Exhibit 10.1
LOAN AGREEMENT
Dated as of January 5, 2011
between
TERRAPINS OWNER LLC,
as Borrower,
and
UBS REAL ESTATE SECURITIES INC.,
as Lender

 

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TABLE OF CONTENTS

          Page
ARTICLE I
     
GENERAL TERMS
     
 
     
Section 1.1. The Loan
    25
Section 1.2. Interest and Principal
    26
Section 1.3. Method and Place of Payment
    27
Section 1.4. Taxes; Regulatory Change
    27
Section 1.5. Release
    29
 
     
ARTICLE II
     
DEFEASANCE AND ASSUMPTION
     
 
     
Section 2.1. Defeasance
    29
Section 2.2. Assumption
    31
Section 2.3. Transfers of Equity Interests in Borrower
    32
 
     
ARTICLE III
     
ACCOUNTS
     
 
     
Section 3.1. Cash Management Account
    33
Section 3.2. Distributions from Cash Management Account
    34
Section 3.3. Loss Proceeds Account
    35
Section 3.4. Basic Carrying Costs Escrow Account
    36
Section 3.5. [Intentionally Omitted]
    37
Section 3.6. FF&E Reserve Account
    37
Section 3.7. Deferred Maintenance and Environmental Escrow Account
    38
Section 3.8. Unfunded Obligations Account
    39
Section 3.9. Account Collateral
    40
Section 3.10. Bankruptcy
    41
 
     
ARTICLE IV
     
REPRESENTATIONS
     
 
     
Section 4.1. Organization
    41
Section 4.2. Authorization
    42
Section 4.3. No Conflicts
    42
Section 4.4. Consents
    42
Section 4.5. Enforceable Obligations
    42
Section 4.6. No Default
    42
Section 4.7. Payment of Taxes
    42
Section 4.8. Compliance with Law
    42
Section 4.9. ERISA
    43
Section 4.10. Investment Company Act
    43
Section 4.11. No Bankruptcy Filing
    43
Section 4.12. Other Debt
    43
Section 4.13. Litigation
    43

 

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          Page
Section 4.14. Leases; Material Agreements
    44
Section 4.15. Full and Accurate Disclosure
    45
Section 4.16. Financial Condition
    45
Section 4.17. Single-Purpose Requirements
    45
Section 4.18. Use of Loan Proceeds
    45
Section 4.19. Not Foreign Person
    45
Section 4.20. Labor Matters
    45
Section 4.21. Title
    46
Section 4.22. No Encroachments
    46
Section 4.23. Physical Condition
    46
Section 4.24. Fraudulent Conveyance
    46
Section 4.25. Management
    47
Section 4.26. Condemnation
    47
Section 4.27. Utilities and Public Access
    47
Section 4.28. Environmental Matters
    47
Section 4.29. Assessments
    48
Section 4.30. No Joint Assessment
    48
Section 4.31. Separate Lots
    48
Section 4.32. Permits; Certificate of Occupancy
    48
Section 4.33. Flood Zone
    48
Section 4.34. Security Deposits
    48
Section 4.35. Acquisition Documents
    49
Section 4.36. Insurance
    49
Section 4.37. No Dealings
    49
Section 4.38. Estoppel Certificates
    49
Section 4.39. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money
Laundering Laws
    49
Section 4.40. IDA Lease
    50
Section 4.41. Survival
    50
 
     
ARTICLE V
     
AFFIRMATIVE COVENANTS
     
 
     
Section 5.1. Existence
    51
Section 5.2. Maintenance of Property
    51
Section 5.3. Compliance with Legal Requirements
    51
Section 5.4. Impositions and Other Claims
    52
Section 5.5. Access to Property
    52
Section 5.6. Cooperate in Legal Proceedings
    52
Section 5.7. Leases
    53
Section 5.8. Plan Assets, etc.
    54
Section 5.9. Further Assurances
    54
Section 5.10. Management of Collateral
    55
Section 5.11. Notice of Material Event
    56
Section 5.12. Annual Financial Statements
    56
Section 5.13. Quarterly Financial Statements
    56
Section 5.14. Monthly Financial Statements; Non-Delivery of Financial Statements
    57
Section 5.15. Insurance
    58

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          Page
Section 5.16. Casualty and Condemnation
    63
Section 5.17. Annual Budget
    65
Section 5.18. Nonbinding Consultation
    66
Section 5.19. Compliance with Encumbrances and Material Agreements
    66
Section 5.20. Prohibited Persons
    66
Section 5.21. Operating Lease
    67
 
     
ARTICLE VI
     
NEGATIVE COVENANTS
     
 
     
Section 6.1. Liens on the Collateral
    67
Section 6.2. Ownership
    67
Section 6.3. Transfer; Change of Control
    67
Section 6.4. Debt
    67
Section 6.5. Dissolution; Merger or Consolidation
    67
Section 6.6. Change in Business
    68
Section 6.7. Debt Cancellation
    68
Section 6.8. Affiliate Transactions
    68
Section 6.9. Misapplication of Funds
    68
Section 6.10. Jurisdiction of Formation; Name
    68
Section 6.11. Modifications and Waivers
    68
Section 6.12. ERISA
    69
Section 6.13. Alterations and Expansions
    69
Section 6.14. Advances and Investments
    69
Section 6.15. Single-Purpose Entity
    69
Section 6.16. Zoning and Uses
    69
Section 6.17. Waste
    70
 
     
ARTICLE VII
     
DEFAULTS
     
 
     
Section 7.1. Event of Default
    70
Section 7.2. Remedies
    73
Section 7.3. No Waiver
    74
Section 7.4. Application of Payments after an Event of Default
    74
 
     
ARTICLE VIII
     
CONDITIONS PRECEDENT
     
 
     
Section 8.1. Conditions Precedent to Closing
    74
 
     
ARTICLE IX
     
MISCELLANEOUS
     
 
     
Section 9.1. Successors
    77
Section 9.2. GOVERNING LAW
    77
Section 9.3. Modification, Waiver in Writing
    78
Section 9.4. Notices
    78
Section 9.5. TRIAL BY JURY
    79
Section 9.6. Headings
    79
Section 9.7. Assignment and Participation
    79

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          Page
Section 9.8. Severability
    80
Section 9.9. Preferences; Waiver of Marshalling of Assets
    81
Section 9.10. Remedies of Borrower
    81
Section 9.11. Offsets, Counterclaims and Defenses
    82
Section 9.12. No Joint Venture
    82
Section 9.13. Conflict; Construction of Documents
    82
Section 9.14. Brokers and Financial Advisors
    82
Section 9.15. Counterparts
    82
Section 9.16. Estoppel Certificates
    82
Section 9.17. General Indemnity; Payment of Expenses; Mortgage Recording Taxes
    83
Section 9.18. No Third-Party Beneficiaries
    85
Section 9.19. Recourse
    85
Section 9.20. Right of Set-Off
    88
Section 9.21. Exculpation of Lender
    88
Section 9.22. Servicer
    88
Section 9.23. No Fiduciary Duty
    88
Section 9.24. Borrower Information
    90
Section 9.25. PATRIOT Act Records
    90
Section 9.26. Prior Agreements
    90
Section 9.27. Publicity
    91
Section 9.28. Delay Not a Waiver
    91
Section 9.29. Schedules and Exhibits Incorporated
    91
Section 9.30. Independence of Covenants
    91

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Exhibits

A    Organizational Chart B    Form of Tenant Notice C    Form of Uniform System
of Accounts

Schedules

A    Property B    Exception Report C    Deferred Maintenance Conditions D   
Post-Closing Matters E    Material Agreements F    Intentionally omitted G   
Leases

 

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LOAN AGREEMENT
     This Loan Agreement (this “Agreement”) is dated January 5, 2011 and is
between UBS REAL ESTATE SECURITIES INC., a Delaware corporation, as lender
(together with its successors and assigns, including any lawful holder of any
portion of the Indebtedness, as hereinafter defined, “Lender”), and TERRAPINS
OWNER LLC, a Delaware limited liability company, as borrower (together with its
permitted successors and assigns, “Borrower”).
RECITALS
     Borrower desires to obtain from Lender the Loan (as hereinafter defined) in
connection with the financing of the property known as the Skamania Lodge in
Stevenson, Washington.
     Lender is willing to make the Loan on the terms and conditions set forth in
this Agreement if Borrower joins in the execution and delivery of this
Agreement, issues the Note and executes and delivers the other Loan Documents.
     In consideration of the premises and the agreements, provisions and
covenants contained herein, and for other good and valuable consideration, the
sufficiency of which is hereby acknowledged, Lender and Borrower agree as
follows:
DEFINITIONS
     (a) When used in this Agreement, the following capitalized terms have the
following meanings:
     “Account Collateral” means, collectively, the Collateral Accounts and all
sums at any time held, deposited or invested therein, together with any interest
or other earnings thereon, and all securities and investment property credited
thereto and all proceeds thereof (including proceeds of sales and other
dispositions), whether accounts, general intangibles, chattel paper, deposit
accounts, instruments, documents or securities.
     “Affiliate” shall mean, as to any Person, any other Person that, directly
or indirectly, is in Control of, is Controlled by or is under common Control
with such Person or is a director or officer of such Person or of an Affiliate
of such Person.
     “Agreement” means this Loan Agreement, as the same may from time to time
hereafter be amended, restated, replaced, supplemented or otherwise modified.
     “ALTA” means the American Land Title Association, or any successor thereto.
     “Alteration” means any demolition, alteration, installation, improvement or
expansion of or to the Property or any portion thereof.
     “Annual Budget” means the Yearly Budget, as defined in the Approved
Management Agreement, which budget shall include, without limitation, a general
business plan, a capital

 

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replacement budget and such other items required under Section 3.2 of the
Approved Management Agreement.
     “Appraisal” means an as-is appraisal of the Property that is prepared by a
member of the Appraisal Institute selected by Lender, meets the minimum
appraisal standards for national banks promulgated by the Comptroller of the
Currency pursuant to Title XI of the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989, as amended (FIRREA) and complies with the Uniform
Standards of Professional Appraisal Practice (USPAP).
     “Approved Annual Budget” means (i) so long as no Event of Default or
Trigger Period shall be continuing, the Annual Budget and (ii) during the
continuance of an Event of Default and/or Trigger Period, the Annual Budget, as
approved by Lender in accordance with Section 5.17.
     “Approved Management Agreement” means that certain Management Agreement,
dated as of November 3, 2010, between Operating Lessee and the initial Approved
Property Manager, as amended by Amendment dated on or about the date hereof, as
the same may be further amended, restated, replaced, supplemented or otherwise
modified in accordance herewith with the consent of Lender, and any other
management agreement that is approved by Lender and with respect to which the
Rating Condition is satisfied, as the same may be amended, restated, replaced,
supplemented or otherwise modified in accordance herewith with the consent of
Lender.
     “Approved Property Manager” means (i) Destination Washington Management,
Inc. and, so long as it is an affiliate of Destination Hotels and Resorts,
(ii) a management company not affiliated with Sponsor (a) possessing no less
than five (5) years’ experience in managing hotel properties similar in size,
quality and value to the Property, (b) which is approved by the applicable hotel
franchisor of the Property, if any, and (c) managing at least ten (10) hotels in
multiple states, with multiple franchisors and having at least an aggregate of
1000 rooms, or (iii) any other management company approved by Lender and with
respect to which the Rating Condition is satisfied, in each case unless and
until Lender requests the termination of that management company pursuant to
Section 5.10(d).
     “Assignment” has the meaning set forth in Section 9.7(b).
     “Assumption” has the meaning set forth in Section 2.2.
     “Bankruptcy Code” has the meaning set forth in Section 7.1(d).
     “Basic Carrying Costs Escrow Account” has the meaning set forth in Section
3.4(a).
     “Borrower” has the meaning set forth in the first paragraph of this
Agreement.
     “Borrower FF&E Subsidiary” shall mean Skamania Lodge Furnishings, LLC, a
Delaware limited liability company, which is wholly-owned by Borrower.
     “Budgeted Operating Expenses” means, with respect to any calendar month,
(i) an amount equal to the Operating Expenses for such calendar month in the
then-applicable

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Approved Annual Budget, or (ii) such greater amount as shall equal Borrower’s
and/or Operating Lessee’s actual Operating Expenses for such month, except that
during the continuance of a Trigger Period such greater amount may in no event
exceed 105% of the amount specified in clause (i), with no individual budget
line item exceeding 110% of the amount set forth in the then-applicable Approved
Annual Budget with respect to such line item for such month, in each case
without the prior written consent of Lender, not to be unreasonably withheld or
delayed.
     “Business Day” means any day other than (i) a Saturday and a Sunday and
(ii) a day on which federally insured depository institutions in the State of
New York or the state in which the offices of Lender, its trustee, its Servicer
or its Servicer’s collection account are located are authorized or obligated by
law, governmental decree or executive order to be closed.
     “Capital Expenditure” means hard and soft costs incurred by Borrower (or
Operating Lessee) with respect to replacements and capital repairs made to the
Property (including repairs to, and replacements of, structural components,
roofs, building systems, parking garages and parking lots, but excluding
expenditures on FF&E), in each case to the extent capitalized in accordance with
GAAP.
     “Cash Management Account” has the meaning set forth in Section 3.1(a).
     “Cash Management Agreement” has the meaning set forth in Section 3.1(a).
     “Cash Management Bank” means a depository institution selected by Borrower
and reasonably approved by Lender in which Eligible Accounts may be maintained.
The initial Cash Management Bank shall be U.S. Bank, National Association.
     “Casualty” means a fire, explosion, flood, collapse, earthquake or other
casualty affecting all or any portion of the Property.
     “Cause” means, with respect to an Independent Director, (i) acts or
omissions by such Independent Director that constitute systematic and persistent
or willful disregard of such Independent Director’s duties, (ii) such
Independent Director has been indicted or convicted for any crime or crimes of
moral turpitude or dishonesty or for any violation of any Legal Requirements,
(iii) such Independent Director no longer satisfies the requirements set forth
in the definition of “Independent Director”, (iv) the fees charged for the
services of such Independent Director are materially in excess of the fees
charged by the other providers of Independent Directors listed in the definition
of “Independent Director “ or (v) any other reason for which the prior written
consent of Lender shall have been obtained.
     “Certificates” means, collectively, any senior and/or subordinate notes,
debentures or pass-through certificates, or other evidence of indebtedness, or
debt or equity securities, or any combination of the foregoing, representing a
direct or beneficial interest, in whole or in part, in the Loan.
     “Change of Control” means the occurrence of any of the following: (i) the
failure of Borrower to be Controlled by one or more Qualified Equityholders
(individually or collectively), (ii) the failure of Operating Lessee to be
Controlled by the same Qualified Equityholders that

3

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Control Borrower or (iii) the failure of the Single-Purpose Equityholder (if
any) to be Controlled by the same Qualified Equityholders that Control Borrower.
     “Closing Date” means the date of this Agreement.
     “Closing Date NOI” means $4,129,492 (before the Monthly FF&E Amount);
$3,369,292 (net of the Monthly FF&E Amount).
     “Code” means the Internal Revenue Code of 1986, as amended, and as it may
be further amended from time to time, any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.
     “Collateral” means (i) all assets owned from time to time by Borrower
(including the Borrower FF&E Subsidiary) and/or Operating Lessee including the
Property, the FF&E, the Revenues, and all other tangible and intangible property
(including any Defeasance Collateral and all of Borrower’s and Operating
Lessee’s respective right, title and interest in and to the Operating Lease and
the Approved Management Agreement) in respect of which Lender is granted a Lien
under the Loan Documents, and all proceeds thereof, and (ii) the Operating
Lessee Pledged Collateral.
     “Collateral Accounts” means, collectively, the Cash Management Account, the
Loss Proceeds Account, the Basic Carrying Costs Escrow Account, the FF&E Reserve
Account, the Qualified FF&E Account, the Qualified Operating Expense Account,
the Excess Cash Flow Reserve Account, the Seasonality Reserve Account and the
Deferred Maintenance and Environmental Escrow Account (if any).
     “Condemnation” means a taking or voluntary conveyance of all or part of the
Property or any interest therein or right accruing thereto or use thereof, as
the result of, or in settlement of, any condemnation or other eminent domain
proceeding by any Governmental Authority.
     “Contingent Obligation” means, with respect to any Person, any obligation
of such Person directly or indirectly guaranteeing any Debt of any other Person
in any manner and any contingent obligation to purchase, to provide funds for
payment, to supply funds to invest in any other Person or otherwise to assure a
creditor against loss.
     “Control” of any entity means the ownership, directly or indirectly, of at
least 51% of the equity interests in, and the right to at least 51% of the
distributions from, such entity and the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such
entity, whether through the ability to exercise voting power, by contract or
otherwise (“Controlled” and “Controlling” each have the meanings correlative
thereto).
     “Cooperation Agreement” means that certain Mortgage Loan Cooperation
Agreement, dated as of the Closing Date, among Borrower, Lender and Sponsor, as
the same may from time to time be amended, restated, replaced, supplemented or
otherwise modified in accordance herewith.
     “Damages” to a party means any and all liabilities, obligations, losses,
demands, damages, penalties, assessments, actions, causes of action, judgments,
proceedings, suits, claims,

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costs, expenses and disbursements of any kind or nature whatsoever (including
reasonable attorneys’ fees and other costs of defense and/or enforcement whether
or not suit is brought), fines, charges, fees, settlement costs and
disbursements imposed on, incurred by or asserted against such party, whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or
otherwise.
     “DBRS” means DBRS, Inc. or its applicable affiliate.
     “Debt” means, with respect to any Person, without duplication:
     (i) all indebtedness of such Person to any other party (regardless of
whether such indebtedness is evidenced by a written instrument such as a note,
bond or debenture), including indebtedness for borrowed money or for the
deferred purchase price of property or services;
     (ii) all letters of credit issued for the account of such Person and all
unreimbursed amounts drawn thereunder;
     (iii) all indebtedness secured by a Lien on any property owned by such
Person (whether or not such indebtedness has been assumed) except obligations
for impositions that are not yet due and payable;
     (iv) all Contingent Obligations of such Person;
     (v) all payment obligations of such Person under any interest rate
protection agreement (including any interest rate swaps, floors, collars or
similar agreements) and similar agreements;
     (vi) all contractual indemnity obligations of such Person; and
     (vii) any material actual or contingent liability to any Person or
Governmental Authority with respect to any employee benefit plan (within the
meaning of Section 3(3) of ERISA) subject to Title IV of ERISA, Section 302 of
ERISA or Section 412 of the Code.
     “Default” means the occurrence of any event that, but for the giving of
notice or the passage of time, or both, would be an Event of Default.
     “Default Interest” means, during the continuance of an Event of Default,
the amount by which interest accrued on the Notes at their respective Default
Rates exceeds the amount of interest that would have accrued on the Notes at
their respective Interest Rates.
     “Default Rate” means, with respect to any Note, the greater of (x) 4% per
annum in excess of the interest rate then applicable to such Note hereunder and
(y) 1% per annum in excess of the Prime Rate from time to time; provided that,
if the foregoing would result in an interest rate in excess of the maximum rate
permitted by applicable law, the Default Rate shall be limited to the maximum
rate permitted by applicable law.

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     “Defeasance Borrower” has the meaning set forth in Section 2.1(b).
     “Defeasance Collateral” means (i) direct full faith and credit obligations
of the United States of America that are not subject to prepayment, call or
early redemption or (ii) to the extent acceptable to the Rating Agencies, other
“government securities” within the meaning of Section 2(a)(16) of the Investment
Company Act of 1940, as amended.
     “Defeasance Pledge Agreement” has the meaning set forth in Section
2.1(a)(iii).
     “Defease” means to deliver Defeasance Collateral as substitute Collateral
for the Loan in accordance with Section 2.1 and to cause the Defeased Note to be
assumed by a Defeasance Borrower in accordance herewith; and the terms
“Defeased” and “Defeasance” have meanings correlative to the foregoing.
     “Deferred Maintenance Amount” means $0.
     “Deferred Maintenance Conditions” means those items described in
Schedule C.
     “Deferred Maintenance and Environmental Escrow Account” has the meaning set
forth in Section 3.7(a).
     “Eligible Account” shall mean a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account or
accounts (or subaccounts thereof) maintained with a federal or state-chartered
depository institution or trust company which complies with the definition of
Eligible Institution or (ii) a segregated trust account or accounts (or
subaccounts thereof) maintained with a federal or state chartered depository
institution or trust company acting in its fiduciary capacity that has a Moody’s
rating of at least “Baa3” and that, in the case of a state chartered depository
institution or trust company, is subject to regulations substantially similar to
12 C.F.R. §9.10(b), having in either case a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by federal and state
authority. An Eligible Account shall not be evidenced by a certificate of
deposit, passbook or other instrument.
     “Eligible Institution” shall mean a depository institution or trust company
insured by the Federal Deposit Insurance Corporation the short term unsecured
debt obligations or commercial paper of which are rated at least “A-1” by S&P,
“P-1” by Moody’s, and “F-1” by Fitch in the case of accounts in which funds are
held for thirty (30) days or less or, in the case of Letters of Credit or
accounts in which funds are held for more than thirty (30) days, the long term
unsecured debt obligations of which are rated at least “A+” by S&P, “A2” by
Moody’s and “AA-” by Fitch.
     “Embargoed Person” has the meaning set forth in Section 4.39.
     “Engineering Report” means a structural and seismic engineering report or
reports (including a “probable maximum loss” calculation, if applicable) with
respect to the Property prepared by an independent engineer approved by Lender
and delivered to Lender in connection with the Loan, and any amendments or
supplements thereto delivered to Lender.

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     “Environmental Claim” means any written notice, claim, proceeding, notice
of proceeding, investigation, demand, abatement order or other order or
directive by any Person or Governmental Authority alleging or asserting
liability with respect to Borrower, Operating Lessee or the Property arising out
of, based on, in connection with, or resulting from (i) the actual or alleged
presence, Use or Release of any Hazardous Substance, (ii) any actual or alleged
violation of any Environmental Law, or (iii) any actual or alleged injury or
threat of injury to property, health or safety, natural resources or to the
environment caused by Hazardous Substances.
     “Environmental Indemnity” means that certain environmental indemnity
agreement executed by Borrower and the Sponsor as of the Closing Date, as the
same may from time to time be amended, restated, replaced, supplemented or
otherwise modified in accordance herewith.
     “Environmental Laws” means any and all present and future federal, State of
Washington and local laws, statutes, ordinances, orders, rules, regulations and
the like, as well as common law, any judicial or administrative orders, decrees
or judgments thereunder, and any permits, approvals, licenses, registrations,
filings and authorizations, in each case as now or hereafter in effect, relating
to (i) the pollution, protection or cleanup of the environment, (ii) the impact
of Hazardous Substances on property, health or safety, (iii) the Use or Release
of Hazardous Substances, (iv) occupational safety and health, industrial hygiene
or the protection of human, plant or animal health or welfare or (v) the
liability for or costs of other actual or threatened danger to health or the
environment. The term “Environmental Law” includes, but is not limited to, the
following statutes, as amended, any successors thereto, and any regulations
promulgated pursuant thereto, and any State of Washington or local statutes,
ordinances, rules, regulations and the like addressing similar issues: the
Comprehensive Environmental Response, Compensation and Liability Act; the
Emergency Planning and Community Right-to-Know Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act (including
Subtitle I relating to underground storage tanks); the Clean Water Act; the
Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act;
the Occupational Safety and Health Act; the Federal Water Pollution Control Act;
the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species
Act; the National Environmental Policy Act; and the River and Harbors
Appropriation Act. The term “Environmental Law” also includes, but is not
limited to, any present and future federal state and local laws, statutes
ordinances, rules, regulations and the like, as well as common law, conditioning
transfer of property upon a negative declaration or other approval of a
Governmental Authority of the environmental condition of a property; or
requiring notification or disclosure of Releases of Hazardous Substances or
other environmental conditions of a property to any Governmental Authority or
other Person, whether or not in connection with transfer of title to or interest
in property.
     “Environmental Reports” means “Phase I Environmental Site Assessments” as
referred to in the ASTM Standards on Environmental Site Assessments for
Commercial Real Estate, E 1527-05 (and, if necessary, “Phase II Environmental
Site Assessments”), prepared by an independent environmental auditor approved by
Lender and delivered to Lender in connection with the Loan and any amendments or
supplements thereto delivered to Lender, and shall also include any other
environmental reports delivered to Lender pursuant to this Agreement and the
Environmental Indemnity.

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     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated thereunder.
     “ERISA Affiliate,” at any time, means each trade or business (whether or
not incorporated) that would, at the time, be treated together with Borrower or
Operating Lessee as a single employer under Title IV or Section 302 of ERISA or
Section 412 of the Code.
     “Event of Default” has the meaning set forth in Section 7.1.
     “Excess Cash Flow Reserve Account” has the meaning set forth in Section
3.9(a).
     “Exception Report” means the report prepared by Borrower and attached to
this Agreement as Schedule B, setting forth any exceptions to the
representations set forth in Article IV.
     “FF&E” means furniture, fixtures and equipment located in the Property.
     “Fiscal Quarter” means the three-month period ending on March 31, June 30,
September 30 and December 31 of each year, or such other fiscal quarter of
Borrower as Borrower may select from time to time with the prior consent of
Lender, such consent not to be unreasonably withheld.
     “Fiscal Year” means the 12-month period ending on December 31 of each year,
or such other fiscal year of Borrower as Borrower may select from time to time
with the prior consent of Lender, not to be unreasonably withheld.
     “Fitch” means Fitch, Inc. and its successors.
     “Force Majeure” means a delay due to acts of God, governmental
restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion,
fire, casualty, strikes, work stoppage, shortages of labor or materials or
similar causes beyond the reasonable control of Borrower; provided that, with
respect to any of such circumstances, for the purposes of this Agreement, (1)
any period of Force Majeure shall apply only to performance of the obligations
necessarily affected by such circumstance and shall continue only so long as
Borrower is continuously and diligently using all reasonable efforts to minimize
the effect and duration thereof; and (2) Force Majeure shall not include the
unavailability or insufficiency of funds.
     “Form W-8BEN” means Form W-8BEN (Certificate of Foreign Status of
Beneficial Owner for United States Tax Withholding) of the Department of
Treasury of the United States of America, and any successor form.
     “Form W-8ECI” means Form W-8ECI (Certificate of Foreign Person’s Claim for
Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America, and any successor form.
     “Funding Date” shall mean January 25, 2011.

