Read Model Leasehold Mortgagee Protections I text version

MODEL LEASEHOLD MORTGAGEE PROTECTIONS

Prepared by Joshua Stein for

AMERICAN COLLEGE OF REAL ESTATE LAWYERS

1999 ANNUAL MEETING

The following model document is provided with no guarantee or warranty at all, and does not define a "minimum standard of practice." Consent is granted for any attorney to use and adapt this model document for specific transactions, but only where appropriate and correct in context. Copyright ã 1999 Joshua Stein (212) 906-1342 [email protected]

(1) (2) (3)

Introductory Comments............................................................................... 2 Model Leasehold Mortgagee Protections.................................................... 5 Substantive Comments and Discussion .................................................... 33

Part "2" and part "3" each has its own table of contents.

NY_DOCS\245855.17 [W97]

Model Leasehold Mortgagee Protections By Joshua Stein

(1) INTRODUCTORY COMMENTS

Description. This document seeks to provide a complete set of "Mortgagee Protections" that can be used in a long-term ground lease (the "Lease") that is intended to be fully "financeable" -- i.e., capable of supporting a significant amount of nonrecourse financing secured solely by a lien on the Tenant's interest in the leasehold -- as opposed to merely being capable of being mortgaged, or "mortgageable." These Leasehold Mortgagee Protections, and the comments that follow, are written almost totally from the point of view of the (prospective) Leasehold Mortgagee, with limited attention to the concerns of other parties (e.g., minimal notice and opportunity to cure for Fee Mortgagees). These provisions do, however, include a number of tolerable conditions, qualifications, and limitations to a Leasehold Mortgagee's rights, to acknowledge concerns a Landlord should express. In other words, this document is not entirely consistent in its level of concern for the Landlord. These Mortgagee Protections are intended, but not guaranteed, to be complete and "state of the art." They should convert a fragile set of possessory rights into a solid and reliable asset. To do it, though, requires perhaps more words than one would like. But these Leasehold Mortgagee Protections are so extensive that, it is hoped, no future prospective Leasehold Mortgagee or its counsel should ever have any basis to object to them, at least absent future legal developments that might raise new issues and concerns. It is hoped that these Mortgagee Protections will prevent the Tenant from ever needing to "go back to the Landlord" to obtain a lease amendment, which is likely to be expensive or impossible to obtain when needed. Of course, this does not constitute a representation, warranty, or guarantee. It is the nature of ground leases to be complex animals that from time to time produce surprises, typically unpleasant. And sooner or later, either the Landlord or the Tenant will be unhappy with the relationship and the pricing. That is one reason lenders and other investors often hesitate to use them. In some cases, however, the use of a ground lease structure will be the only way to make a transaction work. These Leasehold Mortgagee Protections are quite long. The goal has been to provide an authoritatively complete reference point, rather than a "reasonable" subset of Leasehold Mortgagee Protections. This way, users can make their own decisions about where to cut back, rather than be stuck with whatever deletions the author chose to make. (From a user's perspective, it's easier to delete what's inappropriate than to think of and create what's not there but should be.) These Leasehold Mortgagee Protections can also be used for cross-checking those in any ground lease, in preparation for selectively "beefing up" that other ground lease. These Mortgagee Protections may sometimes be "too much" and should be trimmed back. As one obvious example, in representing the Landlord (rather than the Tenant) it may be

2

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

appropriate to drop a number of these provisions. One could do so and still deliver a reasonable and constructive first draft that would not "miss the mark." Brackets indicate blanks to fill in, points to consider, and optional provisions. These Leasehold Mortgagee Protections are still a "work in progress" and are not final. Any comments, corrections, or suggestions should be directed to the author at the email address or telephone number on the cover page. These Leasehold Mortgagee Protections can be obtained in machine-readable form by sending email to the author. A Different Approach. As another project for another day, it would certainly be possible to develop a "middle-ground and minimal" set of Mortgagee Protections ­ one that gives the Leasehold Mortgagee just the basic protection it needs, while honoring the main legitimate concerns of the Tenant and the Landlord, assuming in each case typical plain vanilla motivations and agendas. Such a project could take the form of a "mock negotiation" to reach a "fair" and "balanced" outcome, which might then be promulgated as a recommended document for parties that desire to minimize negotiating time. The author would be interested in participating in such a project. Anyone else who would like to do so should communicate with the author. In the meantime, though, that project should not be confused with the current project, which is rather different and has the great advantage of reducing the likelihood that some future Leasehold Mortgagee or its counsel will be able to find a basis to object to the Lease. Acknowledgments. The author acknowledges the helpful comments and other contributions made by the following attorneys: Randolph Amengual Stevens A. Carey Gary A. Goodman Andrew L. Herz T. Mary McDonald Patrick A. Randolph Benjamin J. Suckewer Esanu Katsky Korins & Siger, LLP Pircher, Nichols & Meeks Akin, Gump, Strauss, Hauer & Feld L.L.P. Richards & O'Neil, LLP Fix, Spindelman, Brovitz, Turk, Himelein & Shukoff, P.C. Blackwell Sanders Peper Martin and University of Missouri, Kansas City Herrick, Feinstein LLP

Defined Terms. These Mortgagee Protections define certain terms relatively specific to mortgagee protections. When these Mortgagee Protections are used in any Lease, the definitions here need to be reflected in, or tailored to, the particular Lease (for example, "Tenant" versus

3

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

"Lessee"). They can either remain part of the Mortgagee Protections or go into the coordinated set of definitions (the dictionary) in the Lease. These mortgagee protections assume the following terms are already defined in the Lease: Additional Rent Base Rent Business Day Casualty Commencement Date Construction Documents Contest Event of Default Fee Estate Fixed Rent Government Include(ing) Landlord Lease Leasehold Estate Legal Costs Memorandum of Lease Premises Prime Rate Prohibited Person Property Insurance Proceeds Recourse Claims Renewal Option Renewal Term Rent State Sublease Subrent Substantial Casualty Subtenant Tenant Term Termination Date Unavoidable Delay

4

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

(2) MODEL LEASEHOLD MORTGAGEE PROTECTIONS

TABLE OF CONTENTS Page 1. DEFINITIONS........................................................................................................................ 8 1.1 Bankruptcy Proceeding .............................................................................................. 8 1.2 Casualty Termination ................................................................................................. 8 1.3 Condemnation ............................................................................................................ 8 1.4 Condemnation Award ................................................................................................ 8 1.5 Control of the Premises .............................................................................................. 8 1.6 Default........................................................................................................................ 9 1.7 Depository .................................................................................................................. 9 1.8 Fee Mortgage.............................................................................................................. 9 1.9 Fee Mortgagee............................................................................................................ 9 1.10 Foreclosure Event....................................................................................................... 9 1.11 Institutional Lender .................................................................................................... 9 1.12 Insubstantial Condemnation..................................................................................... 10 1.13 Leasehold Mortgage ................................................................................................. 10 1.14 Leasehold Mortgagee ............................................................................................... 10 1.15 Leasehold Mortgagee's Consent .............................................................................. 10 1.16 Leasehold Mortgagee's Cure.................................................................................... 10 1.17 Leasehold Mortgagee's Cure Rights ........................................................................ 10 1.18 Leasehold Mortgagee's Representative.................................................................... 10 1.19 Loss Proceeds ........................................................................................................... 10 1.20 Market Value............................................................................................................ 10 1.21 Monetary Default ..................................................................................................... 11 1.22 Mortgage .................................................................................................................. 11 1.23 Mortgagee................................................................................................................. 11 1.24 Mortgagee Protections.............................................................................................. 11 1.25 New Lease ................................................................................................................ 11 1.26 New Lease Delivery Date......................................................................................... 12 1.27 New Lease Option Period......................................................................................... 12 1.28 New Tenant .............................................................................................................. 12 1.29 Nonmonetary Default ............................................................................................... 12 1.30 Notice ....................................................................................................................... 12 1.31 Notice of Default ...................................................................................................... 12 1.32 Option....................................................................................................................... 12 1.33 Permitted Fee Exceptions......................................................................................... 12 1.34 Personal Default ....................................................................................................... 13 5

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Page 1.35 1.36 1.37 1.38 1.39 1.40 1.41 1.42 1.43 2. Personal Obligation .................................................................................................. 13 Post-Rejection Offset Amount ................................................................................. 13 Restoration ............................................................................................................... 13 SNDA ....................................................................................................................... 13 Substantial Condemnation ....................................................................................... 13 Successor Tenant...................................................................................................... 14 Temporary Condemnation........................................................................................ 14 Tenant's Cure Period Expiration Notice .................................................................. 14 Uneconomic ............................................................................................................. 14

DAMAGE OR DESTRUCTION; CONDEMNATION. ...................................................... 14 2.1 Casualty.................................................................................................................... 14 2.2 Substantial Condemnation ....................................................................................... 14 2.3 Insubstantial Condemnation..................................................................................... 15 2.4 Temporary Condemnation........................................................................................ 15 2.5 Adjustment of Claims; Payment of Loss Proceeds .................................................. 16 2.6 Settlement or Compromise....................................................................................... 16 2.7 Prompt Notice .......................................................................................................... 16 2.8 Depository ................................................................................................................ 16 FEE MORTGAGES. ............................................................................................................ 17 3.1 Landlord's Rights ..................................................................................................... 17 3.2 Required Provisions in Fee Mortgage ...................................................................... 17 3.3 Protection of Fee Mortgagees................................................................................... 18 LEASEHOLD MORTGAGES. ............................................................................................ 18 4.1 Tenant's Rights ........................................................................................................ 18 4.2 Required Provisions in Leasehold Mortgage ........................................................... 18 4.3 Effect of Leasehold Mortgage .................................................................................. 19 4.4 Modifications Required by Leasehold Mortgagee ................................................... 19 4.5 Further Assurances ................................................................................................... 19 4.6 Foreclosure ............................................................................................................... 19 4.7 Notice of Leasehold Mortgages................................................................................ 19 4.8 Termination of Leasehold Mortgagee's Rights ........................................................ 20 4.9 Landlord's Acknowledgment of Leasehold Mortgagee ........................................... 20 OPERATIONAL PROTECTIONS FOR LEASEHOLD MORTGAGEES. ........................ 20 5.1 Cancellation, Surrender, Amendment, Etc............................................................... 20 5.2 Certain Proceedings.................................................................................................. 21 5.3 Options ..................................................................................................................... 21 5.4 Copies of Notices ..................................................................................................... 22 5.5 Government Notices................................................................................................. 22 LEASEHOLD MORTGAGEES' NOTICE AND OPPORTUNITY TO CURE.................. 22 6.1 Tenant's Cure Period Expiration Notice; Right to Cure .......................................... 22 6.2 Additional Time for Leasehold Mortgagee's Cure Rights ....................................... 22 6

Model Leasehold Mortgagee Protections By Joshua Stein

3.

4.

5.

6.

NY_DOCS\245855.17 [W97]

Page 6.3 Effect of Cure ........................................................................................................... 24 6.4 Quiet Enjoyment....................................................................................................... 24 6.5 Leasehold Mortgagee's Right to Enter Premises ..................................................... 24 6.6 Payments by Leasehold Mortgagee .......................................................................... 24 7. LEASEHOLD MORTGAGEE'S RIGHT TO A NEW LEASE........................................... 24 7.1 Documentation and Priority ..................................................................................... 25 7.2 Adjustment for Net Income...................................................................................... 25 7.3 Pendency of Dispute................................................................................................. 25 7.4 Assignment of Certain Items.................................................................................... 26 7.5 Preservation of Former Subleases ............................................................................ 26 7.6 Landlord's Costs and Expenses................................................................................ 26 7.7 Survival .................................................................................................................... 26 INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES. ............ 26 8.1 Leasehold Mortgages................................................................................................ 26 8.2 Leasehold Mortgagee's Representative.................................................................... 27 8.3 Interaction Between Lease and Leasehold Mortgage ............................................... 27 8.4 Fee Mortgages .......................................................................................................... 27 8.5 Conflicts Among Mortgagees .................................................................................. 27 8.6 No Merger ................................................................................................................ 28 8.7 Subtenant Nondisturbance........................................................................................ 28 8.8 No Landlord's Lien .................................................................................................. 28 8.9 Collection of Subrent ............................................................................................... 28 OBLIGATIONS AND LIABILITIES OF CERTAIN PARTIES. ........................................ 29 9.1 Recognition; Certain Obligations............................................................................. 29 9.2 Limitation of Liability .............................................................................................. 29

8.

9.

10. BANKRUPTCY. .................................................................................................................. 29 10.1 Affecting Tenant....................................................................................................... 29 10.2 Affecting Landlord ................................................................................................... 29 11. MISCELLANEOUS. ............................................................................................................ 31 11.1 Notices...................................................................................................................... 31 11.2 No Third Party Beneficiaries.................................................................................... 31 11.3 Amendment .............................................................................................................. 32

7

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

MODEL LEASEHOLD MORTGAGEE PROTECTIONS

1.

DEFINITIONS.

1.1 Bankruptcy Proceeding. A "Bankruptcy Proceeding" means any bankruptcy, insolvency, reorganization, composition, or similar proceeding, whether voluntary or involuntary, under Title 11, United States Code, or any similar state or federal statute for the relief of debtors, including any assignment for the benefit of creditors or similar proceeding. 1.2 Casualty Termination. A "Casualty Termination" means a termination of this Lease upon the occurrence of a Substantial Casualty, when and as expressly permitted by this Lease. Any election by Tenant of a Casualty Termination shall not be effective without Leasehold Mortgagee's Consent. 1.3 Condemnation. A "Condemnation" means: (a) any temporary or permanent taking of all or part of (or of the right to use or occupy) the Premises by condemnation, exercise of any right of eminent domain, or any similar proceeding; and/or (b) any action by any Government not resulting in an actual transfer of an interest in (or of the right to use or occupy) the Premises but creating a right to compensation for the Premises, such as a change in the grade of any street upon which the Premises abut. 1.4 Condemnation Award. A "Condemnation Award" means the entire amount of any award paid or payable to Landlord and/or Tenant after the Commencement Date on account of any Condemnation, as compensation for any Condemnation, including: (1) any interest payable on account of such award; (2) any award made on account of any improvements that are the subject of a Condemnation, whether or not the value of such improvements is the subject of a separate award or otherwise separately determined by the applicable Government; (3) the full amount paid or payable by the condemning authority on account of the estate that is the subject of the Condemnation, as determined pursuant to the Condemnation; and (4) any other sums payable on account of such Condemnation, including on account of any prepayment premium payable under any Mortgage. 1.5 Control of the Premises. For any Leasehold Mortgagee, "Control of the Premises" means any of the following: (1) possession of the Premises by a receiver or trustee or similar officer appointed pursuant to a judicial proceeding commenced by such Leasehold Mortgagee; (2) such Leasehold Mortgagee's possession of the Premises as mortgagee-inpossession, if and only if Leasehold Mortgagee affirmatively elects in writing in its sole and absolute discretion to become a mortgagee-in-possession; or (3) acquisition of the Leasehold Estate by a Successor Tenant through a Foreclosure Event initiated by such Leasehold Mortgagee.

