Exhibit 10.4
EXECUTION COPY
ASSUMPTION AGREEMENT
     This Assumption Agreement (“Assumption Agreement”) is made this 9 day of
September, 2010, by BANK OF AMERICA, N.A., as successor to Wells Fargo Bank,
N.A., as Trustee for the Registered Holders of COBALT CMBS Commercial Mortgage
Trust 2007-C2, Commercial Mortgage Pass-Through Certificates, Series 2007-C2
(“Noteholder”), TARIFF BUILDING ASSOCIATES, LP, a California limited partnership
(“Borrower”), Kimpton Development Opportunity Fund, L.P., a California limited
partnership (“Original Guarantor”), JAYHAWK OWNER LLC, a Delaware limited
liability company (“Assumptor”), and PEBBLEBROOK HOTEL, L.P. , a Delaware
limited partnership (“New Guarantor”).
RECITALS
     A. Noteholder’s predecessor in interest, Wachovia Bank, National
Association (in such capacity, “Original Lender”) made a loan to Borrower in the
original principal amount of Thirty Five Million and no/100 Dollars
($35,000,000.00) (“Loan”), under the terms and provisions set forth in the
following loan documents, all of which are dated as of February 23, 2007, unless
otherwise noted:
     1. Promissory Note (“Note”) in the original principal amount of the Loan,
made by Borrower and payable to Original Lender;
     2. Deed of Trust, Security Agreement, Assignment of Rents and Fixture
Filing executed by Borrower to First American Title Insurance Company, as
trustee, for the benefit of Original Lender which, secures the Note and other
obligations of Borrower (“Security Instrument”), and which Security Instrument
was recorded on February 26, 2007 as instrument number 2007026007 in the land
records of the District of Columbia (“Official Records”), the Original Lender’s
interest under which was assigned to Noteholder by instrument recorded on
April 30, 2008, as instrument number 2008059162, in said Official Records. The
land, improvements and other real property which are subject to the Security
Instrument are hereinafter referred to as the “Property” and the equipment,
machinery and other personal property which are subject to the Security
Instrument are hereinafter referred to as the “Collateral”;
     3. Assignment of Leases and Rents (the “Assignment of Leases”) executed by
Borrower, which was recorded on February 26, 2007 as instrument number
2007026008, with said Official Records, the Original Lender’s interest under
which was assigned to Noteholder by instrument recorded on April 30, 2008, as
instrument number 2008059162, in said Official Records;
     4. Guaranty executed by Original Guarantor (“Guaranty”);
     5. Consent and Agreement (“Consent and Agreement”) executed by Kimpton
Hotel & Restaurant Group, LLC (“Manager”);

 

--------------------------------------------------------------------------------

 

     6. Central Account Agreement executed by Borrower, Wachovia Bank, National
Association (in such capacity, “Bank”) and Original Lender (“Central Account
Agreement”);
     7. Rent Account Agreement executed by Borrower, Wachovia Bank, National
Association (in such capacity, “Rent Account Bank”) and Original Lender (“Rent
Account Agreement”);
     8. UCC-1 Financing Statement filed on February 27, 2007, as instrument
number 07-7104479342 with the California Secretary of State (“State UCC”).
     The above documents and any other Loan Documents, including, in each case,
any prior amendments thereto, together with this Assumption Agreement and all
documents executed in connection herewith are hereinafter collectively defined
as the “Loan Documents”.
     B. As of the Effective Date.
     1. The principal balance outstanding under the Note was $35,000,000.00;
     2. Accrued interest on the Note has been paid through August 10, 2010;
     3. The balance in the Basic Carrying Costs Escrow Account (as defined in
Section 5.06 of the Security Instrument) was $00.00;
     4. The balance in the Recurring Replacement Reserve Escrow Account (as
defined in Section 5.08 of the Security Instrument) was $723,352.53 and
     5. The balance in the Engineering Escrow Account (as defined in
Section 5.12 of the Security Instrument) was $25,000.00.
     C. Borrower is about to sell and convey the Property and the Collateral to
Assumptor, and both parties desire to obtain from Noteholder a waiver of any
right Noteholder may have under the Loan Documents to accelerate the Maturity
Date of the Note by virtue of such conveyance.
     D. Subject to the terms and conditions hereof, Noteholder is willing to
consent to the sale and conveyance of the Property and the Collateral, and to
waive any right of acceleration of the Maturity Date of the Note upon assumption
by Assumptor of all obligations of Borrower under the Loan Documents.
NOW THEREFORE, FOR VALUABLE CONSIDERATION, including, without limitation, the
mutual covenants and promises contained herein, the parties agree as follows:
     1. Incorporation. The foregoing recitals are incorporated herein by this
reference.
     2. Assumption Fee. As consideration for Noteholder’s execution of this
Assumption Agreement and in addition to any other sums due hereunder, Borrower
and Assumptor agree to pay Noteholder or Noteholder’s servicer(s) (all as set
forth in the escrow instructions to be

