the battle between tenants and their landlords' mortgages

THE BATTLE BETWEEN
TENANTS
AND
THEIR LANDLORDS’ MORTGAGES
Gregory G. Gosfield, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 S. Broad Street • Philadelphia, PA 19102-5003 •
Tel: 215.569.4164 • Fax: 215.568.6603
GGosfield@klehr.com
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Copyright © 2007, Gregory G. Gosfield. All Rights Reserved.

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B. CAPITAL VALUATION:
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1.1. DOCUMENT REVIEW: LEASE, ESTOPPEL, SNDA, RENT ROLL,
GUARANTY, LANDLORD LIEN WAIVER
LOAN
PROCEEDS
1.1.1. Mortgagee – Lease Issue Analysis
(a) Rent
(i) Adequacy: base rent as gross, semi-net, fully net; bumps
and step up formulas
parking
(ii)
(iii)
(iv)
Pass-through: escalator, stops, caps, pro-rata share
Percentage rent: break-point, inclusions, subrent
Suspension: services, co-tenancy, revenue shortfall,
(v) Reduction (purposes and amounts): free rent, set-off,
deduction, advance rent, “take-over rent,” condemnation, casualty, revenue
production, parking;
(vi)
Independent covenant or dependent for withholding rent.
1.1.2. Termination (consistency among leases) – substantial casualty,
condemnation, buyout, kickout, failed completion, co-tenancy, failed SNDA, after mortgage
term
1.1.3. Uses – conforming, permitted, exclusive, prohibited, radius, right to go
dark; no violation of other leases exclusive uses or “most favored nation”
1.1.4. Value – preservation/repair (whose duty) , replacement (reserves), tenant
improvements (who owns), options/right of first refusal, significant alterations, tenant
negligence, lease, leaseback, concurrent (sandwich) lease
1.1.5. Security Deposit – cash, guaranty, letter of credit (transferability)
1.1.6. Landlord Assignment – by Landlord, acknowledgement of successor, no
continuing liability
1.1.7. Tenant Assignment Subletting, Transfer – consent, criteria, cost of review,
sharing premium rent
1.1.8. No liens – mechanics liens, priming liens
1.1.9. Landlord Liabilities – repair beyond proceeds, core building compliance
(ADA), slow consent, changes for Capital Markets/Rating Agencies pre-existing liabilities from
prior landlords, other property competes, other property serves, tenant allowance, pre-existing
conditions and hazardous materials; reimbursement Tenant Improvements
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1.1.10. Tenant-Mortgage Issue Analysis
(a)
(b)
(c)
(d)
(e)
Possession – interesse termini
Covenants
Recovery of Tenant Improvement Values
Recovery of Curative Costs
Landlord (Successor Landlord) Lien Waiver or Subordination
1.1.11. Documentation
(f)
(g)
(h)
(i)
(j)
Stated loan amount can create implicit limit
No blanks
Fully executed
Changes shown by initialed language or redline
Acknowledged for recording
(k) Comply with state recording requirements: witnesses, tax
identification number, address, seals and attestation, format, margins, recording fees, legal
description
1.1.12. Estoppel Completion
(l)
(m)
Runs to Mortgagee’s benefit
Matches Lease requirements
1.1.13. Guaranty
(n)
(o)
Liable after modification
Liable for SNDA
1.1.14. Rent Roll - Trues up with estoppel and SNDA
1.1.15. Landlord Lien
(p)
(q)
(r)
Common law distress or distraint; statutory codification; UCC
Waiver as to Tenant and its current and future Lenders
Subordination as to Tenant’s current and future Lenders
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(i)
(ii)
(iii)
(iv)
(v)
During Tenant’s secured loan term
Notice and right to cure Tenant defaults
Right to entry, collect collateral, sell, and withdraw
Duty to pay rent, insurance, liability for damage
No holdover liability or extension of term
1.2. CAPITAL MARKETS ISSUES
1.2.1. Before Foreclosure:
(s)
Rating Agency
(i) Estoppels from all anchors, 5% or more of gross rents; and
together 75% of gross leased area
(ii)
Comply with REMIC requirements (1.860G.2(b)(ii))
(t)
Real Estate Mortgage Investment Conduit (REMIC) Requirements
(i)
“Significant modification” for performing loans
(ii) “Significant modification” occurs by adding, subtracting or
altering collateral (Treas. Reg. §1.1001-3(e)(4)(iv));
(iii) Expansion by additional buildings on same parcel are not
“significant modification” (Treas. Reg. §1.1001-3(g)(Ex 9));
(u) Servicer Standards: Service and administer in the best interests of
and for the benefit of the Certificateholders … with the same care, skills and diligence as is
normal and usual in its general mortgage servicing and REO property management activities on
behalf of third parties or on behalf of itself, whichever is higher, with respect to mortgage loans
and REO properties that are comparable to those for which it is responsible …
1.2.2. Upon default: “no substantial modification” merely by default or
imminent default (Treas. Reg. §1.860G-2(b)(3))
1.2.3. After Foreclosure:
(v)
Special Servicer ─ same Servicer standard
(i) REMIC Requirements: IRC §860G(a)(8) points to REIT
rules for “foreclosure property” under §856(e)
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(ii) Real Estate Investment Trust (REIT) Standards: [ ]
§856(e)(4)(B): foreclosure property (and the REMIC holding foreclosure
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property) ceases to be qualified when “any construction takes place on such
property (other than completion of a building, or completion of any other
improvement, where more than 10 percent of the construction of such building or
other improvement was completed before default became imminent)”
1.3. TITLE, LIEN, AND INTERMEDIATE THEORIES
1.3.1. TITLE STATE:
redemption
(w)
Mortgage is conveyance, mortgagor has right of possession and
(x) In a title state, the mortgagee is entitled to rents from a pre-existing
lease upon possession of the real property or the rents. The mortgagee is generally not entitled to
possession until a default occurs. The mortgagee is not entitled to rents from subsequent leases.
1.3.2. LIEN STATE:
(y)
Mortgage is security interest
(z) In a lien state, the mortgagee is generally not entitled to rents from
a pre-existing lease until possession by foreclosure. The mortgagee is not entitled to rents from
subsequent leases.
1.3.3. INTERMEDIATE STATE
(aa)
Mortgage is conveyance treated like security interest
(bb) In an intermediate state, the mortgagee is generally entitled to rents
from a pre-existing lease upon possession of the real property or the rents. Sometimes that is
after default, sometimes that is after an affirmative act of possession is performed. The
mortgagee is not entitled to rents from subsequent leases.
1.4. ASSIGNMENT OF LEASES AND RENTS ISSUES
receivable
(cc)
Rent is a real estate interest like land, not an intangible like a
(dd)
Mortgage lien on land
Assignment of Leases and Rents is a separate security interest from
(ee) Mere lienholder status: no right to rent or possession prior to
foreclosure; only from prior tenants after foreclosure
Mortgagee’s election
(ff)
Confirms direct relationship between Mortgagee and Tenant, at
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obligation
(gg)
(hh)
(ii)
Authorizes direct payment of rent to Mortgagee upon notice or
Permits receipt of rent by Mortgagee, without possession
Precedes Mortgagee’s dispossession remedies
(jj) Absolute transfer to Mortgagee, license back to Mortgagor:
mimics Title Theory fiction for Bankruptcy
(i) Mortgagee rights to “proceeds, … rents, or profits”
(Bankruptcy Code Section 552(b)) prior to possession or foreclosure
(ii) Preserves Mortgagee’s right to cash collateral (First
Fidelity Bank v. Jason Realty L.P., 59 F.3d 423 (3rd Cir. 1995))
(iii) Perfection, effectiveness and enforcement of lien against
rent by possession, receiver, notice to tenant, or by recording (analogous to
recording mortgage or filing UCC) to overcome Debtor’s §544(a) avoidance
power
1.5. ESTOPPEL ISSUES
1.5.1. Estoppel: commonly misnamed
mouth”
(kk)
(ll)
A bar to stop a change in position: “stoppeth or closeth up his
Stipulation – agreed upon facts even if wrong
reasonable reliance
(mm) Representation – facts asserted to be right; defense of no
reasonable reliance
(nn)
Warranty – facts guaranteed to be right, no defense of no
1.5.2. Mortgage Rights – Rights to an Estoppel
(oo)
(pp)
(qq)
In Lease
By Mortgagor if Tenant refuses - very weak
Representations, warranties, covenants, indemnities
1.5.3. Conditions to enforce Estoppel
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(rr)
(ss)
Lack of separate knowledge
Lack of separate means to obtain knowledge
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detriment
(tt)
(uu)
(vv)
Reliance on words or acts of estopped party
Reliance was reasonable and in good faith
Action by Mortgagee, based on reliance, was to Mortgagee’s
1.5.4. Remedies for a bad estoppel
(ww) Limited case law
(xx)
(yy)
(zz)
(aaa)
Based on equity or contract
May act as a lease modification
Injunction against contrary position to avoid inequity
Damages for breach of contract
certifying party
(bbb) Sometimes construed against “drafter,” sometimes against
1.5.5. Tenant Estoppel (Representations) for Mortgagee
and location)
(ccc)
Unique and comprehensive description of premises (square feet
(ddd) Initial and renewal terms commencement and expiration
(eee) Rents: base, pass through, percentage formula, pro rata share
(fff)
Acceptance and possession of premises
(ggg) Rent has commenced without prepayment by more than one month
(hhh) Lease and all documents affecting relationship between the
landlord and tenant have been attached: amendments, modifications, extensions, guaranties,
deposits, options, assignments, settlements, waivers, plans, construction contracts, landlord
waivers, SNDAs
(iii) Facts omitted or inconsistent with Lease are disclosed:
construction, options, deposits
(jjj)
No default by Tenant or Landlord
(kkk) No claims or defenses against Landlord
(lll)
No assignment or subletting by Tenant
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(mmm)No hazardous materials at Premises
(nnn) No circumstances permitting termination of lease, abatement of
rent, or variation in Tenant’s obligations
and authorizations
(ooo) Tenant’s condition: financial, litigation, compliance, organization
1.5.6. Landlord Estoppel Covenants for Mortgagee
(ppp) Casualty and condemnation go to Mortgagee
(qqq) Notice of Tenant assignment and defaults
1.5.7. Tenant Estoppel Covenants for Mortgagee
(rrr)
(sss)
(ttt)
Notice and cure rights for Lease
No lease modification, termination, assignment without consent
Pay rent to Mortgagee upon notice
(uuu) Execute further assurances for Mortgagee
Materials
1.5.8. Tenant Estoppel Release and Indemnity for Mortgagee: Hazardous
1.6. SNDA ISSUES
1.6.1. Subordination
(vvv) To place in a lower order
(www) To make subject to
(xxx) All real property but no personal property based on estates: estates
are based on subordinate rights devolving from Sovereign
1.6.2. Non-Disturbance: Not disturb tenant’s conveyed “quiet enjoyment” of
possession and covenanted lease rights
1.6.3. Attornment: To “turn to” successor to landlord’s estate as successor
landlord of leasehold estate and covenants
1.7. PRIORITY AND SUBORDINATION
1.7.1. Senior Lease: before Mortgage becomes effective
1.7.2. Mortgagee actual knowledge of Lease
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(yyy) Mortgagee constructive knowledge of Lease
(i)
(ii)
Lease recording
Tenant occupancy
1.7.3. Leasehold not divested by foreclosure
1.7.4. Senior Mortgage: before Lease becomes effective
(zzz) Tenant actual knowledge of Mortgage
(aaaa) Tenant constructive knowledge of Mortgage - Mortgage recording
(bbbb) Leasehold divested by foreclosure
(cccc) Affirmation
(i)
(ii)
(iii)
Mortgagee: by non-disturber
Tenant: by attornment
Actions: payment/acceptance of rent
1.8. SUBORDINATION CHART
Senior Lease and
Subordinate Mortgage
1. Mortgage terms subject to
Lease terms, (casualty,
assignment, set-off)
2. Mortgage foreclosure does
not affect lease:
automatically preserved
3. Successor fee holder
subject to and beneficiary
of lease which is preserved
after foreclosure; right to
rent by automatic
attornment (by statute 4
Anne Ch. 16) and right to
reversion
Senior Mortgage
1. Lease terms subject to
Mortgage terms
2. Mortgage foreclosure
divests leasehold (may or
may not terminate lease
agreement)
3. Successor fee holder
unbenefited. Either
ratifies and assumes and
becomes successor
landlord, or divests Lease.
No automatic attornment,
Tenant may be
automatically divested to
Subordinated and
Attorned Lease
1. Lease terms subject to
Mortgage terms
2. Mortgage foreclosure does
not divest (disturb) lessee,
but may affect covenants
3. Mortgagee, for successor
landlord, in advance ratify
and assume lease and
preserve it after
foreclosure
its benefit
1.9. SUBORDINATION ISSUES BETWEEN MORTGAGEE (SUCCESSOR
LANDLORD) AND TENANT
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1.9.1. Before Foreclosure: Tenant Rights
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(dddd) Property Rights (estate): “quiet enjoyment”, leasehold use,
possession, occupancy, waste
(eeee) Real Covenant Rights (contract) running with the land “touch and
concern”: lease agreement, casualty proceeds, repair performance
radius
(ffff)
Personal Covenant Rights: services, “takeover” rent, off-site
(gggg) Payment Rights (blockage): concessions, free rent, subsidies,
reimbursements, set-off
(hhhh) Remedies (standstill): lease agreement termination (in rem, in
personam actions), self-help, set-offs
(iiii) “Lien” Rights: pecuniary interest in fee property title; Right to
sell landlord property to recover debt, set-offs
1.9.2. Before Foreclosure: Mortgagee’s Rights
(jjjj)
Take physical possession under mortgage remedies
(kkkk) Rent collection under assignment of rents
1.9.3. After Foreclosure
(llll)
Divestiture of liens and estates of named parties in interest
(mmmm)
Automatic in lien states: California, Utah and Texas
(nnnn) Pick-and-choose in title or intermediate states: Pennsylvania
(oooo) May still need subsequent court action for ejectment
(pppp) Mortgage covenants (casualty, condemnation, assignment)
disappear and the Lease agreement is not only senior, it is the sole set of terms
(qqqq) Divesture of subordinate leasehold extinguishes its property rights
(use and occupancy) not necessarily lease agreement contract rights (indemnification, deposit,
reimbursement)
of location
(rrrr)
Tenant loses value of Tenant Improvement investment and benefit
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1.9.4. Quasi Circuity
(ssss) When a lien or estate (purchase money mortgage) is subordinated
to, or subordinate to, the Mortgage and a Lease is later in time, if the senior Mortgagee
subordinates to the Lease to preserve the Lease, the later junior lien as senior to the Lease, may
be senior in lien to the senior Mortgage.
FFIRST
MORTGAGE
IINTERVENING
LIEN
LEASE
FFIRST
MORTGAGE
IINTERVENING LIEN
LEASE
FFIRST
MORTGAGE
(b) When a Lease is senior to a Mortgage, and the Mortgage is senior to a lien or
estate by subordination agreement (purchase money mortgage or condominium assessments), if
the Lease subordinates to that subsequent lien (by the subordinate lien holder’s SNDA), the
Mortgage may be subordinate to the subsequent lien. Doctrine of impairment is contrary.
LLEASE
FFIRST MORTGAGE
LLIEN
LLEASE
FFIRST
MORTGAGE
LLIEN
LLIEN
LLEASE
FFIRST
MORTGAGE
LLEASE
LLIEN
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1.10. NON-DISTURBANCE ISSUES BETWEEN MORTGAGEE (SUCCESSOR
LANDLORD) AND TENANT
1.10.1. Before Foreclosure
(tttt)
Primacy of Lease provisions
1.10.2. Primacy of Leasehold estate
1.10.3. After Foreclosure
(uuuu) Conditioned on:
Default
(i)
(ii)
(iii)
no default
no default permitting lease termination
no termination or acceleration for continuing Event of
Successor Landlord;
(vvvv) Issues of direct relationship (privity) by contract with unidentified
(wwww)
Restrictions on subsequent owners
California)
(xxxx) Defacto recognition of tenant by acceptance of rent (not in
(yyyy) Formal ratification of lease
1.11. ATTORNMENT ISSUES BETWEEN SUCCESSOR LANDLORD AND
TENANT: AFTER FORECLOSURE
1.11.1. Creates direct relationship (privity) for property rights (estate)
termination
Landlord
1.11.2. Prevents claims by Subordinate Tenant of automatic or constructive
1.11.3. Tenant wants reciprocal ratification and assumption by Successor
1.12. STATUTES OF PRIVITY
1.12.1. Statutes made at Westminster, Anno 32 HEN. VIII. and Anno Dom.
1540. Grantees of Reversions Act, 1540
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(zzzz) “… Persons [other] than the King’s Highness, and the Heirs,
Executors, Successors and Assigns of every of them, (5) shall and may have and enjoy like
Advantages against the Lessees, their Executors, Administrators and Assigns, by Entry for Nonpayment
of the Rent, or for doing of Waste or other Forfeiture; (6) and also shall and may have
and enjoy all and every such like, and the same Advantage, Benefit and Remedies by Action
only, for not performing of other Conditions, Covenants or Agreements contained and expressed
in the Indentures of their said Leases, Demises or Grants, against all and every the said Lessee
and Farmers and Grantees, their Executors, Administrators and Assigns, as the said Lessors or
Grantors themselves, or their Heirs or Successors, ought, should, or might have had and enjoyed
at any Time or Times.”
(aaaaa) Moreover be it enacted by Authority aforesaid, That all Farmers,
Lessees and Grantees of Lordships, Manors, Lands, Tenements, Rents, Parsonages, Tithes,
Portions, or any other Hereditaments for Term of Years, Life or Lives, their Executors,
Administrators and Assigns, shall and may have like Action, Advantage and Remedy against all
and every Person and Persons and Bodies Politick, their Heirs, Successors and Assigns, which
have or shall have any Gift or Grant of the King our Sovereign Lord, or of any other Person or
Persons, or the Reversion of the same Manors, Lands, Tenements, and other Hereditaments so
letten, or any Parcel thereof, for any Condition, Covenant or Agreement contained or expressed
in the Indentures of their Lease and Leases, as the same Lessees, or any of them might and
should have had against the said Lessors and Grantors, their Heirs and Successors;
1.12.2. 4 Anne, Cap. XVI. A.D. 1705
(bbbbb) And be it further enacted by the authority of the aforesaid,
That from and after the said first day of trinity term, all grants or conveyances thereafter to be
made, by fine or otherwise, of any manors or rents, or of the revision or remainder of any
messuages or lands, shall be good and effectual, to all intents and purposes, without any
attornment of the tenants of any such manors, or of the land out of which such rent shall be
issuing, or of the particular tenants upon whose particular estates any such reversions or
remainders shall and may be expectant or depending, as if their attornment had been had and
made.
(ccccc) Provided nevertheless, That no such tenant shall be prejudiced or
damaged by payment of any rent to any such grantor or conusor, or by breach of any condition
for non-payment of rent, before notice shall be given to him of such grant by the conusee or