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     “GAAP” means generally accepted accounting principles in the United States
of America, consistently applied.
     “Governmental Authority” means any federal, state, county, regional, local
or municipal government, any bureau, department, agency or political subdivision
thereof and any Person with jurisdiction exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(including any court).
     “Guaranty” means that certain guaranty, dated as of the Closing Date,
executed by Sponsor for the benefit of Lender, as the same may be amended,
restated, replaced, supplemented or otherwise modified in accordance herewith.
     “Hazardous Substances” means any and all substances (whether solid, liquid
or gas) defined, listed, or otherwise classified as pollutants, hazardous
wastes, hazardous substances, hazardous materials, extremely hazardous wastes,
toxic substances, toxic pollutants, contaminants, pollutants or words of similar
meaning or regulatory effect under any present or future Environmental Laws or
that may have a negative impact on human health or the indoor or outdoor
environment or the presence of which on, in or under the Property is prohibited
or requires investigation or remediation under Environmental Law, including
petroleum and petroleum by-products, asbestos and asbestos-containing materials,
microbial matters, polychlorinated biphenyls, lead and radon, and compounds
containing them (including gasoline, diesel fuel, oil and lead-based paint),
pesticides and radioactive materials, flammables and explosives and compounds
containing them.
     “Increased Costs” has the meaning set forth in Section 1.4(d).
     “Indebtedness” means the Principal Indebtedness, together with interest and
all other obligations and liabilities of Borrower under the Loan Documents,
including all transaction costs, Yield Maintenance Premiums and other amounts
due or to become due to Lender pursuant to this Agreement, under the Notes or in
accordance with any of the other Loan Documents, and all other amounts, sums and
expenses reimbursable by Borrower to Lender hereunder or pursuant to the Notes
or any of the other Loan Documents.
     “Indemnified Liabilities” has the meaning set forth in Section 9.19(b).
     “Indemnified Parties” has the meaning set forth in Section 9.17.
     “Independent Director” of any corporation or limited liability company
means an individual who is provided by CT Corporation, Corporation Service
Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart
Management Company, Lord Securities Corporation or, if none of those companies
is then providing professional independent directors, another
nationally-recognized company reasonably approved by Lender, in each case that
is not an affiliate of Borrower and that provides professional independent
directors and other corporate services in the ordinary course of its business,
and which individual is duly appointed as a member of the board of directors or
board of managers of such corporation or limited liability company and is not,
and has never been, and will not while serving as Independent Director be, any
of the following:

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     (i) a member (other than an independent, non-economic “springing” member),
partner, equityholder, manager, director, officer or employee of such
corporation or limited liability company or any of its equityholders or
affiliates (other than as an independent director or manager of an affiliate of
such corporation or limited liability company that is not in the direct chain of
ownership of such corporation or limited liability company and that is required
by a creditor to be a single purpose bankruptcy remote entity, provided that
such independent director or manager is employed by a company that routinely
provides professional independent directors or managers);
     (ii) a creditor, supplier or service provider (including provider of
professional services) to such corporation or limited liability company or any
of its equityholders or affiliates (other than a nationally recognized company
that routinely provides professional independent managers or directors and that
also provides lien search and other similar services to such corporation or
limited liability company or any of its equityholders or affiliates in the
ordinary course of business);
     (iii) a family member of any such member, partner, equityholder, manager,
director, officer, employee, creditor, supplier or service provider; or
     (iv) a Person that controls (whether directly, indirectly or otherwise) any
of (i), (ii) or (iii) above.
A natural person who otherwise satisfies the foregoing definition other than
subparagraph (i) by reason of being the Independent Director of a Single-Purpose
Entity affiliated with the corporation or limited liability company in question
shall not be disqualified from serving as an Independent Director of such
corporation or limited liability company, provided that the fees that such
natural person earns from serving as Independent Director of affiliates of such
the corporation or limited liability company in any given year constitute in the
aggregate less than five percent of such natural person’s annual income for that
year. The same natural persons may not serve as Independent Directors of a
corporation or limited liability company and, at the same time, serve as
Independent Directors of an equityholder or member of such corporation or
limited liability company.
     “Initial Interest Rate” means 5.4425% per annum, as same may be adjusted
pursuant to the Rate Lock Agreement.
     “Insurance Requirements” means, collectively, (i) all material terms of any
insurance policy required pursuant to this Agreement and (ii) all material
regulations and then-current standards applicable to or affecting the Property
or any portion thereof or any use or condition thereof, which may, at any time,
be recommended by the board of fire underwriters, if any, having jurisdiction
over the Property, or any other body exercising similar functions.
     “Insurance Reserve Exemption Period” has the meaning set forth in Section
3.4(d)(iii).
     “Interest Accrual Period” means each period from and including the eleventh
day of a calendar month through and including the tenth day of the immediately
succeeding calendar month; provided, that, prior to a Securitization, Lender
shall have the right, in connection with a

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change in the Payment Date in accordance with the definition thereof, to make a
corresponding change to the Interest Accrual Period. Notwithstanding the
foregoing, the first Interest Accrual Period shall commence on and include the
Funding Date.
     “Interest Rate” means (i) with respect to the initial Note, the Initial
Interest Rate, and (ii) with respect to each Note resulting from the bifurcation
of the initial Note into multiple Notes pursuant to Section 1.1(c), the per
annum interest rate of such Note as determined by Lender in accordance with such
Section.
     “Lease” means any lease (except the Operating Lease), license, letting,
concession, occupancy agreement or sublease to which Borrower and/or Operating
Lessee is a party or has a consent right, or other agreement (whether written or
oral and whether now or hereafter in effect) under which Borrower and/or
Operating Lessee is a lessor, sublessor, licensor or other grantor existing as
of the Closing Date or thereafter entered into by Borrower and/or Operating
Lessee, in each case pursuant to which any Person is granted a possessory
interest in, or right to use or occupy all or any portion of any space in the
Property, and every modification or amendment thereof, and every guarantee of
the performance and observance of the covenants, conditions and agreements to be
performed and observed by the other party thereto, excluding short-term
agreements in the ordinary course of business pursuant to which hotel rooms and
facilities are made available to individual hotel guests.
     “Leasing Commissions” means leasing commissions required to be paid by
Borrower or Operating Lessee in connection with the leasing of space to Tenants
at the Property pursuant to Leases entered into by Borrower or Operating Lessee
in accordance herewith and payable in accordance with third-party/arm’s-length
written brokerage agreements, provided that the commissions payable pursuant
thereto are commercially reasonable based upon the then current brokerage market
for property of a similar type and quality to the Property in the geographic
market in which the Property is located.
     “Legal Requirements” means all governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities (including Environmental Laws) affecting Borrower, Sponsor,
Operating Lessee, the Property or any other Collateral or any portion thereof or
the construction, ownership, use, alteration or operation thereof, or any
portion thereof (whether now or hereafter enacted and in force), and all
permits, licenses and authorizations and regulations relating thereto.
     “Lender” has the meaning set forth in the first paragraph of this Agreement
and in Section 9.7.
     “Lender 80% Determination” means a reasonable determination by Lender that,
based on a current or updated Appraisal, a broker’s price opinion by Jones Lang
LaSalle or Eastdil Secured (or such other broker satisfactory to Lender should
neither Jones Lang LaSalle nor Eastdil Secured be actively engaged in the
business of real estate valuation) or other written determination of value using
a commercially reasonable valuation method satisfactory to Lender, the fair
market value of the Property securing the Indebtedness at the time of such
determination (but excluding any value attributable to property that is not an
interest in real property within the

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meaning of section 860G(a)(3)(A) of the Code) is at least 80% of the amount of
the Indebtedness (including any accrued and unpaid interest) at the time of such
determination.
     “Lien” means any mortgage, lien (statutory or other), pledge,
hypothecation, assignment, preference, priority, security interest, or any other
encumbrance or charge on or affecting any Collateral or any portion thereof, or
any interest therein (including any conditional sale or other title retention
agreement, any sale-leaseback, any financing lease or similar transaction having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the Uniform Commercial Code
or comparable law of any other jurisdiction, domestic or foreign, and
mechanics’, materialmen’s and other similar liens and encumbrances, as well as
any option to purchase, right of first refusal, right of first offer or similar
right).
     “Loan” has the meaning set forth in Section 1.1(a).
     “Loan Amount” means $31,000,000.
     “Loan Documents” means this Agreement, the Note, the Mortgage (and related
financing statements), the Environmental Indemnity, the Subordination of
Property Management Agreement, the Subordination of Operating Lease, the Pledge
and Security Agreement (Equity), the Cash Management Agreement, the Cooperation
Agreement, the Guaranty, any Defeasance Pledge Agreement, the Qualified
Operating Expense Account Agreement, the Qualified FF&E Account Control
Agreement (if any), and all other agreements, instruments, certificates and
documents necessary to effectuate the granting to Lender of first-priority Liens
on the Collateral or otherwise in satisfaction of the requirements of this
Agreement or the other documents listed above, as all of the aforesaid may be
amended, restated, replaced, supplemented or otherwise modified from time to
time in accordance herewith.
     “Lockout Period” means the period from the Closing Date to but excluding
the first Payment Date following the earlier to occur of (i) the third
anniversary of the Closing Date and (ii) the second anniversary of the date on
which the entire Loan (including any subordinated interest therein) has been
Securitized pursuant to a Securitization or series of Securitizations.
     “Loss Proceeds” means amounts, awards or payments payable to Borrower,
Operating Lessee or Lender in respect of all or any portion of the Property in
connection with a Casualty or Condemnation thereof (after the deduction
therefrom and payment to Borrower, Operating Lessee and Lender, respectively, of
any and all reasonable expenses incurred by Borrower, Operating Lessee and
Lender in the recovery thereof, including all attorneys’ fees and disbursements,
the fees of insurance experts and adjusters and the costs incurred in any
litigation or arbitration with respect to such Casualty or Condemnation).
     “Loss Proceeds Account” has the meaning set forth in Section 3.3(a).
     “Major Lease” means any Lease that (i) when aggregated with all other
Leases at the Property with the same Tenant (or affiliated Tenants), and
assuming the exercise of all expansion rights and all preferential rights to
lease additional space contained in such Lease, is expected to cover more than
5,000 rentable square feet, (ii) contains an option or preferential right to

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purchase all or any portion of the Property, (iii) is with an affiliate of
Borrower as Tenant or (iv) is entered into during the continuance of an Event of
Default.
     “Material Adverse Effect” means a material adverse effect upon (i) the
ability of Borrower or Sponsor to perform, or of Lender to enforce, any material
provision of any Loan Document, (ii) the enforceability of any material
provision of any Loan Document, (iii) the ability of Operating Lessee to operate
the Property, or (iv) the value, Net Operating Income, use or enjoyment of the
Property or the operation or occupancy thereof.
     “Material Agreements” means (x) each contract and agreement (other than
Leases) relating to the Property, or otherwise imposing obligations on Borrower
or Operating Lessee, under which Borrower or Operating Lessee would have the
obligation to pay more than $150,000 per annum or that cannot be terminated by
Borrower or Operating Lessee without cause upon 60 days’ notice or less without
payment of a termination fee in excess of $10,000, or that is with an affiliate
of Borrower or Operating Lessee, (y) any material reciprocal easement agreement,
declaration of covenants, condominium documents, ground lease, material parking
agreement or other material Permitted Encumbrance and (z) the Operating Lease.
     “Material Alteration” means any Alteration to be performed by or on behalf
of Borrower or Operating Lessee at the Property that (a) is reasonably expected
to result in a Material Adverse Effect, (b) is reasonably expected to cost in
excess of $1,550,000, as determined by an independent architect, or (c) is
reasonably expected to permit (or is reasonably likely to induce) any Tenant
under a Major Lease to terminate its Lease or abate rent.
     “Maturity Date” means the Payment Date in February, 2016, or such earlier
date as may result from acceleration of the Loan in accordance with this
Agreement.
     “Minimum Balance” has the meaning set forth in Section 3.2(a).
     “Monthly FF&E Amount” means, with respect to any calendar month, an amount
equal to the greater of (1) four percent (4%) of Operating Income for the
immediately preceding calendar month, and (2) the amount required to be reserved
for FF&E pursuant to the Approved Management Agreement.
     “Moody’s” means Moody’s Investors Service, Inc. and its successors.
     “Mortgage” means that certain Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing encumbering the Property executed
by Borrower as of the Closing Date, as the same may from time to time be
amended, restated, replaced, supplemented or otherwise modified in accordance
herewith.
     “Net Operating Income” means, with respect to any Test Period, the excess
of (i) Operating Income for such Test Period, minus (ii) Operating Expenses for
such Test Period.
     “Nonconsolidation Opinion” means the opinion letter, dated the Closing
Date, delivered by Borrower’s counsel to Lender and addressing issues relating
to substantive consolidation in bankruptcy.

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     “Note(s)” means that certain promissory note, dated as of the Closing Date,
made by Borrower to the order of Lender to evidence the Loan, as such note may
be replaced by multiple Notes in accordance with Section 1.1(c) and as otherwise
assigned (in whole or in part), amended, restated, replaced, supplemented or
otherwise modified in accordance herewith.
     “OFAC List” means the list of specially designated nationals and blocked
persons subject to financial sanctions that is maintained by the U.S. Treasury
Department, Office of Foreign Assets Control and any other similar list
maintained by the U.S. Treasury Department, Office of Foreign Assets Control
pursuant to any applicable governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental
Authorities, including trade embargo, economic sanctions, or other prohibitions
imposed by Executive Order of the President of the United States. The OFAC List
currently is accessible through the internet website at
www.treas.gov/ofac/t11sdn.pdf.
     “Officer’s Certificate” means a certificate delivered to Lender that is
signed by an authorized officer of Borrower and certifies the information
therein to the best of such officer’s knowledge.
     “Open Prepayment Commencement Date” shall mean the Payment Date that occurs
three (3) months prior to the Maturity Date.
     “Operating Expenses” means, for any period, all operating, renting,
administrative, management, legal and other ordinary expenses of Borrower and,
without duplication, Operating Lessee and Approved Property Manager, during such
period, determined in accordance with GAAP and the Uniform System of Accounts
(excluding reserves for or expenditures on FF&E), plus a deemed expenditure in
respect of FF&E in an amount equal to the greater of (1) four percent (4%) of
Operating Income during such period and (2) the amount required to be reserved
for FF&E pursuant to the Approved Management Agreement; provided, however, that
such expenses shall not include (i) depreciation, amortization or other non-cash
items (other than expenses that are due and payable but not yet paid),
(ii) interest, principal or any other sums due and owing with respect to the
Loan, (iii) income taxes or other taxes in the nature of income taxes,
(iv) Capital Expenditures, or (v) equity distributions.
     “Operating Income” means, for any period, all operating income of Borrower
and, without duplication, Operating Lessee and Approved Property Manager, from
the Property during such period, determined in accordance with GAAP and the
Uniform System of Accounts (but without straight-lining of rents), including
without limitation: (i) all income and proceeds received from any lease,
Operating Lease and rental of rooms, exhibit, sales, commercial, meeting,
conference or banquet space within such Property, including net parking revenue,
and net income from vending machines, golf course fees, health club fees and
service charges; (ii) all income and proceeds received from food and beverage
operations and from catering services conducted from such Property even though
rendered outside of such Property; (iii) all income and proceeds from business
interruption, rental interruption and use and occupancy insurance with respect
to the operation of such Property (after deducting therefrom all necessary costs
and expenses incurred in the adjustment or collection thereof and solely to the
extent that such income and/or proceeds are allocable to such period); (iv) all
awards for temporary use (after deducting therefrom all costs incurred in the
adjustment or collection thereof and in restoration

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of such Property and solely to the extent that such award is allocable to such
period); (v) all income and proceeds from judgments, settlements and other
resolutions of disputes with respect to matters which would be includable in
this definition of “Operating Income” if received in the ordinary course of such
Property’s operation (after deducting therefrom all necessary costs and expenses
incurred in the adjustment or collection thereof); and (vi) interest on credit
accounts, rent concessions or credits, and other required pass-throughs; but
excluding, (1) gross receipts received by lessees, licensees or concessionaires
of such Property; (2) consideration received at such Property for hotel
accommodations, goods and services to be provided at other hotels, although
arranged by, for or on behalf of the Borrower, Operating Lessee or Approved
Property Manager; (3) income and proceeds from the sale or other disposition of
goods, capital assets and other items not in the ordinary course of such
Property’s operation; (4) federal, state and municipal excise, sales and use
taxes collected directly from patrons or guests of such Property as a part of or
based on the sales price of any goods, services or other items, such as gross
receipts, room, admission, cabaret or equivalent taxes; (5) awards (except to
the extent provided in clause (iv) above); (6) refunds of amounts not included
in Operating Expenses at any time and uncollectible accounts; (7) gratuities
collected by employees at such Property; (8) the proceeds of any financing;
(9) other income or proceeds resulting other than from the use or occupancy of
such Property, or any part thereof, or other than from the sale of goods,
services or other items sold on or provided from such Property in the ordinary
course of business; (10) any credits or refunds made to customers, guests or
patrons in the form of allowances or adjustments to previously recorded
revenues; (11) any revenue attributable to a Lease that is not a Qualifying
Lease; (12) any revenue attributable to a Lease to the extent it is paid more
than 30 days prior to the due date, (13) any interest income from any source
(except to the extent provided in clause (vi) above); (14) any repayments
received from any third party of principal loaned or advanced to such third
party by Borrower or Operating Lessee; (15) any proceeds resulting from the
Transfer of all or any portion of such Property, (16) Loss Proceeds (except to
the extent provided in clause (iii) above); and (17) any other extraordinary or
non-recurring items.
     “Operating Lease” means that certain Agreement of Lease dated November 3,
2010 by and between Borrower and Operating Lessee.
     “Operating Lessee” means TERRAPINS LESSEE, LLC.
     “Operating Lessee Pledged Collateral” means one hundred percent of the
equity interests in Operating Lessee, which shall be pledged by Pebblebrook
Hotel Lessee, Inc. to Lender as additional collateral for the Loan pursuant to
the Pledge and Security Agreement (Equity).
     “Participation” has the meaning set forth in Section 9.7(b).
     “PATRIOT Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001), as amended from time to time.
     “Payment Date” means, with respect to each Interest Accrual Period, the
sixth day of the calendar month in which such Interest Accrual Period ends (or,
if such day is not a Business Day, the first preceding Business Day); provided,
that prior to a Securitization, Lender shall have

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the right to change the Payment Date so long as a corresponding change to the
Interest Accrual Period is also made.
     “Permits” means all licenses, permits, variances and certificates used in
connection with the ownership, operation, use or occupancy of the Property
(including certificates of occupancy, business licenses, state health department
licenses, licenses to conduct business and all such other permits, licenses and
rights, obtained from any Governmental Authority or private Person concerning
ownership, operation, use or occupancy of the Property).
     “Permitted Debt” means:
     (i) the Indebtedness;
     (ii) Taxes that are not yet due and payable;
     (iii) tenant allowances and Capital Expenditures and product improvement
plan costs required under the Approved Management Agreement or any Leases or
otherwise permitted to be incurred under the Loan Documents that are paid on or
prior to the date when due; and
     (iv) Trade Payables, if any, that are not represented by a note,
customarily paid by Borrower or Operating Lessee within 60 days of incurrence
and in fact not more than 60 days outstanding, which are incurred in the
ordinary course of Borrower’s or Operating Lessee’s business with respect to the
Property, in amounts reasonable and customary for similar properties and not
exceeding 3.0% of the Loan Amount in the aggregate.
“Permitted Encumbrances” means:
     (i) the Liens created by the Loan Documents;
     (ii) all Liens and other matters specifically disclosed on Schedule B of
the Qualified Title Insurance Policy;
     (iii) Liens, if any, for Taxes not yet delinquent;
     (iv) mechanics’, materialmen’s or similar Liens, if any, and Liens for
delinquent taxes or impositions, in each case only if being diligently contested
in good faith and by appropriate proceedings, provided that no such Lien is in
imminent danger of foreclosure and provided further that either (a) each such
Lien is released or discharged of record or fully insured over by the title
insurance company issuing the Qualified Title Insurance Policy within 30 days of
its creation, or (b) Borrower deposits with Lender, by the expiration of such
30-day period, an amount equal to 150% of the dollar amount of such Lien or a
bond in the aforementioned amount from such surety, and upon such terms and
conditions, as is reasonably satisfactory to Lender, as security for the payment
or release of such Lien;

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     (v) rights of existing and future Tenants as tenants only pursuant to
written Leases entered into in conformity with the provisions of this Agreement;
and
     (vi) easements and other encroachments placed on the Property with the
prior written consent of Lender.
     “Permitted Investments” shall have the meaning set forth in the Cash
Management Agreement.
     “Person” means any natural person, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association or
Governmental Authority and any fiduciary acting in such capacity on behalf of
any of the foregoing.
     “Plan Assets” means assets of any (i) employee benefit plan (as defined in
Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in
Section 4975(e)(1) of the Code) subject to Section 4975 of the Code, or
(iii) governmental plan (as defined in Section 3(32) of ERISA) subject to
federal, state or local laws, rules or regulations substantially similar to
Title I of ERISA or Section 4975 of the Code.
     “Pledge and Security Agreement (Equity)” means that certain Pledge and
Security Agreement (Equity) dated the date hereof, by Pebblebrook Hotel Lessee,
Inc. in favor of Lender.
     “Policies” has the meaning set forth in Section 5.15(b).
     “Post-Closing Matters” means those items described in Schedule D.
     “Prepayment Period” means the period commencing on the Open Prepayment
Commencement Date and ending on the Maturity Date.
     “Prime Rate” means the “prime rate” published in the “Money Rates” section
of The Wall Street Journal. If The Wall Street Journal ceases to publish the
“prime rate,” then Lender shall select an equivalent publication that publishes
such “prime rate,” and if such “prime rate” is no longer generally published or
is limited, regulated or administered by a governmental or quasi-governmental
body, then Lender shall reasonably select a comparable interest rate index.
     “Principal Indebtedness” means the principal balance of the Loan
outstanding from time to time.
     “Prohibited Pledge” has the meaning set forth in Section 7.1(f).
     “Property” means the real property described on Schedule A, together with
all buildings and other improvements thereon and all personal property
encumbered by the Mortgage, together with all rights pertaining to such
property.
     “Qualified Equityholder” means (i) Sponsor (ii) any Person approved by
Lender with respect to which the Rating Condition is satisfied, (iii) a bank,
saving and loan association, investment bank, insurance company, trust company,
commercial credit corporation, pension plan, pension fund or pension advisory
firm, mutual fund, government entity or plan, real estate

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company, investment fund or an institution substantially similar to any of the
foregoing, provided in each case under this clause (iii) that such Person
(x) has total assets (in name or under management) in excess of $100,000,000 and
(except with respect to a pension advisory firm or similar fiduciary)
capital/statutory surplus or shareholder’s equity in excess of $100,000,000 (in
both cases, exclusive of the Property), and (y) is regularly engaged in the
business of owning and operating comparable properties in major metropolitan
areas, or (iv) any Person owned at least 51% by, and Controlled by, a Person
satisfying the requirements of clause (iii), but only during such time period as
such Person is so owned and Controlled.
     “Qualified FF&E Account” has the meaning set forth in Section 3.6(d).
     “Qualified FF&E Account Control Agreement” means an account control
agreement satisfactory to Lender which shall permit Borrower to have free access
to the amounts contained therein for the purposes permitted under the Loan
Documents, provided that, during the continuance of a Trigger Period or Event of
Default all amounts contained therein shall be remitted to the FF&E Reserve
Account and shall be administered in accordance with Section 3.6.
     “Qualified Operating Expense Account” means an Eligible Account maintained
by Operating Lessee at an Eligible Institution, which account (i) shall only
contain amounts in respect of Operating Expenses for the Property (and no
amounts unrelated to the Property shall be deposited therein or otherwise
commingled with the amounts on deposit in such account) and (ii) is subject to a
Qualified Operating Expense Account Agreement.
     “Qualified Operating Expense Account Agreement” means an agreement relating
to the Qualified Operating Expense Account, among Lender, Borrower and the
Eligible Institution at which such account is maintained, pursuant to which such
account is pledged to the Lender and Borrower is given full access to the funds
on deposit therein but provides for the discontinuance of such access upon
receipt by such Eligible Institution of written notice from Lender of the
occurrence of an Event of Default, as such agreement may be amended, restated,
replaced, supplemented or otherwise modified in accordance herewith.
     “Qualified Successor Borrower” means a Single-Purpose Entity that is
Controlled by one or more Qualified Equityholders.
     “Qualified Successor Operating Lessee” means a Single-Purpose Entity that
is Controlled by the same Qualified Equityholders that Control Qualified
Successor Borrower and is a successor to the Operating Lessee under the
Operating Lease.
     “Qualified Survey” means that certain ALTA land title survey of the
Property dated January 4, 2011, prepared by U.S. Surveyor and certified to
Borrower, the title company issuing the Qualified Title Insurance Policy and
Lender and their respective successors and assigns, in form and substance
reasonably satisfactory to Lender.
     “Qualified Title Insurance Policy” means an ALTA extended coverage
mortgagee’s title insurance policy in form and substance reasonably satisfactory
to Lender.
     “Qualifying Lease” means all Leases other than (i) Leases to a Tenant that
is not in occupancy at the Property and open for business at the Property and
(ii) Leases to a Tenant that

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is in default under its Lease or is the subject of bankruptcy or similar
insolvency proceedings (to the extent that such Tenant has not assumed such
Lease in bankruptcy).
     “Rate Lock Agreement” shall mean that certain interest rate lock agreement
dated December 23, 2010 between Borrower and Lender, as amended by that certain
amendment to interest rate lock agreement dated of even date herewith.
     “Rating Agency” shall mean, prior to the final Securitization of the Loan,
each of S&P, Moody’s, DBRS and Fitch, or any other nationally-recognized
statistical rating agency that has been designated by Lender and, after the
final Securitization of the Loan, shall mean any of the foregoing that have
rated and continue to rate any of the Certificates.
     “Rating Condition” means, with respect to any proposed action, the receipt
by Lender of confirmation in writing from each of the Rating Agencies that such
action shall not result, in and of itself, in a downgrade, withdrawal, or
qualification of any rating then assigned to any outstanding Certificates;
except that if all or any portion of the Loan has not been Securitized pursuant
to a Securitization rated by the Rating Agencies, then “Rating Condition” shall
instead mean the receipt of prior written approval of both (x) the applicable
Rating Agencies (if and to the extent that any portion of the Loan has been
Securitized pursuant to a Securitization or series of Securitizations rated by
such Rating Agencies (excluding shadow ratings)), and (y) Lender in its sole
discretion. No Rating Condition shall be regarded as having been satisfied
unless and until any conditions imposed on the effectiveness of any confirmation
from any Rating Agency shall have been satisfied. Lender shall have the right in
its sole discretion to waive a Rating Condition requirement with respect to any
Rating Agency that Lender determines has declined to review the applicable
proposal.
     “Regulatory Change” means any change after the Closing Date in federal,
state or foreign laws or regulations or the adoption or the making, after such
date, of any interpretations, directives or requests applying to a class of
banks or companies controlling banks, including Lender, of or under any federal,
state or foreign laws or regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged with the interpretation
or administration thereof.
     “Release” with respect to any Hazardous Substance means any release,
deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating,
injecting, pumping, pouring, emptying, escaping, dumping, disposing or other
movement of Hazardous Substances into the indoor or outdoor environment
(including the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata).
     “Rent Roll” has the meaning set forth in Section 4.14(a).
     “Revenues” means all rents (including percentage rent), rent equivalents,
moneys payable as damages pursuant to a Lease or in lieu of rent or rent
equivalents, royalties (including all oil and gas or other mineral royalties and
bonuses), income and (without duplication) Operating Income, receivables,
receipts, revenues, deposits (including security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other
consideration of whatever form or nature received by or paid to or for the
account of or benefit of Borrower or (without

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duplication) Operating Lessee or Approved Property Manager (only with respect to
the Property) from any and all sources including any obligations now existing or
hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of property or
rendering of services by Borrower or Operating Lessee and proceeds, if any, from
business interruption or other loss of income insurance.
     “S&P” means Standard & Poor’s Ratings Services, a division of the
McGraw-Hill Companies, Inc., and its successors.
     “Seasonality Reserve Account” shall have the meaning set forth in
Section 3.5 hereof.
     “Seasonality Reserve Required Balance” shall mean $524,694.
     “Securitization” means a transaction in which all or any portion of the
Loan is deposited into one or more trusts or entities that issue Certificates to
investors, or a similar transaction; and the term “Securitize” and “Securitized”
have meanings correlative to the foregoing.
     “Securitization Vehicle” means the issuer of Certificates in a
Securitization of the Loan.
     “Service” means the Internal Revenue Service or any successor agency
thereto.
     “Servicer” means the entity or entities appointed by Lender from time to
time to serve as servicer and/or special servicer of the Loan. If at any time no
entity is so appointed, the term “Servicer” shall be deemed to refer to Lender.
     “Single Member LLC” means a limited liability company that either (x) has
only one member, or (y) has multiple members, none of which is a Single-Purpose
Equityholder.
     “Single-Purpose Entity” means a Person that (a) was formed under the laws
of the State of Delaware solely for the purpose of acquiring and holding (i) an
ownership or leasehold interest in the Property (or, if applicable, Defeasance
Collateral), or (ii) in the case of a Single-Purpose Equityholder, an ownership
interest in the Borrower (or, if applicable, Defeasance Collateral), (b) does
not engage in any business unrelated to (i) the Property (or, if applicable,
Defeasance Collateral), or (ii) in the case of a Single-Purpose Equityholder,
its ownership interest in the Borrower (or, if applicable, Defeasance
Collateral), (c) does not have any assets other than those related to (i) the
Property (or, if applicable, Defeasance Collateral), or (ii) in the case of a
Single-Purpose Equityholder, its ownership interest in the Borrower (or, if
applicable, Defeasance Collateral), (d) does not have any Debt other than
Permitted Debt, (e) maintains books, accounts, records, financial statements,
stationery, invoices and checks that are separate and apart from those of any
other Person (except that such Person’s financial position, assets, results of
operations and cash flows may be included in the consolidated financial
statements of an affiliate of such Person in accordance with GAAP, provided that
any such consolidated financial statements shall contain a note indicating that
such Person and its affiliates are separate legal entities and maintain records,
books of account separate and apart from any other Person), (f) is subject to
and complies with all of the limitations on powers and separateness requirements
set forth in the organizational documentation of such Person as of the Closing
Date, (g) holds itself out as being a Person separate and apart from each other
Person and not as a division or part of another Person, (h) conducts its
business in its own name (except for services rendered

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under a management agreement with an affiliate, so long as the manager, or
equivalent thereof, under such management agreement holds itself out as an agent
of such Person), (i) exercises reasonable efforts to correct any known
misunderstanding actually known to it regarding its separate identity, and
maintains an arm’s-length relationship with its affiliates, (j) pays its own
liabilities out of its own funds (including the salaries of its own employees)
and reasonably allocates any overhead that is shared with an affiliate,
including paying for shared office space and services performed by any officer
or employee of an affiliate, (k) maintains a sufficient number of employees in
light of its contemplated business operations, (l) conducts its business so that
the assumptions made with respect to it that are contained in the
Nonconsolidation Opinion shall at all times be true and correct in all material
respects, (m) maintains its assets in such a manner that it will not be costly
or difficult to segregate, ascertain or identify its individual assets from
those of any other Person, (n) observes all applicable entity-level formalities
in all material respects, (o) does not commingle its assets with those of any
other Person and holds such assets in its own name, (p) does not assume,
guarantee or become obligated for the debts of any other Person, and does not
hold out its credit as being available to satisfy the obligations or securities
of others, (q) does not acquire obligations or securities of its shareholders,
members or partners, (r) does not pledge its assets for the benefit of any other
Person (except, in the case of Operating Lessee, a pledge of its assets for the
benefit of Borrower pursuant to any Loan Document) and does not make any loans
or advances to any Person, (s) intends to maintain adequate capital in light of
its contemplated business operations (unless any such failure to maintain
adequate capital, is due solely to an insufficiency in gross income from the
operation of the Property); provided, however, that the foregoing shall not
require any member, partner or beneficiary to make additional capital
contributions, (t) has two Independent Directors on its board of directors or
board of managers, or, in the case of a limited partnership, has a
Single-Purpose Equityholder with two Independent Directors on such
Single-Purpose Equityholder’s board of directors or board of managers, and has
organizational documents that prohibit replacing any Independent Director
without Cause and without giving at least two Business Days’ prior written
notice to Lender (except in the case of the death, legal incapacity, or
voluntary non-collusive resignation of an Independent Director, in which case no
prior notice to Lender or the Rating Agencies shall be required in connection
with the replacement of such Independent Director with a new Independent
Director that is provided by any of the companies listed in the definition of
“Independent Director”), (u) has by-laws or an operating agreement, or, in the
case of a limited partnership, has a Single-Purpose Equityholder with by-laws or
an operating agreement, which provides that, for so long as the Loan is
outstanding, such Person shall not take or consent to any of the following
actions except to the extent expressly permitted in this Agreement and the other
Loan Documents:
     (i) the dissolution, liquidation, consolidation, merger or sale of all or
substantially all of its assets (and, in the case of a Single-Purpose
Equityholder, the assets of the Borrower);
     (ii) the engagement by such Person (and, in the case of a Single-Purpose
Equityholder, the engagement by the Borrower) in any business other than the
acquisition, development, management, leasing, ownership, maintenance and
operation of the Property and activities incidental thereto (and, in the case of
a Single-Purpose Equityholder, activities incidental to the acquisition and
ownership of its interest in the Borrower);

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     (iii) the filing, or consent to the filing, of a bankruptcy or insolvency
petition, any general assignment for the benefit of creditors or the institution
of any other insolvency proceeding, or the seeking or consenting to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official in respect of such Person without the
affirmative vote of both of its Independent Directors (and, in the case of a
Single-Purpose Equityholder, in respect of the Borrower without the affirmative
vote of both of such Single-Purpose Equityholder’s Independent Directors); and
     (iv) any amendment or modification of any provision of its (and, in the
case of a Single-Purpose Equityholder, the Borrower’s) organizational documents
relating to qualification as a “Single-Purpose Entity”,
and (v) if such entity is a Single Member LLC, has organizational documents that
provide that upon the occurrence of any event (other than a permitted equity
transfer) that causes its sole member to cease to be a member while the Loan is
outstanding, at least one of its Independent Directors shall automatically be
admitted as the sole member of the Single Member LLC and shall preserve and
continue the existence of the Single Member LLC without dissolution.
     “Single-Purpose Equityholder” means a Single-Purpose Entity that (x) is a
limited liability company or corporation formed under the laws of the State of
Delaware, (y) owns at least a 1% direct equity interest in Borrower (or a lesser
amount, providing that Lender receives appropriate legal opinions with respect
thereto), and (z) serves as the general partner or managing member of Borrower.
     “Smith Travel Reports” means a “STAR Program Report” with respect to the
Property prepared by Smith Travel Research, Inc, or its successors and assigns.
     “Sponsor” means Pebblebrook Hotel Trust.
     “Subordination of Operating Lease” means that certain Subordination of
Operating Lease executed by Operating Lessee and Borrower as of the Closing
Date, as the same may from time to time be amended, restated, replaced,
supplemented or otherwise modified in accordance herewith.
     “Subordination of Property Management Agreement” means that certain Consent
and Agreement of Manager and Subordination and Non-Disturbance of Management
Agreement executed by Operating Lessee and the Approved Property Manager as of
the Closing Date, as the same may from time to time be amended, restated,
replaced, supplemented or otherwise modified in accordance herewith.
     “Taxes” means all real estate and personal property taxes, assessments,
fees, taxes on rents or rentals, water rates or sewer rents, facilities and
other governmental, municipal and utility district charges or other similar
taxes or assessments now or hereafter levied or assessed or imposed against the
Property, Borrower or Operating Lessee with respect to the Property or rents
therefrom, or the Operating Lessee Pledged Collateral or that may become Liens
upon the Property, without deduction for any amounts reimbursable to Borrower or
Operating Lessee by third parties.