NY_DOCS\245855.17 [W97]

Model Leasehold Mortgagee Protections By Joshua Stein

1.6 Default. A "Default" means any Monetary Default or Nonmonetary Default. Each and every covenant of Tenant under this Lease, if not performed or complied with by Tenant, shall give rise to a Default as to which Tenant and (other than for Personal Defaults) each Leasehold Mortgagee shall have the cure rights provided for in this Lease. 1.7 Depository. A "Depository" means an Institutional Lender, designated by a Leasehold Mortgagee (or, if no Leasehold Mortgage exists, then by Tenant) to act as "Depository" where provided for in this Lease. A Leasehold Mortgagee that is an Institutional Lender may designate itself (or its Leasehold Mortgagee's Representative) as Depository. 1.8 Fee Mortgage. A "Fee Mortgage" means any Mortgage that encumbers all or any part of the Fee Estate or any interest in the Fee Estate and is made and entered into in compliance with this Lease. 1.9 Fee Mortgagee. A "Fee Mortgagee" means any holder of a Fee Mortgage, and its successors and assigns. 1.10 Foreclosure Event. A "Foreclosure Event" means any transfer of title to the Fee Estate or the Leasehold Estate as the result of any: (1) judicial or nonjudicial foreclosure; (2) trustee's sale; (3) deed, transfer, assignment, or other conveyance in lieu of foreclosure; (4) other similar exercise of rights or remedies under any Mortgage; or (5) transfer by operation of or pursuant to any Bankruptcy Proceeding, in each case ("1" through "5") whether the transferee is a Mortgagee, a party claiming through a Mortgagee, or a third party. 1.11 Institutional Lender. An "Institutional Lender" means: (1) a bank, trust company, insurance company, credit union, savings bank, pension, welfare or retirement fund or system, real estate investment trust (or an umbrella partnership or other entity of which a public real estate investment trust is the majority owner), federal or state agency regularly making or guaranteeing mortgage loans, investment bank, subsidiary of a Fortune 500 company (such as AT&T Capital Corporation or General Electric Capital Corporation), real estate mortgage investment conduit, or securitization trust; (2) a trustee or issuer of collateralized mortgage obligations or similar investment entity (provided that such trustee, issuer, or other entity is publicly traded or is sponsored by an entity that otherwise constitutes an Institutional Lender); (3) any entity of any kind actively engaged in commercial real estate financing and having total assets (on the date when its Leasehold Mortgage is executed and delivered, or on the date of such Leasehold Mortgagee's acquisition of its Leasehold Mortgage by assignment from the previous Leasehold Mortgagee) of at least $__,000,000; or (4) a corporation, other entity, or joint venture that is a wholly owned subsidiary of or is a combination of any one or more of the foregoing entities, including any of the foregoing when acting as trustee for other lender(s) or investor(s), whether or not such other lender(s) or investor(s) are themselves Institutional Lenders. The fact that a particular entity (or any affiliate of such entity) is a partner, member, or other investor in the then Tenant shall not preclude such entity from being an Institutional Lender and a Leasehold Mortgagee (entitled to all Mortgagee Protections) provided that: (x) such entity has, in fact, made or acquired a bona fide loan to Tenant secured by a Leasehold Mortgage; (y) such entity otherwise qualifies as an Institutional Lender and a Leasehold Mortgagee (as applicable); and 9

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

(z) at the time such entity becomes a Leasehold Mortgagee, no Event of Default exists, unless such Event of Default is simultaneously cured. 1.12 Insubstantial Condemnation. An "Insubstantial Condemnation" means any Condemnation other than (1) a Substantial Condemnation and (2) a Temporary Condemnation. 1.13 Leasehold Mortgage. A "Leasehold Mortgage" means any Mortgage that encumbers the Leasehold Estate or any interest in the Leasehold Estate and is made and entered into in compliance with this Lease. 1.14 Leasehold Mortgagee. A "Leasehold Mortgagee" means any holder of a Leasehold Mortgage, and its successors and assigns. 1.15 Leasehold Mortgagee's Consent. A "Leasehold Mortgagee's Consent" as to any matter means prior written consent by Leasehold Mortgagee to such matter. If multiple Leasehold Mortgagees exist, then unless the Leasehold Mortgagees agree otherwise in writing, the determination of only the most senior Leasehold Mortgagee shall govern, as described below under the heading "Conflicts Among Mortgagees." A Leasehold Mortgagee may withhold consent for any reason or no reason (i.e., in its sole, absolute, and unreviewable discretion) except where expressly stated otherwise. During any period when no Leasehold Mortgagee exists, all references to Leasehold Mortgagee's Consent shall be disregarded. 1.16 Leasehold Mortgagee's Cure. "Leasehold Mortgagee's Cure" means any Leasehold Mortgagee's Cure of a Default and any actions taken by a Leasehold Mortgagee to cure a Default. 1.17 Leasehold Mortgagee's Cure Rights. "Leasehold Mortgagee's Cure Rights" means all rights of Leasehold Mortgagee(s) to cure any Default by Tenant. 1.18 Leasehold Mortgagee's Representative. A "Leasehold Mortgagee's Representative" means from time to time any agent, assignee, designee, nominee, or representative of a Leasehold Mortgagee, provided that such agent, assignee, designee, nominee, or representative is a wholly owned subsidiary, full time employee, legal counsel, or bona fide loan servicer, custodian, or collateral agent of the Leasehold Mortgagee. 1.19 Loss Proceeds. The "Loss Proceeds" means Condemnation Award(s) and/or Property Insurance Proceeds. 1.20 Market Value. The "Market Value" of any estate means, as of any specified date, the present fair market value of such estate (including the fair market value of the rights of the holder of such estate in and to any improvements) considered as if the Condemnation had not occurred (and with no adjustment for any expectation of Condemnation), the Leasehold Estate had not been terminated, and the Term included, prospectively, all Renewal Terms except any Renewal Term as to which Leasehold Mortgagee or (with Leasehold Mortgagee's Consent) Tenant gives Notice to Landlord that Tenant would not have exercised the Renewal Option in due course. The Market Value of the Leasehold Estate shall be determined independently of, and 10

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

without regard to, any valuation established pursuant to any judicial or other proceeding (or otherwise by any Government) for purposes of a Condemnation, unless Tenant determines otherwise by Notice to Landlord, with Leasehold Mortgagee's Consent. 1.21 Monetary Default. A "Monetary Default" means any failure by Tenant to: (1) pay, when and as this Lease requires, any Rent, Impositions, or other sum(s) of money that this Lease requires Tenant to pay, whether to Landlord or to a third party; (2) pay as they become due all insurance premiums that this Lease requires Tenant to pay; or (3) properly apply any Loss Proceeds or other sums of money, if any, that this Lease requires Tenant to apply in a particular manner or for a particular purpose. Notwithstanding the foregoing, if a bona fide dispute shall exist between Landlord and Tenant regarding the amount, calculation, or validity of any item of Rent (other than Fixed Rent or insurance premiums) claimed by Landlord to be payable by Tenant, then Tenant's failure to pay such item of Rent (other than Fixed Rent or insurance premiums) shall not constitute a Monetary Default but only so long as (x) the aggregate amount at issue in all such disputes at any given time shall not exceed $___________ [fixed dollar figure or some percentage of an inflation-based variable within the Lease]; (y) Tenant shall have deposited the disputed amount with Leasehold Mortgagee; and (z) if the dispute relates to a matter as to which this Lease permits Tenant to prosecute a Contest, Tenant shall continue to satisfy all conditions to such Contest. 1.22 Mortgage. A "Mortgage" means any mortgage, deed of trust, security deed, contract for deed, deed to secure debt, or other voluntary real property (including leasehold) security instrument(s) or agreement(s) intended to grant real property (including leasehold) security for any obligation (including a purchase-money or other promissory note) encumbering the Leasehold Estate or the Fee Estate, as entered into, renewed, modified, consolidated, increased, decreased, amended, extended, restated, assigned, or supplemented from time to time. If two or more such mortgages are consolidated or restated as a single lien, then all such mortgages so consolidated or restated shall be treated as a single Mortgage. A Mortgage may be either a Fee Mortgage or a Leasehold Mortgage or both. 1.23 and assigns. Mortgagee. A "Mortgagee" means the holder of any Mortgage and its successors

1.24 Mortgagee Protections. The "Mortgagee Protections" means, as to any Mortgagee, all rights, protections, and privileges of such Mortgagee as expressly provided for under this Lease, including the following: (1) any right to receive Notices and/or to cure defaults (including, in the case of a Leasehold Mortgagee, all Leasehold Mortgagee's Cure Rights); (2) any requirement for Leasehold Mortgagee's Consent to any matter; (3) in the case of a Leasehold Mortgagee, all provisions of this Lease relating to a New Lease and all rights of any New Tenant or Successor Tenant; and (4) all other rights, protections, and privileges of such Mortgagee under this Lease. 1.25 New Lease. A "New Lease" means a new lease of the Premises, effective as of (or retroactively to) the Termination Date of this Lease, for the remainder of the Term of this Lease, considered as if this Lease had not been terminated (and Renewal Terms, if, when, and as the corresponding Renewal Options shall have been or shall subsequently be exercised), with New 11

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Tenant, on all the same terms and provisions of this Lease and in the same form as this Lease. Any New Lease shall include all rights, Options and privileges of Tenant under this Lease, but shall not include any Personal Obligations or any obligations of Tenant (such as initial construction) that have already been performed or no longer apply. Any New Lease or a memorandum thereof shall be in recordable form, and shall include all Mortgagee Protections for the benefit of any Leasehold Mortgagee of New Tenant. 1.26 New Lease Delivery Date. A "New Lease Delivery Date" means the date when Landlord and New Tenant enter into a New Lease. 1.27 New Lease Option Period. A "New Lease Option Period" means, upon the occurrence of a Termination Date (other than as the result of (1) the scheduled expiration date of the Term; (2) a Casualty Termination; or (3) a Substantial Condemnation), a period that begins on such Termination Date and ends on the date 90 days after Landlord has given every Leasehold Mortgagee Notice of such Termination Date. The New Lease Option Period shall be tolled and extended during (x) the pendency of any Bankruptcy Proceeding affecting Landlord and (y) any other period during which any Leasehold Mortgagee's right to require Landlord to enter into a New Lease is otherwise restricted or impaired (other than as a result of the acts or omissions of such Leasehold Mortgagee). 1.28 New Tenant. A "New Tenant" means the Leasehold Mortgagee that requests a New Lease, or its Leasehold Mortgagee's Representative, or such other Tenant under a New Lease as such Leasehold Mortgagee shall select (but excluding the Tenant originally named in this Lease), all as designated by such Leasehold Mortgagee. 1.29 Nonmonetary Default. A "Nonmonetary Default" means the occurrence of either of the following, other than a Monetary Default: (1) any substantial breach by Tenant of its obligations under this Lease; or (2) any event or circumstance (not consisting of a breach of Tenant's obligations under this Lease) that, with the passage of time or the giving of notice, or both, or neither, would constitute an Event of Default. 1.30 Notice. A "Notice" means any approval, consent, demand, designation, election, notice, or request, including any of the foregoing relating to a Default, alleged Default, termination, or alleged termination of this Lease, that any party gives in connection with this Lease. 1.31 Notice of Default. A "Notice of Default" means any Notice from one party to the other claiming a Default by the recipient. 1.32 Option. An "Option" means the following rights of Tenant under this Lease, to the extent (if any) otherwise provided for in this Lease: (1) any Renewal Option; (2) any option to purchase the Premises (or any interest therein) or expand the Premises; (3) any option to terminate this Lease, in whole or in part; or (4) ______________. 1.33 Permitted Fee Exceptions. The "Permitted Fee Exceptions" means: (1) the recorded title exceptions affecting the Fee Estate and prior to this Lease as of the 12

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Commencement Date, and constituting exceptions in Leasehold Mortgagee's leasehold mortgagee policy of title insurance covering its Leasehold Mortgage; (2) any Fee Mortgages that comply with this Lease; (3) any title exceptions caused by Tenant's acts or omissions, consented to by Tenant in writing (with Leasehold Mortgagee's Consent), or resulting from Tenant's failure to comply with this Lease or with applicable Law; (4) any Construction Documents entered into at Tenant's request (with Leasehold Mortgagee's Consent); and (5) either this Lease or a New Lease and all the terms and provisions of this Lease or such New Lease. 1.34 Personal Default. A "Personal Default" means any Nonmonetary Default of Tenant that is not reasonably susceptible of cure by a Leasehold Mortgagee, such as (to the extent, if any, that any of the following may actually constitute a Default under this Lease) a Bankruptcy Proceeding affecting Tenant; a prohibited transfer; failure to deliver financial information within Tenant's control; failure to remove or retain any particular officer, employee, or director of Tenant; failure to comply with restrictions on competition or other activities that relate to other sites owned or leased by Tenant; and any other Nonmonetary Default that by its nature relates only to, or can reasonably be performed only by, Tenant or its affiliates. A Personal Default shall also include any Default that consists of Tenant's failure to satisfy or discharge any lien, charge, or encumbrance affecting the Leasehold Estate and prohibited by this Lease, which lien, charge, or encumbrance is either (1) caused by Landlord (other than a Permitted Fee Exception); or (2) junior in priority to the lien of the Leasehold Mortgage (unless such lien, charge, or encumbrance both (a) is not a Permitted Fee Exception, and (b) also attaches to the Fee Estate). 1.35 Personal Obligation. A "Personal Obligation" means any obligation under this Lease the breach of which would constitute a Personal Default. 1.36 Post-Rejection Offset Amount. A "Post-Rejection Offset Amount" means, after a rejection of this Lease in a Bankruptcy Proceeding affecting Landlord, the amount of any offset that Tenant is entitled to claim under 11 U.S.C. § 365(h)(1)(B). 1.37 Restoration. A "Restoration" means reconstruction of any improvements that are damaged or destroyed by Casualty, or partially remaining after an Insubstantial Condemnation, in each case as nearly as practicable to their condition, quality, and value immediately before the Casualty or Insubstantial Condemnation, as the case may be, with such changes, additions, or alterations (including demolition) as Tenant shall elect to make in conformity with this Lease. "Restore" shall have a correlative meaning. 1.38 SNDA. An "SNDA" means a subordination, nondisturbance, and attornment agreement in substantially the form annexed as Exhibit ___, modified as necessary in Tenant's or any Leasehold Mortgagee's reasonable judgment (with reasonable approval by Landlord) to reflect the parties and the nature and circumstances of the estate affected by such SNDA. 1.39 Substantial Condemnation. A "Substantial Condemnation" means a Condemnation of the entire Premises or any Condemnation that, in Tenant's judgment (with Leasehold Mortgagee's Consent) renders Uneconomic the portion of the Premises remaining after such Condemnation. Only with Leasehold Mortgagee's Consent, Tenant may waive in 13

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

writing its right to treat as a Substantial Condemnation any Condemnation that would otherwise qualify as such. 1.40 Successor Tenant. A "Successor Tenant" means: (1) any purchaser, transferee, or assignee of the Leasehold Estate pursuant to a Foreclosure Event, including Leasehold Mortgagee or its assignee, designee, or nominee (if applicable); and (2) such purchaser's, transferee's, or assignee's direct and indirect successors and assigns. Any Successor Tenant shall also have all the rights of a Tenant. 1.41 Temporary Condemnation. A "Temporary Condemnation" means a Condemnation of the temporary right to use or occupy all or part of the Premises. 1.42 Tenant's Cure Period Expiration Notice. A "Tenant's Cure Period Expiration Notice") means a Notice, from Landlord to each Leasehold Mortgagee, that: (1) states that Tenant's cure period for a particular alleged Default has expired, and (2) describes in reasonable detail such alleged default. 1.43 Uneconomic. A fact, circumstance, or event shall render the Premises "Uneconomic" if such fact, circumstance, or event does or would, in Tenant's reasonable judgment, with Leasehold Mortgagee's Consent: (1) materially diminish the value or utility of all or a substantial part of the Premises; (2) prevent or impair all or a substantial part of the Premises from being used for any economic purpose; (3) materially impair access to, parking facilities benefiting, or any material service(s) necessary for the economic operation of any substantial part of the Premises; (4) require Restoration whose cost Tenant reasonably estimates in writing would exceed $_________; (5) cause all or part of the Premises not to comply with the operating requirements imposed on Tenant by any franchisor or licensor of Tenant; or (6) cause Tenant's development or operation of all or part of the Premises to be impracticable or commercially uneconomic. 2. DAMAGE OR DESTRUCTION; CONDEMNATION.

