LOAN AGREEMENT

EXHIBIT 10.3

LOAN AGREEMENT

Dated as of June 22, 2005

Between

1334 YORK AVENUE L.P.,
as Borrower

and

BANK OF AMERICA, N.A.,
as Lender

 

 

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LOAN AGREEMENT

          THIS LOAN AGREEMENT, dated as of June 22, 2005 (as amended, restated, replaced, supplemented or otherwise modified from time to time, this “ Agreement ”), between BANK OF AMERICA, N.A., a national banking association, having an address at 214 North Tyron Street, Charlotte, North Carolina 28255 (together with its successors and/or assigns, “ Lender ”) and 1334 YORK AVENUE L.P ., a Delaware limited partnership, having an address at c/o RFR Holding LLC, 400 Park Avenue, New York, New York 10022 (together with its successors and/or assigns, “ Borrower ”).

RECITALS:

          Borrower desires to obtain the Loan (defined below) from Lender.

          Lender is willing to make the Loan to Borrower, subject to and in accordance with the terms of this Agreement and the other Loan Documents (defined below).

          In consideration of the making of the Loan by Lender and the covenants, agreements, representations and warranties set forth in this Agreement, the parties hereto hereby covenant, agree, represent and warrant as follows:

ARTICLE 1
DEFINITIONS; PRINCIPLES OF CONSTRUCTION

          Section 1.1. Definitions

          For all purposes of this Agreement, except as otherwise expressly required or unless the context clearly indicates a contrary intent:

           “ Acceptable Accountant ” shall mean a “Big Four” accounting firm or other independent certified public accountant acceptable to Lender. Berdon LLP is acceptable to Lender as of the date hereof.

           “ Acquired Property ” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

           “ Acquired Property Statements ” shall have the meaning set forth in Section 5.11(c)(i)(A) hereof.

           “ Act ” shall have the meaning set forth in Section 6.1(c).

           “ Additional Replacement ” shall have the meaning set forth in Section 9.5(g) hereof.

           “ Affiliate ” shall mean, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person or of an Affiliate of such Person.

           “ Affiliated Loans ” shall mean a loan made by Lender to a parent, subsidiary or such other entity affiliated with Borrower or Borrower Principal.

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          “ Affiliated Manager ” shall have the meaning set forth in Section 7.1 hereof.

          “ Aggregate Debt Service ” shall mean the sum of (a) Debt Service for a given period, plus (b) the hypothetical amount of principal and interest payable during such period on an amount equal to the proposed amount of the Permitted Mezzanine Financing based on level combined payments of principal and interest based on a thirty (30) year amortization schedule and an interest rate equal to (i) if the Permitted Mezzanine Financing bears interest at a fixed rate of interest, the interest rate of the Permitted Mezzanine Financing identified in the Mezzanine Notice, or (ii) if the Permitted Mezzanine Financing bears interest at a floating rate of interest, an interest rate equal to the strike rate set forth in the Interest Rate Cap Agreement plus the Mezzanine Spread.

          “ ALTA ” shall mean American Land Title Association, or any successor thereto.

          “ Alteration Threshold ” means $750,000.00.

          “ Annex ” shall have the meaning set forth in Section 4.41 hereof.

          “ Annual Budget ” shall mean the operating budget, including all planned capital expenditures, for the Property approved by Lender in accordance with Section 5.11(a)(iv) hereof for the applicable calendar year or other period.

          “ Appraisal ” shall mean a current “as-is” appraisal prepared in accordance with the requirements of FIRREA by an independent third-party appraiser holding an MAI designation, which appraiser is licensed under the laws of the State of New York, meets the requirements of FIRREA and is otherwise satisfactory to Lender.

          “ Approved Bank ” shall mean (a) a bank or other financial institution which has the Required Rating, (b) if a Securitization has not occurred, a bank or other financial institution reasonably acceptable to Lender or (c) if a Securitization has occurred, a bank or other financial institution which the Rating Agencies have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the then current ratings assigned in connection with such Securitization.

          “ Assignment of Management Agreement ” shall mean that certain Assignment and Subordination of Management Agreement and Consent of Manager dated the date hereof among Lender, Borrower and Manager, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

          “ Award ” shall mean any compensation paid by any Governmental Authority in connection with a Condemnation in respect of all or any part of the Property.

          “ Borrower Principal ” shall mean individually and collectively, as the context may require, Aby Rosen, an individual, and Michael Fuchs, an individual, on a joint and several basis.

          “ Borrower Principal Family Group ” shall mean any Borrower Principal, any Borrower Principal’s immediate family members, trusts formed for the benefit of such immediate family

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members and limited partnerships wholly owned and controlled by such immediate family members.

          “ Business Day ” shall mean a day on which Lender is open for the conduct of substantially all of its banking business at its office in the city in which the Note is payable (excluding Saturdays and Sundays).

          “ Cash Management Bank ” shall have the meaning set forth in Section 10.1 hereof.

          “ Cash Management Account ” shall have the meaning set forth in Section 10.1 hereof.

          “ Casualty ” shall have the meaning set forth in Section 8.2.

          “ Closing Date ” shall mean the date of the funding of the Loan.

          “ Control ” shall have the meaning set forth in Section 7.1 hereof.

          “ Condemnation ” shall mean a temporary or permanent taking by any Governmental Authority as the result, in lieu or in anticipation, of the exercise of the right of condemnation or eminent domain, of all or any part of the Property, or any interest therein or right accruing thereto, including any right of access thereto or any change of grade affecting the Property or any part thereof.

          “ Condemnation Proceeds ” shall have the meaning set forth in Section 8.4(b)

          “ Creditors Rights Laws ” shall mean with respect to any Person any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization, conservatorship, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to its debts or debtors.

          “ Debt ” shall mean the outstanding principal amount set forth in, and evidenced by, this Agreement and the Note together with all interest accrued and unpaid thereon and all other sums due to Lender in respect of the Loan under the Note, this Agreement, the Mortgage or any other Loan Document.

          “ Debt Service ” shall mean, with respect to any particular period of time, scheduled principal and/or interest payments under the Note.

          “ Debt Service Coverage Ratio ” shall mean the ratio, as determined by Lender, of (a) Net Operating Income for the preceding 12 month period to (b) Aggregate Debt Service for the same period, calculated by Lender as of the first Scheduled Payment Date following Lender’s receipt of the Mezzanine Notice.

          “ Debt Service Reserve Account ” shall have the meaning set forth in Section 9.7 hereof.

          “ Debt Service Reserve Event ” shall have the meaning set forth in Section 9.7 hereof.

          “ Debt Service Reserve Funds ” shall have the meaning set forth in Section 9.7 hereof.

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          “ Default ” shall mean the occurrence of any event hereunder or under any other Loan Document which, but for the giving of notice or passage of time, or both, would be an Event of Default.

          “ Default Rate ” shall mean, with respect to the Loan, a rate per annum equal to the lesser of (a) the maximum rate permitted by applicable law, or (b) four percent (4%) above the Note Rate.

          “ Defeasance Collateral ” shall have the meaning set forth in Section 2.4(b)(i)(D)(2) hereof.

          “ Defeasance Security Agreement ” shall have the meaning set forth in Section 2.4(b)(i)(D)(2) hereof.

          “ Disclosure Document ” shall have the meaning set forth in Section 13.5 hereof.

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

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

          “ Eligibility Requirements” shall mean, with respect to any Person, that such Person (i) has total assets (in name or under management) in excess of $600,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of $250,000,000 and (ii) is regularly engaged in the business of making or owning commercial real estate loans or operating commercial mortgage properties.

          “ Embargoed Person ” shall have the meaning set forth in Section 4.40 hereof.

          “ Environmental Law ” shall have the meaning set forth in Section 12.5 hereof.

          “ Environmental Liens ” shall have the meaning set forth in Section 12.5 hereof.

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          “ Environmental Report ” shall mean that certain Phase I Environmental Site Assessment prepared by Environmental Monitoring & Consulting Associates dated May 18, 2005.

          “ Equity Collateral ” shall mean the 100% direct or indirect equity ownership interest held by Mezzanine Borrower in Borrower (other than any equity interest in Borrower held by any SPE Component Entity).

          “ ERISA ” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statutes thereto and applicable regulations issued pursuant thereto in temporary or final form.

          “ Event of Default ” shall have the meaning set forth in Section 11.1 hereof.

          “ Excess Cash Flow ” shall have the meaning set forth in Section 10.2(b)(ii)(I) hereof.

          “ Exchange Act ” shall mean the Securities and Exchange Act of 1934, as amended.

          “ Exchange Act Filing ” shall have the meaning set forth in Section 5.1l(c) hereof.

          “ Extraordinary Expense Reserve Account ” shall have the meaning set forth in Section 9.8(b).

          “ Extraordinary Expense Reserve Funds ” shall have the meaning set forth in Section 9.8(b).

          “ Extraordinary Expenses ” shall mean an operating expense or capital expenditure with respect to the Property that (i) is not set forth on the Annual Budget and (ii) is not subject to payment by withdrawals from the Replacement Reserve Account. Borrower shall deliver promptly to Lender a reasonably detailed explanation of such proposed Extraordinary Expense for the approval of Lender.

          “ Fee Mortgagee ” shall have the meaning set forth in the Sotheby’s Lease and shall be deemed to refer to Lender in accordance with the applicable terms and conditions thereof.

          “ Fitch ” shall mean Fitch, Inc.

          “ GAAP ” shall mean generally accepted accounting principles in the United States of America as of the date of the applicable financial report.

          “ Governmental Authority ” shall mean any court, board, agency, department, commission, office or other authority of any nature whatsoever for any governmental unit (federal, state, county, municipal, city, town, special district or otherwise) whether now or hereafter in existence.

          “ Hazardous Materials ” shall have the meaning set forth in Section 12.5 hereof.

          “ Improvements ” shall have the meaning set forth in the granting clause of the Mortgage.

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          “ Indemnified Parties ” shall mean (a) Lender, (b) any prior owner or holder of the Loan or Participations in the Loan, (c) any servicer or prior servicer of the Loan, (d) any Investor or any prior Investor in any Securities, (e) any trustees, custodians or other fiduciaries who hold or who have held a full or partial interest in the Loan for the benefit of any Investor or other third party, (f) any receiver or other fiduciary appointed in a foreclosure or other Creditors Rights Laws proceeding, (g) any officers, directors, shareholders, partners, members, employees, agents, servants, representatives, affiliates or subsidiaries of any and all of the foregoing, and (h) the heirs, legal representatives, successors and assigns of any and all of the foregoing (including, without limitation, any successors by merger, consolidation or acquisition of all or a substantial portion of the Indemnified Parties’ assets and business), in all cases whether during the term of the Loan or as part of or following a foreclosure of the Mortgage.

           “ Independent Director ” shall have the meaning set forth in Section 6.4(a).

           “ Initial Note Rate ” shall mean, with respect to Note A, the Initial Note A Rate, and, with respect to Note B, the Initial Note B Rate.

           “ Initial Note A Rate ” shall mean an interest rate equal to 5.209619047619050% per annum.

           “ Initial Note B Rate ” shall mean an interest rate equal to 7.770% per annum.

           “ Insurance Premiums ” shall have the meaning set forth in Section 8.1(b) hereof.

           “ Insurance Proceeds ” shall have the meaning set forth in Section 8.4(b) hereof.

           “ Interest Rate Cap Agreement ” shall mean an interest rate cap agreement which (i) is purchased and maintained by Mezzanine Borrower; (ii) is provided by a counterparty reasonably acceptable to Lender and acceptable to the Rating Agencies; (iii) is written on the then current standard ISDA documentation and otherwise contains terms and conditions reasonably acceptable to Lender and acceptable to the Rating Agencies; (iv) is co-terminus with the Permitted Mezzanine Financing (including all extensions thereof); (v) is for a notional amount equal to the amount of the Permitted Mezzanine Financing; and (vi) provides for a strike rate equal to (or less than) the interest rate that, when added to the Mezzanine Spread, results in a Debt Service Coverage Ratio, calculated on a trailing 12-month basis, of 1.25 to 1.00.

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

           “ Investor ” shall have the meaning set forth in Section 13.3 hereof.

          “ I/O Monthly Payment Amount ” shall have the meaning set forth in Section 2.2(b) hereof.

           “ Issuer Group ” shall have the meaning set forth in Section 13.5(b) hereof.

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          “ Issuer Person ” shall have the meaning set forth in Section 13.5(b) hereof.

          “ Lease ” shall have the meaning set forth in the Mortgage.

          “ Legal Requirements ” shall mean all statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities affecting the Property or any part thereof, or the construction, use, alteration or operation thereof, whether now or hereafter enacted and in force, and all permits, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments, either of record or known to Borrower, at any time in force affecting the Property or any part thereof, including, without limitation, any which may (a) require repairs, modifications or alterations in or to the Property or any part thereof, or (b) in any way limit the use and enjoyment thereof.