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     “Tax Reserve Exemption Period” has the meaning set forth in
Section 3.4(d)(i).
     “Tenant” means any Person liable by contract or otherwise to pay monies
(including a percentage of gross income, revenue or profits) pursuant to a
Lease.
     “Tenant Improvements” means, collectively, (i) tenant improvements to be
undertaken for any Tenant that are required to be completed by or on behalf of
Borrower or Operating Lessee pursuant to the terms of such Tenant’s Lease, and
(ii) tenant improvements paid or reimbursed through allowances to a Tenant
pursuant to such Tenant’s Lease.
     “Tenant Notice” has the meaning set forth in Section 3.1(b).
     “Test Period” means each 12-month period ending on the last day of a Fiscal
Quarter.
     “Trade Payables” means unsecured amounts payable by or on behalf of
Borrower or Operating Lessee for or in respect of the operation of the Property
in the ordinary course and that would under GAAP and the Uniform System of
Accounts be regarded as ordinary expenses, including amounts payable to
suppliers, vendors, contractors, mechanics, materialmen or other Persons
providing property or services to the Property, Borrower or Operating Lessee and
the capitalized amount of any ordinary-course financing leases.
     “Transaction” means, collectively, the transactions contemplated and/or
financed by the Loan Documents.
     “Transfer” means the sale or other whole or partial conveyance of all or
any portion of the Property or any direct or indirect interest therein,
including granting of any purchase options, rights of first refusal, rights of
first offer or similar rights in respect of any portion of the Property or the
subjecting of any portion of the Property to restrictions on transfer; except
that the conveyance of a space lease at the Property in accordance herewith
shall not constitute a Transfer.
     “Treasury Note Rate” shall mean, at the time of the prepayment, as
applicable, the rate of interest per annum equal to the yield to maturity
(converted by Lender to the equivalent monthly yield using Lender’s then system
of conversion) of the United States Treasury obligations selected by the holder
of the Note having maturity dates closest to, but not exceeding, the remaining
term to the Open Prepayment Commencement Date.
     “Trigger Level” means Closing Date NOI times 80%.
     “Trigger Period” means any period from (a) the conclusion of any Test
Period during which Net Operating Income is less than the Trigger Level, to
(b) the conclusion of any Test Period thereafter during which Net Operating
Income is equal to or greater than the Trigger Level.
     “Uniform System of Accounts” means the “Uniform System of Accounts for the
Lodging Industry” (tenth edition) published by The American Hotel & Lodging
Association Educational Institute.

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     “Use” means, with respect to any Hazardous Substance, the generation,
manufacture, processing, distribution, handling, possession, use, discharge,
placement, treatment, disposal, disposition, removal, abatement, recycling or
storage of such Hazardous Substance or transportation of such Hazardous
Substance.
     “U.S. Person” means a United States person within the meaning of
Section 7701(a)(30) of the Code.
     “U.S. Tax” means any present or future tax, assessment or other charge or
levy imposed by or on behalf of the United States of America or any taxing
authority thereof.
     “Waste” means any material abuse or destructive use (whether by action or
inaction) of the Property.
     “Yield Maintenance Premium” shall mean an amount equal to the excess, if
any, of (a) the present value (determined using a discount rate equal to the
Treasury Note Rate at such time) of all scheduled payments of principal and
interest payable in respect of the principal amount of the Loan being prepaid
provided that the Note shall be deemed, for purposes of this definition, to be
due and payable on the Open Prepayment Commencement Date, over (b) the principal
amount of the Loan being prepaid;
provided that, the Yield Maintenance Premium shall not be less than 3% of the
amount prepaid.
     The calculation of the Yield Maintenance Premium shall be made by Lender
and shall, absent manifest error, be final, conclusive and binding upon all
parties.
     (b) Rules of Construction. All references to sections, schedules and
exhibits are to sections, schedules and exhibits in or to this Agreement unless
otherwise specified. Unless otherwise specified: (i) all meanings attributed to
defined terms in this Agreement shall be equally applicable to both the singular
and plural forms of the terms so defined, (ii) “including” means “including, but
not limited to”, (iii) “mortgage” means a mortgage, deed of trust, deed to
secure debt or similar instrument, as applicable, and “mortgagee” means the
secured party under a mortgage, deed of trust, deed to secure debt or similar
instrument and (iv) the words “hereof,” “herein,” “hereby,” “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision, article, section or
other subdivision of this Agreement. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with GAAP, as the
same may be modified in this Agreement. Each covenant of Borrower contained
herein or in any other Loan Document (including, without limitation, covenants
relating to the Property) shall be construed to mean that Borrower shall comply
or cause the Operating Lessee to comply with such covenant; and any failure by
the Operating Lessee to comply with any such covenant shall constitute a Default
or Event of Default hereunder or under such other Loan Document, as applicable,
even though Operating Lessee is not a party to this Agreement or such other Loan
Document. For the avoidance of doubt, the foregoing shall not impose on
Operating Lessee any liability to pay the Indebtedness.

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ARTICLE I
GENERAL TERMS
     Section 1.1. The Loan.
     (a) On the Closing Date, subject to the terms and conditions of this
Agreement, Lender shall make a loan to Borrower (the “Loan”) in an amount equal
to the Loan Amount, which Loan shall be disbursed on the Funding Date pursuant
to the terms hereof. The Loan shall initially be represented by a single Note
that shall bear interest as described in this Agreement at a per annum rate
equal to the Initial Interest Rate.
     (b) The Loan shall be secured by the Collateral pursuant to the Mortgage
and the other Loan Documents.
     (c) Lender shall have the right at any time, at Lender’s sole discretion,
to replace the initial Note with two or more replacement Notes, and the holder
of each replacement Note shall similarly have the right at any time, at such
holder’s sole discretion, to replace its Note with two or more replacement
Notes. Each replacement Note shall be in the form of the Note so replaced, but
for its principal amount and Interest Rate. The principal amount of each Note
shall be determined by the applicable holder in its sole discretion, provided
that the initial sum of the principal amounts of the replacement Notes shall
equal the then-outstanding principal balance of the Notes that are so replaced.
The Interest Rate of each replacement Note shall be determined by the applicable
holder in its sole discretion, provided that the initial weighted average of
such Interest Rates, weighted on the basis of the principal balances of the
respective Notes, shall initially equal the Interest Rate of the Note so
replaced. Borrower shall execute and return to Lender each such Note within two
Business Days after Borrower’s receipt of an execution copy thereof, and
Borrower’s failure to do so within such time period shall, at Lender’s election,
constitute an immediate Event of Default hereunder. Borrower hereby authorizes
and appoints Lender as its attorney-in-fact to execute such replacement Notes on
Borrower’s behalf should Borrower fail to do so. The foregoing grant of
authority is a power of attorney coupled with an interest and such appointment
shall be irrevocable for the term of this Agreement. Borrower hereby ratifies
all actions that such attorney shall lawfully take or cause to be taken in
accordance with this Section 1.1(c). If requested by Lender, Borrower shall
deliver to Lender, together with such replacement Notes, an opinion of counsel
with respect to the due authorization and enforceability of such replacement
Notes and confirming that the delivery of such replacement Notes does not alter
the conclusions reached in the legal opinions delivered to Lender at Closing.
     (d) The Loan shall be disbursed on the Funding Date upon delivery to Lender
of a date down endorsement to the Qualified Title Insurance Policy in form and
substance acceptable to Lender and dated as of the Funding Date, satisfaction of
all Post-Closing Matters pursuant to Section 5.22 hereof, payment of all costs
due under the Rate Lock Agreement, and the payment of all fees and costs of
Lender’s counsel and all other third party out-of-pocket expenses incurred in
connection with the funding of the Loan. Failure to satisfy the foregoing on or
before 3:00 p.m., New York City time, on the Funding Date shall be an immediate
Event of Default, and shall terminate Lender’s obligation to fund the Loan.

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     Section 1.2. Interest and Principal.
     (a) On each Payment Date Borrower shall pay to Lender a constant monthly
payment of $174,897.86, which amount shall be applied first toward the payment
of interest on each Note for the applicable Interest Accrual Period at the
applicable Interest Rate (except that in each case, interest shall be payable on
the Indebtedness, including due but unpaid interest, at the Default Rate with
respect to any portion of such Interest Accrual Period falling during the
continuance of an Event of Default, in which case the monthly payment shall be
increased by the amount of Default Interest that shall accrue on the Notes
during the applicable Interest Accrual Period), and the balance shall be applied
toward the reduction of the outstanding principal balances of the Notes pro rata
in accordance with their then outstanding principal balances. On the Funding
Date, Borrower shall pay interest from and including the Funding Date through
the end of the first Interest Accrual Period. Interest payable hereunder shall
be computed on the basis of a 360-day year and the actual number of days elapsed
in the related Interest Accrual Period.
     (b) No prepayments of the Loan shall be permitted except for
(i) prepayments resulting from Casualty or Condemnation as described in
Section 5.16(f), and (ii) a prepayment of the Loan in whole (but not in part)
during the Prepayment Period on not less than 15 days prior written notice;
provided that any prepayment hereunder shall be accompanied by all interest
accrued on the amount prepaid, plus the amount of interest that would have
accrued thereon if the Loan had remained outstanding through the end of the
Interest Accrual Period in which Payment Date following the date of such
prepayment occurs (or is such prepayment occurs on a Payment Date, the amount of
interest that would have accrued thereon if the Loan had remained outstanding
through the end of the Interest Accrual Period in which such Payment Date
occurs), plus all other amounts then due under the Loan Documents. Borrower’s
notice of prepayment shall create an obligation of Borrower to prepay the Loan
as set forth therein, but may be rescinded with five days’ written notice to
Lender (subject to payment of any out-of-pocket costs and expenses resulting
from such rescission). In addition, Defeasance shall be permitted after the
expiration of the Lockout Period as described in Section 2.1. The entire
outstanding principal balance of the Loan, together with interest through the
end of the applicable Interest Accrual Period and all other amounts then due
under the Loan Documents, shall be due and payable by Borrower to Lender on the
Maturity Date.
     (c) If all or any portion of the Principal Indebtedness is paid to Lender
following acceleration of the Loan, Borrower shall pay to Lender an amount equal
to the applicable Yield Maintenance Premium. No Yield Maintenance Premium shall
be payable in the case of a prepayment of principal (or any portion thereof)
pursuant to Section 5.16(f). Amounts received in respect of the Indebtedness
during the continuance of an Event of Default shall be applied toward interest,
principal and other components of the Indebtedness (in such order as Lender
shall determine) before any such amounts are applied toward payment of Yield
Maintenance Premiums, with the result that Yield Maintenance Premiums shall
accrue as the Principal Indebtedness is repaid but no amount received from
Borrower shall constitute payment of a Yield Maintenance Premium until the
remainder of the Indebtedness shall have been paid in full. Borrower
acknowledges that (i) a prepayment will cause damage to Lender; (ii) the Yield
Maintenance Premium is intended to compensate Lender for the loss of its
investment and the expense incurred and time and effort associated with making
the Loan, which will not be fully

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repaid if the Loan is prepaid; (iii) it will be extremely difficult and
impractical to ascertain the extent of Lender’s damages caused by a prepayment
after an acceleration or any other prepayment not permitted by the Loan
Documents; and (iv) the Yield Maintenance Premium represents Lender’s and
Borrower’s reasonable estimate of Lender’s damages from the prepayment and is
not a penalty.
     (d) Any payments of interest and/or principal not paid when due hereunder
shall bear interest at the applicable Default Rate and, in the case of all
payments due hereunder other than the repayment of the Principal Indebtedness on
the Maturity Date or on any other earlier date as a result of an acceleration of
the Loan, when paid, shall be accompanied by a late fee in an amount equal to
the lesser of three and one-half percent (3.5%) of such unpaid sum and the
maximum amount permitted by applicable law in order to defray a portion of the
expense incurred by Lender in handling and processing such delinquent payment
and to compensate Lender for the loss of the use of such delinquent payment.
     Section 1.3. Method and Place of Payment. Except as otherwise specifically
provided in this Agreement, all payments and prepayments under this Agreement
and the Notes (including any deposit into the Cash Management Account pursuant
to Section 3.2(c)) shall be made to Lender not later than 1:00 p.m., New York
City time, on the date when due (except in the case of the payment made on the
Maturity Date, which shall be made not later than 2:00 p.m., New York City time)
and shall be made in lawful money of the United States of America by wire
transfer in federal or other immediately available funds to the account
specified from time to time by Lender. Any funds received by Lender after such
time shall be deemed to have been paid on the next succeeding Business Day.
Lender shall notify Borrower in writing of any changes in the account to which
payments are to be made. If the amount received from Borrower (or from the Cash
Management Account pursuant to Section 3.2(b)) is less than the sum of all
amounts then due and payable hereunder, such amount shall be applied, at
Lender’s sole discretion, either toward the components of the Indebtedness
(e.g., interest, principal and other amounts payable hereunder) and the Notes,
in such sequence as Lender shall elect in its sole discretion, or toward the
payment of Property expenses.
     Section 1.4. Taxes; Regulatory Change.
     (a) Borrower agrees to indemnify Lender against any present or future
stamp, documentary or other similar or related taxes or other similar or related
charges now or hereafter imposed, levied, collected, withheld or assessed by any
United States Governmental Authority by reason of the execution and delivery of
the Loan Documents and any consents, waivers, amendments and enforcement of
rights under the Loan Documents.
     (b) If Borrower is required by law to withhold or deduct any amount from
any payment hereunder in respect of any U.S. Tax, Borrower shall withhold or
deduct the appropriate amount, remit such amount to the appropriate Governmental
Authority and pay to each Person to whom there has been an Assignment or
Participation of a Loan and who is not a U.S. Person such additional amounts as
are necessary in order that the net payment of any amount due to such non-U.S.
Person hereunder after deduction for or withholding in respect of any U.S. Tax
imposed with respect to such payment (or in lieu thereof, payment of such U.S.
Tax by such non-U.S. Person), will not be less than the amount stated in this
Agreement to be then due and

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payable; except that the foregoing obligation to pay such additional amounts
shall not apply (i) to any assignee that has not complied with the obligations
contained in Section 9.7(c), (ii) to any U.S. Taxes imposed solely by reason of
the failure by such Person (or, if such Person is not the beneficial owner of
the relevant Loan, such beneficial owner) to comply with applicable
certification, information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections with the United
States of America of such Person (or beneficial owner, as the case may be) if
such compliance is required by statute or regulation of the United States of
America as a precondition to relief or exemption from such U.S. Taxes; or
(iii) with respect to any Person who is a fiduciary or partnership or other than
the sole beneficial owner of such payment, to any U.S. Tax imposed with respect
to payments made under any Note to a fiduciary or partnership to the extent that
the beneficial owner or member of the partnership would not have been entitled
to the additional amounts if such beneficial owner or member of the partnership
had been the holder of the Note.
     (c) Within 30 days after paying any amount from which it is required by law
to make any deduction or withholding, and within 30 days after it is required by
law to remit such deduction or withholding to any relevant taxing or other
authority, Borrower shall deliver to such non-U.S. Person satisfactory evidence
of such deduction, withholding or payment (as the case may be).
     (d) If, as a result of any Regulatory Change, any reserve, special deposit
or similar requirements relating to any extensions of credit or other assets of,
or any deposits with, Lender or any holder of all or a portion of the Loan is
imposed, modified or deemed applicable and the result is to increase the cost to
such Lender or such holder of making or holding the Loan, or to reduce the
amount receivable by Lender or such holder hereunder in respect of any portion
of the Loan by an amount deemed by Lender or such holder to be material (such
increases in cost and reductions in amounts receivable, “Increased Costs”), then
Borrower agrees that it will pay to Lender or such holder upon Lender’s or such
holder’s request such additional amount or amounts as will compensate Lender
and/or such holder for such Increased Costs to the extent that such Increased
Costs are reasonably allocable to the Loan. Lender will notify Borrower in
writing of any event occurring after the Closing Date that will entitle Lender
or any holder of the Loan to compensation pursuant to this Section 1.4(d) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation and will designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. If such Lender shall fail to notify Borrower of
any such event within 90 days following the end of the month during which such
event occurred, then Borrower’s liability for any amounts described in this
Section incurred by such Lender as a result of such event shall be limited to
those attributable to the period occurring subsequent to the 90th day prior to
the date upon which such Lender actually notified Borrower of the occurrence of
such event. Notwithstanding the foregoing, in no event shall Borrower be
required to compensate Lender or any holder of the Loan for any portion of the
income or franchise taxes of Lender or such holder, whether or not attributable
to payments made by Borrower. If a Lender requests compensation under this
Section 1.4(d), Borrower may, by notice to Lender, require that such Lender
furnish to Borrower a statement setting forth in reasonable detail the basis for
requesting such compensation and the method for determining the amount thereof.

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     Section 1.5. Release. Upon payment of the Indebtedness in full when
permitted or required hereunder, Lender shall execute instruments prepared by
Borrower and reasonably satisfactory to Lender, which, at Borrower’s election
and at Borrower’s sole cost and expense: (a) release and discharge all Liens on
all Collateral securing payment of the Indebtedness (subject to Borrower’s
obligation to pay any associated fees and expenses), including all balances in
the Collateral Accounts; or (b) assign such Liens (and the Loan Documents) to a
new lender designated by Borrower. Any release or assignment provided by Lender
pursuant to this Section 1.5 shall be without recourse, representation or
warranty of any kind.
ARTICLE II
DEFEASANCE AND ASSUMPTION
     Section 2.1. Defeasance.
     (a) On any date after the expiration of the Lockout Period, provided no
Event of Default is then continuing and subject to the notice requirement
described in Section 2.1(c), Borrower may obtain the release of the Collateral
(other than the Defeasance Collateral) from the Liens of the Loan Documents upon
the payment to Lender of all sums then due under the Loan Documents and the
delivery of the following to Lender:
     (i) Defeasance Collateral sufficient to provide payments on or prior to,
and in any event as close as possible to, all successive Payment Dates in an
amount sufficient to make all payments of interest and principal due hereunder,
including the then outstanding Principal Indebtedness, on the first Payment Date
in the Prepayment Period or such other Payment Date in the Prepayment Period as
Borrower shall elect;
     (ii) written confirmation from an independent certified public accounting
firm reasonably satisfactory to Lender that such Defeasance Collateral is
sufficient to provide the payments described in clause (i) above;
     (iii) a security agreement, in form and substance reasonably satisfactory
to Lender, creating in favor of Lender a first priority perfected security
interest in such Defeasance Collateral (a “Defeasance Pledge Agreement”);
     (iv) an opinion of counsel for Borrower, in form and substance reasonably
satisfactory to Lender and delivered by counsel reasonably satisfactory to
Lender, opining that (1) the Defeasance Pledge Agreement has been duly
authorized and is enforceable against Borrower in accordance with its terms and
that Lender has a perfected first priority security interest in such Defeasance
Collateral; and (2) if the Loan has been Securitized, the Defeasance, including
any assumption under Section 2.1(b), does not cause a tax to be imposed on the
Securitization Vehicle or, if the Securitization Vehicle is a REMIC, does not
cause any portion of the Loan to cease to be a “qualified mortgage” within the
meaning of section 860G(a)(3) of the Code, and (3) that the Defeasance does not
constitute a “significant modification” of the Loan under Section 1001 of the
Code;

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     (v) if the Loan has been Securitized, the Rating Condition with respect to
such Defeasance shall have been satisfied;
     (vi) instruments reasonably satisfactory to Lender releasing and
discharging or assigning to a third party Lender’s Liens on the Collateral
(other than the Defeasance Collateral);
     (vii) such other customary certificates, opinions, documents or instruments
as Lender and the Rating Agencies may reasonably request; and
     (viii) reimbursement for any costs and expenses incurred in connection with
this Section 2.1 (including Rating Agency and Servicer fees and expenses,
reasonable fees and expenses of legal counsel and any revenue, documentary stamp
or intangible taxes or any other tax or charge due in connection herewith).
Lender shall reasonably cooperate with Borrower to avoid the incurrence of
mortgage recording taxes in connection with a Defeasance at Borrower’s sole cost
and expense.
     (b) At the time of the Defeasance, the Loan shall be assumed by a
bankruptcy-remote entity established or designated by Borrower and acceptable to
Lender and each Rating Agency, to which Borrower shall transfer all of the
Defeasance Collateral (a “Defeasance Borrower”). The right of the initial Lender
hereunder or its designee to establish or designate a Defeasance Borrower shall
be retained by the initial Lender notwithstanding the sale or transfer of the
Loan unless such obligation is specifically assigned to and assumed by the
transferee. Such Defeasance Borrower shall execute and deliver to Lender an
assumption agreement in form and substance reasonably satisfactory to Lender,
such Uniform Commercial Code financing statements as may be reasonably requested
by Lender and legal opinions of counsel reasonably acceptable to Lender that are
substantially equivalent to the opinions delivered to Lender on the Closing
Date, including new nonconsolidation opinions reasonably satisfactory to Lender
and satisfactory to the Rating Agencies; and Borrower and the Defeasance
Borrower shall deliver such other documents, certificates and legal opinions as
Lender shall reasonably request.
     (c) Borrower must give Lender and each Rating Agency at least 30 days’ (and
not more than 90 days’) prior written notice of any Defeasance under this
Section 2.1, specifying the date on which the Defeasance is to occur. If such
Defeasance is not made on such date (x) Borrower’s notice of Defeasance will be
deemed rescinded, and (y) Borrower shall on such date pay to Lender all
reasonable losses, costs and expenses suffered by Lender as a consequence of
such rescission.
     (d) Upon satisfaction of the requirements contained in this Section 2.1,
Lender will execute and deliver to Borrower, at Borrower’s sole cost and
expense, such instruments, prepared by Borrower and approved by Lender, as shall
be necessary to release the Property from the Liens of the Loan Documents.
     Section 2.2. Assumption. The initial Borrower shall have the right to
Transfer all of the Collateral to a Qualified Successor Borrower that will,
contemporaneously with such Transfer, assume all of the obligations of Borrower
hereunder and under the other Loan Documents (an “Assumption”), provided no
Event of Default or material monetary Default is

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then continuing or would result therefrom and the following conditions are met
to the reasonable satisfaction of Lender:
     (i) such Qualified Successor Borrower shall have executed and delivered to
Lender an assumption agreement (including an assumption of the Mortgage in
recordable form, if requested by Lender), in form and substance reasonably
acceptable to Lender, evidencing its agreement to abide and be bound by the
terms of the Loan Documents and containing representations substantially
equivalent to those contained in Article IV (recast, as necessary, such that
representations that specifically relate to Closing Date are remade as of the
date of such assumption), and such other representations (and evidence of the
accuracy of such representations) as the Servicer shall reasonably request;
     (ii) the obligations of Operating Lessee under the Operating Lease shall
have been assumed by a Qualified Successor Operating Lessee pursuant to an
assumption agreement, in form and substance reasonably acceptable to Lender, and
such Qualified Successor Operating Lessee shall have delivered to Lender all
documents reasonably requested by Lender relating to the existence of such
Qualified Successor Operating Lessee and the due authorization of such Qualified
Operating Lessee to assume the obligations under the Operating Lease, each in
form and substance reasonably satisfactory to Lender, including a certified copy
of the applicable resolutions from all appropriate persons, certified copies of
the organizational documents of the Qualified Successor Operating Lessee,
together with all amendments thereto, and certificates of good standing or
existence for the Qualified Successor Operating Lessee issued as of a recent
date by its state of organization and each other state where such entity, by the
nature of its business, is required to qualify or register;
     (iii) such Uniform Commercial Code financing statements as may be
reasonably requested by Lender shall be filed;
     (iv) a party satisfactory to Lender in its sole discretion assumes all
obligations, liabilities, guarantees and indemnities of Sponsor and any other
guarantor under the Loan Documents pursuant to documentation satisfactory to
Lender (and upon such assumption by such party, Sponsor and any other such
guarantor shall be released from such obligations, liabilities, guarantees and
indemnities);
     (v) such Qualified Successor Borrower, Qualified Successor Operating Lessee
and Borrower FF&E Subsidiary shall have delivered to Lender legal opinions of
counsel reasonably acceptable to Lender that are equivalent to the opinions
delivered to Lender on the Closing Date, including new nonconsolidation opinions
that are reasonably satisfactory to Lender and satisfactory to each of the
Rating Agencies; and Borrower, Qualified Successor Borrower, Qualified Successor
Operating Lessee and Borrower FF&E Subsidiary shall have delivered such other
documents, certificates and legal opinions, including relating to REMIC matters,
as Lender shall reasonably request;
     (vi) such Qualified Successor Borrower, Qualified Successor Operating
Lessee and Borrower FF&E Subsidiary shall have delivered to Lender all documents
reasonably requested by it relating to the existence of each such entity and the
due authorization of

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the Qualified Successor Borrower to assume the Loan and to execute and deliver
the documents described in this Section 2.2, and the due authorization of the
Qualified Successor Operating Lessee to assume the Operating Lease and to
execute and deliver the documents described in this Section 2.2, each in form
and substance reasonably satisfactory to Lender, including a certified copy of
the applicable resolutions from all appropriate persons, certified copies of the
organizational documents of the Qualified Successor Borrower and Qualified
Successor Operating Lessee, together with all amendments thereto, and
certificates of good standing or existence for the Qualified Successor Borrower,
Qualified Successor Operating Lessee and Borrower FF&E Subsidiary issued as of a
recent date by its state of organization and each other state where such entity,
by the nature of its business, is required to qualify or register;
     (vii) the Qualified Title Insurance Policy shall have been properly
endorsed to reflect the Transfer of the Property to the Qualified Successor
Borrower;
     (viii) Neither the Qualified Successor Borrower, the Qualified Successor
Operating Lessee, nor any other Person that is a bankrupty-remote entity under
common ownership or control with Qualified Successor Borrower or the Qualified
Successor Operating Lessee, shall have filed a petition under any state or
federal bankruptcy or insolvency laws or liquidated all or a major portion of
its assets or property within seven (7) years prior to the date of the proposed
Transfer.
     (ix) the Rating Condition shall have been satisfied with respect to the
legal structure of the Qualified Successor Borrower and Qualified Successor
Operating Lessee, the documentation of the Assumption and the related legal
opinions; and
     (x) Borrower shall have paid to Lender a nonrefundable assumption fee in an
amount equal to 1.0% of the Principal Indebtedness, and Borrower shall have
reimbursed Lender for its reasonable out-of-pocket costs and expenses incurred
in connection with such assumption.
     Notwithstanding clause (x) above, in connection with the first assumption
of the Loan in accordance with this Section 2.2, Borrower shall have paid to
Lender a nonrefundable assumption fee in an amount equal to $30,000, and
Borrower shall have reimbursed Lender for its reasonable out-of-pocket costs and
expenses incurred in connection with such assumption.
     In determining whether or not the foregoing conditions are satisifed,
Servicer shall use commercially reasonable efforts to make its determination
within thirty (30) days after receipt from Borrower of all required information,
including any additional information that Servicer requests.
     Section 2.3. Transfers of Equity Interests in Borrower.
     (a) No direct or indirect equity interests in Borrower or Operating Lessee
shall be conveyed or otherwise transferred to any Person prior to the first
anniversary of the Closing Date. From and after the first anniversary of the
Closing Date, provided that no Event of Default is continuing, transfers (but
not pledges, except as permitted under Section 7.1(f)) of direct and

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indirect equity interests in Borrower and Operating Lessee shall be permitted
upon 10 days advance written notice thereof to Lender, provided that:
     (i) no such transfer shall result in a Change of Control without Lender’s
prior written consent;
     (ii) as a condition to any such transfer that results in Borrower ceasing
to be Controlled by Sponsor, and each subsequent transfer that again changes the
identity of the Qualified Equityholder that Controls Borrower, shall be
conditioned upon payment to Lender of a transfer fee in an amount equal to 1.0%
of the Principal Indebtedness at the time of such transfer;
     (iii) as a condition to any such transfer that results in any Person
acquiring more than 49% of the direct or indirect equity interest in Borrower,
Operating Lessee or a Single-Purpose Equityholder (even if not constituting a
Change of Control), Borrower and Operating Lessee shall deliver to Lender with
respect to such Person a new non-consolidation opinion satisfactory to (A) prior
to the occurrence of any Securitization of the Loan, Lender (Lender’s approval
of any such non-consolidation opinion that is in substantially the form of the
Nonconsolidation Opinion not to be unreasonably withheld), and (B) at any time
following any Securitization or series of Securitizations of the Loan, each of
the Rating Agencies rating such Securitization or Securitizations; and
     (iv) Borrower shall have reimbursed Lender for its reasonable out-of-pocket
costs and expenses actually incurred in connection with any such transfer.
     Notwithstanding clause (ii) above, in connection with the first transfer in
accordance with this Section 2.3, Borrower shall have paid to Lender a
nonrefundable transfer fee an amount equal to $30,000, and Borrower shall have
reimbursed Lender for its reasonable out-of-pocket costs and expenses incurred
in connection with such assumption.
     (b) Notwithstanding Section 2.3(a) above, the following transactions shall
not be deemed prohibited transfers under this Agreement and shall not require
the consent of Lender:
     (i) the issuance of additional shares or the transfer of existing shares of
Sponsor on any public exchange or the issuance of new units or transfers of
existing units in Pebblebrook Hotel, L.P. (the “Operating Partnership”),
provided that it shall continue to be Controlled by Sponsor; and
     (ii) any merger of Sponsor or the Operating Partnership or a sale of all or
substantially all of the assets of Sponsor or the Operating Partnership,
provided that the new direct or indirect owner of Borrower resulting from such
transaction assumes all obligations of Sponsor under the Loan Documents, and
shall continue to Control both Borrower and Operating Lessee.