2

--------------------------------------------------------------------------------

 

executed in connection with the closing of this assumption) an assumption fee of
$175,000.00 (0.5% of the loan balance), due on execution of this Assumption
Agreement by Noteholder.
     3. Conditions Precedent. The following are conditions precedent to
Noteholder’s obligations under this Assumption Agreement:
     a. The irrevocable commitment of First American Title Insurance Company
(“Title Company”) to issue endorsements to Title Company’s Title Policy
No. 104652666, dated February 26, 2007, in each case in form and substance
reasonably acceptable to Noteholder and without deletions or exceptions other
than as expressly approved by Noteholder in writing, insuring Noteholder that
the priority and validity of the Security Instrument has not been and will not
be impaired by this Assumption Agreement, the conveyance of the Property, or the
transaction contemplated hereby;
     b. Receipt by Noteholder of: (i) the executed original of this Assumption
Agreement; (ii) an executed original of a Memorandum of Assumption Agreement in
the form attached hereto as EXHIBIT A, with signatures notarized, and otherwise
in form and substance reasonably acceptable to Noteholder (“Memorandum of
Assumption Agreement”); and (iii) any other documents and agreements which are
required pursuant to this Assumption Agreement, in form and content reasonably
acceptable to Noteholder;
     c. Assumptor’s delivery to Noteholder of the Memorandum of Assumption
Agreement, in proper form for filing in the appropriate jurisdictions as
determined by Noteholder, together with such other documents and agreements, if
any, required pursuant to this Assumption Agreement or which Noteholder has
requested to be recorded or filed;
     d. Assumptor’s delivery to Noteholder of UCC-1 Financing Statements in
proper form for filing in the appropriate jurisdictions as reasonably determined
by Noteholder, which Assumptor expressly authorizes Noteholder to file;
     e. Execution and delivery to Noteholder by New Guarantor of a new Guaranty
(“New Guaranty”) in favor of Noteholder and in form and substance reasonably
acceptable to Noteholder, pursuant to which New Guarantor irrevocably guarantees
payment and performance of certain matters under the Loan as more specifically
set forth in the New Guaranty, along with delivery to Noteholder of such
resolutions or certificates of New Guarantor as Noteholder may reasonably
require, in form and content reasonably acceptable to Noteholder;
     f. Receipt and approval by Noteholder of a Blocked Account Control
Agreement with US Bank National Association for the new Rent Account; a Blocked
Account Control Agreement with US Bank National Association for the Operating
Lessee Rent Account and the execution of such amendments to the Central Account
Agreement as required by Noteholder (the “New Cash Management Documents”);
     g. Noteholder’s receipt of the operating lease (the “Operating Lease”)
between Assumptor and Jayhawk Lessee LLC (“Operating Lessee”) in form and
substance reasonably acceptable to Noteholder;

3

--------------------------------------------------------------------------------

 

     h. Execution and delivery to Noteholder by Operating Lessee and Assumptor,
as applicable, of an acceptable Operating Lease Subordination and Attornment
Agreement (the “Operating Lessee Subordination”), an acceptable Security
Agreement (the “Security Agreement”) and Collateral Assignment of Security
Agreement (the “Collateral Assignment of Security Agreement”) and such other
documentation as reasonably required by Noteholder;
     i. Operating Lessee’s delivery to Noteholder of UCC-1 Financing Statements
(showing Operating Lessee as debtor and Assumptor as secured party) in proper
form for filing in the appropriate jurisdictions as determined by Noteholder,
which Assumptor expressly authorizes Noteholder to file;
     j. Delivery to Noteholder of the organizational documents and evidence of
good standing of Assumptor and Operating Lessee, their constituent parties, and
of New Guarantor, together with such resolutions or certificates as Noteholder
may require, in form and content acceptable to Noteholder, authorizing the
assumption of the Loan and executed by the appropriate persons and/or entities
on behalf of Assumptor, Operating Lessee and New Guarantor;
     k. The representations and warranties contained herein are true and correct
in all material respects;
     l. Receipt by Noteholder of evidence that casualty insurance and
comprehensive liability insurance policies with respect to the Property, each in
form and amount reasonably satisfactory to Noteholder, have been obtained with
the annual premium for same to be paid at closing;
     m. Receipt by Noteholder of a copy of the Assignment and Assumption of
Ground Lease by which the Borrower’s interest in the Ground Lease (as defined in
the Security Instrument) will be conveyed to Assumptor, and the purchase and
sale agreement (the “Purchase and Sale Agreement”) documenting the sale of the
Property to Assumptor;
     n. Receipt by Noteholder of an executed Form W-9 for Assumptor;
     o. Receipt and reasonable approval by Noteholder of the Assignment and
Amendment of Hotel Operating Agreement between Assumption and Manager and
Manager’s execution of a new Consent and Agreement (the “New Consent and
Agreement”).
     p. Noteholder shall have received an opinion of counsel to Noteholder with
respect to the compliance of this Assumption Agreement, the transfer to
Assumptor, and the transactions referenced herein with the provisions of the
Internal Revenue Code as the same pertain to real estate mortgage investment
conduits;
     q. Payment of the assumption fee provided for in Section 2 above;

4

--------------------------------------------------------------------------------

 