          “ Letter of Credit ” shall mean an irrevocable, auto-renewing, unconditional, transferable, clean sight draft letter of credit having an initial term of not less than one (1) year and with automatic renewals for one (1) year periods (unless the obligation being secured by, or otherwise requiring the delivery of, such letter of credit is required to be performed at least thirty (30) days prior to the initial expiry date of such letter of credit), for which Borrower shall have no reimbursement obligation and which reimbursement obligation is not secured by the Property or any other property pledged to secure the Note, in favor of Lender and entitling Lender to draw thereon in New York, New York, based solely on a statement that Lender has the right to draw thereon executed by an officer or authorized signatory of Lender. A Letter of Credit satisfying all of the requirements set forth in the preceding sentence must be issued by an Approved Bank. If at any time (a) the institution issuing any such Letter of Credit shall cease to be an Approved Bank or (b) if such Letter of Credit is due to expire prior to the completion of the work for which such Letter of Credit was delivered or termination of the event or events which gave rise to the requirement that Borrower deliver such Letter of Credit to Lender, Lender shall have the right to draw down the same in full and hold the proceeds thereof in accordance with the provisions of this Agreement, unless Borrower shall deliver a replacement Letter of Credit satisfying the requirements set forth in the first sentence hereof from an Approved Bank within (i) as to (a) above, thirty (30) days after Lender delivers written notice to Borrower that the institution issuing the Letter of Credit has ceased to be an Approved Bank or (ii) as to (b) above, within thirty (30) days prior to the expiration date of said Letter of Credit.

          “ Lien ” shall mean any mortgage, deed of trust, lien, pledge, hypothecation, assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting Borrower, the Property, any portion thereof or any interest therein, including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, the filing of any financing statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.

          “ LLC Agreement ” shall have the meaning set forth in Section 6.1(c).

          “ Loan ” shall mean the loan made by Lender to Borrower pursuant to this Agreement.

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          “ Loan Documents ” shall mean, collectively, this Agreement, the Note, the Mortgage, the Assignment of Management Agreement and any and all other documents, agreements and certificates executed and/or delivered in connection with the Loan, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

          “ Lockout Period ” shall mean the period commencing on the date hereof and ending on the date that is three (3) months prior to the Optional Prepayment Date.

          “ Losses ” shall mean any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses, fines, penalties, charges, fees, judgments, awards, amounts paid in settlement of whatever kind or nature (including but not limited to legal fees and other costs of defense).

          “ LTV ” shall mean the ratio, expressed as a percentage, of (a) the sum of (i) the outstanding principal amount of the Loan at the time the LTV is calculated plus (ii) the proposed principal amount of the Permitted Mezzanine Financing, to (b) the appraised value of the Property based on an updated Appraisal obtained by Lender at Borrower’s cost and expense.

          “ Major Lease ” shall mean as to the Property (i) any Lease which, individually or when aggregated with all other leases at the Property with the same Tenant or its Affiliate, either accounts for ten percent (10%) or more of the Property’s aggregate Net Operating Income or gross leaseable area, (ii) any Lease which contains any option, offer, right of first refusal or other similar entitlement to acquire all or any portion of the Property, or (iii) any instrument guaranteeing or providing credit support for any Lease meeting the requirements of (i) or (ii) above.

          “ Major Sotheby’s Sublease ” shall mean as to the Property (i) any sublease of the Sotheby’s Lease with respect to which Lender has entered into a non-disturbance or similar agreement with the subtenant thereunder, or (ii) any instrument guaranteeing or providing credit support for any sublease of the Sotheby’s Lease meeting the requirements of clause (i) above.

          “ Management Agreement ” shall mean the management agreement entered into by and between Borrower and Manager, pursuant to which Manager is to provide management and other services with respect to the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance with the terms of this Agreement.

          “ Manager ” shall mean RFR Realty LLC or such other entity selected as the manager of the Property in accordance with the terms of this Agreement.

          “ Maturity Date ” shall mean July 1, 2035.

          “ Maximum Legal Rate ” shall mean the maximum nonusurious interest rate, if any, that at any time or from time to time may be contracted for, taken, reserved, charged or received on the indebtedness evidenced by the Note and as provided for herein or the other Loan Documents, under the laws of such state or states whose laws are held by any court of competent jurisdiction to govern the interest rate provisions of the Loan.

          “ Member ” shall have the meaning set forth in Section 6.1(c).

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          “ Mezzanine Borrower ” shall mean the constituent party of the Borrower that is the obligor under the Permitted Mezzanine Financing; provided, however, in no event shall the Mezzanine Borrower be any SPE Component Entity.

           “ Mezzanine Foreclosure ” shall have the meaning set forth in the definition of the term “Mezzanine Transfer”.

           “ Mezzanine Intercreditor ” shall have the meaning set forth in Section 7.6(g).

          “ Mezzanine Notice ” shall have the meaning set forth in Section 7.6.

           “ Mezzanine Spread ” shall mean, if the Permitted Mezzanine Financing shall bear interest at a floating rate of interest, an amount equal to (i) the interest rate of the Permitted Mezzanine Financing at the closing date thereof less (ii) the then current one month LIBOR rate or the then current rate provided by any other similar index or interest rate convention used by Mezzanine Lender to calculate the interest rate under the Permitted Mezzanine Financing.

           “ Mezzanine Transfer ” shall mean each of (i) the pledge of the Equity Collateral to Mezzanine Lender in connection with the Permitted Mezzanine Financing and (ii) the transfer of the Equity Collateral by Mezzanine Borrower to Mezzanine Lender in connection with the exercise of Mezzanine Lender’s rights under the Permitted Mezzanine Financing, provided, that, such transfer is made in accordance with the applicable terms and conditions of the Mezzanine Intercreditor (such event, the “Mezzanine Foreclosure” ).

           “ Monthly Payment Amount ” shall mean the monthly payment of interest and principal due on each Scheduled Payment Date as set forth in Section 2.2(b) hereof.

           “ Moody’s ” shall mean Moody’s Investor Services, Inc.

           “ Mortgage ” shall mean that certain first priority Mortgage and Agreement of Consolidation and Modification of Mortgage, Assignment of Leases and Rents, and Security Agreement dated the date hereof, executed and delivered by Borrower as security for the Loan and encumbering the Property, as the same may be amended, restated, replaced, supplemented or otherwise modified from time to time.

           “ Mortgagor Portions ” shall have the meaning set forth in Section 13.5(b).

          “ Mortgagor Information ” shall have the meaning set forth in Section 13.5(c).

          “ Net Operating Income ” shall mean, with respect to any period of time, the amount obtained by subtracting Operating Expenses from Operating Income, as such amount may be adjusted by Lender in its good faith discretion based on Lender’s underwriting standards for loans which are consummated by Lender for the purpose of including the same in any Securitization, including without limitation, adjustments for vacancy allowance.

          “ Net Proceeds ” shall have the meaning set forth in Section 8.4(b) hereof.

          “ Net Proceeds Deficiency ” shall have the meaning set forth in Section 8.4(b)(vi) hereof.

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          “ Net Worth Statement ” shall mean a certification executed by Borrower Principal and addressed to Lender certifying that Borrower Principal’s net worth equals or exceeds $100,000,000 (or, if any lesser amount, setting forth such lesser amount).

          “ Non-Consolidation Opinion ” shall mean that certain substantive non-consolidation opinion given by Edwards & Angell, LLP in connection herewith and dated as of the date hereof, as the same may be amended, restated, supplemented or modified after the date hereof.

          “ Note ” shall mean that certain Consolidated, Amended and Restated Promissory Note of even date herewith in the principal amount of $235,000,000.00 made by Borrower in favor of Lender, as severed pursuant to that certain Note Severance and Modification Agreement dated as of the date hereof pursuant to which such consolidated note was severed and split into the following replacements notes: (i) Replacement Note A original principal amount of $210,000,000.00, made by Borrower in favor of Lender ( “Note A” ), and (ii) Replacement Note B in the original principal amount of $25,000,000.00 ( “Note B” ), made by Borrower in favor of Lender, as each of the same may be assigned, amended, restated, replaced, extended, renewed, supplemented, severed, split, or otherwise modified from time to time in accordance with the terms and provisions hereof. References to the “Note” in this Agreement shall refer to Note A and Note B collectively.

          “ Note A ” shall have the meaning set forth in the definition of the term “Note”.

          “ Note B ” shall have the meaning set forth in the definition of the term “Note”.

          “ Note Rate ” shall mean (a) prior to the Optional Prepayment Date, the Initial Note Rate, and (b) from and after the Optional Prepayment Date, the Revised Note Rate.

          “ OFAC ” shall have the meaning set forth in Section 4.41 hereof.

          “ Offering Document Date ” shall have the meaning set forth in Section 5.11(c)(i)(D) hereof.

          “ Operating Expense Reserve Account ” shall have the meaning set forth in Section 9.8(a).

          “ Operating Expense Reserve Funds ” shall have the meaning set forth in Section 9.8(a).

          “ Operating Expenses ” shall mean, with respect to any period of time, the total of all expenses actually paid or payable, computed in accordance with GAAP, of whatever kind relating to the operation, maintenance and management of the Property, including without limitation, utilities, ordinary repairs and maintenance, Insurance Premiums (the cost of which shall, solely for the purposes of this definition and only for so long as the Sotheby’s Lease is in full force and effect, be deemed to exclude any Insurance Premiums required to be paid by Borrower hereunder beyond those Insurance Premiums required to be paid by Sotheby’s under the Sotheby’s Lease), license fees, Taxes and Other Charges, advertising expenses, payroll and related taxes, computer processing charges, management fees equal to 3% of the Operating Income (provided, that for purposes of Section 10.2(b)(ii)(B), such management fees shall be limited to 1% of the Operating Income), operational equipment or other lease payments as approved by Lender, normalized capital expenditures equal to $105,589.00 per annum and

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normalized tenant improvement costs and/or leasing commissions equal to $1,015,541.00 per annum, but specifically excluding depreciation and amortization, income taxes, Debt Service, any incentive fees due under the Management Agreement, any item of expense that in accordance with GAAP should be capitalized, any item of expense that would otherwise be covered by the provisions hereof but which is paid by any Tenant under such Tenant’s Lease or other agreement, and deposits into the Reserve Accounts.

          “ Operating Income ” shall mean, with respect to any period of time, all income, computed in accordance with GAAP, derived from the ownership and operation of the Property from whatever source, including, but not limited to, Rents, utility charges, escalations, forfeited security deposits, interest on credit accounts, service fees or charges, license fees, parking fees, rent concessions or credits, and other required pass-throughs but excluding sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any Governmental Authority, refunds and uncollectible accounts, sales of furniture, fixtures and equipment, interest income from any source other than the escrow accounts, Reserve Accounts or other accounts required pursuant to the Loan Documents, Insurance Proceeds (other than business interruption or other loss of income insurance), Awards, percentage rents, unforfeited security deposits, utility and other similar deposits, income from tenants not paying rent, income from tenants in bankruptcy, non-recurring or extraordinary income, including, without limitation lease termination payments, and any disbursements to Borrower from the Reserve Funds.

          “ Optional Prepayment Date ” shall mean July 1, 2015.

          “ Other Charges ” shall mean any and all ground rents, maintenance charges, impositions other than Taxes, and any other charges, including, without limitation, vault charges and license fees for the use of vaults, chutes and similar areas adjoining the Property, now or hereafter levied or assessed or imposed against the Property or any part thereof.

          “ Participations ” shall have the meaning set forth in Section 13.1 hereof.

          “ Patriot Act ” shall have the meaning set forth in Section 4.41 hereof.

          “ Permitted Encumbrances ” shall mean collectively, (a) the Lien and security interests created by the Loan Documents, (b) all Liens, encumbrances and other matters disclosed in the Title Insurance Policy, (c) Liens, if any, for Taxes imposed by any Governmental Authority not yet due or delinquent, and (d) such other title and survey exceptions as Lender has approved or may approve in writing in Lender’s sole discretion.

          “ Permitted Fund Manager ” shall mean any Person that on the date of determination is (i) a nationally-recognized manager of investment funds investing in debt or equity interests relating to commercial real estate or an entity that constitutes a Qualified Institutional Lender under clauses (A), (B) , (C) or (D) of the definition thereof, (ii) investing through a fund with committed capital of at least $250,000,000 and (iii) not subject to any action or proceeding under any bankruptcy, insolvency, rehabilitation or other similar proceeding.

