Exhibit 10.81

AMENDED AND RESTATED LOAN AGREEMENT
between
SHR MLB, LLC,
a Delaware limited liability company,
as Borrower
and
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY,
a Massachusetts corporation,
as Lender
Dated as of January 29, 2015
Relating to Property Located at:
Montage Laguna Beach
30801 South Coast Highway
Laguna Beach, California 92651

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TABLE OF CONTENTS

 
 
 
Page
Article 1 CERTAIN DEFINITIONS
 
3
Section 1.1
Certain Definitions
 
3
Section 1.2
Interpretation
 
18
Article 2 LOAN TERMS
 
19
Section 2.1
The Loan and the Note
 
19
Section 2.2
Interest Rate; Late Charge; Default Rate
 
19
Section 2.3
Terms of Payment
 
20
Section 2.4
Loan Term
 
21
Section 2.5
Prepayment
 
21
Section 2.6
Security
 
24
Section 2.7
Payments
 
24
Article 3 INSURANCE AND CONDEMNATION
 
25
Section 3.1
Insurance Requirements
 
25
Section 3.2
Damage, Destruction and Restoration
 
28
Section 3.3
Condemnation
 
34
Article 4 ENVIRONMENTAL MATTERS
 
35
Section 4.1
Terms Incorporated By Reference
 
35
Article 5 CERTAIN PROPERTY MATTERS
 
35
Section 5.1
Lease Covenants and Limitations
 
35
Section 5.2
Management
 
37
Section 5.3
Impositions
 
38
Section 5.4
FF&E Reserve
 
40
Section 5.5
Cash Trap Period
 
44
Article 6 REPRESENTATIONS, WARRANTIES AND COVENANTS
 
44
Section 6.1
Organization and Authority
 
44
Section 6.2
Maintenance of Existence
 
45
Section 6.3
Title
 
45
Section 6.4
Mortgage Taxes
 
47
Section 6.5
Payment of Liens
 
50
Section 6.6
Representations Regarding Mortgaged Property
 
51
Section 6.7
[Intentionally Omitted]
 
52
Section 6.8
Indemnification
 
52
Section 6.9
Estoppel Certificates
 
52
Section 6.10
ERISA
 
52
Section 6.11
Terrorism and Anti-Money Laundering
 
53
Section 6.12
Special Purpose Entity Requirements
 
53
Section 6.13
Notices/Proceedings
 
57

 
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Section 6.14
[Intentionally Omitted]
 
57
Section 6.15
Business Purpose of Loan
 
57
Section 6.16
Legal Requirements and Maintenance of Mortgaged Property
 
57
Section 6.17
Solvency
 
58
Section 6.18
Master Lease
 
59
Section 6.19
CC&Rs
 
61
Article 7 FINANCIAL REPORTING
 
62
Section 7.1
Financial Statements; Records
 
62
Article 8 CONVEYANCES, ENCUMBRANCES AND BORROWINGS
 
64
Section 8.1
Prohibition Against Conveyances, Encumbrances and Borrowing
 
64
Section 8.2
Transfers of Minority, Non-Controlling Interests
 
66
Section 8.3
Partial Interest Transfer
 
66
Section 8.4
Permitted Loan Transfer
 
68
Section 8.5
Transfers of Operating Partnership Units
 
72
Article 9 EVENTS OF DEFAULT
 
72
Section 9.1
Events of Default
 
72
Section 9.2
Notice of Event of Default
 
76
Article 10 REMEDIES
 
76
Section 10.1
Remedies
 
76
Section 10.2
Lender’s Right to Perform the Obligations
 
76
Section 10.3
Waiver of Marshalling of Assets
 
77
Section 10.4
Advances
 
77
Section 10.5
Participation In Proceedings
 
77
Article 11 LIMITATIONS ON LIABILITY
 
78
Section 11.1
Limitation on Liability
 
78
Article 12 MISCELLANEOUS
 
82
Section 12.1
Notices
 
82
Section 12.2
Counterparts
 
83
Section 12.3
Successors and Assigns
 
83
Section 12.4
Joint and Several Liability
 
83
Section 12.5
Captions
 
83
Section 12.6
Further Assurances
 
83
Section 12.7
Severability
 
84
Section 12.8
Borrower’s Obligations Absolute
 
84
Section 12.9
Amendments; Consents
 
84
Section 12.10
Other Loan Documents and Exhibits
 
85
Section 12.11
Merger
 
85
Section 12.12
Time of the Essence
 
85
Section 12.13
Transfer of Loan
 
85
Section 12.14
Cooperation
 
85

 
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Section 12.15
Register
 
86
Section 12.16
Limitation on Interest
 
87
Section 12.17
Survival
 
87
Section 12.18
WAIVER OF JURY TRIAL
 
87
Section 12.19
Governing Law
 
88
Section 12.20
Consent to Jurisdiction and Venue
 
88
Section 12.21
Agent for Service of Process
 
88
Section 12.22
Entire Agreement
 
88
Section 12.23
Pledge and Grant of Security Interest
 
89
Section 12.24
Costs
 
89
Section 12.25
Publicity Restriction
 
90
Article 13 THE ADMINISTRATIVE AGENT
 
90
Section 13.1
Appointment, Powers and Immunities
 
90
Section 13.2
Reliance by Borrower on Administrative Agent
 
90
Section 13.3
Rights as a Lender
 
91
Article 14 AMENDMENT AND RESTATEMENT
 
91
Section 14.1
Amendment and Restatement
 
91

LIST OF EXHIBITS
EXHIBIT A    -    LEGAL DESCRIPTION OF PROPERTY
EXHIBIT B    -    OPERATING AGREEMENTS
EXHIBIT C    -    EASEMENT AGREEMENTS
EXHIBIT D    -    FORM OF CONSENT AND JOINDER

 
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AMENDED AND RESTATED LOAN AGREEMENT
This Amended and Restated Loan Agreement (this “Agreement”) is entered into as
of January 29, 2015, by and between SHR MLB, LLC, a Delaware limited liability
company (“Borrower”), and MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a
Massachusetts corporation (“Lender”).
RECITALS:
A.    Lender and Laguna Beach Luxury Hotel LLC, a Delaware limited liability
company (“LBLH”) previously entered into that certain Loan Agreement dated as of
July 2, 2014 (the “Original Loan Agreement”). In connection therewith, LBLH
executed in favor Lender that certain Promissory Note dated as of July 2, 2014
in the principal amount of One Hundred Fifty Million and 00/100 Dollars
($150,000,000.00) (the “Original Note”). The Original Loan Agreement and the
Original Note evidence a mortgage loan made by Lender to LBLH in the original
principal amount of One Hundred Fifty Million and 00/100 Dollars
($150,000,000.00) (the “Loan”).
B.    The Loan is secured by, among other things, (i) that certain Deed of
Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing
dated as of July 2, 2014, executed by LBLH, as grantor, to Commonwealth Land
Title Company, a California corporation, as trustee, in favor of Lender, as
beneficiary, and recorded on July 3, 2014 in the Official Records of the
Recorder’s Office of Los Angeles County, California (the “Official Records”) as
Instrument No. 2014000264232 (the “Original Deed of Trust”), encumbering LBLH’s
interest in the parcels of land described on Exhibit A attached hereto and by
this reference made a part hereof, together with the improvements thereon and
(ii) that certain Assignment of Leases and Rents dated as of July 2, 2014,
executed by LBLH in favor of Lender and recorded on July 3, 2014 in the Official
Records as Instrument No. 2014000264233 (the “Original Assignment of Leases and
Rents”).
C.    As a condition precedent to entering into the Original Loan Agreement, (i)
LBLH entered into that certain Environmental Indemnification Agreement dated
July 2, 2014 (the “Original Environmental Indemnification Agreement”), (ii)
Ohana Real Estate Holdings, LLC, a Delaware limited liability company entered
into that certain Recourse Guaranty Agreement dated as of July 2, 2014 (the
“Original Recourse Guaranty Agreement”), and (iii) LBLH, Montage Hotels &
Resorts, LLC, a Nevada limited liability company (“Hotel Manager”), and Lender
executed that certain Hotel Manager Subordination, Non-Disturbance and
Attornment Agreement dated as of July 2, 2014 and recorded on July 3, 2014 in
the Official Records as Instrument No. 2014000264234 (the “Original
Subordination of Management Agreement”).
D.    LBLH and Borrower have requested that Lender permit LBLH to enter into
certain transactions in accordance with Section 8.4 of the Original Loan
Agreement which will result in the transfer of title to the Premises (as
hereinafter defined) to Borrower, subject, however, to the terms of the Original
Loan Agreement, the Original Note, the Original Deed of Trust, the Original
Assignment of Leases and Rents, the Original Subordination of Management
Agreement and the other “Loan Documents” (as defined in the Original Loan
Agreement) to which LBLH is party (other than the Original Environmental
Indemnification Agreement).

 
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E.    Lender is willing to allow such transfer, provided that, among other
requirements set forth in Section 8.4 of the Original Loan Agreement, (i)
Borrower shall, pursuant to amended and restated versions of the same, as
described in more detail below, assume the obligations and indebtedness
evidenced by the Original Note and the obligations of LBLH under and pursuant to
the Original Loan Agreement, the Original Deed of Trust, the Original Assignment
of Leases and Rents and the Original Subordination of Management Agreement, (ii)
Master Tenant (as hereinafter defined) shall execute and deliver in favor of
Lender the Master Tenant Security Agreement (as hereinafter defined), (iii)
Borrower and Strategic Hotel Funding, L.L.C, a Delaware limited liability
company (“Strategic”), shall execute and deliver in favor of Lender that certain
Environmental Indemnification Agreement (as the same may be amended, modified,
consolidated or extended from time to time, the “Environmental Indemnification
Agreement”), (iv) Strategic shall execute and deliver in favor of Lender that
certain Recourse Guaranty Agreement (as the same may be amended, modified,
consolidated or extended from time to time, the “Recourse Guaranty Agreement”),
and (v) Borrower, Master Tenant and Lender shall execute and deliver the
Subordination (as hereinafter defined).
F.    As of the date hereof, Borrower is assuming the obligations and
indebtedness evidenced by the Original Note, and the obligations of LBLH
pursuant to the Original Loan Agreement, the Original Deed of Trust, the
Original Assignment of Leases and Rents and the Original Subordination of
Management Agreement, by entering into, as applicable (i) that certain Amended
and Restated Promissory Note of even date herewith made by Borrower in favor of
Lender in the principal amount of One Hundred Fifty Million and 00/100 Dollars
($150,000,000.00) (as the same may hereafter be amended, modified, split,
consolidated or extended, hereinafter, the “Note”), which amends and restates
the Original Note in its entirety, (ii) this Loan Agreement, which amends and
restates the Original Loan Agreement in its entirety, (iii) that certain Amended
and Restated Fee and Leasehold Deed of Trust, Assignment of Leases and Rents,
Security Agreement and Fixture Filing of even date herewith executed by Borrower
in favor of Lender (as the same may be amended, modified, consolidated or
extended from time to time, the “Deed of Trust”), which amends and restates the
Original Deed of Trust in its entirety, (iv) that certain Amended and Restated
Assignment of Leases and Rents of even date herewith executed by Borrower in
favor of Lender (as the same may be amended, modified, consolidated or extended
from time to time, the “Assignment of Leases and Rents”), which amends and
restates the Original Assignment of Leases and Rents in its entirety, and (v)
that certain Amended and Restated Hotel Manager Subordination, Non-Disturbance
and Attornment Agreement of even date herewith by and among Borrower, Lender,
Master Tenant and Hotel Manager (as the same may be amended or modified from
time to time, the “Hotel Manager Subordination”), which amends and restates the
Original Subordination of Management Agreement in its entirety.
G.    As of the date hereof, the outstanding principal balance of the Loan is
One Hundred Fifty Million and 00/100 Dollars ($150,000,000.00).
NOW, THEREFORE, in consideration of the terms and covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged and agreed to, the parties agree to be bound as follows:

 
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Article 1

CERTAIN DEFINITIONS
Section 1.1    Certain Definitions. As used in this Agreement, the following
terms shall mean:
“Acceleration Event” is defined in Section 2.5(c).
“Acceptable Lease” means each Lease that (a) has not been amended (unless such
amendment has been approved by Lender or does not require Lender’s approval
hereunder) and (b) is either in effect on the date hereof, has been approved by
Lender, or does not require Lender’s approval hereunder.
“ACH” is defined in Section 2.7(a).
“Additional Collateral” means the Collateral, as such term is defined in the
Master Tenant Security Agreement.
“Administrative Agent” means Cornerstone Real Estate Advisers Inc. or any
successor pursuant to Article 13.
“Advances” means, other than Loan proceeds, all amounts of money advanced or
paid and all out of pocket costs and expenses incurred by Administrative Agent
or Lender, as provided in this Agreement or in any other Loan Document, upon
failure of Borrower to pay or perform any obligation or covenant contained
herein or in such other Loan Document.
“Affiliate” means any Person Controlled by, in Control of or under common
Control with any other Person.
“Agreement” means this Amended and Restated Loan Agreement, as amended from time
to time.
“Annual Operating Plan” means each annual operating budget prepared by Hotel
Manager pursuant to Section 4.1 of the Management Agreement.
“Anti-Money Laundering Laws” means the USA Patriot Act of 2001, as amended, the
Bank Secrecy Act, as amended, Executive Order 13324 – Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism, as amended, and other federal laws and regulations and executive
orders administered by OFAC which prohibit, among other things, the engagement
in transactions with, and the provision of services to, certain foreign
countries, territories, entities and individuals (such individuals include
specially designated nationals, specially designated narcotics traffickers and
other parties subject to OFAC sanction and embargo programs), and such
additional laws and programs administered by OFAC which prohibit dealing with
individuals or entities in certain countries regardless of whether such
individuals or entities appear on any of the OFAC lists.

 
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“Applicable Taxes” means all present or future taxes, levies, imposts, duties,
deductions, withholdings (including backup withholding), assessments, fees or
other charges imposed by any governmental authority, including any interest,
additions to tax or penalties applicable thereto.
“Appurtenances” is defined in the Granting Clauses of the Deed of Trust.
“Assignment and Assumption” means an assignment and assumption of the Loan
entered into by a Lender and a permitted assignee.
“Assignment of Leases and Rents” is defined in the Recitals.
“Associations” means, collectively, the Laguna Beach Colony Villas Association,
a California non-profit mutual benefit corporation, and the Laguna Beach Colony
Estates Association, a California non-profit mutual benefit corporation.
“Bankruptcy Proceeding” means any proceeding, action, petition or filing under
the Federal Bankruptcy Code or any similar state or federal law now or hereafter
in effect relating to bankruptcy, reorganization or insolvency, or the
arrangement or adjustment of debts.
“Borrower” is defined in the introductory paragraph on page one of this
Agreement, and also includes any subsequent owner of the Mortgaged Property and
its or their respective permitted successors and assigns.
“Borrower Easements” is defined in Section 6.3(b).
“Borrower’s Affidavit” means that certain Borrower’s Affidavit dated as of the
date hereof, executed by Borrower for the benefit of Lender.
“Borrower’s knowledge” means the actual (as distinguished from imputed or
constructive) knowledge of Eric Hassberger. Lender acknowledges that the
foregoing individual is identified solely for the purpose of defining the scope
of Borrower’s knowledge and not for the purpose of imposing personal liability
or creating any duties running from any such individual to Lender. As used
herein, the phrases “to the knowledge of Borrower”, and other similar phrases,
shall have meanings correlative to the foregoing.
“Business Day” means any day other than a Saturday, Sunday or other day on which
national banks in the State are not open for business.
“Cash Collateral Account” is defined in Section 5.5(a).
“Cash Trap DACA” is defined in Section 5.5(a).
“Cash Trap Event” is defined in Section 5.5.
“Cash Trap Payment Waterfall” is defined in Section 5.5(b).
“Cash Trap Period” is defined in Section 5.5.

 
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“CCA Request” is defined in Section 5.5(d).
“CC&Rs” means that certain Amended and Restated Master Declaration of Covenants,
Conditions and Restrictions of the Laguna Beach Colony Destination Resort
Community dated as of December 10, 2002, executed by the City of Laguna Beach, a
municipal corporation, the Laguna Beach Colony Estates Association, a California
nonprofit mutual benefit corporation, and Laguna Beach Resorts LLC, a Delaware
limited liability company, and recorded in the Official Records on December 12,
2002 as Document No. 2002001132724.
“Closed Prepayment Date” is defined in Section 2.5(a).
“Closing Date” means the date title to the Premises is transferred to Borrower.
“Collateral” is defined in the Granting Clauses of the Deed of Trust.
“Collusive Involuntary” is defined in Section 11.1(c)(viii).
“Competitor” means a Person or an Affiliate of a Person that is in the business
of owning, operating, licensing (as licensor) or franchising (as franchisor) a
recognized (whether internationally, nationally or regionally) hotel brand or
lodging system of hotels that has at least five (5) hotels that are classified
as “luxury” and/or “upper upscale” hotels by the Smith Travel Research Chain
Scale Rating; provided, however, neither (i) a Person or an Affiliate of a
Person that merely directly or indirectly owns hotels (as opposed to managing,
licensing (as licensor) or franchising (as franchisor) a group of hotels) nor
(ii) a Financial Investor will be considered to be a “Competitor”.
“Constituent Transfer” is defined in Section 8.2.
“Contest Deposit Amount” is defined in Section 5.3(b).
“Contract Rate” is defined in Section 2.2(a).
“Control” means the power to direct the decision-making, management and policies
of a Person, directly or indirectly, whether through the ownership of voting
securities, by contract, relation to individuals or otherwise; and the terms
“Controlling” or “Controlled” have meanings correlative to the foregoing. A
Person shall be deemed to have Control notwithstanding that a third party may
have veto or approval rights over certain defined actions of a Person who
otherwise possesses power to direct or cause the direction of the management and
policies of that Person. Likewise, a Person shall not be deemed to have Control
over another Person solely as a result of possessing veto or approval rights
over certain defined actions of such other Person.
“Control Party” means Strategic or, following the execution of any Replacement
Indemnity and/or Replacement Guaranty, any Replacement Guarantor.
“Conveyance” is defined in Section 8.1.
“Costs” is defined in Section 12.24.

 
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“Cure Notice” is defined in Section 9.1(c).
“Custodial Funds” means any funds collected for the behalf of any third party
that is not an Affiliate of Borrower or Hotel Manager that must be paid or
remitted to such third party and so are not properly considered revenue of the
Hotel Property, including, without limitation, the following: (a) sales, use and
occupancy or other taxes (whether added on to the sales price or included
therein) collected from hotel guests or patrons and either remitted, or required
to be remitted to appropriate taxing authorities; (b) tips, gratuities or
service charges with respect to food, beverage, banquet or other guest services
paid or received via credit card; (c) rooms, baggage, handling or service fees
paid to or retained by employees; (d) payments or fees received from or on
behalf of hotel guests, patrons or owners of residential condominium units
located in the building which contains the Hotel Property, and paid to third
party service providers, such as movie rental payments, or owners of residential
condominium units located in the building which contains the Hotel Property; (e)
amounts collected from hotel guests, patrons or owners of residential
condominium units located in the building which contains the Hotel Property, on
behalf of hotel tenants, owners of residential condominium units located in the
building which contains the Hotel Property or other third parties; and (f)
amounts paid out to hotel guests, patrons or owners of residential condominium
units located in the building which contains the Hotel Property, for checks
cashed, per diem expense allowances paid and the like.
“Debt Service” means the sum of the monthly installments of principal and
interest under the Loan for the applicable number of months for which the Debt
Service is being calculated.
“Debt Service Coverage Ratio” means, as of the date such calculation is made,
the ratio, as determined by Lender in its reasonable discretion, of (a) Net
Operating Income from the Mortgaged Property for the applicable number of months
for which the Debt Service Coverage Ratio is being calculated, to (b) Debt
Service for the same measured period of time.
“Deed of Trust” is defined in the Recitals.
“Default Rate” is defined in Section 2.2(c).
“Deficiency Amount” is defined in Section 3.2(d)(iv).
“Deposit Agreement” is defined in Section 5.4(a).
“Deposit Bank” is defined in Section 5.4(a).
“Development Agreement” is defined in Exhibit B.
“Dollars” and “$” means lawful money of the United States of America.
“Easement Agreements” is defined in Section 6.3(b).
“Eligible Assignee” means any Person that meets the requirements to be an
assignee under Section 12.13 hereof.

 
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“Environmental Indemnification Agreement” is defined in the Recitals.
“Environmental Insurance” is defined in Section 3.1(d).
“Equipment” is defined in the Granting Clauses of the Deed of Trust.
“ERISA” means the Employee Retirement Income Security Act of 1974, as the same
may be amended from time to time.
“ERISA Affiliate” means any corporation or trade or business that is a member of
any group of organizations (a) described in Section 414(b) or (c) of the IRS
Code, of which Borrower is a member, and (b) solely for purposes of potential
liability or any lien arising under Section 302 of ERISA and Section 412 of the
IRS Code, described in Section 414(m) or (o) of the IRS Code, of which Borrower
is a member.
“Event of Default” means any one or more of the events described in Section 9.1.
“Excess Cash EOD” means an Event of Default that (a) can be cured by the
application of funds then on deposit in the Cash Collateral Account, and (b)
will be cured by the application of such funds pursuant to Sections 5.5 hereof,
at such time as Lender makes such funds available for such purpose, provided
Lender has received written direction from Borrower to so apply such funds.
“Excess Operating Revenue” means any excess Operating Revenue remaining with
respect to any calendar month following (in no particular order) (a) the payment
of all Operating Expenses and other expenses permitted to be incurred by Hotel
Manager pursuant to the Management Agreement (but excluding any incentive
management fees due to Hotel Manager pursuant to the Management Agreement)
incurred during such calendar month, (b) the payment of Debt Service due and
payable during such calendar month, (c) the funding of any required amounts into
the FF&E Reserve and any other reserve required hereunder or under the
Management Agreement during such calendar month, and (d) the funding of the
Working Capital Reserve for the Hotel Property by the Hotel Manager (in an
amount not to exceed projected cash flow needs for the Hotel Property for the
immediately succeeding two (2) months, as determined by the Hotel Manager).
“Excluded Taxes” means any of the following Applicable Taxes imposed on or with
respect to a Lender or required to be withheld or deducted from a payment to a
Lender, (a) Applicable Taxes imposed on or measured by net income (however
denominated), franchise Applicable Taxes, and branch profits Applicable Taxes,
in each case, (i) imposed as a result of such Lender being organized under the
laws of, or having its principal office or, in the case of any Lender, its
applicable lending office located in, the jurisdiction imposing such Applicable
Tax (or any political subdivision thereof) or (ii) that are Other Connection
Taxes, (b) U.S. federal withholding Applicable Taxes imposed on amounts payable
to or for the account of a Lender with respect to an applicable interest in a
Loan pursuant to a law in effect on the date on which (i) such Lender acquires
such interest in the Loan (other than pursuant to an assignment request by the
Borrower) or (ii) such Lender changes its lending office, except in each case to
the extent that, pursuant to Section 6.4, amounts with respect to such
Applicable Taxes were payable either to such Lender's assignor immediately
before such Lender became a party hereto or to such Lender immediately before it
changed its lending office,

 
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(c) Applicable Taxes attributable to such Lender's failure to comply with
Section 6.4(g) and (d) any U.S. federal withholding Applicable Taxes imposed
under FATCA.
“FATCA” means Sections 1471 through 1474 of the United States Code, as of the
date of this Agreement (or any amended or successor version that is
substantively comparable and not materially more onerous to comply with), any
current or future regulations or official interpretations thereof and any
agreements entered into pursuant to Section 1471(b)(1) of the United States
Code.
“Federal Bankruptcy Code” means Title 11 of the United States Code, as the same
may be amended from time to time or any successor statute.
“FF&E” means all fixtures, furnishings, equipment (including operating
equipment, operating supplies and fixtures attached to, and forming part of, the
improvements on the Hotel Property), apparatus and other personal property used
in, or held in storage for use in (or if the context so dictates, required in
connection with), or required for the operation of the Hotel Property, including
without limitation, (a) office furnishings and equipment, (b) specialized hotel
equipment necessary for the operation of any of the improvements on the Hotel
Property, including equipment for kitchens, laundries, dry cleaning facilities,
bars, restaurants, public rooms, commercial and parking space, and spa and
recreational facilities, (c) design and project fees, shipping costs, taxes,
warehousing and installation, (d) flooring, floor coverings, wall coverings,
paint and window treatments, and (e) all other furnishings and equipment as
Borrower deems necessary or desirable for the operation of the Hotel Property.
“FF&E Certificate” means each certain certified report delivered to Lender when
and as required by Section 7.1(a)(vi) detailing amounts deposited into the FF&E
Reserve during the immediately preceding calendar year and reconciling the use
of the funds therein for the payment Qualifying Expenditures during such year.
“FF&E Reserve” is defined in Section 5.4(a).
“FF&E Reserve Deposit” is defined in Section 5.4(a).
“Financial Information” is defined in Section 7.1.
“Financial Information Fee” is defined in Section 7.1(c).
“Financial Investor” a Person or Affiliate of a Person who is an investor having
only a financial interest in any hotel brand or lodging systems, so long as such
Person is not involved in the direction or control of, and has no power to
direct or control, (a) the day-to-day operations and management for a hotel
brand or lodging system or (b) the marketing or strategic planning for a hotel
brand or lodging system.
“Fiscal Year” means each calendar year during the term of this Agreement, or
such other fiscal year of Borrower as Borrower may select from time to time with
prior written notice to Lender.

 
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“Foreign Lender” means (a) if Borrower is a U.S. Person, a Lender that is not a
U.S. Person, and (b) if Borrower is not a U.S. Person, a Lender that is resident
or organized under the laws of a jurisdiction other than that in which Borrower
is resident for tax purposes.
“Hotel Employee Parking Lot” means the portion of the Mortgaged Property
described in the legal description on Exhibit A attached hereto as “Parcel F.”
“Hotel Manager” is defined in the Recitals.
“Hotel Manager Subordination” is defined in the Recitals.
“Hotel Operating Accounts” is defined in Section 5.2(f).
“Hotel Property” means the luxury hotel, with conference, banquet, spa and other
facilities located on the Land and commonly known as “Montage Laguna Beach”,
which is leased to Master Tenant pursuant to and more properly defined in the
Master Tenant Lease.
“Impositions” means all taxes or payments in lieu of taxes of every kind and
nature and assessments, levies and all other charges imposed upon or assessed,
in each case by any applicable governmental or regulatory authority against the
Mortgaged Property or any portion thereof (including the Property Income), and
any stamp or other taxes which might be required to be paid, or with respect to
any of the Loan Documents, any of which might, if unpaid, affect the
enforceability of any of the remedies provided in this Agreement or any other
Loan Documents or result in a lien on the Hotel Property or any portion thereof,
regardless of to whom assessed.
“Improvements” is defined in the Granting Clauses of the Deed of Trust.
“Indebtedness” means the aggregate of all principal and interest payments that
accrue or are due and payable in connection with the Loan, together with all
other obligations and liabilities and all amounts of money advanced or paid or
due as provided in this Agreement or in any other Loan Document, and all costs
and expenses incurred by Lender hereunder or under any other Loan Document which
are the obligation of Borrower pursuant to the terms of the Loan Documents.
“Indemnified Taxes” means (a) Applicable Taxes, other than Excluded Taxes,
imposed on or with respect to any payment made by, or on account of, any
obligation of Borrower under any Loan Document, and (b) to the extent not
otherwise described in (a), Other Taxes.
“Indemnitor” means Strategic or any Replacement Guarantor (following the
execution of any Replacement Indemnity and/or Replacement Guaranty), and any
other guarantor or indemnitor of all or any of Borrower’s obligations or
liabilities under the Loan Documents, including but not limited to Article 11
hereof.
“Intangibles” is defined in the Granting Clauses of the Deed of Trust.
“Investor” is defined in Section 12.13.