     r. Borrower’s or Assumptor’s reimbursement to Noteholder of all reasonable
and documented out-of-pocket costs and expenses incurred by Noteholder (for
which invoices have been presented) in connection with this Assumption Agreement
and the transactions contemplated hereby, including, without limitation, title
insurance costs, escrow and recording fees, reasonable and documented attorneys’
fees, appraisal, engineers’ and inspection fees and documentation costs and
charges, whether such services are furnished by Noteholder’s employees, agents
or independent contractors;
     s. Receipt by Noteholder of: (i) (A) the written acknowledgement of the
United States of America, acting by and through the Administrator of General
Services (the “Ground Lessor”) of the assignment of the Ground Lease or (B) a
novation agreement from the Ground Lessor with respect to the Ground Lease; and
(ii) an acceptable lease status report from the Ground Lessor indicating that
the Ground Lease is in full force and effect and neither party is in default
thereunder;
     t. Receipt by Noteholder of confirmation that the existing liquor license
has been assigned to Assumptor (or that Assumptor has obtained a confirmation
letter issued by the Alcoholic Beverage Control Board confirming approval and
issuance of Assumptor’s liquor license) and that all other necessary permits and
approvals have been assigned and/or obtained;
     u. Receipt by Noteholder of confirmation that the items listed on Schedules
5.1(f) and (g) of the Purchase and Sale Agreement have been resolved or are
being satisfactorily defended;
     v. Receipt and reasonable approval by Noteholder of (A) Assumption opinion
from Assumptor’s counsel (licensed in the District of Columbia) based on
Noteholder’s standard form; (B) standard Delaware single member LLC opinion from
acceptable Delaware counsel; and (C) a new Insolvency Opinion (as defined in the
Security Instrument);
     w. Receipt by Noteholder of confirmations from each applicable Rating
Agency (as defined in the Security Instrument);
     4. Effective Date. The effective date of this Assumption Agreement shall be
the date that each condition precedent set forth in Section 3 above is either
satisfied (or waived by the Lender) (“Effective Date”).
     5. Assumption. Assumptor hereby assumes and agrees to pay when due all sums
due or to become due or owing under the Note, the Security Instrument and the
other Loan Documents and shall hereafter faithfully perform all of Borrower’s
obligations under and be bound by all of the provisions of the Loan Documents,
as modified by this Assumption Agreement, and assumes all liabilities of
Borrower under the Loan Documents as if Assumptor were an original signatory
thereto. The execution of this Assumption Agreement by Assumptor shall be deemed
its execution of the Note, the Security Instrument and the other Loan Documents.

5

--------------------------------------------------------------------------------

 

     6. Partial Release of Borrower; Release of Noteholder. Noteholder hereby
releases (on the Effective Date) Borrower from liability under the Loan
Documents other than this Assumption Agreement; provided however, that the
parties hereby acknowledge and agree that Borrower is expressly not released
from and nothing contained herein is intended to limit, impair, terminate or
revoke, any of Borrower’s obligations with respect to the matters set forth in
Section 4 of the Note and Section 18.32 of the Security Instrument, to the
extent the same arise out of or in connection with any act or omission occurring
on or before the Effective Date (the “Retained Obligations”), and that such
obligations shall continue in full force and effect in accordance with the terms
and provisions thereof and hereof. Borrower’s obligations under the Loan
Documents with respect to the Retained Obligations shall not be discharged or
reduced by any extension, amendment, renewal or modification to, the Note, the
Security Instrument or any other Loan Documents, including, without limitation,
changes to the terms of repayment thereof, modifications, extensions or renewals
of repayment dates, releases or subordinations of security in whole or in part,
changes in the interest rate or advances of additional funds by Noteholder in
its discretion for purposes related to those set forth in the Loan Documents.
Each of Borrower, Original Guarantor, Assumptor and New Guarantor hereby fully
releases (on the Effective Date) Noteholder and any servicer(s) of the Loan from
any liability of any kind arising out of or in connection with the Loan or the
Loan Documents other than this Assumption Agreement; provided, however, this
release shall not apply to any liability due to fraud, gross negligence or
willful misconduct of Noteholder. Each of Borrower, Original Guarantor,
Assumptor and New Guarantor, after consultation with its respective attorney,
hereby expressly waives the benefits of the provisions of applicable law, if
any, which provides to the effect that:
“A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release which, if
known by him, must have materially affected his settlement with the debtor.”
From time to time without first requiring performance on the part of Assumptor,
Noteholder may look to and require performance by Borrower of all Retained
Obligations.
     7. Confirmation of Guaranty; Partial Release of Original Guarantor. Nothing
contained herein is intended to limit, impair, terminate or revoke Original
Guarantor’s obligations under the Guaranty to the extent the same arise out of
or in connection with any act or omission occurring on or before the Effective
Date and such obligations shall continue in full force and effect in accordance
with the terms and provisions of the Guaranty; provided, however, Noteholder
hereby releases Original Guarantor from its obligations under the Guaranty to
the extent the same arise out of or in connection with any act or omission
occurring after the Effective Date.
     8. Representations and Warranties.
     a. Assignment. Borrower and Assumptor each hereby represents and warrants
to Noteholder that Borrower will on the Effective Date contemporaneously with
the transactions contemplated by this Assumption Agreement irrevocably and

6

--------------------------------------------------------------------------------

 

unconditionally transfer and assign to Assumptor all of Borrower’s right, title
and interest in and to:
          i. The Property and the Collateral;
          ii. The Loan Documents;
          iii. All leases related to the Property or the Collateral;
          iv. All rights as named insured under all casualty and liability
insurance policies (and all endorsements in connection therewith) relating to
the Property or the Collateral (unless, but only to the extent that, Assumptor
is obtaining its own such insurance policies);
          v. All reciprocal easement agreements, operating agreements, and
declarations of conditions, covenants and restrictions related to the Property;
          vi. All prepaid rents and security deposits, if any, held by Borrower
in connection with leases of any part of the Property or the Collateral; and
          vii. All funds, if any, deposited in impound accounts held by or for
the benefit of Noteholder pursuant to the terms of the Loan Documents.
          Borrower and Assumptor each hereby further represents and warrants to
Noteholder that no consent to the transfer of the Property and the Collateral to
Assumptor is required under any agreement to which Borrower or Assumptor is a
party, including, without limitation, under any lease, operating agreement,
mortgage or security instrument (other than the Loan Documents), or if such
consent is required, that the parties have obtained all such consents.
     b. No Defaults. Assumptor and Borrower each hereby represents and warrants,
to its respective knowledge, that no default, event of default, breach or
failure of condition has occurred, or would exist with notice or the lapse of
time or both, under any of the Loan Documents, as modified by this Assumption
Agreement, and all representations and warranties herein and in the other Loan
Documents are true and correct in all material respects.
     c. Loan Documents. Assumptor represents and warrants to Noteholder that
Assumptor has actual knowledge of all terms and conditions of the Loan
Documents, and agrees that Noteholder has no obligation or duty to provide any
information to Assumptor regarding the terms and conditions of the Loan
Documents. Assumptor further agrees that all representations, agreements and
warranties in the Loan Documents regarding Borrower (as modified by this
Assumption Agreement), its status, authority, financial condition and business
shall apply to Assumptor, as though Assumptor were the borrower originally named
in the Loan Documents. Assumptor further understands and acknowledges that,
except as expressly provided in this Assignment and Assumption Agreement or in
any other writing executed by Noteholder, Noteholder has not waived any right of
Noteholder or obligation of Borrower or Assumptor under the Loan