          “ Permitted Investments ” shall mean to the extent available from Lender or Lender’s servicer for deposits in the Reserve Accounts or the Cash Management Account, any one or more of the following obligations or securities acquired at a purchase price of not greater than

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par, including those issued by a servicer of the Loan, the trustee under any securitization or any of their respective Affiliates, payable on demand or having a maturity date not later than the Business Day immediately prior to the date on which the funds used to acquire such investment are required to be used under this Agreement and meeting one of the appropriate standards set forth below:

          (a) obligations of, or obligations fully guaranteed as to payment of principal and interest by, the United States or any agency or instrumentality thereof provided such obligations are backed by the full faith and credit of the United States of America including, without limitation, obligations of: the U.S. Treasury (all direct or fully guaranteed obligations), the Farmers Home Administration (certificates of beneficial ownership), the General Services Administration (participation certificates), the U.S. Maritime Administration (guaranteed Title XI financing), the Small Business Administration (guaranteed participation certificates and guaranteed pool certificates), the U.S. Department of Housing and Urban Development (local authority bonds) and the Washington Metropolitan Area Transit Authority (guaranteed transit bonds); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) be rated “AAA” or the equivalent by each of the Rating Agencies, (iii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iv) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (v) such investments must not be subject to liquidation prior to their maturity;

          (b) Federal Housing Administration debentures;

          (c) obligations of the following United States government sponsored agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit System (consolidated systemwide bonds and notes), the Federal Home Loan Banks (consolidated debt obligations), the Federal National Mortgage Association (debt obligations), the Financing Corp. (debt obligations), and the Resolution Funding Corp. (debt obligations); provided, however , that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

          (d) federal funds, unsecured certificates of deposit, time deposits, bankers’ acceptances and repurchase agreements with maturities of not more than 365 days of any bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a

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variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

          (e) fully Federal Deposit Insurance Corporation-insured demand and time deposits in, or certificates of deposit of, or bankers’ acceptances with maturities of not more than 365 days and issued by, any bank or trust company, savings and loan association or savings bank, the short term obligations of which at all times are rated in the highest short term rating category by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency in the highest short term rating category and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities); provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

          (f) debt obligations with maturities of not more than 365 days and at all times rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest long-term unsecured rating category; provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

          (g) commercial paper (including both non-interest-bearing discount obligations and interest-bearing obligations payable on demand or on a specified date not more than one year after the date of issuance thereof) with maturities of not more than 365 days and that at all times is rated by each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) in its highest short-term unsecured debt rating; provided, however, that the investments described in this clause must (i) have a predetermined fixed dollar of principal due at maturity that cannot vary or change, (ii) if rated by S&P, must not have an “r” highlighter affixed to their rating, (iii) if such investments have a variable rate of interest, such interest rate must be tied to a single interest rate index plus a fixed spread (if any) and must move proportionately with that index, and (iv) such investments must not be subject to liquidation prior to their maturity;

          (h) units of taxable money market funds, with maturities of not more than 365 days and which funds are regulated investment companies, seek to maintain a constant net asset value

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per share and invest solely in obligations backed by the full faith and credit of the United States, which funds have the highest rating available from each Rating Agency (or, if not rated by all Rating Agencies, rated by at least one Rating Agency and otherwise acceptable to each other Rating Agency, as confirmed in writing that such investment would not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities) for money market funds; and

          (i) any other security, obligation or investment which has been approved as a Permitted Investment in writing by (i) Lender and (ii) each Rating Agency, as evidenced by a written confirmation that the designation of such security, obligation or investment as a Permitted Investment will not, in and of itself, result in a downgrade, qualification or withdrawal of the initial, or, if higher, then current ratings assigned to the Securities by such Rating Agency;

           provided, however, that no obligation or security shall be a Permitted Investment if (A) such obligation or security evidences a right to receive only interest payments, (B) the right to receive principal and interest payments on such obligation or security are derived from an underlying investment that provides a yield to maturity in excess of one hundred twenty percent (120%) of the yield to maturity at par of such underlying investment or (C) such obligation or security has a remaining term to maturity in excess of one (1) year.

           “ Permitted Mezzanine Financing ” shall have the meaning set forth in Section 7.6 hereof.

           “ Permitted Transferee ” shall mean any of the following entities:

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

           “ Personal Property ” shall have the meaning set forth in the granting clause of the Mortgage.

           “ Physical Conditions Report ” shall mean that certain Property Condition Report prepared by IVI International, Inc. dated May 11, 2005.

           “ Policies ” shall have the meaning specified in Section 8.1(b) hereof.

           “ Private Rating ” shall have the meaning set forth in Section 13.6 hereof.

           “ Prohibited Transfer ” shall have the meaning set forth in Section 7.2 hereof.

           “ Property ” shall mean the parcel of real property, the Improvements thereon and all Personal Property owned by Borrower and encumbered by the Mortgage, together with all rights pertaining to such property and Improvements, as more particularly described in the granting clause of the Mortgage and referred to therein as the “Property”.

           “ Provided Information ” shall have the meaning set forth in Section 13.4(a) hereof.

           “ Qualified Institutional Lender ” shall mean one or more of the following:

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           “ Qualified Manager ” shall mean Manager or a reputable and experienced professional management organization (a) which manages, together with its affiliates, at least ten (10) first class office buildings totaling at least 3,500,000 square feet of gross leasable area, exclusive of the Property and (b) approved by Lender, which approval shall not have been unreasonably withheld and for which Lender shall have received (i) written confirmation from the Rating Agencies that the employment of such manager will not result in a downgrade, withdrawal or qualification of the initial, or if higher, then current ratings issued in connection with a Securitization, or if a Securitization has not occurred, any ratings to be assigned in connection with a Securitization, and (ii) with respect to any Affiliated Manager, a revised substantive non-consolidation opinion if one was delivered in connection with the closing of the Loan.

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           “ Qualified Trustee ” shall mean (i) a corporation, national bank, national banking association or a trust company, organized and doing business under the laws of any state or the United States of America, authorized under such laws to exercise corporate trust powers and to accept the trust conferred, having a combined capital and surplus of at least $100,000,000 and subject to supervision or examination by federal or state authority, (ii) an institution insured by the Federal Deposit Insurance Corporation or (iii) an institution whose long-term senior unsecured debt is rated either of the then in effect top two rating categories of each of the Rating Agencies.

           “ Rating Agencies ” shall mean each of S&P, Moody’s and Fitch, or any other nationally-recognized statistical rating agency which has been approved by Lender and which rate (or are anticipated to rate) the Securities.

           “ Release ” shall have the meaning set forth in Section 12.5 hereof.

           “ REMIC Prohibition Period ” shall have the meaning set forth in Section 2.4(b)(iv) hereof.

           “ REMIC Trust ” shall mean a “real estate mortgage investment conduit” (within the meaning of Section 860D, or applicable successor provisions, of the Code) that holds the Note.

           “ Renewal Lease ” shall have the meaning set forth in Section 5.13 hereof.

           “ Renewal Sublease ” shall have the meaning set forth in Section 5.13 hereof.

           “ Rent Roll ” shall have the meaning set forth in Section 4.24 hereof.

           “ Rents ” shall have the meaning set forth in the Mortgage.

           “ Replacement Reserve Account ” shall have the meaning set forth in Section 9.2(b) hereof.

           “ Replacement Reserve Funds ” shall have the meaning set forth in Section 9.2(b) hereof.

           “ Replacement Reserve Monthly Deposit ” shall have the meaning set forth in Section 9.2(b) hereof.

           “ Replacements ” shall have the meaning set forth in Section 9.2(a) hereof.

           “ Required Rating ” shall mean a rating by S&P of not less than AA- if the term of such Letter of Credit, bond or other instrument is no longer than three (3) months or if the term of such Letter of Credit, bond or other instrument is in excess of three (3) months, a long term unsecured credit rating by the applicable Rating Agencies of not lower than “AA”, “AA” and “Aa2” by S&P, Fitch and/or Moody’s, respectively, or, if a Securitization has not occurred, such other rating that is reasonably acceptable to Lender or, if a Securitization shall have occurred, such other rating that the Rating Agencies shall have confirmed in writing will not, in and of itself, result in a downgrade, withdrawal or qualification of the then current ratings assigned in connection with such Securitization.

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           “ Required Work ” shall have the meaning set forth in Section 9.4 hereof.

           “ Required Special Servicer Rating ” shall mean (i) a rating of “CSS1” in the case of Fitch, (ii) on the S&P list of approved special servicers in the case of S&P and (iii) in the case of Moody’s, such special servicer is acting as special servicer in a commercial mortgage loan securitization that was rated by Moody’s within the twelve (12) month period prior to the date of determination, and Moody’s has not downgraded or withdrawn the then-current rating on any class of commercial mortgage securities or placed any class of commercial mortgage securities on watch citing the continuation of such special servicer as special servicer of such commercial mortgage securities.

           “ Reserve Accounts ” shall mean the Debt Service Reserve Account and the following sub-accounts of the Cash Management Account: the Tax and Insurance Reserve Account, the Replacement Reserve Account, the Operating Expense Reserve Account, the Extraordinary Expense Reserve Account or any other escrow account established by the Loan Documents.

           “ Reserve Funds ” shall mean the Tax and Insurance Reserve Funds, the Replacement Reserve Funds, the Debt Service Reserve Funds, the Operating Expense Reserve Funds, the Extraordinary Expense Reserve Funds or any other escrow funds established by the Loan Documents.

           “ Restoration ” shall mean, following the occurrence of a Casualty or a Condemnation which is of a type necessitating the repair of the Property, the completion of the repair and restoration of the Property as nearly as possible to the condition the Property was in immediately prior to such Casualty or Condemnation, with such alterations as may be reasonably approved by Lender.

           “ Restoration Consultant ” shall have the meaning set forth in Section 8.4(b)(iii) hereof.

           “ Restoration Retainage ” shall have the meaning set forth in Section 8.4(b)(iv) hereof.

           “ Restricted Party ” shall have the meaning set forth in Section 7.1 hereof.

           “ Revised Note Rate ” shall mean, with respect to Note A, the Revised Note A Rate, and, with respect to Note B, the Revised Note B Rate.

           “ Revised Note A Rate ” shall mean a rate per annum equal to the sum of (x) five percent (5.00%) and (y) the Initial Note A Rate.

           “ Revised Note B Rate ” shall mean a rate per annum equal to the sum of (x) five percent (5.00%) and (y) the Initial Note B Rate.

           “ Sale or Pledge ” shall have the meaning set forth in Section 7.1 hereof.

           “ Scheduled Payment Date ” shall have the meaning set forth in Section 2.2(b) hereof.

           “ Securities ” shall have the meaning set forth in Section 13.1 hereof.

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           “ Securities Act ” shall mean the Securities Act of 1933, as amended.

           “ Securities Liabilities ” shall have the meaning set forth in Section 13.5 hereof.

           “ Securitization ” shall have the meaning set forth in Section 13.1 hereof.

           “ Sotheby’s ” shall mean Sotheby’s, Inc., a New York corporation, as tenant under the Sotheby’s Lease, together with its successors and assigns permitted in accordance with the applicable terms and conditions of the Sotheby’s Lease (including, without limitation, the Sotheby’s Guarantor to the extent the Sotheby’s Guarantor assumes the tenant’s obligations under the Sotheby’s Lease in accordance with the applicable terms and conditions of the Sotheby’s Guaranty (defined below), as applicable).

           “ Sotheby’s Event of Default ” shall mean the occurrence and continuance of a default under the Sotheby’s Lease beyond all applicable notice and cure periods thereunder (if any).

           “ Sotheby’s Guarantor ” shall mean Sotheby’s Holdings, Inc., a Michigan corporation, as guarantor under Sotheby’s Guaranty, together with its successors and assigns permitted in accordance with the applicable terms and conditions of the Sotheby’s Lease and of the Sotheby’s Guaranty (provided, that, in the case of any assignment of the Sotheby’s Lease in accordance with the terms of the Sotheby’s Lease (including, without limitation, Section 17(n) thereof) that results in the successor tenant under the Sotheby’s Lease being the only party (as between such tenant and any substitute guarantor under the Sotheby’s Lease) to receive (or to receive a higher) long-term unsecured debt rating (or equivalent Private Rating) from the Rating Agencies, then the term “Sotheby’s Guarantor” as used herein shall be deemed to refer to such substitute tenant under the Sotheby’s Lease).

           “ Sotheby’s Lease ” shall mean, collectively, (i) that certain Lease dated as of the date hereof by and among Borrower and Sotheby’s, Inc., (ii) that certain Guaranty of Lease dated as of the date hereof executed by Sotheby’s Holdings, Inc. (the “Sotheby’s Guaranty”), and (iii) that certain Subordination, Non-Disturbance and Attornment Agreement by and among Lender and Sotheby’s dated as of the date hereof (the “Sotheby’s SNDA” ), as each of the same may be amended, supplemented, restated or otherwise modified in accordance with the applicable terms and conditions thereof and hereof.

           “ Sotheby’s Sublease ” shall have the meaning set forth in Section 5.13 hereof.

           “ Special Member ” shall have the meaning set forth in Section 6.1(c).