 
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“IRS Code” means the Internal Revenue Code of 1986, as amended from time to
time, or any successor statute.
“Land” means the parcel or parcels of land described in Exhibit A attached
hereto and by this reference made a part hereof.
“Late Charge” is defined in Section 2.2(b).
“LBLH” is defined in the Recitals.
“Lease Approval Package” is defined in Section 5.1(a).
“Leases” is defined in the Granting Clauses of the Deed of Trust.
“Legal Requirements” means all applicable existing and future United States
federal, state and local laws, ordinances, rules and regulations and court
orders affecting the Mortgaged Property, Borrower, Master Tenant, or Indemnitor
including those pertaining to zoning, subdivision, land use, environmental,
traffic, fire, building, occupational safety, health and Americans with
Disabilities Act.
“Lender” means, collectively, Massachusetts Mutual Life Insurance Company, a
Massachusetts corporation, any other holders from time to time of the Note as
permitted under this Agreement and their respective successor and assigns.
“Lender Parties” means Lender, Cornerstone Real Estate Advisers LLC, Cornerstone
Real Estate Advisers Inc., any present and future Administrative Agent, loan
participants and co-lenders as permitted under this Agreement and each of their
respective directors, officers, employees, shareholders, agents, affiliates,
heirs, legal representatives, successors and assigns.
“Lien” means any interest, claim, security interest or encumbrance of or in the
Mortgaged Property, the Hotel Property or the Additional Collateral, securing an
obligation owed to, or a claim by, any Person other than the owner of the
Mortgaged Property, the Hotel Property or such Additional Collateral, as
applicable, whether such interest is based on common law, statute or contract,
including the lien or security interest arising from a deed of trust, mortgage,
assignment, encumbrance, pledge, security agreement, conditional sale or trust
receipt or a lease, consignment or bailment for security purposes, or under any
ground leases and any other lease forming a part of the Mortgaged Property, or
any mechanic’s, materialmen’s and other similar liens.
“Loan” means the loan to be evidenced by the Note and made by Lender to Borrower
under this Agreement and all other amounts secured by the Loan Documents.
“Loan Documents” means collectively, this Agreement, the Note, the Deed of
Trust, the Assignment of Leases and Rents, the Environmental Indemnification
Agreement, the Recourse Guaranty Agreement, the Master Tenant Security
Agreement, the Hotel Manager Subordination, the Subordination, the Uniform
Commercial Code Financing Statements naming Borrower as debtor and Lender as
secured party and all other documents now or hereafter executed by Borrower or
any other Person to evidence or secure the payment of the Indebtedness or the
performance of Borrower

 
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or otherwise now or hereafter executed in connection with this Agreement, the
Note or the Deed of Trust and all amendments, modification, restatements,
extensions, renewals and replacements of the foregoing.
“Loan Term” means the term of the Note from the date of the Note through and
including the Maturity Date.
“Losses” means all claims, suits, liabilities, actions, proceedings,
obligations, debts, losses, costs, fines, penalties, charges, fees, expenses,
judgments (including on account of any successful claim against Lender by a
third party for or on account of such third party’s consequential damages, or
any award to such third party on account of a successful claim styled as special
or punitive damages), awards, amounts paid in settlement and damages of every
kind and nature to the extent of Lender’s actual out-of-pocket costs (including,
but not limited to, reasonable out-of-pocket attorneys' fees and the costs and
all expenses of collection and enforcement), but excluding lost profits,
diminution in value, special damages, consequential damages (other than Lender’s
reasonably incurred out-of-pocket third party fees, costs and expenses for
attorneys, accountants or other consultants) or punitive damages.
“Management Agreement” means that certain Management Agreement dated January 22,
2003, by and between Laguna Beach Resorts LLC, a Delaware limited liability
company, and Hotel Manager, as assigned to LBLH pursuant to that certain
Assignment and Assumption of Management Agreement dated June 25, 2003, between
Laguna Beach Resorts LLC, a Delaware limited liability company, and LBLH, as
amended by that certain Amendment to Management Agreement dated as of October
13, 2008, between LBLH and Hotel Manager, and as assumed by Master Tenant
pursuant to that certain Assignment and Assumption of Hotel Management Agreement
dated as of the date hereof by and among Master Tenant, LBLH and Hotel Manager.
“Marijuana Related Use” is defined in Section 6.16.
“Master Lease” means that certain Lease Agreement dated as of the date hereof
between Borrower and Master Tenant.
“Master Tenant” means DTRS MLB, LLC, a Delaware limited liability company, or
any successor or assignee thereof.
“Master Tenant Security Agreement” means that certain Collateral Assignment and
Security Agreement dated as of the date hereof, executed by Master Tenant in
favor of Lender.
“Maturity Date” means August 1, 2021.
“Monthly Payment Differential” is defined in Section 2.5.
“Mortgaged Property” means the Premises and the Collateral.
“MT Qualified Real Estate Investor” means a reputable entity which is reasonably
determined by Lender to have satisfied all of the following conditions: (a) has
a net worth of not less than Two Hundred Million Dollars ($200,000,000), (b) has
not been (i) in default beyond

 
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applicable notice and cure periods on any indebtedness or loan from Lender or
any Affiliate of Lender at any time in the last five (5) years, or (ii) subject
of any criminal charges or proceedings, (c) has not been involved in litigation
with Lender or any affiliate of Lender, and (d) is not listed on, included
within, or an Affiliate of any Person listed on or included within, Executive
Order 13324 – Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit, or Support Terrorism, as amended by OFAC through the
date the determination of MT Qualified Real Estate Investor is made.
“Net Operating Income” means, as determined by Lender in its reasonable
discretion, the difference between Operating Revenues and Operating Expenses for
the specified period of time for which Net Operating Income is being calculated.
The applicable Permitted Assignor shall provide Lender with such Permitted
Assignor’s proposed calculation of Net Operating Income, certified by such
Permitted Assignor or Hotel Manager, together with all relevant supporting
detail required to determine the same. Lender shall then perform Lender’s own
reasonable independent calculation of Net Operating Income, which shall be the
definitive determination of Net Operating Income, absent manifest error.
“New Lease” is defined in Section 5.1(a).
“New Sublease” is defined in Section 5.1(a).
“NFIP” is defined in Section 3.1(a).
“Note” is defined in the Recitals.
“OFAC” means the United States Department of the Treasury, Office of Foreign
Assets Control, or any successor or replacement agency.
“OFAC Prohibited Person” means a country, territory, or a Person that is, or
that is owned, Controlled by, acting on behalf of or affiliated with any Person
that is, (a) listed on, included within or, with respect to any Person, an
Affiliate of any Person listed on, OFAC’s List of Specially Designated Nationals
and Blocked Persons or any other prohibited person lists maintained by
governmental authorities, or otherwise prohibited by OFAC or any other
Anti-Money Laundering Laws, or (b) obligated to pay, donate, transfer or
otherwise assign any property, money, goods, services, or other benefits from
any of the Mortgaged Property, directly or indirectly, to any of (i) countries,
(ii) territories, (iii) Persons or Affiliates thereof on such list or prohibited
by such laws.
“Official Records” is defined in the Recitals.
“Operating Agreements” means the management agreements, leasing commission
agreements, and other agreements concerning the Hotel Property set forth in
Exhibit B, including any and all modifications, amendments, side letters and
extensions relating thereto set forth on Exhibit B or otherwise approved by
Lender to the extent required by this Agreement or any other Loan Document.

 
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“Operating Expenses” means the amount of all ordinary, reasonable and customary
operating expenses applicable to the Hotel Property for the same specified
period of time as Operating Revenues, including, but not limited to, (a)
expenses for utilities, administration, housekeeping, cleaning, landscaping,
security, repairs and maintenance, ground rent payments, if any, hotel
management fees, fully assessed (or estimated fully assessed) real estate and
other taxes and assessments, and insurance premiums; and (b) the amount of money
that would be required to make any required FF&E Reserve Deposit for the same
specified period of time; but excluding from any such expenses any capital
expenditures, debt service, any deductions for federal, state and other income
taxes, depreciation or amortization of capital expenditures (including, if
applicable, leasing commissions, tenant improvements, and other leasing costs)
and other similar non-cash items.
“Operating Revenues” means the amount of all of the gross rents, room rentals,
food and beverage revenues and all other income from the operation of the Hotel
Property during a specified period of time.
“Other Connection Taxes” means, with respect to any Lender, Applicable Taxes
imposed as a result of a present or former connection between such Lender and
the jurisdiction imposing such Applicable Tax (other than connections arising
from such Lender having executed, delivered, become a party to, performed its
obligations under, received payments under, received or perfected a security
interest under, engaged in any other transaction pursuant to or enforced any
Loan Document, or sold or assigned an interest in any Loan or Loan Document).
“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Applicable Taxes that arise from any
payment made under, from the execution, delivery, performance, enforcement or
registration of, from the receipt or perfection of a security interest under, or
otherwise with respect to, any Loan Document, except any such Applicable Taxes
that are Other Connection Taxes imposed with respect to an assignment.
“PACE Lien” means any lien, tax or special assessment or any other encumbrance
relating to a PACE Loan on or affecting all or any portion of the Mortgaged
Property or any interest therein, or any direct or indirect interest in
Borrower.
“PACE Loan” means a loan to finance energy efficient improvements and renewable
energy projects, or other similar initiatives, and commonly known as
“Property-Assessed Clean Energy (PACE) Loan”, as the same may now or hereafter
be more particularly defined and described in any applicable Legal Requirements
or promulgated by any governmental authority.
“Parking Lot Easement” means that certain perpetual, non-exclusive, appurtenant
easement of ingress and egress set forth in the certain Grant Deed recorded in
the Official Records on September 15, 1997 as Document No. 19970449412.
“Partial Interest Transfer” is defined in Section 8.3.
“Participation” is defined in Section 12.13.

 
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“Payment Date” means the first (1st) Business Day of each calendar month from
the date hereof to and including the Maturity Date.
“Permitted Assignor” is defined in Section 8.4.
“Permitted Encumbrances” means with respect to the Premises, collectively, (i)
the outstanding liens, easements, restrictions, security interests and other
exceptions to title expressly set forth in Schedule B to pro-forma title
insurance policy no. CA-SFXFC-IMP-81307-1-1-14-0801106 issued prior to the
Closing Date by Commonwealth Land Title Insurance Company insuring the Deed of
Trust for the benefit of Lender, (ii) the liens and security interests in favor
of Lender created by the Loan Documents, (iii) Leases existing as of the date
hereof and hereafter entered into in accordance with the terms and provisions of
this Agreement, any memorandum thereof and any subordination, nondisturbance
and/or attornment agreements in connection therewith which has been executed by
Lender, and any recorded assignment or mortgage of any such Lease permitted
pursuant to the terms and provisions of such Lease, (iv) non-delinquent real
property taxes and special assessments, (v) zoning and other regulatory laws and
ordinances affecting the Premises, and (vi) Liens with respect to purchases of
equipment or leases of equipment entered into in accordance with this Agreement,
(vii) Liens being contested by Borrower in accordance with the terms of this
Agreement or the other Loan Documents, (viii) any interests of Manager pursuant
to the Management Agreement (provided, however, nothing herein shall be deemed
to permit any lien rights of Manager against the Mortgaged Property, which lien
rights shall not be Permitted Encumbrances) and (ix) such other matters as are
expressly set forth in the Loan Documents; provided, however, that the term
“Permitted Encumbrances” shall expressly exclude any liens granted, or
assessments agreed to, by Borrower in connection with any PACE Loan.
“Person” means and includes any individual, corporation, partnership, joint
venture, limited liability company, association, bank, joint-stock company,
trust, unincorporated organization or government, or an agency or political
subdivision thereof.
“Plan Assets Regulation” is defined in Section 6.10.
“Preliminary Title Report” is defined in Section 6.3(b).
“Premises” means the Land, the Improvements and the Appurtenances.
“Prepayment Date” means the date set forth in Borrower’s written notice to
Lender (as required under Section 2.5) of Borrower’s intention to make a
prepayment of the Loan, or, if no such notice is required or provided, the date
of any prepayment of the Loan, in whole or in part.
“Prepayment Premium” is defined in Section 2.5(b).
“Principal” means each Person that directly or indirectly Controls Borrower or
Indemnitor.
“Proceeds” is defined in the Granting Clauses of the Deed of Trust.
“Processing Fee” is defined in Section 8.3(b)(iv)(E).

 
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“Property Condition Report” means that certain Property Condition Report for
Montage Laguna Beach dated May 23, 2014, prepared by Terracon Consultants, Inc.
as Project No. FR148511 Task 2.
“Property Income” is defined in the Granting Clauses of the Deed of Trust.
“Proposed Partial Interest Transferee” is defined in Section 8.3(b)(iv).
“Proposed Transferee” is defined in Section 8.4.
“Qualified Real Estate Investor” means Indemnitor or another reputable entity
which is determined by Lender in its reasonable discretion to have satisfied all
of the following conditions: (a) either (i) the proposed transferee or its
sponsor has at least ten (10) years of experience owning and/or managing luxury
hotels and has (x) total assets with a current market value of not less than One
Billion Dollars ($1,000,000,000), (y) net worth of not less than Five Hundred
Million Dollars ($500,000,000), and (z) liquid assets of not less than Ten
Million Dollars ($10,000,000), or (ii) in the event the proposed transferee or
its sponsor have less than ten (10) years of experience in owning and/or
managing luxury hotels, the proposed transferee or its sponsor has (x) total
assets with a current market value of not less than One Billion Five Hundred
Million Dollars ($1,500,000,000), (y) net worth of not less than Seven Hundred
Fifty Million Dollars ($750,000,000), and (z) liquid assets of not less than
Fifteen Million Dollars ($15,000,000); and (b) neither the proposed transferee
nor any principal, Affiliate, parent or other majority owner of the proposed
transferee, as of the date of the closing of the applicable transfer or at any
time prior thereto, is or has been (i) in default beyond applicable notice and
cure periods on any indebtedness or loan from Lender or any Affiliate of Lender
at any time in the last five (5) years, (ii) except with respect to a fund or
similarly structured investment vehicle, or any subsidiary thereof, which has
since liquidated, ended its applicable investment period, or wound up, involved
as a debtor or as the principal of a debtor in any voluntary bankruptcy,
reorganization or insolvency proceeding or any such proceeding solicited by or
arising as the result of collusion with the petitioning creditors by the
proposed transferee or any principal, Affiliate, parent or other majority owner
of such proposed transferee, (iii) the subject of any criminal charges or
proceedings, (iv) involved in litigation with Lender or any Affiliate of Lender,
or (v) listed on, included within, or an Affiliate of any Person referred to in,
Executive Order 13324 – Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended by OFAC
through the date the determination of Qualified Real Estate Investor is made.
All of the foregoing conditions must be satisfied as of the date of the request
for approval of a Constituent Transfer as provided in Section 8.2, a Partial
Interest Transfer as provide in Section 8.3 or a Title Transfer as provided in
Section 8.4 and on the date of the proposed closing of said transfer.
“Qualified Transferee” means a reputable entity which is reasonably determined
by Lender in its reasonable discretion to have satisfied all of the following
conditions: (a) the proposed transferee or its sponsor has (i) total assets with
a current market value of not less than One Billion Dollars ($1,000,000,000),
(ii) net worth of not less than Five Hundred Million Dollars ($500,000,000), and
(iii) liquid assets of not less than Ten Million Dollars ($10,000,000); and (b)
neither the proposed transferee nor any principal, Affiliate, parent or other
majority owner of the proposed transferee, as of the date of the closing of the
applicable transfer or at any time prior

 
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thereto, is or has been (i) in default beyond applicable notice and cure periods
on any indebtedness or loan from Lender or any Affiliate of Lender at any time
in the last five (5) years, (ii) except with respect to a fund or similarly
structured investment vehicle, or any subsidiary thereof, which has since
liquidated, ended its applicable investment period, or wound up, involved as a
debtor or as the principal of a debtor in any voluntary bankruptcy,
reorganization or insolvency proceeding or any such proceeding solicited by or
arising as the result of collusion with the petitioning creditors by the
proposed transferee or any principal, Affiliate, parent or other majority owner
of such proposed transferee, (iii) the subject of any criminal charges or
proceedings, (iv) involved in litigation with Lender or any Affiliate of Lender,
or (v) listed on, included within, or an Affiliate of any Person referred to in,
Executive Order 13324 – Blocking Property and Prohibiting Transactions with
Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended by OFAC
through the date the determination of Qualified Real Estate Investor is made.
All of the foregoing conditions must be satisfied as of the date of the request
for approval of a Constituent Transfer as provided in Section 8.2 or a Partial
Interest Transfer as provide in Section 8.3 and on the date of the proposed
closing of said transfer.
“Qualifying Expenditures” means: (i) those FF&E and capital expenditures
permitted to be made by Hotel Manager without Borrower’s or Master Tenant’s
consent or prior approval under the terms of the Management Agreement; and (ii)
any other FF&E and capital expenditures appearing in the Annual Operating Plan
then in effect.
“Recourse Guaranty Agreement” is defined in the Recitals.
“Register” is defined in Section 12.15.
“Rents” is defined in the Assignment of Leases and Rents.
“Replacement Indemnity” is defined in Section 8.4(f).
“Replacement Guarantor” is defined in Section 8.4(f).
“Replacement Guaranty” is defined in Section 8.4(g).
“Required Deferred Maintenance” means any maintenance at the Hotel Property that
is (a) necessary for the health, safety, protection or welfare of the transient
occupants of the Hotel Property or employees of Hotel Manager, (b) required
under applicable laws, or (c) otherwise recommended from time to time by Hotel
Manager if, in the context of such recommended maintenance, failure to perform
the same could be reasonably anticipated to result in substantial impairment to
the physical condition of the Hotel Property (“Recommended Deferred
Maintenance”); provided, however, to the extent Borrower and/or Master Tenant
has a bona fide dispute with Hotel Manager as to the need, scope, cost or timing
of any Recommended Deferred Maintenance, such Recommended Deferred Maintenance
shall not be deemed Required Deferred Maintenance hereunder until the earlier of
(i) Borrower, Master Tenant and Hotel Manager agreeing as to the need, scope,
timing and cost of such Recommended Deferred Maintenance and (ii) any disputes
as to such need, scope, timing and/or cost have been conclusively resolved
pursuant to the dispute resolution process set forth in the Management
Agreement.

 
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“Securities” is defined in Section 12.13.
“Securitization” is defined in Section 12.13.
“SNDA” is defined in Section 5.1(c).
“SPE Requirements” is defined in Section 6.12.
“State” means the state or commonwealth in which the Land is situated.
“Strategic” is defined in the Recitals.
“Sublease” means any sublease of the Hotel Property or any portion thereof
entered into or executed by Master Tenant, excluding any Transient Occupancy
Lease.
“Subordination” means that certain Subordination and Conditional Non-Disturbance
and Attornment Agreement dated as of the date hereof between Borrower, Lender
and Master Tenant.
“Title Transfer” is defined in Section 8.4.
“Title Transfer Processing Fee” is defined in Section 8.4(a).
“Transfer” is defined in Section 12.13.
“Transfer Fee” is defined in Section 8.4(j).
“Transfer LTV Requirement” is defined in Section 8.4(k).
“Transfer Partial Prepayment” is defined in Section 8.4(n).
“Transient Occupancy Leases” is defined in Section 5.1(c).
“TRIPRA” is defined in Section 3.1(b).
“Treasury Issue” means United States Treasury issued bills, notes and bond
instruments specifically excluding any strips, inflation indexed issues and
other types of derivative instruments.
“Uniform System of Accounts” means the Uniform System of Accounts for Hotels,
Tenth Revised Edition, as published by the Hotel Association of New York City,
Inc., as the same may be amended from time to time.
“Upstream Owner” means any Person having a direct or indirect legal, beneficial
or other ownership interest in Borrower (e.g., if Borrower is a limited
liability company, and one of Borrower’s members is a limited partnership, whose
partner is a corporation, then such limited partnership, corporation and the
shareholders of such corporation would each be an Upstream Owner), but excluding
any Person who would be considered an Upstream Owner solely due to such Person’s
direct or indirect legal, beneficial or other ownership interest in the publicly
traded securities of an Upstream Owner and any Person who holds an Operating
Partnership unit in Strategic issued

 
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from and after the date hereof in connection with the acquisition by Strategic,
or any subsidiary thereof, of additional assets from and after the date hereof.
“U.S. Person” means any Person that is a "United States Person" as defined in
Section 7701(a)(30) of the United States Code.
“U.S. Tax Compliance Certificate” has the meaning assigned to such term in
paragraph (f) of Section 6.4.
“Waste Event of Default” means a default under the Loan Documents for any
physical waste to any portion of the Hotel Property for which Borrower has not
commenced and diligently pursued the cure thereof within the applicable notice
and cure period set forth in the Loan Documents. For purposes hereof, physical
waste shall mean active physical waste and the failure of Borrower to contribute
(or to cause Master Tenant to contribute) sufficient capital to perform any
Required Deferred Maintenance.
“Withholding Agent” means Borrower.
“Work” is defined in Section 3.2(a).
“Working Capital Reserve” means the working capital reserve maintained by the
Hotel Manager for working capital needs relating to the Hotel Property from time
to time.
Section 1.2    Interpretation.
For all purposes under and pursuant to this Agreement and each other Loan
Document, except as otherwise expressly required or unless the context clearly
indicates a contrary intent:
(a)    the capitalized terms defined in this Article have the meanings assigned
to them in this Article, include the plural as well as the singular, and, when
used with respect to any instrument, contract or agreement, include all
extensions, modifications, amendments and supplements from time to time thereto;
(b)    the words “herein”, “hereof”, and “hereunder” and other words of similar
import refer to this Agreement and each other Loan Document as a whole and not
to any particular Article, Section, or other subdivision;
(c)    the words “include” and “including” and other words of similar import
shall be construed as if followed by the phrase “, without limitation,”;
(d)    Lender’s consent, approval, acceptance or determination under the Loan
Documents shall be in Lender’s sole discretion, unless a different standard for
consent, approval, acceptance or determination is expressly set forth in the
Loan Documents;
(e)    any provision of the Loan Documents permitting the recovery of
“attorneys’ fees”, “attorneys’ fees and expenses”, “attorneys’ fees and costs”
or “attorneys’ fees, costs and expenses” or any similar term shall: (i) include
all reasonable out-of-pocket costs and expenses,

 
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including reasonable out-of-pocket attorneys’ fees, costs and expenses related
or incidental to, or incurred in any judicial, arbitration, administrative,
probate, appellate, bankruptcy, insolvency or receivership proceeding, as well
as in any post-judgment proceeding to collect or enforce any judgment or order
relating to the Indebtedness or any of the Loan Documents, as well as any
defense or assertion of the rights or claims of Lender in respect of any
thereof, by litigation or otherwise; and (ii) be separate and several and
survive merger into judgment; and
(f)    references to any Section, Article or Exhibit in a Loan Document shall
mean a section, article or exhibit to such Loan Document, unless provided
otherwise.
ARTICLE 2    

LOAN TERMS
Section 2.1    The Loan and the Note.
Lender agrees, on the terms and conditions of this Agreement, to make the Loan,
and Borrower agrees to accept the Loan, in the principal amount of ONE HUNDRED
FIFTY MILLION AND 00/100 DOLLARS ($150,000,000.00), and to repay the Loan in
accordance with this Agreement, the Note and the other Loan Documents. The Note
evidences the indebtedness of Borrower under the Loan.
Section 2.2    Interest Rate; Late Charge; Default Rate.
(a)    Except for any time when the Default Rate is applicable pursuant to the
terms of this Agreement, the outstanding principal balance of the Loan
(including any amounts added to principal in accordance with the Loan Documents)
shall bear interest at a rate equal to THREE AND 90/100 PERCENT (3.90%) per
annum (the “Contract Rate”). All interest accruing on the Loan shall be
calculated on the basis of a three hundred sixty (360) day year consisting of
twelve (12) months of thirty (30) days each, except that any interest due at any
time for a period of less than a full calendar month shall be calculated by
multiplying the Contract Rate by a fraction, the numerator of which is the
actual number of days elapsed in such partial month and the denominator of which
is three hundred sixty (360).
(b)    If any regular monthly installment of principal or interest due under
this Agreement (except for the payment of principal and/or interest amount due
on the Maturity Date, as the same may be accelerated pursuant to the terms
hereof), or any monthly deposit for taxes, ground rent, insurance, replacements
and other sums if required under any Loan Document, shall not be paid as
required under this Agreement or any other Loan Document within seven (7) days
following the date the same is due, Borrower shall pay to Lender a late charge
(the “Late Charge”) of four cents ($0.04) for each dollar so overdue in order to
compensate Lender for its loss of the timely use of the money and frustration of
Lender in the meeting of its financial commitments and to defray part of
Lender’s incurred cost of collection occasioned by such late payment.
Notwithstanding the foregoing, prior to any acceleration of the Maturity Date by
Lender because of the occurrence of an Acceleration Event, Lender shall only
charge the Late Charge with respect to regular monthly installments of principal
or interest due and not paid according to the prior

 
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sentence; provided, however, from and after any such acceleration of the
Maturity Date, Lender shall be entitled to charge the Late Charge with respect
to any regular monthly installment of principal or interest due under this
Agreement (except for the payment of principal and/or interest amount due on the
Maturity Date, as the same may be accelerated pursuant to the terms hereof). Any
Late Charge incurred shall be immediately due and payable. Nothing herein
contained shall be deemed to constitute a waiver or modification of the due date
for such installments or deposits or the requirement that Borrower make all
payment of installments and deposits as and when the same are due and payable.
The Late Charge represents the reasonable estimate of Borrower and Lender of a
fair average compensation for loss that may be sustained by Lender as a result
of the failure of Borrower to make timely payments. Such Late Charge shall be
paid without prejudice to the right of Lender to collect any other amounts
provided to be paid upon a default hereunder or under any other Loan Document,
including without limitation interest at the Default Rate, or to declare a
default hereunder, under the Deed of Trust or under any other Loan Document.
(c)    Following the occurrence and during the continuance of an Event of
Default or from and after the Maturity Date, the unpaid principal balance of the
Loan shall bear interest at the per annum interest rate (the “Default Rate”)
equal to the lesser of:
(i)
the highest rate permitted by law to be charged on a promissory note secured by
a commercial mortgage, or

(ii)
the sum of three percent (3%) plus the Contract Rate.

Interest at the Default Rate as provided in this Section shall be immediately
due and payable to Lender and shall constitute additional Indebtedness evidenced
by the Note and secured by the Loan Documents.
Section 2.3    Terms of Payment. The Loan shall be payable by Borrower as
follows:
(a)    On the date the Loan is made, a payment of interest only shall be due and
payable for the period from such date to the first (1st) day of the next
calendar month;
(b)    Successive monthly installments of interest (in arrears) only in the
amount of Four Hundred Eighty-Seven Thousand Five Hundred and 00/100 Dollars
($487,500.00), shall be made on the first (1st) day of September 2014 and on the
first (1st) day of each calendar month thereafter up to and including the first
(1st) day of August 2017;
(c)    Successive monthly installments of principal and interest (in arrears),
in the constant amount of Seven Hundred Seven Thousand Five Hundred Two and
31/100 Dollars ($707,502.31), shall be made on the first (1st) day of September
2017 and on the first (1st) day of each calendar month thereafter up to and
including the first (1st) day of the month immediately prior to the Maturity
Date. The monthly payments of combined principal and interest required under
this Agreement are based upon a thirty (30) year amortization period; and
(d)    On the Maturity Date or on any earlier date as a result of an
Acceleration Event, Borrower shall pay all outstanding principal, accrued and
unpaid interest, and any other

 
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amounts due under the Loan Documents. Borrower acknowledges that, since the Loan
Term is shorter than the amortization period, all or a substantial portion of
the principal amount of the Loan will be due on the Maturity Date.
Borrower and Lender acknowledge and agree that the Note amends and restates the
Original Note in its entirety, and after the date hereof, the Original Note
shall be of no further force or effect; provided, however, that sums advanced
under the Original Note and pursuant to the applicable provisions of the
Original Loan Agreement shall be deemed to have been advanced, and sums paid
shall be deemed to have been paid, under the Note and the applicable provisions
of this Agreement.
Section 2.4    Loan Term. The Loan Term commenced on July 2, 2014 and shall
terminate on the Maturity Date.
Section 2.5    Prepayment. There are no full or partial prepayment privileges of
the principal amount of the Loan except as set forth in this Agreement:
(a)    Borrower shall have the right to pay the Loan in full (but, other than
with respect to Transfer Partial Prepayments pursuant to Section 8.4(n) hereof,
not in part) on any Business Day on or after, but not prior to August 1, 2016
(the “Closed Prepayment Date”), provided that no Acceleration Event has occurred
and Borrower gives Lender at least thirty (30) days’ prior written notice (which
notice shall be revocable for any reason prior to the previously noticed
Prepayment Date upon written notice to Lender (which may be, subject to
compliance with Section 12.1, on the anticipated prepayment date) provided that
Borrower shall be liable for, and within ten (10) Business Days of written
demand, shall pay to Lender, all of Lender’s Losses associated with such
revocation) of its intention to make any such prepayment, the Prepayment Date
(which date can be subsequently adjourned by Borrower from time to time for no
more than thirty (30) days in the aggregate upon written notice to Lender) and
the amount to be prepaid, and that Borrower also pays to Lender on the actual
Prepayment Date, as consideration for the privilege of making such prepayment,
the Prepayment Premium, plus Lender’s loan servicing fee through and including
the end of the then current calendar month in which the prepayment is made.
(b)    The “Prepayment Premium” shall be equal to the greater of (x) or (y)
where:
(x)
is equal to the amount to be prepaid multiplied by one percent (1%); and

(y)
is the present value of the series of Monthly Payment Differentials from the
date of prepayment to the Maturity Date, discounted at the Reinvestment Yield on
a monthly basis.

The “Monthly Payment Differential” means the monthly interest (without
amortization), which would be earned if the prepayment were invested at the
Contract Rate less the monthly interest that would be earned by reinvesting the
prepayment at the Reinvestment Yield.