2.1 Casualty. If any Casualty occurs after the Commencement Date, then no Rent shall abate. Tenant shall, except as otherwise provided in this paragraph, with reasonable promptness Restore the damaged improvements. Notwithstanding the foregoing, if the Casualty is a Substantial Casualty, then Tenant may, at its election, by Notice to Landlord given within ___ months after the Casualty, but subject to the terms of all Leasehold Mortgages, and only with Leasehold Mortgagee's Consent, elect a Casualty Termination by giving Landlord at least 30 days' prior Notice of such Casualty Termination. Upon any Casualty Termination, Tenant shall assign and transfer to Landlord (or Fee Mortgagee) all of Tenant's rights to Property Insurance Proceeds arising from the Casualty, together with any Property Insurance Proceeds already received by Tenant on account of the Casualty. 2.2 Substantial Condemnation. If a Substantial Condemnation occurs after the Commencement Date, then this Lease shall terminate as of the effective date of the transfer of title pursuant to such Substantial Condemnation. Rent shall be apportioned as of the date of termination. Any Condemnation Award shall be allocated between Landlord (subject to the 14

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

rights of Fee Mortgagee(s)) and Tenant (subject to the rights of Leasehold Mortgagee(s)) as follows and in the following order of priority (without duplication) until exhausted: 2.2.1 Prepayment Premium. To Leasehold Mortgagee, to the extent that (1) as a result of such Condemnation, any Leasehold Mortgagee is entitled to collect a prepayment premium or any other fee or charge that such Leasehold Mortgagee could not have collected but for the Condemnation and the related prepayment of such Leasehold Mortgagee's loan, and (2) the Condemnation Award directly or indirectly includes or is based upon the amount of such prepayment premium or other payment. 2.2.2 Costs and Expenses. To reimburse Tenant for Tenant's actual costs and expenses, including Legal Costs, incurred as a result of the Substantial Condemnation and determination and collection of the Condemnation Award. 2.2.3 Tenant's Claim. Tenant shall, subject to the rights of Leasehold Mortgagees, be entitled to such portion of the Condemnation Award as shall equal the [lesser] [greater] of (1) the principal balance (with accrued interest) secured by, and all other sums payable pursuant to or secured by, all bona fide Leasehold Mortgages or (2) the Market Value of the Leasehold Estate as of the date of transfer of title pursuant to the Condemnation. 2.2.4 Landlord's Claim. Landlord shall, subject to the rights of Fee Mortgagees, be entitled to receive such portion of the Condemnation Award as shall equal the Market Value of the Fee Estate subject to this Lease. as of the date of transfer of title pursuant to the Condemnation. 2.2.5 Tenant's Residual Claim. Tenant shall, subject to the rights of Leasehold Mortgagees, be entitled to receive the entire balance of any Condemnation Award remaining after the foregoing application of such Condemnation Award. 2.3 Insubstantial Condemnation. If an Insubstantial Condemnation occurs after the Commencement Date, then Tenant shall hold in trust any Condemnation Award(s) and apply such Condemnation Award(s) first to Restoration of any remaining improvements not taken. Tenant shall perform such Restoration in compliance with this Lease. Any remaining Condemnation Award(s) shall be distributed to Landlord and Tenant as if arising from a Substantial Condemnation that affected only the portion of the Premises taken. From and after transfer of title pursuant to the Insubstantial Condemnation, all Fixed Rent subsequently payable shall be reduced by a fraction whose numerator is the amount of the Condemnation Award paid to Landlord from such Insubstantial Condemnation and whose denominator is the Market Value of the Fee Estate immediately before the transfer of title pursuant to such Insubstantial Condemnation. 2.4 Temporary Condemnation. If a Temporary Condemnation occurs after the Commencement Date and relates to a period longer than 90 days, then Tenant may, with Leasehold Mortgagee's Consent, terminate this Lease effective as of the commencement date of the Temporary Condemnation. In that event only, the Condemnation Award from such Temporary Condemnation shall belong to Landlord. If the Temporary Condemnation relates to a 15

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

period of 90 days or less, or if Tenant does not (with Leasehold Mortgagee's Consent) elect to terminate this Lease on account of the Temporary Condemnation, then the Condemnation Award arising from such Temporary Condemnation (to the extent attributable to periods within the Term) shall be paid to Tenant (subject to the rights of Leasehold Mortgagees) and this Lease shall not be affected in any way. 2.5 Adjustment of Claims; Payment of Loss Proceeds. Unless Tenant has validly elected a Casualty Termination, Tenant shall be solely responsible for adjustment of any Casualty insurance claim, except that (as between Tenant and Leasehold Mortgagees) each Leasehold Mortgagee is authorized and empowered to participate in any settlement, adjustment, arbitration, or proceeding as to any Casualty insurance claim in accordance with and to the extent provided by such Leasehold Mortgagee's loan documents. Landlord assigns to Tenant (and its Leasehold Mortgagee(s)) the right to receive all Loss Proceeds. All Loss Proceeds shall be paid to Leasehold Mortgagee, to be held in trust and disbursed by Leasehold Mortgagee, subject to the terms of the corresponding Leasehold Mortgage and this Lease. If no Leasehold Mortgage exists, then Loss Proceeds shall be paid to Tenant to be held in trust and applied in accordance with this Lease. Loss Proceeds shall under no circumstances be paid to Landlord or any Fee Mortgagee unless (1) some other express provision of this Lease requires Tenant to pay or assign such proceeds to Landlord and such payment or assignment is consistent with the rights of Leasehold Mortgagees under this Lease and, in the case of payment to a Fee Mortgagee, a Fee Mortgage requires that any such proceeds payable to Landlord to be paid instead to the Fee Mortgagee, or (2) Tenant validly elects a Casualty Termination. Landlord and Tenant direct any condemning authority to remit and disburse any Condemnation Awards to the most senior Leasehold Mortgagee (or Tenant) in accordance with this paragraph. 2.6 Settlement or Compromise. Landlord shall not settle or compromise any Condemnation Award without obtaining both (1) consent by Tenant and (2) Leasehold Mortgagee's Consent. Tenant shall be entitled to control such proceedings (to the exclusion of Landlord, if so elected by Tenant) and claim such share of the Condemnation Award as Tenant is entitled to receive under this Lease. Any Leasehold Mortgagee shall also (to the exclusion of Tenant, if so elected by Leasehold Mortgagee) be entitled to appear in any proceedings relating to any Condemnation Award and empowered to participate in any settlement, arbitration, or other proceeding involving any Condemnation. Landlord shall have no right to participate in any proceedings regarding a Temporary Condemnation unless either (x) Tenant, with Leasehold Mortgagee's Consent, elects to terminate this Lease on account of the Temporary Condemnation or (y) Tenant is not legally permitted to participate in such proceedings. In the latter case, Landlord shall participate in such proceedings in accordance with Tenant's instructions, all at Tenant's reasonable expense and using counsel selected, instructed, and paid by Tenant (subject to the rights of Leasehold Mortgagees under their loan documents). 2.7 Prompt Notice. If either party becomes aware of any Casualty or threatened, contemplated, or actual Condemnation, then such party shall promptly give Notice of such Casualty or Condemnation to the other party. 2.8 Depository. Upon request by any Leasehold Mortgagee, all Loss Proceeds intended to be used for Restoration shall be held by Depository, to be disbursed for Restoration 16

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

in accordance with Leasehold Mortgagee's disbursement requirements. Notwithstanding the preceding sentence, if the Loss Proceeds do not exceed an amount equal to _______ months of Base Rent, then they shall be paid to Tenant, who shall hold them in trust to be applied first to Restoration. 3. FEE MORTGAGES.

3.1 Landlord's Rights. Landlord shall have the right to execute and deliver Fee Mortgage(s) at any time and from time to time during the Term, provided that: (1) the Fee Mortgage complies with all other applicable requirements of this Lease; (2) the Fee Mortgagee is subject to the jurisdiction of the courts of the State and is not immune from suit; (3) notwithstanding the absolute subordination of the Fee Mortgagee's estate to this Lease, if requested by Tenant or any Leasehold Mortgagee, the Fee Mortgagee enters into an SNDA with Tenant, any Leasehold Mortgagees, and any Subtenant with whom Landlord is required to enter into an SNDA (and agrees prospectively to enter into such SNDA's with future such Subtenants); and (4) the Fee Mortgagee confirms to Tenant, by recordable instrument, that the Fee Mortgagee's rights are subject and subordinate to this Lease (and estates arising from this Lease) as more fully set forth in this Lease. Any Fee Mortgage entered into in violation of the preceding sentence shall be null and void. Within ten Business Days after Landlord enters into or records any Fee Mortgage after the Commencement Date, Landlord shall provide Tenant with a copy of such Fee Mortgage. Upon a Foreclosure Event under a Fee Mortgage, this Lease shall continue in full force and effect. Tenant shall attorn to the successor holder of the Fee Estate as successor Landlord, provided that such successor holder has assumed in writing all obligations of Landlord under this Lease. Such attornment shall in no way diminish or impair Tenant's rights and remedies against Landlord (all of which Tenant may continue to assert against the successor Landlord), or require Tenant to waive any default by Landlord. Tenant shall not be required to join in any Fee Mortgage or to subordinate this Lease to any Fee Mortgage. If Tenant elects to enter into any such joinder or subordination, then such joinder or subordination shall not be effective without Leasehold Mortgagee's Consent. 3.2 Required Provisions in Fee Mortgage. Each Fee Mortgage shall contain, and shall be deemed to contain, the following provisions or their substantial equivalent. Each Fee Mortgagee, by accepting its Fee Mortgage, shall be deemed to have agreed to the following provisions. Such provisions reflect the definitions contained in this Lease. All such terms shall be (deemed) modified in the Fee Mortgage as appropriate to reflect the definitions in such Fee Mortgage. This Fee Mortgage attaches solely to the Fee Estate, subject to the Lease, and does not encumber the Leasehold Estate. So long as the Lease or a New Lease has not been terminated, this Fee Mortgage is subordinate to the Lease or such New Lease and all estates arising from the Lease or such New Lease (including Subleases, any Leasehold Mortgage, and the rights of any Successor Tenant as holder of the Lease), all as they may be amended or modified from time to time. Notwithstanding anything to the contrary in this Fee Mortgage, Fee Mortgagee shall have no right to receive any Loss Proceeds except to the extent (and under the conditions) payable to Landlord or a Fee Mortgagee under the Lease. Upon 17

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

any Foreclosure Event under this Fee Mortgage, the resulting owner of the Fee Estate shall not have any rights as Landlord (or otherwise) under or with respect to the Lease unless and until such owner of the Fee Estate has executed, acknowledged, and delivered to Tenant an instrument, in recordable form, by which such owner of the Fee Estate assumes all obligations under the Lease, subject to all terms of the Lease, including terms that limit the liability of any Landlord, except as to Recourse Claims. 3.3 Protection of Fee Mortgagees. If Tenant gives Landlord any Notice of Default, then Tenant shall simultaneously give a copy of such Notice of Default to all Fee Mortgagee(s) provided that Tenant shall have received Notice of their names and addresses and their Fee Mortgage(s) shall not have been satisfied or discharged of record. Such Fee Mortgagee(s) shall have the right to cure Landlord's alleged breach or default within the cure period allowed to Landlord, and with like effect as if Landlord had done so. Tenant's failure to give Fee Mortgagee(s) the Notice required by this paragraph shall not be a Default by Tenant, but no Notice by Tenant of any Default by Landlord (or any resulting exercise of rights and remedies by Tenant) shall be effective against such Fee Mortgagee(s) unless and until Tenant shall have given to such Fee Mortgagee(s) such Notice and opportunity to cure. 4. LEASEHOLD MORTGAGES.

4.1 Tenant's Rights. Notwithstanding anything in this Lease to the contrary, Tenant shall have the absolute and unconditional right, without Landlord's consent, at any time and from time to time during the Term, to: (1) execute and deliver one or more Leasehold Mortgage(s) encumbering this Lease and the Leasehold Estate; (2) assign this Lease and the Leasehold Estate as collateral security; and (3) assign any or all of Tenant's rights under this Lease, including any Options, to any Leasehold Mortgagee. Landlord shall not be required to join in, or "subordinate" the Fee Estate, to any Leasehold Mortgage. There shall be no limit on the amount or nature of any obligation secured by a Leasehold Mortgage; the purpose for which the proceeds of any such financing may be applied; the nature or character of any Leasehold Mortgagee; the subsequent assignment, transfer, or hypothecation of any Leasehold Mortgage; or the creation of participation or syndication interests in or to any Leasehold Mortgage. Leasehold Mortgages may secure construction, permanent, purchase-money, multi-property, general corporate, or any other financing or obligations of any kind. 4.2 Required Provisions in Leasehold Mortgage. Each Leasehold Mortgage shall contain, and shall be deemed to contain, the following provisions or their substantial equivalent. Each Leasehold Mortgagee, by accepting its Leasehold Mortgage, shall be deemed to have agreed to the following provisions. Such provisions reflect the definitions contained in this Lease. All such terms shall be (deemed) modified in the Leasehold Mortgage as appropriate to reflect the definitions in such Leasehold Mortgage. This Leasehold Mortgage attaches solely to the Leasehold Estate and does not encumber the Fee Estate. This Leasehold Mortgage is subject to all the terms and conditions of the Lease. Notwithstanding anything to the contrary in this Leasehold Mortgage, Leasehold Mortgagee shall have no right to receive any Loss 18