           “ Specified Article 7 Breach ” shall mean a Prohibited Transfer that results in (a) a Sale or Pledge of all or any material portion of the Property, or (b) Borrower Principal Family Group failing to Control Borrower, any SPE Component Entity and Affiliated Manager.

           “ Specified Provisions ” shall mean the following Sections of (I) this Agreement: (a) Sections 5.1 through 5.4, (b) Section 5.6, (c) Section 5.9, (d) Section 5.10, (e) Section 5.11(d), (f) Section 5.12(b)(i), (g) Section 5.13(a), (h) Section 5.15, (i) Section 5.17, 0) Section 5.21, (k) Section 7.2, (1) Section 9.2, (m) Section 9.5, (n) Sections 12.2 through 12.4 and (o) Section

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13.4(a); and (II) the Mortgage: (a) Section 3.5, (b) Section 5.1, (c) Section 8.8, (d) Section 9.1 and (e) Section 9.2.

           “ SPE Component Entity ” shall have the meaning set forth in Section 6.1(b) hereof.

           “ Standard Statements ” shall have the meaning set forth in Section 5.1l(c)(i)(A) hereof.

           “ S&P ” shall mean Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.

           “ State ” shall mean the state in which the Property or any part thereof is located.

           “ Successor Borrower ” shall have the meaning set forth in Section 2.4(b)(iii) hereof.

           “ Surveyor ” shall have the meaning set forth in Section 3.2(c) hereof.

           “ Tax and Insurance Reserve Funds ” shall have the meaning set forth in Section 9.6 hereof.

           “ Tax and Insurance Reserve Account ” shall have the meaning set forth in Section 9.6 hereof.

           “ Taxes ” shall mean all real estate and personal property taxes, assessments, water rates or sewer rents, now or hereafter levied or assessed or imposed against the Property or any part thereof.

           “ Tenant ” shall mean any Person leasing, subleasing or otherwise occupying any portion of the Property under a Lease or other occupancy agreement with Borrower (including, without limitation, Sotheby’s).

           “ Tenant Direction Letter ” shall have the meaning set forth in Section 10.2 hereof.

           “ Termination Fee Deposit ” shall have the meaning set forth in Section 9.3(b).

           “ Title Company ” shall have the meaning set forth in Section 3.2(b) hereof.

           “ Title Insurance Policy ” shall mean that certain ALTA mortgagee title insurance policy issued with respect to the Property and insuring the lien of the Mortgage.

           “ Transferee ” shall have the meaning set forth in Section 7.5 hereof.

           “ Tribunal ” shall mean any state, commonwealth, federal, foreign, territorial or other court or governmental department, commission, board, bureau, district, authority, agency, central bank, or instrumentality, or any arbitration authority.

           “ UCC ” or “ Uniform Commercial Code ” shall mean the Uniform Commercial Code as in effect in the State where the applicable Property is located.

           “ Underwriter Group ” shall have the meaning set forth in Section 13.5(b) hereof.

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           “ Voluntary Bankruptcy Proceeding ” shall mean (i) the filing by Borrower of a voluntary petition under any Creditors Rights Laws, or (ii) the filing of a collusive involuntary petition against Borrower under any Creditor’s Rights Laws by an Affiliate of Borrower.

           Section 1.2. Principles of Construction .

          All references to sections and schedules are to sections and schedules in or to this Agreement unless otherwise specified. All uses of the word “including” shall mean “including, without limitation” unless the context shall indicate otherwise. Unless otherwise specified, the words “hereof,” “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all meanings attributed to defined terms herein shall be equally applicable to both the singular and plural forms of the terms so defined.

ARTICLE 2
GENERAL TERMS

           Section 2.1. Loan Commitment; Disbursement to Borrower

          (a) Subject to and upon the terms and conditions set forth herein, Lender hereby agrees to make and Borrower hereby agrees to accept the Loan on the Closing Date.

          (b) Borrower may request and receive only one borrowing in respect of the Loan and any amount borrowed and repaid in respect of the Loan may not be re-borrowed.

          (c) The Loan shall be evidenced by the Note and secured by the Mortgage and the other Loan Documents.

          (d) Borrower shall use the proceeds of the Loan to (i) refinance Borrower’s existing loan secured by the Property, (ii) make deposits into the Reserve Funds on the Closing Date in the amounts provided herein, (iii) pay costs and expenses incurred in connection with the closing of the Loan, as approved by Lender, (iv) fund any working capital requirements of the Property, and (v) distribute the balance, if any, to its partners.

           Section 2.2. Loan Payments

          (a) The outstanding principal balance of the Loan shall bear interest at a fixed rate per annum equal to (i) prior to the Optional Prepayment Date, the Initial Note Rate, and (ii) from and after the Optional Prepayment Date, the Revised Note Rate. Interest shall be computed based on the daily rate produced assuming a three hundred sixty (360) day year, multiplied by the actual number of days elapsed. Except as otherwise set forth in this Agreement, interest shall be paid in arrears.

          (b) (i) Payments Prior to the Optional Prepayment Date. Borrower shall make an initial payment of $322,067.43 (of which $273,504.96 is allocable to Note A and $48,562.47 is allocable to Note B) on the Closing Date for interest from the Closing Date through and including June 30, 2005. Thereafter, except as may be adjusted in accordance with the last sentence of Section 2.2(c), (A) Borrower shall make consecutive monthly installments of interest

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only in an amount calculated in accordance with Section 2.2(a) above (such amount, the “I/O Monthly Payment Amount”) pursuant to the terms of Section 2.2(d) on the first (1st) day of each month beginning on August 1, 2005 (each such date through and including the Maturity Date, a “Scheduled Payment Date”) through and including the Scheduled Payment Date occurring in July, 2010; and (B) Borrower shall make consecutive monthly installments of principal and interest in the applicable amounts set forth on Schedule 2.2(b) (allocable to Note A to Note B as set forth on such Schedule) pursuant to the terms of Section 2.2(d) (the “Monthly Payment Amount”) on each Scheduled Payment Date commencing with the Scheduled Payment Date occurring in August, 2010 through and including the Optional Prepayment Date.

                    (ii) Payments After the Optional Prepayment Date. On each Scheduled Payment Date occurring after the Optional Prepayment Date, Borrower shall (A) make a payment to Lender of principal and interest in an amount equal to the Monthly Payment Amount to be applied first to interest in an amount equal to interest that would have accrued on the Debt (without adjustment for Accrued Interest) at the Initial Note Rate and then to principal, and (B) pay to Lender all Excess Cash Flow to be applied in accordance with the terms and conditions of this Agreement. After the Optional Prepayment Date, interest accrued at the Revised Note Rate and not paid pursuant to the preceding sentence shall be added to the principal balance of Note A or Note B, as applicable, and shall earn interest at the Revised Note Rate to the extent permitted by applicable Legal Requirements (such accrued interest, “Accrued Interest”).

                    (iii) Payment on Maturity Date. Borrower shall pay to Lender on the Maturity Date the remaining outstanding principal amount of the Loan, all accrued and unpaid interest (including, without limitation, the Accrued Interest) and all other amounts due hereunder and under the other Loan Documents.

          (c) The Monthly Payment Amount shall mean the amount of interest and principal which would be due in order to fully amortize the principal amount of the Loan, over an amortization term of thirty (30) years assuming an annual interest rate equal to the Initial Note Rate, computed on the basis of a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days each. Borrower expressly understands and agrees that such computation of interest based on a three hundred sixty (360) day year consisting of twelve (12) months of thirty (30) days each is solely for the purpose of determining the Monthly Payment Amount, and, notwithstanding such computation, interest shall accrue on the outstanding principal amount of the Loan as provided in Section 2.2(a) above. Borrower understands and acknowledges that such interest accrual requirement results in more interest accruing on the Loan than if either a thirty (30) day month and a three hundred sixty (360) day year or the actual number of days and a three hundred sixty-five (365) day year were used to compute the accrual of interest on the Loan. Borrower recognizes that such interest accrual requirement will not fully amortize the Loan within the amortization period set forth above. Following any partial prepayment occurring solely as a result of the application of Insurance Proceeds or Awards pursuant to the terms of this Agreement, Lender shall adjust the Monthly Payment Amount to give effect to any such partial prepayment, provided, however, that in no event will any such adjustment result in any such installment becoming due and payable on any date after the Maturity Date.

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          (d) Each payment by Borrower to Lender hereunder or under the Note shall be payable at P.O. Box 65585, Charlotte, North Carolina 28265-0585, or by wire pursuant to the following instructions: Bank of America, N.A., ABA #111000025, Account #4782779943 for credit to CMSG, Loan #59039, or at such other place or pursuant to such other wiring instructions or to such other account as Lender may designate from time to time on ten (10) days prior written notice to Borrower. Whenever any payment hereunder or under the Note shall be stated to be due on a day which is not a Business Day, such payment shall be made on the first Business Day preceding such scheduled due date.

          (e) Prior to the occurrence of an Event of Default, all monthly payments made as scheduled under this Agreement and the Note shall be applied first to the payment of interest computed at the Note Rate, and the balance toward the reduction of the principal amount of the Note. Prior to the occurrence and continuance of an Event of Default, all voluntary and involuntary prepayments on the Note shall be applied, to the extent thereof, first, to accrued but unpaid interest on the amount prepaid, second, to the remaining principal amount, and, third, to any other sums due and unpaid to Lender in connection with the Loan. Following the occurrence of an Event of Default, any payment made on the Note shall be applied to accrued but unpaid interest, late charges, accrued fees, the unpaid principal amount of the Note, and any other sums due and unpaid to Lender in connection with the Loan, in such manner and order as Lender may elect in its sole and absolute discretion.

          (f) All payments made by Borrower hereunder or under the Note or the other Loan Documents shall be made irrespective of, and without any deduction for, any setoff or counterclaims.

           Section 2.3. Late Payment Charge

          If any principal or interest payment is not paid by Borrower on or before the date occurring five (5) days after the date the same is due, Borrower shall pay to Lender upon demand an amount equal to the lesser of three percent (3%) of such unpaid sum or the maximum amount permitted by applicable law in order to defray the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment. Any such amount shall be secured by the Mortgage and the other Loan Documents to the extent permitted by applicable law.

           Section 2.4. Prepayment; Defeasance

          Except as otherwise expressly permitted by this Section 2.4 no voluntary prepayments, whether in whole or in part, of the Loan or any other amount at any time due and owing under the Note can be made by Borrower or any other Person without the express written consent of Lender.

          (a) Lockout Period. Borrower has no right to make, and Lender shall have no obligation to accept, any voluntary prepayment, whether in whole or in part, of the Loan during the Lockout Period. Notwithstanding the foregoing, if either (i) Lender, in its sole and absolute discretion, accepts a full or partial voluntary prepayment during the Lockout Period or (ii) there is an involuntary prepayment during the Lockout Period, then, in either case, Borrower shall, in

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addition to any portion of the Loan prepaid (together with all interest accrued and unpaid thereon), pay to Lender a prepayment premium in an amount calculated in accordance with Section 2.4(c) hereof.

          (b) Defeasance.

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          (c) Involuntary Prepayment During the Lockout Period . During the Lockout Period, in the event of any involuntary prepayment of the Loan or any other amount under the Note, whether in whole or in part, in connection with or following Lender’s acceleration of the Note, and whether the Mortgage is satisfied or released by foreclosure (whether by power of sale or judicial proceeding), deed in lieu of foreclosure or by any other means, including, without limitation, repayment of the Loan by Borrower or any other Person pursuant to any statutory or common law right of redemption, Borrower shall, in addition to any portion of the principal balance of the Loan prepaid (together with all interest accrued and unpaid thereon and in the event the prepayment is made on a date other than a Scheduled Payment Date, a sum equal to the amount of interest which would have accrued under the Note on the amount of such prepayment if such prepayment had occurred on the next Scheduled Payment Date), pay to Lender a prepayment premium in an amount calculated in accordance with this Section 2.4(c). Such prepayment premium shall be in an amount equal to the greater of:

 

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          As used herein, “Yield Rate” means the yield rate for the 4.125% U.S. Treasury Security due May 15, 2015, as reported in The Wall Street Journal on the fifth Business Day preceding the Prepayment Calculation Date. If the Yield Rate is not published for such U.S. Treasury Security, then the “Yield Rate” shall mean the yield rate for the nearest equivalent U.S. Treasury Security (as selected at Lender’s sole and absolute discretion) as reported in The Wall Street Journal on the fifth Business Day preceding the Prepayment Calculation Date. If the publication of such Yield Rate in The Wall Street Journal is discontinued, Lender shall have the right to determine such Yield Rate from another source typically used by other lenders, trustees or servicers of this type of securitized loan transaction. The “Prepayment Calculation Date” shall mean, as applicable, the date on which (i) notice of prepayment is given to Lender, in the case of a voluntary prepayment of the entire outstanding principal amount of the Note, (ii) Lender applies any partial prepayment to the reduction of the outstanding principal amount of the Note, in the case of a voluntary partial prepayment which is accepted by Lender, (iii) Lender accelerates the Loan, in the case of a prepayment resulting from acceleration, or (iv) Lender applies funds held under any Reserve Account, in the case of a prepayment resulting from such application (other than in connection with acceleration of the Loan).