7

--------------------------------------------------------------------------------

 

Documents and Noteholder has not agreed to any modification of any provision of
any Loan Document or to any extension of the Loan.
     d. Financial Statements. Assumptor represents and warrants to Noteholder
that the financial statements of Assumptor, New Guarantor, and Pebblebrook Hotel
Trust (the “REIT”), previously delivered by Borrower, Assumptor or any of such
parties to Noteholder: (i) are complete and correct in all material respects;
(ii) present fairly and in all material respects the financial condition of each
of such parties; and (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied, except as expressly noted
therein, or other accounting standards approved by Noteholder. Assumptor further
represents and warrants to Noteholder that, since the date of such financial
statements, there has been no material adverse change in the financial condition
of any of such parties, nor have any assets or properties reflected on such
financial statements been sold, transferred, assigned, mortgaged, pledged or
encumbered except as previously disclosed in writing by Assumptor to Noteholder
and approved in writing by Noteholder or disclosed in public filings prior to
the Effective Date.
     e. Reports. Assumptor represents and warrants to Noteholder that all
reports, documents, instruments and information (other than information of a
general economic or industry nature) that Assumptor has delivered to Noteholder
in connection with Assumptor’s assumption of the Loan: (i) are correct and
sufficiently complete to give Noteholder accurate knowledge of their subject
matter; and (ii) do not contain any misrepresentation of a material fact or
omission of a material fact which omission makes the provided information
misleading omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they are made, not
materially misleading; provided that, with respect to projected financial
information, Assumptor represents and warrants only that such information was
prepared in good faith based upon assumptions believed to be reasonable at the
time.
     f. Assumptor Location. Assumptor represents and warrants that its chief
executive office is located at the following address: c/o Pebblebrook Hotel
Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814. Assumptor
represents and warrants that its state of formation is Delaware. All
organizational documents of Assumptor delivered to Noteholder are complete and
accurate in every respect. Assumptor’s legal name is exactly as shown on page
one of this Assumption Agreement. Assumptor shall not change Assumptor’s name
or, as applicable, Assumptor’s chief executive office, Assumptor’s principal
residence or the jurisdiction in which Assumptor is organized, without giving
Noteholder at least 30 days’ prior written notice.
     g. Reserved.
     h. No Pledge of Equity Interests. Assumptor and New Guarantor represent and
warrant to Noteholder that the equity interests in (i) Assumptor or (ii) any
entity that, directly or indirectly, owns an equity interest in Assumptor have
not been pledged, hypothecated or otherwise encumbered as security for any
obligation, and that no portion of the capital contributed to Assumptor,
directly or indirectly, in connection with Assumptor’s acquisition of the
Property consists of borrowed funds.

8

--------------------------------------------------------------------------------

 

     i. Embargoed Person. Assumptor and New Guarantor represent and warrant that
none of the funds or other assets of Assumptor or New Guarantor constitute
property of, or are beneficially owned, directly or indirectly, by any person,
entity or government subject to trade restrictions under U.S. law, including but
not limited to, the USA PATRIOT Act (including the anti-terrorism provisions
thereof), the International 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, including those related to
Specially Designated Nationals and Specially Designated Global Terrorists
(“Embargoed Person”) and further warrant and represent that no Embargoed Person
has any interest of any nature whatsoever in Assumptor or New Guarantor with the
result that the investment in Assumptor (whether directly or indirectly) is
prohibited by law.
     9. Waiver of Acceleration. Noteholder hereby consents to the sale and
conveyance of the Property and Collateral and agrees that it shall not exercise
its right to cause all sums secured by the Security Instrument to become
immediately due and payable because of the conveyance of the Property and the
Collateral from Borrower to Assumptor; provided, however, Noteholder reserves
its right under the terms of the Security Instrument or any other Loan Document
to accelerate all principal and interest in the event of any subsequent sale,
transfer, encumbrance or other conveyance of the Property, the Collateral or any
interest in Assumptor, except as permitted by the Loan Documents.
     10. Modification of Loan Documents. The Loan Documents are hereby modified
as follows:
     a. The definition of “Leases” on page 3 of the Security Instrument and on
page 1 of the Assignment of Leases is modified to specifically include the
Operating Lease.
     b. The following definitions are hereby added to Section 1.01 of the
Security Instrument:
     “Operating Lease” shall mean that certain Agreement of Lease dated as of
September 9, 2010 between Borrower, as landlord, and Operating Lessee, as
tenant.
     “Operating Lessee” shall mean Jayhawk Lessee LLC.
     c. The definition of “Borrower’s Knowledge” on page 8 of the Security
Instrument is hereby deleted and replaced with the following:
     “Borrower’s Knowledge” or words of similar effect shall mean the actual
knowledge of Borrower or Borrower’s President, Vice President, Secretary and/or
Vice President or knowledge after making all due inquiry of the Property’s
general manager or assistant general manager.”