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Proceeds except to the extent (and under the conditions) payable to Tenant or Leasehold Mortgagee under the Lease. No Successor Tenant shall have any rights under the Lease unless and until such Successor Tenant has executed, acknowledged, and delivered to Landlord an instrument, in recordable form, by which Successor Tenant assumes all obligations under the Lease (except as otherwise provided in the Lease), subject to all terms of the Lease, including terms that limit the liability of any Tenant, except as to Recourse Claims. 4.3 Effect of Leasehold Mortgage. Tenant's making of a Leasehold Mortgage shall not be deemed to constitute an assignment or transfer of the Leasehold Estate, nor shall any Leasehold Mortgagee, as such, or in the exercise of its rights under this Lease, be deemed to be an assignee, transferee, or mortgagee in possession of the Leasehold Estate so as to require such Leasehold Mortgagee, as such, to assume or otherwise be obligated to perform any of Tenant's obligations under this Lease except when, and then only for so long as, such Leasehold Mortgagee has acquired ownership and possession of the Leasehold Estate pursuant to a Foreclosure Event under its Leasehold Mortgage (as distinct from its exercise of Leasehold Mortgagee's Cure Rights). 4.4 Modifications Required by Leasehold Mortgagee. If any actual or prospective Leasehold Mortgagee requires any modification(s) of this Lease, then Landlord shall, at Tenant's or such Leasehold Mortgagee's request, promptly execute and deliver to Tenant such instruments in recordable form effecting such modification(s) as such actual or prospective Leasehold Mortgagee shall require, provided that such modification(s) do not modify the Rent, the Term, or any security required to be provided under this Lease, and do not otherwise materially adversely affect Landlord's rights or materially increase Landlord's obligations under this Lease. 4.5 Further Assurances. Upon request by Tenant or by any existing or prospective Leasehold Mortgagee, Landlord shall deliver to the requesting party such documents and agreements as the requesting party shall reasonably request to further effectuate the intentions of the parties as set forth in this Lease, including a separate written instrument in recordable form signed and acknowledged by Landlord setting forth and confirming, directly for the benefit of specified Leasehold Mortgagee(s), any or all rights of Leasehold Mortgagees. 4.6 Foreclosure. Notwithstanding anything to the contrary in this Lease, any Foreclosure Event under any Leasehold Mortgage, or any exercise of rights or remedies under or pursuant to any Leasehold Mortgage, including the appointment of a receiver, shall not in and of itself be deemed to violate this Lease or, in and of itself, entitle Landlord to exercise any rights or remedies, but the foregoing shall not limit Landlord's rights and remedies (subject to all other Mortgagee Protections) if any Default occurs. 4.7 Notice of Leasehold Mortgages. If Tenant enters into any Leasehold Mortgage that complies with the definition of such term, then the Leasehold Mortgagee under such Leasehold Mortgage shall be entitled to all Mortgagee Protections (as against both Landlord and any successor holder of the Fee Estate) from and after such date as Tenant or the Leasehold Mortgagee has given Landlord Notice of such Leasehold Mortgage and Leasehold Mortgagee, accompanied by a copy of the Leasehold Mortgage, recorded or unrecorded. No change of 19

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

address of such Leasehold Mortgagee, or assignment of such Leasehold Mortgage, shall be effective against Landlord unless and until such Leasehold Mortgagee shall have given Landlord Notice of such change or assignment. 4.8 Termination of Leasehold Mortgagee's Rights. If a Leasehold Mortgagee is entitled to Mortgagee Protections, then such entitlement shall not terminate unless and until such time, if any, as either (1) the Leasehold Mortgage shall have been satisfied and discharged of record, except through a Foreclosure Event; (2) such Leasehold Mortgagee has consented in writing to the termination of its Mortgagee Protections; or (3) after Landlord has complied with all Mortgagee Protections, Landlord has validly terminated this Lease, no Leasehold Mortgagee has validly requested (and is entitled to) a New Lease, and the New Lease Option Period has expired. 4.9 Landlord's Acknowledgment of Leasehold Mortgagee. Landlord shall, upon written request, acknowledge receipt of the name and address of any Leasehold Mortgagee (or proposed Leasehold Mortgagee) and confirm to such party that such party is or would be, upon closing of its loan to Tenant or its acquisition of an existing Leasehold Mortgage: (1) a Leasehold Mortgagee (in compliance with the definition of such term, including all applicable conditions and requirements set forth in such definition) entitled to all Mortgagee Protections and (2) an Institutional Lender, if applicable. Such acknowledgment shall, if requested, be in recordable form, and may be recorded. If Landlord reasonably determines that any such acknowledgment requested by Tenant or any (proposed) Leasehold Mortgagee would be inaccurate, then Landlord shall promptly give Notice of such determination to Tenant and the (prospective) Leasehold Mortgagee or assignee, which Notice shall specify the reasonable basis for Landlord's determination. 5. OPERATIONAL PROTECTIONS FOR LEASEHOLD MORTGAGEES.

Notwithstanding anything to the contrary in this Lease, if Tenant at any time or from time to time enters into any Leasehold Mortgage, and Tenant or a Leasehold Mortgagee has given Landlord Notice of such Leasehold Mortgage, then: 5.1 Cancellation, Surrender, Amendment, Etc. No cancellation, termination (including Tenant's termination of this Lease pursuant to any express right of termination in this Lease or under applicable law), surrender, acceptance of surrender, abandonment, amendment, modification, or rejection of this Lease, or subordination of this Lease to any Fee Mortgage or other encumbrance on the Fee Estate, shall bind a Leasehold Mortgagee if done without Leasehold Mortgagee's Consent. Nothing in this paragraph shall limit the right of Landlord to terminate this Lease upon occurrence of an Event of Default and the expiration of all Leasehold Mortgagee's Cure Rights without cure of such Event of Default, subject however to (1) provisions of this Lease that limit the right of Landlord to terminate this Lease on account of Personal Default(s) or certain Nonmonetary Defaults; and (2) the right of any Leasehold Mortgagee to obtain a New Lease as provided for in this Lease.

20

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

5.2 Certain Proceedings. In the event of any arbitration, appraisal, or other dispute resolution proceeding, or any proceeding relating to the determination of Rent or any component of any Rent, or any proceeding relating to the application or determination of any Loss Proceeds: 5.2.1 Notice. Landlord shall promptly notify Leasehold Mortgagee of the commencement of such proceeding, which notice shall enclose copies of all notices, papers, and other documents related to such proceeding to the extent then given or received by Landlord. Landlord shall provide Leasehold Mortgagee with copies of all additional notices, papers, and other documents related to such proceeding when and as given or received by Landlord. 5.2.2 Participation. Leasehold Mortgage shall be entitled to participate in such proceeding and, at the option of Leasehold Mortgagee, such participation shall be to the exclusion of (and in place of participation by) Tenant. Such participation shall, to the extent required by Leasehold Mortgagee, include: (1) receiving copies of all notices, demands, and other written communications and documents at the same time they are served upon or delivered to Landlord or Tenant; (2) filing any papers contemplated or permitted by such proceedings; and (3) attending and participating in all hearings, meetings, and other sessions or proceedings relating to such dispute resolution. 5.3 Options. To the extent that this Lease grants Tenant any Option:

5.3.1 Exercise. Any exercise of such Option by a Leasehold Mortgagee shall be as effective as if Tenant had exercised such Option. If the time for Tenant to exercise any Option has expired without Tenant's valid exercise of such Option, then Landlord shall provide Notice of such fact to each Leasehold Mortgagee. Each Leasehold Mortgagee shall then have __ additional days from receipt of such Notice to exercise such Option, either in Tenant's name or in Leasehold Mortgagee's name. 5.3.2 Deemed Exercise. Tenant shall be deemed to have exercised each Renewal Option automatically unless Tenant has elected not to exercise such Renewal Option by giving Landlord Notice to such effect at least __ days before the expiration of the then-current Term. Any election by Tenant not to exercise a Renewal Option shall not be effective without Leasehold Mortgagee's Consent. Tenant may, but shall not be required to, simultaneously exercise two or more successive Renewal Options by Notice to Landlord. If Tenant properly gives Notice that Tenant elects not to exercise any Renewal Option, then: (1) this Lease shall terminate and expire upon the expiration or termination of the then Term; and (2) neither Tenant nor a Leasehold Mortgagee shall be permitted to exercise any subsequent Renewal Option. 5.3.3 Default by Tenant. Every Option shall remain effective notwithstanding any Default or any exercise of Leasehold Mortgagee's Cure Rights, unless and until (1) Tenant's and all Leasehold Mortgagees' cure periods shall have expired without cure; (2) Landlord has terminated this Lease; and (3) the New Lease Option Period has expired without any Leasehold Mortgagee requesting a New Lease. [So long as the foregoing ("1" through "3") have not all occurred, there shall be no conditions (express or implied) to Tenant's or any Leasehold Mortgagee's exercise of any Option.] 21

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

5.4 Copies of Notices. If Landlord gives any Notice to Tenant, then Landlord shall at the same time (and by a means permitted by this Lease) give a copy of such Notice to each Leasehold Mortgagee. No Notice to Tenant shall be effective unless and until so given to each Leasehold Mortgagee. No Default, Event of Default, termination of this Lease, or other rights or remedies of Landlord predicated upon the giving of Notice to Tenant shall be deemed to have occurred or arisen unless like Notice shall have been so given to each Leasehold Mortgagee at the same time and by the same means, which Notice shall describe in reasonable detail the alleged Default or other event allegedly giving rise to rights of Landlord. 5.5 Government Notices. If Landlord receives any notice from any Government relating to the Premises, then Landlord shall promptly give a copy of such notice to each Leasehold Mortgagee. 6. LEASEHOLD MORTGAGEES' NOTICE AND OPPORTUNITY TO CURE.

Notwithstanding anything to the contrary in this Lease, if Tenant at any time or from time to time enters into any Leasehold Mortgage, and Tenant or a Leasehold Mortgagee has given Landlord Notice of such Leasehold Mortgage, then: 6.1 Tenant's Cure Period Expiration Notice; Right to Cure. If a Default occurs and Tenant does not cure it within the cure period that applies to Tenant under this Lease, then Landlord shall promptly give each Leasehold Mortgagee a Tenant's Cure Period Expiration Notice. Any Leasehold Mortgagee shall have the right, but not the obligation, to perform any obligation of Tenant under this Lease and to cure any Default. Landlord shall accept performance by or at the instigation of a Leasehold Mortgagee in fulfillment of Tenant's obligations, for the account of Tenant and with the same force and effect as if performed by Tenant. No performance by or on behalf of a Leasehold Mortgagee shall cause it to become a "mortgagee in possession" or otherwise cause it to be deemed to be in possession of the Premises or bound by or liable under this Lease. 6.2 Additional Time for Leasehold Mortgagee's Cure Rights. If any Default occurs, then any Leasehold Mortgagee shall have the same cure period available to Tenant under this Lease, plus the additional time provided for below (regardless of the original time fixed for performance by Tenant), within which to take (if such Leasehold Mortgagee so elects; and no Leasehold Mortgagee shall have any duty to undertake any Leasehold Mortgagee's Cure of any kind) whichever of the actions set forth below shall apply to such Default: 6.2.1 Monetary Defaults. In the case of a Monetary Default, Leasehold Mortgagee shall be entitled (but not required) to cure such Default within a cure period consisting of Tenant's cure period under this Lease extended through the date 30 days after such Leasehold Mortgagee shall have received Tenant's Cure Period Expiration Notice for such Monetary Default. If the amount of any Monetary Default has not been finally determined (for example, because of a dispute between Landlord and Tenant regarding the amount of any Rent), then in place of curing such Monetary Default a Leasehold Mortgagee that is an Institutional Lender may instead (1) cure such Monetary Default to the extent the amount of such Monetary Default is not in dispute and (2) undertake in writing that such Leasehold Mortgagee shall cure 22

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

the remaining disputed portion of such Monetary Default within 30 days after the dispute shall have been resolved. The parties shall then cooperate to resolve such dispute promptly in accordance with this Lease. 6.2.2 Nonmonetary Defaults Curable Without Obtaining Possession. In the case of any Nonmonetary Default that a Leasehold Mortgagee is reasonably capable of curing without obtaining possession of the Premises (excluding in any event a Personal Default), Leasehold Mortgagee shall be entitled, but not required, to: (1) within a period consisting of Tenant's cure period for the Default, extended through the date 90 days after receipt of the Tenant's Cure Period Expiration Notice for such Default, advise Landlord of Leasehold Mortgagee's intention to take all reasonable steps necessary to remedy such Nonmonetary Default; (2) duly commence the cure of such Nonmonetary Default within such extended period, and then (during and after such extended period) diligently prosecute to completion the remedy of such Nonmonetary Default, subject to Unavoidable Delay; and (3) then complete such remedy within a reasonable time under the circumstances, subject to Unavoidable Delay. 6.2.3 Defaults Curable Only by Obtaining Possession and Personal Defaults. In the case of (1) any Nonmonetary Default that is not reasonably susceptible of being cured by a Leasehold Mortgagee without obtaining possession of the Premises (including any Default relating to any construction or alterations) or (2) any Personal Default, Leasehold Mortgagee shall be entitled (but not required) to do the following, so long as, for any Defaults other than those referred to in this paragraph ("1" and "2"), such Leasehold Mortgagee has exercised or is exercising, within the applicable periods, the applicable Leasehold Mortgagee's Cure Rights as provided in this Lease: 6.2.3.1 During Cure Period. At any time during the cure period (if any) that applies to Tenant, extended through the date 90 days after such Leasehold Mortgagee's receipt of the Tenant's Cure Period Expiration Notice as to such Default, or if no cure period applies to Tenant, then within 90 days after receiving Notice of the Nonmonetary Default, Leasehold Mortgagee shall be entitled to institute proceedings, and (subject to any stay in any Bankruptcy Proceedings affecting Tenant, or any injunction, so long as such stay or injunction has not been lifted) then diligently prosecute the same to completion (but not necessarily within such 90-day period) subject to Unavoidable Delay, to obtain Control of the Premises. 6.2.3.2 Further Cure After Control of Premises. Upon obtaining Control of the Premises (whether before or after expiration of any otherwise applicable cure period), Leasehold Mortgagee or Successor Tenant shall then be entitled (but not required) to proceed with reasonable diligence to cure such Nonmonetary Defaults as are then reasonably susceptible of being cured by such Leasehold Mortgagee or Successor Tenant (excluding Personal Defaults, which neither Leasehold Mortgagee nor Successor Tenant need cure at any time), subject to Unavoidable Delay. A Leasehold Mortgagee or Successor Tenant having Control of the Premises shall not be bound by any deadline for completion of any construction or alterations, or other performance, required of Tenant under this Lease, provided that such Leasehold Mortgagee or Successor Tenant shall with reasonable diligence prosecute completion of same and shall cure all Monetary Defaults within the period provided for under this Lease for such cure. 23

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

6.3 Effect of Cure. A Leasehold Mortgagee shall not be required to continue to exercise Leasehold Mortgagee's Cure Rights or otherwise proceed to obtain or to exercise Control of the Premises if and when the Default that such Leasehold Mortgagee was attempting to cure shall have been cured. Upon such cure and the cure of any other Defaults in accordance with this Lease, this Lease shall continue in full force and effect as if no Default(s) had occurred. Even if a Leasehold Mortgagee has commenced Leasehold Mortgagee's Cure, such Leasehold Mortgagee may abandon or discontinue Leasehold Mortgagee's Cure at any time, without liability to Landlord or otherwise. Mortgagee's exercise of Leasehold Mortgagee's Cure Rights shall not be deemed an assumption of this Lease in whole or in part. 6.4 Quiet Enjoyment. So long as the period for a Leasehold Mortgagee to exercise Leasehold Mortgagee's Cure Rights for any Default has not expired, Landlord shall not (1) reenter the Premises on account of such Default (but this shall not limit any Landlord's right of access to the Premises otherwise provided for under the express terms of this Lease), (2) give any Notice terminating or electing to terminate this Lease, or (3) bring a proceeding on account of such Default to (w) dispossess Tenant, Subtenants and/or other occupants of the Premises, (x) reenter the Premises, (y) terminate this Lease or the Leasehold Estate, or (z) otherwise (except as expressly permitted by this paragraph) exercise any other rights or remedies under this Lease by reason of such Default. Nothing in the Mortgagee Protections shall, however, be construed to either (i) extend the Term beyond the expiration date provided for in this Lease (including Renewal Terms) that would have applied if no Default had occurred or (ii) require any Leasehold Mortgagee to cure any Personal Default as a condition to preserving this Lease or to obtaining a New Lease (but this shall not limit a Leasehold Mortgagee's obligation to seek to obtain Control of the Premises, and then consummate a Foreclosure Event, by way of the exercise of Leasehold Mortgagee's Cure Rights, if Leasehold Mortgagee desires to preclude Landlord from terminating this Lease on account of a Personal Default). 6.5 Leasehold Mortgagee's Right to Enter Premises. Landlord and Tenant authorize each Leasehold Mortgagee to enter the Premises as necessary to effect Leasehold Mortgagee's Cure and take any action(s) reasonably necessary to effect Leasehold Mortgagee's Cure. A Leasehold Mortgagee's rights under this paragraph or exercise of such rights shall not constitute Control of the Premises or mean that such Leasehold Mortgagee has possession of the Premises or liability to Landlord or Tenant. 6.6 Payments by Leasehold Mortgagee. Any payment made, or performance rendered, by a Leasehold Mortgagee to Landlord to cure any claimed Default shall be deemed to have been made or rendered "under protest" and without prejudice to Tenant's or Leasehold Mortgagee's rights and remedies if Landlord's claim of a Default shall be determined to have been erroneous. 7. LEASEHOLD MORTGAGEE'S RIGHT TO A NEW LEASE.