          (d) Insurance and Condemnation Proceeds; Excess Interest . Notwithstanding any other provision herein to the contrary, and provided no Event of Default exists, Borrower shall not be required to pay any prepayment premium in connection with any prepayment occurring solely as a result of (i) the application of Insurance Proceeds or Condemnation Proceeds pursuant to the terms of the Loan Documents, or (ii) the application of any interest in excess of the maximum rate permitted by applicable law to the reduction of the Loan.

          (e) After the Lockout Period . Borrower may voluntarily prepay (without premium) the Note in whole or in part at any time after the day the Lockout Period ends upon giving Lender at least ten (10) days (but not more than ninety (90) days) prior written notice. Lender shall accept a prepayment pursuant to this Section 2.4(e) on a day other than a Scheduled Payment Date provided that, in addition to payment of the full outstanding principal balance of the Note, Borrower pays to Lender a sum equal to the amount of interest which would have accrued on the Note if such prepayment occurred on the next Scheduled Payment Date.

          (f) Partial Prepayments . Notwithstanding anything herein to the contrary, provided no Event of Default has occurred and is continuing, any partial prepayment of the Note shall be applied pro rata (based on the initial principal balance of Note A and Note B) to Note A and Note B.

          Section 2.5. Payments after Default

          Upon the occurrence and during the continuance of an Event of Default, interest on the outstanding principal balance of the Loan and, to the extent permitted by law, overdue interest and other amounts due in respect of the Loan, (a) shall accrue at the Default Rate, and (b) Lender shall be entitled to receive and Borrower shall pay to Lender all cash flow from the Property in accordance with the terms of Article 10 hereof, such amount to be applied by Lender to the payment of the Debt in such order as Lender shall determine in its sole discretion, including, without limitation, alternating applications thereof between interest and principal. Interest at the Default Rate shall be computed from the occurrence of the Event of Default until the earlier of

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(i) the actual receipt and collection of the Debt (or that portion thereof that is then due) and (ii) the cure of such Event of Default. To the extent permitted by applicable law, interest at the Default Rate shall be added to the Debt, shall itself accrue interest at the same rate as the Loan and shall be secured by the Mortgage. This paragraph shall not be construed as an agreement or privilege to extend the date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to Lender by reason of the occurrence of any Event of Default; the acceptance of any payment from Borrower shall not be deemed to cure or constitute a waiver of any Event of Default; and Lender retains its rights under this Agreement to accelerate and to continue to demand payment of the Debt upon the happening of and during the continuance of any Event of Default, despite any payment by Borrower to Lender.

          Section 2.6. Usury Savings

          This Agreement and the Note are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the principal balance of the Loan at a rate which could subject Lender to either civil or criminal liability as a result of being in excess of the Maximum Legal Rate. If, by the terms of this Agreement or the other Loan Documents, Borrower is at any time required or obligated to pay interest on the principal balance due hereunder at a rate in excess of the Maximum Legal Rate, the Note Rate or the Default Rate, as the case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate and all previous payments in excess of the Maximum Legal Rate shall be deemed to have been payments in reduction of principal and not on account of the interest due hereunder. All sums paid or agreed to be paid to Lender for the use, forbearance, or detention of the sums due under the Loan, shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term of the Loan until payment in full so that the rate or amount of interest on account of the Loan does not exceed the Maximum Legal Rate of interest from time to time in effect and applicable to the Loan for so long as the Loan is outstanding.

ARTICLE 3
CONDITIONS PRECEDENT

          The obligation of Lender to make the Loan hereunder is subject to the fulfillment by Borrower or waiver by Lender of the following conditions precedent no later than the Closing Date. At the time Lender funds the Loan, the conditions precedent contained in this Article 3 shall be deemed satisfied or otherwise waived by Lender (except to the extent specifically set forth in any post closing letter or similar agreement between Borrower and Lender).

          Section 3.1. Representations and Warranties; Compliance with Conditions

          The representations and warranties of Borrower contained in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the Closing Date with the same effect as if made on and as of such date, and Lender shall have determined that no Default or an Event of Default shall have occurred and be continuing; and Borrower shall be in compliance in all material respects with all terms and conditions set forth in this Agreement and in each other Loan Document on its part to be observed or performed.

          Section 3.2. Delivery of Loan Documents; Title Insurance; Reports; Leases

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          (a) Mortgage, Loan Agreement and Note . Lender shall have received from Borrower a fully executed and acknowledged counterpart of the Mortgage and evidence that counterparts of the Mortgage and Uniform Commercial Code financing statements have been delivered to Title Company for recording, in the reasonable judgment of Lender, so as to effectively create upon such recording valid and enforceable Liens upon the Property, of the requisite priority, in favor of Lender (or such other trustee as may be required or desired under local law), subject only to the Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents. Lender shall have also received from Borrower fully executed counterparts of the this Agreement, the Note and Assignment of Management Agreement and all other Loan Documents.

          (b) Title Insurance . Lender shall have received a Title Insurance Policy issued by Counsel Abstract, Inc., as agent for Chicago Title Insurance Company ( “Chicago” ), containing co-insurance endorsements issued by Counsel Abstract, Inc., as agent for Stewart Title Insurance Company ( “Stewart”; Chicago and Stewart are collectively herein referred to as the “Title Company” ) and dated as of the Closing Date, with co-insurance agreements acceptable to Lender. Such Title Insurance Policy shall (i) provide coverage in the amount of the Loan, (ii) insure Lender that the Mortgage creates a valid lien on the Property of the requisite priority, free and clear of all exceptions from coverage other than Permitted Encumbrances and standard exceptions and exclusions from coverage (as modified by the terms of any endorsements), (iii) contain such endorsements and affirmative coverages as Lender may reasonably request, and (iv) name Lender as the insured. The Title Insurance Policy shall be assignable. Lender also shall have received evidence that all premiums in respect of such Title Insurance Policy have been paid.

          (c) Survey . Lender shall have received a re-dated title survey for the Property, certified to Title Company and Lender and their successors and assigns, in form and content satisfactory to Lender and prepared by Earl B. Lovell - S.P. Belcher, Inc. and visually updated by Fehringer Surveying, P.C. (the “Surveyor” ) in accordance with the 1999 Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys. The survey shall meet the classification of an “Urban Survey” and the following additional items from the list of “Optional Survey Responsibilities and Specifications” (Table A) should be added to each survey: 2, 3, 4, 6, 8, 9, 10, 11 and 13. Such survey shall reflect the same legal description contained in the Title Insurance Policy referred to in subsection (b) above and shall include, among other things, a metes and bounds description of the real property comprising part of the Property reasonably satisfactory to Lender. The Surveyor’s seal shall be affixed to the survey and the Surveyor shall provide a certification for each survey in form and substance acceptable to Lender.

          (d) Insurance . Lender shall have received copies of the Policies required hereunder, satisfactory to Lender in its sole discretion, and evidence of the payment of all Insurance Premiums payable for the existing policy period.

          (e) Environmental Reports . Lender shall have received the Environmental Report in respect of the Property satisfactory to Lender.

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          (f) Zoning/Building Code . Lender shall have received evidence of compliance with zoning and building ordinances and codes, including, without limitation, required certificates of occupancy, reasonably acceptable to Lender.

          (g) Encumbrances . Borrower shall have taken or caused to be taken such actions in such a manner so that Lender has a valid and perfected first Lien as of the Closing Date on the Property, subject only to applicable Permitted Encumbrances and such other Liens as are permitted pursuant to the Loan Documents, and Lender shall have received satisfactory evidence thereof.

          (h) Lien Searches . Borrower shall have delivered to Lender certified search results pertaining to the Borrower, Borrower Principal and such other Persons or any SPE Component Entity as reasonably required by Lender for state and federal tax liens, bankruptcy, judgment, litigation and state and local UCC filings

          Section 3.3. Related Documents

          Each additional document not specifically referenced herein, but relating to the transactions contemplated herein, shall have been duly authorized, executed and delivered by all parties thereto and at Lender’s written request, Lender shall have received and approved certified copies thereof.

          Section 3.4. Organizational Documents

          On or before the Closing Date, Borrower shall deliver or cause to be delivered to Lender (a) copies certified by Borrower of all organizational documentation related to Borrower, each SPE Component Entity and Borrower Principal which must be acceptable to Lender in its sole discretion, and (b) such other evidence of the formation, structure, existence, good standing and/or qualification to do business of the Borrower, each SPE Component Entity and Borrower Principal, as Lender may request in its sole discretion, including, without limitation, good standing or existence certificates, qualifications to do business in the appropriate jurisdictions, resolutions authorizing the entering into of the Loan and incumbency certificates as may be requested by Lender.

          Section 3.5. Opinions of Borrower’s Counsel

          Lender shall have received opinions of Borrower’s counsel (a) with respect to non-consolidation issues and (b) with respect to due execution, authority, enforceability of the Loan Documents and such other matters as Lender may require, all such opinions in form, scope and substance satisfactory to Lender and Lender’s counsel in their sole discretion.

          Section 3.6. Annual Budget

          Borrower shall have delivered, and Lender shall have approved, the Annual Budget for the current fiscal year, a copy of which is attached as Exhibit A hereto.

          Section 3.7. Taxes and Other Charges

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          Borrower shall have paid or cause to have been paid all Taxes and Other Charges (including any in arrears) relating to the Property, which amounts may be funded with proceeds of the Loan.

          Section 3.8. Completion of Proceedings

          All corporate and other proceedings taken or to be taken in connection with the transactions contemplated by this Agreement and other Loan Documents and all documents incidental thereto shall be satisfactory in form and substance to Lender, and Lender shall have received all such counterpart originals or certified copies of such documents as Lender may reasonably request.

          Section 3.9. Payments

          All payments, deposits or escrows required to be made or established by Borrower under this Agreement, the Note and the other Loan Documents on or before the Closing Date shall have been paid, deposited or escrowed, which such amounts may be funded with the proceeds of the Loan.

          Section 3.10. Transaction Costs

          Except as otherwise expressly provided herein, Borrower shall have paid or reimbursed Lender for all out of pocket expenses in connection with the underwriting, negotiation, Securitization and closing of the Loan, including title insurance premiums and other title company charges; recording, registration, filing and similar fees, taxes and charges; transfer, mortgage, deed, stamp or documentary taxes or similar fees or charges; costs of third-party reports, including without limitation, environmental studies, credit reports, seismic reports, engineer’s reports, appraisals and surveys; underwriting and origination expenses; Securitization expenses; and all actual, reasonable legal fees and expenses charged by counsel to Lender.

          Section 3.11. No Material Adverse Change

          There shall have been no material adverse change in the financial condition or business condition of the Property, Borrower, Borrower Principal, any SPE Component Entity, Manager or any other person or party contributing to the operating income and operations of the Property since the date of the most recent financial statements and/or other information delivered to Lender. The income and expenses of the Property, the occupancy and leases thereof, and all other features of the transaction shall be as represented to Lender without material adverse change. Neither Borrower nor Borrower Principal, any SPE Component Entity or Affiliated Manager shall be the subject of any bankruptcy, reorganization, or insolvency proceeding.

          Section 3.12. Leases and Rent Roll

          Lender shall have received copies of all Leases affecting the Property, which shall be satisfactory in form and substance to Lender. Lender shall have received a current certified rent roll or other similar occupancy statement of the Property, reasonably satisfactory in form and substance to Lender.

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           Section 3.13. Intentionally Omitted

          Section 3.14. Estoppel Certificates

          Borrower shall have delivered to Lender an original estoppel certificate executed by Sotheby’s in form and substance satisfactory to Lender.

          Section 3.15. Subordination and Attornment

          Borrower shall have delivered to Lender a fully executed version of the Sotheby’s SNDA.

          Section 3.16. Tax Lot

          Lender shall have received evidence that the Property constitutes one (1) or more separate tax lots, which evidence shall be reasonably satisfactory in form and substance to Lender.

          Section 3.17. Physical Conditions Report

          Lender shall have received the Physical Conditions Report with respect to the Property, which report shall be reasonably satisfactory in form and substance to Lender.

          Section 3.18. Management Agreement

          Lender shall have received a certified copy of the Management Agreement with respect to the Property which shall be satisfactory in form and substance to Lender.

           Section 3.19. Appraisal

          Lender shall have received an appraisal of the Property, which shall be satisfactory in form and substance to Lender.