 
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The “Reinvestment Yield” means fifty (50) basis points, plus the yield to
maturity of a Treasury Issue, adjusted from a semi-annual rate to a monthly
rate, which has the closest maturity (month and year) prior to the Maturity
Date, as quoted in The Wall Street Journal published in print or on-line on the
second (2nd) calendar day immediately preceding the date for prepayment, but if
said second (2nd) day is not a Business Day, then as quoted on the preceding
Business Day. If more than one Treasury Issue has the same maturity date, then
the Treasury Issue having the market yield that differs least from the Contract
Rate will be used in the calculations. If The Wall Street Journal is not in
publication on the applicable date, or ceases to publish such Treasury Issue
information in print or on-line on the applicable date, then any other
publication selected by Lender (in its reasonable discretion) quoting daily
market yields for Treasury Issues may be used.
(c)    If the Maturity Date is accelerated by Lender in accordance with this
Agreement because of the occurrence and continuance of an Event of Default or as
otherwise provided in the Loan Documents (an “Acceleration Event”), the
acceleration shall be deemed to be an election on the part of Borrower to prepay
the Loan. Accordingly, there shall be added to the amount due after an
Acceleration Event, the Prepayment Premium or Closed Period Prepayment Premium,
as applicable, calculated as set forth below and using as the Prepayment Date
the date on which any tender of payment is made, and Borrower agrees to pay the
same. Any tender of payment made (or judgment entered) after acceleration by or
on behalf of Borrower (including payment by any guarantor or purchaser at a
foreclosure sale), shall include the Prepayment Premium or Closed Period
Prepayment Premium, as applicable, computed as provided below. If the
Acceleration Event occurs prior to the Closed Prepayment Date, a prepayment
premium (a “Closed Period Prepayment Premium”) shall nevertheless be paid, which
Closed Period Prepayment Premium shall be calculated as set forth in Section
2.5(b) above, except that with respect to clause (x), the Closed Period
Prepayment Premium shall equal the amount to be prepaid multiplied by two
percent (2%) (rather than one percent (1%)), and that with respect to clause
(y), the Reinvestment Yield (calculated as provided for above) shall be reduced
by one (1) percentage point (but not to less than 0). If the Acceleration Event
occurs on or after the Closed Prepayment Date, the Prepayment Premium, and not
the Closed Period Prepayment Premium, shall apply.
(d)    There will be due with any principal prepayment, all accrued and unpaid
interest and all other fees, charges and payments due under the Loan Documents.
(e)    No Prepayment Premium or Closed Period Prepayment Premium, as applicable,
shall be required to be paid in connection with payment of fire, casualty, or
condemnation Proceeds to Lender which Lender requires to be applied to the
Indebtedness in accordance with the provisions of this Agreement.
(f)    Borrower acknowledges and agrees that all of the economic terms set forth
in the Loan Documents, including the Contract Rate, have been agreed to by
Lender based on Lender’s expectation that the Loan will not be repaid prior to
the Maturity Date. However, in order to accommodate Borrower, Lender has agreed
to permit Borrower to repay the Loan prior to the Maturity Date in accordance
with, and subject to, the terms set forth above provided that, and as
consideration for such agreement, Borrower agrees to pay Lender the Prepayment
Premium or Closed Period Prepayment Premium, as applicable. Borrower
acknowledges and agrees that, even

 
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if Lender is able to loan the amount prepaid by Borrower to another Person on
the same terms and conditions as herein provided, Lender shall not have fully
recovered Lender’s lost profits, costs, expenses and damages suffered as a
result of such early prepayment; therefore, Borrower and Lender have agreed on
the Prepayment Premium and Closed Period Prepayment Premium as compensation for
Lender’s estimated lost profits, costs, expenses and damages resulting from such
prepayment. The Prepayment Premium or Closed Period Prepayment Premium, as
applicable, shall be paid without prejudice to the right of Lender to collect
any other amounts provided to be paid under this Agreement or the other Loan
Documents, or pursuant to the provisions of law.
(g)    No Prepayment Premium shall be required to be paid during the last ninety
(90) days of the Loan Term.
[Remainder of Page Intentionally Left Blank; Initial Page Follows]

 
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(h)    TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY EXPRESSLY (I)
WAIVES ANY RIGHTS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 2954.10 TO
PREPAY THE NOTE, IN WHOLE OR IN PART, WITHOUT PENALTY, UPON ACCELERATION OF THE
MATURITY DATE IN ACCORDANCE WITH THIS AGREEMENT, AND (II) AGREES THAT IF, FOR
ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE
NOTE IS MADE UPON OR FOLLOWING ANY ACCELERATION OF THE MATURITY DATE BY LENDER
ON ACCOUNT OF ANY DEFAULT BY BORROWER IN ACCORDANCE WITH THIS AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER ENCUMBRANCE
PROHIBITED OR RESTRICTED BY THE DEED OF TRUST AS SET FORTH THEREIN, THEN
BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY WITH SUCH PREPAYMENT THE
PREPAYMENT PREMIUM SPECIFIED IN, AND IN ACCORDANCE WITH, THE FOREGOING
PROVISIONS. BY INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER
HEREBY DECLARES THAT THE AGREEMENT TO MAKE THE LOAN EVIDENCED BY THE NOTE AT THE
INTEREST RATE AND FOR THE TERM SET FORTH IN THIS AGREEMENT CONSTITUTES ADEQUATE
CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER FOR THIS WAIVER AND
AGREEMENT.
Borrower’s Initials: _____________

[Remainder of Page Intentionally Left Blank]
Section 2.6    Security. The Loan shall be secured by inter alia (a) the Deed of
Trust creating a first priority lien on the Mortgaged Property, (b) the
Assignment of Leases and Rents creating a first priority lien on the Leases and
the Property Income, (c) the Master Tenant Security Agreement and (d) the liens
and security interests granted in the other Loan Documents.
Section 2.7    Payments.
(a)    All payments of principal, interest and other amounts to be made by
Borrower under the Loan Documents, shall be made in Dollars, in immediately
available funds, without deduction, set-off or counterclaim, to Lender. All such
payments that are regularly scheduled monthly payments of principal, interest or
reserves shall be made by Borrower by automatic clearing house (“ACH”) debit of
a bank account of Borrower of which Lender has received at least thirty (30)
days’ prior written notice. All other payments from Borrower to Lender shall be
made by wire transfer of immediately available funds to an account designated by
Lender in writing to Borrower.
(b)    If the due date of any payment under the Loan Documents would otherwise
fall on a day that is not a Business Day, such date shall be extended to the
next succeeding Business Day, and interest shall accrue and be payable for any
principal so extended for the period of such extension.

 
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(c)    Each payment received by Lender under the Loan Documents shall be applied
in the following order:
(i)
First, to the interest due on any Advances made by Lender in accordance with the
Loan Documents;

(ii)
Next, to the principal amount of any Advances made by Lender in accordance with
the Loan Documents;

(iii)
Next, to Late Charges, reasonable out-of-pocket attorneys’ fees or any other
amount due under any Loan Document save for the amounts described in clauses
(iv), (v) and (vi) immediately below;

(iv)
Next, to any Prepayment Premium or Closed Period Prepayment Premium, as
applicable, then due and payable under this Agreement;

(v)
Next, to accrued interest due Lender under the Loan Documents; and

(vi)
Finally, to the principal balance of the Loan.

Notwithstanding the foregoing, during the continuance of an Event of Default or
in the event that Borrower does not pay the outstanding principal balance and
accrued interest due under this Agreement, when due, whether on the Maturity
Date or on any earlier date as a result of any Acceleration Event, Lender, at
its option, shall apply any payments it then receives in such order as Lender
deems appropriate in its sole discretion.
ARTICLE 3    

INSURANCE AND CONDEMNATION
Section 3.1    Insurance Requirements. All insurance coverages, limits and
deductibles under this Section 3.1 must be satisfactory to Lender in its
reasonable discretion; provided, however, Lender agrees that it will only
require changes to the insurance carriers or coverages required hereunder if
Lender is requiring similar criteria for carriers or coverages for properties
within its portfolio that are either hotel properties or located within regional
Southern California. Capitalized terms used in this Section 3.1 and not defined
herein shall have the meanings generally ascribed to such terms in the
commercial insurance marketplace. Lender hereby acknowledges that, based solely
on the insurance certificates provided to Lender on or before the date hereof,
the insurance requirements set forth in this Section 3.1 have, as of the date
hereof, been satisfied.
(a)    Property Insurance. Borrower shall maintain, or cause Master Tenant to
maintain, either “All Risk” or “Special Form” real and personal property
insurance and “Boiler and Machinery Insurance”, insuring one hundred percent
(100%) of the insurable replacement cost value of the Improvements and the
Equipment, and with a deductible not to exceed One Hundred Thousand Dollars
($100,000) with the exception for Earthquake, Named Windstorm and Flood,
providing no coinsurance or similar penalty. Such insurance shall also cover
“Rent Loss” or “Business Interruption” and “Extra Expense” on an “Actual Loss
Sustained Basis” (including Rent

 
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Loss), in an amount equal to at least eighteen (18) months of the Property
Income, and an extended period of indemnity of at least one hundred eighty (180)
days. Covered perils shall include, but not be limited to, “Windstorm”
(including “Named Windstorm”), “Boiler and Machinery Insurance” and, subject to
the limitations set forth below, “Acts of Terrorism”. Also, Borrower shall
maintain, or cause Master Tenant to maintain, “Ordinance and Law” coverage. If
the Improvements are non-conforming and such non-conformity is not covered under
the “Ordinance & Law” provisions, Borrower may be required by Lender to
purchase, or cause Master Tenant to purchase, a separate policy covering such
non-conformity for the benefit of Lender. Lender may from time to time also
require that Borrower maintain, or cause Master Tenant to maintain, insurance
acceptable to Lender (in its reasonable discretion) for “Builder’s Risk” during
the period of any construction, renovation or alteration of the Improvements. If
the Hotel Property is located within a Special Hazard Flood Area, National Flood
Insurance Program (“NFIP”) insurance is required. In addition, the Property
policy must provide and maintain a Flood Limit in excess of NFIP that is
acceptable to Lender. All insurance coverages, limits and deductibles must be
satisfactory to Lender in its reasonable discretion.
(b)    Terrorism Insurance. Notwithstanding anything to the contrary in clause
(a) above, Borrower shall maintain, or cause Master Tenant to maintain,
insurance that includes “Act of Terrorism” (whether or not certified) as a
covered peril throughout the Loan Term so long as the Terrorism Risk Insurance
Program Reauthorization Act (“TRIPRA”) is in effect. During any time period that
TRIPRA or a similar program is not in effect, Borrower will at a minimum be
required to purchase and maintain, or cause Master Tenant to purchase and
maintain, the maximum amount of terrorism risk insurance coverage for the
Mortgaged Property that is available for a premium that does not exceed two (2)
times the annual “All Risk” insurance premium (inclusive of any terrorism
component thereof prior to the expiration of TRIPRA, but exclusive of the flood
or earthquake component thereof) for the Mortgaged Property.
(c)    Liability Insurance. Borrower shall cause Hotel Manager to maintain
General Liability insurance (including contractual liability and “Acts of
Terrorism”) in an amount equal to at least One Million Dollars ($1,000,000) per
occurrence and Two Million Dollars ($2,000,000) in the aggregate. In addition,
Borrower shall maintain, or cause Master Tenant to maintain, Umbrella or Excess
Liability insurance in an amount Lender determines (in its reasonable
discretion) to be reasonable from time to time but in no event less than One
Hundred Million Dollars ($100,000,000). Also, Borrower shall maintain, or cause
Master Tenant or Hotel Manager, as applicable, to maintain, “Liquor Liability”
insurance. If applicable, Lender may, from time to time also require that
Borrower maintain, or cause Master Tenant to maintain, insurance acceptable to
Lender for “Commercial Auto”, “Workers Compensation”, and such other insurance
as Lender may require.
(d)    Environmental Insurance. Borrower may, at its option, maintain an
Environmental policy of insurance for the Mortgaged Property throughout the Loan
Term with a Ten Million Dollar ($10,000,000) per claim and Twenty Five Million
Dollar ($25,000,000) aggregate limit, in a form and from an insurer acceptable
to Lender (in its reasonable discretion), naming Lender as a Mortgagee
Additional Insured (such policy of insurance, the “Environmental Insurance”).
Lender acknowledges that Borrower may maintain the Environmental Insurance by

 
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providing evidence satisfactory to Lender in its reasonable discretion that the
Mortgaged Property has been added to the corporate environmental insurance
policy of Strategic Hotels & Resorts, Inc., a Maryland corporation.
(e)    Evidence of Insurance by Acceptable Insurers. At all times during the
term of the Loan, Borrower shall, or shall cause Master Tenant to, provide to
Lender the following evidences of insurance for approval by Lender (in its
reasonable discretion): (i) an ACORD 28 (current version) Evidence of Property
Insurance provided by an authorized insurance agent, broker or insurance company
or, where ACORD 28 (current version) is not available, other evidence of
insurance confirming the same rights as are provided by ACORD 28 (current
version) and all applicable policy endorsements; and (ii) an ACORD 25 (current
version) Certificate of Liability Insurance, provided by an authorized insurance
agent, broker or insurance company confirming coverages are maintained for
liability insurance as required to be carried by Borrower or Master Tenant. Any
ACORD or equivalent evidencing a Blanket insurance policy shall specifically
identify the replacement cost of the improvements and the annual gross rents.
The foregoing evidence shall be provided to Lender at least five (5) Business
Days prior to the expiration date of each such policy. Each evidence of
insurance and certificate must include a mortgagee clause and a loss payee
clause satisfactory to Lender, and any Certificate of Liability Insurance must
name Lender and, if such insurance policy is maintained by Master Tenant,
Borrower, as Additional Insureds for Commercial General Liability with respect
to the Premises. Each insurance company providing coverage must have an A. M.
Best rating of A-X or better.
(f)    Blanket Insurance Policies. The insurance requirements under this Article
3 may be satisfied by either Borrower or Master Tenant maintaining individual
policies covering only the Premises, or blanket insurance policies covering
multiple properties; provided that with respect to any blanket insurance
policies, Borrower also covenants to, or to cause Master Tenant to, either
immediately reinstate any limits and coverages which are used, reduced or
cancelled back up to the blanket policy limits then in place under policies
approved pursuant to this Section 3.1 immediately prior to such use, reduction
or cancellation or such lesser limits as are then approved by Lender, in
Lender’s reasonable discretion, or to secure individual policy coverages for the
Premises satisfying these insurance requirements. Borrower will, or will cause
Master Tenant to, deliver to Lender a Schedule of Locations Insured under any
blanket insurance policy together with the related certificates of insurance.
(g)    Miscellaneous Insurance Requirements. Subject to the terms of the
Management Agreement, the General Liability policy shall be endorsed to name
Lender as a primary additional insured thereunder, as its interest may appear,
and the “All Risk” or “Special Form” policy shall provide loss payable to
Lender, without contribution, under a long-form, non-contributory mortgagee
clause, or otherwise endorsed as Lender may require in its reasonable
discretion. All insurance policies and endorsements required pursuant to this
Agreement must be satisfactory to Lender in its reasonable discretion and shall:
(i) reserved; (ii) be fully paid for and contain such provisions and expiration
dates and be in such form and issued by such insurance companies licensed to do
business in the State; (iii) without limiting the foregoing, provide that any
policy or endorsement maintained by Borrower or Master Tenant may not be
canceled or materially changed except upon at least thirty (30) days’ (or, in
the case of cancellation for nonpayment of the

 
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applicable premium, ten (10) days’) prior written notice of intention of
non-renewal, cancellation or material change to Lender, and that no act or thing
done by Borrower, Master Tenant or Lender shall invalidate the policy as against
Lender; and (iv) be in form and content satisfactory to Lender. Borrower shall,
or shall cause Master Tenant to, upon Borrower’s or Master Tenant’s receipt of
the same, promptly deliver to Lender any notice of non-renewal, cancellation or
material change for any policy or endorsement maintained by Hotel Manager. Upon
the occurrence of an Event of Default (for so long as such Event of Default
exists) or a casualty for which the cost of the resulting Work is more than five
percent (5%) of the outstanding principal balance of the Note as of the date of
loss or damage to the Premises and/or Equipment, within ten (10) Business Days
following a request by Lender, Borrower shall deliver, or cause Master Tenant to
deliver, to Lender all original policies including all endorsements and renewals
thereof, or copies thereof certified by the insurance company or authorized
agent, together with all endorsements required hereunder and any other insurance
policy information and other related information as Lender may request from time
to time. Borrower may request an extension of time not exceeding sixty (60) days
to cause the delivery of the foregoing policies, endorsements and renewals or
certified copies thereof if (1) Borrower has done, or has caused Master Tenant
to do, all things necessary to obtain the issuance of the policies, endorsements
and renewals including the payment of all premiums therefor, and (2) Borrower
has delivered, or has caused Master Tenant to deliver, to Lender within the
above ten (10) day period an insurance binder and evidence of insurance
satisfactory to Lender issued by the approved insurer showing all required
coverage to be in full force and effect for the succeeding twelve (12) month
period along with evidence satisfactory to Lender of payment in full of all
premiums. If Borrower fails to maintain, or fails to cause Master Tenant to
maintain, insurance in compliance with this Agreement, Lender may (but shall not
be obligated to) obtain such insurance and make Advances to pay the premium
therefore. Notwithstanding anything to the contrary contained herein or in any
provision of law, the Proceeds of insurance policies coming into the possession
of Lender shall not be deemed trust funds and Lender shall be entitled to
dispose of such Proceeds as hereinafter provided.
Section 3.2    Damage, Destruction and Restoration.
(a)    In the event of any damage to or destruction of the Premises and/or
Equipment, Borrower shall, or shall cause Master Tenant or Hotel Manager to,
give prompt written notice to Lender and, subject to Lender making insurance
Proceeds available to Borrower when and as provided in Section 3.2(d) or upon
retaining insurance Proceeds pursuant to Section 3.2(h), shall promptly commence
and diligently continue to completion the repair, restoration and rebuilding of
the Premises and/or Equipment so damaged or destroyed in full compliance with
all Legal Requirements and with the provisions of Sections 3.2(e), (f) and (h),
and free and clear from any and all liens and claims, except for Permitted
Encumbrances. Such repair, restoration and rebuilding of the Premises are
sometimes hereinafter collectively referred to as the “Work”. Except as
expressly permitted under Section 3.2(h), Borrower shall not, and shall not
cause or permit Master Tenant or Hotel Manager to, adjust, compromise or settle
any claim for insurance Proceeds without the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed so long
as no Event of Default exists. Subject to Sections 3.2(d) and 3.2(h), Lender
shall have the option in its sole discretion to apply any insurance Proceeds it
may receive pursuant to this Agreement (less any reasonable out-of pocket costs
to Lender of recovering and paying out such Proceeds,

 
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including reasonable out-of-pocket attorneys’ fees, costs and expenses) to the
payment of the Indebtedness or to allow all or a portion of such Proceeds to be
used for the Work. If any insurance Proceeds are applied to reduce the
Indebtedness, Lender shall apply the same, without any Prepayment Premium or
Closed Period Prepayment Premium, as applicable, in accordance with the
provisions of Section 2.7(c) of this Agreement.
(b)    In the event of the foreclosure of the Deed of Trust or other transfer of
title to or assignment of the Mortgaged Property in extinguishment of the
Indebtedness in whole or in part, all right, title and interest of Borrower
and/or Master Tenant, as applicable, in and to all policies of insurance
required by this Agreement and any insurance Proceeds shall inure to the benefit
of and pass to Lender or any purchaser or transferee at the foreclosure sale of
the Mortgaged Property to the extent allowed by such policies.
(c)    Lender may notify any and all insurers under casualty and liability
insurance policies that Lender has a security interest pursuant to the
provisions of this Agreement in and to such insurance policies and any proceeds
thereof, and, subject to Section 3.2(h), that any payments under those insurance
policies are to be made directly to Lender. Lender’s rights under this Section
3.2 may be exercised by Lender or a court appointed receiver appointed upon the
request of Lender and irrespective of whether or not an Event of Default shall
have occurred under this Agreement.
(d)    Notwithstanding the provisions of Section 3.2(a), but subject to Section
3.2(h), if the cost of the Work (as determined by Borrower and confirmed by
Lender in its reasonable discretion) shall not exceed fifty percent (50%) of the
then outstanding principal balance of the Loan, then Lender shall, upon request
by Borrower, permit Borrower to use the Proceeds for the Work (subject to the
provisions of, and less Lender’s costs described in, Section 3.2(e)), so long
as:
(i)
no Event of Default shall then exist nor any matter(s) exist which, after notice
of default or passage of time or both, would constitute an Event of Default;

(ii)
the Work can be completed, as determined by Lender in its reasonable discretion,
by the date which is six (6) months prior to the Maturity Date;

(iii)
the Debt Service Coverage Ratio (as calculated by Lender) for the twelve (12)
month period immediately following the date when Business Interruption or Rent
Loss insurance is no longer payable after the casualty shall be not less than
1.20:1.00 excluding from the calculation of Net Operating Income any Leases that
contain any still exercisable right to cancel or terminate as a result of such
damage or destruction;

(iv)
all sums necessary to effect the Work over and above any available Proceeds (the
“Deficiency Amount”) shall be at the sole cost and expense of Borrower and
Borrower shall either (A) deposit the Deficiency Amount (in cash or in the form
of a Letter of Credit, in a

 
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form and from an issuer acceptable to Lender in its reasonable discretion), as
estimated by Lender in its reasonable discretion, with Lender prior to
commencing such Work and such deposit shall be made available to Borrower to pay
for the Work on the same terms and conditions as the Proceeds being held by
Lender, or (B) fund such Deficiency Amount from Borrower's funds as and when the
cost of the Work is incurred, prior to the disbursement of the Proceeds to
Borrower to pay for any Work in excess of the Deficiency Amount;
(v)
at all times during any such Work, Borrower shall (or shall cause Master Tenant
to) maintain, at its sole cost and expense, workers’ compensation, builders risk
and public liability insurance in amounts satisfactory to Lender (in its
reasonable discretion) and in accordance with the provisions of Section 3.1;

(vi)
at all times during any such Work, business income and extra expense including
rental value insurance shall be in full force and effect and available to cover
any loss of business income and rents resulting from the damage to or
destruction of the Premises and/or Equipment; and

(vii)
the Improvements shall be restored as nearly as possible to the condition
existing immediately prior to such damage or destruction except for immaterial
changes as determined by Lender in its reasonable judgment.

(e)    If any insurance Proceeds are used for the Work, then, unless Section
3.2(h) applies, such Proceeds together with any Deficiency Amount (subject to
clause (d)(iv)(B) above) shall be held by Lender and shall be paid out from time
to time to Borrower as the Work progresses (less any reasonable out-of-pocket
costs to Lender of recovering and paying out such Proceeds and/or Deficiency
Amount, including reasonable out-of-pocket attorneys’ fees, costs and expenses
and costs allocable to inspecting the Work and the plans and specifications
therefor), subject to each of the following conditions:
(i)
the Work shall be conducted under the supervision of a certified and registered
architect or engineer satisfactory to Lender in its reasonable discretion if the
nature of such Work requires the supervision of an architect or engineer. Before
Borrower commences, or causes or permits Master Tenant to commence, any Work,
other than temporary work to protect property or prevent interference with
business or Work for which no permits, plans or governmental approvals are
required, Lender shall have approved the plans and specifications for the Work,
which approval shall not be unreasonably withheld, conditioned or delayed, it
being nevertheless understood that such plans and specifications shall provide
for Work so that, upon completion thereof, the Premises shall be constructed as
nearly as

 
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possible to the condition existing immediately prior to the damage or
destruction;
(ii)
each request for payment shall be made on not less than seven (7) Business Days
prior written notice to Lender and shall be accompanied by a certificate of the
architect or engineer in (i) above stating: (A) that all of the Work completed
has been done in compliance with the approved plans and specifications, if
required under (i) above; (B) that the sum requested is justly required to
reimburse Borrower or Master Tenant, as applicable, for payments made by
Borrower or Master Tenant, as applicable, or is justly due to the contractor,
subcontractors, materialmen, laborers, engineers, architects or other Persons
rendering services or materials for the Work (giving a brief description of such
services and materials); (C) if the sum requested is to cover payment relating
to repair and restoration of Equipment required or relating to the Premises,
that title (which may be in the form of a leasehold interest pursuant to an
equipment lease) to the items of Equipment covered by the request for payment is
vested in Borrower or Master Tenant, as applicable; and (D) that the amount of
such Proceeds together with any Deficiency Amount remaining in the hands of
Lender will be sufficient on completion of the Work to pay for the same in full
(giving in such reasonable detail as Lender may require in its reasonable
discretion an estimate of the cost of such completion). Additionally, each
request for payment shall contain a statement signed by Borrower certifying that
Borrower approves payment for both the Work done to date and the Work covered by
the request for payment in question;

(iii)
each request for payment shall be accompanied by waivers of lien or conditional
waivers of lien satisfactory to Lender covering that part of the Work for which
payment or reimbursement was requested in the prior request for disbursement
and, if required by Lender in connection with any disbursement in excess of Two
Hundred Fifty Thousand Dollars ($250,000), a search prepared by a title
insurance company or licensed abstractor, or by other evidence satisfactory to
Lender in its reasonable discretion that there has not been filed with respect
to the Premises any mechanics’ or other lien relating to any part of the Work
not discharged of record other than Permitted Encumbrances. Additionally, as to
any Equipment covered by the request for payment, Lender shall be provided with
evidence of payment therefor and such further evidence satisfactory to assure
Lender of its valid first lien on the Equipment;

 
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(iv)
Lender shall have the right with respect to any Work with a cost in excess of
One Hundred Thousand Dollars ($100,000) to inspect the Work at all reasonable
times (and such inspections shall not materially interfere with the Manager’s
operations of the Hotel Property or the guests’ enjoyment of the Hotel Property,
and shall not require entry into occupied rooms) and may condition any
disbursement of Proceeds upon the satisfactory completion, as determined by
Lender’s reasonable discretion, of any portion of the Work for which payment or
reimbursement is being requested. Neither the approval by Lender of the plans
and specifications for the Work nor the inspection by Lender of the Work shall
make Lender responsible for the preparation of such plans and specifications or
the compliance of such plans and specifications, or of the Work, with any
applicable law, regulation, ordinance, covenant or agreement (provided, however,
unless an Event of Default exists, Lender shall not exercise its right to
inspect under this Section 3.2(e)(iv) more than once in any given calendar
month);

(v)
Proceeds shall not be disbursed more frequently than once every thirty (30)
days; and

(vi)
any request for payment made after the Work has been completed shall be
accompanied by a copy or copies of any certificate or certificates required by
law to render occupancy and full operation of the Premises legal.

(f)    Subject to Lender making insurance Proceeds available to Borrower when
and as provided in Section 3.2(d), upon any failure on the part of Borrower to,
or to cause Master Tenant to, proceed diligently and continuously to completion
of the Work, after notice with a reasonable opportunity of Borrower to cure or
upon the occurrence of any Event of Default, at Lender’s option, Lender shall be
entitled to apply at any time all or any portion of the Proceeds it then or
thereafter holds to the repayment of the Indebtedness or to the curing of any
Event of Default.
(g)    Upon completion of the Work and payment in full thereof, any unexpended
Proceeds, at Lender’s option, shall be paid over to Borrower or Master Tenant,
as applicable.
(h)    Notwithstanding any other provision of this Section 3.2, if no Event of
Default shall exist and be continuing and, in Borrower’s judgment (as confirmed
by Lender in its reasonable discretion), the cost of the Work is less than five
percent (5%) of the outstanding principal balance of the Note as of the date of
loss or damage to the Premises and/or Equipment and the Work can be completed
within fifteen (15) months from the date of the applicable casualty, then
Borrower or Master Tenant shall have the right to apply for and receive the
insurance Proceeds directly from the insurer (and Lender shall advise the
insurer to pay over such Proceeds directly to Borrower or Master Tenant, as
applicable), provided that Borrower shall apply, or shall cause Master Tenant to
apply, such insurance Proceeds solely to the prompt and diligent commencement
and completion of such Work.