If this Lease terminates before its stated expiration date (including Renewal Terms, except to the extent that Tenant, with Leasehold Mortgagee's Consent, elects in accordance with this Lease not to exercise Renewal Options) for any reason (including a Default or rejection in a Bankruptcy Proceeding affecting Tenant), but excluding a Casualty Termination or a termination, 24

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

with Leasehold Mortgagee's Consent, as the result of a Substantial Condemnation, then (in addition to any other or previous Notice required to be given by Landlord to a Leasehold Mortgagee) Landlord shall, within ten Business Days, give Notice of such termination to each Leasehold Mortgagee. Upon a Leasehold Mortgagee's request given within the New Lease Option Period, Landlord shall enter into a New Lease with New Tenant, provided that such Leasehold Mortgagee shall, on the New Lease Delivery Date: (1) pay to Landlord any and all sums then due under this Lease as if this Lease had not been terminated; and (2) agree to cure all then-uncured Nonmonetary Defaults (other than Personal Defaults), within a reasonable period after the New Lease Delivery Date with reasonable diligence. If Landlord fails to enter into such a New Lease when and as required to do so, then Landlord shall nevertheless be deemed to have entered into such a New Lease. In no event shall any Leasehold Mortgagee or New Tenant be required to cure a Personal Default of Tenant as a condition to obtaining or retaining a New Lease or otherwise. The following additional provisions shall apply to any New Lease: 7.1 Documentation and Priority. Any New Lease, any memorandum of a New Lease, and the Leasehold Estate under any New Lease shall be subject to no prior right, lien, encumbrance, or other interest in the Fee Estate except Permitted Fee Exceptions. The immediately preceding sentence shall be self-executing. On the New Lease Delivery Date (or promptly after request), Landlord shall, if requested, execute and deliver such documents as New Tenant shall reasonably determine are necessary to enable New Tenant to obtain title insurance for the New Lease (including ownership of the improvements demised thereunder), at New Tenant's expense, subject only to Permitted Fee Exceptions, including a new memorandum of lease, tax returns, and affidavits. Any New Lease shall be owned and held solely by New Tenant free and clear of any claims of: (1) any previous Tenant, including the Tenant originally named in this Lease; or (2) except to the extent that New Tenant gives Landlord Notice otherwise, any holder of any lien that encumbered the Leasehold Estate before this Lease was terminated, but whose lien was junior and subordinate to the Leasehold Mortgage whose Leasehold Mortgagee requested the New Lease. 7.2 Adjustment for Net Income. On the New Lease Delivery Date, Landlord shall pay New Tenant an amount equal to the net operating income derived from the Premises (gross income from Subleases and other operations conducted at the Premises less Rent and reasonable operating expenses) during the period from the Termination Date to the New Lease Delivery Date, together with interest at the Prime Rate from the date Landlord received each (net) payment on account of such net operating income, provided that New Tenant concurrently pays Landlord all sums required to be paid Landlord pursuant to this Lease upon execution of such New Lease, and not otherwise paid by Landlord from gross income of the Premises. 7.3 Pendency of Dispute. If Landlord and New Tenant disagree regarding any payment due Landlord as a condition to execution of a New Lease, then New Tenant (if an Institutional Lender or a Leasehold Mortgagee's Representative acting for an Institutional Lender) shall not be required to pay the disputed portion of such payment (as a condition to obtaining a New Lease) provided that such New Tenant: (1) on the New Lease Delivery Date pays Landlord the full amount not in controversy and (2) agrees in writing to pay any additional sum ultimately determined to be due promptly upon such determination with interest at the Prime 25

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Rate from the New Lease Delivery Date. The parties shall cooperate to determine any disputed amount promptly in accordance with the New Lease. 7.4 Assignment of Certain Items. On the New Lease Delivery Date, Landlord shall assign without recourse to New Tenant all of Landlord's right, title and interest in and to all: (1) moneys (including Loss Proceeds), if any, then held by, or payable to, Landlord that Tenant (or Leasehold Mortgagee) would have been entitled to receive but for termination of this Lease; (2) leases affecting any portion of the Premises (which leases, upon such assignment by Landlord to New Tenant, shall become Subleases arising from the Leasehold Estate under the New Lease); and (3) security deposits of Subtenants. 7.5 Preservation of Former Subleases. Between the Termination Date and the New Lease Delivery Date (or the expiration of the New Lease Option Period, if no Leasehold Mortgagee requests a New Lease): (1) the parties acknowledge that any Subleases shall be direct leases between Landlord and the former Subtenant; (2) Landlord shall not, except with Leasehold Mortgagee's written consent (which shall not be unreasonably withheld), cancel any such direct lease or accept any cancellation, termination, or surrender of such a direct lease (unless such termination shall be effected as a matter of law upon the termination of this Lease, in which case such direct lease shall, at New Tenant's option, be reinstated as a Sublease arising from the New Lease on the New Lease Delivery Date) without consent by New Tenant; or (3) enter into any new leases of the Premises or any portion thereof, except with Leasehold Mortgagee's written consent (which shall not be unreasonably withheld). At the request of New Tenant, on the New Lease Delivery Date Landlord shall enter into SNDA's with any Subtenants as to which Landlord would otherwise be required to deliver SNDA's under this Lease. 7.6 Landlord's Costs and Expenses. If a Leasehold Mortgagee requires Landlord to enter into a New Lease, then such Leasehold Mortgagee shall pay all reasonable expenses, including transfer taxes and Legal Costs incurred by Landlord in connection with any Default and termination of this Lease, recovery of possession of the Premises, and preparation, execution, and delivery of the New Lease and any memorandum of the New Lease requested by New Tenant. 7.7 Survival. All rights of any Leasehold Mortgagee, and obligations of Landlord, regarding a New Lease shall survive the termination of this Lease for the duration of the New Lease Option Period. 8. INTERACTION OF MORTGAGES WITH OTHER ESTATES AND PARTIES.

8.1 Leasehold Mortgages. A Leasehold Mortgage shall not encumber or attach to the Fee Estate or affect, limit, or restrict Landlord's rights and remedies under this Lease except as expressly provided in this Lease. Any Leasehold Mortgage shall attach solely to the Leasehold Estate and not the Fee Estate. If this Lease terminates and the New Lease Option Period has expired without any Leasehold Mortgagee requesting a New Lease, then the obligations formerly secured by the Leasehold Mortgage shall be unsecured. Upon a Foreclosure Event under a Leasehold Mortgage, the Leasehold Mortgagee or Successor Tenant shall succeed only to the Leasehold Estate. Any Foreclosure Event under a Leasehold Mortgage shall not extinguish, terminate, or otherwise adversely affect the Fee Estate (subject to this Lease) or the rights of any 26

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Fee Mortgagees as against Landlord or the Fee Estate (which shall in all events remain subject to this Lease). 8.2 Leasehold Mortgagee's Representative. Any Leasehold Mortgagee [that is an Institutional Lender] may exercise its rights (including all Mortgagee Protections and the benefit thereof) under this Lease, or perform any action permitted to be taken by a Leasehold Mortgagee, through a Leasehold Mortgagee's Representative. 8.3 Interaction Between Lease and Leasehold Mortgage. If a Leasehold Mortgage expressly limits the related Leasehold Mortgagee's exercise of any Mortgage Protections, then as between Tenant and such Leasehold Mortgagee the terms of such Leasehold Mortgage shall govern. A Leasehold Mortgagee may, by Notice to Landlord, temporarily or permanently waive any Mortgagee Protections as specified in such Notice. Any such waiver shall be effective in accordance with its terms as against such Leasehold Mortgagee and its successors and assigns. Any such waiver shall not bind any subsequent Leasehold Mortgagee under a subsequent Leasehold Mortgage granted by Tenant. Tenant's default as mortgagor under a Leasehold Mortgage shall not constitute a Default under this Lease except to the extent that Tenant's acts or omissions, in and of themselves, constitute a Default under this Lease. The exercise of any rights or remedies of a Leasehold Mortgagee under a Leasehold Mortgage, including the appointment of a receiver and the consummation of any Foreclosure Event, shall not constitute a Default under this Lease, notwithstanding anything to the contrary in this Lease. 8.4 Fee Mortgages. Any Fee Mortgage shall be subject and subordinate to, and shall not attach to: (1) this Lease and the Leasehold Estate (whether held by Tenant, a Successor Tenant, or a New Tenant); (2) any New Lease and the Leasehold Estate thereunder; (3) any judgment arising from Landlord's breach of this Lease; (4) any estate (including a subleasehold and a leasehold mortgagee estate) directly or indirectly arising from this Lease or any New Lease or the Leasehold Estate under either (so long as this Lease or such New Lease has not been terminated in accordance with its terms and in compliance with all rights of Leasehold Mortgages); (5) Tenant's or New Tenant's and any Leasehold Mortgagee's rights and remedies under this Lease; and (6) any rights of a Leasehold Mortgagee with respect to the Leasehold Estate. Any Fee Mortgagee, and in the event of a foreclosure of a Fee Mortgage or delivery of a deed in lieu of such foreclosure, the Fee Mortgagee or grantee or successful bidder at the foreclosure sale, shall succeed only to the Fee Estate, subject to items "1" through "6" and, so long as this Lease or any such New Lease has not been terminated, any Subleases and other estates arising from this Lease or any such New Lease. 8.5 Conflicts Among Mortgagees. If more than one Mortgagee desires to exercise any Mortgagee Protection, then the party against whom such Mortgagee Protection is to be exercised shall be required to recognize either: (1) only the Fee Mortgagee or Leasehold Mortgagee, as applicable, that desires to exercise such Mortgagee Protection and whose Fee Mortgage or Leasehold Mortgage, as applicable, is most senior in lien (as against other Mortgages of like type) or (2) such other Fee Mortgagee or Leasehold Mortgagee, as applicable, as has been designated in writing by all Fee Mortgagees or all Leasehold Mortgagees, as applicable, to exercise such Mortgagee Protection. Priority of Mortgages shall be conclusively evidenced by (in order of precedence of application): (x) written agreement among the affected Mortgagees; 27

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

(y) a report or certificate of a title insurance company licensed to do business in the State; or (z) joint written instructions of all Mortgagees (Fee or Leasehold, as applicable). Neither Tenant nor Landlord shall be obligated to determine the relative priorities of any Mortgages. With respect to any Mortgagee Protections that by their nature can only be exercised by the most senior of the Leasehold Mortgagees (such as the right to a New Lease), pending the determination of priority, any time period that applies to Leasehold Mortgagees' exercise of such Mortgagee Protections shall be tolled, provided that such tolling shall not (a) extend for more than 60 days or (b) apply to any other Mortgagee Protections. 8.6 No Merger. Without the written consent of Landlord, Tenant, and all Mortgagees, the Fee Estate and the Leasehold Estate shall remain distinct and separate estates and shall not merge, notwithstanding the acquisition of both the Fee Estate and the Leasehold Estate by Landlord, Tenant, a New Tenant, any Mortgagee, or a third party, whether by purchase or otherwise. 8.7 Subtenant Nondisturbance. Landlord shall, upon Tenant's request from time to time, enter into an SNDA with any Subtenant, provided that: (1) either (x) the rent per rentable square foot of improvements under such Sublease equals or exceeds the corresponding Rent under this Lease, reasonably allocated by Tenant over all improvements constituting part of the Premises, and such Sublease is on terms that are commercially reasonable at the time or (y) a Leasehold Mortgagee that is an Institutional Lender has entered into a nondisturbance agreement with such Subtenant (and, upon Landlord's request, Tenant has provided Landlord with evidence of the foregoing); (2) Tenant provides Landlord with a copy of such Sublease; (3) such Sublease does not violate this Lease; and (4) no Event of Default shall exist at the time Landlord executes and delivers the SNDA. If Landlord fails to execute and return to Tenant any such SNDA within ten Business Days after Landlord's receipt of such SNDA, then Landlord authorizes and instructs Tenant to execute such SNDA on Landlord's behalf. Accordingly, Landlord appoints Tenant as Landlord's attorney-in-fact, irrevocably, with full power of substitution, to execute and deliver any such SNDA for and on behalf of Landlord. This appointment is coupled with an interest and is irrevocable. 8.8 No Landlord's Lien. Landlord has no lien or security interest in any personal property of Tenant or any Subtenant located in, on, or at the Premises. Such personal property shall not constitute security for payment of any Rent. If, at any time, any statute or principle of law would grant Landlord any such lien or security interest, then Landlord waives the benefit of any such statute and such lien. Landlord shall execute such documentation, in recordable form, as Tenant shall reasonably require, or as any Leasehold Mortgagee (or other lender or any equipment lessor) shall require, to confirm the foregoing waiver. 8.9 Collection of Subrent. If, pursuant to the Lease, Landlord collects any Subrent from any Subtenant, then after Landlord has applied such Subrent only to pay any Rent then due under this Lease, Landlord shall remit to Leasehold Mortgagee, and not to Tenant, any remaining Subrent. Tenant hereby directs Landlord accordingly. Leasehold Mortgagee shall apply any such Subrent in compliance with its Leasehold Mortgage or the documents secured by such Leasehold Mortgage. 28

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

9.

OBLIGATIONS AND LIABILITIES OF CERTAIN PARTIES.