grantee.
1.13. SNDA “EXTRAS” FOR MORTGAGEES FROM (WEAK) TENANTS
1.13.1. Before Foreclosure: Provisions for Mortgagee
(ddddd)
Mortgage clauses for casualty and condemnation prevail
(eeeee) No modification of lease without Mortgagee consent
(fffff) No Tenant assignment without Mortgagee consent
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Mortgagee consent
(ggggg)
(hhhhh)
No voluntary cancellation or termination without
Notice and longer cure rights for Mortgagee
(iiiii) Estoppel provisions
(jjjjj) Assignment of rent and acknowledgment of assignment
(kkkkk)
Tenant financial statements
(lllll) Payment of fees and costs for approvals requested of Mortgagee
(mmmmm)
Mortgagee negligence
Indemnification and release for current conditions,
1.13.2. After Foreclosure: Provisions for Successor Landlord
(nnnnn) Not bound by prior Landlord representations of the use,
zoning, subdivision, taxes, title, landlord’s authority, tenant ability, compliance with laws, fitness
for tenant’s use
of rights by Tenant.
(ooooo)
(ppppp)
Not subject to Tenant right of offset or abatement
Environmental indemnification, release of claims, waiver
(qqqqq) Rights against Successor Landlord available to Tenant as if
Lease had commenced on date Successor Landlord succeeds to Landlord position under the
Lease and all pre-existing landlord covenants and conditions are deemed satisfied or waived
(leaky roof or incomplete roof expansion)
(rrrrr) Tenant Remedy: termination
(sssss) No Successor Landlord liability for prior landlord liabilities:
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(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Rent adjustment
Rent reduction
Casualty/condemnation, beyond proceeds
Use conflicts
Co-tenancy
Security deposits
Construction: alteration, phases
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(viii) Tenant allowance
(ix)
(x)
Arbitration awards
Hazardous materials
1.14. SNDA “EXTRAS” FOR (STRONG) TENANTS FROM MORTGAGEES
1.14.1. Before Foreclosure: Provisions for Tenant
(ttttt) Lease covenants control (casualty/condemnation, assignment)
(uuuuu) Waiver of mortgagee’s rights to tenant improvements upon
casualty or condemnation and lease termination, or application of insurance first to tenant
improvements
(vvvvv) Modification approval right of mortgagee limited only for
change in rent, reduction of term, release of guarantor or credit enhancement or defaults, change
in remedies for default (Material Adverse Effect); otherwise not binding on Mortgagee and
Successor Landlord
(wwwww) Right to set off Tenant costs to perform Landlord acts that
preserve value of real estate, after notice to Mortgagee (perhaps set off only against a portion of
base rent)
(xxxxx) Set off to the extent Tenant provides notice to Mortgagee of
Landlord’s failure, at least if Tenant’s acts preserve or increase value of lien (e.g., payment of
taxes), value of collateral (e.g., capital improvements), or rent (e.g., expansion)
(yyyyy) Tenant exculpation and Landlord indemnity for Tenant
payment of rent to Mortgagee without inquiry
(zzzzz) Non-disturbance continues until Lease is accelerated or terminated
for non-payment default or acceleration for Event of Default – retain equivalent of priority
(aaaaaa) Mortgagee not to unreasonably withhold, delay, or
condition its approval or consent, and deemed automatic if silence for ten days
(bbbbbb) Abatement or termination (least favored alternative) for
landlord non-performance or interference with quiet enjoyment
(cccccc) No cross-collateralization, cross default, or increase in
obligations (other than curative advances)
1.14.2. After Foreclosure
Lease
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(dddddd)
Successor Landlord agrees to ratify, not just take subject to,
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(eeeeee)
Successor Landlord accepts rent concessions in Lease
(ffffff) Set off for lost security deposit; perhaps, only if held by Mortgagee
1.15. SUBTLE STRATEGIES
1.15.1. Extinguish (“disturb”) defaulted lease by divestiture rather than
Landlord/Tenant lawsuit; not declaration of default, acceleration, termination
1.15.2. Do not automatically agree to “non-disturb” bad subordinate leases
(gggggg)
(hhhhhh)
Below market
Affiliates
(iiiiii) Inappropriate (bad mix)
1.15.3. Sometimes Lease extensions and amendments are deemed to cause the
lease to post date and be subordinated to the Mortgage without the benefit of non-disturber
1.15.4. Guaranty Lease and Tenant’s SNDA covenants
agreement
1.15.5. Security deposits held by Mortgagee or subject to Mortgagee’s control
1.15.6. Tenant rights of recovery for prior Landlord defaults limited to
Landlord’s interest in the realty. After foreclosure prior landlord has no interest in realty
1.15.7. Seniority can be by recording, notice (tenant occupancy), or contract
1.15.8. Recording the SNDA helps the otherwise subordinate party-in-interest
1.15.9. Lease guaranty may terminate after foreclosure if lease is ratified or
reinstated instead of preserved by non-disturber/attornment
1.15.10. Priority and non-disturbance diverge on divestiture upon default,
circuity, mortgagee bankruptcy and rejection of executory covenants
1.16. SNDA PROVISIONS EXAMPLES: Tenant Changes - Bold; Mortgagee
Changes - Underlined
1.16.1. RECITALS
The following language is representative of a typical Recital clause: “WHEREAS, Tenant
has agreed that its rights in and pursuant to the Lease are and shall be subordinate to the
Mortgage, provided Lender executes and delivers to Tenant a Non-Disturbance Agreement,
which Lender is willing to provide on condition that Tenant agrees to attorn to Lender;”
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Sometimes the Mortgagee will include in a recital special information such as: “The
Mortgage is a first lien.” Sometimes the pre-existing mortgage is identified by recording
information. The mortgagee should either fill it in or strike it to avoid ambiguity. Sometimes
the Mortgagee will provide “ Capitalized words used herein shall have the meaning provided in
the Mortgage unless expressly defined otherwise in this Agreement” The Tenant should strike
that sentence because the Tenant almost never reads the Mortgage.
1.16.2. SUBORDINATION
“The Lease, which for purpose of this Agreement shall include all of Tenant’s rights,
privileges, interests, benefits, indemnities, and covenants contained in the Lease during the
initial term and any extensions, renewals, or subsequent terms shall be, and shall at all times
remain, subject and subordinate to the Mortgage, the lien imposed by the Mortgage, and all
indebtedness and other advances made under the Mortgage as amended, increased, renewed,
extended spread, consolidated, severed, restated, or otherwise changed from time to time.”
A strong Tenant may take the position: “provided that any such extension,
amendment, increase, renewal, extension, spreader, consolidation, severance, restatement
or other change in the Mortgage does not have a material adverse effect on the Lease, the
Premises, the Property, or the Tenant’s interest under the Lease.
1.16.3. NON-DISTURBANCE
1.16.3.1. ACTS OF MORTGAGEE: Some Tenant attorneys
elaborate a long list of various acts of Mortgagee, which should have the effect of making the
Mortgage a successor landlord in fact or in effect: “the date on which (“Succession Date”) (a)
Mortgagee takes possession of the Premises as mortgagee-in-possession, (b) Mortgagee
commences to foreclose on the Mortgage, (c) any suit, action or proceeding upon any bond or
note or other obligation or any other documents held by the Mortgagee is undertaken which
deprives Landlord of the rights of management of the Premises, including without limitation, the
appointment of a receiver, (d) any judicial sale or execution or other sale of the Mortgaged
Property for other judgments or liens obtained by Mortgage, such as from tort or other actions
not related to the mortgage (e) any judicial sale or execution or other sale of the Mortgaged
Property for which Mortgagee becomes the assignee of the bid or otherwise subrogated to the
moving party;”
1.16.3.2. CONDITIONS TO NON-DISTURBANCE
From the Mortgagee’s point of view, if it were senior to the Lease, the Mortgagee would
consider it kindness to allow that the “Tenant shall be entitled to retain its leasehold estate,
undisturbed by Mortgagee prior to a default under the Lease.” The Tenant would look to
expand the events as including “beyond any applicable grace period in the payment of rent,
additional rent or other charges resulting in termination in accordance with the terms of
the Lease.” Mortgagee would add the further proviso: provided, however, and Lender agrees,
that so long as (A) no event has occurred and no condition exists, which would entitle Landlord
to terminate the Lease or would cause, without further action of Landlord, the termination of the
Lease or would entitle Landlord to dispossess Tenant from the Premises, (B) the term of the
PHIL1 712780-2
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Lease has commenced and Tenant is in possession of the Premises, (C) the Lease shall be in full
force and effect and shall not have been otherwise modified or supplemented in any way without
Lender’s prior written consent, (D) Tenant attorns to Lender, which attornment is hereby
acknowledged by Tenant as effective and self-operative, without the execution of any other
instruments, and (E) neither Lender nor its successors or assigns shall be liable under any
warranty of construction contained in the Lease or any implied warranty of construction; then,
and in such event Tenant’s leasehold estate under the Lease shall not be terminated, Tenant’s
possession of the Premises shall not be disturbed by Lender and Lender will accept the
attornment of Tenant.
1.16.3.3. MORTGAGEE UNILATERAL ELECTION OF
STRUCTURAL OR PROCEDURAL NONDISTURBANCE
(A)
TENANT NOT NAMED IN FORECLOSURE ACTION:
“Notwithstanding the foregoing, if no “Event of Default” exists on
the part of Tenant pursuant to the Lease and the Lease has not
been terminated, then: (a) Lender shall not join Tenant as a party
in any mortgage foreclosure action; and (b) neither Lender, nor any
successor in title to the Property pursuant to a mortgage
foreclosure action or deed-in-lieu of foreclosure, shall disturb the
peaceful use, possession and enjoyment of the Premises by Tenant,
except to the extent authorized specifically in the Lease; provided,
however, Mortgagee may join Tenant as a defendant in such
actions only for such purpose and without the effect of terminating
or otherwise adversely effecting Tenant’s rights under the Lease or
this Agreement in such action provided that at the time of the
commencement of any such action or proceeding or at the time of
any such sale or exercise of any such other rights (i) the term of
the Lease shall have commenced pursuant to the provisions
thereof, (ii) Tenant shall be in possession of the premises demised
under the Lease, (iii) the Lease shall be in full force and effect and
(iv) Tenant shall not be in default under any of the terms,
covenants or conditions of the Lease or of this Agreement on
Tenant’s part to be observed or performed. Tenant shall not be
obligated to defend such action, and the absence of defense
shall have no effect on the continuation of the Lease as
remaining in full force and effect and Successor Landlord shall
promptly upon the request of Tenant enter into a replacement
lease “Replacement Lease’ on the same terms and conditions
as are under the lease except for the substitution of the
Successor Landlord for the Landlord, and such other changes
as are provided in this Agreement, in order to preserve
Tenant’s rights as initially established under the terms of the
Lease, and the “Lease” shall mean the Replacement Lease for
all purposes of this Agreement ”
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1.16.3.4. MORTGAGEE ELECTION TO SUBORDINATE TO
LEASE: “Notwithstanding anything to the contrary contained herein, Mortgagee may at any
time subordinate the Mortgage to the Lease, without Tenant's consent, by notice in writing to
Tenant and thereupon the Lease shall be deemed prior to the Mortgage without regard to their
respective dates of execution and delivery, and in that event Mortgagee shall have the same
rights and liabilities with respect to the Lease as though the Lease has been executed and a
memorandum thereof recorded prior to the execution, delivery and receipt of the Mortgage.”
1.16.3.5. NON-DISTURBANCE OF POSSESSORY RIGHTS
UNDER LEASE AGREEMENT: “The leased premises includes all ancillary rights to common
areas and to other areas of Landlord’s property that provide parking, access, signage and similar
rights outside of the Building.” The rights of possession may be described as “the peaceful and
quiet enjoyment, possession, and use” of the Premises.
1.16.3.6. NON-DISTURBANCE OF PROPERTY RIGHTS AND
REAL COVENANTS UNDER THE LEASE AGREEMENT: The Tenant may also elaborate
that it has a fundamental right to real covenants: “Tenant’s right of quiet enjoyment shall
include all covenants and obligations of Landlord which are real covenants, including,
without limitation, preservation from waste, covenants to repair, Tenant renewal options, and
Tenant purchase options.”
1.16.3.7. NON-DISTURBANCE OF PERSONAL COVENANTS
UNDER LEASE AGREEMENT: The Mortgagee would seek an acknowledgement with
language equivalent to the following: “Tenant acknowledges that Mortgagee has a claim
superior to Tenant’s claim for insurance proceeds, if any, received with respect to the
Improvements or the Property.” Contrarily, the Tenant would seek an acknowledgement along
the lines of the following: “All condemnation awards and insurance proceeds paid or payable
with respect to the Mortgaged Property shall be applied and paid in the manner required
under the Lease in order to repair such casualty loss and replace and restore such takings,
notwithstanding that Mortgagee may be the recipient of such awards and proceeds by
mortgagee endorsement or assignment, as the case may be.” A weak Tenant may try to contain
the Mortgagee’s control by requiring that “as long as the Mortgagee’s collateral is not impaired
by distribution of proceeds and awards in accordance with the Lease, then the use of such
proceeds and awards in accordance with the Lease shall apply.” A Mortgagee would seek to
set further conditions under which it would be entitled to control the insurance proceeds, similar
to non-disturber conditions, for example, “(a) Tenant is not in default (beyond any period given
Tenant to cure such default) in the payment of rent or additional rent or in the performance of
any of the material terms, covenants or conditions of the Lease on Tenant’s part to be performed,
(b) Tenant is at that time occupying the Premises, and (c) the provisions in the Mortgage be
applied which direct the protocol of disbursing construction funds, including the posting of
sufficient additional funds to confirm that the Property can be rebuilt in full.”
PHIL1 712780-2
1.16.4. ATTORNMENT
“Tenant agrees that if Mortgagee or Successor Landlord shall become the owner of the
Premises by reason of the foreclosure of the Mortgage or the acceptance of a deed or assignment
in lieu of foreclosure or otherwise, the Lease shall not be terminated or affected thereby but shall
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continue in full force and effect as a direct lease between Mortgagee, or Successor Landlord, as
the case may be, and Tenant upon all of the terms, covenants and conditions set forth in the
Lease and in that event Tenant agrees to attorn to Mortgagee, or Successor Landlord, as the case
may be, and Mortgagee agrees for itself and the Successor Landlord to accept such attornment,
provided, however, that if the Mortgagee becomes the Successor Landlord, then the provisions
of the Mortgage shall govern with respect to the disposition of any casualty insurance proceeds
or condemnation awards and Mortgagee shall not be (i) obligated to complete any construction
work required to be done by Landlord (as hereinafter defined) pursuant to the provisions of the
Lease or to reimburse Tenant for any construction work done by Tenant, (ii) liable for any
accrued obligation of Landlord, or for any act or omission of Landlord, whether prior to or after
such foreclosure or sale, (iii) required to make any repairs to the Premises or to the premises
demised under the Lease required as a result of fire, or other casualty or by reason of
condemnation unless Mortgagee shall be obligated under the Lease to make such repairs and
shall have received sufficient casualty insurance proceeds or condemnation awards to finance
the completion of such repairs, (iv) required to make any capital improvements to the Premises
or to the premises demised under the Lease which Landlord may have agreed to make, but had
not completed, or to perform or provide any services not related to possession or quiet
enjoyment of the premises demised under the Lease, or (v) subject to any offsets or counterclaims
which shall have accrued to Tenant against Landlord prior to the date upon which Mortgagee
shall become the owner of the Premises.
PHIL1 712780-2
1.16.5. RECIPROCAL RECOGNITION
The Tenant will also frequently insist on the absent successor landlord agreeing to
“attorn” to the Tenant, by including language to the following effect: “and so long as the Lease
in force and effect, Mortgagee or Successor Landlord shall be deemed to have automatically
recognized and accepted Tenant as its tenant thereunder, and the Lease shall continue,
without further agreement, in full force and effect as a direct lease between Successor
Landlord and Tenant for the full term thereof, together with all extensions and renewals now
provided thereunder , upon the same terms, covenants and conditions as therein provided, and
Successor Landlord shall thereafter assume and perform all of Landlord’s subsequent
obligations, as Landlord under the Lease, with the same force and effect as if Successor
Landlord originally named therein as Landlord and Tenant shall thereafter make all rent
payments directly to Successor Landlord.” The SNDA commonly makes the self-serving
statement that the reciprocal attornment is self-operative.
1.16.6. NO SUCCESSOR LIABILITY
“Notwithstanding the foregoing, the Successor Landlord shall not be deemed to: (a)
assume any Lease obligations of Landlord arising before it acquired title to the Property; (b) be
precluded from collecting any rent or other sums paid by Tenant more than 30 days in advance;
(c) be responsible for any security deposit paid by Tenant, unless it is transferred to and accepted
in writing by the new owner; (d) be subject to any defenses or rights of setoff held by Tenant
pursuant to the Lease and arising before it acquired title to the Property; or (e) be bound by any
amendment or waiver of any Lease provision, unless approved in writing by Mortgagee. . . .
provided however, if Tenant provided Lender with written notice of the default on the part of
Landlord pursuant to the Lease and opportunity to cure as provided in the Lease for the
25