 
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(i)    BORROWER HEREBY ACKNOWLEDGES AND AGREES THAT IT IS AWARE OF AND
UNDERSTANDS SCHOOLCRAFT V. ROSS (81 CAL. APP. 3D 75 (1981)) AND ITS PROGENY AS
WELL AS CALIFORNIA CIVIL CODE SECTION 2924.7 AND FINANCIAL CODE SECTIONS 1227.3
AND 7462, WHICH PERMIT LENDER TO REQUIRE INSURANCE BUT OBLIGATE LENDER TO ALLOW
BORROWER TO USE CASUALTY INSURANCE PROCEEDS FOR THE PURPOSE OF REPAIRING OR
RESTORING THE PREMISES PLEDGED AS SECURITY FOR THE BORROWER’S OBLIGATIONS TO
LENDER UNLESS LENDER’S SECURITY HAS BEEN IMPAIRED. BORROWER HEREBY ACKNOWLEDGES
AND AGREES THAT, IN THE EVENT OF A CASUALTY TO THE PREMISES, IF BORROWER FAILS
TO REPAIR OR RESTORE THE PREMISES IN A MANNER CONSISTENT WITH THE PROVISIONS OF
THIS AGREEMENT, REGARDLESS OF WHETHER SUCH FAILURE IS THE RESULT OF ANY
VOLUNTARY ACTION OR INACTION BY BORROWER, OR ANY ACT OR DETERMINATION OF ANY
GOVERNMENTAL AUTHORITY (WHETHER PURSUANT TO ANY ZONING, LAND USE OR OTHER
ORDINANCE, CODE, REGULATION OR REQUIREMENT OR OTHERWISE), SUCH FAILURE IS AND
SHALL BE DEEMED A SUBSTANTIAL IMPAIRMENT OF THE MORTGAGED PROPERTY ENTITLING
LENDER, SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, TO APPLY THE NET
INSURANCE PROCEEDS TO THE INDEBTEDNESS IN SUCH ORDER AND MANNER AS LENDER MAY
ELECT, WHETHER OR NOT DUE AND PAYABLE, WITH ANY EXCESS PAID TO BORROWER. BY
INITIALING THIS PROVISION IN THE SPACE PROVIDED BELOW, BORROWER HEREBY
ACKNOWLEDGES AND AGREES THAT THE TERMS OF THIS PROVISION HAVE BEEN SPECIFICALLY
BARGAINED FOR AND ARE A MATERIAL INDUCEMENT FOR LENDER TO MAKE THE LOAN AND
WITHOUT WHICH LENDER WOULD NOT MAKE THE LOAN.
BORROWER’S INITIALS ____________

[Remainder of Page Intentionally Left Blank]
Section 3.3    Condemnation. Borrower shall, or shall cause Master Tenant or
Hotel Manager to, notify Lender promptly of the actual or threatened (in
writing) commencement of any proceedings for the condemnation or taking of the
Premises or any portion thereof and shall deliver to Lender copies of any and
all papers served in connection with such proceedings. Lender may participate in
such proceedings and Borrower shall, or shall cause Master Tenant to, deliver to
Lender all instruments requested by Lender in its reasonable discretion to
permit such participation. Borrower shall not, and shall not cause or permit
Master Tenant to, adjust, compromise, settle or enter into any agreement with
respect to such proceedings without the prior written consent of Lender;
provided, however, Lender’s prior consent shall not be required if the value of
the portion of the Mortgaged Property subject to such actual or threatened
condemnation or taking is (in Lender’s reasonable discretion) less than three
percent (3%) of the outstanding principal amount of the Note as of the date of
the applicable actual or threatened condemnation or taking and such actual or
threatened condemnation or taking does not (a) affect any physical structure
comprising any portion of the Mortgaged Property nor (b) materially and
adversely impact the Borrower’s ability to perform

 
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its obligations under the Loan Documents or the value of the Mortgaged Property.
All Proceeds of any condemnation, or purchase in lieu thereof, of the Premises
or any portion thereof are hereby assigned to and shall be paid to Lender.
Borrower hereby authorizes Lender to receive such Proceeds, to give proper
receipts and acquittances therefor and, in Lender’s reasonable discretion, to
apply such Proceeds (less any reasonable out-of-pocket costs to Lender of
recovering and paying out such Proceeds, including reasonable out-of-pocket
attorneys’ fees, costs and expenses allocable to inspecting any repair,
restoration or rebuilding work and the plans and specifications therefor) toward
the payment of the Indebtedness or to the repair, restoration or rebuilding of
the Premises in the manner and subject to the conditions set forth in Section
3.2. If the Proceeds are permitted hereunder to be used by Lender to reduce the
Indebtedness, they shall be applied in the order provided in Section 2.7(c),
without any Prepayment Premium or Closed Period Prepayment Premium, as
applicable. Borrower shall, or shall cause Master Tenant to, promptly execute
and deliver all instruments requested by Lender for the purpose of confirming
the assignment of the condemnation Proceeds to Lender. Borrower waives the
provisions of any law prohibiting Lender from taking such an election, including
but not limited to, the provisions of California Code of Civil Procedure
Sections 1265.210 et seq.
ARTICLE 4    

ENVIRONMENTAL MATTERS
Section 4.1    Terms Incorporated By Reference.
The terms and provisions of the Environmental Indemnification Agreement are
incorporated herein by reference in their entirety.
ARTICLE 5    

CERTAIN PROPERTY MATTERS
Section 5.1    Lease Covenants and Limitations.
(a)    Except with respect to New Leases or New Subleases that Hotel Manager has
the right to enter into without Borrower’s or Master Tenant’s approval in
accordance with the Management Agreement, all New Leases and New Subleases of
space at the Hotel Property in excess of twenty thousand (20,000) net rentable
square feet shall be subject to the prior review and approval of Lender at
Borrower’s expense, which approval shall not be unreasonably withheld,
conditioned or delayed. For any such New Lease or New Sublease requiring Lender
approval, if, within ten (10) Business Days after Lender’s receipt of Borrower’s
written request for such approval stating: (i) “TIME SENSITIVE RESPONSE REQUIRED
WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OR DEEMED APPROVAL MAY OCCUR”, together
with the following: (1) a true and complete copy of the proposed final New Lease
or New Sublease, including any amendments, exhibits and side agreements relating
thereto, (2) a lease summary describing in reasonable detail all material terms,
and (3) a description of material financial terms of the proposed tenants,
including any available tenant financial statements or credit reports
(collectively, the “Lease Approval Package”), Lender does not approve or
disapprove such New Lease or New Sublease (disapproval

 
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to include reasons), Borrower may deliver a second notice to Lender, together
with a second Lease Approval Package, stating: “PURSUANT TO THE TERMS OF
SUBSECTION 5.1(a) OF THE AMENDED AND RESTATED LOAN AGREEMENT EXECUTED BY SHR
MLB, LLC, A DELAWARE LIMITED LIABILITY COMPANY, AS BORROWER, DATED JANUARY 29,
2015, LENDER HAS FAILED TO RESPOND TO THE REQUEST FOR APPROVAL OF A NEW LEASE OR
NEW SUBLEASE. FAILURE OF LENDER TO RESPOND TO BORROWER’S REQUEST FOR SUCH
APPROVAL WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF THIS SECOND NOTICE SHALL BE
DEEMED TO BE LENDER’S APPROVAL OF SUCH NEW LEASE OR NEW SUBLEASE”. If Lender
fails to approve or disapprove (which such disapproval shall include in
reasonable detail, the reasons for such disapproval) of such New Lease or New
Sublease within such additional five (5) Business Day period, such New Lease or
New Sublease shall be deemed approved by Lender. “New Leases” means
collectively, all Leases (other than Transient Occupancy Leases) executed or
entered into by Borrower subsequent to the Closing Date, and “New Subleases”
means collectively, all Subleases executed or entered into by Master Tenant (or
by Hotel Manager on Master Tenant’s behalf) subsequent to the Closing Date.
Borrower shall, or shall cause Master Tenant to, as applicable, provide Lender
with a complete copy of each New Lease or New Sublease within ten (10) Business
Days of the execution thereof. “Transient Occupancy Lease” means any agreement
concerning the occupancy by a guest of a hotel room at the Hotel Property and
any lease by a transient occupant of the Hotel Property of any other portion of
the Hotel Property, including, without limitation, any banquet facilities,
conference or meeting rooms.
(b)    Each New Sublease entered into (other than Transient Occupancy Leases not
reduced to a form of written agreement) shall provide that upon the expiration
or earlier termination of the Master Lease such New Sublease shall become a
direct Lease with Borrower (or the then owner of the Mortgaged Property). In
addition, for each Lease or Sublease (other than Transient Occupancy Leases),
upon Lender’s written request, Borrower shall, or shall cause Master Tenant to,
use commercially reasonable efforts to provide Lender with: (i) a tenant
estoppel certificate, and (ii) an SNDA, in either case executed by each tenant,
utilizing either Lender pre-approved forms or such other forms as Lender shall
approve in its reasonable discretion.
(c)    Any ground lease must be approved by Lender in advance in writing. Unless
otherwise specifically approved, any such ground lease affecting the Mortgaged
Property must be or be made to be expressly subject and subordinate to the lien
and terms of the Deed of Trust. Fee owner(s) shall provide Lender with an
estoppel and recognition agreement acceptable to Lender.
(d)    Lender may require at any time an Event of Default continues to exist
uncured that Borrower transfer, or cause to be transferred, to Lender all tenant
security deposits, including any letters of credit securing tenant lease
obligations. Lender may hold and co-mingle such security deposits without
interest, except as required by applicable law or any Leases.
(e)    To Borrower’s knowledge, all of the Leases and Subleases (including,
without limitation, Transient Occupancy Leases) are in full force and effect and
there are no defaults or any conditions which, after notice, passage of time or
both, would constitute defaults thereunder.

 
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Section 5.2    Management.
(a)    As of the date hereof, Lender approves Montage Hotels & Resorts, LLC, a
Nevada limited liability company, as the Hotel Manager of the Hotel Property,
and approves the Management Agreement.
(b)    Borrower hereby represents and warrants that the Management Agreement is
in full force and effect. To Borrower's knowledge, no event of default has
occurred under the Management Agreement, and no event has occurred thereunder
which, with notice or the passage of time or both, would constitute an event of
default thereunder. Prior to the date of this Agreement, Borrower or Master
Tenant has delivered to Lender a true, correct and complete copy of the
Management Agreement (including all amendments and side letters issued in
connection therewith).
(c)    Borrower shall cause Master Tenant to ensure that the Hotel Property
shall at the time of the Closing Date and thereafter throughout the term of the
Loan be managed by Hotel Manager pursuant to the Management Agreement. Borrower
shall not, and shall not cause or permit Master Tenant to, amend, supplement
(including by side letter), terminate or otherwise modify the Management
Agreement without Lender’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed. Borrower may not, and shall not
cause or permit Master Tenant to, remove or otherwise replace Hotel Manager
until a replacement Hotel Manager for the Hotel Property and the related
management agreement have been approved in writing by Lender in Lender’s
reasonable discretion.
(d)    Borrower shall, and shall cause Master Tenant to, as applicable:
(i)
Except as otherwise set forth herein, pay all sums required to be paid by
Borrower or Master Tenant under the Management Agreement, promptly perform
and/or observe all of the covenants and agreements (if any) required to be
performed and observed by Master Tenant or Borrower under the Management
Agreement, and do all commercially reasonable things necessary to preserve and
to keep unimpaired their respective material rights under the Management
Agreement;

(ii)
Promptly notify Lender of any material default under the Management Agreement of
which it is aware, and provide Lender with copies of any notices delivered in
connection with any default (material or otherwise);

(iii)
In addition to the financial statements and annual operating plans required to
be provided pursuant to Section 7.1 and notices required to be provided pursuant
to Section 5.3(d)(ii) above, promptly deliver to Lender a copy of each material
notice received by Master Tenant under the Management Agreement; and

 
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(iv)
Promptly enforce in a commercially reasonable manner the performance and
observance of all of the material covenants and agreements required to be
performed and/or observed by Hotel Manager under the Management Agreement.

(e)    Borrower shall not, and shall not cause or permit Master Tenant to, as
applicable:
(i)
Pay any incentive fee due to Hotel Manager under the Management Agreement during
the existence of a Cash Trap Period; provided, however, that any such incentive
fees due to Hotel Manager that are not paid during a Cash Trap Period shall be
permitted to accrue through any such Cash Trap Period, and upon the cessation of
the Cash Trap Period, may be paid from Excess Operating Revenue.

(ii)
Amend, terminate, supplement or otherwise modify the Management Agreement
without Lender’s prior written consent.

(f)    Borrower and Lender acknowledge and agree that pursuant to the terms of
the Management Agreement, Hotel Manager has established and shall maintain one
or more bank accounts in connection with the operation of the Hotel Property
(collectively, the “Hotel Operating Accounts”) into which Hotel Manager deposits
and holds any and all Operating Revenues and out of which Hotel Manager pays all
Operating Expenses and pays debt service on the Loan. So long as the Management
Agreement remains in effect, Borrower and Lender agree that Hotel Manager shall
continue to maintain the Hotel Operating Accounts, including signing or
otherwise authorizing checks or other documents of withdrawal therefrom, and
perform all of its other responsibilities pursuant to the Management Agreement,
including collecting all Operating Revenues and paying all Operating Expenses
and the debt service on the Loan.
Section 5.3    Impositions.
(a)    Borrower shall pay and discharge, or shall cause Master Tenant to pay and
discharge, all Impositions prior to delinquency and shall provide to Lender
validated receipts or other evidence satisfactory to Lender showing the payment
of such Impositions within fifteen (15) days after the same would otherwise have
become delinquent. Borrower’s obligation to pay, or cause to be paid,
Impositions pursuant to this Agreement shall include, to the extent permitted by
applicable law, taxes resulting from future changes in law which impose upon
Lender an obligation to pay any property taxes or other Impositions. Should
there be any default under this Section 5.3(a) in the payment of any
Impositions, Lender may (but shall not be obligated to) make an Advance to pay
such Impositions or any portion thereof.
(b)    Borrower shall not be required to pay, discharge or remove (or to cause
the payment, discharge or removal of) any Imposition so long as Borrower, Master
Tenant or Hotel Manager (as applicable) contests in good faith such Imposition
or the validity, applicability or amount thereof by an appropriate legal
proceeding which operates to prevent the collection of such amounts and the sale
of the Mortgaged Property or any portion thereof; provided, however, that

 
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such contest will not result in a tax certificate or other sale of the tax lien
and prior to the date on which such Imposition would otherwise have become
delinquent Borrower shall have: (i) given Lender prior written notice of such
contest; and (ii) deposited or caused to be deposited with Lender, and shall
deposit, within ten (10) Business Days after Lender’s request, such additional
amounts as are necessary to keep on deposit at all times, an amount equal to at
least one hundred five percent (105%) of the total of (such amount, the “Contest
Deposit Amount”): (A) the balance of such Imposition then remaining unpaid; plus
(B) all interest, penalties, costs and charges accrued or accumulated thereon
(provided, however, that Borrower may request that Lender apply such amount to
the payment of the particular Imposition for which such amount was deposited).
Notwithstanding the foregoing, Borrower shall have the option to deposit the
Contest Deposit Amount (or any portion thereof) with the arbiter of any such
contest so long as the total aggregate amount of funds deposited with Lender and
such arbiter is at all times equal to the Contest Deposit Amount described in
the foregoing sentence. Any such contest shall be prosecuted with due diligence,
and Borrower shall promptly pay, or cause to be paid, the amount of such
Imposition as finally determined, together with all interest, penalties, costs
and charges payable in connection therewith. Lender shall have full power and
authority to apply any amount deposited with Lender under this Section 5.3(b) to
the payment of any unpaid Imposition to prevent the sale of any tax lien or the
sale or forfeiture of the Mortgaged Property (or any portion thereof) for
non-payment thereof. Lender shall have no liability, however, for failure to so
apply any amount deposited unless Borrower requests the application of such
amount to the payment of the particular Imposition for which such amount was
deposited. Any surplus retained by Lender after payment of the Imposition for
which a deposit was made shall be repaid to or at the direction of Borrower
unless an Event of Default shall have occurred and is continuing, in which case
said surplus may be retained by Lender to be applied to the Indebtedness.
Notwithstanding any provision of this Section 5.3(b) to the contrary, Borrower
shall pay, or cause to be paid, any Imposition which it might otherwise be
entitled to contest if, in the reasonable opinion of Lender, (1) failure to pay
will promptly thereafter result in a tax certificate or other sale of the tax
lien or (2) the Mortgaged Property (or any portion thereof) is in imminent
jeopardy or in imminent danger of being forfeited or foreclosed; or Lender may
make an Advance to pay the same after Borrower has failed, within ten (10)
Business Days of written demand (or such shorter time as would be required by
Lender (in its reasonable discretion) to avoid the circumstances set forth in
Section 5.3(b)(1) and (2), to pay such amounts.
(c)    Borrower shall deposit with Lender, monthly, on each Payment Date, 1/12th
of the annual charges (as estimated by Lender in its reasonable discretion) for
Impositions with respect to the Mortgaged Property. If required by Lender in
it’s reasonable discretion, Borrower shall also deposit with Lender,
simultaneously with such monthly deposits and/or the execution of this
Agreement, a sum of money which together with such monthly deposits will be
sufficient to make the payment of each such charge at least thirty (30) days
prior to the date such payment becomes delinquent. Should such charges not be
ascertainable at the time any deposit is required to be made, the deposit shall
be made on the basis of the charges for the prior year or payment period, as
estimated by Lender in its reasonable discretion. When the charges are fixed for
the then current year or period, (i) Borrower shall deposit any deficiency
within ten (10) Business Days after demand by Lender, and (ii) Lender shall
promptly reimburse Borrower for any overpayments or, at Borrower’s request,
credit such overpayments to future impounds required hereunder. All funds
deposited with Lender shall be held without interest (unless the payment of
interest thereon is

 
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required under applicable law), may be commingled with Lender’s other funds, and
shall be applied in payment of the foregoing charges when and as payable
provided that no Event of Default shall be continuing. Should an Event of
Default be continuing, the funds so deposited may be applied in payment of the
charges for which such funds shall have been deposited or to the payment of the
Indebtedness or any other charges affecting the Mortgaged Property, as Lender in
its sole discretion may determine, but no such application shall be deemed to
have been made by operation of law or otherwise until actually made by Lender as
herein provided. Borrower shall provide Lender with bills and all other
documents necessary for the payment of the foregoing charges within ten (10)
Business Days following Borrower’s receipt of the same, but in any event at
least fifteen (15) days prior to the date on which each payment thereof shall
first become delinquent.
(d)    Notwithstanding the requirements of Section 5.3(c), Lender shall waive
the requirement for Borrower to make monthly deposits of the annual charges for
Impositions to the extent the making such monthly deposits is inconsistent with
the terms and provisions of the Management Agreement or for so long as no Event
of Default exists under the Loan Documents.
Section 5.4    FF&E Reserve.
(a)    In order to maintain an active reserve for the maintenance and repair of
the Hotel Property, including, but not limited to, the replacement of FF&E, on
or before the twentieth (20th) day of each calendar month during the Loan Term,
Borrower shall deposit or cause to be deposited into the Reserve Fund (defined
in the Management Agreement) (hereinafter, the “FF&E Reserve”) an amount equal
to the amount of Operating Revenues required to be deposited into the FF&E
Reserve pursuant to the terms of the Management Agreement (each such deposit, an
“FF&E Reserve Deposit”). Borrower shall cause Master Tenant to cause Hotel
Manager to maintain the FF&E Reserve in accordance with the Management
Agreement. The depository institution or commercial bank at which the FF&E
Reserve is held (the “Deposit Bank”), shall have provided Lender with a
controlled account agreement acceptable to Lender (in its reasonable discretion)
with respect to the FF&E Reserve (the “Deposit Agreement”). Borrower shall cause
Master Tenant to grant Lender a first priority security interest in the FF&E
Reserve and all deposits at any time contained therein and the proceeds thereof,
and to take all actions necessary to maintain in favor of Lender a perfected
first priority security interest in the FF&E Reserve. Any interest that accrues
on the funds in the FF&E Reserve shall remain in the FF&E Reserve and shall,
except as may be required by applicable law or if an Event of Default has
occurred and is continuing, be for the benefit of Master Tenant. The proceeds
from the sale of any FF&E no longer needed for the operation of the Hotel
Property shall be deposited into the FF&E Reserve and such proceeds shall be
credited against Borrower’s obligation to make, or cause to be made, the monthly
FF&E Reserve Deposits required hereunder and under the Management Agreement.
(b)    So long as there is no Event of Default then outstanding, Borrower and
Master Tenant shall have access to the funds in the FF&E Reserve and may
withdraw (and Borrower shall be permitted to instruct Hotel Manager to withdraw)
funds from the FF&E Reserve without Lender’s prior consent, provided that such
funds are used solely for Qualifying Expenditures. Notwithstanding the
foregoing, at all times, including, without limitation, during the continuance
of an Event of Default, Hotel Manager shall have the right to access and apply
funds in the FF&E

 
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Reserve in such amounts and for any purpose permitted under the Management
Agreement without Lender’s prior approval.
(c)    Upon no less than two (2) Business Days’ prior written notice to
Borrower, Lender shall have the right with respect to any Qualifying Expenditure
costing in excess of One Hundred Thousand Dollars ($100,000) to inspect the
Hotel Property during normal business hours and subject to all rights of
occupants thereof in order to confirm that funds withdrawn from the FF&E Reserve
have been used for such Qualifying Expenditure or for such other purpose as is
permitted under the Management Agreement, and that any work to the Hotel
Property in connection therewith has been completed free from liens (other than
those being contested in accordance with the terms of this Agreement) and
defects; provided, however, unless an Event of Default exists, Lender shall not
exercise its right to inspect under this Section 5.4(c) more than once in any
calendar quarter. Borrower agrees to reimburse Lender promptly upon request for
Lender’s reasonable actual out-of-pocket expenses incurred in connection with
such inspections of the Hotel Property.
(d)    Upon the occurrence and during the continuance of any Event of Default,
neither Borrower nor Master Tenant shall have any further right without Lender’s
consent to (i) access the funds in the FF&E Reserve, or (ii) request (or to
approve Hotel Manager’s request, to the extent such approval is required under
the Management Agreement) for a disbursement from the FF&E Reserve for a
Qualifying Expenditure or for any other purpose, in each case to the extent such
request disbursement is discretionary in nature under the Management Agreement.
Notwithstanding the foregoing, during the continuance of any such Event of
Default, Hotel Manager may continue to withdraw funds from the FF&E Reserve for
Qualifying Expenditures and for such other expenditures that are mandatory under
the Management Agreement and over which neither Master Tenant nor Borrower have
any consent or approval rights. Upon completion of foreclosure under the Deed of
Trust or Lender’s acceptance of a deed in lieu thereof, funds in the FF&E
Reserve (or any portion thereof) shall be made available to Hotel Manager
pursuant to the terms of the Management Agreement. Once the Indebtedness is paid
in full, the remaining balance in the FF&E Reserve shall promptly be returned to
Borrower. In no event shall funds in the FF&E Reserve be applied by Lender to
pay down the Loan while an Event of Default Exists or upon foreclosure.
Section 5.5    Cash Trap Period. If at any time on or after August 1, 2015, (i)
an Event of Default exists or (ii) the Debt Service Coverage Ratio falls below
1.20:1.00, as calculated as of the end of each calendar quarter from and after
August 1, 2015 based on the immediately preceding twelve (12) month period (each
a “Cash Trap Trigger Event”), Lender will have the right, upon five (5) days’
written notice to Borrower, Master Tenant and Hotel Manager, to require Borrower
to cause Master Tenant to cause Hotel Manager to deposit all Excess Operating
Revenue in accordance with Section 5.5(a) below until such Cash Trap Trigger
Event is deemed cured in accordance with Section 5.5(f) below (each such period,
a “Cash Trap Period”). During any such Cash Trap Period, the following
provisions shall apply:
(a)    The Excess Operating Revenue shall be deposited on a monthly basis by
Hotel Manager within twenty (20) days of the end of each calendar month into an
account (the “Cash Collateral Account”) maintained at a bank or other financial
institution selected by Lender in its sole good faith discretion and shall be
under the sole dominion and control of Lender.

 
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Notwithstanding the foregoing, Hotel Manager shall have access to the Cash
Collateral Account as provided herein and in the Cash Trap DACA (defined below).
Each such deposit shall be accompanied by a copy of the applicable monthly
operating statement for the Hotel Property prepared by Hotel Manager pursuant to
the Management Agreement. The Cash Collateral Account shall be entitled “SHR
MLB, LLC, as pledgor, for the benefit of Massachusetts Mutual Life Insurance
Company, as Secured Party – Cash Collateral Account,” or such other name as
required by Lender from time to time. Borrower shall grant, and/or shall cause
Master Tenant to grant, Lender a first priority security interest in the Cash
Collateral Account and all deposits at any time contained therein and the
proceeds thereof, and to take all actions necessary to maintain in favor of
Lender a perfected first priority security interest in the Cash Collateral
Account, including, without limitation, filing or authorizing Lender to file
UCC-1 financing statements and continuations thereof and entering into a control
agreement with respect to such the Cash Collateral Account with the bank or
financial institution selected by Lender (the “Cash Trap DACA”). Borrower hereby
grants Lender an irrevocable power of attorney, coupled with an interest, to
enter into any such Cash Trap DACA if Borrower fails to cause Master Tenant to
execute the same promptly following the delivery to Master Tenant of two (2)
separate written requests by Lender. Borrower will not in any way, and shall
cause Master Tenant to not in any way, alter, modify or close the Cash
Collateral Account, and will notify Lender of the account number thereof. Except
as may be expressly permitted in this Agreement and in the Cash Trap DACA,
Lender shall have the sole right to make withdrawals from the Cash Collateral
Account and all costs and expenses for establishing and maintaining the Cash
Collateral Account shall be paid by Borrower or Master Tenant. All monies now or
hereafter deposited into the Cash Collateral Account shall be deemed additional
security for the Indebtedness. Any interest that accrues on the funds in the
Cash Collateral Account shall remain in the Cash Collateral Account and shall,
except as may be required by applicable law or if an Event of Default has
occurred and is continuing, be for the benefit of Master Tenant.
(b)    Provided that the Cash Trap Trigger Event with respect to a Cash Trap
Period was not an Event of Default and provided no Event of Default (other than
an Excess Cash EOD or to the extent permitted by clause (i) of this Section
5.5(b)) exists during such Cash Trap Period, Hotel Manager may apply to Lender
for monthly distributions from the Cash Collateral Account in order to fund, and
Lender shall instruct the bank or financial institution maintaining the Cash
Collateral Account to disburse funds from the Cash Collateral Account to so
fund, any shortfalls (not funded from Operating Revenues) in connection with the
payment of the following items in the following order (the “Cash Trap Payment
Waterfall”):
(i)
First, whether or not an Event of Default exists, the payment of those third
parties for whom Custodial Funds have been collected by or on behalf of Borrower
or Master Tenant;

(ii)
Second, the payment of Operating Expenses not previously paid, including
Impositions and any hotel management fees (but excluding any incentive
management fees set forth in the Management Agreement);

 
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(iii)
Third, to the Working Capital Reserve for the Hotel Property maintained by the
Hotel Manager as one of the Hotel Operating Accounts and pledged to Lender as
security for the Loan, in an amount equal to the greater of (A) One Million
Dollars ($1,000,000) and (B) an amount sufficient to cover projected cash flow
needs for the immediately succeeding calendar month, as determined by the Hotel
Manager;

(iv)
Fourth, the payment of debt service payments then due and payable under the
Loan;

(v)
Fifth, to the payment of any Interest accruing at the Default Rate and Late
Charges, if any;

(vi)
Sixth, to the Working Capital Reserve for the Hotel Property maintained by Hotel
Manager as one of the Hotel Operating Accounts and pledged to Lender as security
for the Loan, in an amount such that, when added to the amounts allocated to the
Working Capital Reserve pursuant to Section 5.5(b)(iii) hereof, would cause the
amounts set aside for working capital to be sufficient to cover projected cash
flow needs for the immediately succeeding two (2) calendar months, as determined
by Hotel Manager;

(vii)
Seventh, to the payment of any FF&E Reserve Deposits; and

(viii)
Eighth, to the payment of any other costs, fees and expenses approved by Lender
in its reasonable discretion.

(c)    During any Cash Trap Period, Hotel Manager shall not be entitled to
receive any incentive management fees set forth in the Management Agreement.
Notwithstanding the foregoing but subject to the limitations of Section 8.1(d),
any incentive management fees due to Hotel Manager that are not paid during any
Cash Trap Period shall be permitted to accrue throughout such Cash Trap Period.
(d)    Any such application to Lender for distributions from the Cash Collateral
Account shall be made pursuant to a written request (a “CCA Request”), certified
as true, correct and complete by Hotel Manager and in a form approved by Lender
in its reasonable discretion, and shall (i) set forth a detailed explanation of
the purposes of the requested distribution and (ii) other than with respect to
CCA Requests for distributions solely for the payment of Custodial Funds, affirm
that at the time of the CCA Request and at the time the applicable disbursement
would be made, no Event of Default (other than an Excess Cash EOD) exists and,
to Hotel Manager’s actual knowledge, no event has occurred which, with the
passage of time or notice or both, would constitute an Event of Default (other
than an Excess Cash EOD).
(e)    Any undrawn funds are to be retained in the Cash Collateral Account
during each Cash Trap Period and applied to Borrower's obligation under the Loan
Documents as and when

 
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such obligations become due. Upon repayment in full of the Loan, any balance
remaining in the Cash Collateral Account will be paid as designated by Borrower.
(f)    Notwithstanding the foregoing, a Cash Trap Period shall terminate, and
the related Cash Trap Trigger Event shall be deemed cured, in the following
circumstances: (i) if the Cash Trap Trigger Event with respect to such Cash Trap
Period was the failure of the Hotel Property to meet the required Debt Service
Coverage Ratio, such Cash Trap Period shall terminate once the Hotel Property
achieves a Debt Service Coverage Ratio equal to 1.20:1.00, as calculated based
on the immediately preceding twelve (12) month period, for two (2) consecutive
subsequent calendar quarters, provided no Event of Default shall then exist; and
(ii) if the Cash Trap Trigger event with respect to such Cash Trap Period was an
Event of Default, such Cash Trap Period shall terminate upon the cure or waiver
(by Lender in writing) of such Event of Default, provided no other Event of
Default shall then exist. Upon the termination of a Cash Trap Period, Hotel
Manager shall cease making any deposits into the Cash Collateral Account and any
funds remaining in the Cash Collateral Account shall be transferred to the Hotel
Operating Accounts. Notwithstanding the foregoing, in no event shall funds in
the Cash Collateral Account be released to Borrower or Master Tenant during the
last three (3) months of the Loan Term.
(g)    If at any time during the Loan Term an Event of Default (other than an
Excess Cash EOD) exists, Lender shall have the right (at its sole and absolute
election) to hold any funds then remaining in the Cash Collateral Account and to
apply such funds to cure such Event of Default or toward the repayment of the
Indebtedness pursuant to Section 2.7 hereof.
ARTICLE 6    

REPRESENTATIONS, WARRANTIES AND COVENANTS
Borrower represents, warrants and covenants that:
Section 6.1    Organization and Authority.
(a)    The execution and delivery of the Loan Documents have been duly
authorized and there is no provision in Borrower’s organizational documents, as
amended, requiring further consent for such action by any other Person.
(b)    Borrower is duly organized, validly existing and in good standing under
the laws of the state of its formation.
(c)    Borrower has all necessary franchises, licenses, authorizations,
registrations, permits and approvals and full power and authority to own and
operate the Hotel Property pursuant to the Master Lease Agreement, and carry on
its business as now conducted in each jurisdiction where Borrower conducts
business. Master Tenant has all necessary franchises, licenses, authorizations,
registrations, permits and approvals and full power and authority to lease and
operate the Hotel Property, and carry on its business as now conducted in each
jurisdiction where Master Tenant conducts business.

 
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(d)    The execution and delivery of and performance of its obligations under
the Loan Documents: (i) will not result in Borrower being in default under any
provision of its organizational documents, as amended, any court order, or any
mortgage, deed of trust or other agreement to which it is a party; and (ii) do
not require the consent of or any filing with any governmental authority.
(e)    All necessary and required actions have been duly taken by and on behalf
of Borrower to make and constitute the Loan Documents, and the Loan Documents
constitute, legal, valid and binding obligations enforceable in accordance with
their respective terms, subject only to the application of bankruptcy and other
laws affecting the rights of creditors generally.
Section 6.2    Maintenance of Existence. So long as any Indebtedness remains
outstanding, Borrower shall do all things necessary to preserve and keep in full
force and effect its existence, franchises, licenses, authorizations,
registrations, permits and approvals under the laws of the state of its
formation and the state where the Premises is located and shall comply in all
material respects with all regulations, rules, ordinances, statutes, orders and
decrees of any governmental authority or court now or hereafter applicable to
Borrower or to the Hotel Property or any portion thereof. Further, Borrower
shall cause Master Tenant to do all things necessary to preserve and keep in
full force and effect Master Tenant’s existence, franchises, licenses,
authorizations, registrations, permits and approvals under the laws of the state
of its formation and the State where the Premises is located and shall comply in
all material respects with all regulations, rules, ordinances, statutes, orders
and decrees of any governmental authority or court now or hereafter applicable
to Master Tenant or the Hotel Property or any portion thereof.
Section 6.3    Title.
(a)    Borrower has insurable fee simple title to the Premises and good
indefeasible title to the balance of the Mortgaged Property, in all instances,
free and clear of all Liens whatsoever, except the Permitted Encumbrances. To
Borrower’s knowledge, the Deed of Trust creates (i) a valid, perfected Lien on
the Mortgaged Property, subject only to Permitted Encumbrances and (ii)
perfected security interests in and to, and perfected collateral assignments of,
all Collateral (including the Leases), all in accordance with the terms hereof,
in each case subject only to any applicable Permitted Encumbrances and such
other Liens as are permitted pursuant to the Loan Documents. Borrower will
preserve such title and will forever warrant and defend the same and validity
and priority of the lien hereof to Lender against all claims whatsoever.
(b)    Borrower is the owner of certain easements and other appurtenant rights
(collectively, the “Borrower Easements”) created under the agreements listed and
described on Exhibit C hereof (as may be modified or amended from time to time
in accordance with this Agreement, collectively, the “Easement Agreements”).
Borrower has caused to be delivered to Lender preliminary title report(s)
(“Preliminary Title Report”) covering the Mortgaged Property prepared for Lender
in connection with the Loan and, to the extent not included in the Preliminary
Title Report, has otherwise caused to be delivered to Lender true, correct and
complete copies of all material Operating Agreements and Easement Agreements. To
Borrower’s knowledge,

 
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(i)
Except as set forth on Exhibit B or Exhibit C, no Operating Agreement, Easement
Agreement or Borrower Easement created thereunder has been modified, amended,
supplemented, transferred or limited, and they are all in full force and effect;

(ii)
no material defaults have occurred under any Operating Agreement or Easement
Agreement, and no event has occurred which with notice or the passage of time
would constitute a material event of default under any Operating Agreement or
Easement Agreement;

(iii)
there is no litigation or condemnation proceeding, pending or threatened in
writing, that would materially and adversely affect Borrower’s rights as the
holder of any of the Borrower Easements or the exercise of Borrower’s rights
thereunder; and

(iv)
any payments due from Borrower or Master Tenant with respect to any Operating
Agreement, Easement Agreement or Borrower Easement are current, other than
amounts for which payment has not been requested.