9.1 Recognition; Certain Obligations. If any Successor Tenant shall acquire this Lease and the Leasehold pursuant to a Foreclosure Event, or if any New Tenant shall obtain a New Lease, then: (1) Landlord shall recognize such Successor Tenant or New Tenant as Tenant under this Lease; (2) all Personal Defaults shall no longer be deemed Defaults; (3) all Personal Obligations shall be deemed to have been removed and deleted from this Lease; and (4) for a period of ________, such New Tenant or Successor Tenant shall have no obligation to comply with (x) any covenant to use or operate the Premises (if such covenant exists in this Lease), (y) any covenant to perform any construction or development of the Premises; or (z) any of the following covenants in this Lease or the New Lease: __________. The preceding clauses "2" through "4" shall not limit Landlord's rights and remedies against any former Tenant in such former Tenant's personal capacity (i.e., not as Tenant under this Lease), to the extent that such former Tenant may have any personal liability. 9.2 Limitation of Liability. Notwithstanding anything to the contrary in this Lease, no Leasehold Mortgagee, Leasehold Mortgagee's Representative, New Tenant, Successor Tenant, or any person acting on behalf of any of them shall have any personal liability under or with respect to this Lease (or a New Lease) except during such period as such person is Tenant under this Lease (or a New Lease). Notwithstanding anything to the contrary in this Lease, any such person's liability shall not in any event extend beyond its interest in this Lease (or a New Lease). All liability of any such person (past, present, and future, including any then-accrued liabilities) shall terminate upon such person's assignment or abandonment of this Lease or the New Lease. 10. BANKRUPTCY.

10.1 Affecting Tenant. If Tenant (as debtor in possession) or a trustee in bankruptcy for Tenant rejects this Lease in any Bankruptcy Proceeding affecting Tenant, then such rejection shall be deemed Tenant's assignment of the Lease and the Leasehold Estate to a Successor Tenant (to be designated by Tenant's Leasehold Mortgagee(s)), in the nature of an assignment in lieu of foreclosure, subject to all Leasehold Mortgages. Upon such deemed assignment, this Lease shall not terminate. Each Leasehold Mortgagee shall continue to have all the rights of a Leasehold Mortgagee as if the Bankruptcy Proceeding had not occurred, unless such Leasehold Mortgagee shall disapprove such deemed assignment by Notice to Landlord within thirty days after such Leasehold Mortgagee received Notice of the rejection of this Lease in Bankruptcy Proceedings. If any court of competent jurisdiction shall determine that this Lease shall have been terminated notwithstanding the deemed assignment provided for in place of rejection of this Lease, then Leasehold Mortgagee(s) shall continue to be entitled to a New Lease as provided in this Lease. 10.2 Affecting Landlord. If Landlord (as debtor in possession) or a trustee in bankruptcy for Landlord rejects this Lease in any Bankruptcy Proceeding affecting Landlord, then:

29

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

10.2.1 Assignment. Landlord and Tenant acknowledge that Leasehold Mortgagee's collateral includes all rights of Tenant under 11 U.S.C. § 365(h), all of which rights have been validly and effectively assigned to Leasehold Mortgagee. 10.2.2 Tenant's Election. Tenant shall not have the right to elect to treat this Lease as terminated except with Leasehold Mortgagee's Consent. If Tenant purports, without Leasehold Mortgagee's Consent, to elect to treat this Lease as terminated, then such election and purported termination shall be null, void, and of no force or effect. Leasehold Mortgagee shall have the right, to the exclusion of Tenant, to make any election and exercise any rights of Tenant under 11 U.S.C. § 365(h)(1). Provided that a Leasehold Mortgagee shall have received Notice of Landlord's Bankruptcy Proceeding simultaneously with Notice to Tenant, such Leasehold Mortgagee's rights under the preceding sentence must be exercised, if at all, subject to such time limits and requirements as would apply to Tenant, except that as against Leasehold Mortgagee every such time period shall be extended 30 days. 10.2.3 Continuation of Lease. If Tenant does not with Leasehold Mortgagee's Consent treat this Lease as terminated, then (notwithstanding any purported election by Tenant to the contrary made without Leasehold Mortgagee's Consent) Tenant shall be deemed to have elected to continue this Lease pursuant to 11 U.S.C. § 365(h)(1)(A)(ii). This Lease shall continue in effect without change upon all the terms and conditions in this Lease, including provisions relating to Rent, Options, SNDA's, and New Leases. Tenant and its successors (including Leasehold Mortgagees, New Tenants, and Successor Tenants) shall then be entitled to offset against Rent the Post-Rejection Offset Amount. 10.2.4 Continuation of Leasehold Mortgages. The lien of any Leasehold Mortgage that was in effect before rejection of this Lease shall extend to Tenant's continuing possessory and other rights under 11 U.S.C. § 365(h) in the Premises and this Lease following such rejection, with the same priority as such lien would have enjoyed against the Leasehold Estate had such rejection not taken place. 10.2.5 Post-Rejection Offset Amounts. If Tenant shall desire to reduce any Rent by any Post-Rejection Offset Amount, then Tenant shall, on or within ten Business Days after the date on which such Rent shall have become due under this Lease, deliver to Landlord a Notice setting forth the Post-Rejection Offset Amount, the reason for such offset, and an itemization in reasonable detail of the damages suffered and costs incurred by Tenant arising from Landlord's nonperformance of the covenant(s) in this Lease that gave rise to such Post-Rejection Offset Amount. Landlord shall be deemed to have irrevocably accepted such Post-Rejection Offset Amount unless, within ten Business Days after Tenant shall have given Notice of the PostRejection Offset Amount (as determined by Tenant), Landlord shall give Notice to Tenant stating: (1) Landlord disputes the Post-Rejection Offset Amount; (2) the reasonable basis for such dispute; and (3) the Post-Rejection Offset Amount, if any, that Landlord would accept. If, ten Business Days after receipt of such Notice, Tenant has not paid Landlord an amount equal to the difference between the Post-Rejection Offset Amount as determined by Tenant and the PostRejection Offset Amount as determined by Landlord (or if Landlord shall not have proposed such an amount, then the entire Post-Rejection Offset Amount as determined by Tenant), then Landlord may commence a proceeding in the United States Bankruptcy Court in which 30

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Landlord's case under the Bankruptcy Code is then pending, or if such case has been closed then in any court of competent jurisdiction in the State, to determine the proper Post-Rejection Offset Amount. Landlord shall provide each Leasehold Mortgagee with simultaneous copies of all pleadings, motions, and other papers filed by Landlord in any such action. Leasehold Mortgagee shall have the right to intervene in any such action and, at Leasehold Mortgagee's option, the right to control any such action to the exclusion of Tenant. If, as of the date 30 days after such court enters a final and nonappealable order or judgment declaring that Tenant must pay Landlord any amount previously offset, Tenant has not paid such amount to Landlord, then Landlord shall have all the rights and remedies available to it under this Lease or otherwise at law in respect of a Monetary Default, subject in each case to Leasehold Mortgagee's Cure Rights. Except as described in the preceding sentence, Tenant's failure to pay any disputed Rent on account of a Post-Rejection Offset Amount shall not constitute a Default. 11. MISCELLANEOUS.

11.1 Notices. All Notices shall be in writing and shall be addressed to Landlord and Tenant as set forth below. Notices shall be delivered by Federal Express, Postal Service Express Mail, or other nationally recognized overnight delivery service to the addresses set forth below. Notices shall be deemed delivered on the date of delivery (or when delivery has been attempted twice, as evidenced by the written report of the delivery service) to the address(es) set forth below. No Notice shall be effective unless and until a copy of such Notice has been delivered to the intended recipient's Mortgagee(s) of which the sender shall have received Notice. Either party may change its address or the name and address of its attorneys by giving Notice in compliance with this Lease. Notice given on behalf of a party by any attorney who represents such party shall constitute Notice by such party. The addresses of the parties are: Landlord: [Name and Address] With a copy to: [Name and Address] Tenant: [Name and Address] With a copy to: [Name and Address] 11.2 No Third Party Beneficiaries. Any present or future Mortgagee or Leasehold Mortgagee's Representative shall have the right to enforce all Mortgagee Protections directly in its own name as a third-party beneficiary. Nothing in this Lease is intended or shall be deemed to confer upon any person (other than Landlord, Tenant, New Tenant, Successor Tenant, Mortgagees, and any Leasehold Mortgagee's Representative) any right to insist upon, or to 31

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

enforce against Landlord or Tenant, the performance or observance by either party of its obligations under this Lease. 11.3 Amendment. Any modification or amendment to this Lease, and any waiver of Landlord's obligations under this Lease, must be in writing signed by the party to be charged. If such party is Tenant, then such modification or amendment shall not be effective without Leasehold Mortgagee's Consent.

32

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

(3) SUBSTANTIVE COMMENTS AND DISCUSSION

1. 2. 3. 4. 5.

Selected Issues Raised by Mortgagee Protections ................................................................ 33 Additional Mortgagee Protections ........................................................................................ 36 Possible Concessions to Landlord ........................................................................................ 40 The Rest of the Lease............................................................................................................ 43 Other Related Documents ..................................................................................................... 45

1.

Selected Issues Raised by Mortgagee Protections.

The following are some issues raised by the preceding mortgagee protections. Additional substantive considerations and issues will arise from any particular Lease and from the circumstances of each particular transaction. The sheer breadth of these and other potential issues demonstrates why many lenders and investors are legitimately nervous about ground leases. 1.1 Casualty. The preceding Mortgagee Protections allow Tenant to terminate and walk away in the event of a Major Casualty, but the Property Insurance Proceeds belong to Landlord. Whether that is actually appropriate will depend on the circumstances. Did the Rent reflect the value of the improvements or merely the value of the land? What did the Landlord demise at Lease inception? If the Landlord demised raw land and the Tenant (or Leasehold Mortgagees) paid for construction, then the Property Insurance Proceeds should perhaps go first to repay all Leasehold Mortgages and then to repay Tenant's contribution to construction. This will vary from Lease to Lease. In some cases, the allocation might reflect a formula depending on the remaining Term. In all cases, the goal is to liquidate what would have been a continued long-term relationship in a way that gives each party cash that approximates the value of the intended long-term relationship that ended prematurely. 1.2 Condemnation. These Mortgagee Protections give a Leasehold Mortgagee a first priority claim to any Condemnation Award, and in a number of important (and arguably "unfair") ways favor the Leasehold (and Leasehold Mortgagee) at the expense of the Fee Estate. A hungry Leasehold Mortgagee might want "first bite" at all value until its entire loan is paid. This would, however, be inconsistent with the theory of a Leasehold Mortgage (i.e., the collateral for the mortgage consists of the value of the Leasehold Estate only, and not the value of the Fee Estate) and is excessive. That does not mean a Leasehold Mortgagee should not try to ask for it. More generally, the application of any Condemnation Award is something that must be carefully analyzed and worked through for every Lease. It is a business issue. If handled incorrectly, it can significantly impair financeability of either the Leasehold or the Fee Estate (or conceivably, 33

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

if done badly enough, both estates). One cannot merely assume all ground leases are the same. Application of a Condemnation Award raises issues similar to those suggested above for casualty. In both cases, the rest of the world may think real estate lawyers are rather odd for spending so much time thinking about these things, but casualties and condemnations do happen (particularly in "the long run," such as the 50-year term of a Lease). If the Lease does not handle these events correctly, the defect may be more than a minor "anomaly." Instead, it may lead a conservative lender to reject an entire transaction, merely because under one particular circumstance (a casualty or a condemnation) the value that the lender counted on will simply vanish ­ with nothing to replace it. 1.3 Lender's Transfers. This model assumes any Tenant is always totally free to assign the Lease without obtaining Landlord's consent. Therefore nothing needs to be said about a foreclosing lender's right to transfer. If Tenant agrees to any restrictions on transfer (something that is usually inadvisable to agree to, but may be essential to a successful transaction), then add language to exempt foreclosing Leasehold Mortgagees from those restrictions, or at least as many of the restrictions as possible. The exemption should apply to the Leasehold Mortgagee's foreclosure sale, the first subsequent transfer, and all subsequent transfers after that as much as can be negotiated. If the transfer restrictions merely exempt a foreclosure sale, but then come back to bite the next transfer (or perhaps the transfer after that), the Leasehold Mortgagee may have a problem, unless its business strategy contemplated long-term ownership of the collateral. 1.4 Who's Protected? These Leasehold Mortgagee protections often require the consent of Leasehold Mortgagee(s) to any particular adverse event (e.g., election to treat Lease as terminated under 11 U.S.C. § 365). In the event of disputes, however, the most senior Leasehold Mortgagee would control the situation, and these Leasehold Mortgagee protections give the most senior Leasehold Mortgagee such control. The potential of conflicts among Leasehold Mortgagees may require some fine-tuning of these mortgagee protections. These provisions do not adequately address the issues created by the possible existence of multiple Leasehold Mortgagees. As an alternative, those issues should be covered in a separate intercreditor agreement. This would allow the Leasehold Mortgagees to tailor their relationship to the business context and structure within the lending group. 1.5 New Lease Provisions. These Leasehold Mortgagee protections include traditional language requiring the Landlord to enter into a "New Lease" if the Lease is terminated. Some commentators believe "New Lease" provisions are overkill. Many Leasehold Mortgagees and their counsel still expect to see them, though, as they provide a backup measure of protection from unexpected surprises (e.g., Tenant's rejection in Bankruptcy without Leasehold Mortgagee's Consent). It has been suggested that a "New Lease" clause may violate the Rule Against Perpetuities. If this is so, consider whether to add a perpetuities savings clause, or provide for some outside date for the exercise of the "New Lease" right. Also, before relying too heavily on a "New Lease" clause, consider what happens if the Landlord goes into bankruptcy. Would the "New Lease" clause be an executory contract? Would it be preserved under 11 U.S.C. § 365(h)(1)(A)(ii)? 1.6 Interaction with Mortgage. A Tenant may be concerned about some of the rights of Leasehold Mortgagees under this model, particularly where those rights are "above standard." 34

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

In such cases, Tenant can either modify those rights as part of initial Lease negotiations or insist that the Leasehold Mortgagee waive those rights. These mortgagee protections expressly provide for such a possibility. 1.7 Nonrecourse. A long-term Lease may or may not be "nonrecourse." These Mortgagee Protections assume full recourse, and expressly negate such recourse for any New Tenant or Successor Tenant. If the Lease is generally "nonrecourse," a Leasehold Mortgagee will still be concerned about the scope of the carveouts, and may want to add language like the following: Every Leasehold Mortgagee, Leasehold Mortgagee's Representative, Successor Tenant, and New Tenant shall be entitled to the benefit of the Article of this Lease entitled ["Nonrecourse,"] except that as against the foregoing parties the term "Recourse Claims" shall mean only claims arising on account of misapplication by such parties of insurance awards, condemnation proceeds, or refunds of Impositions. Any such party shall have no liability for any Recourse Claim that could have been asserted against such party's predecessor(s) in interest. This paragraph shall not be deemed a waiver of any rights of Landlord against any other party liable under this Lease, subject in all cases to the Article of this Lease entitled ["Nonrecourse."] 1.8 Renewal Options. These Leasehold Mortgagee protections state that Renewal Options are deemed to have been exercised unless the Tenant, with Leasehold Mortgagee's Consent, affirmatively elects otherwise. Deemed renewals may in some states (e.g., New York) be unenforceable against a Tenant. This issue and its implications should be considered in each case. Tenant is given the express right to exercise multiple Renewal Options at once. Tenant may want the right to "unexercise" such Renewal Options (with Leasehold Mortgagee's Consent) if the world changes later. No such "unexercise" right is provided for, although if the Lease is nonrecourse the Tenant always has a "walkaway" right. 1.9 Fee Mortgagees. To shorten this document, one could remove all rights, remedies, and protections for Fee Mortgagees. The defined term "Fee Mortgage" and terms derived from it should remain, however, as they are relevant to defining the Leasehold Mortgagee's protections. Tenant should consider whether to restrict who may hold a Fee Mortgage. These mortgagee protections contain a few (rather limited) restrictions and conditions relating to Fee Mortgages, and state that any Fee Mortgage delivered in violation of the Lease is "void." Do not assume this will necessarily work. If it is a major concern, Tenant may wish to create special remedies (such as Rent abatement, perhaps raising its own issues of enforceability) if Landlord enters into a Fee Mortgage in violation of the Lease. 1.10 Subleases. If there is no likelihood of Subleases, ever, then all provisions relating to Subleases, and the related provisions on SNDA's, can possibly be deleted. 1.11 Powers of Attorney. These Leasehold Mortgagee protections require the Landlord to grant the Tenant a power of attorney to sign SNDA's. While this may sound great, and is common in loan documents and elsewhere, no one is likely to rely on such a power of attorney or 35