Landlord, then the Successor Landlord shall be deemed automatically to: (a) assume any Lease
obligations of Landlord relating to said default and (b) be subject to any defenses or rights of
setoff held by Tenant relating to said default.”
PHIL1 712780-2
1.16.7. REPRESENTATIONS AND WARRANTIES
Tenant agrees that the Mortgagee and any Successor Landlord shall not be bound by, or
liable for the breach of, any representation or warranty of the Landlord, notwithstanding
anything set forth in the Lease to the contrary except for those representations and warranties
made applicable to times or events occurring after the Succession Date. Notwithstanding
anything set forth above to the contrary, if Mortgagee, at the time it approved or consented to the
Lease, had actual knowledge of the falsehood of any material representation or warranty made
by Landlord therein, then any Successor Landlord shall be bound by and liable for the breach of
said representation or warranty to the same extent as the Landlord.
1.16.8. SET OFF FOR PREDECESSOR LANDLORD LIABILITIES
The Tenant’s argument is that if the Landlord were to file bankruptcy, the worst case
scenario for everyone, then the Landlord either has to perform its obligations or reject the lease,
and if rejected, the Tenant can set off up to the amount of rent otherwise payable, for the
expenses it incurs to perform the : Landlord’s obligations. If that is the worst case, so says the
Tenant, then if the Mortgagee or Successor Landlord takes over the Lease, then they too should
either perform or remain subject to setoff rights. Basically, the Bankruptcy Code stands for the
principle that the Lease is made up of dependent covenants. The approach to set off is not
standard. Some people adopt language similar to the following: “Tenant shall not be entitled to
hold Mortgagee or Successor Landlord liable for any offset right that Tenant may have against
any prior Landlord relating to any event or occurrence before the date of attornment, including
any claim for damages of any kind whatsoever as the result of any breach by prior Landlord that
occurred before the date of attornment, except those of which Tenant provided notice to
Mortgagee or Successor Landlord, regardless of whether they elected to respond to such
notice unless the response was the denial or objection to the assertion of default . The
foregoing shall not limit either (a) Tenant’s right to exercise against Successor Landlord any
offset right otherwise available to Tenant which are expressly permitted under the Lease because
of events occurring after the date of attornment or (b) Successor Landlord’s obligations as
landlord under the Lease.” A compromise would be that damages be limited to “direct damages”
(such as those damages which were a direct consequence or reasonably foreseeable from the
Landlord’s acts and would include loss due to physical damage, third party claims, damage to
Tenant Improvements and damage to Tenant’s personal property, but expressly excluding
indirect, consequential or punitive damages) set-off, capped in a way that prevents the lease from
dropping below the value needed to support the required underwriting. The Mortgagee may seek
a protection by requiring a provision to the effect that, “Notice by Tenant to Landlord of any
breach or default by Landlord under the Lease will be effective to permit any set off of rent or
termination of the lease by Tenant only after (a) a copy of the notice is received by Mortgagee,
and (b) either (i) such time as is provided in the Lease for cure by Landlord has elapsed without
the cure having occurred, or (ii) a reasonable period of time, if no time period is specified in the
Lease, has elapsed following Mortgagee’s receipt of such notice, but in the case of a cure by the
payment of money no more than five (5) days and in the case of a cure by performance no more
26