(c)    With respect to each Operating Agreement, Easement Agreement and
Permitted Encumbrance, Borrower shall, or shall cause Master Tenant to, to the
extent commercially reasonable to do so: (i) observe, perform and discharge all
material obligations, covenants and warranties required to be kept and performed
by Borrower or Master Tenant, and (ii) enforce or secure the performance of each
and every material obligation, term, covenant, condition and agreement to be
performed by any other party. Also, Borrower shall, or shall cause Master Tenant
to, (A) promptly deliver to Lender copies of all material written notices,
demands or requests sent or otherwise made by Borrower, Master Tenant or any
other Person pursuant to the Operating Agreements, Easement Agreements or
Permitted Encumbrances, and (B) timely pay any charges assessed against the
Premises as and when finally due pursuant to the Operating Agreements, Easement
Agreements or Permitted Encumbrances. Except with respect to (1) interim parking
agreements related to events at the Hotel Property entered into in the ordinary
course of business, (2) any modification, amendment, supplement, termination or
reduction of parking rights, to the extent such modification, amendment,
supplement, termination or reduction is required by the City of Laguna Beach,
the project entitlements or any existing agreement between Borrower and the City
of Laguna Beach, and (3) any modification, amendment, supplement or
clarification of the Parking Lot Easement, so long as any such modification,
amendment, supplement or clarification does not impair or adversely affect
access to the Hotel Employee Parking Lot from the adjacent public right-of-way
commonly known as South Coast Highway; Borrower will not, and will not cause or
permit Master Tenant to, without Lender’s prior written consent (which consent
shall not be unreasonably withheld, conditioned or delayed), consent to or enter
into any agreement or writing that modifies, amends, supplements, restates,
terminates or reduces any: (V) Operating Agreement, (W) Easement Agreement, (X)
any other public or private parking rights, or (Y) any appurtenant rights or
interests, including any reversionary interests which Borrower or Master Tenant
possesses or may acquire related to parking.

 
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Section 6.4    Mortgage Taxes.
(a)    Defined Terms. For purposes of this Section 6.4, the term “applicable
Legal Requirements” includes FATCA.
(b)    Payments Free of Taxes. Any and all payments by or on account of any
obligation of Borrower under any Loan Document shall be made without deduction
or withholding for any Applicable Taxes, except as required by applicable Legal
Requirements. If any applicable Legal Requirement (as determined in the good
faith discretion of an applicable Withholding Agent) requires the deduction or
withholding of any Tax from any such payment by a Withholding Agent, then the
applicable Withholding Agent shall be entitled to make such deduction or
withholding and shall timely pay the full amount deducted or withheld to the
relevant governmental authority in accordance with applicable Legal Requirements
and, if such Tax is an Indemnified Tax, then the sum payable by Borrower shall
be increased as necessary so that after such deduction or withholding has been
made (including such deductions and withholdings applicable to additional sums
payable under this Section) the applicable Lender receives an amount equal to
the sum it would have received had no such deduction or withholding been made.
(c)    Payment of Other Taxes by the Borrower. Borrower shall timely pay to the
relevant governmental authority in accordance with applicable Legal
Requirements, or at the option of Lender timely reimburse it for the payment of,
any Other Taxes.
(d)    Indemnification by the Borrower. Borrower shall indemnify each Lender,
within ten (10) days after demand therefor, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section) payable or paid by such
Lender or required to be withheld or deducted from a payment to such Lender and
any reasonable expenses arising therefrom or with respect thereto, whether or
not such Indemnified Taxes were correctly or legally imposed or asserted by the
relevant governmental authority. A certificate as to the amount of such payment
or liability delivered to Borrower by a Lender shall be conclusive absent
manifest error.
(e)    Indemnification by the Lenders. Each Lender shall severally indemnify the
Borrower, within ten (10) days after demand therefor, for (i) any Applicable
Taxes attributable to such Lender’s failure to comply with the provisions of
Section 12.15 relating to the maintenance of a Participant Register and (iii)
any Excluded Taxes attributable to such Lender, in each case, that are payable
or paid by Borrower in connection with any Loan Document, and any reasonable
expenses arising therefrom or with respect thereto, whether or not such
Applicable Taxes were correctly or legally imposed or asserted by the relevant
governmental authority. A certificate as to the amount of such payment or
liability delivered to any Lender by Borrower shall be conclusive absent
manifest error. Each Lender hereby authorizes Borrower to set off and apply any
and all amounts at any time owing to such Lender under any Loan Document or
otherwise payable by Borrower to Lender from any other source against any amount
due to Borrower under this paragraph (e).
(f)    Evidence of Payments. As soon as practicable after any payment of
Applicable Taxes by Borrower to a governmental authority pursuant to this
Section 6.4, Borrower

 
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shall deliver to Lender the original or a certified copy of a receipt issued by
such governmental authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Lender.
(g)    Status of Lenders.
(i)
Any Lender that is entitled to an exemption from or reduction of withholding Tax
with respect to payments made under any Loan Document shall deliver to the
Borrower, at the time or times reasonably requested by the Borrower, such
properly completed and executed documentation reasonably requested by Borrower
as will permit such payments to be made without withholding or at a reduced rate
of withholding. In addition, any Lender, if reasonably requested by the
Borrower, shall deliver such other documentation prescribed by applicable Legal
Requirements or reasonably requested by Borrower as will enable Borrower to
determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in
the preceding two sentences, the completion, execution and submission of such
documentation (other than such documentation set forth in Section 6.4(g)(ii)(A),
(ii)(B) and (ii)(D) below) shall not be required if in the Lender’s reasonable
judgment such completion, execution or submission would subject such Lender to
any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of such Lender.

(ii)
Without limiting the generality of the foregoing, in the event that Borrower is
a U.S. Borrower,

(A)    any Lender that is a U.S. Person shall deliver to Borrower on or prior to
the date on which such Lender becomes a Lender under this Agreement (and from
time to time thereafter upon the reasonable request of the Borrower), executed
originals of IRS Form W-9 certifying that such Lender is exempt from U.S.
federal backup withholding tax;
(B)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower (in such number of copies as shall be requested by the
Borrower) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower), whichever of the following is applicable:
1.    in the case of a Foreign Lender claiming the benefits of an income tax
treaty to which the United States is a party (x) with respect to payments of
interest under any Loan Document, executed originals of IRS Form W-8BEN or IRS
Form W-8BEN-E, as

 
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applicable, establishing an exemption from, or reduction of, U.S. federal
withholding Tax pursuant to the “interest” article of such tax treaty and (y)
with respect to any other applicable payments under any Loan Document, IRS Form
W-8BEN or IRS Form W-8BEN-E, as applicable, establishing an exemption from, or
reduction of, U.S. federal withholding Tax pursuant to the “business profits” or
“other income” article of such tax treaty;
2.    executed originals of IRS Form W-8ECI;
3.    in the case of a Foreign Lender claiming the benefits of the exemption for
portfolio interest under Section 881(c) of the United States Code, (x) a
certificate substantially to the effect that such Foreign Lender is not a “bank”
within the meaning of Section 881(c)(3)(A) of the United States Code, a “10
percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of
the United States Code, or a “controlled foreign corporation” described in
Section 881(c)(3)(C) of the United States Code (a “U.S. Tax Compliance
Certificate”) and (y) executed originals of IRS Form W-8BEN or IRS Form
W-8BEN-E, as applicable; or
4.    to the extent a Foreign Lender is not the beneficial owner, executed
originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN or
IRS Form W-8BEN-E, as applicable, IRS Form W-9, and/or other certification
documents from each beneficial owner, as applicable;
(C)    any Foreign Lender shall, to the extent it is legally entitled to do so,
deliver to Borrower (in such number of copies as shall be requested by the
Borrower) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable
request of the Borrower), executed originals of any other form prescribed by
applicable Legal Requirements as a basis for claiming exemption from or a
reduction in U.S. federal withholding Tax, duly completed, together with such
supplementary documentation as may be prescribed by applicable Legal
Requirements to permit Borrower to determine the withholding or deduction
required to be made; and
(D)    if a payment made to a Lender under any Loan Document would be subject to
U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to
comply with the applicable reporting requirements of FATCA (including those
contained in Section 1471(b) or 1472(b) of the United States Code, as
applicable), such Lender shall deliver to Borrower at the time or times
prescribed by Legal Requirements and at such time or times reasonably requested
by Borrower such documentation prescribed by applicable Legal Requirements
(including as prescribed by Section 1471(b)(3)(C)(i) of the United States Code)
and such additional documentation reasonably requested by Borrower as is
necessary for Borrower to comply with its obligations under FATCA and to
determine that such Lender has complied with such Lender’s obligations under
FATCA

 
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or to determine the amount to deduct and withhold from such payment. Solely for
purposes of this clause (D), “FATCA” shall include any amendments made to FATCA
after the date of this Agreement.
Each Lender agrees that if any form or certification it previously delivered
expires or becomes obsolete or inaccurate in any respect, it shall update such
form or certification or promptly notify Borrower in writing of its legal
inability to do so.
(h)    Treatment of Certain Refunds. If any party determines, in its sole
discretion exercised in good faith, that it has received a refund of any
Applicable Taxes as to which it has been indemnified pursuant to this Section
6.4 (including by the payment of additional amounts pursuant to this Section
6.4), it shall pay to the indemnifying party an amount equal to such refund (but
only to the extent of indemnity payments made under this Section with respect to
the Applicable Taxes giving rise to such refund), net of all out-of-pocket
expenses (including Applicable Taxes) of such indemnified party and without
interest (other than any interest paid by the relevant governmental authority
with respect to such refund). Such indemnifying party, upon the request of such
indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this paragraph (h) (plus any penalties, interest or other charges
imposed by the relevant governmental authority) in the event that such
indemnified party is required to repay such refund to such governmental
authority. Notwithstanding anything to the contrary in this paragraph (h), in no
event will the indemnified party be required to pay any amount to an
indemnifying party pursuant to this paragraph (h) the payment of which would
place the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the Applicable Tax subject to
indemnification and giving rise to such refund had not been deducted, withheld
or otherwise imposed and the indemnification payments or additional amounts with
respect to such Tax had never been paid. This paragraph shall not be construed
to require any indemnified party to make available its Tax returns (or any other
information relating to its Applicable Taxes that it deems confidential) to the
indemnifying party or any other Person.
(i)    Survival. Each party’s obligations under this Section 6.4 shall survive
any assignment of rights by, or the replacement of, a Lender and the repayment,
satisfaction or discharge of all obligations under any Loan Document.
Section 6.5    Payment of Liens. Borrower shall, or shall cause Master Tenant
to, pay when due all payments and charges due under or in connection with any
Liens and shall cause the prompt (but in no event later than thirty (30) days
after imposition), full and unconditional discharge of all Liens imposed on or
against the Mortgaged Property, the Hotel Property or the Additional Collateral
or any portion of any of the foregoing (other than Permitted Encumbrances), or
if not so discharged Lender may (but shall not be obligated to) make Advances to
do so. Borrower shall do or cause to be done, at the sole cost of Borrower,
everything reasonably necessary to fully preserve the first priority of the Lien
of the Deed of Trust. If Borrower fails or fails to cause Master Tenant to make
any such payment or if a Lien attaches to the Mortgaged Property, the Hotel
Property, the Additional Collateral or any portion of any of the foregoing, and
is not discharged within said thirty (30) day period, Lender may (but shall not
be obligated to) make such payment or discharge such

 
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lien and Borrower shall reimburse Lender on demand for all such Advances.
Notwithstanding the foregoing, after giving prior notice to Lender, Borrower or
Master Tenant may contest, bond over and/or insure any such Lien, including any
lien arising from the claims and demands of mechanics, laborers and others so
long as any such contest hereunder is done in accordance with the provisions for
contesting Impositions under Section 5.3(b) (including without limitation, the
requirements that Borrower deposit with Lender (to the extent required
hereunder) or the applicable arbiter the Contest Deposit Amount).
Notwithstanding the foregoing, Borrower shall have the right to bring tax
certiorari proceedings regarding the adjustment of tax assessments with respect
to the Mortgaged Property in the normal course of business provided that taxes
shall continue to be paid as provided in this Agreement.
Section 6.6    Representations Regarding Mortgaged Property.
(a)    To Borrower’s knowledge, no part of the Premises has been designated as
wetlands under any federal, state or local law or regulation or by any
governmental agency, and no portion of the Premises is located within a 100-year
flood plain, except as may be disclosed as such on the survey of the Premises
delivered to Lender in connection with the closing of the Loan.
(b)    To Borrower’s knowledge, except as set forth in the Property Condition
Report, (i) the Improvements are in good condition and repair, have not suffered
any material damage which has not been substantially repaired, and are free of
material structural defects or other material defects and (ii) the Hotel
Property is in compliance in all material respects with all Legal Requirements.
(c)    Public water supply, storm and sanitary sewers and sanitary sewer
capacity, and electrical, gas, cable and telephone facilities are available to
the Premises within the boundary lines thereof, and the Improvements connect to
all storm and sanitary sewer lines serving the Premises, and to Borrower’s
knowledge such lines are sufficient to meet the reasonable needs of the Premises
as currently used. To Borrower’s knowledge, except as set forth in the Property
Condition Report, surface and storm water do not accumulate on the Premises and
do not drain from the Premises across land of adjacent property owners, except
as permitted by an easement or other agreement with such adjacent property
owners.
(d)    The Premises are managed by the Hotel Manager pursuant to the Management
Agreement.
(e)    Borrower reports, for accounting purposes, on a fiscal year basis
commencing on January 1 and terminating on December 31.
(f)    To Borrower’s knowledge, there are no actions, suits or proceedings,
pending or threatened, affecting any Borrower, Master Tenant, any Indemnitor or
the Premises at law or in equity, on, before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or other
governmental instrumentality, which is reasonably expected to have a material
adverse impact on the Mortgaged Property. There are no outstanding judgments,
arbitration awards, decrees or awards of any kind pending against Borrower,
Master Tenant, any Indemnitor or any of the Mortgaged Property, the Hotel
Property or the Additional Collateral.

 
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(g)    All personal property comprising any portion of the Mortgaged Property is
in working condition for its intended use as part of the Hotel Property.
Section 6.7    [Intentionally Omitted]Indemnification Borrower shall indemnify,
defend and hold Lender and Lender Parties harmless from and against, and be
responsible for paying, all Losses which may be imposed upon, asserted against,
or incurred or paid by any of them: (a) by reason of, on account of or in
connection with any act or occurrence relating to the Mortgaged Property or any
bodily injury, death, other personal injury or property damage occurring prior
to any foreclosure by Lender or deed-in-lieu thereof and in, upon or in the
vicinity of the Mortgaged Property from any cause whatsoever, except with
respect to a Lender Party to the extent caused by its gross negligence or
willful misconduct; or (b) as a result of the failure of Borrower to perform any
of tis obligations under any Loan Document.
Section 6.9    Estoppel Certificates. Within fifteen (15) Business Days
following a request by Lender, Borrower shall provide to Lender a duly
acknowledged written statement confirming: (a) the original principal amount of
the Loan; (b) the unpaid principal amount of the Loan; (c) the rate of interest
of the Loan; (d) the terms of payment and maturity date of the Loan; (e) the
date installments of interest and/or principal were last paid; (f) that, except
as provided in detail in such statement, to Borrower’s knowledge there are no
offsets or defenses against the Indebtedness or defaults or events which with
the passage of time or the giving of notice, or both, would constitute an Event
of Default under the Loan Documents including, without limitation, any breach of
Section 6.11 or Event of Default under Section 9.1(n), 9.1(q) or 9.1(r); and
(g) such other information, to which Lender is otherwise entitled pursuant to
the terms of the Loan Documents, that Lender shall request in its reasonable
discretion.
Section 6.10    ERISA.
(a)    None of Borrower or Master Tenant shall engage in any transaction which
would cause any obligation, or action taken or to be taken hereunder (or the
exercise by Lender of any of its rights under the Loan Documents) to be a
non-exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA and/or Section 4975 of the IRS Code.
(b)    Borrower further covenants and agrees to deliver, and cause Master Tenant
to deliver, to Lender such certifications and other evidence from time to time,
until full repayment of the Indebtedness, as are requested by Lender in its
reasonable discretion that (i) neither of Borrower or Master Tenant is (nor is
either deemed to include the assets of) an “employee benefit plan” that is
subject to Title I of ERISA and/or a “plan” that is subject to Section 4975 of
the IRS Code; (ii) neither of Borrower or Master Tenant is a “governmental plan”
within the meaning of Section 3(32) of ERISA and is not subject to state
statutes regulating investments and fiduciary obligations with respect to
governmental plans; and (iii) one or more of the following statements is and
remains true:
(i)
Equity interests in Borrower and in Master Tenant are “publicly offered
securities” within the meaning of 29 C.F.R. § 2510.3-101 (as modified by Section
3(42) of ERISA, the “Plan Assets Regulation”); or

 
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(ii)
Less than twenty-five percent (25%) of each outstanding class of equity
interests in Borrower and in Master Tenant are held by “benefit plan investors”
(determined in accordance with the Plan Assets Regulation).

(c)    Neither Borrower nor Master Tenant shall agree to, enter into or
consummate any transaction which would render Borrower or Master Tenant (as
applicable) unable to furnish the certification or other evidence referred to in
Section 6.10(b), to the extent applicable.
(d)    Borrower represents, warrants and covenants to each Lender Party that
neither Borrower nor any ERISA Affiliate maintains, contributes to, or has any
obligation to contribute to, or has any direct or indirect liability with
respect to any “employee benefit plan” as defined in Section 3(3) of ERISA
(including any “multiemployer plan” as defined in Section 3(37) of ERISA) that
is subject to Title IV or Section 302 of ERISA or Section 412 of the IRS Code.
Borrower shall take or refrain from taking and shall cause Master Tenant to take
or refrain from taking, as the case may be, such actions as may be necessary to
cause the representation and warranty in this Section 6.10 to remain true and
accurate until full repayment of the Indebtedness.
Section 6.11    Terrorism and Anti-Money Laundering.
(a)    Borrower represents and warrants that, as of the date hereof, none of (i)
Borrower; (ii) any Person Controlling or Controlled by Borrower; (iii) if
Borrower is a privately held entity, any Upstream Owner having a ten percent
(10%) or more direct or indirect beneficial interest in Borrower; or (iv) any
Person for whom Borrower is acting as agent or nominee in connection with this
transaction, is an OFAC Prohibited Person, and Borrower hereby covenants that
until full repayment of the Indebtedness, none of (i) Borrower; (ii) any Person
Controlling or Controlled by Borrower; (iii) if Borrower is a privately held
entity, any Upstream Owner having a ten percent (10%) or more direct or indirect
beneficial interest in Borrower; or (iv) any Person for whom Borrower is acting
as agent or nominee in connection with this transaction, shall be an OFAC
Prohibited Person.
(b)    To comply with applicable Anti-Money Laundering Laws, all payments by
Borrower to Lender or from Lender to Borrower will only be made and received in
Borrower’s name and to and from a bank account of a bank based or incorporated
in or formed under the laws of the United States or a bank that is not a
“foreign shell bank” within the meaning of the U.S. Bank Secrecy Act (31 U.S.C.
§ 5311 et seq.), as amended, and the regulations promulgated thereunder by the
U.S. Department of the Treasury, as such regulations may be amended from time to
time.
(c)    Borrower shall provide Lender at any time and from time to time until
repayment in full of the Indebtedness with such information as Lender determines
(in its reasonable discretion) to be necessary or appropriate to comply with the
Anti-Money Laundering Laws of any applicable jurisdiction, or to respond to
requests for information concerning the identity of Borrower, any Person
Controlling or Controlled by Borrower or any Person having a beneficial interest
in Borrower, from any governmental authority, self-regulatory organization or
financial institution in connection with its anti-money laundering compliance
procedures, or to update such information.

 
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Section 6.12    Special Purpose Entity Requirements.
All of the provisions of this Section 6.12 are individually and collectively
referred to as the “SPE Requirements”.
(a)    Borrower has not and, until repayment in full of the Indebtedness, shall
not:
(i)
engage in any business or activity other than the acquisition, ownership,
operation and maintenance of the Mortgaged Property, and activities incidental
thereto;

(ii)
acquire or own any material asset other than the Mortgaged Property and such
incidental personal property as may be necessary for the operation of the
Mortgaged Property;

(iii)
merge into or consolidate with any Person or dissolve, terminate or liquidate in
whole or in part, or, except for a permitted Title Transfer, transfer or
otherwise dispose of all or substantially all of its assets or change its legal
structure, without in each case obtaining the prior written consent of Lender,
which consent shall not be unreasonably withheld, conditioned or delayed;

(iv)
fail to preserve its existence as an entity duly organized, validly existing and
in good standing (if applicable) under the laws of the jurisdiction of its
organization or formation, or without the prior written consent of Lender, which
consent shall not be unreasonably withheld, conditioned or delayed, terminate
the provisions of Borrower’s formation or entity management documents or amend
such organizational documents in a manner which would result in a breach of any
of the representations, warranties or covenants set forth in this Section 6.12
or that would otherwise adversely affect Borrower’s single purpose entity
status;

(v)
own any subsidiary or make any investment in or acquire the obligations or
securities of any other Person without the prior written consent of Lender,
which consent shall not be unreasonably withheld, delayed or conditioned;

(vi)
commingle its assets with the assets of any of its shareholders, partners,
members, Principals, Affiliates, or any shareholder, partner, member, principal
or affiliate thereof, or of any other Person or transfer any assets to any such
Person other than distributions on account of equity interests in Borrower
permitted hereunder and properly accounted for;

 
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(vii)
incur any debt, secured or unsecured, direct or contingent (including
guaranteeing any obligation), other than the Indebtedness, except as permitted
under Section 8.1; provided that any such debt is satisfied when due and
payable, subject to reasonable and customary rights to contest such obligations
and provided that there is sufficient cash flow from the Hotel Property at such
time to do so and Borrower’s constituent owners shall not be required to fund or
advance any additional capital to satisfy such obligation;

(viii)
except for a payment of the Indebtedness by a guarantor or indemnitor of the
Loan, (A) allow any Person to pay its debts and liabilities, or (B) fail to pay
its debts and liabilities solely from its own assets so long as there is
sufficient cash flow from the Hotel Property at such time to do so and
Borrower’s constituent owners shall not be required to fund or advance any
additional capital to satisfy this obligation;

(ix)
fail to maintain its records, books of account and bank accounts separate and
apart from those of its shareholders, partners, members, Principals and
Affiliates, or any shareholder, partner, member, principal or Affiliate thereof,
and any other Person or fail to prepare and maintain its own financial
statements in accordance with the Uniform System of Accounts and susceptible to
audit, or if such financial statements are consolidated fail to cause such
financial statements to contain footnotes disclosing that the Mortgaged Property
is actually owned by Borrower;

(x)
other than the Master Lease, enter into any contract or agreement with any of
its shareholders, partners, members, Principals or Affiliates, any guarantor or
indemnitor of all or a portion of the Loan or any shareholder, partner, member,
principal or Affiliate thereof, except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arms-length basis with third parties;

(xi)
fail to correct any misunderstandings actually known by Borrower regarding the
separate identity of Borrower;

(xii)
hold itself out to be responsible or pledge its assets or credit worthiness for
the debts of another Person or allow any Person to hold itself out to be
responsible or pledge its assets or credit worthiness for the debts of Borrower
(except for a guarantor or indemnitor of the Loan);

(xiii)
make any loans or advances to any third party, including any of its
shareholders, partners, members, Principals or Affiliates, or any shareholder,
partner, member, Principal or Affiliate thereof;

 
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(xiv)
fail to use separate contracts, purchase orders, invoices and checks (other than
such documents that bear the name of its manager or managing agent with
reference to the Premises);

(xv)
fail either to hold itself out to the public as a legal entity separate and
distinct from any other Person or to conduct its business solely in its own name
in order not (A) to mislead others as to the entity with which such other party
is transacting business, or (B) to suggest that Borrower is responsible for the
debts of any third party (including any of its shareholders, partners, members,
principals or Affiliates, or any shareholder, partner, member, principal or
Affiliate thereof);

(xvi)
allow any Person to pay the salaries of its own employees or fail to maintain a
sufficient number of employees for its contemplated business operations;

(xvii)
intentionally fail to maintain adequate capital for the normal obligations
reasonably foreseeable in a business of its size and character and in light of
its contemplated business operations, provided that there is sufficient cash
flow from the Hotel Property at such time to do so and Borrower’s constituent
owners shall not be required to fund or advance any additional capital to
satisfy this obligation;

(xviii)
seek dissolution or winding up in whole, or in part;

(xix)
file a voluntary petition or otherwise initiate proceedings to have Borrower or
Indemnitor adjudicated bankrupt or insolvent, or consent to the institution of
bankruptcy or insolvency proceedings against Borrower or Indemnitor, or file a
petition seeking or consenting to reorganization or relief of Borrower or
Indemnitor as debtor under any applicable federal or state law relating to
bankruptcy, insolvency, or other relief for debtors with respect to Borrower or
Indemnitor; or seek or consent to the appointment of any trustee, receiver,
conservator, assignee, sequestrator, custodian, liquidator (or other similar
official) of Borrower or Indemnitor or of all or any substantial part of the
properties and assets of Borrower or Indemnitor, or make any general assignment
for the benefit of creditors of Borrower or Indemnitor, or admit in writing in a
legal proceeding the inability of Borrower or Indemnitor to pay its debts
generally as they become due (other than at the request of Lender or Lender’s
agents or employees or in any information provided to Lender pursuant to this
Agreement or the other Loan Documents and unless failure to make such admission
would be a violation of law) or declare or effect a moratorium on Borrower or
Indemnitor debt or take any action in furtherance of any such action; or

 
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(xx)
intentionally conceal assets from any creditor, or enter into any transaction
with the intent to hinder, delay or defraud its creditors or the creditors of
any other Person.