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

to accept an SNDA purportedly signed pursuant to such a power of attorney. And some companies, as a matter of policy, refuse to grant such powers of attorney (even though they may be meaningless). But it probably doesn't hurt to include this language. 1.12 Permitted Fee Exceptions. This term is broadly defined to include all title exceptions likely to be tolerable at the commencement and in the ordinary course of the Lease. The same definition should not necessarily apply for extraordinary events under the Lease, such as delivery of title under a purchase option or reappraisal of the Fee Estate for purposes of a Rent adjustment. And the definition might not work for the title exceptions that a Leasehold Mortgagee will tolerate in its policy of title insurance. 1.13 "Subordination of the Fee." These mortgagee protections are not necessarily appropriate for transactions where the Landlord "subordinates the fee" (i.e., more accurately, joins in the mortgage solely to subject its Fee Estate to the lien of the Leasehold Mortgage). In such cases, the Leasehold Mortgagee is really also a Fee Mortgagee and cares much less about what the Lease says. In a foreclosure against a fee/leasehold collateral package, the mortgagee should be able to take over both the fee and the leasehold. The Leasehold Mortgagee could, for example, collapse the Lease after a Foreclosure Event. The Lease could say almost anything at all. That assumes, of course, that the Leasehold Mortgagee is not obligated to release the Fee Estate, or proceed against only the Leasehold Estate, under particular circumstances. In the author's experience, today's Landlords are rarely willing to "subordinate the fee" (any more than they are willing to pledge their stock portfolio or their car to the Tenant's mortgagee), because the whole concept is inconsistent with the purpose and structure of a ground lease. In the rare cases where a Landlord might "subordinate the fee," these transactions raise special problems of their own, starting (but not ending) with the following. 1.13.1 Enforceability. If the Landlord merely "promises" to join in future leasehold mortgages, such a promise is disfavored by the courts, particularly in California (see, e.g., the Handy v. Gordon case), and must be carefully and specifically crafted to protect the Landlord's interests to assure enforceability. 1.13.2 Suretyship. The fee owner will probably be deemed to be a "surety," entitled to the same panoply of "surety protections" that make guaranties so long, again particularly in California. 1.13.3 More Players. The fee owner will often be an individual (and will over time become a group of heirs), which will introduce at least one more player into the negotiation and closing process, and substantial additional complexity into the enforcement process (e.g., sequential bankruptcies of co-owners). 2. Additional Mortgagee Protections.

Although it may be difficult to believe, these Leasehold Mortgagee protections do not contain every possible protection for a Leasehold Mortgagee that might make sense under some circumstances. Here are some examples of additional protections that are not already provided for, and might be added where appropriate: 36

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

2.1 Escrowed New Lease. Occasionally, a Lease will require Landlord to deliver into escrow a fully executed "New Lease" for use if the original Lease ever terminates. Particularly given the split of authority regarding the value of "New Lease" provisions themselves, any requirement for an escrowed "New Lease" may be overkill. If the parties desire to provide for an escrowed "New Lease," language similar to the following could be used. Escrowed New Lease. Upon written request made at any time by Tenant or a Leasehold Mortgagee, Landlord shall execute a New Lease (in blank or specifying a New Tenant designated by the requesting party) and related documentation as required by this Lease, to be held in escrow under documentation reasonably satisfactory to Landlord, Tenant, and such Leasehold Mortgagee and released only if and when such Leasehold Mortgagee (or a New Tenant it may designate) is entitled to a New Lease. The escrowee shall be: (1) Leasehold Mortgagee, if an Institutional Lender; (2) a Depository designated by Leasehold Mortgagee; (3) a person reasonably satisfactory to Landlord, Tenant, and such Leasehold Mortgagee or (4) a law firm having at least 50 partners or one of the ten largest accounting firms in the United States (by number of principals in the United States) selected by such Leasehold Mortgagee. 2.2 Power of Attorney. As another option, also not reflected in this model, the Lease (or a separate document) could grant a Leasehold Mortgagee a power of attorney, coupled with an interest, to execute a New Lease. But see comments above about the dubious value of any such power of attorney. 2.3 Who's the Landlord? Some of the nastiest little messes of the early Nineties arose where the leasehold mortgagor's (the borrower's) principals owned (or acquired) the Fee Estate. They took title in a separate entity to defeat the "after-acquired interest" clause in the Leasehold Mortgage. Then they used their control of the Fee Estate to squeeze the Leasehold Mortgagee. Aside from analyzing who actually holds the Fee Estate, a Leasehold Mortgagee should consider adding a covenant to its loan documents stating that no affiliate of the borrower will acquire any interest in the Fee Estate. The Leasehold Mortgagee might also ask that if this occurs, the Rent under the Lease should automatically drop to $1 per year (fully prepayable at any time) and the Lease should become nonterminable under any circumstances. No such provision appears in the preceding Leasehold Mortgagee protections. And the entire concept may raise issues of forfeiture. 2.4 Notice of Leasehold Mortgage. As is customary, these Mortgagee Protections contemplate that the Landlord will receive actual Notice of the Leasehold Mortgage. A Leasehold Mortgagee may prefer to deem the Landlord to be on notice of the Leasehold Mortgage starting (for example) thirty days after recordation, with no need to give actual Notice. This would be atypical. 2.5 Deemed Estoppel. Along the same lines, and just as atypical (and also just as logical and appropriate from a Leasehold Mortgagee's perspective), would be a provision stating that so long as Landlord has not commenced an action in a particular court and/or recorded an appropriate notice in the land records, any (prospective) Leasehold Mortgagee may assume that 37

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

the Lease is in full force and effect, has not been amended or terminated, and Landlord has not given Tenant any notice of default. In effect, the recording system would be used to provide a public registry of the status of the Lease ­ only a slight variation on its fundamental purpose and not all that different from foreclosure statutes that require notices of default or notices of sale to be recorded. While such a mechanism might help simplify future financing (by reducing the need to obtain estoppel certificates from the Landlord), it is not clear whether Leasehold Mortgagees would rely on it. For example, the recording system would not disclose whether the Landlord merely knows of a default as to which the Landlord has not yet bothered to give notice. Tenants that have had trouble obtaining estoppel certificates from their Landlords might well decide that it's worthwhile to set up a structure like the one suggested in this paragraph. 2.6 Change of Use. A Leasehold Mortgagee may desire the right to change the use, zoning, or certificate of occupancy of the Premises after a Foreclosure Event. If the Lease restricts use of the Premises, the Leasehold Mortgagee will want some flexibility added. If the Lease provides for percentage rent, it may need to include a mechanism to adjust the percentage rent formula upon any change of use, although percentage rent (hence possible changes in its formula) is not common in ground leases. 2.7 Sale and Leaseback. To facilitate sale and leaseback transactions, the following may be desirable where appropriate, but is typically not essential to financeability: If Tenant sells, assigns, transfers, or otherwise conveys the Leasehold Estate to a third party and, at substantially the same time, Tenant or an affiliate of Tenant enters into or reserves, excepts, retains, or receives a Sublease or similar interest, or a conditional re-assignment of the Lease, as to part or all of the Premises, from such third party (a "Financing Sublandlord"), then upon joint written notice from Tenant, Subtenant, and the Financing Sublandlord: (a) the Sublease shall be deemed to be a "Leasehold Mortgage" as to which the Financing Sublandlord is "Leasehold Mortgagee"; and (b) such Financing Sublandlord shall not be deemed to have assumed or become liable under this Lease except to the extent that Financing Sublandlord has exercised remedies against Tenant under Tenant's Sublease that have the effect of terminating Tenant's Sublease or are otherwise functionally equivalent to a Foreclosure Event under a Leasehold Mortgage. To the extent that, pursuant to clause "b," a Financing Sublandlord avoids obligations or liability under this Lease, all such avoided obligations and liability under this Lease shall automatically be borne and performed directly by the Subtenant. Under such a structure, one should also modify the definitions of Leasehold Mortgage and Leasehold Mortgagee by adding the following language to each: A "Leasehold Mortgage" also includes certain agreements entered into in connection with a "sale and leaseback" transaction, as described in the text of this Lease. A "Leasehold Mortgagee" also includes certain parties to "sale and leaseback" transactions, as described in the text of this Lease. 38

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

The foregoing language will not work for "synthetic lease" transactions, but with some changes could be made to work there fairly easily. 2.8 Waiver of Certain Requirements. A Leasehold Mortgagee would like to see a provision such as the following, but even the most conservative Leasehold Mortgagee should not regard it as "essential" to financeability (even in the context of curing Tenant defaults): Escrow Deposits, Bond, and Security. Notwithstanding anything in this Lease to the contrary, no escrow deposits, bonds, or security (to the extent otherwise required, if at all, under this Lease) shall be required pursuant to this Lease: (a) if and for so long as Tenant is an Institutional Lender (or a Leasehold Mortgagee's Representative acting on behalf of an Institutional Lender) or (b) with respect to the performance of any obligation being undertaken or performed by any Institutional Lender (or a Leasehold Mortgagee's Representative acting on behalf of an Institutional Lender). Nothing in this paragraph shall be deemed to require any other party to deliver any escrow deposit, bond, or security except to the extent, if any, expressly required by this Lease. 2.9 Delegation of Tenant Rights. The following provision is nonstandard and hence not in the basic model. In appropriate cases (e.g., where Tenant holds particular valuable rights that the Lender wants to control unambiguously from day one), it could be added: Delegation of Rights. Tenant may delegate or otherwise transfer to a Leasehold Mortgagee any or all of Tenant's rights under this Lease, either exclusively or nonexclusively as against Tenant. No such delegation or transfer shall bind Landlord unless and until Landlord shall have received a copy of a written instrument in recordable form effecting such delegation accompanied by a photocopy of the Leasehold Mortgagee's fully executed Leasehold Mortgage. Such delegation or transfer of authority may be effected by the terms of the Leasehold Mortgage itself. In that case, Landlord shall be bound by such delegation or transfer of rights (in accordance with its terms) from and after such date as the applicable Leasehold Mortgagee is otherwise entitled to the rights of a Leasehold Mortgagee under this Lease. Any such delegation or transfer of rights shall remain effective unless and until terminated by Leasehold Mortgagee's Consent. 2.10 Purchase-Money Lenders. Although the model expressly allows purchase-money leasehold mortgagees, such mortgagees are not automatically deemed to be "institutional." Consider whether to modify the "institutional" characterization of purchase-money lenders. 2.11 Security Deposits. Ground leases normally do not require the Tenant to deliver a security deposit. If a particular ground lease does provide for a security deposit, then a Leasehold Mortgagee will want the following language: Security Deposit. Upon the occurrence of any Foreclosure Event or New Lease Delivery Date, the entire right, title, and interest in any security deposit, 39

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

letter of credit, or other security delivered by the former Tenant under this Lease shall automatically be deemed to have been assigned to New Tenant or Successor Tenant, as applicable. In such event, such former Tenant shall no longer have any right, title, or interest in or to such security deposit, or any right to reclaim such security deposit under any circumstances. All such rights shall be held by New Tenant or Successor Tenant. To the extent that on the New Lease Delivery Date, Tenant is obligated to restore the amount of such security deposit, Tenant's failure to do so shall constitute a Monetary Default subject to Mortgagee's Cure Rights. 3. Possible Concessions to Landlord.

Set forth below are some concessions that a Landlord may request, including language that may (possibly) make these concessions palatable. The following list does not purport to include all objections and concerns a Landlord or its counsel might raise after reviewing these Leasehold Mortgagee protections. 3.1 Qualification of Right to Mortgage. These Leasehold Mortgagee protections in no way limit the right of Tenant to grant Leasehold Mortgages to anyone in the world - including an affiliate of Tenant. An affiliated Leasehold Mortgage might be abusive, as it would in effect give Tenant all the added protections of a Leasehold Mortgagee. A Tenant should be willing to agree to reasonable qualifications and restrictions on the identity of a Leasehold Mortgagee and its transferees, such as "institutional" characteristics, minimum net worth, and being subject to jurisdiction of state courts (i.e., not the beneficiary of any form of immunity). Neither a Tenant nor a Leasehold Mortgagee will, however, tolerate any general right for the Landlord to approve the Leasehold Mortgagee. To the extent that the Lease prohibits assignments of the Lease to specified categories of person (e.g., "bad guys," as defined in a narrow and specific way, or persons entitled to diplomatic immunity), the same prohibition can apply to Leasehold Mortgagees. A Tenant would also probably be willing to agree that a Leasehold Mortgagee must be an Institutional Lender, at least if the Leasehold Mortgagee wishes to exercise certain of the Mortgagee Protections. 3.2 Qualification of "New Lease" Rights. If the Lease terminates for almost any reason, including a Default, Landlord must offer a Leasehold Mortgagee a New Lease. A Landlord may try to narrow the "New Lease" right to apply only in a bankruptcy-related termination of the Lease; otherwise, the "New Lease" provisions give the Leasehold Mortgagee perhaps a third, fourth, or fifth bite at the apple. But that's what many Leasehold Mortgagees want to see. Remember, it's a fragile asset and the more protections the Leasehold Mortgagee can obtain (including multiple bites at the apple), the more financeable the asset will become. 3.3 Nondisturbance. This model imposes on the Landlord relatively burdensome obligations to enter into "recognition" or "nondisturbance" agreements with Subtenants obtained by Tenant. Attorneys practicing in this area disagree on the right name for these agreements. "Recognition" is probably the better term in the context of protecting Subtenants against adverse consequences from possible termination of a ground lease. The word "nondisturbance" probably applies more to protection of tenants after the foreclosure of a mortgage. A Landlord may want to limit, qualify, restrict, or condition these obligations to protect against the possibility of 40