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ARTICLE III
ACCOUNTS
     Section 3.1. Cash Management Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank a cash management account into
which income from the Property payable to Borrower or Operating Lessee will be
deposited (the “Cash Management Account”), which account shall be owned by
Borrower but remain under the sole and exclusive control (as defined in the New
York Uniform Commercial Code) of Lender. As a condition precedent to the closing
of the Loan, Borrower shall cause the Cash Management Bank to execute and
deliver an agreement (as amended, restated, replaced, supplemented or otherwise
modified in accordance herewith, a “Cash Management Agreement”) that provides,
inter alia, that no party other than Lender and Servicer shall have the right to
withdraw funds from the Cash Management Account and that the Cash Management
Bank shall comply with all instructions and entitlement orders of Lender
relating to the Cash Management Account and the other Collateral Accounts, in
each case, without the consent of Borrower, Operating Lessee or any other
Person. The fees and expenses of the Cash Management Bank shall be paid by
Borrower.
     (b) Borrower shall cause Approved Property Manager to remit all sums in the
Agency Account (as defined in the Approved Management Agreement) after
(i) payment of Gross Operating Expenses (as defined in the Approved Management
Agreement); (ii) payment of any Management Fees (as defined in the Approved
Management Agreement) or other amounts owed to Manager or its affiliates under
the Approved Management Agreement then due; (iii) the deposit of an amount equal
to 4% of Gross Revenue into the Reserve (as defined in the Approved Management
Agreement); and (iv) retention of Working Capital (as defined in the Approved
Management Agreement) in the Agency Account of at least $250,000, to the Cash
Management Account.
     (c) Lender shall have the right at any time, upon not less than 30 days’
prior written notice to Borrower, to replace the Cash Management Bank with any
Eligible Institution at which Eligible Accounts may be maintained that will
promptly execute and deliver to Lender a Cash Management Agreement substantially
identical to the Cash Management Agreement executed at Closing.
     (d) Borrower shall maintain at all times a Qualified Operating Expense
Account. Borrower shall not permit any amounts unrelated to the Property to be
commingled with amounts on deposit in the Qualified Operating Expense Account
and shall cause all amounts payable with respect to Operating Expenses for the
Property (to the extent such Operating Expenses have not previously been paid or
retained by Approved Property Manager in accordance with the Approved Management
Agreement) to be paid from the Qualified Operating Expense Account or the Cash
Management Account (to the extent required or permitted hereunder) and no other
account. Borrower shall deliver to Lender each month the monthly bank statement
related to such Qualified Operating Expense Account. Unless and until an Event
of Default shall occur, Borrower shall have direct access to, and shall be
permitted to make withdrawals and, except

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during the continuance of a Trigger Period, equity distributions from, the
Qualified Operating Expense Account, without the consent of Lender. Upon, and
during the continuance of, an Event of Default, any balance in the Qualified
Operating Expense Account shall be remitted to the Cash Management Account.
     Section 3.2. Distributions from Cash Management Account.
     (a) The Cash Management Agreement shall provide that the Cash Management
Bank shall remit to the Qualified Operating Expense Account, at the end of each
Business Day (or, at Borrower’s election, on a less frequent basis), the amount,
if any, by which amounts then contained in the Cash Management Account exceed
the aggregate amount required (or estimated by Lender to be required) to be paid
to or reserved with Lender on the next Payment Date pursuant hereto (the
“Minimum Balance”); provided, however, that Lender shall have the right to
terminate such remittances during the continuance of an Event of Default or
Trigger Period upon notice to the Cash Management Bank. Lender may notify the
Cash Management Bank at any time of any change in the Minimum Balance. Upon
notice to Borrower following an Event of Default or Trigger Period, Borrower
shall remit to the Cash Management Account all sums previously remitted to the
Qualified Operating Expense Account during the then current Interest Accrual
Period.
     (b) On each Payment Date, provided no Event of Default is continuing,
Lender shall transfer amounts from the Cash Management Account, to the extent
available therein, to make the following payments in the following order of
priority:
     (i) to the Basic Carrying Costs Escrow Account, the amounts then required
to be deposited therein pursuant to Section 3.4;
     (ii) to Lender, the amount of all scheduled or delinquent interest and
principal on the Loan and all other amounts then due and payable under the Loan
Documents (with any amounts in respect of principal paid last);
     (iii) during the continuance of a Trigger Period, to the Qualified
Operating Expense Account, an amount equal to the Budgeted Operating Expenses
for the month in which such Payment Date occurs, to the extent such Budgeted
Operating Expenses have not previously been paid or retained by Approved
Property Manager in accordance with the Approved Management Agreement as
certified by Borrower in an Officer’s Certificate delivered to Lender at least
five Business Days prior to such payment date, or otherwise disbursed to
Borrower pursuant to Section 3.2(a), provided that the amounts disbursed to such
account pursuant to this clause (iii) shall be used solely to pay Budgeted
Operating Expenses for such month (Borrower agreeing that, in the event that
such Budgeted Operating Expenses exceed the actual operating expenses for such
month, such excess amounts shall be remitted to the Cash Management Account
prior to the next succeeding Payment Date);
     (iv) to the FF&E Reserve Account, the amounts, if any, required to be
deposited therein pursuant to Section 3.6;

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     (v) if no Trigger Period is continuing, on each Payment Date commencing in
August of each year, and continuing until the balance in the Seasonality Reserve
Account equals or exceeds the Seasonality Reserve Required Balance, all
remaining amounts to the Seasonality Reserve Account;
     (vi) during the continuance of a Trigger Period, all remaining amounts to
the Excess Cash Flow Reserve Account; and
     (vii) if no Trigger Period is continuing, all remaining amounts to the
Qualified Operating Expense Account.
     (c) If on any Payment Date the amount in the Cash Management Account shall
be insufficient to make all of the transfers described in Section 3.2(b)(i)
through (iv), Borrower shall deposit into the Cash Management Account on such
Payment Date the amount of such deficiency. If Borrower shall fail to make such
deposit, the same shall constitute an Event of Default and, in addition to all
other rights and remedies provided for under the Loan Documents, Lender may
disburse and apply the amounts in the Collateral Accounts in accordance with
Section 3.10(c).
     Section 3.3. Loss Proceeds Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank an account for the purpose of
depositing any Loss Proceeds (the “Loss Proceeds Account”).
     (b) Provided no Event of Default is continuing, funds in the Loss Proceeds
account shall be applied in accordance with Section 5.16.
     Section 3.4. Basic Carrying Costs Escrow Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank an account for the purpose of
reserving amounts payable by Borrower in respect of Taxes and insurance premiums
(the “Basic Carrying Costs Escrow Account”).
     (b) On the Funding Date, the Basic Carrying Costs Escrow Account shall be
funded in an amount equal to the sum of (i) an amount sufficient to pay all
Taxes by the 30th day prior to the date they come due, assuming subsequent
monthly fundings on Payment Dates of 1/12 of projected annual Taxes, plus
(ii) an amount sufficient to pay all insurance premiums by the 30th day prior to
the date they come due, assuming subsequent monthly fundings on Payment Dates of
1/12 of projected annual insurance premiums.
     (c) On each subsequent Payment Date, an additional deposit shall be made
therein in an amount equal to the sum of:
     (A) 1/12 of the Taxes that Lender reasonably estimates, based on
information provided by Borrower, will be payable during the next ensuing
12 months, plus

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     (B) Intentionally omitted, plus
     (C) 1/12 of the insurance premiums that Lender reasonably estimates, based
on information provided by Borrower, will be payable during the next ensuing
12 months;
provided, however, that if at any time Lender reasonably determines that the
amount in the Basic Carrying Costs Escrow Account will not be sufficient to
accumulate (upon payment of subsequent monthly amounts in accordance with the
provisions of this Agreement) the full amount of all installments of Taxes and
insurance premiums by the date on which such amounts come due, then Lender shall
notify Borrower of such determination and Borrower shall increase its monthly
payments to the Basic Carrying Costs Escrow Account by the amount that Lender
reasonably estimates is sufficient to achieve such accumulation.
     (d) Notwithstanding the terms and provisions of the foregoing paragraphs of
this Section 3.4:
     (i) Borrower shall have no obligation to comply with subclause (i) of
Section 3.4(b) and Section 3.4(c)(A) for so long as (i) no Event of Default or
Trigger Period shall be continuing, (ii) no Taxes that are currently due and
payable remain unpaid; and (iii) Borrower shall maintain in the Basic Carrying
Costs Escrow Account an amount equal to 50% of the Taxes that Lender reasonably
estimates, based on information provided by Borrower, will be payable on the
next semi-annual payment date (such estimate not to be reduced to the extent of
any actual or proposed tax appeal) (excluding any amounts in such Basic Carrying
Costs Escrow Account on account of insurance premiums) (any such period, a “Tax
Reserve Exemption Period”);
     (ii) Intentionally omitted; and
     (iii) Borrower shall have no obligation to comply with subclause (iii) of
Section 3.4(b) and Section 3.4(c)(C) for so long as (i) no Event of Default or
Trigger Period shall be continuing, (ii) no insurance premiums that are
currently due and payable remain unpaid; and (iii) Borrower shall have provided
Lender with satisfactory evidence (as determined by Lender) that the Property is
insured in accordance with the requirements of this Agreement pursuant to a
blanket insurance Policy covering substantially all real property owned directly
or indirectly by Sponsor, including, without limitation, the Property (any such
period, a “Insurance Reserve Exemption Period”).
     (e) Borrower shall provide Lender with copies of all tax and insurance
bills relating to the Property promptly after Borrower’s receipt thereof. During
any Tax Reserve Exemption Period, Borrower shall make all Tax payments on or
before the date due. During any Insurance Reserve Exemption Period, Borrower
shall make all insurance premium payments on or before the date due. At all
other times, provided no Event of Default is continuing, Lender will apply
amounts in the Basic Carrying Costs Escrow Account toward the purposes for which
such amounts are deposited therein, including, for the avoidance of doubt, Taxes
due and payable. In connection with the making of any payment from the Basic
Carrying Costs Escrow Account, Lender may cause such payment to be made
according to any bill, statement or estimate procured

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from, as applicable, the appropriate public office or insurance carrier, without
inquiry into the accuracy of such bill, statement or estimate or into the
validity of any tax, assessment, sale, forfeiture, tax lien or title or claim
thereof unless given written advance notice by Borrower of such inaccuracy,
invalidity or other contest.
     Section 3.5. Seasonality Reserve Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank an account for the purpose of
reserving amounts in respect of seasonal fluctuations in Net Operating Income
(the “Seasonality Reserve Account”).
     (b) On each Payment Date commencing in August of each year, and continuing
until the balance in the Seasonality Reserve Account equals or exceeds the
Seasonality Reserve Required Balance, there shall be deposited into the
Seasonality Reserve Account all amounts set forth in Section 3.2(b)(v).
     (c) Provided that no Event of Default is continuing, on the Payment Date in
each November, Lender shall cause one-third of the balance in the Seasonality
Reserve Account to be applied toward the monthly payment of principal and
interest then due; on the Payment Date in each December, Lender shall cause
one-half of the remaining balance in the Seasonality Reserve Account to be
applied toward the monthly payment of principal and interest then due; and on
the Payment Date in each January, Lender shall cause the remaining balance in
the Seasonality Reserve Account to be applied toward the monthly payment of
principal and interest then due. Notwithstanding the foregoing, if a Trigger
Period exists on the Payment Date in November, December or January, such funds
from the Seasonality Reserve shall be deposited into the Excess Cash Flow
Reserve Account.
     Section 3.6. FF&E Reserve Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank an account for the purpose of
reserving amounts in respect of FF&E expenditures (the “FF&E Reserve Account”).
     (b) On each Payment Date there shall be deposited into the FF&E Reserve
Account an amount equal to the Monthly FF&E Amount.
     (c) Upon the request of Borrower at any time that no Event of Default is
continuing (but not more often than once per calendar month), Lender shall cause
disbursements to Borrower from the FF&E Reserve Account to reimburse Borrower
for FF&E expenditures that are consistent with the Approved Annual Budget;
provided that:
     (i) Borrower shall deliver to Lender invoices evidencing that the costs for
which such disbursements are requested are due and payable;
     (ii) Borrower shall deliver to Lender an Officer’s Certificate confirming
that all such costs have been previously paid by Borrower or will be paid from
the proceeds of the requested disbursement and that all conditions precedent to
such disbursement required by the Loan Documents have been satisfied; and

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     (iii) Lender may condition the making of a requested disbursement on
(1) reasonable evidence establishing that Borrower has applied any amounts
previously received by it in accordance with this Section for the expenses to
which specific draws made hereunder relate, (2) a reasonably satisfactory site
inspection, and (3) receipt of lien releases and waivers from any contractors,
subcontractors and others with respect to such amounts.
     (d) Notwithstanding the foregoing, Borrower shall have no obligation to
comply with subclause (b) of this Section 3.6 for so long as (i) no Event of
Default or Trigger Period is continuing, (ii) Borrower maintains with an
Eligible Institution a separate account (the “Qualified FF&E Account”) owned by
Borrower but subject to a Qualified FF&E Account Control Agreement, into which
Borrower shall deposit, or cause to be deposited, on a monthly basis, an amount
equal to the Monthly FF&E Amount and (iii) Borrower’s chief financial officer
shall deliver to Lender within ten Business Days of the end of each Fiscal
Quarter, an Officer’s Certificate certifying as to the amount contained in the
Qualified FF&E Account on the last day of such Fiscal Quarter and, upon Lender’s
request, further certifying that; no amount has been remitted from the Qualified
FF&E Account for any purpose other than the payment of FF&E expenditures
pursuant to the Approved Annual Budget. Upon the occurrence of a Trigger Period
or an Event of Default all amounts contained in the Qualified FF&E Account shall
be remitted into the FF&E Reserve Account.
     Section 3.7. Deferred Maintenance and Environmental Escrow Account.
     (a) On or prior to the Closing Date, if the Deferred Maintenance Amount is
greater than zero, Borrower shall establish and thereafter maintain with the
Cash Management Bank an account for the purpose of reserving amounts anticipated
to be required to correct Deferred Maintenance Conditions (the “Deferred
Maintenance and Environmental Escrow Account”).
     (b) On the Funding Date, Borrower shall deposit into the Deferred
Maintenance and Environmental Escrow Account, from the proceeds of the Loan, an
amount equal to the Deferred Maintenance Amount.
     (c) Upon the request of Borrower at any time that no Event of Default is
continuing (but not more often than once per calendar month), Lender shall cause
disbursements to Borrower from the Deferred Maintenance and Environmental Escrow
Account to reimburse Borrower for reasonable costs and expenses incurred in
order to correct Deferred Maintenance Conditions, provided that
     (i) Borrower shall deliver to Lender invoices evidencing that the costs for
which such disbursements are requested are due and payable;
     (ii) Borrower shall deliver to Lender an Officer’s Certificate confirming
that all such costs have been previously paid by Borrower or will be paid from
the proceeds of the requested disbursement and that all conditions precedent to
such disbursement required by the Loan Documents have been satisfied; and
     (iii) Lender may condition the making of a requested disbursement on
(1) reasonable evidence establishing that Borrower has applied any amounts
previously

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received by it in accordance with this Section for the expenses to which
specific draws made hereunder relate, (2) a reasonably satisfactory site
inspection, and (3) receipt of lien releases and waivers from any contractors,
subcontractors and others with respect to such amounts.
     (d) Upon substantial completion (as reasonably determined by Lender) of the
portion of the Deferred Maintenance Conditions identified on any line on
Schedule C, and provided no Event of Default or Trigger Period is then
continuing, the remainder of the portion of the Deferred Maintenance Reserve
Account held for such line item (as shown adjacent to such line item on
Schedule C) shall promptly be remitted to Borrower. Upon the correcting of all
Deferred Maintenance Conditions, provided no Event of Default or Trigger Period
is then continuing, any amounts then remaining in the Deferred Maintenance
Reserve Account shall promptly be remitted to Borrower and the Deferred
Maintenance Account will no longer be maintained.
     Section 3.8. [Intentionally omitted].
     Section 3.9. Excess Cash Flow Reserve Account.
     (a) On or prior to the Closing Date, Borrower shall establish and
thereafter maintain with the Cash Management Bank an account for the deposit of
amounts required to be deposited therein in accordance with Section 3.2(b)(vi)
(the “Excess Cash Flow Reserve Account”).
     (b) Provided that no Event of Default is then continuing, Lender shall
release to the Cash Management Account all amounts then contained in the Excess
Cash Flow Reserve Account on the first Payment Date after Borrower delivers to
Lender evidence reasonably satisfactory to Lender establishing that no Trigger
Period is then continuing. Such a release shall not preclude the subsequent
commencement of a Trigger Period and the deposit of amounts into the Excess Cash
Flow Reserve Account as set forth in Section 3.2(b)(vi).
     Section 3.10. Account Collateral.
     (a) Borrower hereby grants a perfected first-priority security interest in
favor of Lender in and to the Account Collateral as security for the
Indebtedness, together with all rights of a secured party with respect thereto.
Each Collateral Account shall be an Eligible Account under the sole dominion and
control of Lender and shall be in the name of Borrower, as pledgor, and Lender,
as pledgee. Borrower shall have no right to make withdrawals from any of the
Collateral Accounts. Funds in the Collateral Accounts shall not be commingled
with any other monies at any time. Borrower shall execute any additional
documents that Lender in its reasonable discretion may require and shall provide
all other evidence reasonably requested by Lender to evidence or perfect its
first-priority security interest in the Account Collateral. Funds in the
Collateral Accounts shall be invested at Lender’s discretion only in Permitted
Investments, which Permitted Investments shall be credited to the related
Collateral Account. All income and gains from the investment of funds in the
Collateral Accounts shall be retained in the Collateral Accounts from which they
were derived for the benefit of Borrower. After the Loan and all other
Indebtedness have been paid in full, the Collateral Accounts shall be closed and
the balances therein, if any, shall be paid to Borrower.

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     (b) The insufficiency of amounts contained in the Collateral Accounts shall
not relieve Borrower from its obligation to fulfill all covenants contained in
the Loan Documents.
     (c) During the continuance of an Event of Default, Lender may, in its sole
discretion, apply funds in the Collateral Accounts, and funds resulting from the
liquidation of Permitted Investments contained in the Collateral Accounts,
either toward the components of the Indebtedness (e.g., interest, principal and
other amounts payable hereunder), the Loan and the Notes in such sequence as
Lender shall elect in its sole discretion, and/or toward the payment of Property
expenses.
     Section 3.11. Bankruptcy. Borrower and Lender acknowledge and agree that
upon the filing of a bankruptcy petition by or against Borrower under the
Bankruptcy Code, the Account Collateral and the Revenues (whether then already
in the Collateral Accounts, or then due or becoming due thereafter) shall be
deemed not to be property of Borrower’s bankruptcy estate within the meaning of
Section 541 of the Bankruptcy Code. If, however, a court of competent
jurisdiction determines that, notwithstanding the foregoing characterization of
the Account Collateral and the Revenues by Borrower and Lender, the Account
Collateral and/or the Revenues do constitute property of Borrower’s bankruptcy
estate, then Borrower and Lender further acknowledge and agree that all such
Revenues, whether due and payable before or after the filing of the petition,
are and shall be cash collateral of Lender. Borrower acknowledges that Lender
does not consent to Borrower’s use of such cash collateral and that, in the
event Lender elects (in its sole discretion) to give such consent, such consent
shall only be effective if given in writing signed by Lender. Except as provided
in the immediately preceding sentence, Borrower shall not have the right to use
or apply or require the use or application of such cash collateral (i) unless
Borrower shall have received a court order authorizing the use of the same, and
(ii) Borrower shall have provided such adequate protection to Lender as shall be
required by the bankruptcy court in accordance with the Bankruptcy Code.
ARTICLE IV
REPRESENTATIONS
          Borrower represents to Lender that, as of the Closing Date, except as
set forth in the Exception Report:
     Section 4.1. Organization.
     (a) Borrower, Operating Lessee and Borrower FF&E Subsidiary each are duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is in good standing in each other jurisdiction where ownership of
its property or the conduct of its business requires it to be so, and each has
all power and authority under such laws and its organizational documents and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
     (b) Borrower, Operating Lessee and Borrower FF&E Subsidiary each have no
subsidiaries and do not own any equity interest in any other Person, provided,
however, Borrower is the sole member and equity holder of Borrower FF&E
Subsidiary.

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     (c) The organizational chart contained in Exhibit A is true and correct as
of the date hereof.
     (d) The limited liability company interests of Borrower, Operating Lessee
and Borrower FF&E Subsidiary are not represented by any limited liability
company certificates, other certificates or other instruments of any kind.
     Section 4.2. Authorization. Borrower has the power and authority to enter
into this Agreement and the other Loan Documents, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated by the
Loan Documents and has by proper action duly authorized the execution and
delivery of the Loan Documents.
     Section 4.3. No Conflicts. Neither the execution and delivery of the Loan
Documents, nor the consummation of the transactions contemplated therein, nor
performance of and compliance with the terms and provisions thereof will
(i) violate or conflict with any provision of its formation and governance
documents, (ii) violate any Legal Requirement, regulation (including
Regulation U, Regulation X or Regulation T), order, writ, judgment, injunction,
decree or permit applicable to it, (iii) violate or conflict with contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, contract or other Material Agreement to which Borrower,
Operating Lessee or Sponsor is a party or by which Borrower, Operating Lessee or
Sponsor may be bound, or (iv) result in or require the creation of any Lien or
other charge or encumbrance upon or with respect to the Collateral in favor of
any party other than Lender.
     Section 4.4. Consents. No consent, approval, authorization or order of, or
qualification with, any court or Governmental Authority is required in
connection with the execution, delivery or performance by Borrower of this
Agreement or the other Loan Documents, except for any of the foregoing that have
already been obtained.
     Section 4.5. Enforceable Obligations. This Agreement and the other Loan
Documents have been duly executed and delivered by Borrower and constitute
Borrower’s legal, valid and binding obligations, enforceable in accordance with
their respective terms, subject to bankruptcy, insolvency and similar laws of
general applicability relating to or affecting creditors’ rights and to general
equity principles. The Loan Documents are not subject to any right of
rescission, set-off, counterclaim or defense by Borrower, including the defense
of usury.
     Section 4.6. No Default. No Default or Event of Default will exist
immediately following the making of the Loan.
     Section 4.7. Payment of Taxes. Borrower, Operating Lessee and Borrower FF&E
Subsidiary each have filed, or caused to be filed, all tax returns (federal,
state, local and foreign) required to be filed and paid all amounts of taxes due
(including interest and penalties) except for taxes that are not yet delinquent
and has paid all other taxes, fees, assessments and other governmental charges
(including mortgage recording taxes, documentary stamp taxes and intangible
taxes) owing by it necessary to preserve the Liens in favor of Lender.
     Section 4.8. Compliance with Law. Borrower, Operating Lessee, Borrower FF&E
Subsidiary, the Property and the use thereof comply in all material respects
with all applicable

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Insurance Requirements and Legal Requirements, including building and zoning
ordinances and codes (including, without limitation, the Americans with
Disabilities Act). The Property conforms to current zoning requirements
(including requirements relating to parking) and is neither an illegal nor a
legal nonconforming use. Neither Borrower, Operating Lessee nor Borrower FF&E
Subsidiary is in default or violation of any order, writ, injunction, decree or
demand of any Governmental Authority the violation of which could adversely
affect the Property or the condition (financial or otherwise) or business of
Borrower, Operating Lessee or Borrower FF&E Subsidiary. There has not been
committed by or on behalf of Borrower, Operating Lessee, Borrower FF&E
Subsidiary or, to the best of Borrower’s knowledge, any other person in
occupancy of or involved with the operation or use of the Property, any act or
omission affording any federal Governmental Authority or any state or local
Governmental Authority the right of forfeiture as against the Property or any
portion thereof or any monies paid in performance of its obligations under any
of the Loan Documents. None of Borrower, Operating Lessee, Borrower FF&E
Subsidiary or Sponsor has purchased any portion of the Property with proceeds of
any illegal activity.
     Section 4.9. ERISA. None of Borrower, Operating Lessee, Borrower FF&E
Subsidiary, or any ERISA Affiliate of Borrower or Operating Lessee has incurred
or could be subjected to any liability under Title IV or Section 302 of ERISA or
Section 412 of the Code or maintains or contributes to, or is or has been
required to maintain or contribute to, any employee benefit plan (as defined in
Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or
Section 412 of the Code. The consummation of the transactions contemplated by
this Agreement will not constitute or result in any non-exempt prohibited
transaction under Section 406 of ERISA, Section 4975 of the Code or
substantially similar provisions under federal, state or local laws, rules or
regulations.
     Section 4.10. Investment Company Act. Neither Borrower, Operating Lessee
nor Borrower FF&E Subsidiary is an “investment company”, or a company
“controlled” by an “investment company”, registered or required to be registered
under the Investment Company Act of 1940, as amended.
     Section 4.11. No Bankruptcy Filing. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary is contemplating either the filing of a petition by it
under any state or federal bankruptcy or insolvency laws or the liquidation of
all or a major portion of its assets or property. Neither Borrower, Operating
Lessee nor Borrower FF&E Subsidiary has knowledge of any Person contemplating
the filing of any such petition against it. During the ten year period preceding
the Closing Date, no petition in bankruptcy has been filed by or against
Borrower, Operating Lessee, Borrower FF&E Subsidiary, any Single-Purpose
Equityholder or Sponsor, or any affiliate of any of the aforementioned Persons,
or any person who owns or controls, directly or indirectly, ten percent or more
of the beneficial ownership interests of any such Person.
     Section 4.12. Other Debt. Neither Borrower, Operating Lessee nor Borrower
FF&E Subsidiary has outstanding any Debt other than Permitted Debt.
     Section 4.13. Litigation. There are no actions, suits, proceedings,
arbitrations or governmental investigations by or before any Governmental
Authority or other court or agency now pending, and to the best of Borrower’s
knowledge there are no such actions, suits,