          Section 3.20. Financial Statements

          Lender shall have received such financial statements and related information (including, without limitation, tax bills) as may be reasonably requested by Lender, which such financial statements and related information shall be in form and substance (and prepared by such parties (including, without limitation, an Acceptable Accountant)) as may be reasonably required by Lender and shall be in compliance with any Legal Requirements promulgated by the Securities and Exchange Commission.

          Section 3.21. Net Operating Income

          The Net Operating Income for the Property is not less than $16,808,448.00 as determined by Lender in its sole discretion pursuant to its standard underwriting procedures for loans which are consummated by Lender for the purpose of including the same in any Securitization.

          Section 3.22. Further Documents

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          Lender or its counsel shall have received such other and further approvals, opinions, documents and information as Lender or its counsel may have reasonably requested including the Loan Documents in form and substance satisfactory to Lender and its counsel.

ARTICLE 4
REPRESENTATIONS AND WARRANTIES

          Borrower and, where specifically indicated, each Borrower Principal represents and warrants to Lender as of the Closing Date that:

          Section 4.1. Organization

          Borrower (a) has been duly organized and is validly existing and in good standing with requisite power and authority to own the Property and to transact the business in which it is now engaged, (b) is duly qualified to do business and is in good standing in each jurisdiction where it is required to be so qualified in connection with the Property, its business and its operations, (c) possesses all rights, licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own the Property and to transact the business in which it is now engaged, and the sole business of Borrower is the ownership, management and operation of the Property, and (d) has full power, authority and legal right to mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey the Property pursuant to the terms of the Loan Documents, and has full power, authority and legal right to keep and observe all of the terms of the Loan Documents to which it is a party. Borrower and each Borrower Principal represent and warrant that the chart attached hereto as Exhibit B sets forth an accurate listing of the direct and indirect owners of the equity interests in Borrower and each SPE Component Entity.

          Section 4.2. Status of Borrower

          Borrower’s exact legal name is correctly set forth on the first page of this Agreement, on the Mortgage and on any UCC-1 Financing Statements filed in connection with the Loan. Borrower is an organization of the type specified on the first page of this Agreement. Borrower is incorporated in or organized under the laws of the state of Delaware. Borrower’s principal place of business and chief executive office, and the place where Borrower keeps its books and records, including recorded data of any kind or nature, regardless of the medium of recording, including software, writings, plans, specifications and schematics, has been for the preceding four months (or, if less, the entire period of the existence of Borrower) the address of Borrower set forth on the first page of this Agreement. Borrower’s organizational identification number, if any, assigned by the state of incorporation or organization is 030060905-3619750.

          Section 4.3. Validity of Documents

          Borrower has taken all necessary action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents. This Agreement and such other Loan Documents have been duly executed and delivered by or on behalf of Borrower and each Borrower Principal and constitute the legal, valid and binding obligations of Borrower and each Borrower Principal enforceable against Borrower and each Borrower Principal in accordance with their respective terms, subject only to applicable bankruptcy, insolvency and similar laws

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affecting rights of creditors generally, and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).

          Section 4.4. No Conflicts

          The execution, delivery and performance of this Agreement and the other Loan Documents by Borrower and each Borrower Principal will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the property or assets of Borrower or any Borrower Principal pursuant to the terms of any agreement or instrument to which Borrower or any Borrower Principal is a party or by which any of Borrower’s or Borrower Principal’s property or assets is subject, nor will such action result in any violation of the provisions of any statute or any order, rule or regulation of any Governmental Authority having jurisdiction over Borrower or any Borrower Principal or any of Borrower’s or Borrower Principal’s properties or assets, and any consent, approval, authorization, order, registration or qualification of or with any Governmental Authority required for the execution, delivery and performance by Borrower or Borrower Principal of this Agreement or any of the other Loan Documents has been obtained and is in full force and effect.

          Section 4.5. Litigation

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

          Section 4.6. Agreements

          Borrower is not a party to any agreement or instrument or subject to any restriction which would materially and adversely affect Borrower or the Property, or Borrower’s business, properties or assets, operations or condition, financial or otherwise. Borrower is not in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument to which it is a party or by which Borrower or the Property is bound. Borrower has no material financial obligation under any agreement or instrument to which Borrower is a party or by which Borrower or the Property is otherwise bound, other than (a) obligations incurred in the ordinary course of the operation of the Property and (b) obligations under the Loan Documents.

          Section 4.7. Solvency

          Borrower and each Borrower Principal have (a) not entered into the transaction contemplated under this Agreement or executed the Note, this Agreement or any other Loan Documents with the actual intent to hinder, delay or defraud any creditor and (b) received reasonably equivalent value in exchange for their obligations under the Note, this Agreement or any such other Loan Documents. Giving effect to the Loan, the fair saleable value of the assets

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of Borrower and each Borrower Principal exceeds and will, immediately following the making of the Loan, exceed the total liabilities of Borrower and each Borrower Principal, including, without limitation, subordinated, unliquidated, disputed and contingent liabilities. No petition in bankruptcy has been filed against Borrower, any Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager in the last ten (10) years, and neither Borrower nor any Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager in the last ten (10) years has made an assignment for the benefit of creditors or taken advantage of any Creditors Rights Laws. Neither Borrower nor any Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager is contemplating either the filing of a petition by it under any Creditors Rights Laws or the liquidation of all or a major portion of Borrower’s assets or property, and Borrower has no knowledge of any Person contemplating the filing of any such petition against Borrower or any Borrower Principal, any SPE Component Entity (if any) or Affiliated Manager.

          Section 4.8. Full and Accurate Disclosure

          No statement of fact made by or on behalf of Borrower or any Borrower Principal in this Agreement or in any of the other Loan Documents or in any other document or certificate delivered by or on behalf of Borrower or any Borrower Principal contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained herein or therein not misleading. There is no material fact presently known to Borrower or any Borrower Principal which has not been disclosed to Lender which materially adversely affects, nor as far as Borrower or any Borrower Principal can reasonably foresee, might materially adversely affect, the Property or the business, operations or condition (financial or otherwise) of Borrower or any Borrower Principal.

          Section 4.9. No Plan Assets

          Borrower is not an “employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I of ERISA, and none of the assets of Borrower constitutes or will constitute “plan assets” of one or more such plans within the meaning of 29 C.F.R. Section 2510.3-101. In addition, (a) Borrower is not a “governmental plan” within the meaning of Section 3(32) of ERISA and (b) transactions by or with Borrower are not subject to state statutes regulating investment of, and fiduciary obligations with respect to, governmental plans similar to the provisions of Section 406 of ERISA or Section 4975 of the Internal Revenue Code currently in effect, which prohibit or otherwise restrict the transactions contemplated by this Agreement.

          Section 4.10. Not a Foreign Person

          Neither Borrower nor Borrower Principal is a “foreign person” within the meaning of §1445(f)(3) of the Internal Revenue Code.

          Section 4.11. Enforceability

          The Loan Documents are not subject to any right of rescission, set-off, counterclaim or defense by Borrower, including the defense of usury, nor would the operation of any of the terms of the Loan Documents, or the exercise of any right thereunder, render the Loan Documents unenforceable, and neither Borrower nor Borrower Principal has asserted any right of rescission, set-off, counterclaim or defense with respect thereto. As of the date hereof, to the best of

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Borrower’s knowledge, no Default or Event of Default exists under or with respect to any Loan Document.

          Section 4.12. Business Purposes

          The Loan is solely for the business purpose of Borrower, and is not for personal, family, household, or agricultural purposes.

          Section 4.13. Compliance

          To the best of Borrower’s knowledge, the Property, and the use and operation thereof, comply in all material respects with all Legal Requirements, including, without limitation, building and zoning ordinances and codes and the Americans with Disabilities Act. To Borrower’s knowledge, Borrower is not in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority and Borrower has received no written notice of any such default or violation. There has not been committed by Borrower or, to Borrower’s knowledge, any other Person in occupancy of or involved with the operation or use of the Property any act or omission affording any Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

          Section 4.14. Financial Information

          All financial data, including, without limitation, the balance sheets, statements of cash flow, statements of income and operating expense and rent rolls (or similar occupancy statement), that have been delivered to Lender in respect of Borrower, any Borrower Principal and/or the Property (a) (i) with respect to Borrower and/or Borrower Principal, are true, complete and correct in all material respects, and (ii) with respect to the Property, are, to Borrower’s actual knowledge, true, complete and correct in all material respects, (b) accurately represent the financial condition of Borrower or Borrower Principal, as applicable, as of the date of such reports, and (c) with respect to Borrower and/or Borrower Principal, to the extent prepared or audited by an independent certified public accounting firm, have been prepared in accordance with GAAP throughout the periods covered, except as disclosed therein. Borrower does not have any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and reasonably likely to have a material adverse effect on the Property or the current and/or intended operation thereof, except as referred to or reflected in said financial statements. Since the date of such financial statements, there has been no materially adverse change in the financial condition, operations or business of Borrower or Borrower Principal from that set forth in said financial statements.

          Section 4.15. Condemnation

          No Condemnation or other proceeding has been commenced or, to Borrower’s best knowledge, is threatened or contemplated with respect to all or any portion of the Property or for the relocation of roadways providing access to the Property.

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          Section 4.16. Utilities and Public Access; Parking

          The Property has adequate rights of access to public ways and is served by water, sewer, sanitary sewer and storm drain facilities adequate to service the Property for full utilization of the Property for its intended uses. All public utilities necessary to the full use and enjoyment of the Property as currently used and enjoyed are located either in the public right-of-way abutting the Property (which are connected so as to serve the Property without passing over other property) or in recorded easements serving the Property and such easements are set forth in and insured by the Title Insurance Policy. All roads necessary for the use of the Property for its current purposes have been completed and dedicated to public use and accepted by all Governmental Authorities. The Property has, or is served by, parking to the extent required to comply with all Legal Requirements.

          Section 4.17. Separate Lots

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

          Section 4.18. Assessments

          To Borrower’s knowledge after due inquiry of the owner of the Property immediately prior to the Closing Date, there are no pending or proposed special or other assessments for public improvements or otherwise affecting the Property, nor are there any contemplated improvements to the Property that may result in such special or other assessments.

          Section 4.19. Insurance

          Borrower has obtained and has delivered to Lender insurance certificates reflecting the insurance coverages, amounts and other requirements set forth in this Agreement. To Borrower’s knowledge after due inquiry (including, without limitation, due inquiry of Sotheby’s), no claims have been made under any of the Policies, and to Borrower’s knowledge, no Person, including Borrower and/or Sotheby’s, has done, by act or omission, anything which would materially impair the coverage of any of the Policies.

          Section 4.20. Use of Property

          The Property is used exclusively for auction house, restaurant, limited retail and office purposes and other appurtenant and related uses.

          Section 4.21. Certificate of Occupancy; Licenses

          All material certifications, permits, licenses and approvals, including, without limitation, certificates of completion or occupancy and any applicable liquor license required for the legal use, occupancy and operation of the Property for the purpose intended herein, have been obtained and are valid and in full force and effect. Borrower shall keep and maintain (or cause to be kept and maintained) all licenses necessary for the operation of the Property for the purpose intended herein. The use being made of the Property is in conformity with the certificate of occupancy and any permits or licenses issued for the Property.

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          Section 4.22. Flood Zone

          To the best of Borrower’s knowledge, none of the Improvements on the Property are located in an area identified by the Federal Emergency Management Agency as an area having special flood hazards, or, if any portion of the Improvements is located within such area, Borrower has obtained (or has caused to be obtained) the insurance prescribed in Section 8.1(a)(i).

          Section 4.23. Physical Condition

          Except as set forth in the Physical Conditions Report, to Borrower’s knowledge, the Property, including, without limitation, all buildings, improvements, parking facilities, sidewalks, storm drainage systems, roofs, plumbing systems, HVAC systems, fire protection systems, electrical systems, equipment, elevators, exterior sidings and doors, landscaping, irrigation systems and all structural components, are in good condition, order and repair in all material respects. Except as set forth in the Physical Conditions Report, to Borrower’s knowledge, there exists no structural or other material defects or damages in the Property, as a result of a Casualty or otherwise, and whether latent or otherwise. Borrower has not received notice from any insurance company or bonding company of any defects or inadequacies in the Property, or any part thereof, which would adversely affect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.

          Section 4.24. Boundaries

          (a) To the best of Borrower’s knowledge, none of the Improvements which were included in determining the appraised value of the Property lie outside the boundaries and building restriction lines of the Property to any material extent, and (b) no improvements on adjoining properties encroach upon the Property and no easements or other encumbrances upon the Property encroach upon any of the Improvements so as to materially affect the value or marketability of the Property.