9

--------------------------------------------------------------------------------

 

     d. The definition of “Guarantor” on page 13 of the Security Instrument is
hereby modified to refer to New Guarantor as the current “Guarantor” under the
Loan Documents.
     e. The definition of “Loan Documents” on page 15 of the Security Instrument
is hereby modified to include this Assumption Agreement, the new Guaranty, the
Operating Lessee Subordination, the Collateral Assignment of Security Agreement,
Consent and Agreement, the new Cash Management Documents and the other documents
executed by Assumptor, New Guarantor, Operating Lessee and Manager in connection
with the assumption.
     f. The reference to “Kimpton Group Holding LLC” in the definition of
“Transfer” on pages 22-24 of the Security Instrument is hereby modified to refer
to “Pebblebrook Hotel Trust.”
     g. The definition of “Transfer” on pages 22-24 of the Security Instrument
is hereby modified to restrict Transfers of direct interests in Operating Lessee
to the same extent as Transfers of direct interests in Assumptor; provided,
however, that nothing contained in the definition of “Transfer” shall prohibit
the execution of the Operating Lease between the Borrower and Operating Lessee.
     h. The following is hereby added at the end of the definition of “Transfer”
on pages 22-24 of the Security Instrument:
     “Notwithstanding the foregoing or anything to the contrary contained herein
or in any other Loan Documents, the issuance, sale, conveyance, transfer or
other disposition (the “REIT Transfer”) of any shares of stock (the “REIT
Shares”) in Pebblebrook Hotel Trust (the “REIT”) shall be permitted without
Lender’s prior written consent, provided that (i) the REIT Shares are publicly
traded on a nationally recognized U. S. Stock Exchange; (ii) no Person or group
(as that term is used in Section 13(d) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) and the rules and regulations thereunder) shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of a percentage (based on voting power, in the event different
classes of stock shall have different voting powers) of the voting stock of the
REIT greater than forty nine percent (49%); and (iii) the REIT Transfer does not
result in or cause: (A) Borrower no longer being the owner of the Property; (B)
Operating Lessee no longer being the tenant under the Operating Lease; (C) the
REIT no longer being the sole general partner and in Control of Guarantor and
the owner of at least 51% of the limited partnership interests in the Guarantor;
(D) the Guarantor no longer owning at least a 51% ownership interest in and
maintaining Control over both DC Hotel Trust (the “Baby REIT”) and Pebblebrook
Hotel Lessee, Inc. (the “TRS”); (E) the Baby REIT no longer being the sole
member of and in Control of Borrower; (F) TRS no longer being the sole member of
and in Control of Operating Lessee; (G) Guarantor no longer being the guarantor
under the Loan Documents; or (H) a REIT Change of Control (as defined below).

10

--------------------------------------------------------------------------------

 

     For purposes of this Section, a “REIT Change of Control” shall occur when:
(i) one Person or group of affiliated Persons acquires more than 49% of the REIT
Shares in one or a series of transactions, (ii) during the twelve (12) month
period immediately prior to the REIT Transfer, individuals who at the beginning
of such period constituted the Board of Directors or Trustees of the REIT (the
“Board”) (together with any new directors whose election by the Board or whose
nomination for election by the shareholders of the REIT was approved by a vote
of at least a majority of the members of the Board then in office who either
were members of the Board at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of the Board as of the date of completion
of the REIT Transfer, or (iii) if the REIT enters into a merger, consolidation
or other business combination, or a sale of all or substantially all of the
REIT’s assets and/or ownership interests which results in Borrower, Operating
Lessee and/or Guarantor no longer being controlled, directly or indirectly, by
the REIT.”
     i. The following language is hereby deleted from the end of the first
sentence of Section 2.02(g) (iv) on page 27 of the Security Instrument: “...have
filed and will file their own tax returns or, if Borrower and/or, if applicable,
General Partner is part of a consolidated group for purposes of filing tax
returns, Borrower and General Partner, as applicable, have been shown and will
be shown as separate members of such group.”
     j. Section 2.02(g)(vii) on page 27 of the Security Instrument is hereby
amended and restated in its entirety as follows: “Borrower and, if applicable,
each General Partner, have been at all times, and intend to remain, adequately
capitalized in light of the nature of their respective businesses.”
     k. The reference to “California limited partnership” in Section 2.02(g)(xi)
on page 28 of the Security Instrument is modified to refer to “Delaware limited
liability company”.
     l. The following is hereby added as Section 2.05(y) of the Security
Instrument:
     “(y) Operating Lease.
     (i) Borrower shall (A) promptly perform and observe all of the material
covenants required to be performed and observed by it under the Operating Lease
and do all things necessary to preserve and to keep unimpaired its material
rights thereunder; (B) promptly notify Lender of any material default under the
Operating Lease; (C) promptly deliver to Lender a copy of any notice of default
or other material notice under the Operating Lease delivered to Operating Lessee
by Borrower; (D) promptly give notice to Lender of any notice or information
that Borrower receives which indicates that Operating Lessee is terminating its
Operating Lease or that Operating Lessee is otherwise