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proceedings, arbitrations or governmental investigations threatened against or
affecting Borrower, Operating Lessee or the Collateral, in each case, except as
listed in the Exception Report (and none of the matters listed in the Exception
Report, even if determined against Borrower, Operating Lessee or the Collateral,
could reasonably be expected to result in a Material Adverse Effect).
     Section 4.14. Leases; Material Agreements.
     (a) Except as set forth in Schedule G, there are no Leases and neither
Borrower nor Operating Lessee is currently engaged in negotiations with any
prospective tenant to enter into any Lease.
     (b) There are no Material Agreements except as described in Schedule E.
Borrower has made available to Lender true and complete copies of all Material
Agreements. Each Material Agreement has been entered into at arm’s length in the
ordinary course of business by or on behalf of Borrower or Operating Lessee. The
Material Agreements are in full force and effect and there are no defaults
thereunder by Borrower, Operating Lessee, or to Borrower’s knowledge, any other
party thereto. Neither Borrower, Operating Lessee nor Borrower FF&E Subsidiary
is in default in any material respect in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
Permitted Encumbrance or any other agreement or instrument to which it is a
party or by which it or the Property is bound (including, for the avoidance of
doubt, the Operating Lease).
     (c) Other than as disclosed on Schedule E, Operating Lessee is not a party
to any Material Agreements related to the Property.
     Section 4.15. Full and Accurate Disclosure. No statement of fact heretofore
delivered by Borrower, Sponsor or Operating Lessee to Lender in writing in
respect of the Property or Borrower, Sponsor or Operating Lessee contains any
untrue statement of a material fact or omits to state any material fact
necessary to make statements contained therein not misleading unless
subsequently corrected. There is no fact, event or circumstance presently known
to Borrower, Sponsor or Operating Lessee that has not been disclosed to Lender
that has had or could reasonably be expected to result in a Material Adverse
Effect.
     Section 4.16. Financial Condition. All financial data concerning Borrower,
Operating Lessee and the Property heretofore provided to Lender fairly presents
in accordance with GAAP the financial position of Borrower and Operating Lessee
in all material respects, as of the date on which it was made, and does not omit
to state any fact necessary to make statements contained herein or therein not
misleading. Since the delivery of such data, except as otherwise disclosed in
writing to Lender, there have occurred no changes or circumstances that have had
or are reasonably expected to result in a Material Adverse Effect.
     Section 4.17. Single-Purpose Requirements.
     (a) Each of Borrower and Operating Lessee is now, and has always been since
its formation, a Single-Purpose Entity and has conducted its business in
substantial compliance with the provisions of its organizational documents.
Neither Borrower, Operating Lessee nor Borrower FF&E Subsidiary has ever
(i) owned any property other than the Property and/or

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related personal property , (ii) engaged in any business, except the ownership
and/or operation of the Property, or (iii) had any material contingent or actual
obligations or liabilities unrelated to the Property.
     (b) Borrower has provided Lender with true, correct and complete copies of
(i) Borrower’s and Operating Lessee’s current financial statements; and
(ii) Borrower’s and Operating Lessee’s respective current operating agreements,
together with all amendments and modifications thereto.
     Section 4.18. Use of Loan Proceeds. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any “margin stock”
within the meaning of Regulations T, U or X of the Board of Governors of the
Federal Reserve System or for any other purpose that would be inconsistent with
such Regulations T, U or X or any other Regulations of such Board of Governors,
or for any purpose prohibited by Legal Requirements or by the terms and
conditions of the Loan Documents. The Loan is solely for the business purpose of
Borrower or for distribution to Borrower’s equityholders in accordance with
Legal Requirements.
     Section 4.19. Not Foreign Person. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary is a “foreign person” within the meaning of
Section 1445(f)(3) of the Code.
     Section 4.20. Labor Matters. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary is a party to any collective bargaining agreements.
     Section 4.21. Title. Borrower owns good, marketable and insurable fee title
to the Property. Borrower, through its wholly-owned subsidiary, Skamania Lodge
Furnishing, LLC, owns good and marketable title to the FF&E. Borrower and/or
Operating Lessee own good and marketable title to all personal property related
to the Property (other than the FF&E, which is owned solely by Borrower), to the
Collateral Accounts and to any other Collateral), in each case free and clear of
all Liens whatsoever except the Permitted Encumbrances. The Mortgage, when
properly recorded in the appropriate records, together with any Uniform
Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, perfected first priority Lien on the
Property and the rents therefrom, enforceable as such against creditors of and
purchasers from Borrower or Operating Lessee and subject only to Permitted
Encumbrances, and (ii) perfected Liens (pursuant to the Uniform Commercial Code
of the State of New York) in and to all personalty, all in accordance with the
terms thereof, in each case subject only to any applicable Permitted
Encumbrances. The Permitted Encumbrances do not and will not materially and
adversely affect or interfere with the value, or current or contemplated use or
operation, of the Property, or the security intended to be provided by the
Mortgage or Borrower’s ability to repay the Indebtedness in accordance with the
terms of the Loan Documents. Except as insured over by a Qualified Title
Insurance Policy, there are no claims for payment for work, labor or materials
affecting the Property that are or may become a Lien prior to, or of equal
priority with, the Liens created by the Loan Documents. No creditor of Borrower
(other than Lender) or Operating Lessee has in its possession any goods that
constitute or evidence the Collateral.
     Section 4.22. No Encroachments. Except as shown on the Qualified Survey,
all of the improvements on the Property lie wholly within the boundaries and
building restriction lines

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of the Property, and no improvements on adjoining property encroach upon the
Property, and no easements or other encumbrances upon the Property encroach upon
any of the improvements, so as, in either case, to adversely affect the value or
marketability of the Property, except those that are insured against by a
Qualified Title Insurance Policy.
     Section 4.23. Physical Condition.
     (a) Except for matters set forth in the Engineering Reports, the Property
(including sidewalks, storm drainage system, roof, plumbing system, HVAC system,
fire protection system, electrical system, equipment, elevators, exterior
sidings and doors, irrigation system and all structural components) is in good
condition, order and repair in all respects material to its use, operation or
value.
     (b) Borrower is not aware of any material structural or other material
defect or damages in the Property, whether latent or otherwise.
     (c) Borrower has not received and is not aware of any other party’s receipt
of notice from any insurance company or bonding company of any defects or
inadequacies in the Property that would, alone or in the aggregate, adversely
affect in any material respect the insurability of the same or cause the
imposition of extraordinary premiums or charges thereon or of any termination or
threatened termination of any policy of insurance or bond.
     Section 4.24. Fraudulent Conveyance. Neither Borrower nor Operating Lessee
has entered into the Transaction or any of the Loan Documents with the actual
intent to hinder, delay or defraud any creditor. Borrower and Operating Lessee
each have received reasonably equivalent value in exchange for its obligations
under the Loan Documents. On the Closing Date, the fair salable value of
Borrower’s aggregate assets is and will, immediately following the making of the
Loan and the use and disbursement of the proceeds thereof, be greater than
Borrower’s probable aggregate liabilities (including subordinated, unliquidated,
disputed and Contingent Obligations). Borrower’s aggregate assets do not and,
immediately following the making of the Loan and the use and disbursement of the
proceeds thereof will not, constitute unreasonably small capital to carry out
its business as conducted or as proposed to be conducted. Neither Borrower nor
Operating Lessee intends to, and does not believe that it will, incur debts and
liabilities (including Contingent Obligations and other commitments) beyond its
ability to pay such debts as they mature (taking into account the timing and
amounts to be payable on or in respect of obligations of Borrower or Operating
Lessee, respectively).
     Section 4.25. Management. Except for any Approved Management Agreement, no
property management agreements are in effect with respect to the Property. The
Approved Management Agreement is in full force and effect and there is no event
of default thereunder by any party thereto and no event has occurred that, with
the passage of time and/or the giving of notice would constitute a default
thereunder.
     Section 4.26. Condemnation. No Condemnation has been commenced or, to
Borrower’s knowledge, is contemplated with respect to all or any portion of the
Property or for the relocation of roadways providing access to the Property.

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     Section 4.27. Utilities and Public Access. The Property has adequate rights
of access to dedicated public ways (and makes no material use of any means of
access or egress that is not pursuant to such dedicated public ways or recorded,
irrevocable rights-of-way or easements) and is adequately served by all public
utilities necessary to the continued use and enjoyment of the Property as
presently used and enjoyed.
     Section 4.28. Environmental Matters. Except as disclosed in the
Environmental Reports:
     (i) The Property is in compliance in all material respects with all
Environmental Laws applicable to the Property (which compliance includes, but is
not limited to, the possession of, and compliance with, all environmental,
health and safety permits, approvals, licenses, registrations and other
governmental authorizations required in connection with the ownership and
operation of the Property under all Environmental Laws).
     (ii) No Environmental Claim is pending with respect to the Property, nor,
to Borrower’s knowledge, is any threatened, nor are there any consent decrees or
other decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any Environmental Law
with respect to Borrower, Operating Lessee or the Property.
     (iii) Without limiting the generality of the foregoing, there is not
present at, on, in or under the Property, any Hazardous Substances,
PCB-containing equipment, asbestos or asbestos containing materials, underground
storage tanks or surface impoundments for any Hazardous Substance, lead in
drinking water (except in concentrations that comply with all Environmental
Laws), or lead-based paint.
     (iv) There have not been and are no past, present or threatened Releases of
any Hazardous Substance from or at the Property that are reasonably likely to
form the basis of any Environmental Claim, and, to Borrower’s knowledge, there
is no threat of any Release of any Hazardous Substance migrating to the
Property.
     (v) No Liens are presently recorded with the appropriate land records under
or pursuant to any Environmental Law with respect to the Property and, to
Borrower’s knowledge, no Governmental Authority has been taking any action to
subject the Property to Liens under any Environmental Law.
     (vi) There have been no material environmental investigations, studies,
audits, reviews or other analyses conducted by or that are in the possession of
Borrower or Operating Lessee in relation to the Property that have not been made
available to Lender.
     Section 4.29. Assessments. There are no pending or, to Borrower’s
knowledge, proposed special or other assessments for public improvements or
otherwise affecting the Property, nor are there any contemplated improvements to
the Property that may result in such special or other assessments. No extension
of time for assessment or payment of Taxes is in effect.

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     Section 4.30. No Joint Assessment. Borrower has not suffered, permitted or
initiated the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, or (ii) with any personal property, or any
other procedure whereby the Lien of any Taxes that may be levied against such
other real property or personal property shall be assessed or levied or charged
to the Property as a single Lien.
     Section 4.31. Separate Lots. No portion of the Property is part of a tax
lot that also includes any real property that is not Collateral.
     Section 4.32. Permits; Certificate of Occupancy. To the best of Borrower’s
knowledge after due inquiry, Borrower, Operating Lessee and/or Approved Property
Manager have obtained all Permits necessary for the present and contemplated use
and operation of the Property. The uses being made of the Property are in
conformity in all material respects with the certificate of occupancy and/or
Permits for the Property and any other restrictions, covenants or conditions
affecting the Property.
     Section 4.33. Flood Zone. None of the improvements on the Property is
located in an area identified by the Federal Emergency Management Agency or the
Federal Insurance Administration as a “100 year flood plain” or as having
special flood hazards (including Zones A and V), or, to the extent that any
portion of the Property is located in such an area, the Property is covered by
flood insurance meeting the requirements set forth in Section 5.15(a)(ii).
     Section 4.34. Security Deposits. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary are in possession of any security deposits.
     Section 4.35. Acquisition Documents. Borrower has delivered to Lender true
and complete copies of all material agreements and instruments under which
Borrower, Operating Lessee or any of their affiliates or the seller of the
Property have remaining rights or obligations in respect of Borrower’s
acquisition of the Property.
     Section 4.36. Insurance. Borrower or Operating Lessee has obtained, or
caused to be obtained, insurance policies reflecting the insurance coverages,
amounts and other requirements set forth in this Agreement. All premiums on such
insurance policies required to be paid as of the Closing Date have been paid for
the current policy period. No Person, including Borrower and Operating Lessee,
has done, by act or omission, anything that would impair the coverage of any
such policy.
     Section 4.37. No Dealings. Borrower, Operating Lessee and the Sponsor are
not aware of any unlawful influence on the assessed value of the Property.
     Section 4.38. Estoppel Certificates. Borrower has delivered to Lender true
and complete copies of (a) the form(s) of estoppel certificate heretofore sent
by Borrower, Operating Lessee or any of their affiliates to every Tenant at the
Property, and (b) each estoppel certificate received back from any such Tenant
prior to the Closing Date.
     Section 4.39. Compliance with Anti-Terrorism, Embargo, Sanctions and
Anti-Money Laundering Laws. (a) None of the funds or other assets of any of
Borrower, Operating Lessee, any Single-Purpose Equityholder or Sponsor
constitute property of, or are beneficially owned,

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directly or indirectly, by any person, entity or government subject to trade
restrictions under federal law, including the International Emergency Economic
Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading with the Enemy Act, 50 U.S.C.
App. 1 et seq., and any executive orders or regulations promulgated thereunder,
with the result that (i) the investment in any of Borrower, Operating Lessee,
any Single-Purpose Equityholder or Sponsor, as applicable (whether directly or
indirectly), is prohibited by law or (ii) the Loan is in violation of law (any
such person, entity or government, an “Embargoed Person”); (b) no Embargoed
Person has any interest of any nature whatsoever in any of Borrower, Operating
Lessee, any Single-Purpose Equityholder or Sponsor, as applicable (whether
directly or indirectly), with the result that (i) the investment in any of
Borrower, Operating Lessee, any Single-Purpose Equityholder or Sponsor, as
applicable (whether directly or indirectly) is prohibited by law or (ii) the
Loan is in violation of law, (c) none of the funds of any of Borrower, Operating
Lessee, any Single-Purpose Equityholder or Sponsor, as applicable, have been
derived from any unlawful activity with the result that (i) the investment in
any of Borrower, Operating Lessee, any Single-Purpose Equityholder or Sponsor,
as applicable (whether directly or indirectly) is prohibited by law or (ii) the
Loan is in violation of law, (d) to the best of Borrower’s knowledge, no Tenant
at the Property is identified on the OFAC List and (e) Borrower, Operating
Lessee, any Single-Purpose Equityholder and Sponsor are in material compliance
with the PATRIOT Act. Borrower has implemented procedures, and will consistently
apply those procedures throughout the term of the Loan, to ensure the foregoing
representations and warranties remain true and correct during the term of the
Loan. Notwithstanding Section 4.41 to the contrary, the representations and
warranties contained in this Section 4.39 shall survive in perpetuity.
     Section 4.40. Intentionally omitted.
     Section 4.41. Intentionally omitted.
     Section 4.42. Survival. Borrower agrees that all of the representations of
Borrower set forth in this Agreement and in the other Loan Documents shall
survive for so long as any portion of the Indebtedness is outstanding. All
representations, covenants and agreements made by Borrower in this Agreement or
in the other Loan Documents shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on
its behalf. On the date of any Securitization, on not less than three days’
prior written notice, Borrower shall deliver to Lender a certification
(x) confirming that all of the representations contained in this Agreement are
true and correct as of the date of such Securitization, or (y) otherwise
specifying any changes in or qualifications to such representations as of such
date as may be necessary to make such representations consistent with the facts
as they exist on such date.
ARTICLE V
AFFIRMATIVE COVENANTS
     Section 5.1. Existence. Borrower, Operating Lessee and if applicable, any
Single-Purpose Equityholder shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its existence and all rights,
licenses, Permits, franchises and other agreements necessary for the continued
use and operation of its business. Borrower, Operating

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Lessee and, if applicable, each Single-Purpose Equityholder shall deliver to
Lender a copy of each amendment or other modification to any of its
organizational documents promptly after the execution thereof.
     Section 5.2. Maintenance of Property.
     (a) Borrower shall cause the Property to be maintained in good and safe
working order and repair, reasonable wear and tear excepted, and in keeping with
the condition and repair of properties of a similar use, value, age, nature and
construction. Borrower shall not, and shall not cause or permit Operating Lessee
or Approved Property Manager to, use, maintain or operate the Property in any
manner that constitutes a public or private nuisance or that makes void,
voidable, or cancelable, or increases the premium of, any insurance then in
force with respect thereto. Subject to Section 6.13, without the prior written
consent of Lender, no improvements or equipment located at or on the Property
shall be removed, demolished or materially altered (except for replacement of
equipment in the ordinary course of Borrower’s or Operating Lessee’s business
with items of the same utility and of equal or greater value and sales of
obsolete equipment no longer needed for the operation of the Property). Subject
to Section 6.13, Borrower shall from time to time make, or cause to be made, all
reasonably necessary and desirable repairs, renewals, replacements, betterments
and improvements to the Property. Borrower shall not, and shall not cause or
permit Operating Lessee or Approved Property Manager to, make any change in the
use of the Property that would materially increase the risk of fire or other
hazard arising out of the operation of the Property, or do or permit to be done
thereon anything that may in any way impair the value of the Property in any
material respect or the Lien of the Mortgage or otherwise cause or reasonably be
expected to result in a Material Adverse Effect. Borrower shall not install or
permit to be installed on the Property any underground storage tank. Borrower
shall not, without the prior written consent of Lender, permit any drilling or
exploration for or extraction, removal, or production of any minerals from the
surface or the subsurface of the Property, regardless of the depth thereof or
the method of mining or extraction thereof.
     (b) Borrower shall remediate the Deferred Maintenance Conditions within
9 months following the Closing Date, subject to Force Majeure, and upon request
from Lender after the expiration of such period shall deliver to Lender an
Officer’s Certificate confirming that such remediation has been completed and
that all associated expenses have been paid.
     Section 5.3. Compliance with Legal Requirements. Borrower shall, and shall
cause Operating Lessee to, comply with, and shall cause the Property to comply
with and be operated, maintained, repaired and improved in compliance with, all
Legal Requirements, Insurance Requirements and all material contractual
obligations by which Borrower is legally bound.
     Section 5.4. Impositions and Other Claims. Borrower shall pay and discharge
all taxes, assessments and governmental charges levied upon it, its income and
its assets as and when such taxes, assessments and charges are due and payable,
as well as all lawful claims for labor, materials and supplies or otherwise,
subject to any rights to contest contained in the definition of Permitted
Encumbrances. Borrower shall file all federal, state and local tax returns and
other reports that it is required by law to file. If any law or regulation
applicable to Lender, any Note, any of the Collateral or the Mortgage is enacted
that deducts from the value of

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property for the purpose of taxation any Lien thereon, or imposes upon Lender
the payment of the whole or any portion of the taxes or assessments or charges
or Liens required by this Agreement to be paid by Borrower, or changes in any
way the laws or regulations relating to the taxation of mortgages or security
agreements or debts secured by mortgages or security agreements or the interest
of the mortgagee or secured party in the property covered thereby, or the manner
of collection of such taxes, so as to affect the Mortgage, the Indebtedness or
Lender, then Borrower, upon demand by Lender, shall pay such taxes, assessments,
charges or Liens, or reimburse Lender for any amounts paid by Lender. If in the
opinion of Lender’s counsel it might be unlawful to require Borrower to make
such payment or the making of such payment might result in the imposition of
interest beyond the maximum amount permitted by applicable Law, Lender may elect
to declare all of the Indebtedness to be due and payable 90 days from the giving
of written notice by Lender to Borrower.
     Section 5.5. Access to Property. Borrower shall, and shall cause Operating
Lessee and Approved Property Manager to permit agents, representatives and
employees of Lender and the Servicer to enter and inspect the Property or any
portion thereof, and/or inspect, examine, audit and copy the books and records
of Borrower, Operating Lessee and Approved Property Manager (including all
recorded data of any kind or nature, regardless of the medium of recording), at
such reasonable times as may be requested by Lender upon reasonable advance
notice ( all subject to the terms and conditions of the Approved Management
Agreement). If Lender shall determine that an Event of Default exists, the cost
of such inspections, examinations, copying or audits shall be borne by Borrower,
including the cost of all follow up or additional investigations, audits or
inquiries deemed reasonably necessary by Lender. The cost of such inspections,
examinations, audits and copying, if not paid for by Borrower following demand,
may be added to the Indebtedness and shall bear interest thereafter until paid
at the Default Rate. If Borrower prohibits, bars or fails to permit agents,
representatives and employees of Lender and Servicer from entering and
inspecting the Property or from inspecting, examining, auditing and copying the
books and records of Borrower, Operating Lessee and Approved Property Manager,
as required by this Section, for more than five days after a written request is
made by Lender to do so, Borrower agrees to pay Lender on demand the sum of
$1,000.00 for each day after such five-day period that Borrower so prohibits or
bars such inspection, and such sum or sums shall be part of the Indebtedness.
Notwithstanding any of Lender’s or Servicer’s rights in this Section, in no
event shall Lender or Servicer have any right to enter or inspect the Property
or inspect, examine, audit or copy the books and records of Approved Property
Manager that is greater than or inconsistent with the access afforded to
Borrower under the terms of the Approved Management Agreement.
     Section 5.6. Cooperate in Legal Proceedings. Except with respect to any
claim by Borrower against Lender, Borrower shall, and shall cause Operating
Lessee to, cooperate fully with Lender with respect to any proceedings before
any Governmental Authority that may in any way affect the rights of Lender
hereunder or under any of the Loan Documents and, in connection therewith,
Lender may, at its election, participate or designate a representative to
participate in any such proceedings.
     Section 5.7. Leases.

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     (a) Borrower shall furnish Lender with executed copies of all Leases,
together with a detailed breakdown of income and cost associated therewith. All
new Leases and renewals or amendments of Leases must (i) be entered into on an
arms-length basis with Tenants that are not affiliates of Borrower and whose
identity and creditworthiness is appropriate for tenancy in property of
comparable quality, (ii) provide for rental rates and other economic terms that,
taken as a whole, are at least equivalent to then-existing market rates, based
on the applicable market, and otherwise contain terms and conditions that are
commercially reasonable, (iii) have an initial term of not more than 10 years,
(iv) not have or reasonably be expected to result in a Material Adverse Effect,
(v) be expressly subject and subordinate to the Mortgage and contain provisions
for the agreement by the Tenant thereunder to attorn to Lender and any purchaser
at a foreclosure sale, such attornment to be self-executing and effective upon
acquisition of title to the Property by any purchaser at a foreclosure sale and
(vi) require the Tenant thereunder to execute and deliver to Borrower an
estoppel certificate addressing the issues set forth in Section 9.16(b) of this
Agreement (in each case, unless Lender consents to such Lease in its sole
discretion).
     (b) All new Leases that are Major Leases, and all terminations, renewals
and amendments of Major Leases, and any surrender of rights under any Major
Lease, shall be subject to the prior written consent of Lender. If Lender shall
fail to respond to Borrower’s request for such consent within five (5) Business
Days of Lender’s receipt thereof, Borrower may deliver to Lender a second
request for consent stating in bold and capitalized type that “LENDER’S FAILURE
TO RESPOND TO THE ENCLOSED REQUEST WITHIN TEN (10) BUSINESS DAYS SHALL BE DEEMED
LENDER’S APPROVAL.” In the event Lender fails to approve or disapprove such
request within ten (10) Business Days of Lender’s receipt of such second
request, such request shall be deemed approved.
     (c) Borrower shall, and shall cause Operating Lessee to, (i) observe and
punctually perform all the material obligations imposed upon the lessor under
the Leases; (ii) enforce all of the material terms, covenants and conditions
contained in the Leases on the part of the lessee thereunder to be observed or
performed, short of termination thereof, except that the lessor may terminate
any Lease following a material default thereunder by the respective Tenant;
(iii) not collect any of the rents thereunder more than one month in advance;
(iv) not execute any assignment of lessor’s interest in the Leases or associated
rents other than the assignment of rents and leases under the Mortgage; (v) not
cancel or terminate any guarantee of any of the Major Leases without the prior
written consent of Lender; and (vi) not permit any subletting of any space
covered by a Lease or an assignment of the Tenant’s rights under a Lease, except
in strict accordance with the terms of such Lease. Borrower shall, or shall
cause Operating Lessee to, deliver to each new Tenant a Tenant Notice upon
execution of such Tenant’s Lease, and promptly thereafter deliver to Lender a
copy thereof and evidence of such Tenant’s receipt thereof.
     (d) Security deposits of Tenants under all Leases, whether held in cash or
any other form, shall not be commingled with any other funds of Borrower or
Operating Lessee and, if cash, shall be deposited by Borrower or Operating
Lessee in an account at such commercial or savings bank as may be reasonably
satisfactory to Lender, which account shall be pledged to Lender. Borrower
shall, or shall cause Operating Lessee to, maintain books and records of
sufficient detail to identify all security deposits of Tenants separate and
apart from any other payments received from Tenants. Any bond or other
instrument that Borrower or Operating

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Lessee is permitted to hold in lieu of cash security deposits under any
applicable Legal Requirements shall be maintained in full force and effect
unless replaced by cash deposits as described above, shall be issued by an
institution reasonably satisfactory to Lender, shall (if not prohibited by any
Legal Requirements) name Lender as payee or mortgagee thereunder (or at Lender’s
option, be fully assignable to Lender) or may name Borrower or Operating Lessee
as payee thereunder so long as such bond or other instrument is pledged to
Lender as security for the Indebtedness and shall, in all respects, comply with
any applicable Legal Requirements and otherwise be reasonably satisfactory to
Lender. Borrower shall, upon Lender’s request, provide Lender with evidence
reasonably satisfactory to Lender of Borrower’s and Operating Lessee’s
compliance with the foregoing. During the continuance of any Trigger Period or
Event of Default, Borrower shall, upon Lender’s request, cause to be deposited
with Lender in an Eligible Account pledged to Lender an amount equal to the
aggregate security deposits of the Tenants (and any interest theretofore earned
on such security deposits and actually received by Borrower or Operating Lessee)
that Borrower and Operating Lessee had not returned to the applicable Tenants or
applied in accordance with the terms of the applicable Lease.
     (e) Borrower shall cause to be promptly delivered to Lender a copy of each
written notice from a Tenant under any Major Lease claiming that Borrower or
Operating Lessee is in default in the performance or observance of any of the
material terms, covenants or conditions thereof. Borrower shall cause each Major
Lease executed after the Closing Date to which Borrower or Operating Lessee is a
party to provide that any Tenant delivering any such notice shall send a copy of
such notice directly to Lender.
     Section 5.8. Plan Assets, etc. Borrower will do, or cause to be done, all
things necessary to ensure that neither Borrower nor Operating Lessee will be
deemed to hold Plan Assets at any time.
     Section 5.9. Further Assurances. Borrower shall (and, as applicable, shall
cause Operating Lessee to), at Borrower’s sole cost and expense, from time to
time as reasonably requested by Lender, execute, acknowledge, record, register,
file and/or deliver to Lender such other instruments, agreements, certificates
and documents (including Uniform Commercial Code financing statements and
amended or replacement mortgages) as Lender may reasonably request to evidence,
confirm, perfect and maintain the Liens securing or intended to secure the
obligations of Borrower and the rights of Lender under the Loan Documents or to
facilitate a replacement of the Cash Management Bank pursuant to Section 3.1(c)
or a bifurcation of the Notes pursuant to Sections 1.1(c) and/or 9.7(b) or a
restructuring of the Loan pursuant to the Cooperation Agreement, in each case if
requested by Lender, and do and execute all such further lawful and reasonable
acts, conveyances and assurances for the better and more effective carrying out
of the intents and purposes of this Agreement and the other Loan Documents as
Lender shall reasonably request from time to time. Upon foreclosure, the
appointment of a receiver or any other relevant action, Borrower shall (and, as
applicable, shall cause Operating Lessee or Approved Property Manager to), at
Borrower’s sole cost and expense, cooperate fully and completely to effect the
assignment or transfer of any license, permit, agreement or any other right
necessary or useful to the operation of the Collateral. Borrower hereby
authorizes and appoints Lender as its attorney-in-fact to execute, acknowledge,
record, register and/or file such instruments, agreements, certificates and
documents, and to do and execute such acts, conveyances and assurances, should
Borrower fail to do so itself in violation of this Agreement

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or the other Loan Documents following written request from Lender, in each case
without the signature of Borrower. The foregoing grant of authority is a power
of attorney coupled with an interest and such appointment shall be irrevocable
for the term of this Agreement. Borrower hereby ratifies all actions that such
attorney shall lawfully take or cause to be taken in accordance with this
Section 5.9.
     Section 5.10. Management of Collateral.
     (a) The Property shall be managed at all times by an Approved Property
Manager pursuant to an Approved Management Agreement. Pursuant to the
Subordination of Property Management Agreement, Approved Property Manager shall
agree that the Approved Management Agreement and the incentive fee payable
thereunder are subordinate to the Indebtedness. Borrower may from time to time
appoint an Approved Property Manager to manage the Property pursuant to an
Approved Management Agreement, and such successor manager shall execute for
Lender’s benefit a Subordination of Property Management Agreement in form and
substance reasonably satisfactory to Lender. The per annum fees of the Approved
Property Manager (including any incentive fees) shall not exceed the fees
specified in the Approved Management Agreement. In connection with any approval
by Lender of a replacement Approved Property Manager, including any negotiation
of a replacement Subordination of Property Management Agreement, Servicer shall
use commercially reasonable efforts to make its determination within thirty
(30) days after receipt from Borrower of all required information, including any
additional information that Servicer requests.
     (b) Borrower shall cause each Approved Property Manager (including any
successor Approved Property Manager) to maintain at all times worker’s
compensation insurance as required by Governmental Authorities.
     (c) Borrower shall notify Lender in writing of any default of Borrower,
Operating Lessee or the Approved Property Manager under the Approved Management
Agreement, after the expiration of any applicable cure periods, of which
Borrower has actual knowledge. Lender shall have the right, after reasonable
notice to Borrower and in accordance with the Subordination of Management
Agreement, to cure defaults of Borrower or Operating Lessee under the Approved
Management Agreement. Any out-of-pocket expenses incurred by Lender to cure any
such default shall constitute a part of the Indebtedness and shall be due from
Borrower upon demand by Lender.
     (d) During the continuance of an Event of Default and, simultaneously, a
material default by the Approved Property Manager under the Approved Management
Agreement after the expiration of any applicable cure period or upon the filing
of a bankruptcy petition or the occurrence of a similar event with respect to
the Approved Property Manager, Lender may, in its sole discretion, require
Borrower to cause the termination of the Approved Management Agreement and the
engagement of an Approved Property Manager selected by Lender to serve as
replacement Approved Property Manager pursuant to an Approved Management
Agreement.
     Section 5.11. Notice of Material Event.