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

"forced" direct relationships with unsatisfactory parties on unsatisfactory terms. This area is full of pitfalls for a Landlord. Among other things, it raises issues similar to those arising from a "release" clause in a mortgage. It must be considered with special care. 3.4 Redelivery of Raw Land. In some cases a Landlord may want to obligate the Tenant to demolish the improvements, and return the site as raw land, upon any Casualty Termination. The following language would achieve this, in a manner that a Leasehold Mortgagee might tolerate: If Tenant elects a Casualty Termination, then Landlord shall have the right, by Notice to Tenant within ten Business Days after receipt of Tenant's notice of Casualty Termination, to require Tenant to cause the remaining improvements on the Premises to be demolished and the debris removed and any substantial excavations filled in, so that the Premises are returned to Landlord as vacant land, free of improvements, demolition debris, and substantial excavations. The parties shall cooperate to make available for such work, in installments as the work proceeds, all available Property Insurance Proceeds, in accordance with the disbursement procedures that would otherwise govern Property Insurance Proceeds under the Lease. Tenant shall perform such work with reasonable promptness, but the completion of such work shall not be a condition to effectiveness of any Casualty Termination. After completion of and full payment for such work, any remaining Property Insurance Proceeds shall belong to Landlord. 3.5 Other Rights and Remedies. Landlord may want to add language such as the following at an appropriate location in the Lease: During any period when a Leasehold Mortgagee is exercising, or is entitled to exercise, Leasehold Mortgagee's Cure Rights, Landlord shall, notwithstanding anything to the contrary in this Lease, have the right to seek to collect actual damages from, and to seek equitable relief (including the issuance of a negative or mandatory injunction) against, Tenant on account of any Default, or to require Tenant to Indemnify Landlord when and as expressly provided for in this Lease. Landlord shall have no such rights against any Leasehold Mortgagee (unless and until such Leasehold Mortgagee becomes a Successor Tenant but in no event on account of any Personal Defaults by Tenant) or any right to terminate this Lease or the Leasehold Estate unless and until otherwise expressly permitted by this Lease upon the expiration of all Leasehold Mortgagee's Cure Rights without cure, and subject to the provisions of this Lease relating to New Leases. 3.6 "Fish or Cut Bait." These Leasehold Mortgagee protections allow a Leasehold Mortgagee to abandon its efforts to "cure" a Default at any time, no matter how long the Leasehold Mortgagee has dragged out the process and made the Landlord wait. This open-ended right of abandonment may be excessive. A Leasehold Mortgagee will typically be willing to live with a requirement (not contained here) that it must agree to cure a particular Default before it can obtain an extended cure period (beyond Tenant's cure period) for that Default. (The 41

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Leasehold Mortgagee will not, however, be willing to assume the entire Lease as the price of an extended cure period.) The following language may provide a reasonable middle ground: At any time when a Leasehold Mortgagee has been exercising Leasehold Mortgagee's Cure Rights for a particular Nonmonetary Default for a period of ____ days or more after receipt of the Tenant's Cure Period Expiration Notice for such Nonmonetary Default, Landlord may, by Notice to such Leasehold Mortgagee, require such Leasehold Mortgagee to elect, within ____ days after receipt of such Notice, by Notice to Landlord, to either: (a) abandon such Leasehold Mortgagee's Cure or (b) agree in writing that that such Leasehold Mortgagee (1) shall within a reasonable period cure the particular Default as to which such Leasehold Mortgagee's Cure Right arose, and (2) waives any right to abandon such cure. 3.7 Rent Offsets After Rejection. If Landlord rejects the Lease in bankruptcy, these Leasehold Mortgagee protections give Tenant an open-ended right to offset any damages suffered. A Landlord may wish to require the Tenant to act, within a specified period, to give notice of the amount of such damages and then resolve promptly any dispute regarding the amount of such damages. 3.8 Personal Obligations. Any "Personal Obligations" under the Lease vanish upon a Foreclosure Event or Landlord's entering into a New Lease. Total elimination of "Personal Obligations" may be excessive. Perhaps some should remain or be revived, maybe with some adjustments. Proper treatment of this issue will vary from deal to deal. 3.9 Cure Activities. If a Leasehold Mortgagee damages the Premises in trying, but failing, to cure a Default, Landlord may want to make sure that someone ­ Tenant, Leasehold Mortgagee, guarantor, whoever ­ is responsible for making Landlord whole. This may already be covered by the other provisions of the Lease (e.g., indemnification). Landlord may also want to add language emphasizing that if the cure period expires, then so too have the cure rights, and Landlord is free to terminate the Lease. 3.10 Indemnity. A Landlord may wish to add the following language:

Any Leasehold Mortgagee, by entering the Property to cure any Default, shall be deemed to have agreed to Indemnify Landlord in the same manner as Tenant is required to Indemnify Landlord, but solely regarding such Leasehold Mortgagee's actions taken to cure Defaults. 3.11 Right to Walk? This model allows the Leasehold Mortgagee to abandon its collateral at any time with no liability. A Landlord may want the Leasehold Mortgagee to remain responsible for certain obligations, such as unfinished construction work. These negotiations, if commenced, are likely to be quite interesting.

42

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

3.12 Choice of Depository. Any "Institutional Lender" can be "Depository." A Landlord may wish to narrow the scope of permitted "Depository," as the term "Institutional Lender" is quite broad. 3.13 Fee Mortgagee Protections. Landlord may want to beef up the protections for a Fee Mortgagee, using as a model the Leasehold Mortgagee Protections provided here. 4. The Rest of the Lease.

The Leasehold Mortgagee protections offered here simply address issues that are unique to Leasehold Mortgagees. A Leasehold Mortgagee should also review the Lease as a whole, from the Tenant's perspective, and make sure the Lease is satisfactory from the position of any Tenant (never mind a Leasehold Mortgagee). The author has prepared a model Lease that is designed to be attractive to any "ground lessee" and its prospective lender. These model Leasehold Mortgagee protections work particularly well with that model Lease, which is available from the author on request. These Leasehold Mortgagee protections can, of course, readily be adapted for use in other ground leases. These are the main concerns of a Leasehold Mortgagee when reviewing a Lease: 4.1 Remaining Term. The remaining term should be substantial, enough to: (a) comply with any formulaic requirements under applicable laws and regulations (e.g., at least 125% of the term of the loan or at least 21 years); (b) create value to support the Leasehold Mortgage at all times during its term, taking into account both the projected amortization schedule and the "wasting" value of the leasehold; and (c) provide a reasonable cushion to allow for, among other things, foreclosure delays, unexpected problems, etc. In theory, perhaps, even a Lease with a minimal remaining term should be valuable, and hence financeable, if the rent is low enough. For example, if a developer obtained a lease of all of Midtown Manhattan for six months for $24, with a lockbox to collect subrent, would the developer be able to obtain a substantial leasehold loan despite the short remaining term of the lease? In the real world, of course, Leasehold Mortgagees know that when a Lease has a short remaining term, the Tenant's incentives and overall position become quite unstable and unreliable. At some point the Lease stops being attractive. The Leasehold Mortgagee needs to make sure it will be repaid before that point. 4.2 Rent. Rent needs to be quantifiable and tolerable over time. Leasehold lenders disfavor CPI escalators but will typically tolerate a periodic "reset" based on the revaluation of the Fee Estate. The basis for any such revaluation should be defined with absolute precision. Does it reflect the highest and best use? The existing use? The existing improvements on the date of commencement of the lease? On the date of revaluation? Is it adjusted for any mortgages? 43

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

4.3 Alterations. Tenant should be able to alter and probably even demolish improvements. 4.4 Use. Total flexibility regarding use.

4.5 Assignability. Free assignability, without any requirement for Landlord consent under any circumstances (not even "reasonable" consent). Under black letter law, a lease is typically assignable unless it says it's not. Many Leasehold Mortgagees and their counsel will, however, want to see an express right to assign. Therefore, any Lease that is intended to be "financeable" should contain such a provision, to avoid leaving a basis for any Leasehold Mortgagee or its counsel to object to the Lease. 4.6 Loss Proceeds. Casualty and Condemnation provisions need to allocate proceeds in a manner that reflects the overall economics and allocations of risk, while protecting Leasehold Mortgagee. 4.7 Estoppel Certificates. Landlord should agree to deliver estoppel certificates.

4.8 Everything Else. All other terms and conditions need to be tolerable or better. This checklist does not purport to identify all terms and conditions that are desirable or appropriate for a ground lease. For example, any Tenant and any Leasehold Mortgagee would like to see an option to purchase the fee, but such an option is not essential for mortgageability. 4.9 Overall. Evaluation of a Lease for "mortgageability" requires careful review of the entire Lease. If the Lease is unacceptable, the Leasehold Mortgagee should have it amended or not make the loan or figure out some other way to live with the unacceptability. (The Leasehold Mortgagee's level of concern and issues raised may vary depending on the remaining unexpired Term, whether the transaction is nonrecourse, the transactional context, and all other facts and circumstances.) 4.10 Caveat; Additional Resources. Neither the preceding short checklist nor anything else in this document is intended to address the full range of issues that a Leasehold Mortgagee or a Tenant should consider in reviewing a Lease. For any particular Lease, such review may raise additional issues and concerns, some of which will need to be dealt with by supplementing or expanding the "Leasehold Mortgagee protections" offered here. In that sense, but probably only in that sense, this document may be incomplete. This does not, however, constitute a representation, warranty, or guarantee. For a more extensive discussion of how a Leasehold Mortgagee, and the rating agencies, would review a Lease (beyond the mortgagee protections), please see Stein, Joshua (Editor), Commercial Real Estate Financing: What Borrowers and Lenders Need to Know Now, 1999 Practising Law Institute Program Book, Volume 2, pages 11153 (three articles on "Leasehold Financing"). 4.11 Conforming Changes. In addition to the substantive comments above, Tenant's (and Leasehold Mortgagee's) counsel should confirm that the rest of the Lease is consistent with the Leasehold Mortgagee Protections. As a small example, the definition of "Event of Default"

44

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

should state that it is: "(subject, however, to the rights of Leasehold Mortgagees under this Lease)." 5. Other Related Documents.

An attorney preparing to close a Leasehold Mortgage loan should also consider the possible need for the following additional documentation. 5.1 Memorandum of Lease. A Memorandum of Lease should be recorded. Consider whether it should disclose restrictions on Tenant's right to agree to certain matters, restrictions on Fee Mortgages (including "null and void" status of any prohibited Fee Mortgage), "New Lease" provisions (including priority of a New Lease versus (a) all estates junior to the original Lease and (b) all estates arising from the original Lease but junior to the Leasehold Mortgage), off-premises restrictions, etc. May also be appropriate to include any appointment of Tenant as Landlord's attorney in fact for various purposes. 5.2 Mortgage. A Leasehold Mortgage should contain ground-lease-specific collateral descriptions (e.g., Tenant's rights under 11 U.S.C. § 365(h)), covenants, defaults, and remedies. Covenants between Tenant (borrower) and Leasehold Mortgagee (lender) that need to be addressed in the mortgage are not repeated in these mortgagee protections, except where comparable or related assurances from Landlord enhance the Leasehold Mortgagee's security. 5.3 UCC-1. The Leasehold Mortgagee's UCC-1 may need to be tailored to cover elements of the collateral that might arguably not be real property, such as Tenant's rights under Bankruptcy Code Section 365. 5.4 Estoppel Certificate. From Landlord, acknowledging status of Lease and receipt of notice of Leasehold Mortgagee, which Renewal Options have already been exercised, current Rent, etc. 5.5 Notice to Landlord. Formal notice (in compliance with the Lease) of the existence of Leasehold Mortgagee, if not already addressed in Estoppel Certificate. 5.6 Power of Attorney. To the extent that Landlord appoints Tenant as attorney-infact, consider whether to require a separate power of attorney that complies with the formalistic requirements for powers of attorney. As a legal matter, is the appointment adequately "coupled with an interest"? 5.7 Title Insurance. As to validity and priority of Leasehold Mortgage, with appropriate leasehold assurances, including validity of any separate but related agreement(s) between Landlord and Leasehold Mortgagee or between Fee Mortgagee and Tenant or Leasehold Mortgagee. 5.8 Lease Amendment. If necessary to solve problems with the Lease.

5.9 Guaranty of Nonrecourse Carveouts. If a leasehold loan is being made on a "nonrecourse" basis, the lender should consider obtaining personal liability carveouts (guarantied 45

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

by the underlying principals in a way that goes beyond the single-asset "borrower" entity) regarding bad-faith amendments, surrenders of the underlying Lease, etc., as these amount to willful destruction of Leasehold Mortgagee's collateral. For example, the principals could be asked to assume full personal liability (either for the entire Loan or for Lender's losses): [I]f Borrower violates any covenant in the Loan Documents relating to preservation of and compliance with the Lease, including any covenant by which Borrower agrees: (1) not to amend, modify, cancel, or surrender the Lease; or (2) to pay and perform all of Borrower's obligations, and enforce all of Borrower's rights, under the Lease. The Leasehold Mortgagee may wish to refer to specific sections of the Loan Documents for absolute clarity. Borrower's principals should insist on narrowing the above language to assure that Borrower can always "walk away" from the project, provided Borrower walks away gracefully without leaving behind too much of a mess. A Borrower may want to delete clause "2" in the above language, replacing it with a covenant saying merely that if the Borrower decides to walk away from the asset, the Borrower will give the lender reasonable prior notice so the lender can preserve the collateral if it chooses to do so. The risk of being placed in this position is part of the risk that a lender bought into when it agreed to make a nonrecourse loan against a leasehold. Unless the principals of Borrower preserve a "walkaway" right of that kind, a wide-open obligation such as in clause "2" would force the principals to perform all obligations under the Lease (which in turn probably obligates them to comply with all documents of record against the property and perhaps even the leasehold mortgage), thus making any "nonrecourse" features of the loan illusory. 5.10 Intercreditor Agreement. If multiple Leasehold Mortgagees exist, these Leasehold Mortgagee protections do not adequately address their relations among themselves. An intercreditor agreement would be required, and perhaps changes in the substance of the Leasehold Mortgagee protections. Among other things, the multiple Leasehold Mortgagees may want to think about what happens if Landlord is required to issue a "New Lease" to one of the Leasehold Mortgagees. Do the claims of the junior mortgagees reattach? Any such intercreditor agreement should also establish priorities of the mortgages for purposes of exercising Mortgagee Protections, to avoid any disputes if/when the time actually comes. 5.11 Fee Mortgagee Subordination. Typically, a Leasehold Mortgagee will demand full subordination by each Fee Mortgagee (including subordination to all future modifications of the Lease), and will not accept a mere nondisturbance agreement. This concern is based on, among other things, the possibility that the Fee Mortgagee might try to reject the nondisturbance agreement in bankruptcy. (Whether the Fee Mortgagee should actually be able to do so is an issue beyond the scope of this discussion.) If a Leasehold Mortgagee is willing to compromise on full subordination by Fee Mortgagee(s), it must, among other things, review the Fee Mortgage and all related loan documents and consider the risk of possible future changes in any of them. 46

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

5.12 New Lease Arrangements. If the Lease will provide for an escrowed New Lease or a power of attorney for execution of a New Lease, then such documentation will need to be prepared, including related documents such as an escrow agreement providing for the release or possible destruction of the New Lease. 5.13 Entity Due Diligence. Opinion of counsel regarding Landlord, together with copies of related backup documentation. 5.14 Local Counsel Opinion; State Law Issues. Consider need for opinion of local counsel. Consultation and due diligence regarding state law. 5.15 Renewal Option Exercise. If Leasehold Mortgagee wants Tenant to exercise future Renewal Options today, that should be handled as part of the closing. 5.16 Regulatory Requirements. Confirmation that this particular lender can make this particular leasehold loan, as a regulatory matter. 5.17 Real Estate Due Diligence. Typical real estate due diligence deliveries and requirements. 5.18 Insurance. As required by the Lease.

47

NY_DOCS\245855.17 [W97] Model Leasehold Mortgagee Protections By Joshua Stein

Information

Model Leasehold Mortgagee Protections I

47 pages

Find more like this

Report File (DMCA)

Our content is added by our users. We aim to remove reported files within 1 working day. Please use this link to notify us:

Report this file as copyright or inappropriate

977368


You might also be interested in

BETA
Real Estae Finance J
rp-newsl-sumfall04.qxd
Model Leasehold Mortgagee Protections I