11

--------------------------------------------------------------------------------

 

discontinuing its operation of the Property; and (e) promptly enforce the
performance and observance of all of the material covenants required to be
performed and observed by Operating Lessee under the Operating Lease.
     (ii) Borrower shall not, without the prior written consent of Lender, (A)
surrender, terminate or cancel the Operating Lease or otherwise replace
Operating Lessee; (B) reduce or consent to the reduction of the term of the
Operating Lease; or (C) enter into, renew, amend, modify, waive any provisions
of, reduce Rents under or shorten the term of the Operating Lease except in the
case of clauses (B) and (C) above, to the extent the foregoing could not
reasonably be expected to be materially adverse to the Noteholder.
     m. Assumptor acknowledges and agrees that the annual, quarterly and other
financial statements and reports required or otherwise requested by Noteholder
under Section 2.09 of the Security Instrument shall include statements and
reports of Operating Lessee as applicable.
     n. The seventh and eighth sentences in Section 5.01 shall be amended and
restated in their entirety as follows:
“Additionally, Borrower shall cause Operating Lessee or Manager to send each
respective credit card company or credit card clearing bank with which Operating
Lessee or Manager has entered into merchant’s agreements (each, a “Credit Card
Company”) a direction letter in the form of Exhibit F annexed hereto and made
part hereof (the “Credit Card Payment Direction Letter”) directing such Credit
Card Company to make all payments due in connection with goods or services
furnished at or in connection with the Property by Federal wire or through ACH
directly to a bank account established by the Operating Lessee (the “Operating
Lessee Rent Account”). Without the prior written consent of Lender, Borrower
shall not permit Operating Lessee or Manager to (i) terminate, amend, revoke or
modify any Credit Card Payment Direction Letter in any manner or (ii) direct or
cause any Credit Card Company to pay any amount in any manner other than as
specifically provided in the related Credit Card Payment Direction Letter.”
     o. The definition of “Management Agreement” in Section 7.02(e) on page 77
of the Security Instrument is hereby modified to include that certain Assignment
of and First Amendment to Hotel Operating Agreement being executed by Operating
Lessee and Manager in connection with this assumption.
     p. Assumptor shall cause Operating Lessee to comply in all material
respects with all provisions of the Management Agreement and to comply with all
of the provisions of the Security Instrument relating to the management and
operation of the Property, including, without limitation, Section 7.02 of the
Security Instrument.

12

--------------------------------------------------------------------------------

 

     q. Sections 13.01 (d), (f), (g), (h), (i), (j), (l) and (n) of the Security
Instrument are hereby modified to include acts and omissions of the Operating
Lessee to the same extent as acts and omissions of the Assumptor and/or New
Guarantor, as applicable
     r. Except as specifically amended hereby, the Loan Documents shall remain
unchanged and in full force and effect.
     11. Net Worth Representation of New Guarantor. As of the Effective Date,
New Guarantor represents and warrants to Noteholder that New Guarantor has a
Tangible Net Worth of not less than $300,000,000. For purposes of this
Section 11, “Tangible Net Worth” means the sum of (a) consolidated partnership’s
equity of the New Guarantor and its subsidiaries, plus (b) accumulated
depreciation with respect to real assets (to the extent deducted in determining
partnerships’ equity), less (c) the value of all intangible assets of New
Guarantor and its consolidated subsidiaries on a consolidated basis (to the
extent included in determining partnerships’ equity), in each case as determined
in accordance with GAAP.
     12. Hazardous Materials. Without in any way limiting any other provision of
this Assumption Agreement, Assumptor and Borrower expressly reaffirm as of the
date hereof, and Assumptor reaffirms continuing hereafter: (a) each and every
representation and warranty in the Loan Documents respecting “Hazardous
Materials”; and (b) each and every covenant and indemnity in the Loan Documents
respecting “Hazardous Materials”.
     13. Multiple Parties. If more than one person or entity has signed this
Assumption Agreement as Assumptor or Borrower, then all references in this
Assumption Agreement to Assumptor or Borrower shall mean each and all of the
persons so signing, as applicable. The liability of all persons and entities
signing shall be joint and several with all others similarly liable.
     14. Confirmation of Security Interest. Nothing contained herein shall
affect or be construed to affect any lien, charge or encumbrance created by any
Loan Document or the priority of that lien, charge or encumbrance. All
assignments and transfers by Borrower to Assumptor are subject to any security
interest(s) held by Noteholder. Assumptor shall promptly execute and deliver any
further documents reasonably requested by the Noteholder to evidence the liens,
charges and encumbrances created by the Loan Documents, including, without
limitation, evidence of recordation of the Memorandum of Assumption Agreement
after the Effective Date.
     15. Notices. All notices to be given to Assumptor and/or Operating Lessee
pursuant to the Loan Documents shall be addressed as follows: c/o Pebblebrook
Hotel Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814,
Attn. Attn: Raymond Martz, Vice President and Secretary. All notices to be given
to Noteholder pursuant to the Loan Documents shall be addressed as follows: c/o
Wells Fargo Commercial Mortgage Servicing – East, 201 S. College Street, 9th
Floor, Charlotte, NC 28244-1075, MAC D1100-090, Attn. Asset Manager.