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     (i) Borrower shall give Lender prompt notice (containing reasonable detail)
of (i) any material change in the financial or physical condition of the
Property, as reasonably determined by Borrower, including the termination or
cancellation of any Major Lease and the termination or cancellation of terrorism
or other insurance required by this Agreement, (ii) any notice from the Approved
Property Manager, to the extent such notice relates to a matter that is
reasonably expected to result in a Material Adverse Effect, (iii) any litigation
or governmental proceedings pending or threatened in writing against Borrower,
Operating Lessee or the Property that is reasonably expected to result in a
Material Adverse Effect, (iv) the insolvency or bankruptcy filing of Borrower,
Operating Lessee, any Single-Purpose Equityholder, Sponsor or an affiliate of
any of the foregoing and (v) any other circumstance or event reasonably expected
to result in a Material Adverse Effect.
     (ii) Borrower shall deliver to Lender, within three Business Days of
receipt thereof, the periodic reports regarding the Property, if any, delivered
to Borrower and/or Operating Lessee by Approved Property Manager.
     Section 5.12. Annual Financial Statements. As soon as available, and in any
event within 90 days after the close of each Fiscal Year, Borrower shall furnish
to Lender, in an Excel spreadsheet file in electronic format (which may be via
an intralinks site at Borrower’s sole cost and expense), or, in the case of
predominantly text documents, in Adobe pdf format, a balance sheet of Borrower
as of the end of such year, together with related statements of income and
equityholders’ capital for such Fiscal Year, in each case either audited or
reviewed by a certified public accounting firm reasonably satisfactory to
Lender. Together with Borrower’s annual financial statements, Borrower shall
furnish to Lender, in an Excel spreadsheet file in electronic format (which may
be via an intralinks site at Borrower’s sole cost and expense), or, in the case
of predominantly text documents, in Adobe pdf format:
     (i) a statement of cash flows and income and expenses in the format set
forth in the most recent Uniform System of Accounts (as shown on Exhibit C);
     (ii) average daily room rates, sales reports, Smith Travel Reports (to the
extent available) and occupancy reports;
     (iii) an annual report for the most recently completed fiscal year,
describing Capital Expenditures (stated separately with respect to any project
costing in excess of $100,000); and
     (iv) such other information as Lender shall reasonably request.
     Section 5.13. Quarterly Financial Statements. As soon as available, and in
any event within 45 days after the end of each Fiscal Quarter (including
year-end), Borrower shall furnish to Lender, in an Excel spreadsheet file in
electronic format (which may be via an intralinks site at Borrower’s sole cost
and expense), or, in the case of predominantly text documents, in Adobe pdf
format, quarterly and year-to-date unaudited financial statements prepared for
such fiscal quarter with respect to Borrower, including a balance sheet and
operating statement as of the end of such Fiscal Quarter, together with related
statements of income, equityholders’ capital and

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cash flows for such Fiscal Quarter and for the portion of the Fiscal Year ending
with such Fiscal Quarter, which statements shall include income and expenses in
the format set forth in the most recent Uniform System of Accounts (as shown on
Exhibit C) and be accompanied by an Officer’s Certificate certifying that the
same are true, correct and complete and were prepared in accordance with GAAP
applied on a consistent basis, subject to changes resulting from audit and
normal year-end audit adjustments. Each such quarterly report shall be
accompanied by the following, in an Excel spreadsheet file in electronic format
(which may be via an intralinks site at Borrower’s sole cost and expense), or,
in the case of predominantly text documents, in Adobe pdf format:
     (i) a statement in reasonable detail that calculates Net Operating Income
for each of the Fiscal Quarters in the Test Period ending in such Fiscal
Quarter, in the case of each such Fiscal Quarter, ending at the end thereof;
     (ii) copies of each of the Leases signed during such quarter, together with
a summary thereof that shall include the Tenant’s name, lease term, base rent,
Tenant Improvements, leasing commissions paid, free rent and other material
tenant concessions;
     (iii) average daily room rates, sales reports, Smith Travel Reports (to the
extent available) and occupancy reports; and
     (iv) such other information as Lender shall reasonably request.
     Section 5.14. Monthly Financial Statements; Non-Delivery of Financial
Statements.
     (a) Until the occurrence of a Securitization and during the continuance of
a Trigger Period or an Event of Default (or, in the case of item (iii) below, at
all times), Borrower shall furnish within 30 days after the end of each calendar
month (other than the calendar month immediately following the final calendar
month of any Fiscal Year or Fiscal Quarter), in an Excel spreadsheet file in
electronic format (which may be via an intralinks site at Borrower’s sole cost
and expense), or, in the case of predominantly text documents, in Adobe pdf
format, monthly and year-to-date unaudited financial statements prepared for the
applicable month with respect to Borrower, including a balance sheet and
operating statement as of the end of such month, together with related
statements of income, equityholders’ capital and cash flows for such month and
for the portion of the Fiscal Year ending with such month , which statements
shall include income and expenses in the format set forth in the most recent
Uniform System of Accounts (as shown on Exhibit C) and be accompanied by an
Officer’s Certificate certifying that the same are true, correct and complete
and were prepared in accordance with GAAP applied on a consistent basis, subject
to changes resulting from audit and normal year-end audit adjustments. Each such
monthly report shall be accompanied by the following:
     (i) a summary of Leases signed during such month, which summary shall
include the Tenant’s name, lease term, base rent, escalations, Tenant
Improvements, leasing commissions paid, free rent and other concessions;
     (ii) then current rent roll, average daily room rates, sales reports, Smith
Travel Reports (to the extent available) and occupancy reports; and

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     (iii) such other information as Lender shall reasonably request.
     (b) If Borrower fails to provide to Lender any of the financial statements
and other information specified in Sections 5.12, 5.13 or this Section 5.14
within the respective time period specified in such Sections, Lender shall
deliver to Borrower written notice of such failure. If Borrower fails to provide
such financial statements and other information within ten Business Days after
receipt of such notice, such failure shall constitute a Trigger Period, and if
such failure continues for an additional ten Business Days, such failure shall,
at Lender’s election, constitute an Event of Default.
     Section 5.15. Insurance.
     (a) Borrower shall cause to be obtained and maintained with respect to the
Property, for the mutual benefit of Borrower and Lender at all times, the
following policies of insurance:
      (i) insurance against loss or damage by standard perils included within
the classification “All Risks Special Form Cause of Loss” (including coverage
for damage caused by windstorm and hail). Such insurance shall (A) be in an
amount equal to the full replacement cost of the Property and fixtures (without
deduction for physical depreciation); (B) have deductibles acceptable to Lender
(but in any event not in excess of $50,000, except in the case of windstorm and
earthquake coverage, which shall have deductibles not in excess of 5% of the
total insurable value of the Property); (C) be paid annually in advance; (D)
contain a “Replacement Cost Endorsement” with a waiver of depreciation and an
“Agreed Upon Amount Endorsement” waiving all coinsurance provisions; (E) include
an ordinance or law coverage endorsement containing Coverage A: “Loss Due to
Operation of Law” (with a limit equal to replacement cost, provided, that, the
limit under the coverage in effect as of the Closing Date may be maintained so
long as the Property remains legal and conforming under all applicable zoning
requirements), Coverage B: “Demolition Cost” and Coverage C: “Increased Cost of
Construction” coverages each with limits of no less than 10% of replacement cost
or such lesser amounts as Lender may require in its sole discretion; (F) permit
that the improvements and other property covered by such insurance be rebuilt at
another location in the event that such improvements and other property cannot
be rebuilt at the location on which they are situated as of the date hereof. If
such insurance excludes mold, Borrower shall implement a mold prevention program
satisfactory to Lender;
     (ii) flood insurance if the Property is located in a “100 Year Flood
Plain”, “special hazard area” (Zones A and V) in an amount equal to the maximum
limit of coverage available from FEMA/FIA, plus such excess limits requested by
Lender;
     (iii) commercial general liability insurance, including broad form coverage
of property damage, blanket contractual liability and personal injury (including
death resulting therefrom), to be on the so-called “occurrence” form containing
minimum limits per occurrence of not less than $1,000,000 with not less than a
$2,000,000 general aggregate for any policy year (with a per location aggregate
if the Property is on a blanket policy). In addition, at least $50,000,000
excess and/or umbrella liability insurance shall

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be obtained and maintained for any and all claims, including all legal liability
imposed upon Borrower and all related court costs and attorneys’ fees and
disbursements;
     (iv) rental loss and/or business interruption insurance covering all risks
required to be covered by the insurance provided for herein, including but not
limited to, clauses (i), (ii), (v), (vii), (viii) and (ix) of this
Section 5.15(a), and covering the 18month period commencing on the date of any
Casualty or Condemnation, and containing an extended period of indemnity
endorsement covering the 12 month period commencing on the date on which the
Property has been restored, as reasonably determined by the applicable insurer
(even if the policy will expire prior to the end of such period). The amount of
such insurance shall be increased from time to time as and when the gross
revenues from the Property increase;
     (v) insurance against loss or damage from (A) leakage of sprinkler systems,
if not provided by the policy required by Section 5.15(a)(i), and (B) explosion
of steam boilers, air conditioning equipment, high pressure piping, machinery
and equipment, pressure vessels or similar apparatus now or hereafter installed
in any of the improvements (without exclusion for explosions) and insurance
against loss of occupancy or use arising from any breakdown, in such amounts as
are generally available and are generally required by institutional lenders for
properties comparable to the Property;
     (vi) worker’s compensation insurance with respect to all employees of
Borrower as and to the extent required by any Governmental Authority or Legal
Requirement and employer’s liability coverage of at least $1,000,000 (if
applicable);
     (vii) during any period of repair or restoration, and only if the property
and liability coverage forms do not otherwise apply, owner’s contingent or
protective liability insurance covering claims not covered by or under the terms
or provisions of the insurance provided for in Section 5.15(a)(iii). The
insurance provided for in Section 5.15(a) shall (1) be written in a so-called
builder’s risk completed value form or equivalent coverage, including coverage
for 100% of the total costs of construction on a non-reporting basis and against
all risks insured against pursuant to clauses (i), (ii), (iv), (v), (viii) and
(ix) of Section 5.15(a), (2) shall include permission to occupy the Property,
and (3) shall contain an agreed amount endorsement waiving co-insurance
provisions;
     (viii) if required by Lender, earthquake insurance (A) with minimum
coverage equivalent to the greater of 1.0x SUL (scenario upper loss) and 1.5x
SEL (scenario expected loss) multiplied by the full replacement cost of the
building plus business income, (B) having a deductible approved by Lender (but
in any event not be in excess of 5% of the total insurable value of the
Property), and (C) if the Property is legally nonconforming under applicable
zoning ordinances and codes, containing ordinance of law coverage in amounts as
required by Lender;
     (ix) so long as the Terrorism Risk Insurance Program Reauthorization Act of
2007 (“TRIPRA”) or a similar statute is in effect, terrorism insurance for
Certified and Non-Certified acts (as such terms are defined in TRIPRA or similar
statute) in an amount equal to the full replacement cost of the Property (plus
twelve months of business

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interruption coverage). If TRIPRA or a similar statute is not in effect, then
provided that terrorism insurance is commercially available, Borrower shall be
required to carry terrorism insurance throughout the term of the Loan as
required by the preceding sentence, but in such event Borrower shall not be
required to spend on terrorism insurance coverage more than two times the amount
of the insurance premium that is payable at such time in respect of the property
and business interruption/rental loss insurance required hereunder (without
giving effect to the cost of terrorism and earthquake components of such
property and business interruption/rental loss insurance), and if the cost of
terrorism insurance exceeds such amount, Borrower shall purchase the maximum
amount of terrorism insurance available with funds equal to such amount;
     (x) liquor liability insurance in an amount of at least $10,000,000 or in
such greater amount as may be required by applicable Legal Requirements against
claims or liability arising directly or indirectly to persons or property on
account of the sale or dispensing of alcoholic beverages at the Property and
public liability insurance in an amount of at least $10,000,000 or in such
greater amount as may be required by applicable Legal Requirements providing
coverage against such claims or liability;
     (xi) crime coverage in an amount not less than $2,000,000 to protect
against employee dishonesty and related incidents, containing minimum limits per
occurrence of $1,000,000;
     (xii) motor vehicle liability coverage for all owned and non owned
vehicles, including rented and leased vehicles containing minimum limits per
occurrence of $1,000,000.00 (if applicable); and
     (xiii) such other insurance as may from time to time be requested by
Lender.
     (b) All policies of insurance (the “Policies”) required pursuant to this
Section 5.15 shall be issued by one or more primary insurers having a
claims-paying ability of at least “A” or “A2” by each of the Rating Agencies, or
by a syndicate of insurers through which at least 75% of the coverage (if there
are 4 or fewer members of the syndicate) or at least 60% of the coverage (if
there are 5 or more members of the syndicate) is with carriers having such
claims-paying ability ratings (provided that the first layers of coverage are
from carriers rated at least “A” or “A2” and all such carriers shall have
claims-paying ability ratings of not less than “BBB+” or “Baa1”).
Notwithstanding anything to the contrary herein, for purposes of determining
whether the insurer ratings requirements set forth above have been satisfied,
(1) any insurer that is not rated by Fitch will be regarded as having a Fitch
rating that is the equivalent of the rating given to such insurer by any of
Moody’s and S&P that does rate such insurer (or, if both such rating agencies
rate such insurer, the lower of the two ratings), (2) any insurer that is not
rated by Moody’s will be regarded as having a Moody’s rating of “Baa1” or better
if it is rated “A-” or better by S&P and will be regarded as having a Moody’s
rating of “A2” or better if it is rated “A+” or better by S&P, and (3) RSUI
Indemnity Company shall be deemed to have satisfied such insurer ratings
requirements with respect to insurance coverage provided by it as of the Closing
Date so long as it maintains a Moody’s rating of A3.
     (c) All Policies required pursuant to this Section 5.15:

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     (i) shall contain deductibles that, in addition to complying with any other
requirements expressly set forth in Section 5.15(a), are approved by Lender
(such approval not to be unreasonably withheld, delayed or conditioned, but
subject to the requirements of each Rating Agency) and are no larger than is
customary for similar policies covering similar properties in the geographic
market in which the Property is located, but in any event are not in excess of
$25,000 (except in the case of windstorm and earthquake coverage, which shall
have deductibles not in excess of 5% of the total insurable value of the
Property);
     (ii) shall be maintained throughout the term of the Loan without cost to
Lender and shall name Borrower as the named insured;
     (iii) with respect to casualty policies, shall contain a standard
noncontributory mortgagee clause naming Lender and its successors and assigns as
their interests may appear as first mortgagee and loss payee;
     (iv) with respect to liability policies, shall name Lender and its
successors and assigns as their interests may appear as additional insureds;
     (v) with respect to rental or business interruption insurance policies,
shall name Lender and its successors and/or assigns as their interests may
appear as loss payee;
     (vi) shall contain an endorsement providing that neither Borrower nor
Lender nor any other party shall be a co-insurer under said Policies;
     (vii) shall contain an endorsement providing that Lender shall receive at
least 30 days’ prior written notice of any modification, reduction or
cancellation thereof;
     (viii) shall contain an endorsement providing that no act or negligence of
Borrower or of a Tenant or other occupant or any foreclosure or other proceeding
or notice of sale relating to the Property shall affect the validity or
enforceability of the insurance insofar as a mortgagee is concerned;
     (ix) shall provide that Lender shall not be liable for any insurance
premiums thereon or subject to any assessments thereunder;
     (x) shall contain a waiver of subrogation against Lender;
     (xi) may be in the form of a blanket policy, provided that Borrower shall
provide evidence satisfactory to Lender that the insurance premiums for the
Property are separately allocated under such Policy to the Property and that
(i) payment of such allocated amount shall maintain the effectiveness of such
Policy as to the Property notwithstanding the failure of payment of any other
portion of premiums, and (ii) overall insurance limits will under no
circumstance limit the amount that will be paid in respect of the Property, and
provided further that any such blanket policy shall specifically allocate to the
Property the amount of coverage from time to time required hereunder or shall
otherwise provide the same protection as would a separate Policy in Lender’s

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discretion, subject to review and approval by Lender based on the schedule of
locations and values; and
     (xii) shall otherwise be reasonably satisfactory in form and substance to
Lender and shall contain such other provisions as Lender deems reasonably
necessary or desirable to protect its interests.
     (d) Borrower shall pay the premiums for all Policies as the same become due
and payable. Copies of such Policies, certified as true and correct by Borrower,
shall be delivered to Lender promptly upon request. Not later than 30 days prior
to the expiration date of each Policy, Borrower shall deliver to Lender
evidence, reasonably satisfactory to Lender, of its renewal. Borrower shall
promptly forward to Lender a copy of each written notice received by Borrower of
any modification, reduction or cancellation of any of the Policies or of any of
the coverages afforded under any of the Policies. Within 30 days after request
by Lender, Borrower shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested by Lender, taking into
consideration changes in the value of money over time, changes in liability
laws, changes in prudent customs and practices, and the like.
     (e) Borrower shall not procure any other insurance coverage that would be
on the same level of payment as the Policies or would adversely impact in any
way the ability of Lender or Borrower to collect any proceeds under any of the
Policies. If at any time Lender is not in receipt of written evidence that all
Policies are in full force and effect when and as required hereunder, Lender
shall have the right to take such action as Lender deems necessary to protect
its interest in the Property, including the obtaining of such insurance coverage
as Lender in its sole discretion deems appropriate (but limited to the coverages
and amounts required hereunder). All premiums incurred by Lender in connection
with such action or in obtaining such insurance and keeping it in effect shall
be paid by Borrower to Lender upon demand and, until paid, and shall bear
interest at the Default Rate.
     (f) In the event of foreclosure of the Mortgage or other transfer of title
to the Property in extinguishment in whole or in part of the Indebtedness, all
right, title and interest of Borrower in and to the Policies then in force with
respect to the Property and all proceeds payable thereunder shall thereupon vest
in the purchaser at such foreclosure or in Lender or other transferee in the
event of such other transfer of title.
     Section 5.16. Casualty and Condemnation.
     (a) Borrower shall give prompt notice to Lender of any Casualty or
Condemnation or of the actual or threatened commencement of proceedings that
would result in a Condemnation
     (b) Lender may participate in any proceedings for any taking by any public
or quasi-public authority accomplished through a Condemnation or any transfer
made in lieu of or in anticipation of a Condemnation, to the extent permitted by
law. Upon Lender’s request, Borrower shall deliver to Lender all instruments
reasonably requested by it to permit such participation. Borrower shall, at its
sole cost and expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Borrower shall not consent or
agree to a

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Condemnation or action in lieu thereof without the prior written consent of
Lender in each instance, which consent shall not be unreasonably withheld or
delayed in the case of a taking of an immaterial portion of the Property.
     (c) Lender may (x) jointly with Borrower settle and adjust any claims,
(y) during the continuance of an Event of Default, settle and adjust any claims
without the consent or cooperation of Borrower, or (z) allow Borrower to settle
and adjust any claims; except that if no Event of Default is continuing,
Borrower may settle and adjust claims aggregating not in excess of $300,000 if
such settlement or adjustment is carried out in a competent and timely manner,
but Lender shall be entitled to collect and receive (as set forth below) any and
all Loss Proceeds. The reasonable expenses incurred by Lender in the adjustment
and collection of Loss Proceeds shall become part of the Indebtedness and shall
be reimbursed by Borrower to Lender upon demand therefor.
     (d) All Loss Proceeds from any Casualty or Condemnation shall be
immediately deposited into the Loss Proceeds Account (monthly rental
loss/business interruption proceeds to be initially deposited into the Loss
Proceeds Account and subsequently deposited into the Cash Management Account in
installments as and when the lost rental income covered by such proceeds would
have been payable). Following the occurrence of a Casualty, Borrower, regardless
of whether proceeds are available, shall in a reasonably prompt manner proceed
to restore, repair, replace or rebuild the Property to be of at least equal
value and of substantially the same character as prior to the Casualty, all in
accordance with the terms hereof applicable to Alterations. If any Condemnation
or Casualty occurs as to which, in the reasonable judgment of Lender:
     (i) in the case of a Casualty, the cost of restoration would not exceed 25%
of the Loan Amount and the Casualty does not render untenantable, or result in
the cancellation of Leases covering, more than 25% of the gross rentable area of
the Property, or result in cancellation of Leases covering more than 25% of the
base contractual rental revenue of the Property;
     (ii) in the case of a Condemnation, the Condemnation does not render
untenantable, or result in the cancellation of Leases covering, more than 15% of
the gross rentable area of the Property;
     (iii) restoration of the Property is reasonably expected to be completed
prior to the expiration of rental interruption insurance and at least six months
prior to the Maturity Date;
     (iv) after such restoration, the fair market value of the Property is
reasonably expected to equal at least the fair market value of the Property
immediately prior to such Condemnation or Casualty; and
     (v) all necessary approvals and consents from Governmental Authorities will
be obtained to allow the rebuilding and re-occupancy of the Property;
or if Lender otherwise elects to allow Borrower to restore the Property, then,
provided no Event of Default is continuing, the Loss Proceeds after receipt
thereof by Lender and reimbursement of

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any reasonable expenses incurred by Lender in connection therewith shall be
applied to the cost of restoring, repairing, replacing or rebuilding the
Property or part thereof subject to the Casualty or Condemnation, in the manner
set forth below (and Borrower shall commence, as promptly and diligently as
practicable, to prosecute such restoring, repairing, replacing or rebuilding of
the Property in a workmanlike fashion and in accordance with applicable law to a
status at least equivalent to the quality and character of the Property
immediately prior to the Condemnation or Casualty). Provided that no Event of
Default shall have occurred and be then continuing, Lender shall disburse such
Loss Proceeds to Borrower upon Lender’s being furnished with (i) evidence
reasonably satisfactory to it of the estimated cost of completion of the
restoration, (ii) funds, or assurances reasonably satisfactory to Lender that
such funds are available and sufficient in addition to any remaining Loss
Proceeds, to complete the proposed restoration (including for any reasonable
costs and expenses of Lender to be incurred in administering such restoration)
and for payment of the Indebtedness as it becomes due and payable during the
restoration, and (iii) such architect’s certificates, waivers of lien,
contractor’s sworn statements, title insurance endorsements, bonds, plats of
survey and such other evidences of cost, payment and performance as Lender may
reasonably request; and Lender may, in any event, require that all plans and
specifications for restoration reasonably estimated by Lender to exceed $300,000
be submitted to and approved by Lender prior to commencement of work (which
approval shall not be unreasonably withheld). If Lender reasonably estimates
that the cost to restore will exceed $300,000, Lender may retain a local
construction consultant to inspect such work and review Borrower’s request for
payments and Borrower shall, on demand by Lender, reimburse Lender for the
reasonable fees and expenses of such consultant (which fees and expenses shall
constitute Indebtedness). No payment shall exceed 90% of the value of the work
performed from time to time until such time as 50% of the restoration
(calculated based on the anticipated aggregate cost of the work) has been
completed, and amounts retained prior to completion of 50% of the restoration
shall not be paid prior to the final completion of the restoration. Funds other
than Loss Proceeds shall be disbursed prior to disbursement of such Loss
Proceeds, and at all times the undisbursed balance of such proceeds remaining in
the Loss Proceeds Account, together with any additional funds irrevocably and
unconditionally deposited therein or irrevocably and unconditionally committed
for that purpose, shall be at least sufficient in the reasonable judgment of
Lender to pay for the cost of completion of the restoration free and clear of
all Liens or claims for Lien.
     (e) Borrower shall cooperate with Lender in obtaining for Lender the
benefits of any Loss Proceeds lawfully or equitably payable to Lender in
connection with the Property. Lender shall be reimbursed for any expenses
reasonably incurred in connection therewith (including reasonable attorneys’
fees and disbursements, and, if reasonably necessary to collect such proceeds,
the expense of an Appraisal on behalf of Lender) out of such Loss Proceeds or,
if insufficient for such purpose, by Borrower. Borrower hereby irrevocably
constitutes and appoints Lender as the attorney-in-fact of Borrower for matters
in excess of $300,000.00 with respect to the Property, with full power of
substitution, subject to the terms of this Section 5.16, to settle for, collect
and receive all Loss Proceeds and any other awards, damages, insurance proceeds,
payments or other compensation from the parties or authorities making the same,
to appear in and prosecute any proceedings therefor and to give receipts and
acquittance therefor (which power of attorney shall be irrevocable so long as
any of the Indebtedness is outstanding, shall be deemed coupled with an
interest, and shall survive the voluntary or involuntary dissolution of
Borrower).

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     (f) If Borrower is not entitled to apply Loss Proceeds toward the
restoration of the Property pursuant to Section 5.16(d) and Lender elects not to
permit such Loss Proceeds to be so applied, such Loss Proceeds shall be applied
on the first Payment Date following such election to the prepayment of the
principal of the Loan and shall be accompanied by interest through the end of
the applicable Interest Accrual Period (calculated as if the amount prepaid were
outstanding for the entire Interest Accrual Period). If the Note has been
bifurcated into multiple Notes pursuant to Section 1.1(c), all prepayments of
the Loan made by Borrower in accordance with this Section 5.16(f) shall be
applied to the Notes in ascending order of interest rate (i.e., first to the
Note with the lowest interest rate until its outstanding principal balance has
been reduced to zero, then to the Note with the second lowest interest rate
until its outstanding principal balance has been reduced to zero, and so on) or
in such other order as Lender shall determine.
     (g) Notwithstanding the foregoing provisions of this Section 5.16, if the
Loan is included in a REMIC and immediately following a release of any portion
of the applicable Property from the Lien of the Loan Documents in connection
with a Casualty or Condemnation the Loan would fail to satisfy a Lender 80%
Determination, then the principal of the Loan shall be prepaid in accordance
with Section 5.16(f) in an amount equal to either (i) so much of the Loss
Proceeds as are necessary to cause the Lender 80% Determination to be satisfied,
or if the aggregate Loss Proceeds are insufficient for such purpose, then the
amount realized by Borrower from the Casualty or Condemnation for purposes of
computing gain or loss under section 1001 of the Code, or (ii) a lesser amount
provided the Borrower delivers to Lender an opinion of counsel for Borrower, in
form and substance reasonably satisfactory to Lender and delivered by counsel
reasonably satisfactory to Lender, opining that such release of Property from
the Lien does not cause any portion of the Loan to cease to be a “qualified
mortgage” within the meaning of section 860G(a)(3) of the Code.
     Section 5.17. Annual Budget. Each calendar year during the term of the
Loan, as soon as made available to Borrower and/or Operating Lessee in
accordance with the terms of Sections 3.2 of the Approved Management Agreement,
Borrower or Operating Lessee shall deliver or shall cause Approved Property
Manager to deliver to Lender, for informational purposes only, the Annual Budget
and, promptly after preparation thereof, any subsequent revisions to the Annual
Budget. If the budget approval process under the Approved Management Agreement
shall be ongoing during the continuance of a Trigger Period or an Event of
Default, neither Borrower nor Operating Lessee shall exercise any budget
approval right they may have under the Approved Management Agreement without the
approval of Lender, such approval not to be unreasonably conditioned, withheld
or delayed. For so long as Lender shall withhold its consent to any Annual
Budget or any revisions thereto, the Annual Budget in effect prior to any such
request for approval shall remain in effect. Without the prior written consent
of Lender, which consent shall not be unreasonably withheld or delayed, during
the continuance of a Trigger Period neither Borrower nor Operating Lessee shall
make or approve any expenditures that are either not provided for in the
Approved Annual Budget or that would, in the aggregate, cause any line item in
the Approved Annual Budget to be exceeded by 5% or more measured on an annual
basis, other than expenditures for non-discretionary items and expenditures
required to be made by reason of the occurrence of any emergency (i.e., an
unexpected event that threatens imminent harm to persons or property at the
Property) and with respect to which it would be impracticable, under the
circumstances, to obtain Lender’s prior consent thereto. For the avoidance of
doubt, decreases made or approved to any line item in the Approved Annual

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Budget shall not require Lender’s consent. Borrower and/or Operating Lessee
shall deliver, or cause to be delivered, the 2011 Annual Budget as soon as is
practical.
     Section 5.18. Nonbinding Consultation. Lender shall have the right to
consult with and advise Borrower regarding significant business activities and
business and financial developments of Borrower and Operating Lessee, provided
that any such advice or consultation or the result thereof shall be completely
nonbinding on Borrower.
     Section 5.19. Compliance with Encumbrances and Material Agreements.
Borrower covenants and agrees as follows:
     (i) Borrower shall, and shall cause Operating Lessee to, comply with all
material terms, conditions and covenants of each Material Agreement and each
material Permitted Encumbrance, including any reciprocal easement agreement, any
declaration of covenants, conditions and restrictions, and any condominium
arrangements.
     (ii) Borrower shall, and shall cause Operating Lessee to, promptly deliver
to Lender a true, correct and complete copy of each and every notice of default
received by Borrower or Operating Lessee with respect to any obligation of such
Borrower or Operating Lessee under the provisions of any Material Agreement
and/or Permitted Encumbrance.
     (iii) Borrower shall, and shall cause Operating Lessee to, deliver to
Lender copies of any written notices of default or event of default relating to
any Material Agreement and/or Permitted Encumbrance served by Borrower or
Operating Lessee.
     (iv) After the occurrence of an Event of Default, so long as the Loan is
outstanding, Borrower shall not, and shall not cause Operating Lessee to, grant
or withhold any material consent, approval or waiver under any Material
Agreement or Permitted Encumbrance without the prior written consent of Lender.
     (v) Borrower shall, and shall cause Operating Lessee to, deliver to each
other party to any Permitted Encumbrance and any Material Agreement notice of
the identity of Lender and each assignee of Lender of which Borrower is aware if
such notice is required in order to protect Lender’s interest thereunder.
     (vi) Borrower shall, and shall cause Operating Lessee to, enforce, short of
termination thereof, the performance and observance of each and every material
term, covenant and provision of each Material Agreements to be performed or
observed, if any.
     Section 5.20. Prohibited Persons. None of Borrower, Operating Lessee,
Sponsor or any Person owning a direct or indirect beneficial interest in
Borrower, Operating Lessee, or Sponsor shall (i) knowingly conduct any business,
or engage in any transaction or dealing, with any Embargoed Person, including,
but not limited to, the making or receiving of any contribution of funds, goods,
or services, to or for the benefit of a Embargoed Person, or (ii) knowingly
engage in or conspire to engage in any transaction that evades or avoids, or has
the purpose of evading or avoiding, or attempts to violate, any of the
prohibitions set forth in Executive Order 13224. Borrower shall deliver to
Lender from time to time written certification or other evidence