than 30 days,, during which period Mortgagee will have the right, but shall not be obligated, to
cure the breach or default, or (iii) if the nature of the act or omission or the requirements of
local law require the Mortgagee to appoint a receiver or to foreclose on or commence legal
proceedings to recover possession of the Property in order to effect such remedy and such legal
proceedings and consequent remedy cannot be reasonably achieved within the period permitted
Landlord under the Lease or if no time is provided in the Lease, then said thirty (30) days, then
such additional time as may be reasonably required within the circumstances provided that
Mortgagee shall commit to Tenant by written notice within five(5) days after notice of such
default to perform such cure, shall immediately commence such cure, and Mortgagee shall
diligently pursue the remedies necessary to cure such default including, but not limited to,
commencement of foreclosure proceedings or otherwise acquiring title to the Property, if
necessary, to effect such cure…”
PHIL1 712780-2
1.16.9. CASUALTY PROCEEDS
“Casualty insurance proceeds shall be paid to Mortgagee for disbursement in
accordance with the conditions of the Mortgage: (a) first, to Tenant in such amount as
Mortgagee deems appropriate to repair any physical damage to any buildings owned by
Tenant and located on the leased premises; (b) second, to Landlord in such amount as
Mortgagee deems appropriate to repair any physical damage to any buildings owned by
Landlord and located on the leased premises; and (c) third, to the Mortgagee to be applied
as set forth in the loan documents. Notwithstanding the foregoing, the casualty insurance
company shall pay all insurance proceeds to the Mortgagee, which may hold those portions
payable to Tenant and Landlord for repair of the leased premises until such time as it has
been provided with: (x) contractors affidavit and lien waivers confirming that repair of the
premises has been completed; or (y) a payment and performance bond with corporate
surety in form and content acceptable to Lender. After the Succession Day, if the Lease
requires that all or a portion of the insurance proceeds or eminent domain award be
applied toward restoration, Successor Landlord agrees to allow the utilization of such net
proceeds or net award (that is, in each instance, the net amount actually received and
retained by Successor Landlord after deducting all necessary expenses of determination of
the amount and collection thereof, including but not limited to adjustor, legal and expert
fees and expenses) toward restoration in accordance with the Lease, except that,
notwithstanding the Lease, Successor Landlord shall (i) keep control and possession of such
proceeds or awards and apply same toward restoration and periodically pay contractors
and vendors directly upon properly received requisitions, paid receipts, waivers of lien and
other requisites imposed by Mortgagee in its then applicable standard form of Building
Loan Agreement and (ii) never be required to expend toward such restoration any monies
in excess of such net proceeds or net award and (c) this paragraph shall modify the Lease.”
1.16.10. CONSTRUCTION
Mortgagee is not responsible for completing construction of the Premises or other
portions of the Property or correcting any construction defects. Notwithstanding the
foregoing, if: (a) prior to institution of mortgage foreclosure proceedings, or a deed in lieu
of foreclosure, Tenant provides Mortgagee with written notice specifying in detail any
failure on the part of Landlord to perform any construction obligation, or correct any
27