(b)    If Borrower is, or ever becomes, a limited partnership, then any general
partner of Borrower must also be a special purpose entity and comply with the
provisions of this Section 6.12.
(c)    Borrower and any Person required to be a special purpose entity pursuant
to the terms of this Section 6.12 shall not amend or modify any of their
respective formation or entity management documents in any manner that would
result in a breach of any of the representations, warranties or covenants set
forth in this Section 6.12 or that would otherwise adversely affect Borrower’s
special purpose entity status without the prior written consent of Lender, which
consent shall not be unreasonably withheld, delayed or conditioned. Promptly
after Lender’s written request from time to time, but not more frequently than
once in any calendar year, Borrower shall deliver to Lender evidence
satisfactory to Lender in its reasonable discretion that Borrower and any other
Person required to be a special purpose entity pursuant to the terms of this
Section 6.12 are in compliance with the provisions of this Section 6.12.
Section 6.13    Notices/Proceedings. Borrower shall, and shall cause Master
Tenant to, promptly notify Lender in writing of the occurrence of any of the
following: (a) receipt of any material written notice from any holder of any
other lien or security interest in any of the Mortgaged Property (other than a
Permitted Encumbrance), the Hotel Property or the Additional Collateral; it
being understood that, except as expressly set forth in this Agreement, no such
lien or security interest is ever permitted to exist at any time under any
circumstances until after repayment in full of the Indebtedness; or (b)
commencement of any judicial or administrative proceedings against or otherwise
materially affecting any Borrower, Master Tenant, any Indemnitor or any of the
Mortgaged Property, the Hotel Property or the Additional Collateral, or any
other material action by any creditor thereof as a result of any default under
the terms of any loan.
Section 6.14    [Intentionally Omitted]
Section 6.15    Business Purpose of Loan. Borrower stipulates and warrants that
the purpose of the Loan is for the sole purpose of carrying on or acquiring a
business, professional or commercial enterprise. Borrower further stipulates and
warrants that all proceeds of the Loan will be used for said business,
professional or commercial enterprise.
Section 6.16    Legal Requirements and Maintenance of Mortgaged Property. To
Borrower’s knowledge, except as disclosed to Lender in writing, the Mortgaged
Property (including the Hotel Property) is in compliance with all Legal
Requirements. Borrower shall, and shall cause Master Tenant to, maintain, or
shall cause to be maintained, the Mortgaged Property and the Hotel Property, as
applicable, in good and safe condition, working order and repair, and comply
with all Legal Requirements in all material respects. Borrower shall, and shall
cause Master Tenant to, permit Lender and its agents to enter upon and inspect:
(a) the areas of the Mortgaged Property (including the Hotel Property) which are
open to the public at all reasonable hours upon reasonable prior notice and (b)
subject to the rights of tenants under the Leases, all other areas of the
Mortgaged

 
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Property (including the Hotel Property) during regular business hours upon at
least forty-eight (48) hours prior written notice, except that no notice shall
be required in the event of an emergency. Borrower shall not, and shall cause
Master Tenant not to, without the prior written consent of Lender, which consent
may be granted or withheld in Lender’s reasonable discretion: (u) cause or
permit any change in the use of the Premises; (v) intentionally cause or permit
the use or occupancy of any part of the Premises to be discontinued if such
discontinuance would violate any zoning or other law, ordinance or regulation;
(w) intentionally apply for or consent to, or cause or permit Master Tenant to
apply for or consent to, any subdivision, re-subdivision, zoning
reclassification, modification or restriction affecting the Premises; (x) commit
or permit Master Tenant or any other tenant to commit (to the extent within its
control and not the control of any tenant under any Leases, other than Master
Tenant) (i) any physical waste (provided that the Equipment included within the
Collateral may be removed at the request of Hotel Manager or if obsolete or if
replaced with similar items of equal or greater utility or value) or (ii) any
structural or material addition to or material alteration, demolition or removal
of the Mortgaged Property (including the Hotel Property); provided, however,
Lender’s prior consent shall not be required for any such addition, alteration,
demolition or removal if (A) Lender receives written notice of such addition,
alteration, demolition or removal, and (B) such addition, alteration, demolition
or removal is either required under an Acceptable Lease, required pursuant to or
agreed to by Hotel Manager under the Management Agreement, or is reasonably
necessary or attendant to keeping the Hotel Property in good working order and
repair; (y) take any action whatsoever to apply for, consent to or acquiesce in
any subdivision or re-subdivision of the Mortgaged Property (including the Hotel
Property), or any portion thereof; or (z) cause or permit any space in the
Premises to be leased, used or occupied for or in connection with any marijuana
related use or business, whether or not marijuana is a dominant or incidental
use or element of such business or space in the Building and whether or not such
use is legal or permissible under any applicable laws, rules or regulations
(collectively a “Marijuana Related Use”). No provision of this Section 6.16
shall prohibit Borrower from undertaking and completing, or causing Master
Tenant to undertake or complete, tenant improvement work authorized under Leases
previously approved by Lender or not requiring Lender’s prior approval or normal
maintenance and repairs.
Section 6.17    Solvency. (a) Neither Borrower nor Indemnitor has entered into
the transaction contemplated by this Agreement or any Loan Document with the
actual intent to hinder, delay, or defraud any creditor, and (b) Borrower and
Indemnitor have each received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the fair
saleable value of Borrower’s assets exceeds and will, immediately following the
making of the Loan, exceed Borrower’s total liabilities, including subordinated,
unliquidated, disputed and contingent liabilities. The fair saleable value of
Borrower’s assets is and will, immediately following the making of the Loan, be
greater than Borrower’s probable liabilities, including the maximum amount of
its contingent liabilities on its debts as such debts become absolute and
matured. Borrower’s assets do not and, immediately following the making of the
Loan will not, constitute unreasonably small capital for such entity to carry
out its business as conducted or as proposed to be conducted. Borrower does not
intend to, and does not believe that it will, incur debt and other liabilities
(including contingent liabilities and other commitments) beyond its ability to
pay such debt and liabilities as they mature (taking into account the timing and
amounts of cash to be received by it and the amounts to be payable on or in
respect of obligations of such party).

 
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No petition in bankruptcy has been filed against Borrower or any Indemnitor and
neither Borrower nor any Indemnitor has ever made an assignment for the benefit
of creditors or taken advantage of any insolvency act for the benefit of
debtors. Neither Borrower nor Indemnitor has been involved in a foreclosure or
in a default on any indebtedness owing to Lender or to any affiliate of Lender
or on any other indebtedness obtained for commercial purposes. All financial and
other information submitted by or on behalf of Borrower and Indemnitor to Lender
in connection with the Loan is true, complete and correct in all material
respects. All of Borrower’s obligations to creditors, including, but not limited
to, all payments and accounts relating to the Premises, are current.
Section 6.18    Master Lease.
(a)    Borrower hereby represents and warrants that the Premises are leased and
subleased, as applicable, to Master Tenant pursuant to the Master Lease. The
Master Lease is in full force and effect. To Borrower’s knowledge, no default
has occurred and is continuing under the Master Lease, and no event has occurred
thereunder which, with notice or the passage of time or both, would constitute a
default thereunder. Prior to the date of this Agreement, Borrower has delivered
to Lender a true, correct and complete copy of the Master Lease (including all
amendments and side letters issued in connection therewith).
(b)    With respect to the Master Lease, Borrower shall:
(i)
Pay all sums required to be paid by Borrower thereunder, promptly perform and/or
observe all of the material covenants and agreements required to be performed
and observed by Borrower thereunder, and do all commercially reasonable things
necessary to preserve and to keep unimpaired its material rights thereunder;

(ii)
Promptly notify Lender of any default under the Master Lease of which it is
aware, and provide Lender with copies of any material written notices delivered
in connection therewith;

(iii)
Promptly deliver to Lender a copy of each written notice received by it under
the Master Lease with respect to a violation of law or the existence of
circumstances that could reasonably be anticipated to result in a breach or
default under the Loan Documents;

(iv)
Use commercially reasonable efforts to enforce in a commercially reasonable
manner the performance and observance of all of the covenants and agreements
required to be performed and/or observed by the Master Tenant under the Master
Lease;

(v)
Not amend, supplement or otherwise modify the Master Lease without Lender’s
prior written consent, which will not be unreasonably withheld, conditioned or
delayed; provided, however, that Lender’s consent shall not be required for the
following modifications or amendments to the Master Lease: (i) ministerial,

 
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typographical or other clerical modifications or amendments, and (ii) any
resizing of the amount of Base Rent or Percentage Rent (each as defined in the
Master Lease) payable by Master Tenant under the Master Lease so long as
following each and every such resizing, the resulting amount of each monthly
installment of Base Rent payable by Master Tenant under the Master Lease will be
not less than the monthly installment of interest or principal and interest, as
applicable, then payable under the Loan. Notwithstanding the foregoing, if the
resulting amount of any monthly installment of Base Rent payable by Master
Tenant under the Master Lease will be less than the monthly installment of
interest or principal and interest, as applicable, then payable under the Loan,
Lender’s consent shall not be required for such resizing so long as Borrower
provides assurances satisfactory to Lender in its reasonable discretion that the
aggregate amount of Base Rent and Percentage Rent that will be payable by Master
Tenant under the Master Lease for a period of time to be selected by Lender in
its reasonable discretion, based upon pro forma Base Rent and Percentage Rent
for such period of time and otherwise with such detail as Lender may request in
its reasonable discretion, will be sufficient to pay the aggregate amount of the
monthly installments of interest and/or principal and interest, as applicable,
that will be due under the Loan for such period of time;
(vi)
Not terminate the Master Lease without prior written notice to Lender; provided,
however, in connection with any such termination, either (A) Borrower shall
enter into a new master lease and deliver to Lender a replacement collateral
assignment and security agreement from a Person acceptable to Lender in Lender’s
sole discretion and substantially in the form of the Master Lease and the
Security Agreement delivered as of the Closing Date, that are executed and
delivered to Lender prior to or concurrently with such termination or (B) there
shall be no replacement master lease, the assets of the Master Tenant shall be
transferred to Borrower, and Lender shall have received such amendment to the
Loan Documents as reasonably requested by Lender to reflect Lender’s continuing
security interest in such transferred assets; and

(vii)
Not permit Master Tenant to assign any or all of its right, title and interest
under the Master Lease unless the assignee assumes and affirms the obligations
of Master Tenant under the Loan Documents to which Master Tenant is a party by
either (A) executing and delivering to Lender an assumption of and amendment to
the Loan Documents to which Master Tenant is a party in form and substance
satisfactory to Lender in its reasonable discretion or (B) executing and
delivering in favor of Lender a replacement Hotel Manager

 
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Subordination, Non-Disturbance and Attornment Agreement, Collateral Assignment
and Security Agreement, Subordination and Conditional Non-Disturbance and
Attornment Agreement, and Master Tenant’s Affidavit, all in substantially the
same form as those executed by Master Tenant on the Closing Date, and any other
documents required by Lender in its reasonable discretion in connection with
such assumption.
In the event Borrower submits any amendment, modification or termination to
Lender for approval, pursuant to clause (v) above, Borrower shall pay for
Lender’s reasonable out-of-pocket attorneys’ fees, costs and expenses in
connection with Lender’s review of any such amendment, modification or
termination of the Master Lease. A copy of each amendment, modification or
termination to the Master Lease, whether entered into with Lender’s approval or
for which Lender’s approval is expressly not required pursuant to clause (v)
above, shall be promptly delivered to Lender.
Section 6.19    CC&Rs. Borrower agrees that Borrower’s rights under the CC&Rs
are part of the Collateral. In addition, Borrower covenants and agrees that
Borrower shall, and shall cause Master Tenant to:
(i)
pay all sums required to be paid by Borrower or Master Tenant under the CC&Rs
and promptly perform and/or observe all of the material covenants and agreements
required to be performed and observed by it under the CC&Rs and do all
commercially reasonable things necessary to preserve and to keep unimpaired its
rights thereunder;

(ii)
promptly notify Lender of any default under the CC&Rs of which it is aware and
provide Lender with copies of any material written notices delivered in
connection therewith or otherwise received from or in connection with the CC&Rs,
the Associations and/or the City of Laguna Beach;

(iii)
Use commercially reasonable efforts to enforce in a commercially reasonable
manner the performance and observance of all of the covenants and agreements
required to be performed and/or observed by the City and/or the Associations
under the CC&Rs; and

(iv)
not amend, modify or terminate, and not agree to any amendment, modification or
termination of, the CC&Rs without the prior written approval of Lender, which
approval shall not be unreasonably withheld, conditioned or delayed; provided,
however, that Lender’s consent shall not be required for ministerial,
typographical or other clerical modifications or amendments.

In the event Borrower submits any amendment, modification or termination to
Lender for approval, pursuant to clause (iv) above, Borrower shall pay for
Lender’s reasonable out-

 
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of-pocket attorneys’ fees, costs and expenses in connection with Lender’s review
of any such amendment, modification or termination of the CC&Rs.
ARTICLE 7    

FINANCIAL REPORTING
Section 7.1    Financial Statements; Records. Borrower shall keep adequate books
and records of account in accordance with the Uniform System of Accounts and
shall provide to Lender in both hard copy and in electronic format, if
available, via e-mail to addresses specified by Lender, within the time periods
set forth, the following (collectively, the “Financial Information”):
(a)    Financial Information. Borrower shall deliver, or cause to be delivered,
to Lender the following:
(i)
monthly operating statements of the Premises, prepared and certified by Hotel
Manager pursuant to the Management Agreement, within twenty (20) days after the
end of each calendar month;

(ii)
an annual operating statement of the Premises, within one hundred twenty (120)
days after the close of each calendar year;

(iii)
an annual balance sheet and profit and loss statement of Borrower, Indemnitor
and Master Tenant each in a form consistent with the applicable form delivered
to Lender in connection with the closing of the Loan or such other form approved
by Lender in its reasonable discretion, prepared and certified by Borrower,
Indemnitor and Master Tenant as to the applicable statement, and, such
statements, if required by Lender during the continuance of an Event of Default,
shall be audited financial statements prepared and certified by Pricewaterhouse
Coopers or another independent certified public accountant acceptable to Lender,
(A) with respect to Borrower and Master Tenant, within one hundred twenty (120)
days after the close of each Fiscal Year of Borrower and (B) with respect to
Indemnitor, within one hundred fifty (150) days after the close of each Fiscal
Year of Indemnitor;

(iv)
an annual statement from Borrower and Indemnitor in a form approved by Lender in
its reasonable discretion, certifying: (A) the names of all Upstream Owners that
either own (directly or indirectly) ten percent (10%) or more of the beneficial
interest in Borrower or own a general partnership or managing membership
interest in Borrower; and (B) that no Person has obtained any financing
prohibited by the Loan Documents, signed and dated by Borrower, within one
hundred twenty (120) days after the close of each Fiscal

 
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Year of Borrower and from time to time as Lender may request in its reasonable
discretion;
(v)
a proposed Annual Operating Plan for the Hotel Property, prepared by Hotel
Manager pursuant to the Management Agreement, at least thirty (30) days prior to
the commencement of each calendar year; and

(vi)
the FF&E Certificate, within sixty (60) days after the close of each calendar
year.

(b)    Financial Information Upon Request: Upon written request from Lender,
Borrower shall deliver, or cause to be delivered, the following:
(i)
a copy of the federal tax return of Borrower and Master Tenant, as and when
filed with the Internal Revenue Service;

(ii)
such other financial or management information from Borrower, Master Tenant and
Indemnitor (but not of any other Upstream Owner) as may, from time to time, be
required by Lender in its reasonable discretion and in form and substance
satisfactory to Lender in its reasonable discretion;

(iii)
Borrower’s, Master Tenant’s and Hotel Manager’s books and records regarding the
Premises for examination, review, copying and audit by Lender or its auditors
(at Lender's expense so long as there is then no existing Event of Default)
during normal business hours and convenient facilities for such examination,
review, copying and audit of Borrower’s, Master Tenant’s and Hotel Manager’s
books and records of account; and

(iv)
to the extent Borrower has such information or has the ability to obtain such
information utilizing commercially reasonable efforts, financial statements
(audited if available), including balance sheets and profit and loss statements,
and copies of federal tax returns for Master Tenant.

(c)    Failure to Deliver Financial Information: If Borrower fails to deliver to
Lender any Financial Information required hereunder within thirty (30) days
following written notice from Lender to Borrower that Borrower has failed to
timely deliver said Financial Information and such failure is within the
reasonable control of Borrower, Lender may, in its sole and absolute discretion,
(i) declare such failure to be an Event of Default pursuant to Section 9.1(m),
and/or (ii) charge Borrower (and Borrower shall pay to Lender) a fee equal to
One Thousand Dollars ($1,000) (the “Financial Information Fee”), for each thirty
(30) day period or portion thereof during which Borrower fails to timely deliver
to Lender any such Financial Information.

 
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(d)    Annual Operating Plan. Lender shall have the right to review and, during
the continuance of an Event of Default and solely with respect to any item or
amount in such proposed Annual Operating Plan over which Master Tenant has
approval rights pursuant to the Management Agreement, to approve such items or
amounts in such proposed Annual Operating Plan. Any such approval shall not be
unreasonably withheld, conditioned or delayed. If, within ten (10) Business Days
after Lender’s receipt of Borrower’s written request for such approval of such
proposed Annual Operating Plan stating: (i) “TIME SENSITIVE RESPONSE REQUIRED
WITHIN TEN (10) BUSINESS DAYS OF RECEIPT OR DEEMED APPROVAL MAY OCCUR”, together
with the a true and complete copy of the proposed Annual Operating Plan,
including any exhibits or supporting information prepared by Hotel Manager and
delivered to Borrower or Master Tenant pursuant to the Management Agreement (if
any), Lender does not approve or disapprove such proposed Annual Operating Plan
(disapproval to include reasons), Borrower may deliver a second notice to
Lender, together with a second copy of the proposed Annual Operating Plan and
any such exhibits and supporting information (if any), stating: “PURSUANT TO THE
TERMS OF SUBSECTION 7.1(d) OF THE AMENDED AND RESTATED LOAN AGREEMENT EXECUTED
BY SHR MLB, LLC, A DELAWARE LIMITED LIABILITY COMPANY, AS BORROWER, DATED
JANUARY 29, 2015, LENDER HAS FAILED TO RESPOND TO THE REQUEST FOR APPROVAL OF
THE PROPOSED ANNUAL OPERATING PLAN. FAILURE OF LENDER TO RESPOND TO BORROWER’S
REQUEST FOR SUCH APPROVAL WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF THIS
SECOND NOTICE SHALL BE DEEMED TO BE LENDER’S APPROVAL OF SUCH PROPOSED ANNUAL
OPERATING PLAN”. If Lender fails to approve or disapprove (which such
disapproval shall include in reasonable detail, reasons for such disapproval) of
such proposed Annual Operating Plan within such additional five (5) Business Day
period, such proposed Annual Operating Plan shall be deemed approved by Lender.
To the extent Master Tenant, Lender and Hotel Manager cannot agree on any such
proposed Annual Operating Plan, Borrower shall cause Master Tenant to submit
such matter to arbitration for resolution in accordance with the procedures set
forth in Article 10 of the Management Agreement and, until such resolution is
determined according to such procedures or a new Annual Operating Plan is agreed
to by Master Tenant, Lender and Hotel Manager, Borrower shall cause Master
Tenant to cause Hotel Manager to continue operating the Premises pursuant to the
prior year’s Annual Operating Budget in the manner, and subject to the terms and
conditions, set forth in Article 4 of the Management Agreement.
ARTICLE 8    

CONVEYANCES, ENCUMBRANCES AND BORROWINGS
Section 8.1    Prohibition Against Conveyances, Encumbrances and Borrowing.
(a)    Except with the prior written consent of Lender, and except as expressly
permitted in Sections 8.2, 8.3, 8.4 and 8.5, neither Borrower, Master Tenant nor
any Upstream Owner shall sell, transfer, convey, assign, mortgage, encumber,
pledge, hypothecate, grant a security interest in, grant options with respect
to, or otherwise dispose of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) (collectively, a “Conveyance”) all or any portion of
any legal or beneficial interest in: (i) all or

 
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any portion of the Mortgaged Property including the Leases; or (ii) all or any
ownership interest in Borrower or in any Upstream Owner, except that Conveyances
of any publicly traded shares in any Upstream Owner shall be specifically
permitted without the consent of Lender. In addition, Borrower shall not incur
or accept a PACE Loan, and shall not permit or suffer the existence of any PACE
Lien on all or any portion of the Mortgaged Property, in either case without
Lender’s prior written consent thereto
(b)    In furtherance of the foregoing, subordinate liens (voluntary or
involuntary) secured by any portion of the Mortgaged Property, or any beneficial
interest in the Mortgaged Property, and any mezzanine or any other financing,
whether unsecured or secured by any ownership interest in Borrower or in any
Upstream Owner, shall not be permitted, except with the prior written consent of
Lender in each case.
(c)    Without limiting Lender’s right to withhold its consent to any
Conveyance, any Conveyance must not be to a tenancy in common or an OFAC
Prohibited Person. Lender’s consent to any of the foregoing actions, if required
pursuant to this Agreement and if given, may be conditioned upon a change in the
interest rate, maturity date, amortization period or other terms under this
Agreement, the payment of a transfer or encumbrance fee and/or any other
requirements of Lender. Notwithstanding the foregoing, Lender shall not
unreasonably withhold, delay or condition its consent to easements or access
licenses (or amendments thereto), nor shall Lender require a change in the terms
of the Loan in connection with a request for consent to easements or access
licenses (or amendments thereto) so long as such easements or access licenses do
not have a material adverse impact on the use, operation or value of the
Mortgaged Property or the Hotel Property. In addition to the standard processing
fee and the transfer or encumbrance fee referred to in this Section 8.1,
Borrower shall pay or reimburse Lender within five (5) Business Days after
demand for all reasonable out-of-pocket expenses (including reasonable
out-of-pocket attorneys’ fees, costs and expenses, title search costs, and title
insurance endorsement premiums) incurred by Lender in connection with the
review, approval and documentation of any such transaction.
(d)    The foregoing prohibitions are not intended to apply to Leases (which
shall be governed by Section 5.1 hereof), excluding, however, the Master Lease,
or to prevent the individual Upstream Owners (other than any general partner or
managing member of Borrower or any other Upstream Owner that is required to
comply with the provisions of Section 6.12) from obtaining personal loans
unrelated to Borrower, the Mortgaged Property and the Hotel Property. Further,
the foregoing prohibitions in this Section 8.1 are also not intended to prevent
Borrower from incurring (i) reasonable and customary equipment leases, provided
that such leases do not, in the aggregate, exceed Five Hundred Thousand Dollars
($500,000) in annual payments, and (ii) reasonable and customary trade payables
and unsecured operational debt incurred with trade creditors in the ordinary
course of its business of owning and operating the Hotel Property in such
amounts as are reasonable and customary under the circumstances that will be
satisfied within sixty (60) days of incurrence, provided that such debt is not
evidenced by a note, is paid when due and there will be sufficient Net Operating
Income (as projected by Hotel Manager for the immediately succeeding calendar
month) to pay such debt when due. In addition, the foregoing prohibitions of
this Section 8.1 shall not be deemed to restrict the payment of any accrued and
unpaid incentive management fees due to Hotel Manager pursuant to the Management
Agreement to the extent there

 
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is sufficient Net Operating Income to pay such fees, nor, to the extent there is
insufficient Net Operating Income to pay such fees, shall the foregoing
prohibitions of this Section 8.1 be deemed to restrict the accrual of such fees.
Section 8.2    Transfers of Minority, Non-Controlling Interests. Notwithstanding
the prohibitions in Section 8.1 above, the constituent owners of Borrower
(including any Person who becomes a holder of a direct or indirect interest in
Borrower pursuant to Section 8.3 hereof) may make Conveyances among themselves
of direct and indirect interests in Borrower (each, a “Constituent Transfer”)
without Lender’s prior written consent; provided, that after giving effect to
such Conveyance and all prior Conveyances, (i) Control Party maintains Control
of Borrower and continues to own (directly or indirectly) not less than five
percent (5%) of Borrower, (ii) Hotel Manager continues to operate the Hotel
Property, and (iii) unless at least forty-nine percent (49%) of the direct or
indirect interests in Borrower are owned by one or more Qualified Real Estate
Investors, if such constituent owner transferee, together with its Affiliates,
will following such Constituent Transfer own in the aggregate ten percent (10%)
or more of the direct and indirect interests in Borrower, then such constituent
owner transferee and such Affiliates, or the sponsor, principal, parent or other
majority owner thereof, shall be a Qualified Transferee.
Section 8.3    Partial Interest Transfer. Notwithstanding the prohibitions in
Section 8.1 above, Lender’s consent will not be required for Conveyances of
direct or indirect interest in Borrower to one or more investors which do not
own direct or indirect interests in Borrower as of the date hereof (each such
transfer, a “Partial Interest Transfer”), provided that all of the following
conditions have been fully satisfied:
(a)    Intentionally omitted.
(b)    At the time of the proposed Partial Interest Transfer, the following
conditions are fully satisfied:
(i)
Solely with respect to transfers of direct or indirect interests in Borrower by
Indemnitor, no monetary default or Event of Default exists;

(ii)
Borrower named on page one of this Agreement, or any successor Borrower pursuant
to Section 8.4, holds title to the Mortgaged Property;

(iii)
After giving effect to the proposed Partial Interest Transfer and all prior
Partial Interest Transfers, Control Party continues (A) to Control Borrower and
(B) to own, directly or indirectly, no less than five percent (5%) of all legal
and beneficial ownership interests in Borrower;

(iv)
Unless at least forty-nine percent (49%) of the direct or indirect interests in
Borrower are owned by one or more Qualified Real Estate Investors, if following
the consummation of such Partial Interest

 
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Transfer the proposed third party transferee (a “Proposed Partial Interest
Transferee”) and its Affiliates, will own, in the aggregate, more than ten
percent (10%) of the direct and indirect interests in Borrower, then:
(A)    such Proposed Partial Interest Transferee and such Affiliates shall be,
or the sponsor, principal, parent or other majority owner thereof shall be a
Qualified Real Estate Investor or, if clause (iii) above is satisfied, a
Qualified Transferee;
(B)    At least ten (10) Business Days prior to the consummation of such
Proposed Partial Interest Transfer, Borrower shall notify Lender in writing
describing the proposed Partial Interest Transfer in reasonable detail,
including such evidence as is reasonably necessary to confirm, and Borrower
shall so certify to Lender in such written notice, that at least forty-nine
percent (49%) of the direct or indirect interests in Borrower are owned by one
or more Qualified Real Estate Investors or that the Proposed Partial Interest
Transferee and its Affiliates, or the sponsor, principal, parent or other
majority owner thereof, is a Qualified Real Estate Investor or a Qualified
Transferee, as applicable;
(C)    Borrower shall pay any reasonable out-of-pocket costs and expenses
reasonably incurred by Lender in connection with the proposed Partial Interest
Transfer, whether or not such Partial Interest Transfer actually occurs;
(D)    Borrower shall provide Lender with current Borrower ownership charts
depicting Borrower’s ownership structure before and after the Partial Interest
Transfer, including the percentage interests held by Borrower’s direct and
indirect owners; and
(E)    Together with Borrower's notice of such Partial Interest Transfer,
Borrower shall certify to Lender that each of the requirements in this
subsection (iv) are or will be satisfied as of the date of the proposed Partial
Interest Transfer, together with a non-refundable administrative processing fee
in the amount of Fifteen Thousand Dollars ($15,000) (the “Processing Fee”),
which fee shall be deemed earned by Lender upon receipt, whether or not Borrower
completes the proposed Partial Interest Transfer. A separate Processing Fee
shall be required for each proposed Partial Interest Transfer under this
subsection.
Without limiting the rights set forth above, if the condition in clause (b)(iii)
above is not satisfied but all other conditions set forth in this Section 8.3
have been satisfied, such proposed Partial Interest Transfer shall be permitted,
provided that after giving effect to such Partial Interest

 
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Transfer, a Qualified Real Estate Investor continues to Control Borrower, one or
more Qualified Real Estate Investors owns at least forty-nine percent (49%) of
the direct or indirect interests in Borrower, and prior to or concurrently with
the closing of such proposed Partial Interest Transfer, Borrower delivers, or
causes to be delivered, to Lender (1) a Replacement Indemnity (or evidence
satisfactory to Lender in its reasonable discretion that the Environmental
Insurance remains in place) and a Replacement Guaranty, both executed by a
Replacement Guarantor, and (2) evidence satisfactory to Lender in its reasonable
discretion that after giving effect to such Partial Interest Transfer, such
Replacement Guarantor (A) will Control Borrower and (B) own, directly or
indirectly, no less than five percent (5%) of all legal and beneficial ownership
interests in Borrower. In such instance, Lender shall release Indemnitor as and
to the same extent that such Replacement Guarantor assumes any obligations under
such Replacement Indemnity and Replacement Guaranty.
Section 8.4    Permitted Loan Transfer. Notwithstanding the prohibitions in
Section 8.1 above, Lender will permit up to one (1) transfer (the “Title
Transfer”) of title to the Mortgaged Property in an arms-length transaction to
an independent third party proposed transferee (the “Proposed Transferee”),
which benefit shall be personal to the named Borrower herein (for purposes of
this Section 8.4, the “Permitted Assignor”), and shall not apply to any
third-party successor, assignee or transferee of the foregoing, and shall be
null and void upon any transfer of title to the Mortgaged Property, upon any
transfer of title to any portion of the Mortgaged Property or, except as
expressly permitted in Sections 8.2, 8.3 and 8.4 upon any direct or indirect
transfer of any ownership interest in Permitted Assignor or in any Upstream
Owner, provided that all of the following terms and conditions have been fully
satisfied, as determined by Lender in its reasonable discretion:
(a)    At least thirty (30) days prior to such Title Transfer, Permitted
Assignor shall have provided Lender with written notice of the proposed Title
Transfer, together with a non-refundable administrative processing fee in the
amount of Ten Thousand Dollars ($10,000) (the “Title Transfer Processing Fee”),
along with the name(s), address(es) and organizational documents of the Proposed
Transferee and of the sponsor, principals, Affiliates, parent or other majority
owners, as applicable, of the Proposed Transferee. Upon receipt by Lender, the
Title Transfer Processing Fee shall be deemed earned by Lender, whether or not
Permitted Assignor completes the proposed Title Transfer and whether or not any
proposed Title Transfer is actually approved by Lender pursuant to this
Section 8.4. A separate Title Transfer Processing Fee shall be required for each
request for a Title Transfer.
(b)    Permitted Assignor shall furnish to Lender along with such written notice
the following:
(i)
detailed and complete financial statements of the Proposed Transferee and of the
principals, Affiliates and parent or other majority owners, as applicable, of
the Proposed Transferee;

(ii)
information with respect to the business and business experience of the Proposed
Transferee and its sponsors, principals, Affiliates, and parent or other
majority owners, as applicable, and including, without limitation, their
experience in the ownership and operation of

 
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properties similar to the Hotel Property and other commercial real estate;
(iii)
evidence that the Hotel Property, as of the proposed date of the Title Transfer
and thereafter, will be managed by a hotel management company and under a
management agreement meeting the requirements of Section 5.2;

(iv)
the terms and conditions of the proposed sale or transfer and a copy of the
executed purchase and sale agreement or transfer document (or the most recent
draft, provided the final executed purchase and sale agreement or other transfer
document is provided to Lender as soon as it is available);

(v)
a chart of the ownership structure of the Proposed Transferee and each of its
sponsors, principals, Affiliates and any owners of a ten percent (10%) or
greater interest in the Proposed Transferee, as applicable;

(vi)
evidence satisfactory to Lender in its reasonable discretion that either the
Proposed Transferee or, if the Proposed Transferee is a special purpose entity,
one of its sponsors, principals, parent or another majority owner that will
Control the Proposed Transferee, is a Qualified Real Estate Investor, and
evidence satisfactory to Lender in its reasonable discretion that at least
forty-nine percent (49%) of the direct or indirect interests in the Proposed
Transferee will be owned by one or more Qualified Real Estate Investors; and

(vii)
such other information as Lender may reasonably request to permit Lender to
determine if the Proposed Transferee and/or its principals, Affiliates, parent
or other majority owners, as applicable, is a Qualified Real Estate Investor.