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as may be reasonably requested by Lender, confirming that (x) none of Borrower,
Operating Lessee, Sponsor or, to Borrower’s knowledge, any Person owning a
direct or indirect beneficial interest in Borrower, Operating Lessee, or Sponsor
is an Embargoed Person and (y) none of Borrower, Operating Lessee, Sponsor or,
to Borrower’s knowledge, any Person owning a direct or indirect beneficial
interest in Borrower, Operating Lessee, or Sponsor has knowingly engaged in any
business, transaction or dealings with a Embargoed Person, including, but not
limited to, the making or receiving of any contribution of funds, goods, or
services, to or for the benefit of a Embargoed Person.
     Section 5.21. Operating Lease.
     (i) Borrower shall cause Operating Lessee to comply with the affirmative
and negative covenants contained in this Agreement as if Operating Lessee were
the Borrower hereunder and no Default hereunder shall be excused by virtue of
the fact that such Default was caused by Operating Lessee.
     (ii) Borrower shall use best efforts to cause the Operating Lease to remain
in effect so long as any portion of the Indebtedness is outstanding.
     (iii) Notwithstanding anything to the contrary herein or in any other Loan
Documents or in the Operating Lease, during the continuance of an Event of
Default (but only after Lender shall have exercised its rights and remedies
under the Mortgage), Lender may, at its sole option and regardless of whether
Operating Lessee is in default or compliance with the terms of the Operating
Lease, terminate the Operating Lease without payment of any termination fee,
penalty or other amount (the parties hereto agreeing that any such fee, penalty
or other amount shall be solely the obligation of Sponsor and shall be paid by
Sponsor or an affiliate of Sponsor other than Borrower or Operating Lessee).
     Section 5.22. Post-Closing Matters. Within ten (10) Business Days after the
Closing Date, or such longer time as set forth on Schedule D, Borrower shall
satisfy all of the Post-Closing Matters.
ARTICLE VI
NEGATIVE COVENANTS
     Section 6.1. Liens on the Collateral. None of Borrower, Operating Lessee
or, if applicable, any Single-Purpose Equityholder shall permit or suffer the
existence of any Lien on any of its assets, other than Permitted Encumbrances.
     Section 6.2. Ownership. Neither Borrower, Operating Lessee nor Borrower
FF&E Subsidiary shall hold any interest in any assets other than the Property
and related personal property and fixtures located therein or used in connection
therewith,.
     Section 6.3. Transfer; Change of Control. Neither Borrower nor Operating
Lessee shall Transfer any Collateral other than in compliance with Article II
and other than the replacement or other disposition of obsolete or non-useful
personal property and fixtures in the ordinary course of business, and neither
Borrower nor Operating Lessee shall hereafter file a

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declaration of condominium with respect to the Property. No Change of Control or
Prohibited Pledge shall occur. Borrower shall not Transfer any of its equity
interests in Borrower FF&E Subsidiary.
     Section 6.4. Debt. Neither Borrower, Operating Lessee nor Borrower FF&E
Subsidiary shall have any Debt, other than Permitted Debt.
     Section 6.5. Dissolution; Merger or Consolidation. None of Borrower,
Operating Lessee or, if applicable, any Single-Purpose Equityholder shall
dissolve, terminate, liquidate, merge with or consolidate into another Person
without first causing the Loan to be assumed by a Qualified Successor Borrower
pursuant to Section 2.2.
     Section 6.6. Change in Business. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary shall make any material change in the scope or nature
of its business objectives, purposes or operations or undertake or participate
in activities other than the continuance of its present business.
     Section 6.7. Debt Cancellation. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary shall cancel or otherwise forgive or release any
material claim or Debt owed to it by any Person, except for adequate
consideration or in the ordinary course of its business.
     Section 6.8. Affiliate Transactions. Neither Borrower, Operating Lessee nor
Borrower FF&E Subsidiary shall enter into, or be a party to, any transaction
with any affiliate, except on terms that are no less favorable to Borrower or
Operating Lessee than would be obtained in a comparable arm’s length transaction
with an unrelated third party.
     Section 6.9. Misapplication of Funds. Neither Borrower nor Operating Lessee
shall (a) distribute any Revenue or Loss Proceeds in violation of the provisions
of this Agreement (and shall promptly cause the reversal of any such
distributions made in error of which Borrower becomes aware), (b) fail to remit
amounts to the Cash Management Account as required by Section 3.1, or
(c) misappropriate any security deposit or portion thereof.
     Section 6.10. Jurisdiction of Formation; Name. Neither Borrower, Borrower
FF&E Subsidiary nor Operating Lessee shall change its jurisdiction of formation
or name without receiving Lender’s prior written consent and promptly providing
Lender such information and replacement Uniform Commercial Code financing
statements and legal opinions as Lender may reasonably request in connection
therewith.
     Section 6.11. Modifications and Waivers. Unless otherwise consented to in
writing by Lender, none of Borrower, Operating Lessee or, in the case of clause
(ii) below, any Single-Purpose Equityholder (if applicable) shall:
     (i) amend, modify, terminate, renew, or surrender any rights or remedies
under any Lease, or enter into any Lease, except in compliance with Section 5.7;
     (ii) terminate, amend or modify its organizational documents (including any
operating agreement, limited partnership agreement, by-laws, certificate of
formation, certificate of limited partnership or certificate of incorporation);

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     (iii) terminate, amend or modify the Approved Management Agreement, except
immaterial amendments and modifications that have no adverse effect on Lender
and do not alter any economic term of the Approved Management Agreement; and
     (iv) amend, modify, surrender or waive any material rights or remedies
under, or enter into or terminate, or default in its obligations under, any
Material Agreement.
     Section 6.12. ERISA.
     (a) Neither Borrower, Operating Lessee nor Borrower FF&E Subsidiary shall
maintain or contribute to, or agree to maintain or contribute to, or permit any
ERISA Affiliate to maintain or contribute to or agree to maintain or contribute
to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to
Title IV or Section 302 of ERISA or Section 412 of the Code.
     (b) Neither Borrower, Operating Lessee nor Borrower FF&E Subsidiary shall
engage in a non-exempt prohibited transaction under Section 406 of ERISA,
Section 4975 of the Code, or substantially similar provisions under federal,
state or local laws, rules or regulations or in any transaction that would cause
any obligation or action taken or to be taken hereunder (or the exercise by
Lender of any of its rights under the Notes, this Agreement, the Mortgage or any
other Loan Document) to be a non-exempt prohibited transaction under such
provisions.
     Section 6.13. Alterations and Expansions. During the continuance of any
Trigger Period or Event of Default, Borrower shall not, and shall not permit
Operating Lessee to, perform or contract to perform any capital improvements
requiring Capital Expenditures that are not consistent with the Approved Annual
Budget. Borrower shall not, and shall not permit Operating Lessee to, perform,
undertake, contract to perform or consent to any Material Alteration without the
prior written consent of Lender, which consent (in the absence of an Event of
Default) shall not be unreasonably withheld, but such consent may be conditioned
on the delivery of additional collateral acceptable to Lender in respect of the
unpaid cost of any such Material Alteration. If Lender’s consent is requested
hereunder with respect to a Material Alteration, Lender may retain a
construction consultant to review such request and, if such request is granted,
Lender may retain a construction consultant to inspect the work from time to
time. Borrower shall, on demand by Lender, reimburse Lender for the reasonable
fees and disbursements of such consultant.
     Section 6.14. Advances and Investments. Neither Borrower, Operating Lessee
nor Borrower FF&E Subsidiary shall lend money or make advances to any Person, or
purchase or acquire any stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any Person, except for
Permitted Investments.
     Section 6.15. Single-Purpose Entity. Neither Borrower, Borrower FF&E
Subsidiary nor Operating Lessee shall cease to be a Single-Purpose Entity.
Neither Borrower, Operating Lessee nor Borrower FF&E Subsidiary shall remove or
replace any Independent Director without Cause and without providing at least
two (2) Business Days’ advance written notice thereof to Lender and the Rating
Agencies.

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     Section 6.16. Zoning and Uses. Neither Borrower nor Operating Lessee shall
do any of the following:
     (i) initiate or support any limiting change in the permitted uses of the
Property (or to the extent applicable, zoning reclassification of the Property)
or any portion thereof, seek any variance under existing land use restrictions,
laws, rules or regulations (or, to the extent applicable, zoning ordinances)
applicable to the Property, or use or permit the use of the Property in a manner
that would result in the use of the Property becoming a nonconforming use under
applicable land-use restrictions or zoning ordinances or that would violate the
terms of any Lease, Material Agreement or Legal Requirement (and if under
applicable zoning ordinances the use of all or any portion of the Property is a
nonconforming use, Borrower shall not cause or permit such nonconforming use to
be discontinued or abandoned without the express written consent of Lender);
     (ii) consent to any modification, amendment or supplement to any of the
terms of, or materially default in its obligations under, any Permitted
Encumbrance;
     (iii) impose or consent to the imposition of any restrictive covenants,
easements or encumbrances upon the Property in any manner that adversely affects
in any material respect its value, utility or transferability;
     (iv) execute or file any subdivision plat affecting the Property, or
institute, or permit the institution of, proceedings to alter any tax lot
comprising the Property;
     (v) amend or cause to be amended any Material Agreement in any manner that
might (x) diminish the value of the Property, (y) diminish the rights of
Borrower or Lender thereunder or (z) or otherwise cause or reasonably be
expected to result in a Material Adverse Effect, or terminate the same for any
reason or purpose whatsoever, in each case, without the prior written consent of
Lender; or
     (vi) permit or consent to the Property’s being used by the public or any
Person in such manner as might make possible a claim of adverse usage or
possession or of any implied dedication or easement.
     Section 6.17. Waste. Neither Borrower, Operating Lessee nor Borrower FF&E
Subsidiary shall commit or permit any Waste on the Property, nor take any
actions that might invalidate any insurance carried on the Property (and
Borrower shall promptly correct any such actions of which Borrower becomes
aware).
     Section 6.18. Joint Assessment. Borrower shall not suffer, permit or
initiate the joint assessment of the Property (i) with any other real property
constituting a separate tax lot, or (ii) with any personal property, or any
other procedure whereby the Lien of any Taxes that may be levied against such
other real property or personal property shall be assessed or levied or charged
to the Property as a single Lien.

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ARTICLE VII
DEFAULTS
     Section 7.1. Event of Default. The occurrence of any one or more of the
following events shall be, and shall constitute the commencement of, an “Event
of Default” hereunder (any Event of Default that has occurred shall continue
unless and until waived by Lender in writing in its sole discretion):
     (a) Payment.
     (i) Borrower shall default in the payment when due of any principal or
interest owing hereunder or under the Notes (including any mandatory prepayment
required hereunder) provided that the Default Rate shall not apply to any amount
owing hereunder or under the Notes unless and until Borrower and Borrower’s
counsel shall have received email notification at the email addresses provided
in Section 9.4, or any other form of notice permitted under this Agreement,
setting forth the payment amount and the due date thereof; or
     (ii) Borrower shall default, and such default shall continue for at least
five Business Days after notice to Borrower that such amounts are owing, in the
payment when due of fees, expenses or other amounts owing hereunder, under the
Notes or under any of the other Loan Documents (other than principal and
interest owing hereunder or under the Note).
     (b) Representations. Any representation made by Borrower, Borrower FF&E
Subsidiary, Sponsor or Operating Lessee in any of the Loan Documents, or in any
report, certificate, financial statement or other instrument, agreement or
document furnished to Lender proves to be untrue in any material respect (or,
with respect to any representation that itself contains a materiality qualifier,
in any respect) as of the date such representation was made.
     (c) Other Loan Documents. Any Loan Document shall fail to be in full force
and effect or to convey the material Liens, rights, powers and privileges
purported to be created thereby; or a default shall occur under any of the other
Loan Documents or Material Agreements, or a default by Borrower or Operating
Lessee, as applicable, shall occur under the Approved Management Agreement, or
the Operating Lease, in each case, beyond the expiration of any applicable cure
period.
     (d) Bankruptcy; Reorganization; Receivership; and Insolvency.
     (i) Borrower, Borrower FF&E Subsidiary, Operating Lessee or, if applicable,
any Single-Purpose Equityholder shall commence a voluntary case concerning
itself under Title 11 of the United States Code (as amended, modified, succeeded
or replaced, from time to time, the “Bankruptcy Code”);
     (ii) Borrower, Borrower FF&E Subsidiary, Operating Lessee or, if
applicable, any Single-Purpose Equityholder shall commence any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of creditors,
dissolution,

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insolvency or similar law of any jurisdiction whether now or hereafter in effect
relating to Borrower, Borrower FF&E Subsidiary, Operating Lessee or such
Single-Purpose Equityholder, or shall dissolve or otherwise cease to exist;
     (iii) there is commenced against Borrower, Borrower FF&E Subsidiary,
Operating Lessee or, if applicable, any Single-Purpose Equityholder an
involuntary case under the Bankruptcy Code, or any such other proceeding, which
remains undismissed for a period of 60 days after commencement;
     (iv) Borrower, Borrower FF&E Subsidiary, Operating Lessee or, if
applicable, any Single-Purpose Equityholder is adjudicated insolvent or
bankrupt;
     (v) Borrower, Borrower FF&E Subsidiary, Operating Lessee or, if applicable,
any Single-Purpose Equityholder suffers appointment of any custodian or the like
for it or for any substantial portion of its property and such appointment
continues unchanged or unstayed for a period of 60 days after commencement of
such appointment;
     (vi) Borrower, Borrower FF&E Subsidiary, Operating Lessee or, if
applicable, any Single-Purpose Equityholder makes a general assignment for the
benefit of creditors; or
     (vii) any action is taken by Borrower, Borrower FF&E Subsidiary, Operating
Lessee or, if applicable, any Single-Purpose Equityholder for the purpose of
effecting any of the foregoing.
     (e) Change of Control.
     (i) A Change of Control shall occur; or
     (ii) the failure to deliver any Nonconsolidation Opinion required pursuant
to Section 2.3.
     (f) Equity Pledge; Preferred Equity. Any direct or indirect equity interest
in or right to distributions from Borrower, Borrower FF&E Subsidiary or
Operating Lessee shall be subject to a Lien in favor of any Person, or Borrower,
Borrower FF&E Subsidiary, Operating Lessee or any holder of a direct or indirect
interest in Borrower, Borrower FF&E Subsidiary or Operating Lessee shall issue
preferred equity (or debt granting the holder thereof rights substantially
similar to those generally associated with preferred equity); except that the
following shall be permitted:
     (i) any pledge of direct and indirect equity interests in and rights to
distributions from a Qualified Equityholder meeting the requirements of
subclauses (i), (ii) or (iii) of the definition of Qualified Equityholder; and
     (ii) the issuance of preferred equity interests in a Qualified Equityholder
meeting the requirements of subclauses (i), (ii) or (iii) of the definition of
Qualified Equityholder.

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Any act, action or state of affairs that would result in an Event of Default
pursuant to this Section 7.1(f) shall be referred to in this Agreement as a
“Prohibited Pledge”.
     (g) Insurance. Any of the Policies required hereunder shall not be
maintained in full force and effect.
     (h) ERISA; Negative Covenants. A default shall occur in the due performance
or observance by Borrower or Operating Lessee of any term, covenant or agreement
contained in Section 5.8 or in Article VI.
     (i) Legal Requirements. If Borrower fails to cure or cause the cure of any
violations of Legal Requirements affecting all or any portion of the Property
within 30 days after Borrower first receives written notice of any such
violations; provided, however, if any such violation is reasonably susceptible
of cure, but not within such 30 day period, then Borrower shall be permitted up
to an additional 30 days to cure such violation provided that cure is commenced
within such initial 30 day period and thereafter diligently and continuously
pursued.
     (j) Other Covenants. A default shall occur in the due performance or
observance by Borrower of any term, covenant or agreement (other than those
referred to in any other subsection of this Section 7.1) contained in this
Agreement or in any of the other Loan Documents, except that in the case of a
default that can be cured by the payment of money, such default shall not
constitute an Event of Default unless and until it shall remain uncured for
10 days after Borrower receives written notice thereof; and in the case of a
default that cannot be cured by the payment of money but is susceptible of being
cured within 30 days, such default shall not constitute an Event of Default
unless and until it remains uncured for 30 days after Borrower receives written
notice thereof, provided that within 5 days of its receipt of such written
notice, Borrower delivers written notice to Lender of its intention and ability
to effect such cure within such 30 day period; and if such non-monetary default
is not cured within such 30 day period despite Borrower’s diligent efforts but
is susceptible of being cured within 90 days of Borrower’s receipt of Lender’s
original notice, then Borrower shall have such additional time as is reasonably
necessary to effect such cure, but in no event in excess of 90 days from
Borrower’s receipt of Lender’s original notice, provided that prior to the
expiration of the initial 30 day period, Borrower delivers written notice to
Lender of its intention and ability to effect such cure prior to the expiration
of such 90 day period.
     (k) Intentionally omitted.
     (l) Operating Lease. The Operating Lease shall no longer be in effect for
any reason whatsoever, including, without limitation, expiration of the
Operating Lease by its terms absent renewal or extension of the Operating Lease.
     Section 7.2. Remedies.
     (a) During the continuance of an Event of Default, Lender may by written
notice to Borrower, in addition to any other rights or remedies available
pursuant to this Agreement, the Notes, the Mortgage and the other Loan
Documents, at law or in equity, declare by written notice to Borrower all or any
portion of the Indebtedness to be immediately due and payable, whereupon all or
such portion of the Indebtedness shall so become due and payable, and Lender

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may enforce or avail itself of any or all rights or remedies provided in the
Loan Documents against Borrower and the Collateral (including all rights or
remedies available at law or in equity); provided, however, that,
notwithstanding the foregoing, if an Event of Default specified in paragraph
7.1(d) shall occur, then the Indebtedness shall immediately become due and
payable without the giving of any notice or other action by Lender. Any actions
taken by Lender shall be cumulative and concurrent and may be pursued
independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth in this
Agreement or in the other Loan Documents.
     (b) If Lender forecloses on the Property, Lender shall apply all net
proceeds of such foreclosure to repay the Indebtedness, the Indebtedness shall
be reduced to the extent of such net proceeds and the remaining portion of the
Indebtedness shall remain outstanding and secured by the Property and the other
Loan Documents, it being understood and agreed by Borrower that Borrower is
liable for the repayment of all the Indebtedness; provided, however, that at the
election of Lender, the Notes shall be deemed to have been accelerated only to
the extent of the net proceeds actually received by Lender with respect to the
Property and applied in reduction of the Indebtedness.
     (c) During the continuance of any Event of Default (including an Event of
Default resulting from a failure to satisfy the insurance requirements specified
herein), Lender may, but without any obligation to do so and without notice to
or demand on Borrower and without releasing Borrower from any obligation
hereunder, take any action to cure such Event of Default. Lender may enter upon
any or all of the Property upon reasonable notice to Borrower for such purposes
or appear in, defend, or bring any action or proceeding to protect its interest
in the Collateral or to foreclose the Mortgage or collect the Indebtedness. The
costs and expenses incurred by Lender in exercising rights under this Section
(including reasonable attorneys’ fees), with interest at the Default Rate for
the period after notice from Lender that such costs or expenses were incurred to
the date of payment to Lender, shall constitute a portion of the Indebtedness,
shall be secured by the Mortgage and other Loan Documents and shall be due and
payable to Lender upon demand therefor.
     (d) Interest shall accrue on any judgment obtained by Lender in connection
with its enforcement of the Loan at a rate of interest equal to the Default
Rate.
     Section 7.3. No Waiver. No delay or omission to exercise any remedy, right
or power accruing upon an Event of Default shall impair any such remedy, right
or power or shall be construed as a waiver thereof, but any such remedy, right
or power may be exercised from time to time and as often as may be deemed by
Lender to be expedient. A waiver of any Default or Event of Default shall not be
construed to be a waiver of any subsequent Default or Event of Default or to
impair any remedy, right or power consequent thereon.
     Section 7.4. Application of Payments after an Event of Default.
Notwithstanding anything to the contrary contained herein, during the
continuance of an Event of Default, all amounts received by Lender in respect of
the Loan shall be applied at Lender’s sole discretion either toward the
components of the Indebtedness (e.g., Lender’s expenses in enforcing the Loan,

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interest, principal and other amounts payable hereunder) and the Notes in such
sequence as Lender shall elect in its sole discretion, or toward the payment of
Property expenses.
ARTICLE VIII
INTENTIONALLY OMITTED
ARTICLE IX
MISCELLANEOUS
     Section 9.1. Successors. Except as otherwise provided in this Agreement,
whenever in this Agreement any of the parties to this Agreement is referred to,
such reference shall be deemed to include the successors and permitted assigns
of such party. All covenants, promises and agreements in this Agreement
contained, by or on behalf of Borrower, shall inure to the benefit of Lender and
its successors and assigns.
     Section 9.2. GOVERNING LAW.
     (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES TO THE
EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
     (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER, BORROWER,
OPERATING LESSEE OR SPONSOR ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS (OTHER THAN ANY ACTION IN RESPECT OF THE CREATION,
PERFECTION OR ENFORCEMENT OF A LIEN OR SECURITY INTEREST CREATED PURSUANT TO ANY
LOAN DOCUMENTS NOT GOVERNED BY THE LAWS OF THE STATE OF NEW YORK) SHALL BE
INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK. BORROWER,
OPERATING LESSEE AND SPONSOR HEREBY (i) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM, (ii) IRREVOCABLY SUBMIT TO THE JURISDICTION OF
ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND (iii) IRREVOCABLY
CONSENT TO SERVICE OF PROCESS BY MAIL, PERSONAL SERVICE OR IN ANY OTHER MANNER
PERMITTED BY APPLICABLE LAW, AT THE ADDRESS SPECIFIED IN SECTION 9.4 (AND AGREES
THAT SUCH SERVICE AT SUCH ADDRESS IS SUFFICIENT TO CONFER PERSONAL JURISDICTION
OVER ITSELF IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT).

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     Section 9.3. Modification, Waiver in Writing. Neither this Agreement nor
any other Loan Document may be amended, changed, waived, discharged or
terminated, nor shall any consent or approval of Lender be granted hereunder,
unless such amendment, change, waiver, discharge, termination, consent or
approval is in writing signed by Lender.
     Section 9.4. Notices. All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
either (i) in writing by expedited prepaid delivery service, either commercial
or United States Postal Service, with proof of delivery or attempted delivery,
addressed as follows (or at such other address and person as shall be designated
from time to time by any party to this Agreement, as the case may be, in a
written notice to the other parties to this Agreement in the manner provided for
in this Section) or (ii) by email at the email addresses provided below,
provided that such email notification is followed by an additional written
notice delivered in accordance with clause (i) of this paragraph, provided,
however, that no such additional notification shall be required in the case of
email notice of a payment default, as provided for in Section 7.1(a). A notice
shall be deemed to have been given when delivered or upon refusal to accept
delivery.

         
 
  If to Lender:   UBS Real Estate Securities Inc.
 
      1285 Avenue of the Americas
 
      New York, New York 10019
 
      Attention: Transaction Manager — Henry Chung
 
      Facsimile No.: 212-821-2943
 
       
 
  with a copy to:   Katten Muchin Rosenman LLP
 
      550 South Tryon Street, Suite 2900
 
      Charlotte, North Carolina 28202
 
      Attention: Daniel S. Huffenus, Esq.
 
      Facsimile No.: 704-344-3056
 
       
 
  If to Borrower:   TERRAPINS Owner LLC
 
      c/o Pebblebrook Hotel Trust
 
      2 Bethesda Metro Center
 
      Suite 1530
 
      Bethesda, MD 20814
 
      Attention: Raymond D. Martz
 
      Email: rmartz@pebblebrookhotels.com
 
       
 
  with a copy to:   Honigman Miller Schwartz and Cohn LLP
 
      38500 Woodward Avenue, Suite 100
 
      Bloomfield Hills, Michigan 48304-5048
 
      Attention: J. Adam Rothstein
 
      Facsimile: (248) 566-8479

     Section 9.5. TRIAL BY JURY. LENDER, BORROWER, OPERATING LESSEE AND SPONSOR,
TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY AGREE NOT TO ELECT A
TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO
TRIAL BY JURY FULLY TO THE

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EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN
DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION
THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND
VOLUNTARILY BY LENDER, BORROWER, OPERATING LESSEE AND SPONSOR AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A
TRIAL BY JURY WOULD OTHERWISE ACCRUE. LENDER, BORROWER, OPERATING LESSEE AND/OR
SPONSOR ARE HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING
AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER, OPERATING LESSEE AND SPONSOR.
     Section 9.6. Headings. The Article and Section headings in this Agreement
are included in this Agreement for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
     Section 9.7. Assignment and Participation.
     (a) Except as explicitly set forth in Sections 2.1 and 2.2, Borrower may
not sell, assign or transfer any interest in the Loan Documents or any portion
thereof (including Borrower’s rights, title, interests, remedies, powers and
duties hereunder and thereunder).
     (b) Lender and each assignee of all or a portion of the Loan shall have the
right from time to time in its discretion to sell one or more of the Notes or
any interest therein (an “Assignment”) and/or sell a participation interest in
one or more of the Notes (a “Participation”). Borrower agrees to reasonably
cooperate with Lender, at Lender’s request, in order to effectuate any such
Assignment or Participation, and Borrower shall promptly provide such
information, legal opinions and documents relating to Borrower, any
Single-Purpose Equityholder, Sponsor, the Property, the Approved Property
Manager and any Tenants as Lender may reasonably request in connection with such
Assignment or Participation. In the case of an Assignment, (i) each assignee
shall have, to the extent of such Assignment, the rights, benefits and
obligations of the assigning Lender as a “Lender” hereunder and under the other
Loan Documents, (ii) the assigning Lender shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to an Assignment,
relinquish its rights and be released from its obligations under this Agreement,
and (iii) one Lender shall serve as agent for all Lenders and shall be the sole
Lender to whom notices, requests and other communications shall be addressed and
the sole party authorized to grant or withhold consents hereunder on behalf of
the Lenders (subject, in each case, to appointment of a Servicer, pursuant to
Section 9.22, to receive such notices, requests and other communications and/or
to grant or withhold consents, as the case may be) and to be the sole Lender to
designate the account to which payments shall be made by Borrower to the Lenders
hereunder. Lender (or an Affiliate of Lender) or, upon the appointment of a
Servicer, such Servicer, shall maintain, or cause to be maintained, as agent for
Borrower, a register on which it shall enter the name or names of the registered
owner or owners from time to time of the Notes. Borrower agrees that upon
effectiveness of any Assignment of any Note in part, Borrower will promptly
provide to the assignor and the assignee separate promissory notes in the amount
of their respective interests (but, if applicable, with a notation thereon that
it is given in substitution for and replacement of an original Note or any
replacement thereof), and otherwise in the form of such Note, upon return of the
Note then being replaced. The assigning Lender

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shall notify in writing each of the other Lenders of any Assignment. Each
potential or actual assignee, participant or investor in a Securitization, and
each Rating Agency, shall be entitled to receive all information received by
Lender under this Agreement. After the effectiveness of any Assignment, the
party conveying the Assignment shall provide notice to Borrower and each Lender
of the identity and address of the assignee. Notwithstanding anything in this
Agreement to the contrary, after an Assignment, the assigning Lender (in
addition to the assignee) shall continue to have the benefits of any
indemnifications contained in this Agreement that such assigning Lender had
prior to such assignment with respect to matters occurring prior to the date of
such assignment.
     (c) If, pursuant to this Section 9.7, any interest in this Agreement or any
Note is transferred to any transferee that is not a U.S. Person, the transferor
Lender shall cause such transferee, concurrently with the effectiveness of such
transfer, (i) to furnish to the transferor Lender either Form W-8BEN or Form
W-8ECI or any other form in order to establish an exemption from, or reduction
in the rate of, U.S. withholding tax on all interest payments hereunder, and
(ii) to agree (for the benefit of Lender and Borrower) to provide the transferor
Lender a new Form W-8BEN or Form W-8ECI or any forms reasonably requested in
order to establish an exemption from, or reduction in the rate of, U.S.
withholding tax upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such transferee, and
to comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption.
     Section 9.8. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
     Section 9.9. Preferences; Waiver of Marshalling of Assets. Lender shall
have no obligation to marshal any assets in favor of Borrower or any other party
or against or in payment of any or all of the obligations of Borrower pursuant
to this Agreement, the Notes or any other Loan Document. Lender shall have the
continuing and exclusive right to apply or reverse and reapply any and all
payments by Borrower to any portion of the obligations of Borrower hereunder and
under the Loan Documents. To the extent Borrower makes a payment or payments to
Lender, which payment or proceeds or any portion thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the obligations hereunder or portion thereof
intended to be satisfied shall be revived and continue in full force and effect,
as if such payment or proceeds had not been received by Lender. To the fullest
extent permitted by law, Borrower, for itself and its permitted successors and
assigns, waives all rights to a marshalling of the assets of Borrower, and
Borrower’s partners and others with interests in Borrower, or to a sale in
inverse order of alienation in the event of foreclosure of the Mortgage, and
agrees not to assert any right under any laws pertaining to the marshalling of
assets, the sale in inverse order of alienation, homestead exemption, the
administration of estates of decedents, or any other matters whatsoever to
defeat, reduce or affect the right of Lender under the Loan