construction defect, required by the Lease to be completed or corrected by Landlord; the
(b) any Successor Landlord of the Property shall complete the construction or correct the
defect specified in said notice, to the same extent, and subject to the same conditions and
qualifications, as required by Landlord pursuant to the Lease.
1.16.11. LEASE AMENDMENTS
The Mortgagee frequently tries to limit the effectiveness of Lease amendments to those
that are approved by the Mortgagee, the Tenant seeks to condition the effect of those restrictions
on amendments by providing: “no amendment shall be effective with respect to the Mortgagee
or Successor Landlord unless the amendment either (a) has been expressly provided in the
Lease, and Tenant has notified Mortgagee of such amendment no later than its effective date, or
(b) has no material adverse effect on the Lease, or (c)has a material adverse effect on the
Lease and has not been approved by Mortgagee, which approval shall not be unreasonably
withheld, delayed or conditioned. The failure of Mortgagee to respond within 10 days to a
request for approval mailed to the last address provided to Tenant shall be deemed
approval. Material Adverse Effect shall occur upon the decrease in the value of the
Property by more than 5%, the increase of the difficulty of Mortgagee’s recovery of the
Lease by extending the time for recovery by more than 30 days or the cost of recovery by
more than $____________, the decrease of the term by more than 20%, lowering the rent,
or release of credit enhancement,”
1.16.12. ASSIGNMENT AND SUBLETTING
Other than those compliant with the Lease terms, no Successor Landlord shall be bound
by any assignment, subletting or termination of the Lease, nor shall Tenant surrender possession
of the Premises to Landlord unless approved in writing by Mortgagee or Successor Landlord.
1.16.13. PRE-EXISTING DAMAGE
“Mortgagee and Successor Landlord shall continue to fund ongoing or pre-existing
repairs, restorations or replacements whether from ordinary wear and tear, fire or other
casualty or condemnation, provided (a) the need for the repairs first arose after the transfer of
ownership to the Successor Landlord, (b) the repair is not attributable to an act or omission of
Tenant or its employees, agents or contractors, (c) all funds necessary to effect the repairs have
been actually received by Successor Landlord from insurance proceeds or the Tenant, and (d)
they have no liability for costs of restoration which exceed any proceeds received or for losses
which are otherwise uninsured or underinsured regardless of whether the lack of insurance is
permitted or prohibited under the terms of the Lease.”
1.16.14. LIMITED LIABILITY
Mortgagee’s liability under the Lease and this Agreement shall be limited to its interest
solely in the real estate and not to any assets of the Mortgagee not attributable to the real estate,
and therefore expressly includes all (A) net (i) rents, (ii) issues, (iii) profits, and (iv) insurance
proceeds or condemnation awards after all other rights and obligations related to the use of
them have been satisfied or fulfilled, provided, however, Tenant may exercise any other right
PHIL1 712780-2
28

or remedy provided by law or equity in the event of any failure of Successor Landlord to
perform any material obligation.”
1.16.15. CLAIMS ARISING OUTSIDE OF PERIOD OF SUCCESSOR
LANDLORD OWNERSHIP
“Successor Landlord shall be liable to Tenant under the Lease only during Successor
Landlord’s period of ownership, and such liability shall not continue or survive as to the
transferor after a transfer by Successor Landlord of its interest in the Lease and the Premises.”
1.16.16. EXCLUSIVES OR RESTRICTIONS ON USE
“Mortgagee and Successor Landlord shall have no liability or obligation under any
restriction, including without limitation restrictions on competitive uses which were agreed to
prior to the Succession Date and for which the Mortgagee had no knowledge or notice; and in
the event such provision was violated by the prior Landlord, Tenant shall have no right to
terminate the Lease or reduce rent due from the Tenant.” Some Tenant’s require as a tradeoff
that the Mortgagee declare the Landlord in default and the Mortgage foreclosed so that the
violative lease of the Tenant’s competitor can be divested. They hold the Mortgagee liable if it
entered into an SNDA for a prohibited use. The Mortgagee may also seek to include in its
Mortgage a covenant by the Landlord not to violate exclusives or use restrictions, and to grant
Mortgagee the power to stop violations by tenants. That Mortgagee power to stop exclusive use
violations would be included in the SNDA, such as “Tenant acknowledges that the uses
permitted under the Lease are subject to restrictions from other leases at the Property as
specifically set forth in the Lease, if any, and the Mortgagee and Successor Landlord may
prevent Tenant from violating those restrictions, including by way of injunctive relief, during
such period that Tenant has not received notice from Mortgagee that Landlord is in default
under the Mortgage and provided that Tenant shall be deemed in compliance if its uses are
approved by Landlord.” The Mortgagee may also push to add violations of prohibited uses a
cause for disqualifying the Tenant from obtaining a non-disturber.
1.16.17. FURTHER ASSURANCES
“The foregoing provisions shall be self-operative and effective without the execution of
any further instruments on the part of any party hereto. Tenant agrees, however, to execute and
deliver to Mortgagee or to any person to whom Tenant herein agrees to attorn such other
instruments as either shall reasonably request in order to effectuate said provisions. Such
documents or instruments shall be strictly limited in their wording to the matters of (A) the
confirmation by Tenant of the subordination of the Leasehold (B) the Mortgagee’s
irrevocable covenant not to disturb Tenant’s possession and (C) the attornment by Tenant
and any Successor Land owner to recognize this Lease and be bound by the provisions
hereunder in accordance with the provisions of this section. No such document or
instrument may contain terms or provisions which increase any of Tenant’s burdens,
obligations or liabilities, or decrease any of Tenant’s benefits, rights or privileges in any
material respect.”
1.16.18. COMPETING CLAIMS TO RENT
PHIL1 712780-2
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“Tenant shall not be obligated to pay any rent Mortgagee or Successor Landlord, as
the case may be, until Tenant has received written notice from such party of the completion
of the transfer and the due exercise of its right to succeeding payments of rent. If Tenant
receives conflicting claims to the payment of rent, Tenant shall have the right to institute an
interpleader suit for the purpose of determining who is entitled to payment of such rent,
and to pay the rent, net of the cost to Tenant of the interpleader, in accordance with the
judicial determination rendered in such suit.” Competing claims to rent can largely mirror
the ALR language, by providing , for example, “Payments made by Tenant to Mortgagee shall
not relieve Landlord of its obligations under the Lease, except for obligations arising after the
Succession Date.” A waiver and release by Landlord of Tenant, is also protection frequently
requested by the Tenant such as “Landlord authorizes Tenant to rely upon any such notice
without duty to investigate or make further inquiry; Landlord releases any claims it may
have against Tenant for making such payments; and, Landlord waives any defenses it may
have against Mortgagee’s enforcement of the requirement for Tenant to make such
payments.”
1.16.19. MORTGAGEE SUBSTITUTE NOTICE
“Tenant agrees that notice from Mortgagee shall have the same effect under the Lease as
notice to Tenant from the landlord thereunder and Tenant agrees to be bound by such notice
notwithstanding the existence or nonexistence of a default under the Mortgage or any dispute
with respect thereto between the mortgagor under the Mortgage and Mortgagee. Landlord has
joined in the execution of this Agreement to indicate its consent to the provisions of this
paragraph.”
1.16.20. TENANT’S WAIVER OF OPTION RIGHTS
“In the event of any Transfer of the Property, Tenant specifically waives any right,
whether arising out of the Lease or otherwise, to exercise any option or right of first refusal or
right of first offer which remains unexercised at the time of such transfer, to (a) purchase the
Premises or the Property, or any interest or portion in or of either of them; or (b) expand into
other space in the Improvements which would require expenditures of funds by Successor
Landlord. The foregoing waiver does not apply to any option to extend or renew the Lease
term which is set forth in the Lease as of the date of this Agreement; Tenant does not waive
any right to exercise any such option following a Transfer of the Property. If, after the date
of this Agreement, Tenant acquires any purchase option, option to expand into other space in the
Improvements, or option to extend or renew the term of the Lease, Tenant agrees that such
option shall be deemed part of the Lease and subject and subordinate to the lien of the Mortgage
in the same manner as the Lease under the terms of this Agreement, and shall be null and void
upon any Transfer of the Property.”
1.16.21. HAZARDOUS MATERIALS
As of the date of the attornment, the following provision shall be deemed inserted in the
Lease, retroactively effective as of the commencement of the term of the Lease, and shall prevail
in the event of any conflicts with other provisions of the Lease:
PHIL1 712780-2
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“Tenant covenants and agrees not to suffer, permit, introduce or maintain in, on
or about any portion of the Leased Premises, any asbestos, polychlorinated
biphenyls, or any other hazardous or toxic materials, wastes and substances (all
of the foregoing, collectively, “Hazardous Materials”) which are defined,
determined or identified as such (including petroleum products if they are
defined, determined or identified as such) in any federal, state or local laws, rules
or regulations (whether now existing or hereafter enacted or promulgated) or any
judicial or administrative interpretation of any thereof, including any judicial or
administrative orders or judgments (collectively, “Laws”), except for Hazardous
Materials of types and in quantities as may be used or stored in the Premises (i)
in the normal course of Tenant’s business (in accordance with the permitted
use(s) under the Lease) and (ii) in accordance with applicable Laws, or as
otherwise expressly permitted under the terms of the Lease.”
1.16.22. GUARANTORS
“Each Guarantor, if any, of Tenant’s obligations under the Lease has signed below,
to evidence Guarantor’s consent and approval to, and agreement to be bound by, the
provisions hereof and to guaranty Tenant’s performance under this Agreement to the same
extent as it guaranties Tenant’s payment and performance under the Lease.”
1.16.23. REMIC FORECLOSURE PROPERTY
“If Mortgagee succeeds to the interest of Landlord or any successor to Landlord (such
event, whether a foreclosure, deed-in-lieu of foreclosure or other acquisition, being referred to
herein as a “Foreclosure”), in no event shall Mortgagee be obligated to complete or permit the
construction of any improvements under the Lease, except for any obligation arising after
Foreclosure and only for any construction or expenditure that a real estate mortgage investment
conduit is allowed to make under Section 856(e)(4)(B) of the Internal Revenue Code of 1986, as
amended and/or supplemented from time to time, and regulations and rulings thereunder.
1.16.24. LANDLORD LIEN WAIVER BY MORTGAGEE
The Mortgagee’s efforts to shovel some additional protections and covenants into the
SNDA that have nothing to do with the Lease subordination, is matched to a lesser degree by the
Tenant who looks to use the SNDA as a platform from which to better its bargain under the
Lease and to address issues relating to the Mortgage which are not directly or efficiently covered
in the Lease. One typical issue usually resolved in Tenant’s favor is the Tenant request that the
Mortgagee, for itself and for any Successor Landlord, agree that the rights to any landlord lien or
any other rights it might otherwise assert against the personal property of the Tenant, whether
owned or leased, are waived or at least subordinated to the interest of any secured creditor of
Tenant so long as such creditor’s debt is not indefeasibly paid in full: Mortgagee hereby
acknowledges and agrees that all inventory, goods, fixtures and equipment whether owned
by Tenant or any subtenant or leased by Tenant and installed in or on the Leased Premises,
regardless of the manner or mode of attachment, shall be and remain the property of
Tenant and may, subject to the provision of the Lease, be removed by Tenant at any time
free from any landlord lien under statute, contract, or common law. In no event (including
PHIL1 712780-2
31