13

--------------------------------------------------------------------------------

 

     16. Integration; Interpretation. The Loan Documents, including this
Assumption Agreement, contain or expressly incorporate by reference the entire
agreement of the parties with respect to the matters contemplated herein and
supersede all prior negotiations. The Loan Documents shall not be modified
except by written instrument executed by Noteholder and Assumptor. Any reference
in any of the Loan Documents to the property or the Collateral shall include all
or any parts of the Property or the Collateral.
     17. Successors and Assigns. This Assumption Agreement is binding upon and
shall inure to the benefit of the heirs, successors and assigns of the parties
but subject to all prohibitions of transfers contained in any Loan Document.
     18. Attorneys’ Fees; Enforcement. If any attorney is engaged by Noteholder
to enforce, construe or defend any provision of this Assumption Agreement, or as
a consequence of any default under or breach of this Assumption Agreement, with
or without the filing of any legal action or proceeding, Assumptor shall pay to
Noteholder, within 15 days after written demand, the amount of all attorneys’
fees and costs reasonably incurred by Noteholder in connection therewith,
together with interest thereon from the date that is15 days after the date of
such demand at the rate of interest applicable to the principal balance of the
Note as specified therein.
     19. Right of Transfer of Property. The parties acknowledge that
Section 9.04 of the Security Instrument provides that Noteholder shall consent
to the voluntary sale or exchange of all of the Property, all subject, however,
to the terms and conditions set forth therein. The parties agree that this
Assumption Agreement and the actions to be taken as contemplated herein shall
constitute one such consent.
     20. Deferred Maintenance; Liquor License. Assumptor covenants and agrees
that it will, within 60 days of the Effective Date, provide Noteholder with
satisfactory evidence that (a) the short term repair items listed on Exhibit D
of the Security Instrument have been completed; (b) the elevator #2 repairs have
been completed with no further environmental clean-up necessary; and (c) that
Assumptor has obtained a permanent liquor license for the Property. Assumptor
further covenants and agrees that should such items of Deferred Maintenance not
be repaired as provided herein or that the permanent liquor license shall not be
obtained in such time-frame, that an immediate Event of Default shall have
occurred, and that Noteholder shall have all remedies available to it under the
terms of the Loan Documents, including but not limited to the immediate right to
accrue interest on the Loan at the Default Interest Rate.
     21. Miscellaneous.
     a. This Assumption Agreement shall be governed and interpreted in
accordance with the laws of the jurisdiction(s) specified in the other Loan
Documents as governing the other Loan Documents. In any action brought or
arising out of this Assumption Agreement, Borrower, Original Guarantor, New
Guarantor, Noteholder and Assumptor, and general partners, members and joint
venturers of them, hereby consent to the jurisdiction of any state or federal
court having proper venue as specified in the other Loan Documents and also
consent to the service of process by any means authorized by the law of such
jurisdiction(s). Except as expressly provided otherwise herein, all terms

14

--------------------------------------------------------------------------------

 

used herein shall have the meaning given to them in the Loan Documents. Time is
of the essence of each term of the Loan Documents, including this Assumption
Agreement. If any provision of this Assumption Agreement or any of the other
Loan Documents shall be determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable, that portion shall be deemed severed
therefrom and the remaining parts shall remain in full force as though the
invalid, illegal, or unenforceable portion had not been a part thereof.
     b. Notwithstanding anything to the contrary herein, this Agreement is
subject to the provisions of Section 4 of the Note and Section 18.32 of the
Security Instrument as if such provisions were set forth at length herein.
     22. Counterparts. This Assumption Agreement may be executed in any number
of counterparts, each of which when executed and delivered will be deemed an
original and all of which taken together will be deemed to be one and the same
instrument.
[SEE ATTACHED SIGNATURE PAGES]

15

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Noteholder, Assumptor, New Guarantor, Borrower, and
Original Guarantor have caused this Assumption Agreement to be duly executed as
of the date first above written.

                   
 
                    NOTEHOLDER:   BANK OF AMERICA, N.A., as successor to Wells
Fargo Bank, N.A., as Trustee for the Registered Holders of COBALT CMBS
Commercial Mortgage Trust 2007-C2, Commercial Mortgage Pass-Through
Certificates, Series 2007-C2    
 
                        By:    Wells Fargo Bank, N.A., successor by merger to
Wachovia Bank, National Association, as authorized pursuant to that certain
Pooling and Servicing Agreement dated as of April 1, 2007    

            By:   /s/  Tracy Mills-Smith       Name:   Tracy Mills-Smith      
Title:   Vice President    

 

--------------------------------------------------------------------------------

 

               
 
            ASSUMPTOR:   JAYHAWK OWNER LLC,         a Delaware limited liability
company    
 
           
 
  By:   /s/ Raymond D. Martz    
 
         
 
    Name:   Raymond D. Martz    
 
           
 
    Title:   Vice President & Secretary    
 
           
 
           
NEW
            GUARANTOR:   PEBBLEBROOK HOTEL, L.P.,         a Delaware limited
partnership    
 
                By: Pebblebrook Hotel Trust,         Its general partner    
 
           
 
  By:   /s/ Raymond D. Martz    
 
         
 
    Name:   Raymond D. Martz    
 
           
 
    Title:   Chief Financial Officer    
 
           

 

--------------------------------------------------------------------------------

 

                       
 
                    BORROWER:   TARIFF BUILDING ASSOCIATES, L.P.,
a California limited partnership    
 
                        By:   Square 430, LLC,
a Delaware limited liability company,
its general partner    
 
                            By:   Kimpton Group Holding LLC, a Delaware limited
liability company, its sole member    
 
                   
 
          By:   /s/ Judith C. Miles    
 
                 
 
            Name:   Judith C. Miles    
 
                   
 
            Title:   EVP and Secretary    
 
                   

                   
ORIGINAL
                GUARANTOR:   KIMPTON DEVELOPMENT OPPORTUNITY FUND, L.P.,
a California limited partnership    
 
                    By:   Kimpton Group Holding, LLC,
a Delaware limited liability company,
its General Partner
 
               
 
      By:   /s/ Ben Rowe    
 
             
 
        Name:   Ben Rowe    
 
               
 
        Title:   CFO    
 
               

 

--------------------------------------------------------------------------------

 