          Section 4.25. Leases and Rent Roll

          Borrower has delivered to Lender a true, correct and complete (i) copy of the fully executed Sotheby’s Lease, which such Lease represents the entire agreement of the parties thereto with respect to the matters contained therein, and (ii) rent roll for the Property or similar occupancy statement relating to the Property reasonably acceptable to Lender (each, a “Rent Roll”) which includes all Leases affecting the Property. Except as set forth in the Rent Roll (as same has been updated by written notice thereof to Lender) delivered to Lender on or prior to the Closing Date: (a) the Sotheby’s Lease is in full force and effect; (b) the premises demised under the Sotheby’s Lease has been completed and Sotheby’s has accepted possession of and is in occupancy of all of its demised premises under the Sotheby’s Lease; (c) Sotheby’s has commenced the payment of rent under the Sotheby’s Lease, there are no offsets, claims or defenses to the enforcement thereof, and Borrower has no monetary obligations to Sotheby’s under the Sotheby’s Lease; (d) all Rents due and payable under the Sotheby’s Lease have been paid and no portion thereof has been paid for any period more than thirty (30) days in advance;

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(e) the rent payable under Sotheby’s Lease is the amount of fixed rent set forth in the Sotheby’s Lease, and there is no claim or basis for a claim by Sotheby’s for an offset or adjustment to the rent; (f) Sotheby’s has not made any written claim of a material default against Borrower which remains outstanding nor has Borrower or Manager received, by telephonic, in-person, e-mail or other communication, any notice of a material default under the Sotheby’s Lease; (g) to Borrower’s knowledge there is no present material default by Sotheby’s under the Sotheby’s Lease; (h) all security deposits, if any, under the Sotheby’s Lease have been collected by Borrower; (i) Borrower is the sole owner of the entire landlord’s interest in the Sotheby’s Lease; (j) the Sotheby’s Lease is the valid, binding and enforceable obligation of Borrower and the Sotheby’s Lease and the Sotheby’s Guaranty are the valid, binding and enforceable obligation of Sotheby’s and Sotheby’s Guarantor (as applicable) and there are no agreements with Sotheby’s or Sotheby’s Guarantor under the Sotheby’s Lease or the Sotheby’s Guaranty (as applicable) other than as expressly set forth in the Sotheby’s Lease or the Sotheby’s Guaranty (as applicable); (k) to Borrower’s actual knowledge, no Person has any possessory interest in, or right to occupy, the Property or any portion thereof except under the terms of the Sotheby’s Lease or any of the existing subleases thereof as set forth on Schedule 8.1(i) thereof; (1) the Sotheby’s Lease does not contain any option or offer to purchase or right of first refusal to purchase the Property or any part thereof (other than the right of first offer set forth in Section 23 thereof); (m) neither the Sotheby’s Lease nor the Rents have been assigned, pledged or hypothecated except to Lender, and no other Person has any interest therein except Sotheby’s; and (n) no conditions exist which now give Sotheby’s the right to “go dark” pursuant to the provisions of the Sotheby’s Lease.

          Section 4.26. Filing and Recording Taxes

          All mortgage, mortgage recording, stamp, intangible or other similar tax required to be paid by any Person under applicable Legal Requirements currently in effect in connection with the execution, delivery, recordation, filing, registration, perfection or enforcement of any of the Loan Documents, including, without limitation, the Mortgage, have been paid or will be paid, and, under current Legal Requirements, the Mortgage is enforceable in accordance with its terms by Lender (or any subsequent holder thereof).

          Section 4.27. Management Agreement

           The Management Agreement is in full force and effect and there is no default thereunder by any party thereto and, to Borrower’s knowledge, no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder. No management fees under the Management Agreement are accrued and unpaid.

          Section 4.28. Illegal Activity

          No portion of the Property has been or will be purchased with proceeds of any illegal activity on the part of Borrower or its Affiliates, and no part of the proceeds of the Loan will be used in connection with any illegal activity.

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          Section 4.29. Construction Expenses

          Except as set forth in Lender’s Title Insurance Policy, to Borrower’s knowledge, there are no claims for payment for work, labor or materials affecting the Property which are or may become a lien prior to, or of equal priority with, the Liens created by the Loan Documents.

          Section 4.30. Personal Property

          Borrower has paid in full for, and is the owner of, all Personal Property (other than tenants’ property) used in connection with the operation of the Property, free and clear of any and all security interests, liens or encumbrances, except for Permitted Encumbrances and the Lien and security interest created by the Loan Documents.

          Section 4.31. Taxes

          Borrower and Borrower Principal have filed all federal, state, county, municipal, and city income, personal property and other tax returns required to have been filed by them and have paid all taxes and related liabilities which have become due pursuant to such returns or pursuant to any assessments received by them. Neither Borrower nor Borrower Principal knows of any basis for any additional assessment in respect of any such taxes and related liabilities for prior years.

          Section 4.32. Permitted Encumbrances

          None of the Permitted Encumbrances, individually or in the aggregate, materially interferes with the benefits of the security intended to be provided by the Loan Documents, impairs the use or the operation of the Property or impairs Borrower’s ability to pay its obligations in a timely manner.

          Section 4.33. Federal Reserve Regulations

          Borrower will use the proceeds of the Loan for the purposes set forth in Section 2.1(d) hereof and not for any illegal activity. No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulation U of the Board of Governors of the Federal Reserve System or for any other purpose which would be inconsistent with such Regulation U or any other Regulations of such Board of Governors, or for any purposes prohibited by Legal Requirements or prohibited by the terms and conditions of this Agreement or the other Loan Documents.

          Section 4.34. Investment Company Act

          Borrower is not (a) an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended; (b) a “holding company” or a “subsidiary company” of a “holding company” or an “affiliate” of either a “holding company” or a “subsidiary company” within the meaning of the Public Utility Holding Company Act of 1935, as amended; or (c) subject to any other federal or state law or regulation which purports to restrict or regulate its ability to borrow money.

          Section 4.35. Intentionally Omitted

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           Section 4.36. No Change in Facts or Circumstances; Disclosure

          All information submitted by Borrower or its agents to Lender and in all financial statements, rent rolls (or similar occupancy statements), reports, certificates and other documents submitted in connection with the Loan or in satisfaction of the terms thereof and all statements of fact made by Borrower in this Agreement or in any other Loan Document, are accurate, complete and correct in all material respects. There has been no material adverse change in any condition, fact, circumstance or event that would make any such information inaccurate, incomplete or otherwise misleading in any material respect or that otherwise materially and adversely affects or might materially and adversely affect the Property or the business operations or the financial condition of Borrower. Borrower has disclosed to Lender all material facts and has not failed to disclose any material fact that could cause any representation or warranty made herein to be materially misleading.

          Section 4.37. Intellectual Property

          All trademarks, trade names and service marks necessary to the business of Borrower as presently conducted or as Borrower contemplates conducting its business are in good standing and, to the extent of Borrower’s actual knowledge, uncontested. Borrower has not infringed, is not infringing, and has not received notice of infringement with respect to asserted trademarks, trade names and service marks of others. To Borrower’s knowledge, there is no infringement by others of trademarks, trade names and service marks of Borrower.

          Section 4.38. Survey

          The Survey for the Property delivered to Lender in connection with this Agreement has been prepared in accordance with the provisions of Section 3.2(c) hereof or such requirement has otherwise been waived by Lender, and to the knowledge of Borrower does not fail to reflect any material matter affecting the Property or the title thereto.

          Section 4.39. Survival

          Borrower agrees that, unless expressly provided otherwise, all of the representations and warranties of Borrower set forth in this Agreement and elsewhere in this Agreement and in the other Loan Documents shall survive for so long as any portion of the Debt remains owing to Lender. All representations, warranties, covenants and agreements made in this Agreement or in the other Loan Documents by Borrower shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.

          Section 4.40. Embargoed Persons Act .

          As of the date hereof and at all times throughout the term of the Loan, including after giving effect to any transfers of interests permitted pursuant to the Loan Documents, (a) none of the funds or other assets of Borrower and Borrower Principal constitute property of, or are beneficially owned, directly or indirectly, by any person, entity or government subject to trade restrictions under U.S. law, including but not limited to, the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or regulations promulgated thereunder with the result that the

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investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan made by Lender is in violation of law (“ Embargoed Person ”); (b) no Embargoed Person has any interest of any nature whatsoever in Borrower or Borrower Principal, as applicable, with the result that the investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower or Borrower Principal, as applicable, have been derived from any unlawful activity with the result that the investment in Borrower or Borrower Principal, as applicable (whether directly or indirectly), is prohibited by law or the Loan is in violation of law.

          Section 4.41. Patriot Act .

          All capitalized words and phrases and all defined terms used in the USA Patriot Act of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all orders, rules and regulations of the United States government and its various executive departments, agencies and offices related to the subject matter of the Patriot Act, including Executive Order 13224 effective September 24, 2001 (collectively referred to in this Section only as the “ Patriot Act ”) and are incorporated into this Section. Each of Borrower and Borrower Principal hereby represents and warrants that Borrower and Borrower Principal and each and every Person affiliated with Borrower or Borrower Principal or that to Borrower’s knowledge has an economic interest in Borrower, or, to Borrower’s knowledge, that has or will have an interest in the transaction contemplated by this Agreement or in the Property or will participate, in any manner whatsoever, in the Loan, is: (i) not a “blocked” person listed in the Annex to Executive Order Nos. 12947, 13099 and 13224 and all modifications thereto or thereof (as used in this Section only, the “ Annex ”); (ii) in full compliance with the requirements of the Patriot Act and all other requirements contained in the rules and regulations of the Office of Foreign Assets Control, Department of the Treasury (as used in this Section only, “ OFAC ”); (iii) operated under policies, procedures and practices, if any, that are in compliance with the Patriot Act and available to Lender for Lender’s review and inspection during normal business hours and upon reasonable prior notice; (iv) not in receipt of any notice from the Secretary of State or the Attorney General of the United States or any other department, agency or office of the United States claiming a violation or possible violation of the Patriot Act; (v) not listed as a Specially Designated Terrorist or as a “blocked” person on any lists maintained by the OFAC pursuant to the Patriot Act or any other list of terrorists or terrorist organizations maintained pursuant to any of the rules and regulations of the OFAC issued pursuant to the Patriot Act or on any other list of terrorists or terrorist organizations maintained pursuant to the Patriot Act; (vi) not a person who has been determined by competent authority to be subject to any of the prohibitions contained in the Patriot Act; and (vii) not owned or controlled by or now acting and or will in the future act for or on behalf of any person named in the Annex or any other list promulgated under the Patriot Act or any other person who has been determined to be subject to the prohibitions contained in the Patriot Act. Borrower covenants and agrees that in the event Borrower receives any notice that Borrower Principal or Borrower (or any of its beneficial owners or affiliates or participants) become listed on the Annex or any other list promulgated under the Patriot Act or is indicted, arraigned, or custodially detained on charges involving money laundering or predicate crimes to money laundering, Borrower shall immediately notify Lender. It shall be an Event of Default hereunder if Borrower, Borrower Principal or any other party to any Loan Document becomes

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listed on any list promulgated under the Patriot Act or is indicted, arraigned or custodially detained on charges involving money laundering or predicate crimes to money laundering.

ARTICLE 5
BORROWER COVENANTS

          From the date hereof and until repayment of the Debt in full and performance in full of all obligations of Borrower under the Loan Documents or the earlier release of the Lien of the Mortgage (and all related obligations) in accordance with the terms of this Agreement and the other Loan Documents, Borrower hereby covenants and agrees with Lender that:

          Section 5.1. Existence; Compliance with Legal Requirements

          (a) Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect its existence, rights, licenses, permits and franchises and comply with all Legal Requirements applicable to it and the Property to the extent that the failure to do so would have a material adverse effect on the value or quality of the Property or Borrower’s ability to repay the Loan. Borrower hereby covenants and agrees not to commit, permit or suffer to exist any act or omission affording any Governmental Authority the right of forfeiture as against the Property or any part thereof or any monies paid in performance of Borrower’s obligations under any of the Loan Documents.

          (b) After prior written notice to Lender, Borrower, at its own expense, may contest (or may permit Sotheby’s to contest (in accordance with the applicable terms and conditions of the Sotheby’s Lease)) by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the Legal Requirements affecting the Property, provided that (i) no Event of Default or Sotheby’s Event of Default has occurred and is continuing; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower or the Property is subject and shall not constitute a default thereunder (including, without limitation, the Sotheby’s Lease); (iii) neither the Property, any part thereof or interest therein, any of the tenants or occupants thereof, nor Borrower shall be affected in any material adverse way as a result of such proceeding; (iv) non-compliance with the Legal Requirements shall not impose civil or criminal liability on Sotheby’s, Borrower or Lender; (v) Borrower shall have furnished (or shall have caused to be furnished) the security as may be required in the proceeding or by Lender to ensure compliance by Borrower and/or Sotheby’s with the Legal Requirements; and (vi) Borrower shall have furnished (or shall have caused to be furnished) to Lender all other items reasonably requested by Lender.

