa corporation By: PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, its authorized signatory By: /s/ Steven Traynor ————————– Counsel By: /s/ Stephen G. Skrivenet ———————— Counsel (Signatures Continue on Next Page) [Signature Page – Loan Agreement]BORROWERS:NNN CONGRESS CENTER, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, its Manager By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 1, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 2, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: President [Signatures Continue on the Following Page] [Signature Page – Loan Agreement]NNN CONGRESS CENTER 3, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 4, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 5, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 6, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: President [Signatures Continue on the Following Page] [Signature Page – Loan Agreement]NNN CONGRESS CENTER 7, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 8, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 10, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 11, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: President [Signatures Continue on the Following Page] [Signature Page – Loan Agreement]NNN CONGRESS CENTER 12, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 13, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 14, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 15, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: President [Signatures Continue on the Following Page] [Signature Page – Loan Agreement]NNN CONGRESS CENTER 16, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentNNN CONGRESS CENTER 17, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: PresidentGREIT – CONGRESS CENTER, LLC, a Delaware limited liability company By TRIPLE NET PROPERTIES, LLC, a Virginia limited liability company, as authorized Vice President By: /s/ Anthony W. Thompson ————————- Name: Anthony W. Thompson Title: President [Signature Page – Loan Agreement]