(c)    No monetary default or Event of Default may be outstanding, either as of
the date the notice is given to Lender under Subsection 8.4(a) above, or on the
date of the Title Transfer;
(d)    The Proposed Transferee may in no event be a tenant in common and in no
event shall the Loan Documents permit a tenancy in common form of ownership of
the Mortgaged Property.
(e)    At the time of the closing of any approved Title Transfer, the Proposed
Transferee shall expressly assume Permitted Assignor’s obligations under the
Loan and the Loan Documents pursuant to a written agreement which is
satisfactory to Lender in its reasonable discretion, subject to the recourse
limitations and the non-recourse exceptions of the Loan Documents;

 
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(f)    At the time of the assumption of the Loan, unless Permitted Assignor
provides Lender with evidence satisfactory to Lender in its reasonable
discretion that (i) the Environmental Insurance remains in place, and (ii) the
conditions set forth in Section 9 of the Environmental Indemnification Agreement
regarding release of Strategic thereunder have been satisfied, the Proposed
Transferee shall furnish to Lender an environmental indemnification agreement
(the “Replacement Indemnity”), executed by the Proposed Transferee and the
Qualified Real Estate Investor Controlling the Proposed Transferee (the
“Replacement Guarantor”) that will become an Indemnitor as of the date of the
Title Transfer. It is understood and agreed that the Replacement Indemnity shall
be prepared on substantially the same form as the Environmental Indemnification
Agreement executed on the Closing Date. Lender shall release the existing
Borrower from liability under the Environmental Indemnification Agreement as and
to the extent that the Proposed Transferee and Replacement Guarantor assume any
of the obligations under the Replacement Indemnity;
(g)    At the time of the assumption of the Loan, the Proposed Transferee shall
furnish to Lender a recourse exceptions guaranty in substantially the same form
as executed on the Closing Date (a “Replacement Guaranty”), executed by the
Replacement Guarantor. Lender shall release the existing Indemnitor under the
Loan Documents as and to the same extent that the Replacement Guarantor assumes
any of the existing Indemnitor’s obligations under the Recourse Guaranty;
(h)    In the event the Master Lease will remain in effect following the
consummation of such approved Title Transfer, Replacement Guarantor, an
Affiliate thereof or an MT Qualified Real Estate Investor shall Control Master
Tenant (or any successor thereto in connection with such approved Title
Transfer);
(i)    At the closing of the approved Title Transfer, Permitted Assignor and the
Proposed Transferee and such other Persons or entities as Lender shall require
in its reasonable discretion, shall also deliver and, if applicable, execute;
(i)
evidence of authority and entity existence;

(ii)
Uniform Commercial Code searches;

(iii)
Uniform Commercial Code financing statements;

(iv)
an endorsement to Lender’s title insurance policy insuring the Deed of Trust,
which endorsement updates the effective date of said policy to the date of the
Title Transfer, showing the Proposed Transferee as the owner of the Mortgaged
Property, and showing no additional title exceptions, except as shall be
approved in writing by Lender in its reasonable discretion, and otherwise
acceptable to Lender in its reasonable discretion;

(v)
opinions of counsel acceptable to Lender in its reasonable discretion addressing
(1) the due organization and authorization of the Proposed

 
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Transferee, (2) the enforceability of the Loan Documents and (3) such other
matters as Lender may require in its reasonable discretion;
(vi)
evidence of such insurance as shall be required by the Loan Documents; and

(vii)
such other documents as Lender shall require in its reasonable discretion in
order to effectuate the transaction as contemplated by this Section 8.4.

(j)    At the closing of the approved Title Transfer, the Proposed Transferee
shall deposit with Lender sufficient funds to pay when due all Impositions. In
addition, Lender may require the Proposed Transferee to establish with Lender at
the time of the closing of the approved Title Transfer, a reserve for
Impositions, ground rents, future tenant improvements, leasing commissions
and/or capital improvements to the extent the Loan Documents require any such
(or any other) reserves or deposits, even if Lender had previously waived such
requirement for Permitted Assignor. To the extent previously waived, the
Proposed Transferee shall establish such reserves as are required under the Loan
Documents simultaneously with the closing of such Title Transfer;
(k)    At the closing of the approved Title Transfer, Permitted Assignor shall
pay to Lender a fee (a “Transfer Fee”) in the amount of two percent (2.0%) of
the then outstanding principal balance of the Loan in cash or certified funds;
provided, however, if the Proposed Transferee is an Affiliate of the Permitted
Assignor, the amount of such Transfer Fee shall be reduced to one percent (1.0%)
of the then outstanding principal balance of the Loan. The Transfer Fee is being
paid in order to induce Lender to allow the Proposed Transferee to assume the
obligations of Permitted Assignor under the Loan Documents and to release
Permitted Assignor from liability thereunder for Permitted Assignor’s
obligations, acts and omissions from and after the date of the Title Transfer in
accordance with the provisions of this Section 8.4, provided that, in no event
shall Permitted Assignor be released from any liability for acts or omissions
occurring prior to the date of such Title Transfer, including, without
limitation, acts or omissions leading to environmental contamination, whether
known or unknown;
(l)    On the date of the closing of the Title Transfer, both (i) the unpaid
principal balance of the Loan shall be not more than fifty-five percent (55%) of
the appraised value of the Mortgaged Property (the “Transfer LTV Requirement”)
based on either Lender’s own analysis and estimate or, if the Transfer LTV
Requirement is not satisfied based on such estimate, on a then current appraisal
of the Mortgaged Property that is acceptable to Lender (in its reasonable
discretion), prepared by an independent appraiser holding the MAI designation
and selected by Lender, at Permitted Assignor’s sole cost, and (ii) the Proposed
Transferee shall provide evidence acceptable to Lender (in its reasonable
discretion) that it has made a minimum unencumbered forty-five percent (45%)
cash equity investment in the Mortgaged Property;
(m)    The proposed Title Transfer shall not cause a violation or a breach of
any Federal, state or local law, statute, rule, regulation or order governing
the Mortgaged Property, Permitted Assignor or the Proposed Transferee, or any of
its or their principals, parent or other owners, including any Anti-Money
Laundering Laws; and

 
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(n)    Permitted Assignor shall pay all of Lender’s reasonable out-of-pocket
costs and expenses incurred in connection with the proposed Title Transfer,
whether or not the proposed Title Transfer actually occurs, including, without
limitation, reasonable out-of-pocket attorneys’ fees, recording and filing
charges, title company charges and the cost of the endorsements to Lender’s
title policy.
Notwithstanding the foregoing, Permitted Assignor shall have the right in
connection with a proposed Title Transfer to make a partial prepayment of the
Loan in an amount (the “Transfer Partial Prepayment”) that would cause the Loan
to satisfy the Transfer LTV Requirement. Permitted Assignor shall be required to
pay the applicable Prepayment Premium or Closed Period Prepayment Premium, as
applicable, on the amount of the Transfer Partial Prepayment. In the event of
any such Transfer Partial Prepayment, the monthly installments of principal
and/or interest, as applicable, due hereunder shall be adjusted accordingly
based upon the amount of principal repaid, the interest rate in effect at the
time of the Transfer Partial Payment and the applicable remaining thirty (30)
year amortization schedule.
Lender will not review or process Permitted Assignor’s request for approval of a
proposed Title Transfer until such time as Lender has received all of the items,
including the Title Transfer Processing Fee, required to be delivered to Lender
pursuant to this Section 8.4.
Section 8.5    Transfers of Operating Partnership Units. Notwithstanding the
prohibitions in Section 8.1 above, Lender’s consent will not be required for the
issuance of additional Operating Partnership units in Strategic issued in
connection with (i) the acquisition by Strategic, or any subsidiary thereof, of
additional assets or the raising of equity capital from and after the date
hereof, or (ii) the redemption of up to 53,830 partnership units of SHC Santa
Monica Beach Hotel, L.L.C. into 53,830 Operating Partnership units.
ARTICLE 9    

EVENTS OF DEFAULT
Section 9.1    Events of Default. Each of the following shall constitute an
Event of Default under the Loan Documents (each an “Event of Default”):
(a)    Failure to pay (i) any monthly installment of principal or interest in
accordance with Section 2.3 or any monthly reserve payment required under
Section 5.3(c) within seven (7) days following the date such amount is due, or
(ii) the entire amount due under the Loan Documents by the Maturity Date;
(b)    Except for the payments described in Sections 9.1(a) and 9.1(i), failure
to pay any other amount due to Lender under the Loan Documents within ten (10)
Business Days following notice from Lender that such amount is due;
(c)    Except as provided in Section 9.1(a), 9.1(b) and 9.1(d) to 9.1(v),
inclusive, failure of Borrower or Master Tenant to perform or comply with any
term, obligation, covenant or condition contained in this Agreement or any other
Loan Documents, within thirty (30) days after

 
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the delivery of written notice (“Cure Notice”) from Lender of such failure;
provided that if such default is not reasonably capable of being cured (without
taking into account financial capability) within such thirty (30) day period,
such failure shall not constitute an Event of Default so long as Borrower
commences, or causes Master Tenant to commence, the cure of such default within
such thirty (30) day period, diligently prosecutes such cure to completion and
completes such cure within one hundred twenty (120) days after delivery of the
Cure Notice from Lender;
(d)    The occurrence of an Event of Default under the Master Tenant Security
Agreement;
(e)    Intentionally omitted;
(f)    If any representation, warranty, certification or other statement made in
any Loan Document or in any statement or certificate at any time given by
Borrower or Guarantor to Lender in connection with the Loan shall prove to be
untrue or misleading in any material respect at the time when made or given;
provided, however, if (i) Borrower, Master Tenant or Indemnitor makes a good
faith, unintentional misrepresentation in any Loan Document, (ii) there is no
monetary Event of Default, and (iii) the underlying facts or situation that
rendered such representation inaccurate or untrue can be remedied to Lender’s
satisfaction (in its reasonable discretion) within thirty (30) days following
the earlier to occur of the discovery of such misrepresentation by Borrower or
written notice from Lender to Borrower of such misrepresentation and Borrower,
Master Tenant or Indemnitor, as applicable, actually remedies said underlying
facts or situation so as to make the original representation in the Loan
Document(s) true and correct on a going forward basis prior to the expiration of
said thirty (30) day period and there are not remaining material adverse
consequences to Lender, the Loan, the Mortgaged Property (including the Hotel
Property) or the Additional Collateral, then such misrepresentation shall not be
deemed to be an Event of Default;
(g)    If Lender fails to have a legal, valid, binding and enforceable first
priority lien on (i) the Mortgaged Property or any portion thereof or (ii) the
Additional Collateral, and (iii) any other collateral securing the Loan;
provided, however, in the event that the Deposit Bank unilaterally terminates
the Deposit Agreement with respect to the FF&E Reserve, such resulting failure
of Lender to have a perfected security interest in the FF&E Reserve, and the
deposits therein and proceeds thereof, shall not result in an Event of Default
hereunder so long as a fully-executed replacement controlled account agreement
with respect to the FF&E Reserve acceptable to Lender (in its reasonable
discretion) is delivered to Lender within twenty (20) days of such termination;
(h)    Failure to permit Lender or its agents to enter to the Hotel Property or
to access Borrower’s or Master Tenant’s books and records in accordance with the
terms of the Loan Documents, such failure continuing for more than five (5)
Business Days after written notice from Lender to Borrower of such failure;
(i)    Failure to pay any Imposition prior to delinquency (except as expressly
permitted in accordance with Section 5.3(b)), or to maintain insurance as
required by this Agreement;
(j)    Except as permitted in this Agreement, adjusting, compromising, settling
or entering into any agreement with respect to insurance settlements and
condemnation proceedings;

 
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(k)    Except as permitted in this Agreement: (i) causing or permitting Master
Tenant to cause a material change in the use of any of the Premises or causing
or permitting the use or occupancy of any part of the Premises to be
discontinued if such change of use or discontinuance would violate any zoning or
other law, ordinance or regulation; (ii) causing or permitting Master Tenant to
consent to or permit any zoning reclassification, modification or restriction
affecting any then current use of the Premises; (iii) taking any steps
whatsoever to convert any of the Premises, or any portion thereof, to a
cooperative or tenancy in common form of ownership; or (iv) causing or
permitting Master Tenant to cause the material alteration, demolition or removal
of any of the Improvements except as permitted hereunder or in the normal course
of Borrower’s business as permitted herein;
(l)    Failure by either Borrower or Master Tenant to deliver (in accordance
with the terms of the Loan Documents) copies of any written notices from
governmental or regulatory authorities asserting a failure of compliance in any
material respect with any Legal Requirement that is reasonably likely to result
in an Event of Default under, or prevent compliance with the terms of, any Loan
Document;
(m)    Failure by either Borrower or Master Tenant to deliver financial
statements required by Article 7 following the written notice from Lender to
Borrower and/or Master Tenant, as applicable, and the expiration of the cure
period described in Section 7.1(c) or the failure to deliver the estoppel
certificates required by Section 6.9 within ten (10) additional days after the
delivery of written notice from Lender;
(n)    Violation of any of the terms, obligations, covenants or conditions set
forth in Section 5.1(a) (Leasing), Section 5.1(b) (Leasing), Section 5.2
(Management Agreement), Section 6.3 (Title), Section 6.12 (Special Purpose
Entity Requirements), Section 6.18 (Master Lease), Section 6.19 (CC&Rs) or
Article 8 (Conveyances, Encumbrances and Borrowings);
(o)    If a default or event of default by Borrower shall occur under any
permitted mortgage, encumbrance, lien or security agreement encumbering all or
any portion of the Mortgaged Property, the Hotel Property or the Additional
Collateral which is subordinate or superior to the lien of the Deed of Trust or
any other liens granted to Lender pursuant to the Loan Documents, or if any
party under any such instrument shall commence a foreclosure or other collection
or enforcement action in connection therewith, except to the extent the same is
being contested in accordance with the terms hereof;
(p)    Failure of Borrower, Master Tenant or Indemnitor to preserve and keep in
full force and effect its existence and any material franchises, licenses,
authorizations, registrations, permits and approvals required under the laws of
the State of its formation and the State where the Premises is located and any
material franchises, licenses, authorizations, registrations, permits and
approvals required or necessary to operate its business;
(q)    If Borrower, Master Tenant or Indemnitor consents to the filing of, or
commences or consents to the commencement of, any Bankruptcy Proceeding with
respect to Borrower, Master Tenant or Indemnitor; provided, however, that any
Bankruptcy Proceeding with respect to Indemnitor shall not constitute an Event
of Default if, within forty-five (45) days following

 
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such Bankruptcy Proceeding, Borrower shall cause a Replacement Guarantor that is
a Qualified Real Estate Investor or is otherwise approved by Lender in its sole
discretion to execute and deliver to Lender a Replacement Guaranty and a
Replacement Indemnity (if the Environmental Insurance is then not in full force
and effect);
(r)    If any Bankruptcy Proceeding shall have been filed against Borrower,
Master Tenant or Indemnitor and the same is not withdrawn, discharged, stayed,
dismissed, canceled or terminated within ninety (90) days of such filing;
provided, however, that any Bankruptcy Proceeding with respect to Indemnitor
shall not constitute an Event of Default if, prior to the expiration of such
ninety (90) day period, (i) with respect to Indemnitor, Borrower shall cause a
Replacement Guarantor that is a Qualified Real Estate Investor or is otherwise
approved by Lender in its sole discretion to execute and deliver to Lender a
Replacement Guaranty and a Replacement Indemnity (if the Environmental Insurance
is then not in full force and effect), and (ii) with respect to Master Tenant,
Borrower terminates the Master Lease in compliance with Section 6.18(b)(vi)(A)
hereof;
(s)    If Borrower, Master Tenant or Indemnitor is adjudicated bankrupt or
insolvent in any Bankruptcy Proceeding or a petition for reorganization of
Borrower, Master Tenant or Indemnitor is granted;
(t)    If a receiver, liquidator or trustee of Borrower, Master Tenant or
Indemnitor, or of any of the properties of Borrower, Master Tenant or Indemnitor
shall be appointed; provided, however, if such appointment was involuntary and
not consented to, and is diligently contested, by Borrower, Master Tenant or
Indemnitor, as applicable, upon the same not being withdrawn, discharged,
stayed, dismissed, canceled or terminated within ninety (90) days;
(u)    If Borrower, Master Tenant or Indemnitor shall make an assignment for the
benefit of its creditors or shall admit in writing in a legal proceeding the
inability to pay its debts generally as they become due; provided, however, that
any such assignment or admission with respect to Indemnitor shall not constitute
an Event of Default if, within forty-five (45) days following such assignment or
admission, (i) with respect to Indemnitor, Borrower shall cause a Replacement
Guarantor that is a Qualified Real Estate Investor or is otherwise approved by
Lender in its sole discretion to execute and deliver to Lender a Replacement
Guaranty and a Replacement Indemnity (if the Environmental Insurance is then not
in full force and effect), and (ii) with respect to Master Tenant, Borrower
terminates the Master Lease in compliance with Section 6.18(b)(vi)(A) hereof; or
(v)    Except as otherwise permitted herein, if Borrower, Master Tenant, any
Principal or Indemnitor shall institute or cause to be instituted any proceeding
for the termination or dissolution of Borrower, Master Tenant or Indemnitor;
provided, however, that the termination or dissolution of Indemnitor or Master
Tenant shall not constitute an Event of Default if, within forty-five days
following such termination or dissolution, (i) with respect to Indemnitor,
Borrower shall cause a Replacement Guarantor that is a Qualified Real Estate
Investor or is otherwise approved by Lender in its sole discretion to execute
and deliver to Lender a Replacement Guaranty and a Replacement Indemnity (if the
Environmental Insurance is then not in full force and effect), and

 
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(ii) with respect to Master Tenant, Borrower terminates the Master Lease in
compliance with Section 6.18(b)(vi)(A) hereof.
Notwithstanding the foregoing, with respect to any Event of Default under
Sections 9.1(g), 9.1(l), 9.1(m), 9.1(n) (solely with respect to Sections 5.1(a),
5.1(b), 6.12 or 6.19, but not other breaches under Section 9.1(n) caused by
Master Tenant) or 9.1(p) caused by Master Tenant, such Event of Default shall be
deemed cured if, within thirty (30) days, Borrower cures the underlying default
and terminates the Master Lease in compliance with Section 6.18(b)(vi)(A) or
(B); provided, however, Borrower shall have an additional period not to exceed
sixty (60) days to so cure such Event of Default if (1) the underlying default
is curable, (2) Borrower commences to cure such default and terminate the Master
Lease within such thirty (30) day period, (3) Borrower diligently pursues such
cure and termination and (4) so long as the Mortgaged Property, the Hotel
Property and Borrower’s ability to perform under the Loan Document will not be
materially and adversely impacted during such period.
Section 9.2    Notice of Event of Default. Pursuant to Section 2924b(d) of the
California Civil Code, Borrower and Lender request that a copy of any notice of
default be mailed to Borrower and Lender, respectively, at the address for such
party set forth herein.
ARTICLE 10    

REMEDIES
Section 10.1    Remedies. During the continuance of any Event of Default, Lender
may (a) declare the entire Loan to be immediately due and payable without
presentment, demand, protest, notice of protest or dishonor, notice of intent to
accelerate the maturity thereof, notice of acceleration of the maturity thereof,
or other notice of default of any kind, all of which are hereby expressly waived
by Borrower, (b) terminate the obligation, if any, of Lender to advance amounts
hereunder, and (c) exercise all rights and remedies therefor under this
Agreement, the Deed of Trust and the other Loan Documents and otherwise
available at law or in equity.
Section 10.2    Lender’s Right to Perform the Obligations. If Borrower shall
fail, refuse or neglect to make any payment or perform any act required by the
Loan Documents, then while any Event of Default exists, and without notice to or
demand upon Borrower and without waiving or releasing any other right, remedy or
recourse Lender may have because of such Event of Default, Lender may (but shall
not be obligated to) make Advances to make such payment or perform such act, and
shall have the right (subject to rights of tenants) to enter upon the Hotel
Property for such purpose and to take all such action thereon and with respect
to the Mortgaged Property as is necessary to protect the Mortgaged Property or
Lender's interest therein. Similarly, in making any payments to protect the
security intended to be created by the Loan Documents, Lender shall not be bound
to inquire into the validity of any apparent or threatened adverse title, lien,
encumbrance, claim or charge before making an Advance for the purpose of
preventing or removing the same. Borrower shall indemnify, defend and hold
Lender harmless from and against, and be responsible for, any and all Losses
incurred or accruing by reason of any acts performed by Lender pursuant to the
provisions of this Section 10.2, except as a result of Lender’s gross negligence
or willful misconduct.

 
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Section 10.3    Waiver of Marshalling of Assets. To the fullest extent permitted
by law, Borrower, for itself and its successors and assigns, waives all rights
to a marshalling of the assets of Borrower, and others with interests in
Borrower, and of the Mortgaged Property, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, 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 Documents to a sale
of the Mortgaged 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 Mortgaged Property in
preference to every other claimant whatsoever. Borrower agrees that the actions,
sales, proceedings and foreclosure described herein or in any of the other Loan
Documents may be commenced in any order determined by Lender in its reasonable
discretion.
Section 10.4    Advances. Provided an Event of Default exists, Lender shall have
the right (but not the obligation) to make Advances and obtain reimbursement for
any and all Advances to satisfy any of Borrower’s obligations under this
Agreement that Borrower fails to timely satisfy, which Advances shall constitute
additions to the Loan. Lender may make an Advance in reliance on any bill,
statement or assessment procured from the appropriate governmental authority or
other issuer thereof without inquiring into the accuracy or validity thereof.
All Advances shall bear interest at the Default Rate from the date that Lender
notifies Borrower that each such Advance or expense is made or incurred to the
date of repayment. Borrower shall pay or reimburse Lender within fifteen (15)
Business Days after written demand for any and all Advances made pursuant to
this Agreement, including for all interest thereon and for all reasonable out of
pocket costs and expenses (including reasonable out-of-pocket attorneys’ and
appraisers’ and receivers’ fees, costs and expenses and the expenses and
reasonable out-of-pocket fees of any similar official) related or incidental to
the collection of the Indebtedness, any foreclosure of the Deed of Trust or any
other Loan Document, any enforcement, compromise or settlement of any Loan
Document or the Indebtedness in any judicial, arbitration, administrative,
probate, appellate, bankruptcy, insolvency or receivership proceeding, as well
as in any post-judgment proceeding to collect or enforce any judgment or order
relating to the Indebtedness or any Loan Document, as well as any defense or
assertion of the rights or claims of Lender in respect of any thereof, by
litigation or otherwise. All Advances made and any reasonable expenses incurred
at any time by Lender pursuant to the provisions the Loan Documents or under
applicable law shall be secured by the Deed of Trust as part of the
Indebtedness, with equal rank and priority.
Section 10.5    Participation In Proceedings. Except as limited by applicable
law, Lender may, after written notice to Borrower: (a) appear in and defend any
action or proceeding, in the name and on behalf of either Lender or, during the
continuance of an Event of Default, Borrower, in which Lender is named or,
during the continuance of an Event of Default, which Lender determines in its
reasonable discretion is likely to have a material adverse effect on the
Mortgaged Property (including the Hotel Property), the Additional Collateral,
the Deed of Trust, the Lien thereof or any other Loan Document; and (b) during
the continuance of an Event of Default, institute any action or proceeding which
Lender determines in its reasonable discretion should be instituted to protect
its interest in the Mortgaged Property or its rights under the Loan Documents,
including foreclosure proceedings.

 
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ARTICLE 11    

LIMITATIONS ON LIABILITY
Section 11.1    Limitation on Liability.
(a)    Subject to the provisions of this Section 11.1, in any action or
proceedings brought on any Loan Document in which a money judgment is sought,
Lender will look solely to the Mortgaged Property and other property described
in the Loan Documents (including the Property Income and any other rents and
profits from such property prior to the distribution thereof in compliance with
this Agreement) for payment of the Indebtedness and, specifically and without
limitation, Lender agrees to waive any right to seek or obtain a deficiency
judgment against Borrower (other than as provided in the Environmental
Indemnification Agreement), Master Tenant, or any member, shareholder, partner,
manager, director, officer, agent, affiliate or employee of Borrower or Master
Tenant (or any member, shareholder, partner or other owner of any such member,
shareholder, partner, manager, director, officer, agent, affiliate or employee
of Borrower or Master Tenant, or any director, officer, employee, agent, manager
or trustee of any of the foregoing) (other than as provided in the Recourse
Guaranty Agreement or any other third party indemnity or guaranty agreements
delivered to Lender from time to time).
(b)    The provisions of Section 11.1(a) shall not:
(i)
constitute a waiver, release or impairment of any obligation evidenced or
secured by any Loan Document;

(ii)
be deemed to be a waiver of any right which Lender may have under Sections
506(a), 506(b), 1111(b) or any other provisions of the Federal Bankruptcy Code
to file a claim for the full amount of the Indebtedness evidenced by this
Agreement and the Note and secured by the Deed of Trust or to require that all
of the Mortgaged Property shall continue to secure all of the Indebtedness owing
to Lender in accordance with the Loan Documents;

(iii)
impair the right of Lender to name Borrower as a party or parties’ defendant in
any action or suit for judicial foreclosure and sale under the Deed of Trust;

(iv)
affect the validity or enforceability of, or limit recovery under, any indemnity
(including the Environmental Indemnification Agreement), guaranty or other lease
or similar instrument made in connection with the Loan Documents;

(v)
impair the right of Lender to obtain the appointment of a receiver; or

 
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(vi)
impair Lender’s rights and remedies under this Agreement, the Deed of Trust or
any separate assignment of leases and rents regarding the assignment of Leases
and Property Income to Lender.

(c)    Notwithstanding any provisions of Section 11.1(a), Borrower and
Indemnitor (pursuant to the terms of the Recourse Guaranty Agreement) shall be
personally liable to Lender and Lender shall have full recourse to Borrower and
Indemnitor in connection with the Loan to the extent provided below in
connection with the following:
(i)
Fraud or intentional material misrepresentation by Borrower, any Indemnitor, any
Affiliate of the foregoing, or any constituent general partner, manager or
managing member of Borrower, in connection with the Loan Documents or the
assumption of the Loan – Recourse liability for any Losses actually incurred by
Lender to the extent resulting from such acts;

(ii)
Misappropriation by Borrower, any Indemnitor, any Affiliate of the foregoing, or
constituent general partner, manager or managing member of Borrower, of
insurance and/or condemnation proceeds received by or on behalf of Borrower and
not paid over to Lender or applied in accordance with the terms of the Loan
Documents – Recourse liability for the amount of any sums not applied to
expenses related to the Hotel Property or paid over to Lender;

(iii)
Misappropriation by Borrower, any Indemnitor, any Affiliate of the foregoing, or
any constituent general partner, manager or managing member of Borrower, of any
security deposits, advances or prepaid rents, cancellation or termination
payments and other sums received by Borrower, any Indemnitor or any other Person
in connection with the operation of the Hotel Property – Recourse liability for
the amount of any such sums not applied to expenses related to the Hotel
Property or not paid over to Lender;

(iv)
Unless such removal is done at the request of Hotel Manager, removal of any
non-obsolete equipment from the Hotel Property by Borrower, any Indemnitor, any
Affiliate of the foregoing, or any constituent general partner, manager or
managing member of Borrower, which is not replaced with equipment of equal or
greater utility or value – Recourse liability for the replacement value of any
equipment which is so removed and not so replaced;

(v)
Any act of arson or malicious destruction or a Waste Event of Default affecting
any of the Mortgaged Property, the Hotel Property or the Additional Collateral
by Borrower, any Indemnitor, any Affiliate of the foregoing, or any constituent
general partner, manager or managing member of Borrower – Recourse liability for
any Losses

 
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actually incurred by Lender to the extent resulting from each such act
(provided, however, there shall be no recourse hereunder to the extent there are
insufficient revenues from the Hotel Property and/or from funds in the FF&E
Reserve to pay for the cost of any Required Deferred Maintenance or Lender fails
to disburse funds from any reserves established and controlled by Lender under
the Loan Documents to pay the same);
(vi)
Filing by Borrower or any Indemnitor of a voluntary bankruptcy or insolvency
proceeding, or (as a result of a violation of the SPE Requirements set forth in
Section 6.12 hereof) the substantive consolidation of Borrower into the
bankruptcy estate of another – Recourse liability for the entire Indebtedness;

(vii)
The filing against Borrower or any Indemnitor of an involuntary bankruptcy or
insolvency proceeding by a party other than the Lender Parties, with respect to
which proceeding Borrower or Indemnitor, any Affiliate thereof, or any
constituent general partner, manager or managing member of Borrower, has acted
in concert with, solicited or caused to be solicited, petitioning creditors, or
has colluded or conspired with any party to cause the filing thereof (a
“Collusive Involuntary”) – Recourse liability for the entire Indebtedness;

(viii)
In the context of any involuntary insolvency proceeding filed against Borrower
or Indemnitor other than a Collusive Insolvency, Borrower, any Affiliate
thereof, or any constituent general partner, manager or managing member of
Borrower (A) opposes, or joins any opposition to, any motion by Lender for
relief from the automatic stay of Section 362 of the Federal Bankruptcy Code or
any motion to dismiss such insolvency proceeding or seeks to reinstate the
automatic stay in such insolvency proceeding, or (B) in such insolvency
proceeding, (1) challenges the liens or claims of Lender, or brings any action
to avoid the liens or claims of Lender as a preference or a fraudulent transfer,
or pursuant to any similar law or principle at equity, (2) brings or joins in a
motion for use, sale (other than a sale that repays the Loan, including all
related fees, costs, expenses and any applicable prepayment premiums, in full)
or lease of any of the Hotel Property without the consent of Lender, which
consent shall not be unreasonably withheld, conditioned or delayed, or (3)
files, joins in or consents to any plan of reorganization or relief of Borrower
that impairs Lender’s claims and/or interests in any of the Mortgaged Property
or the Additional Collateral that was not consented to by Lender - Recourse
liability for entire Indebtedness;

 
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(ix)
Failure of Borrower to timely pay (A) premiums for any insurance required to be
maintained under the Loan Documents or (B) real estate taxes and assessments,
provided that in each case under subparagraphs (A) and (B), there is sufficient
cash flow from the Hotel Property to pay the same and provided further that
Lender’s failure to disburse funds from any reserves established under the Loan
Documents to pay the same shall not constitute a failure by Borrower to make
such payment for purposes hereof – Recourse liability for any Losses actually
incurred by Lender to the extent resulting from any such failure accruing up to
the earlier of (1) foreclosure of the Deed of Trust on the Mortgaged Property or
(2) tender by Borrower to Lender of a binding deed in lieu of foreclosure
insurable by Lender’s title insurance company (without any obligation of Lender
to accept the deed in lieu);

(x)
Violation of the restrictions set forth in Article 8 hereof restricting (A)
transfers of fee simple title to all or substantially all of the Mortgage
Property or (B) a change in Control of Borrower or, if Indemnitor ceases to own
less than five (5%) of Borrower without Lender obtaining a Replacement Indemnity
and/or a Replacement Guaranty when and as required under Article 8 hereof –
Recourse liability for the entire Indebtedness;

(xi)
Without limiting the provisions of clause (x) above, violation of the
restrictions on transfers of the Mortgaged Property or any ownership interest in
Borrower set forth in the Loan Documents and such violation is not cured within
thirty (30) days after notice from Lender – Recourse liability for any Losses
actually incurred by Lender to the extent resulting from any such violation;

(xii)
Violation of the restrictions on subordinate, mezzanine and other financing
secured by the Mortgaged Property, or direct or indirect interests in Borrower,
as described in the Loan Documents – Recourse liability for the entire
Indebtedness; and

(xiii)
Violation of the SPE Requirements set forth in Section 6.12 hereof – Recourse
liability for any Losses incurred by Lender to the extent resulting from such
violation of the SPE Requirements.