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Documents to a sale of the Property for the collection of the Indebtedness
without any prior or different resort for collection or of the right of Lender
to the payment of the Indebtedness out of the net proceeds of the Properties in
preference to every other claimant whatsoever. In addition, to the fullest
extent permitted by law, Borrower, for itself and its successors and assigns,
waives in the event of foreclosure of the Mortgage, any legal right otherwise
available to Borrower that would require the separate sale of any Collateral or
require Lender to exhaust its remedies against any Collateral before proceeding
against any other Collateral; and further in the event of such foreclosure,
Borrower does hereby expressly consent to and authorize, at the option of
Lender, the foreclosure and sale either separately or together of any
combination of the Collateral.
     Section 9.10. Remedies of Borrower. If a claim is made that Lender or its
agents have unreasonably delayed acting or acted unreasonably in any case where
by law or under this Agreement, the Notes, the Mortgage or the other Loan
Documents, any of such Persons has an obligation to act promptly or reasonably,
Borrower agrees that no such Person shall be liable for any monetary damages,
and Borrower’s sole remedy shall be limited to commencing an action seeking
specific performance, injunctive relief and/or declaratory judgment. Without in
any way limiting the foregoing, Borrower shall not assert, and hereby waives,
any claim against Lender and/or its affiliates, directors, employees, attorneys,
agents or sub-agents, on any theory of liability, for direct, special, indirect,
consequential or punitive damages (whether or not the claim therefor is based on
contract, tort or duty imposed by any applicable legal requirement) arising out
of, as a result of, or in any way related to, the Loan Agreement or any other
Loan Document or any agreement or instrument contemplated hereby or thereby or
referred to herein or therein, the transactions contemplated hereby or thereby,
the Loan or the use of the proceeds thereof or any act or omission or event
occurring in connection therewith, and Borrower hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
     Section 9.11. Offsets, Counterclaims and Defenses. All payments made by
Borrower hereunder or under the other Loan Documents shall be made irrespective
of, and without any deduction for, any setoffs or counterclaims. Borrower waives
the right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Lender arising
out of or in any way connected with the Notes, this Agreement, the other Loan
Documents or the Indebtedness. Any assignee of Lender’s interest in the Loan
shall take the same free and clear of all offsets, counterclaims or defenses
that are unrelated to the Loan.
     Section 9.12. No Joint Venture. Nothing in this Agreement is intended to
create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender, nor to grant Lender any interest in
the Property other than that of mortgagee or lender.
     Section 9.13. Conflict; Construction of Documents. In the event of any
conflict between the provisions of this Agreement and the provisions of the
Notes, the Mortgage or any of the other Loan Documents, the provisions of this
Agreement shall prevail.
     Section 9.14. Brokers and Financial Advisors. Borrower and Sponsor each
represent that they have dealt with no financial advisors, brokers,
underwriters, placement agents, agents

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or finders in connection with the transactions contemplated by this Agreement.
Borrower and Sponsor each agree, jointly and severally, to indemnify and hold
Lender harmless from and against any and all claims, liabilities, costs and
expenses of any kind in any way relating to or arising from a claim by any
Person that such Person acted on behalf of Borrower in connection with the
transactions contemplated in this Agreement. The provisions of this Section 9.14
shall survive the expiration and termination of this Agreement and the repayment
of the Indebtedness.
     Section 9.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. Any
counterpart delivered by facsimile, pdf or other electronic means shall have the
same import and effect as original counterparts and shall be valid, enforceable
and binding for the purposes of this Agreement.
     Section 9.16. Estoppel Certificates.
     (a) Borrower agrees at any time and from time to time, to execute,
acknowledge and deliver to Lender, within five days after receipt of Lender’s
written request therefor, a statement in writing setting forth (A) the Principal
Indebtedness, (B) the date on which installments of interest and/or principal
were last paid, (C) any offsets or defenses to the payment of the Indebtedness,
(D) that the Notes, this Agreement, the Mortgage and the other Loan Documents
are valid, legal and binding obligations and have not been modified or if
modified, giving particulars of such modification, (E) that neither Borrower
nor, to Borrower’s knowledge, Lender, is in default under the Loan Documents (or
specifying any such default), (F) that all Leases are in full force and effect
and have not been modified (except in accordance with the Loan Documents),
(G) whether or not any of the Tenants under the Leases are in material default
under the Leases (setting forth the specific nature of any such material
defaults) and (H) such other matters as Lender may reasonably request. Any
prospective purchaser of any interest in a Loan shall be permitted to rely on
such certificate.
     (b) Upon Lender’s written request, Borrower shall use commercially
reasonable efforts to obtain from each Tenant whose Lease requires such Tenant
to execute and deliver an estoppel certificate, and shall thereafter promptly
deliver to Lender duly executed estoppel certificates from any one or more
Tenants under the Leases as requested by Lender, attesting to such facts
regarding the Leases as Lender may reasonably require, including, but not
limited to, attestations that each Lease covered thereby is in full force and
effect with no material defaults thereunder on the part of any party, that rent
has not been paid more than one month in advance, except as security, and that
the Tenant claims no defense or offset against the full and timely performance
of its obligations under the Lease. Borrower shall not be required to deliver
such certificates more frequently than one time in any 12-month period, other
than the 12-month period during which a Securitization occurs or is attempted.
     Section 9.17. General Indemnity; Payment of Expenses; Mortgage Recording
Taxes.
     (a) Borrower, at its sole cost and expense, shall protect, indemnify,
reimburse, defend and hold harmless Lender and its officers, partners, members,
directors, trustees, advisors, employees, agents, sub-agents, affiliates,
successors, participants and assigns of any and all of the foregoing
(collectively, the “Indemnified Parties”) for, from and against, and shall be

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responsible for, any and all Damages of any kind or nature whatsoever that may
be imposed on, incurred by, or asserted against any of the Indemnified Parties
arising out of (i) any negligence or tortious act or omission on the part of
Borrower, Operating Lessee, Sponsor or any of their respective agents,
contractors, servants, employees, sublessees, licensees or invitees; (ii) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(iii) any use, nonuse or condition in, on or about the Property any part thereof
or on adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (iv) any failure on the part of Borrower, Operating Lessee or
Sponsor to perform or comply with any of the terms of the Loan Documents;
(v) performance of any labor or services or the furnishing of any materials or
other property in respect of the Property or any part thereof; (vi) any failure
of the Property, Borrower, Operating Lessee or Sponsor to comply with any Legal
Requirements; (vii) any claim by brokers, finders or similar persons claiming to
be entitled to a commission in connection with any lease or other transaction
involving the Property or any part thereof under any legal requirement or any
liability asserted against any Indemnified Party with respect thereto; and
(viii) any and all claims and demands whatsoever that may be asserted against
any Indemnified Party by reason of any alleged obligations or undertakings on
such party’s part to perform or discharge any of the terms, covenants, or
agreements contained in any Lease, in each case, to the extent resulting,
directly or indirectly, from any claim (including any Environmental Claim) made
(whether or not in connection with any legal action, suit, or proceeding) by or
on behalf of any Person; provided, however, that no Indemnified Party shall have
the right to be indemnified hereunder to the extent that such Damages have been
found by a final, non-appealable judgment of a court of competent jurisdiction
to have resulted from the gross negligence or willful misconduct of such
Indemnified Party.
     (b) If for any reason (including violation of law or public policy) the
undertakings to defend, indemnify, pay and hold harmless set forth in this
Section 9.17 are unenforceable in whole or in part or are otherwise unavailable
to Lender or insufficient to hold it harmless, then Borrower shall contribute to
the amount paid or payable by Lender as a result of any Damages the maximum
amount Borrower is permitted to pay under Legal Requirements. The obligations of
Borrower under this Section 9.17 will be in addition to any liability that
Borrower may otherwise have hereunder and under the other Loan Documents, will
extend upon the same terms and conditions to any affiliate of Lender and the
partners, members, directors, agents, employees and controlling persons (if
any), as the case may be, of Lender and any such affiliate, and will be binding
upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of Borrower, Lender, any such affiliate and any such person.
     (c) At the option of the Indemnified Parties and in their sole discretion,
upon written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals reasonably approved by
such Indemnified Party. Notwithstanding the foregoing, any Indemnified Party may
engage its own attorneys and other professionals to defend or assist it (chosen
at Lender’s sole discretion), and, at the option of such Indemnified Party, its
attorneys shall control the resolution of any claim or proceeding. Upon demand,
Borrower shall pay or, in the sole discretion of the Indemnified Parties,
reimburse, the Indemnified Parties for the payment

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of reasonable and actual fees and disbursements of attorneys, engineers,
environmental consultants, laboratories and other professionals in connection
therewith.
     (d) Any amounts payable to Lender by reason of the application of this
Section 9.17 shall be secured by the Mortgage and shall become immediately due
and payable and shall bear interest at the Default Rate from the date Damages
are sustained by the Indemnified Parties until paid.
     (e) The provisions of and undertakings and indemnification set forth in
this Section 9.17 shall survive the satisfaction and payment in full of the
Indebtedness and termination of this Agreement.
     (f) Borrower shall reimburse Lender upon receipt of written notice from
Lender for (i) all out-of-pocket costs and expenses incurred by Lender (or any
of its affiliates) in connection with the Transaction and the origination of the
Loan, including legal fees and disbursements, fees of auditors and consultants,
accounting fees, and the costs of the Appraisal, the Engineering Report, the
Qualified Title Insurance Policy, the Qualified Survey, the Environmental Report
and any other third-party diligence materials; (ii) all out-of-pocket costs and
expenses incurred by Lender (or any of its affiliates) in connection with
(A) monitoring Borrower’s ongoing performance of and compliance with Borrower’s
agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date,
including confirming compliance with environmental and insurance requirements,
(B) the negotiation, preparation, execution, delivery and administration of any
consents, amendments, waivers or other modifications to this Agreement and the
other Loan Documents and any other documents or matters requested by Borrower or
by Lender (including Leases, Material Agreements, and Permitted Encumbrances),
(C) filing, registration or recording fees and expenses and other similar
expenses incurred in creating and perfecting the Liens in favor of Lender
pursuant to this Agreement and the other Loan Documents (including the filing,
registration or recording of any instrument of further assurance) and all
federal, state, county and municipal, taxes (including, if applicable,
intangible taxes), search fees, title insurance premiums, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of the Loan Documents, any mortgage supplemental thereto, any security
instrument with respect to the Collateral or any instrument of further
assurance, (D) enforcing or preserving any rights, in response to third party
claims or the prosecuting or defending of any action or proceeding or other
litigation, in each case against, under or affecting Borrower, this Agreement,
the other Loan Documents or any Collateral and (E) the satisfaction of the
Rating Condition required or requested by Borrower hereunder; and (iii) all
actual out-of-pocket costs and expenses (including attorney’s fees and, if the
Loan has been Securitized, special servicing fees) incurred by Lender (or any of
its affiliates) in connection with the enforcement of any obligations of
Borrower, or a Default by Borrower, under the Loan Documents, including any
actual or attempted foreclosure, deed-in-lieu of foreclosure, refinancing,
restructuring, settlement or workout and any insolvency or bankruptcy
proceedings (including any applicable transfer taxes).
     Section 9.18. No Third-Party Beneficiaries. This Agreement and the other
Loan Documents are solely for the benefit of Lender and Borrower, and nothing
contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than

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Lender, Borrower and Indemnified Parties any right to insist upon or to enforce
the performance or observance of any of the obligations contained herein or
therein. All conditions to the obligations of Lender to make the Loan hereunder
are imposed solely and exclusively for the benefit of Lender, and no other
Person shall have standing to require satisfaction of such conditions in
accordance with their terms or be entitled to assume that Lender will refuse to
make the Loan in the absence of strict compliance with any or all thereof, and
no other Person shall under any circumstances be deemed to be a beneficiary of
such conditions, any or all of which may be freely waived in whole or in part by
Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable
to do so.
     Section 9.19. Recourse.
     (a) Except for any indemnification by Borrower under this Agreement or any
of the other Loan Documents, the Loan shall not be recourse to Borrower and,
subject to Section 9.19(c), Lender’s recourse shall be solely to the Property
and the Collateral, except as set forth below. In addition, no recourse shall be
had for the Loan against any other Person, including any affiliate of Borrower
or any officer, director, partner or equityholder of Borrower or any such
affiliate, unless expressly set forth in a Loan Document or other written
agreement to which such Person is a party.
     (b) Borrower shall indemnify Lender and hold Lender harmless from and
against any and all Damages to Lender (including the legal and other expenses of
enforcing the obligations of Borrower under this Section 9.19 and the Sponsor
under the Guaranty) resulting from or arising out of any of the following (the
“Indemnified Liabilities”), which Indemnified Liabilities shall be guaranteed by
Sponsor pursuant to the Guaranty:
     (i) fraud or intentional misrepresentation by Borrower, Operating Lessee,
Sponsor or any Affiliate of Borrower, Operating Lessee or Sponsor in connection
with the Property or the Loan;
     (ii) the gross negligence or willful misconduct by Borrower, Operating
Lessee, Sponsor or any Affiliate of Borrower, Operating Lessee or Sponsor in
connection with the Loan misconduct (including wrongful interference by Borrower
or Operating Lessee with the exercise of remedies by Lender during an Event of
Default, provided, however, the goof faith assertion of valid defenses shall not
be deemed “wrongful”);
     (iii) the breach of any representation, warranty, covenant or
indemnification provision in the environmental indemnity or in the mortgage
concerning environmental laws, hazardous substances and asbestos and any
indemnification of Lender with respect thereto in either document;
     (iv) the removal or disposal of any personal property during the existence
of an Event of Default, unless such personal property is removed or disposed of
in the ordinary course of business and replaced with personal property of equal
or greater value;
     (v) the misapplication or conversion by Borrower or Operating Lessee of
(A) any insurance proceeds, (B) any condemnation awards, or (C) any rents during
the existence of an Event of Default or any Rents collected for more than one
(1) month in

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advance to the extent such Rents are not applied to the costs of maintenance and
operation of the Property or to amounts due under the loan documents;
     (vi) failure to pay charges for labor or materials or other charges that
can create a lien on the Property, provided, neither borrower nor any guarantor
shall have liability for such losses (I) if gross revenues from the Property
were insufficient to pay all such amounts, except to the extent Borrower or
Operating Lessee has paid (during the relevant period) any sums due to any
Affiliate of Borrower or any guarantor, or (II) if funds were available in the
cash management account to pay such charges and could have been applied in
accordance with the loan documents, but Lender or its agent intentionally did
not pay such charges or did not pay such charges as a result of their gross
negligence.
     (vii) Borrower or Operating Lessee incurs voluntary unsecured debt
prohibited under the loan documents (for these purposes, debt will be regarded
as voluntary if either incurred voluntarily, or incurred involuntarily but
subsequently not repaid despite the availability of sufficient cash flow from
the Property);
     (viii) any security deposits, advance deposits or any other deposits
collected with respect to the Property which are not delivered to Lender upon a
foreclosure of the Property or action in lieu thereof;
     (ix) Borrower’s indemnification of Lender in connection with a
securitization of the loan as provided in the loan documents;
     (x) Borrower’s failure to pay any Taxes or assessments affecting the
Property, or to obtain and maintain in full force and effect insurance policies
as required by the loan documents or pay the amount of any insurance deductible
following a casualty or other insurance claim, provided, neither borrower nor
any guarantor shall have liability for such losses (I) if gross revenues from
the Property were insufficient to pay all such amounts, except to the extent
Borrower or operating lessee has paid (during the relevant period) any sums due
to any affiliate of borrower or any guarantor, or (II) if funds were available
in the cash management account to pay such charges and could have been applied
in accordance with the loan documents, but Lender or its agent intentionally did
not pay such charges or did not pay such charges as a result of their gross
negligence; or
     (xi) intentional or grossly negligent waste;
     (xii) any shortfall in the amount required to be contained in the Qualified
FF&E Account pursuant to the loan documents to the extent such amounts were not
otherwise applied to operation of the Property in accordance with the loan
documents (excluding sums paid to any affiliate of Borrower or Guarantor);
     (xiii) fees or commissions paid to affiliates in violation of the loan
documents; or
     (xiv) Borrower or Operating Lessee fails to permit on-site inspections of
the Property, fails to provide financial information, or fails to appoint a new
property

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manager upon the request of Lender, each as required by, and in accordance with
the terms and provisions of the loan documents.
     In addition to the foregoing, the Loan shall be fully recourse to Borrower
and Sponsor, jointly and severally, upon (1) a violation of any Single-Purpose
Entity covenant that results in a substantive consolidation of Borrower with any
affiliate in a bankruptcy or similar proceeding (or the filing of a motion for
substantive consolidation in bankruptcy citing any such violation which is not
dismissed, provided that, in the event such motion is dismissed, Borrower and
Sponsor shall nonetheless be liable for Lender’s actual damages arising from or
relating to such filing or proceeding); (2) Borrower fails to obtain Lender’s
consent to any secured indebtedness or voluntary lien encumbering the Property
or any part thereof; (3) Borrower fails to obtain Lender’s prior consent to any
transfer the Property or any part thereof or interest therein, except to the
extent expressly permitted by the loan documents; (4) Borrower files a voluntary
petition under the Bankruptcy Code or any other Federal or state bankruptcy or
insolvency law; (5) Borrower files an answer consenting to or otherwise
acquiescing in or joining in any involuntary petition filed against it by any
other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law, or solicits or causes to be solicited petitioning creditors
for any involuntary petition from any Person; (6) Borrower makes an assignment
for the benefit of creditors, or admits, in writing or in any legal proceeding,
its insolvency.
     (c) The foregoing limitations on personal liability shall in no way impair
or constitute a waiver of the validity of the Notes, the Indebtedness secured by
the Collateral, or the Liens on the Collateral, or the right of Lender, as
mortgagee or secured party, to foreclose and/or enforce its rights with respect
to the Collateral after an Event of Default. Nothing in this Agreement shall be
deemed to be a waiver of any right which Lender may have under the Bankruptcy
Code to file a claim for the full amount of the debt owing to Lender by Borrower
or to require that all Collateral shall continue to secure all of the
Indebtedness owing to Lender in accordance with the Loan Documents. Lender may
seek a judgment on the Note (and, if necessary, name Borrower in such suit) as
part of judicial proceedings to foreclose under the Mortgage or to foreclose
pursuant to any other Loan Documents, or as a prerequisite to any such
foreclosure or to confirm any foreclosure or sale pursuant to power of sale
thereunder, and in the event any suit is brought on the Notes, or with respect
to any Indebtedness or any judgment rendered in such judicial proceedings, such
judgment shall constitute a Lien on and will be and can be enforced on and
against the Collateral and the rents, profits, issues, products and proceeds
thereof. Nothing in this Agreement shall impair the right of Lender to
accelerate the maturity of the Note upon the occurrence of an Event of Default,
nor shall anything in this Agreement impair or be construed to impair the right
of Lender to seek personal judgments, and to enforce all rights and remedies
under applicable law, jointly and severally against any guarantors to the extent
allowed by any applicable guarantees. The provisions set forth in this
Section 9.19 are not intended as a release or discharge of the obligations due
under the Note or under any Loan Documents, but are intended as a limitation, to
the extent provided in this Section, on Lender’s right to sue for a deficiency
or seek a personal judgment against Borrower or Sponsor except as required in
order to realize on the Collateral.
     Section 9.20. Right of Set-Off. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, during the continuance of an Event of Default, Lender may from time
to time, without presentment,

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demand, protest or other notice of any kind (all of such rights being hereby
expressly waived), set-off and appropriate and apply any and all deposits
(general or special) and any other indebtedness at any time held or owing by
Lender (including branches, agencies or affiliates of Lender wherever located)
to or for the credit or the account of Borrower against the obligations and
liabilities of Borrower to Lender hereunder, under the Notes, the other Loan
Documents or otherwise, irrespective of whether Lender shall have made any
demand hereunder and although such obligations, liabilities or claims, or any of
them, may be contingent or unmatured, and any such set-off shall be deemed to
have been made immediately upon the occurrence of an Event of Default even
though such charge is made or entered on the books of Lender subsequent thereto.
     Section 9.21. Exculpation of Lender. Lender neither undertakes nor assumes
any responsibility or duty to Borrower or any other party to select, review,
inspect, examine, supervise, pass judgment upon or inform Borrower or any third
party of (a) the existence, quality, adequacy or suitability of Appraisals of
the Property or other Collateral, (b) any environmental report, or (c) any other
matters or items, including engineering, soils and seismic reports that are
contemplated in the Loan Documents. Any such selection, review, inspection,
examination and the like, and any other due diligence conducted by Lender, is
solely for the purpose of protecting Lender’s rights under the Loan Documents,
and shall not render Lender liable to Borrower or any third party for the
existence, sufficiency, accuracy, completeness or legality thereof.
     Section 9.22. Servicer. Lender may delegate any and all rights and
obligations of Lender hereunder and under the other Loan Documents to the
Servicer upon notice by Lender to Borrower, whereupon any notice or consent from
the Servicer to Borrower, and any action by Servicer on Lender’s behalf, shall
have the same force and effect as if Servicer were Lender.
     Section 9.23. No Fiduciary Duty.
     (a) Borrower acknowledges that, in connection with this Agreement, the
other Loan Documents and the Transaction, Lender has relied upon and assumed the
accuracy and completeness of all of the financial, legal, regulatory,
accounting, tax and other information provided to, discussed with or reviewed by
Lender for such purposes, and Lender does not assume any liability therefor or
responsibility for the accuracy, completeness or independent verification
thereof. Lender, its affiliates and their respective stockholders and employees
(for purposes of this Section, the “Lending Parties”) have no obligation to
conduct any independent evaluation or appraisal of the assets or liabilities
(including any contingent, derivative or off-balance sheet assets and
liabilities) of Sponsor, Borrower or any other Person or any of their respective
affiliates or to advise or opine on any related solvency or viability issues.
     (b) It is understood and agreed that (i) the Lending Parties shall act
under this Agreement and the other Loan Documents as an independent contractor,
(ii) the Transaction is an arm’s-length commercial transactions between the
Lending Parties, on the one hand, and Borrower, on the other, (iii) each Lending
Party is acting solely as principal and not as the agent or fiduciary of
Borrower, Sponsor or their respective affiliates, stockholders, employees or
creditors or any other Person and (iv) nothing in this Agreement, the other Loan
Documents, the Transaction or otherwise shall be deemed to create (a) a
fiduciary duty (or other implied duty) on the party of any Lending Party to
Sponsor, Borrower, any of their respective affiliates,

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stockholders, employees or creditors, or any other Person or (b) a fiduciary or
agency relationship between Sponsor, Borrower or any of their respective
affiliates, stockholders, employees or creditors, on the one hand, and the
Lending Parties, on the other. Borrower agrees that neither it nor Sponsor nor
any of their respective affiliates shall make, and hereby waives, any claim
against the Lending Parties based on an assertion that any Lending Party has
rendered advisory services of any nature or respect, or owes a fiduciary or
similar duty to Borrower, Sponsor of their respective affiliates, stockholders,
employees or creditors. Nothing in this Agreement or the other Loan Documents is
intended to confer upon any other Person (including affiliates, stockholders,
employees or creditors of Borrower and Sponsor) any rights or remedies by reason
of any fiduciary or similar duty.
     (c) Borrower acknowledges that it has been advised that the Lending Parties
are a full service financial services firm engaged, either directly or through
affiliates in various activities, including securities trading, investment
banking and financial advisory, investment management, principal investment,
hedging, financing and brokerage activities and financial planning and benefits
counseling for both companies and individuals. In the ordinary course of these
activities, the Lending Parties may make or hold a broad array of investments
and actively trade debt and equity securities (or related derivative securities)
and/or financial instruments (including loans) for their own account and for the
accounts of their customers and may at any time hold long and short positions in
such securities and/or instruments. Such investment and other activities may
involve securities and instruments of affiliates of Borrower, including Sponsor,
as well as of other Persons that may (i) be involved in transactions arising
from or relating to the Transaction, (ii) be customers or competitors of
Borrower, Sponsor and/or their respective affiliates, or (iii) have other
relationships with Borrower, Sponsor and/or their respective affiliates. In
addition, the Lending Parties may provide investment banking, underwriting and
financial advisory services to such other Persons. The Lending Parties may also
co-invest with, make direct investments in, and invest or co-invest client
monies in or with funds or other investment vehicles managed by other parties,
and such funds or other investment vehicles may trade or make investments in
securities of affiliates of Borrower, including Sponsor, or such other Persons.
The Transaction may have a direct or indirect impact on the investments,
securities or instruments referred to in this paragraph. Although the Lending
Parties in the course of such other activities and relationships may acquire
information about the Transaction or other Persons that may be the subject of
the Transaction, the Lending Parties shall have no obligation to disclose such
information, or the fact that the Lending Parties are in possession of such
information, to Borrower, Sponsor or any of their respective affiliates or to
use such information on behalf of Borrower, Sponsor or any of their respective
affiliates.
     (d) Borrower acknowledges and agrees that Borrower has consulted its own
legal and financial advisors to the extent it deemed appropriate and that it is
responsible for making its own independent judgment with respect to this
Agreement, the other Loan Documents, the Transaction and the process leading
thereto.
     Section 9.24. Borrower Information. Borrower shall make available to Lender
all information concerning its business and operations that Lender may
reasonably request, provided that disclosure of such information does not and
will not violate any securities laws or violate the terms of any confidentiality
agreement between Borrower and/or any affiliate of Borrower on the one hand, and
any third party, on the other hand. Lender shall have the right to disclose any
and

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all information provided to Lender by Borrower or Sponsor regarding Borrower,
Sponsor, the Loan and the Property (i) to affiliates of Lender and to Lender’s
agents and advisors, (ii) to any bona fide or potential assignee, transferee or
participant in connection with the contemplated assignment, transfer,
participation or Securitization of all or any portion of the Loan or any
participations therein or by any direct or indirect contractual counterparties
(or the professional advisors thereto) to any swap or derivative transaction
relating to Borrower and its obligations, in each case, to the extent reasonably
required by such Person, (iii) to any Rating Agency in connection with a
Securitization or as otherwise required in connection with a disposition of the
Loan, (iv) to any Person necessary or desirable in connection with the exercise
of any remedies hereunder or under any other Loan Document, (v) to any
governmental agency or representative thereof or by the National Association of
Insurance Commissioners or pursuant to legal or judicial process and (vi) in any
Disclosure Document (as defined in the Cooperation Agreement). In addition,
Lender may disclose the existence of this Agreement and the information about
this Agreement to market data collectors, similar services providers to the
lending industry, and service providers to Lender in connection with the
administration and management of this Agreement and the other Loan Documents.
Each party hereto (and each of their respective affiliates, employees,
representatives or other agents) may disclose to any and all Persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions and other tax analyses) that
are provided to any such party relating to such tax treatment and tax structure.
For the purpose of this Section 9.24, “tax structure” means any facts relevant
to the federal income tax treatment of the Transaction but does not include
information relating to the identity of any of the parties hereto or any of
their respective affiliates.
     Section 9.25. PATRIOT Act Records. Lender hereby notifies Borrower that
pursuant to the requirements of the PATRIOT Act, it is required to obtain,
verify and record information that identifies Borrower and Sponsor, which
information includes the name and address of Borrower and Sponsor and other
information that will allow Lender to identify Borrower or Sponsor in accordance
with the PATRIOT Act.
     Section 9.26. Prior Agreements. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND THERETO IN RESPECT OF THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS AMONG OR
BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, INCLUDING ANY TERM SHEETS,
CONFIDENTIALITY AGREEMENTS AND COMMITMENT LETTERS, ARE SUPERSEDED BY THE TERMS
OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT THAT ANY ORIGINATION FEE
SPECIFIED IN ANY TERM SHEET, COMMITMENT LETTER OR FEE LETTER SHALL BE AN
OBLIGATION OF BORROWER AND SHALL BE PAID AT CLOSING, AND ANY INDEMNIFICATIONS,
FLEX PROVISION, EXIT FEES AND THE LIKE PROVIDED FOR THEREIN SHALL SURVIVE THE
CLOSING).
     Section 9.27. Publicity. If the Loan is made, Lender may issue press
releases, advertisements and other promotional materials describing in general
terms or in detail Lender’s participation in such transaction, and may utilize
photographs of the Property in such promotional materials. Borrower shall not
make any references to Lender in any press release,

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advertisement or promotional material issued by Borrower or Sponsor, unless
Lender shall have approved of the same in writing prior to the issuance of such
press release, advertisement or promotional material.
     Section 9.28. Delay Not a Waiver. Neither any failure nor any delay on the
part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or under any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power, remedy or
privilege. In particular, and not by way of limitation, by accepting payment
after the due date of any amount payable under this Agreement, the Note or any
other Loan Document, Lender shall not be deemed to have waived any right either
to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
     Section 9.29. Schedules and Exhibits Incorporated. The Schedules and
Exhibits annexed hereto are hereby incorporated herein as a part of this
Agreement with the same effect as if set forth in the body hereof.
     Section 9.30. Independence of Covenants. All covenants hereunder shall be
given independent effect so that if a particular action or condition is not
permitted by any of such covenants, the fact that it would be permitted by an
exception to, or would otherwise be within the limitations of, another covenant
shall not avoid the occurrence of a Default or an Event of Default if such
action is taken or condition exists.

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     Lender and Borrower are executing this Agreement as of the date first above
written.

            LENDER:

UBS REAL ESTATE SECURITIES INC., a Delaware corporation
      By:   /s/ Peter Morral         Name:   Peter Morral        Title:  
Managing Director        By:   /s/ Oliver Striker         Name:   Oliver
Striker        Title:   Director        BORROWER:

TERRAPINS OWNER LLC, a Delaware limited liability company
      By:   /s/ Raymond D. Martz         Name:   Raymond D. Martz       
Title:   President