a default under the Lease or Mortgage) shall Mortgagee have any liens, rights or claims in
Tenant’s fixtures and equipment, whether or not all or any part thereof shall be deemed
fixtures; and Mortgagee expressly waives all rights of levy, distraint, or execution with
respect to said fixtures and equipment arising out of the Mortgage.
The Tenant would look for broad language limiting liability, such as “the Tenant’s
liability for the statements contained herein shall be limited to estoppel and shall not be
liable for any actual or purported negligence or inadvertent misstatement, omission or
incomplete certification.” ”The certifications shall not be deemed representations,
warranties or covenants. Neither Tenant, nor any owner, partner, officer, agent,
consultant, employee, director, or other party providing advice or services to Tenant shall
be liable for the statements contained in this Estoppel Certificate. This Estoppel shall not
act as a waiver, release, acquiescence, consent, acknowledgment, subordination or
subjection by Tenant to any right, title, interest, lien, claim, covenant, restriction, duty or
indemnification held or owed to any other party, including, without limitation, any rights
relating to financing, collateral, sale, purchase or other disposition of the Property or
Premises . This Certificate shall not act to waive any current or future requirement for
32
PHIL1 712780-2
1.17. ESTOPPEL PROVISIONS EXAMPLES
1.17.1. LIMITED CLASS OF RELIANCE PARTIES
The Tenant is motivated to limit reliance to a specified narrow class of beneficiaries: “no
party other than those parties named in this certificate may rely upon or be deemed to
succeed to the benefits of the provisions of this certificate” thereby excluding beneficiaries
unless the Tenant expressly agrees to add them as additional parties. The Mortgagee wants the
estoppel to run to the benefit of the “title holder of the Property from whom Tenant’s leasehold
interest was granted, including any successor and assign of the Landlord and Successor
Landlord.”
1.17.2. LEASE ATTACHMENT
Both the Landlord and Tenant want to confirm the exact components of the Lease: the
initial agreement and all amendments. The Tenant would have an interest in attaching the form
of Lease for the purpose of avoiding any controversy over the terms of the Lease. Site plans and
diagrams are an important element not to be omitted.
1.17.3. KNOWLEDGE QUALIFIER
As a general matter the Tenant would want to limit any certificates to the knowledge of
the party who signs the certificate: “To the actual knowledge of the individual signing below
as the authorized officer of the Tenant, and who hereby certifies is the officer of the Tenant
with direct responsibility for managing the facility and being apprised of the information
certified to, without undertaking or directing any investigation, other than a review of the
files and materials ordinarily in the possession or reasonably available to the undersigned
without taking any measures which are out of the ordinary business efforts of the undersigned.”.
1.17.4. CERTIFICATE LIABILITY

consent to any such action or any other action required of the Landlord under the Lease.
The sole purpose, intent, and effect of this Estoppel Certificate is to estop the undersigned
Tenant from making any statement, claim or assertion that is contrary to the statements
contained in this Certificate. It is not an agreement, nor does it contain any
representations or warranties. In the event of any conflict between the terms of this
Certificate and the terms of the Lease, the terms of the Lease shall prevail.”
1.17.5. CERTIFICATION QUALIFIERS
Notwithstanding Tenant’s estoppel as to current claims. Tenant expressly reserves
the right to audit and object to any prior billings of rent based on formulas or other
calculations such as common area or operating expense charges, percentage rent, and
prorated charges.
PHIL1 712780-2
33

Dangerous Liaisons orElective Affinities:
Subordination, Non-disturbance And Attornment
Agreements
Assignments Of Leases And Rents
Estoppels
Gregory G. Gosfield, Esq.
10062892.6 BUS

CASH FLOW VAUJATION:
DEBT SERVICE TO RENT COVFRAGE RATIO
MORTGAGEE
10062892_6 BUS
March 2006
L_2_

CAPiTAL VALUATiON:
lOAN TO PROPERTY VALUE RATiO
MORTGAGEE
SUCCESSOR
LANDLORD
10062892_6 BUS
March 2006
~

DOCUMENTATION
"'lJARANTY
SPONSOR I ~;
MORTGAGEE
EQUITY
s
MORTGAGE LOAN
PROCEEDS
s
DEBT
SERVICE
$
MORTGAGE,
ASSIGNMENT
OF LEASE
ESTOPPEL
I I' I i
# ,
LEASE
• I
!MORTGAGORI di~ ~ ! ~ TENANT
L j

"'iiJ\;>"
D . ocument Kevrew: L. ease
Mortgagee - Lease Issue Analysis
1. Rent-
2. Termination -
3. Uses-
4. Value-
5. Security Deposit-
6. Landlord Assignment -
7. Tenant Assignment, Subletting, Transfer-
8. No liens -
9. Landlord Liabilities -
10062892_6 BUS
March 2006
'\ ~

Document Review:
Il!l
Tenant-Mortgage Issue Analysis
1. Possession
2. Covenants (Personal or Real)
3. Recovery of Tenant Improvement Values
4. Recovery of Curative Costs
5. Landlord (Successor Landlord) Lien Waiver or
Subordination
10062892_6 BUS
March 2006
\ ~

Document Review:
~ Documentation
o Stated loan amount can create implicit limit
o No blanks
o Fully executed
o Changes shown by initialed language or redline
o Acknowledged for recording
10062892_6 BUS
March 2006
'L2

Document Review:
1!ii!
I!i!l
1!ii!
Estoppel Completion
o Runs to Mortgagee's benefit
o Matches Lease requirements
Guaranty
o Liable after modification
o Liable for SNDA
Rent Roll
o Trues up with estoppel and SNDA
10062892_6 BUS
March 2006
'\ !l

Document Review:
~ Landlord Lien
o Common law distress or distraint; statutory codification; vee
o Waiver as to Tenant and its current and future Lenders
o Subordination as to Tenant's current and future Lenders
10062892_6 BUS
March 2006
'\ ~

TOI I" d llf . d@T'11 e
. It e, .LIen an· . Interme 'late . heones
i!ll
Title Theory:
o Mortgage is conveyance, mortgagor has right of possession and
redemption.
o Mortgagee is entitled to rents from a pre-existing lease upon
entitlement to possession of the real propertyor the rents; not
entitled to possession until a default occurs; not entitled to rents
from subsequent leases.
10062892_6 BUS
March 2006
~

G
T 1
L'" ~ ""IT. ~.. +- T1 e
It e, ' len ana Intermediate ' neortes
WI
Lien Theory
o Mortgage is security interest.
o Mortgagee is generally not entitled to rents from a pre-existing
lease until possession byforeclosure; not entitled to rents from
subsequent leases.
10062892_6 BUS
March 2006
\ 12

T" 1 L" d T 1" Th o
. It e, len an : Intermediate 1 b. eones
~ Intermediate Theory:
o Mortgage is conveyance treated like securityinterest.
o Mortgagee is generally entitled to rents from a pre-existing lease
upon possession of the real propertyor the rents. Sometimes
that is after default. sometimes that is after an affirmative act of
possession is performed; not entitled to rents from subsequent
leases.
10062892_6 BUS
March 2006
~

::> '" al
"'''' 10
NO
CON
"'.c: N ()
'" ~
;::a; o '"
, ,

Assignment of Leases and Rents Issues
~ Assignment of Leases and Rents is a separate security
interest from Mortgage lien on land: does not merge into
sheriffs deed
~ Mere Lienholder status: no right to rent orpossession
prior to foreclosure; only senior tenants after foreclosure
~ Confirms direct relationship between Mortgagee and
Tenant, at Mortgagee's election
~ Authorizes direct payment of rent to Mortgagee upon
notice or obligation
!Ill Permits receipt of rent by Mortgagee, without possession
!Ill Precedes Mortgagee's dispossession remedies
10062892_6 BUS
March 2006
\ 15

Assignment ofLeases and Rents Issues
Absolute transfer to Mortgagee, license back to
Mortgagor: mimics Title Theory fiction for
Bankruptcy
10062892_6 BUS
March 2006
\ '16

Estoppel Issues
IIJ.'l
Estoppel: misnamed
o A bar to stop a change in position: "stoppab or dcsab up his
mouth"
o Stipulation - agreed upon facts even if wrong
o Representation - facts asserted to be right (reliance)
o Warranty - facts guaranteed to be right
10062892_6 BUS
March 2006
'\ 17