EXHIBIT A
TO ASSUMPTION AGREEMENT

         
PREPARED BY AND
  )    
WHEN RECORDED MAIL TO:
  )    
Alston & Bird LLP
  )    
Bank of America Plaza
  )    
101 S. Tryon Street, Suite 4000
  )    
Charlotte, NC 28280-4000
  )    
Attn: James A. L. Daniel, Jr.
  )    

MEMORANDUM OF ASSUMPTION AGREEMENT
     TARIFF BUILDING ASSOCIATES, LP, a California limited partnership, with a
mailing address at 222 Kearny Street, Suite 200, San Francisco, CA 94108
(“Borrower”), Kimpton Development Opportunity Fund, L.P., a California limited
partnership, with a mailing address at 222 Kearny Street, Suite 200, San
Francisco, CA 94108 (“Original Guarantor”), JAYHAWK OWNER LLC, a Delaware
limited liability company, with a mailing address at c/o Pebblebrook Hotel
Trust, 2 Bethesda Metro Center, Suite 1530, Bethesda, Maryland 20814
(“Assumptor”), PEBBLEBROOK HOTEL, L.P. , a Delaware limited partnership, with a
mailing address c/o Pebblebrook Hotel Trust, 2 Bethesda Metro Center,
Suite 1530, Bethesda, Maryland 20814 (“New Guarantor”), and BANK OF AMERICA,
N.A., as successor to Wells Fargo Bank, N.A., as Trustee for the Registered
Holders of COBALT CMBS Commercial Mortgage Trust 2007-C2, Commercial Mortgage
Pass-Through Certificates, Series 2007-C2, with a mailing address c/o Wells
Fargo Bank, N. A., Commercial Mortgage Servicing, 1901 Harrison Street, 7th
Floor, Oakland, CA 94612, MAC AO227-020 “Noteholder"), are parties to that
certain Assumption Agreement dated of even date herewith (“Assumption
Agreement”).
     The undersigned parties agree that all obligations under that certain
Promissory Note dated February 23, 2007 (“Note”) in the original principal
amount of $35,000,000.00, secured by: (i) that certain Deed of Trust, Security
Agreement, Assignment of Rents and Fixture Filing executed by Borrower to First
American Title Insurance Company, as trustee, for the benefit of Original
Lender, which Security Instrument was recorded on February 26, 2007 as
instrument number 2007026007 in the land records of the District of Columbia
(“Official Records”), the Original Lender’s interest under which was assigned to
Noteholder by instrument recorded on April 30, 2008, as instrument number
2008059162, in said Official Records; (ii) that certain Assignment of Leases and
Rents executed by Borrower, which was recorded on February 26, 2007 as
instrument number 2007026008, with said Official Records, the Original Lender’s
interest under which was assigned to Noteholder by instrument recorded on
April 30, 2008, as instrument number 2008059162, in said Official Records; and
(iii) all other Loan Documents (as defined in the Assumption Agreement) securing
the real property described on EXHIBIT A, have been assumed by Assumptor upon
the terms and conditions set forth in the Assumption Agreement. The Assumption
Agreement is by this reference incorporated herein and made a part hereof. This
Memorandum of Assumption Agreement may be executed in any number of

 

--------------------------------------------------------------------------------

 

counterparts, each of which when executed and delivered will be deemed an
original and all of which taken together will be deemed to be one and the same
instrument.
[SEE ATTACHED SIGNATURE PAGES]

 

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, Noteholder, Assumptor, New Guarantor, Borrower, and
Original Guarantor have caused this Memorandum of Assumption Agreement to be
duly executed as of the                      day of September, 2010.

                  NOTEHOLDER:   BANK OF AMERICA, N.A., as successor to Wells
Fargo Bank,
N.A., as Trustee for the Registered Holders of COBALT CMBS
Commercial Mortgage Trust 2007-C2, Commercial Mortgage
Pass-Through Certificates, Series 2007-C2
 
           
 
      By:   Wells Fargo Bank, N.A., successor by merger to Wachovia
Bank, National Association, as authorized pursuant to that
certain Pooling and Servicing Agreement dated as of April 1, 2007

                  By:           Name:           Title:        

ACKNOWLEDGMENT OF NOTEHOLDER

             
STATE OF CALIFORNIA
    )      
 
    )     ss
COUNTY OF CONTRA COSTA
    )      

     On                     , 2010, before me,
                                        , the undersigned Notary Public in and
for said County and State, personally appeared Tracy Mills-Smith, who proved to
me on the basis of satisfactory evidence to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California
that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.

         
 
 
 
Notary Public    

    My Commission Expires:                                         

 

--------------------------------------------------------------------------------

 

              ASSUMPTOR:   JAYHAWK OWNER LLC,
a Delaware limited liability company
      By:           Name:

      Title:

      NEW       GUARANTOR: PEBBLEBROOK HOTEL, L.P.,
a Delaware limited partnership
      By: Pebblebrook Hotel Trust,       Its general partner         By:        
  Name:

      Title:

 

 

--------------------------------------------------------------------------------

 

          BORROWER:  TARIFF BUILDING ASSOCIATES, L.P.,
a California limited partnership
      By:   Square 430, LLC,
a Delaware limited liability company,
its general partner    

        By:   Kimpton Group Holding LLC, a Delaware limited
liability company, its sole member    

        By:            Name: 

       Title: 

   

              ORIGINAL        
GUARANTOR:  KIMPTON DEVELOPMENT OPPORTUNITY FUND, L.P.,
a California limited partnership
      By:   Kimpton Group Holding, LLC,
a Delaware limited liability company,
its General Partner    

        By:            Name: 

       Title: 

   

 

--------------------------------------------------------------------------------

 

         

Exhibit A
Legal Description