          Section 5.2. Maintenance and Use of Property

          Subject to Section 20.12 hereof, (i) Borrower shall cause the Property to be maintained in a good and safe condition and repair, (ii) the Improvements and the Personal Property shall not be removed, demolished or other than in accordance with the provisions of Section 5.21, materially altered (except for normal replacement of the Personal Property) without the prior written consent of Lender, and (iii) if under applicable zoning provisions the use of all or any portion of the Property is or shall become a nonconforming use, Borrower will not cause or permit the nonconforming use to be discontinued or the nonconforming Improvement to be

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abandoned without the express written consent of Lender (which such consent (a) prior to the Optional Prepayment Date, shall not be unreasonably withheld, conditioned or delayed, or (b) from and after the Optional Prepayment Date, may be granted or withheld in Lender’s sole and absolute discretion).

          Section 5.3. Waste

          Borrower shall not knowingly commit (or permit to be committed) or suffer (or permit to be suffered) any waste of the Property or make or permit any change in the use of the Property which will in any way materially increase the risk of fire or other hazard arising out of the operation of the Property, or take (or permit to be taken) any action that might invalidate or give cause for cancellation of any Policy, or do or permit to be done thereon anything that may in any way impair the value of the Property or the security for the Loan. Borrower will not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of the Property, regardless of the depth thereof or the method of mining or extraction thereof.

          Section 5.4. Taxes and Other Charges

          (a) Borrower shall pay (or cause to be paid) all Taxes and Other Charges now or hereafter levied or assessed or imposed against the Property or any part thereof as the same become due and payable; provided, however, Borrower’s obligation to directly pay Taxes shall be suspended for so long as (i) the same are paid by Sotheby’s pursuant to the terms of the Sotheby’s Lease, or (ii) funds sufficient to pay the same have been deposited with Lender pursuant to Section 9.6 hereof. Borrower shall furnish (or caused to be furnished) to Lender receipts for the payment of the Taxes and the Other Charges prior to the date the same shall become delinquent (provided, however, that Borrower is not required to furnish such receipts for payment of Taxes in the event that such Taxes have been paid by Lender pursuant to Section 9.6 hereof). Borrower shall not suffer and shall promptly cause to be paid and discharged any Lien or charge whatsoever which may be or become a Lien or charge against the Property, and shall, subject to Section 3.5(b) of the Mortgage and Sections 5.1(b) and 5.4(b) hereof, promptly pay for all utility services provided to the Property.

          (b) After prior written notice to Lender, Borrower, at its own expense, may (or may permit Sotheby’s to) contest by appropriate legal proceeding, promptly initiated and conducted in good faith and with due diligence, the amount or validity or application in whole or in part of any Taxes or Other Charges, provided that (i) no Event of Default or Sotheby’s Event of Default has occurred and remains uncured; (ii) such proceeding shall be permitted under and be conducted in accordance with the provisions of any other instrument to which Borrower is subject (including, without limitation, the Sotheby’s Lease) and shall not constitute a default thereunder and such proceeding shall be conducted in accordance with all applicable Legal Requirements; (iii) neither the Property nor any part thereof or interest therein will be in danger of being sold, forfeited, terminated, canceled or lost; (iv) Borrower shall promptly upon final determination thereof pay (or cause to be paid) the amount of any such Taxes or Other Charges, together with all costs, interest and penalties which may be payable in connection therewith; (v) such proceeding shall suspend the collection of such contested Taxes or Other Charges from the Property; and (vi) Borrower shall furnish (or cause to be furnished) such security as may be

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required in the proceeding, or deliver (or cause to be delivered) to Lender such reserve deposits as may be requested by Lender, to insure the payment of any such Taxes or Other Charges, together with all interest and penalties thereon (unless Borrower has paid (or caused to be paid) all of the Taxes or Other Charges under protest). Lender may pay over any such cash deposit or part thereof held by Lender to the claimant entitled thereto at any time when, in the judgment of Lender, the entitlement of such claimant is established or the Property (or part thereof or interest therein) shall be in danger of being sold, forfeited, terminated, canceled or lost or there shall be any danger of the Lien of the Mortgage being primed by any related Lien.

          Section 5.5. Litigation

          On and after the date hereof, Borrower shall give prompt written notice to Lender of any litigation or governmental proceedings pending or threatened in writing against Borrower or against Sotheby’s (of which it has actual notice) which might materially adversely affect Borrower’s or Sotheby’s condition (financial or otherwise) or business or the Property.

          Section 5.6. Access to Property

          Subject to the rights of Tenants under Leases, Borrower shall permit agents, representatives and employees of Lender to inspect the Property or any part thereof at reasonable hours upon reasonable advance notice.

          Section 5.7. Notice of Default

          Borrower shall promptly advise Lender of any material adverse change in the condition (financial or otherwise) of Borrower, any Borrower Principal, Sotheby’s (of which it has actual notice) or the Property or of the occurrence of any Default, Event of Default or Sotheby’s Event of Default of which Borrower has knowledge.

          Section 5.8. Cooperate in Legal Proceedings

          Borrower shall at Borrower’s expense cooperate fully with Lender with respect to any proceedings before any court, board or other Governmental Authority which may in any way affect the rights of Lender hereunder or any rights obtained by Lender under any of the other Loan Documents and, in connection therewith, permit Lender, at its election, to participate in any such proceedings.

          Section 5.9. Performance by Borrower

          Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term and provision to be observed and performed by Borrower under this Agreement and the other Loan Documents and any other agreement or instrument affecting or pertaining to the Property and any amendments, modifications or changes thereto.

          Section 5.10. Awards; Insurance Proceeds

          Subject to Section 20.12 hereof, Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Awards or Insurance Proceeds lawfully or equitably payable in

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connection with the Property, and Lender shall be reimbursed for any expenses incurred in connection therewith (including reasonable, actual attorneys’ fees and disbursements, and the payment by Borrower of the expense of an appraisal on behalf of Lender in case of a Casualty or Condemnation affecting the Property or any part thereof) out of such Awards or Insurance Proceeds.

          Section 5.11. Financial Reporting

          (a) Borrower and Borrower Principal shall keep adequate books and records of account in accordance with GAAP or on a federal income tax basis, or in accordance with other methods acceptable to Lender in its sole discretion, consistently applied and shall furnish to Lender:

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          (b) Upon request from Lender made during any period that the Sotheby’s Lease is no longer in full force or effect, Borrower shall promptly furnish to Lender:

          (c) Borrower shall comply with the following:

 

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          (d) Borrower shall furnish Lender with such other additional financial or management information (including state and federal tax returns) as may, from time to time, be reasonably required by Lender in form and substance reasonably satisfactory to Lender (including, without limitation, any financial reports required to be delivered by any Tenant or any guarantor of any Lease pursuant to the terms of such Lease), and shall furnish to Lender and its agents convenient facilities for the examination and audit of any such books and records.

          (e) All items requiring the certification of Borrower shall, except where Borrower is an individual, require a certificate executed by the general partner, managing member or chief executive officer of Borrower, as applicable (and the same rules shall apply to any sole shareholder, general partner or managing member which is not an individual).

          Section 5.12. Estoppel Statement

          (a)     (i) After request by Lender, Borrower shall within ten (10) Business Days furnish Lender with a statement, duly acknowledged and certified, setting forth (1) the amount of the original principal amount of the Note, (2) the current rate of interest on the Note, (3) the unpaid principal amount of the Note, (4) the date installments of interest and/or principal were last paid, (5) any offsets or defenses to the payment of the Debt, if any, and (6) that the Note, this Agreement, the Mortgage and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification; provided, that, except in connection with a Securitization or a Default or an Event of Default, such request shall be made no more frequently than once per calendar year.

                    (ii) Upon request by Borrower made no more frequently than once per calendar year, Lender, within twenty (20) Business Days of such request, shall provide Borrower with an informational statement setting forth: (1) the unpaid principal amount of the Note, (2) the current interest rate of the Note, and (3) the maturity date of the Note, and the date installments of interest and/or principal were last paid; provided, that, such statement shall (I) be made only to Lender’s actual knowledge and shall be for informational purposes only, (II) not be binding on Lender or have the effect of an estoppel and (III) not waive, amend or otherwise modify Borrower’s obligations contained herein and in the other Loan Documents.

          (b)     (i) So long as the Sotheby’s Lease is in full force and effect, Borrower shall use commercially reasonable efforts (which such efforts (in and of themselves) shall not require Borrower to default any Tenant under its Lease or any guarantor under any related guaranty) to deliver to Lender, promptly upon request, duly executed estoppel certificates from any one or more Tenants (including, without limitation, Sotheby’s) or related guarantors (including, without limitation, the Sotheby’s Guarantor) as required by Lender attesting to such facts regarding the related Lease or guaranty (as applicable) as Lender may require and as to which such Tenant or

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guarantor (as applicable) shall be required to attest under its Lease or related guaranty (as applicable).

                    (ii) During any period that the Sotheby’s Lease is no longer in full force or effect, Borrower shall use its best efforts to deliver to Lender, promptly upon request, duly executed estoppel certificates from any one or more Tenants as required by Lender attesting to such facts regarding the related Lease as Lender may require, including, but not limited to attestations that each Lease covered thereby is in full force and effect with no defaults thereunder on the part of any party, that none of the Rents have been paid more than one month in advance, except as security, and that the Tenant claims no defense or offset against the full and timely performance of its obligations under the Lease.

          Section 5.13. Leasing Matters .

          (a) To the extent that the Sotheby’s Lease is in full force and effect, the following provisions shall apply:

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          (b) To the extent that the Sotheby’s Lease is no longer in full force and effect, the following provisions shall apply:

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          (c) Notwithstanding anything to the contrary contained herein, to the extent Lender’s prior approval is required for any leasing matters set forth in this Section 5.13, Lender shall have twenty (20) days from receipt of written request and all required information and documentation relating thereto in which to approve or disapprove such matter, provided that such request to Lender is marked in bold lettering with the following language: “LENDER’S RESPONSE IS REQUIRED WITHIN TWENTY (20) DAYS OF RECEIPT OF THIS NOTICE PURSUANT TO THE TERMS OF A LOAN AGREEMENT BETWEEN THE UNDERSIGNED AND LENDER” and the envelope containing the request must be marked “PRIORITY”. In the event that Lender fails to approve or disapprove the leasing matter in question within such time (which such disapproval (if applicable) shall set forth the reasons for the same), Lender’s approval shall

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be deemed given for all purposes. Borrower shall provide Lender with such information and documentation as may be reasonably required by Lender, including, without limitation, lease comparables and other market information as reasonably required by Lender.

          Section 5.14. Property Management

          (a) Borrower shall (i) promptly perform and observe all of the covenants required to be performed and observed by it under the Management Agreement and do all things necessary to preserve and to keep unimpaired its material rights thereunder; (ii) promptly notify Lender of any default under the Management Agreement of which it is aware; (iii) promptly deliver to Lender a copy of any notice of default or other material notice received by Borrower under the Management Agreement; (iv) promptly give notice to Lender of any notice or information that Borrower receives which indicates that Manager is terminating the Management Agreement or that Manager is otherwise discontinuing its management of the Property; and (v) promptly enforce the performance and observance of all of the covenants required to be performed and observed by Manager under the Management Agreement.

          (b) If at any time, (i) Manager shall become insolvent or a debtor in a bankruptcy proceeding; (ii) an Event of Default has occurred and is continuing and Lender has accelerated the Loan; (iii) a material default has occurred and is continuing beyond applicable notice and cure periods (if any) under the Management Agreement, or (iv) the Optional Prepayment Date shall occur; Borrower shall, at the request of Lender, terminate the Management Agreement upon thirty (30) days prior notice to Manager and replace Manager with a Qualified Manager approved by Lender on terms and conditions satisfactory to Lender, it being understood and agreed that the management fee for such replacement manager shall not exceed then prevailing market rates.

          (c) Intentionally Omitted.

          (d) Borrower shall not, without the prior written consent of Lender (which consent shall not be unreasonably withheld, conditioned or delayed): (i) surrender, terminate or cancel the Management Agreement or otherwise replace Manager or enter into any other management agreement with respect to the Property; (ii) reduce or consent to the reduction of the term of the Management Agreement; (iii) increase or consent to the increase of the amount of any charges under the Management Agreement; or (iv) otherwise materially modify, change, supplement, alter or amend, or waive or release any of its rights and remedies under, the Management Agreement in any material respect. In the event that Borrower replaces Manager at any time during the term of Loan pursuant to this subsection, such Manager shall be a Qualified Manager.

          Section 5.15. Liens

          Borrower shall not, without the prior written consent of Lender, create, incur, assume or suffer to exist any Lien on any portion of the Property or permit any such action to be taken, except Permitted Encumbrances.

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          Section 5.16. Debt Cancellation

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

          Section 5.17. Zoning

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

          Section 5.18. ERISA

          (a) Borrower shall not engage in any transaction which would cause any obligation, or action taken or to be taken, hereunder (or the exer