Estoppel Issues
~ Mortgage Rights - Rights to an Estoppel
o In Lease
o ByMortgagor if Tenant refuses - veryweak
• • • 1 • •
o Representations, warranties, covenants, moemmnes
10062892_6 BUS
March 2006
'\ 18

Estoppel Issues
fi1:
Conditions for Estoppel to Work for Mortgagee
o Lack of separate knowledge
o Lack of separate means to obtain knowledge
o Reliance on words or acts of estopped party
o Reliance was reasonable and in. good faith
o Action byMortgagee, based on reliance, was to Mortgagee's
detriment
10062892_6 BUS
March 2006
~

Estoppel Issues
Wi!
Remedies for a bad estoppel
o Limited case law
o Based on equity or contract
o May act as a lease modification
o Injunction against contraryposition to avoid inequity
o Damages for breach of contract
o Sometimes construed against «drafter," sometimes against
certifying party
10062892_6 BUS
March 2006
~

Estoppel ISSLles
~ Tenant Estoppel (:B&.presentations) for Mortgagee
10062892_6 BUS
March 2006
'\ 21

Estoppel Issues
~ Landlord Estoppel Covenants for Mortgagee
o Casualty and condemnation go to Mortgagee
u Notice of Tenant assignment and defaults
10062892_6 BUS
March 2006
\ 22

Estoppel Issues
fJ!
Tenant Estoppel Covenants for Mortgagee
o Notice and cure rights for Lease
o No lease modification, termination, assignment without
consent
o Payrent to Mortgagee upon notice
o Execute further assurances for Mortgagee
10062892_6 BUS
March 2006
LE

~ -cry
p ~ 11 c ~ l' ~~ P ~.
~'-I .~ton '\11\!\.'
.l1J-! V ~ ¥.t-" U ~ lL .ss.;» v ~,~ ~
A J.\..
~ Tenant Estoppel Release and Indemnity for Mortgagee
o Hazardous Materials
o Pre-existing Conditions
10062892_6 BUS
March 2006
~

SNDAIssues
l1iiJ
l1iiJ
l1iiJ
Subordination
o To place in a lower order
o All real property but no personal property based on estates:
estates are based on subordinate rights devolving from
Sovereign
Non-Disturbance
o Not disturb tenant's conveyed "quiet enjoyment" of
possession and covenanted lease rights
Attornment
o To "tum to" successor to landlord's estate as successor
landlord of leasehold estate and covenants
10062892_6 BUS
March 2006
'\ 25

Priority and Subordination
1. Senior Lease: before Mortgage becomes effective
a. Mortgagee actual knowledge of Lease
b. Mortgagee constructive knowledge of Lease
ill
!l.1
Lease recording
Tenant occupancy
10062892_6 BUS
March 2006
~

Priority and Subordination.
2. Senior Mortgage: before Lease becomes effective
a. Tenant actual knowledge of Mortgage
b. Tenant constructive knowledge of Mortgage
to!
Mortgage recording
c. Leasehold divested byforeclosure
d. Affirmation
I!ll
mil
!ll
Mortgagee: bynon-disturber
Tenant: by attornment
Actions: payment/acceptance of rent
10062892_6 BUS
March 2006
LE

Subordination Chart
SEN!OR !LEASE AND
SUBORDINATED
MORTGAGE
SENIOR
MORTGAGE
/1' Mortgage terms @ Lease terms subject to V subject to Lease Mortgage terms
~
terms, (casualty,
assignment, set-off)
®
I I
'1'
\j
SUBORDINATED AND
ATTORNED !LEASE
Lease terms
subject to
Mortgage terms
@ Mortgage foreclosure
Mortgage foreclosure
Mortgage foreclosure
does not affect lease: divests leasehold (may does not divest
automatically or may not terminate (disturb) lessee, but
preserved lease agreement) may affect covenants
@ ® Successor fee holder ® Mortgagee, for
Successor fee holder unbenefited. Either successor landlord,
subject to and ratifies and assumes in advance ratify and
beneficiary of lease and becomes assume lease and
which is preserved after successor landlord, or preserve it after
foreclosure; right to rent divests Lease. No foreclosure
by automatic attornment
automatic attornment,
(by statute 4 Anne Ch.
Tenant may be
16) and to reversion automatically divested
to its benefit
I
@
10062892_6 BUS
March 2006
\ 28

Subordination Issues between Mortgagee
(Successor Landlord) and Tenant
I&l
I&l
Before Foreclosure: Tenant Rights
Before Foreclosure: Mortgagee's Rights
o Take physical possession under mortgage remedies
o Rent collection (from Mortgagor) under assignment of rents
10062892_6 BUS
March 2006
~

Subordination Issues between Mortgagee
(Successor Landlord) and Tenant
!Ill
After Foreclosure
10062892_6 BUS
March 2006
~

Subordination Issues between Mortgagee
(Successor Landlord) and Tenant-Circuity
o When a lien is
subordinate to
Mortgage and a Lease
is later in time, if the
senior Mortgagee elects
to subordinate to the
Lease to preserve the
Lease, the later junior
lien may be senior in
lien to the senior
Mortgage.
FIRST
MORTGAGE
INTERVENING LIEN
LEASE
-
-li/!I;>
1-------,
FIRST
INTERVENING LIEN
LEASE
FIRST
MORTGAGE
10062892_6 BUS
March 2006
L2!

Subordination Issues between Mortgagee
(Successor Landlord) and Tenant-Circuity
o %en a Lease is
senior to Mortgage,
if it subordinates to
a subsequent lien,
the Mortgage may
be subordinate to
the lien. Doctrine
of impairment is
contrary.
LEASE
FIRST
MORTGAGE
LIEN
r-----'
I
FIRST
MORTGAGE
LIEN
-
LEASE
;+ LIEN
o..o
LEASE
FIRST
MORTGAGE
i
t...!I
10062892_6 BUS
March 2006
\ 32

Non~Disturbance Issues
between Mortgagee
(Successor Landlord) and Tenant
ill
Before Foreclosure
o Primacy of Lease provisions
o Primacy of Leasehold estate
10062892_6 BUS
March 2006
\ 33

Non-Disturbance Issues
between Mortgagee
(Successor Landlord) and Tenant
IIl1l
After Foreclosure
o Conditions:
o Issues of direct relationship (privity) bycontract with
unidentified Successor Landlord;
o Restrictions on subsequent owners
o Defacto recognition of tenant by acceptance of rent
o Formal ratification of lease
10062892_6 BUS
March 2006
'\ 34

(/)
:::>
III
CDJ~
NO
"'N CO""
CO N " ~
;:::;; o '"

Attornment Issues between Successor
Landlord and Tenant
II!i
After Foreclosure
o Creates direct relationship (privity) for propertyrights (estate)
o Prevents claims bySubordinate Tenant of automatic or
. ..
constructive termmanon
o Tenant wants reciprocal ratification and assumption by
Successor Landlord
10062892_6 BUS
March 2006
\ 36

SNDA "Extras" for Mortgagees From
(Weak) Tenants
!Ill
llII
Before Foreclosure: for Mortgagee
After Foreclosure: for SuccessorLandlord
o No Successor Landlord liability for prior landlord liabilities:
10062892_6 BUS
March 2006
LE

SNDA "Extras" for (Strong) Tenants from
Mortgagees
IiiIl
Before Foreclosure
10062892_6 BUS
March 2006
~

Subtle Strategies
iI
!Ill
iI
iI
iI
iI
IIlIt
Extinguish ("disturb") defaulted lease by divestiture
Do not automatically agree to "non-disturb" bad
subordinate leases
Lease amendments may subordinate it to the Mortgage
Guaranty Lease and Tenant's SNDA covenants
Tenant rights of recovery for prior Landlord defaults limited
to Landlord's interest in the realty. After foreclosure prior
landlord has no interest in realty
Recording the SNDA helps the otherwise subordinate partyin-interest
Lease guaranty may terminate on new lease orrestatement
instead of preserved by non-disturber/attornment
10062892_6 BUS
March 2006
'\ 39

AGREEMENT OF LANDLORD
by and among
_________J
and
December , 2006
PHIL! 711719-1

AGREEMENT OF LANDLORD
This AGREEMENT OF LANDLORD (this "Agreement") is made as of fDecember
~~~~~~~2~O~0~6,~b~y~an~~d among [ ], having an address at
t: (herein, together with its successors and assigns, "Landlord"), having
its principal place of business at [
J (herein, together with its successors
and assigns, "Tenant"), and as agent for the Secured Creditors (as defined in the Financing Agreement
referred to below) having its principal place of business at (herein, together with its successors and
assigns, the "Agent"),
RECITALS:
A. Reference is made to the Financing Agreement, dated as of [
among Tenant, the lenders from time to time party thereto (herein, together with
successors and assigns, the "Lenders") and Agent (the "Financing Agreement").
], by and
their respective
B. l'eHHHlc-hH s-,1gH,,,,,,j·-\

(b) The Lease has not been modified or amended except as set forth on Exhibit B
and the Leasej,)jnJ:UJ,U\)I;;J:,,~nQsJIQi;J, The Lease, as it may have been modified or amended contains
the entire agreement of Landlord and Tenant with respect to the Leased Property, (except for Ii) l\illC
,surviving representations, warranties, covelli!1lts.m:jndemnities ~et forth in that cel1ain Purch!llie and Sale
Agreement dated N=mber 15, 2006, by and belweeD-Ie,!l

guaranteed.
(I,)
2. Consent to Mortgage. Landlord consents to the execution and delivery by Tenant
to Agent, for the benefit of the Secured Creditors, of ~'iry-I-Rs+Hjffi_~lllildmortgage Cthe
"Le.aJ!e.huid.M9rtgage") mortgaging, pledging, conveying, transferring and assigning as security for the
Obligations, inter alia, Tenant's interest in the Lease and Tenant's leasehold interest in and to the Leased
Property, and to the recording of the Seeurity-l-l'ls+fUfl_+Le.

autQmatically be deemed tQ be thirty (30) days after the =Urrence Qf the Receil!L9f PQssessiQn, The
tenil "Per Diem AmQunt" meallS-an amQunt eguili

(a) Landlord agrees that, in the event of any default by Tenant in the performance of
any of its obligations under the Lease, including, without limitation, any default in the payment of rent
and other charges and impositions payable by Tenant thereunder, then, in each and every case, Agent may
(but shall not be obligated to) 0*e"*se any and a~-f-igJtls-B-I@l£'--Sliid default by Tenant under the
Lease by performance of said obligationJi in the name and on behalfofTenant.
(b) Landlord further agrees, prior to exercising any rights to terminate the Lease, that
Agent shall have the right, but not the obligation, to cure any curable default by Tenant under the Lease,
dtber (j) within five ~days following a Landlord Notice of Tellilllt Default with respect to the payment
of rent or other sums due thereunder aooQb(ijl not more than 91l days fo!-lewtng-il-L-BJldlord Notice of
G€4'atB+:tlliu!p.plicable cure periili! under the Lease with respect to other defaults curable by Agent,wi-t+!
such 90 B-aT!leriod beil:g e"ternk.~finite!y GO long as AgCR+-RilS comme-f\G€€-BJ~-ooeeding in a
GBffifl~TfOilWf\ab+e-+naHf1er to CUI'e-ffilob---t+e-faBll or to gain--rosnessioR of the Pr8j'l€l'ty-W-here-B-Uob
!7OS$SSioo-is-Hcecssary in--BF6cT to cure s'lCh defElu-J-t-(aHtl,iH slich ease-;--R7-~BW-i-ng the o\ltaining of SUBIl
posncssion,Agent--j3romplly eOH'trnees--and proceeds in-a--Tcasonably commBfC-iil! manner to cure 11l+eft
dBfffitJ-tl.
(c) In the event of a default under the Lease which is not capable of or susceptible to
cure.so long as Tenant r€;mains a party thereun_der, Agent shall have the option to enter into a new Lease
with Landlord upon termination of the Lease (whether by rejection in bankruptcy proceedings or
otherwise), which new Lease shall be directly between Landlord and Agent, shall be for a term equal to
the term of the Lease which would have remained absent such termination or rejection, and shall
otherwise be on terms identical to the terms of the Lease;"provideLh=ver. that Landlord's obligation
to enter in!.o-Sllch a Lease....sh.all in all cases be subiJ4;lJ.Q (i) said event o..Ldefault being cured there.b_y. or
uil said event of default being made Sllsceptible of cure ther~by and Agent's obJigat!J:lO to promptly cure
s.aid event of defa!!lt if it is of a contin!1ing nature.
8. No Modification or Tennination of Lease Without GeHWn+---e.J.Notice to Agent.
Landlord agrees not to accept any surrender of Tenant's leasehold estate and interest in the Land, Leased
Property, or any interest under the Lease nor agree to any termination or cancellation of the Lease,
whether pursuant to the terms thereof (including, but not limited to, any rights to terminate as a result of
damage to, or destruction of, the Improvements) or otherwise without til~-)C]3f

exercised as required by the Lease, all without the need to execute any further instruments on the part of
Landlord, Tenant or Agent to make such succession and assignment effective.
(b) Notwithstanding any provision of the Lease to the contrary, Agent may assign its
interest in the S€6l+l'ity-j.nstr'HffJBm~.hQlQM~gaM and the Additional Documents to any commercial
bank or other institntional lender, which assignee shall succeed to the rights and obligations of Agent
hereunder,
(c) Notwithstanding anYJlrovision of this Agreement to the C12utrary. th~ rigb.t£Jilld
interests of Tenant in and to the Leased PropertY..-and" the L~e shall not be assigned or in anyway
~ITed to a.Jhird::P.arty, other thau,Agynt or Agent's successor in interest to the Le,,&,sehSlld.l\101igfl&i'
and the Addil;iQnal Documents (which shall be a commercial banlLslLDJber institntional lender. as
pJ:illllded abovel. other than pursuant tQ_and in C.Q.mpJ!.ance with the termS,,, restrictions,..wnditiQns and
reguiremcrlt:Lof the lease (including. but not limited to. the prohibi.tioJ1S a,nl! restrictions on assigning and
subleasing therein).
10, Condemnation and Insurance Proceeds.
(a) Landlord agrees that (i) any proceeds of insurance pertaining to the Leased
Property-pavab.!§_trLTenan.Lp,ul:8Uant to the lease. or (ii) any award resulting from a taking of eminent
domain payable to Tenant pursuant to the L=,,-shall be paid in accordance with the tenus of the Lease
and any ffisf-mortgage encumbering the fee interest in the pr-ej,eftyL=d Proj2er!Y. Landlord shall have
no right to any portion of Tenant's payment,i-f-afl)'-; ill any condemnation award payable to Tenant
pursuant tQ the LeasJ),.JJ any so long as any portion of the obligations secured by the &~
InctrumontLeasehold Mortgage shall remain unpaid.
(b) The parties hereto agree that each of Tenant, Agent, Landlord, and any
mortgagee of Landlord's fee simple interest in the Leased Property shall be permitted to appear in, and
participate as interested parties, in any condemnation proceedings pertaining to the Leased Property,
subject to the limitations set forth in the Lease.
11. :WUi-YBJ'Sulli2rdjnatmn of Rights to Tenant's Personal Property. Landlord hereby
wa-i-¥esslJ1l.Qrdiu~in all respects to any security interest in and to the CollaJ~raJ now or hereafter held by
Agent any contractnal (including any which may be contained in the Lease) and/or statntory liens and any
rights ofdistress or distraint with respect to the PfBp~'f!y-0+-+e+\ffil{-(BT-+enant's suble;;;;ees, successors or
a;;signs, iflffilding Agen~)CQ]J_attral from time to time located within or upon the Leased Property
~'Hlfl{"-&-l'-r-eJl0f(N, which Landlord now has or hereafter may have during the term of the Lease or any
extension thereof. bandJord agrec-&--!'e-e*OC-0-K."-1H'lB-6B{i¥"""f;tl

13. Notices.
(a) Any and all notices required to be given hereunder shall be personally delivered,
delivered by reputable overnight courier or made by registered or certified mail, return receipt requested,
addressed to the parties at the following respective addresses or at such other address as the parties
hereafter may designate:
Notices to Agent shall be given to it at:
With a copy to:
Notices to Tenant shall be given to it at:
With a copy to:
And
Notices to Landlord shall be given to it at:
With a copy to:
With a col)){ to~
PHIL! 711719-1
7

Unless otherwise provided herein, any such notice or demand shall be deemed given when personally
delivered or, if delivered by ovemight courier, on the next business day, or, if mailed, three business days
after deposit in the United States Mail. All payments due hereunder shall, unless otherwise so directed by
the receiving party, be paid as such addresses.
14. No Oral Change. This Agreement and any provisions hereof may not be
modified, amended, waived, extended, changed, discharged or terminated orally, or by any act or failure
to act on the part of Landlord, Tenant or Agent, but only by an agreement in writing signed by the party
against whom the enforcement of any modification, amendment, waiver, extension, change, discharge or
termination is sought.
15. Authoritv. Tenant represents and warrants that it has full power and authority to
execute and deliver this Agreement and the execution and delivery of this Agreement has been duly
authorized and does not conflict with or constitute a default under any law, judicial order or other
agreement affecting Tenant or the Leased Property.
16. Inapplicable Provisions. If any term, covenant or condition of this Agreement is
held to be invalid, illegal or unenforceable in any respect, this Agreement shall be construed without such
provision.
17. Duplicate Originals: Counterparts. This Agreement may be executed in any
number of duplicate originals and each such duplicate original shall be deemed to be an original. This
Agreement may be executed in several counterparts, each of which counterparts shall be deemed an
original instrument and all ofwhich together shall constitute a single Agreement.
18. Goveming Law. This Agreement shall be govemed, construed, applied and
enforced in accordance with the laws ofthe state where the Land is located.
19. Joint and Several. If Tenant or Landlord consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and several.
20. Headings and Captions. The headings and captions of various paragraphs of this
Agreement are for convenience of reference only and are not to be construed as defining or limiting, in
any way, the scope or intent ofthe provisions hereof.
21. Number and Gender. Whenever the context may require, any pronouns used
herein shall include the corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
[Remainder of page intentionally left blank]
paILJ 711719-1
8

IN WITNESS WHEREOF, Landlord, Agent, and Tenant have executed this Agreement
as ofthe day and year first above written.
AGENT:
[ ---.1
as Agent
Print Name:
By
Name:
Title:
Print Name:
LANDLORD:
Print Name:
By
Name:
Title:
Print Name:
TENANT:
Print Name:
By
Name:
Title:
Print Name:
CLI·1464911v2
PHILl 711719·1

STATE G-F-==========--J )
COUNT¥-O-lF'-=========--)
On thi:;, tho __ day of _
' 2006, befor0-fflB-a-NDtary Publi~ the State
afore;;aid, l*'fS6f\il+lY~£H'8€ , to me Imown--(Bf
Sil#sfiletefi.l~ho acknowle4ged himself/horself to be the-
ef
[ _], aJw-ac-kRowledged :0 1110 that helsl10, as SUBh-ffi;j-y-al±IJ1B1~OO
effk-c.....-ef-[
] and being anthBrized to do so, exccuted the foregoing
instrument fef----l.J.'B----j3B'170seS therein oontai-noo by signing the name of
1:============_J-by-l~rnelfasuch duly au-thBfiud-BffiBBr.
tn--wftfloss whereoL I h"r-Blffite-BB-t my hand and amcial :leah
STA-T-E OF
COUNTY OF
0fl.4hil1, the __ day of , 2006, befor~wNe-ta-ry-Publio ef the State
aforesaid, persoHatly--i1tJj*arod _, te me Imewn (131'
sa:islactoril-Yi,HweJ.1), whe acknowledged hi~+hBfsB+f'-te-b

STATE-0F
) SS
)
GGUNT¥,-

EXHIBITB
Lease and All Modifications and Amendments
[
~~_ffiy-r'\greeJ11ent],
recorded-on
Reeocds (the-"Mortgage"),
J ("Mortaagee"), is ti,e-owner anB-llo1der ofthat~rv"lftgag.e
dated as-of
, 2006, granted by Lafl€lord to Mortgage%;
, 2006 in [Book __, Page __' of [county, stat"!], Land
---Mortgagee joinl1 in the c>H'l-€t'Boo of the foregoing--Agr€Ol11ont-B-f Landlord fOH-h~~
~'{ling w; fol~
2, MortgageB-eOfl;;Bnts-!B-+BJlant'!; encumbering i~1{-lkl-tnt-eres':in the P-fOj3

M.y COl1'1ff1issioH EJ~
"----------"C-;:,CLI-146491Iv2

arison done b
DeltaView on Frida , December 08, 2006 4:22:55 PM
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