 
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ARTICLE 12    

MISCELLANEOUS
Section 12.1    Notices.
(a)    All notices, consents, approvals and requests required or permitted under
any Loan Document shall be given in writing and shall be effective for all
purposes if hand delivered or sent by: (i) certified United States mail, postage
prepaid, return receipt requested; or (ii) expedited prepaid delivery service,
either commercial or United States Postal Service, with proof of attempted
delivery; addressed in either case as follows:
If to Lender, at the following address:
Massachusetts Mutual Life Insurance Company
c/o Cornerstone Real Estate Advisers
One Financial Plaza
Hartford, Connecticut 06103
Attention:    Finance Group Loan Servicing
Loan No. 1471101
With copies to:
Massachusetts Mutual Life Insurance Company
c/o Cornerstone Real Estate Advisers
One Financial Plaza
Hartford, Connecticut 06103
Attention:    Paralegal (Finance Group Loan Servicing)
Loan No. 1471101
And:
Massachusetts Mutual Life Insurance Company
c/o Cornerstone Real Estate Advisers
5000 Birch Street, Suite 7500
Newport Beach, California 92660
Attention:    Managing Director
Loan No. 1471101

And:

Cox, Castle & Nicholson LLP
2029 Century Park East, 21st Floor
Los Angeles, California 90067
Attention:    Adam B. Weissburg, Esq.

 
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If to Borrower, at the following address:
SHR MLB, LLC
    c/o Strategic Hotels & Resorts, Inc.
200 W. Madison Street, Suite 1700
Chicago, Illinois 60606
Attention: Paula C. Maggio, Esq.
With a copy to:
Greenberg Traurig, LLP
1840 Century Park East, Suite 1900
Los Angeles, California 90067
Attention: Gregg Bernhard, Esq.
or to such other address and person as shall be designated from time to time by
Lender or Borrower, as the case may be, in a written notice to the other party
in the manner provided for in this Section 12.1. A notice shall be deemed to
have been given at the time of actual delivery or refusal of delivery.
(b)    Borrower acknowledges that Lender may elect to correspond or transmit
information concerning the Loan or Borrower to Borrower, the Principals,
Indemnitor, investors and other third parties via email or the internet. Such
transmissions shall be for the convenience of the parties hereto and shall not
replace or supplement the required methods of delivering notices provided for
above. In addition, Borrower acknowledges that such information may be
transmitted via the internet or by email and with or without any algorithm
enhanced security software and Borrower waives any right to privacy in
connection therewith.
Section 12.2    Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall constitute an original, but all of which shall
constitute one document.
Section 12.3    Successors and Assigns. This Agreement shall be binding upon
Borrower’s successors and assigns and shall inure to the benefit of Lender, the
Lender Parties and their respective successors and assigns.
Section 12.4    Joint and Several Liability. If more than one party is executing
this Agreement as a Borrower, then each party that executes this Agreement shall
be jointly and severally responsible for any and all obligations of any Borrower
hereunder.
Section 12.5    Captions. The captions of the sections and Sections of this
Agreement are for convenience only and are not intended to be a part of this
Agreement and shall not be deemed to modify, explain, enlarge or restrict any of
the provisions hereof.
Section 12.6    Further Assurances. Borrower shall do, execute, acknowledge and
deliver, at Borrower’s sole cost and expense, such further acts, instruments or
documentation, as Lender may (in its reasonable discretion) require from time to
time to better assure, transfer and confirm unto Lender the rights now or
hereafter intended to be granted to Lender under any Loan Document,

 
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but in no event will Borrower, Indemnitor or Master Tenant be required to incur,
suffer or accept (except to a de minimis extent) any lesser rights or greater
obligations or administrative or operational burden than as currently set forth
in the Loan Documents. Further, concurrently herewith, Borrower shall deliver to
Lender a Consent and Joinder substantially in the form of Exhibit D attached
hereto, executed by Master Tenant with respect to this Agreement.
Section 12.7    Severability. All rights, powers and remedies provided in this
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable law, and are intended to be limited to the extent (but
only to the extent) necessary so that they will not render this Agreement
invalid or unenforceable. If any term, covenant, condition, or provision of this
Agreement or the application thereof to any person or circumstances shall, to
any extent, be invalid or unenforceable, the remaining terms, covenants,
conditions and provisions of this Agreement, or the application of such term,
covenant, condition or provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, shall not be affected thereby, and
each term, covenant, condition and provision of this Agreement shall be modified
and/or limited to the extent necessary to render the same valid and enforceable
to the fullest extent permitted by law.
Section 12.8    Borrower’s Obligations Absolute. All sums payable by Borrower
hereunder shall be paid without notice, demand, counterclaim, setoff, deduction
or defense and without abatement, suspension, deferment, diminution or
reduction, and the obligations and liabilities of Borrower hereunder shall in no
way be released, discharged, or otherwise affected (except as expressly provided
herein) by reason of: (a) any damage to or destruction of or any condemnation or
similar taking of the Premises or any portion thereof; (b) any restriction or
prevention of or interference with any use of the Premises or any portion
thereof; (c) any title defect or encumbrance or any eviction from the Premises
or any portion thereof by title paramount or otherwise; (d) any Bankruptcy
Proceeding relating to Borrower, any Principal, any Indemnitor or any general
partner, manager or managing member of Borrower, or any action taken with
respect to any Loan Document by any trustee or receiver of Borrower, any
Principal, any Indemnitor or any general partner, manager or managing member of
Borrower, or by any court, in any such proceeding; (e) any claim which Borrower
has or might have against Lender; (f) any default or failure on the part of
Lender to perform or comply with any of the terms hereof or of any other
agreement with Borrower; or (g) any other occurrence whatsoever, whether similar
or dissimilar to the foregoing, whether or not Borrower shall have notice or
knowledge of any of the foregoing. Except as expressly provided herein, Borrower
waives all rights now or hereafter conferred by statute or otherwise to any
abatement, suspension, deferment, diminution or reduction of any sum secured
hereby and payable by Borrower.
Section 12.9    Amendments; Consents. This Agreement cannot be altered, amended,
modified or discharged orally and no executory agreement shall be effective to
modify or discharge it in whole or in part, unless in writing and signed by the
party against which enforcement is sought. No consent or approval required under
any Loan Document shall be binding unless in writing and signed by the party
sought to be bound.

 
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Section 12.10    Other Loan Documents and Exhibits. All of the agreements,
conditions, covenants, provisions and stipulations contained in the Loan
Documents, and each of them, which are to be kept and performed by Borrower are
hereby made a part of this Agreement to the same extent and with the same force
and effect as if they were fully set forth in this Agreement, and Borrower shall
keep and perform the same, or cause them to be kept and performed, strictly in
accordance with their respective terms. The Cover Sheet and each exhibit,
schedule and rider attached to this Agreement are integral parts of this
Agreement and are incorporated herein by this reference. In the event of any
conflict between the provisions of any such exhibit, schedule or rider and the
remainder of this Agreement, the provisions of such exhibit, schedule or rider
shall prevail.
Section 12.11    Merger. So long as any Indebtedness shall remain unpaid, fee
title to and any other estate in the Mortgaged Property shall not merge, but
shall be kept separate and distinct, notwithstanding the union of such estates
in any Person.
Section 12.12    Time of the Essence. Time shall be of the essence in the
performance of all obligations of Borrower under every Loan Document.
Section 12.13    Transfer of Loan. Lender may, at any time, sell, transfer or
assign the Loan Documents or any portion thereof, and any or all servicing
rights with respect thereto (collectively, a “Transfer”), or grant
participations therein (a “Participation”) or issue mortgage pass-through
certificates or other securities (the “Securities”) evidencing a beneficial
interest in a rated or unrated public offering or private placement (a
“Securitization”). In the case of a Transfer, the transferee shall have, to the
extent of such Transfer, the rights, benefits and obligations of “Lender” under
the Loan Documents. Lender may, on a confidential basis, forward to each
prospective purchaser, transferee, assignee, servicer, participant, investor in
such Transfer, Participation or Securitization or any Rating Agency rating such
Securitization (collectively, the “Investor”) and each prospective Investor or
any agency maintaining databases on the underwriting and performance of
commercial mortgage loans, all documents and information which Lender now has or
may hereafter acquire relating to the Loan, the Mortgaged Property, Borrower,
and any Indemnitor, whether provided by Borrower, any Indemnitor, or otherwise,
as Lender determines (in its reasonable discretion) necessary or desirable.
Borrower irrevocably waives any and all rights it may have under applicable
state or federal law to prohibit disclosure, including any right of privacy.
Further Borrower acknowledges that such information may be transmitted via the
internet or by email. Lender will notify Borrower in writing of any Transfer of
the Loan that results in Lender or its affiliates not retaining any ownership or
servicing interest in the Loan. Lender shall reimburse Borrower for its
reasonable out-of-pocket costs and expenses incurred in connection with this
Section 12.13. Notwithstanding the foregoing, so long as there is then no Event
of Default outstanding, Lender shall not undertake any Transfer or grant any
Participation to any Competitor.
Section 12.14    Cooperation. Borrower shall, and shall cause Indemnitor to, use
commercially reasonable efforts to cooperate with Lender in connection with
servicing the Loan and any Transfer, Participation, Securitization or any other
financing created or obtained in connection with the loan, including:

 
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(a)    Estoppel Certificates. Borrower, within ten (10) Business Days following
a request by Lender, shall provide Lender or any proposed assignee with an
estoppel certificate containing the information set forth in Section 6.9, duly
acknowledged and certified;
(b)    Bifurcation of Note. The Note and the Deed of Trust may, at any time
until the same shall be fully paid and satisfied, at the sole election of
Lender, be split or divided into two or more notes and two or more security
instruments, each of which shall cover all or a portion of the Mortgaged
Property to be more particularly described therein. To that end, Borrower, upon
written request of Lender, shall execute, acknowledge and deliver, or cause to
be executed, acknowledged and delivered by any Indemnitor or the then owner of
any of the Mortgaged Property, to Lender and/or its designee or designees
substitute notes and security instruments in such principal amounts, aggregating
not more than the then unpaid principal amount of Indebtedness, on the same form
as the Note, provided, however, that any such substitute notes and security
instruments shall not, without Borrower’s consent, (A) increase or otherwise
adversely change the monetary obligations or liabilities of Borrower, Indemnitor
or Master Tenant under the Loan Documents or the other economic terms thereof,
(B) adversely modify any non-monetary obligations of Borrower, Indemnitor or
Master Tenant under the Loan Documents or any rights or remedies of Borrower,
Indemnitor or Master Tenant under the Loan Documents, (C) result in any adverse
operational change to the Property, or (D) otherwise adversely affect (in
Borrower’s good faith judgment) the Mortgaged Property, Borrower, Indemnitor or
Master Tenant (including any tax or estate planning consequence), except with
respect to any of the foregoing clauses, in a de minimis manner; without
limiting the foregoing, Borrower shall not be required to incur any “rate creep”
or similar effect. Lender shall reimburse Borrower for its reasonable
out-of-pocket costs and expenses incurred in connection with this Section
12.14(b); and
(c)    Transfer of Funds. In the event of a Securitization, all funds held by
Lender in connection with the Loan may be deposited in eligible accounts at
eligible institutions as then defined and required by any Rating Agency.
Borrower and Indemnitor may be required to execute additional documents in
connection with any such Transfer, Participation, Securitization or financing,
including a new note or notes, subject to the proviso set forth in clause (b)
above. Borrower shall not be required to incur any out of pocket costs in
connection with any such cooperation.
Section 12.15    Register. Lender shall cause to be kept a register (the
“Register”) for the registration of ownership and transfer or assignment of the
Note or any substitute note or notes secured by the Deed of Trust. The names and
addresses of the registered owners of such notes, the transfers or assignment of
such notes and the names and addresses of the transferees of such notes will be
registered in the Register under such reasonable regulations as Lender may
prescribe. Borrower and Lender shall deem and treat the registered owner of any
note as shown in the Register as the absolute owner thereof for all purposes,
and neither Borrower nor Lender shall be affected by any notice to the contrary
and payment of the principal of, interest on, and Prepayment Premium or Closed
Period Prepayment Premium, as applicable, if any, due on or with respect to the
related note shall be made only to or upon the order of such registered owner.
All such payments so made shall be valid and effective to satisfy and discharge
the liability of Borrower upon such notes to the extent of the sums so paid.
Upon reasonable request from time to time, Lender shall permit Borrower to
examine the Register.

 
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Section 12.16    Limitation on Interest. It is the intention of the parties
hereto to conform strictly to applicable usury laws. Accordingly, all agreements
between Borrower and Lender with respect to the Loan are hereby expressly
limited so that in no event, whether by reason of acceleration of maturity or
otherwise, shall the amount paid or agreed to be paid to Lender or charged by
Lender for the use, forbearance or detention of the money to be lent hereunder
or otherwise, exceed the maximum amount allowed by law. If the Loan would be
usurious under applicable law (including the laws of the State and the laws of
the United States of America), then, notwithstanding anything to the contrary in
the Loan Documents: (a) the aggregate of all consideration which constitutes
interest under applicable law that is contracted for, taken, reserved, charged
or received under the Loan Documents shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited, without any Prepayment Premium or Closed Period Prepayment Premium, as
applicable, to the outstanding principal of the Loan; and (b) if the Maturity
Date is accelerated by reason of an election by Lender in accordance with the
terms hereof, or in the event of any prepayment, then any consideration which
constitutes interest may never include more than the maximum amount allowed by
applicable law. In such case, excess interest, if any, provided for in the Loan
Documents or otherwise, to the extent permitted by applicable law, shall be
amortized, pro-rated, allocated and spread from the date of advance until
payment in full thereof so that the actual rate of interest is uniform through
the term hereof. If such amortization, pro-ration, allocation and spreading is
not permitted under applicable law, then such excess interest shall be cancelled
automatically on the Note as of the date of such acceleration or prepayment and,
if theretofore paid, shall be credited, without any Prepayment Premium or Closed
Period Prepayment Premium, as applicable, to the outstanding principal of the
Loan. The terms and provisions of this Section 12.16 shall control and supersede
every other provision of the Loan Documents. The Loan Documents are contracts
made under and shall be construed in accordance with and governed by the laws of
the State as set forth in Section 12.19, except that if at any time the laws of
the United States of America permit Lender to contract for, take, reserve,
charge or receive a higher rate of interest than is allowed by the laws of the
State (whether such federal laws directly so provide or refer to the law of any
state), then such federal laws shall to such extent govern as to the rate of
interest which Lender may contract for, take, reserve, charge or receive under
the Loan Documents.
Section 12.17    Survival. All of the representations, warranties, covenants,
and indemnities of Borrower hereunder (other than relating to environmental
matters which are instead addressed in the Environmental Indemnification
Agreement) shall survive (a) until full and final repayment of the entire
Indebtedness (including satisfaction of any outstanding obligations under the
Recourse Guaranty Agreement), (b) the transfer (by sale, foreclosure, conveyance
in lieu of foreclosure or otherwise) of any or all right, title and interest in
and to the Mortgaged Property to any party, and (c) any assignment by Lender of
any interest in the Loan hereunder in accordance with the terms of this
Agreement, the making of such assignment, notwithstanding that after giving
effect to such assignment Lender may cease to be a “Lender” hereunder.
Section 12.18    WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, BORROWER AND LENDER EACH HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY
BORROWER AND LENDER, AND

 
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EACH PARTY ACKNOWLEDGES THAT THE OTHER PARTY HAS NOT MADE ANY REPRESENTATIONS OF
FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY
ITS EFFECT. BORROWER FURTHER ACKNOWLEDGES THAT BORROWER HAS BEEN REPRESENTED (OR
HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT BY
INDEPENDENT LEGAL COUNSEL SELECTED BY BORROWER AND THAT BORROWER HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
Section 12.19    Governing Law. In all respects, including matters of
construction and performance of this Agreement and the obligations arising
hereunder, this Agreement shall be governed by, and construed in accordance
with, the laws of the State in which the Premises are located applicable to
contracts and obligations made and performed in such State and any applicable
laws of the United States of America. Interpretation and construction of this
Agreement shall be according to the contents hereof and without presumption or
standard of construction in favor of or against Borrower or Lender.
Section 12.20    Consent to Jurisdiction and Venue. Each of Borrower and Lender
hereby submits to personal jurisdiction in the State in which the Premises are
located for the enforcement of the provisions of this Agreement and irrevocably
waives any and all rights to object to such jurisdiction for the purposes of
litigation to enforce any provision of this Agreement. Each of Borrower and
Lender hereby consents to the jurisdiction of and agrees that any action, suit
or proceeding to enforce this Agreement may be brought in any state or federal
court in the state in which the Premises are located. Each of Borrower and
Lender hereby irrevocably waives any objection that it may have to the laying of
the venue of any such actions, suit, or proceeding in any such court and hereby
further irrevocably waives any claim that any such action, suit or proceeding
brought in such a court has been brought in an inconvenient forum.
Section 12.21    Agent for Service of Process. Borrower hereby designates and
appoints Corporation Service Company, having an address of 2710 Gateway Oaks
Drive, Suite 150-N, Sacramento, California 95833, as its authorized agent to
accept and acknowledge on its behalf service of any and all process which may be
served in any such suit, action or proceeding in any federal or state court and
agrees that service of process upon said agent at said address and written
notice of said service mailed or delivered to Borrower in the manner provided
herein shall be deemed in every respect effective service of process upon
Borrower, in any such suit, action or proceeding in connection with this
Agreement. Borrower (a) shall give prompt notice to Lender of any change of
address of its authorized agent hereunder, (b) may at any time and from time to
time designate a substitute authorized agent with an office in the State where
the Premises are located (which substitute agent and office shall be designated
as the person and address for service of process), and (c) shall promptly
designate such a substitute if its authorized agent ceases to have an office the
State where the Premises are located or is dissolved without leaving a
successor.
Section 12.22    Entire Agreement. This Agreement and the other Loan Documents
embody the entire agreement and understanding between Lender and Borrower and
supersede all prior agreements and understandings between such parties relating
to the subject matter hereof and thereof. Accordingly, the Loan Documents may
not be contradicted by evidence of prior,

 
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contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.
Section 12.23    Pledge and Grant of Security Interest. Borrower hereby pledges
to Lender, and grants a security interest in, any and all monies now or
hereafter deposited with Lender or with a third-party depository bank from time
to time as additional security for the payment of the Loan but subject to the
rights of tenants with respect to any tenant security deposits under Leases and
excluding any payroll account held by Borrower. Without limiting the foregoing,
Borrower hereby grants a security interest in all monies deposited into the FF&E
Reserve to be maintained pursuant to Section 5.4 and into the Working Capital
Reserve contemplated under Section 5.5 and all proceeds thereof and any interest
thereon, which security interests shall be perfected by operation of the Deposit
Agreement; provided, however, in each instance, such security interest shall be
subject to the Hotel Manager’s right to utilize the funds therein set forth in
Section 9 of the Hotel Manager Subordination. Borrower shall not further pledge,
assign or grant any security interest in any monies on deposit therein from time
to time or permit any lien or encumbrance to attach thereto, or any levy to be
made thereon, or any UCC-1 financing statements (except those naming Lender as
the secured party) to be filed with respect thereto. Except as otherwise
provided in this Agreement, during the continuance of an Event of Default,
Lender may apply any such sums then deposited with Lender to the payment of the
charges for which such funds have been deposited or to the payment of the Loan
or any other charges affecting the security of the Loan, as Lender may elect,
but no such application shall be deemed to have been made by operation of law or
otherwise until actually made by Lender. Until expended or applied as above
provided, such funds shall constitute additional security for the Loan.
Section 12.24    Costs. Borrower shall pay all reasonable out-of-pocket Costs
incurred by Lender in connection with the collection or enforcement of the Loan
or any of the Loan Documents (as applicable), including probate, appellate and
bankruptcy proceedings, any post-judgment proceedings to collect or enforce any
judgment or order relating to the Loan or any of the Loan Documents (as
applicable), and all such Costs occurring after the Closing Date shall be
included as additional Indebtedness bearing interest at the Default Rate set
forth herein until paid. In any action to foreclose the lien hereof or otherwise
enforce Lender’s rights and remedies hereunder, there shall be allowed and
included as additional Indebtedness all Costs which may be paid or incurred by
or on behalf of Lender. For the purposes hereof “Costs” means all reasonable
out-of-pocket expenditures and expenses which may be paid or incurred by or on
behalf of Lender including repair costs, payments to remove or protect against
liens, attorneys’ fees, receivers’ fees, appraisers’ fees, engineers’ fees,
accountants’ fees, independent consultants’ fees (including environmental
consultants), all costs and expenses incurred in connection with any of the
foregoing, Lender’s out-of-pocket costs and expenses related to any audit or
inspection of the Hotel Property, outlays for documentary and expert evidence,
stenographers’ charges, stamp taxes, publication costs, and costs (which may be
estimates as to items to be expended after entry of an order or judgment) for
procuring all such abstracts of title, title searches and examination, title
insurance policies, and similar data and assurances with respect to title as
Lender may (in its reasonable discretion) deem necessary either to prosecute any
action or to evidence to bidders at any sale of the partnership interests in
Borrower the true condition of the title to, or the value of, the Mortgaged
Property. Further, all “Costs” shall include such other reasonable out-of-pocket
costs, expenses and fees as may be

 
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incurred by Lender in the protection of the Mortgaged Property and the
maintenance of the lien of the Deed of Trust, including, attorneys’ fees,
expenses and costs in any litigation or proceeding affecting this Agreement, the
Deed of Trust, the Note, the other Loan Documents, the Mortgaged Property, the
Additional Collateral, or the personal property, including probate, appellate,
and bankruptcy proceedings, and any post-judgment proceedings to collect or
enforce any judgment or order relating to this Agreement or the other Loan
Documents, to obtain any court order or the appointment of a receiver to enforce
Lender’s rights pursuant to Section 564 of the California Code of Civil
Procedure and/or Section 2929.5 of the California Civil Code or in preparation
for the commencement or defense of any action or proceeding, shall be
immediately due and payable to Lender, with interest thereon at the Default
Rate, and shall be secured by the Deed of Trust. This provision is separate and
several, and shall survive the merger of this provision into any judgment.
Section 12.25    Publicity Restriction. Each of Borrower and Lender hereby
covenants for itself and its Affiliates that it shall not issue any press
release or public statement with respect to this Agreement or the transactions
contemplated by this Agreement without the prior consent of all parties to this
Agreement, except to the extent required by any applicable Legal Requirements or
the regulations of the U.S. Securities and Exchange Commission. If any party is
required by any applicable Legal Requirements or the regulations of the U.S.
Securities and Exchange Commission to issue such a press release or public
statement, such party shall, at least two (2) Business Days prior to the
issuance of the same, deliver a copy of the proposed release or statement to the
other parties for their review.
ARTICLE 13    

THE ADMINISTRATIVE AGENT
Section 13.1    Appointment, Powers and Immunities. At all times when there is a
lender other than (including in addition to) Lender under this Agreement, the
Lenders shall be deemed to appoint and authorize the Administrative Agent to act
for all purposes as their agent under the Loan Documents. The provisions of this
Article 13 shall not apply at any time when the Administrative Agent is the sole
Lender.
Section 13.2    Reliance by Borrower on Administrative Agent. At all times when
there is more than one Lender, (a) Borrower (i) is entitled to rely on the
Administrative Agent for any waiver, amendment, approval or consent given by
“Lender” under the Loan Documents, (ii) shall adhere only to waivers,
amendments, approvals or consents given by Administrative Agent, on behalf of
“Lender” under the Loan Documents, and (iii) shall make all payments under the
Notes and the other Loan Documents to Administrative Agent, as set forth herein;
(b) Administrative Agent shall, on behalf of all of the Lenders, be permitted to
take all actions, including exercising all remedies, permitted to be taken by
“Lender” under the Loan Documents (either by law or pursuant to the terms of the
Loan Documents); and (c) all legal action taken respecting the Loan Documents
shall be taken by the Administrative Agent on behalf of the Lenders, and all
default notices under the Loan Documents will be provided by the Administrative
Agent. Unless and until the Lenders notify Borrower otherwise, the
Administrative Agent is Cornerstone Real Estate Advisers Inc. The use of the
term “agent” in this Agreement with reference to the Administrative Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of

 
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any applicable law. Instead, such term is used merely as a matter of market
custom, and is intended to create or reflect only an administrative relationship
between independent contracting parties. Notwithstanding anything to the
contrary contained in the Notes, unless otherwise directed by Administrative
Agent in writing, all payments under the Loan Documents shall be made by
Borrower to the Administrative Agent in accordance with the provisions of
Section 2.7(a).
Section 13.3    Rights as a Lender. If the Administrative Agent is also a Lender
hereunder it shall have the same rights and powers hereunder as any other Lender
and may exercise the same as though it were not acting as the Administrative
Agent, and the term “Lender” or “Lenders” shall, unless the context otherwise
indicates, include the Administrative Agent in its individual capacity.
ARTICLE 14    

AMENDMENT AND RESTATEMENT
Section 14.1    Amendment and Restatement. This Agreement amends, restates and
replaces in its entirety the Original Loan Agreement, and after the date hereof,
the Original Loan Agreement shall be of no further force or effect. The Original
Loan Agreement shall be cancelled by the substitution of this Agreement
therefor, effective as of the date hereof, but shall not constitute a novation
of the indebtedness evidenced by the Original Loan Agreement.
[Remainder of Page Intentionally Left Blank; Signature Pages Follow]

IN WITNESS WHEREOF, Lender and Borrower have executed and delivered this
Agreement as of the date first written above.
LENDER:
MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, a Massachusetts
                        Corporation
By:    Cornerstone Real Estate Advisers Inc.,
its Authorized Agent
By:    /s/ Christian Andersson
Name:    Christian Andersson
Its:    Managing Director
[Signatures continue on the following page]

 
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BORROWER:
SHR MLB, LLC,
a Delaware limited liability company
By:    /s/ Jonathan P. Stanner
Name:    Jonathan P. Stanner
Its:    SVP, Capital Markets, Acquisitions & Treasurer

[End of Signatures]

 
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EXHIBIT A
LEGAL DESCRIPTION OF PREMISES

All that certain real property situated in the County of Orange, State of
California, described as follows:

Parcel A:

Lots 17 and 18 and Lettered Lots A, C, E, J and K of Tract No. 15497, in the
City of Laguna Beach, County of Orange, State of California, as shown on a Map
filed in Book 827, Pages 16 through 26 inclusive of Miscellaneous Maps, Records
of Orange County, California.

Parcel B: (formerly Lettered Lot F of Tract No. 15497)

Parcel 2 as shown on Exhibit “B” attached to Lot Line Adjustment No. LL-02-12,
recorded December 11, 2002 as Instrument No. 2002001125723 of Official Records,
and re-recorded February 10, 2003 as Instrument No. 2003000150452 of Official
Records.

Parcel C:

A perpetual easement for the purpose of a storm drain and maintenance of all
storm drains and storm drain facilities, in, on, over, under, above and across
those portions of Lots “H” and “I” of Tract No. 15497, as shown on a Map
recorded in Book 827, Pages 16 to 26 inclusive of Miscellaneous Maps, Records of
Orange County, California, included within the land described in that certain
grant of storm drain easement between the City of Laguna Beach, a municipal
corporation, grantor and Five Star Resort, LLC, a Delaware limited liability
company, grantee, dated June 19, 2002, recorded June 20, 2002 as Instrument No.
20020519671 of Official Records of Orange County, California.

Parcel D:

Appurtenant, non-exclusive easements for common maintenance area and common
maintenance area ingress and egress; private storm drain purposes; and support
as said easements are set forth and defined in Sections 3.2, 3.3 and 3.4.2 in
that certain Amended and Restated Master Declaration of Covenants, Conditions
and Restrictions of the Laguna Beach Colony Destination Resort Community
recorded December 12, 2002 as Instrument No. 2002001132724 of Official Records
of Orange County, California.

Parcel E:

An easement for view corridor maintenance as set forth and defined in Section
3.4.3 in that certain Amended and Restated Master Declaration of Covenants,
Conditions and Restrictions of the Laguna Beach Colony Destination Resort
Community recorded December 12, 2002 as Instrument No. 2002001132724 of Official
Records of Orange County, California.

 
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Parcel F:

Parcel 2, as shown on Exhibit “B” attached to Lot Line Adjustment LL 95-01
recorded November 22, 1995 as Instrument No. 95-0520276 of Official Records of
Orange County, California.

Parcel G:

A non-exclusive easement for ingress and egress over Parcel 1 as shown on
Exhibit “B” attached to Lot Line Adjustment LL 95-01 recorded November 22, 1995
as Instrument No. 95-0520276 of Official Records of Orange County, California,
as set forth and defined in that certain grant deed recorded September 15, 1997
as Instrument No. 97-0449412 of Official Records of Orange County, California,
and as clarified by that certain Agreement Regarding Reserved Easement for
Ingress and Egress recorded August 6, 2014 as Instrument No. 2014000316578 of
Official Records of Orange County, California.
Assessor’s Parcel No.: 656-451-01, 02, 04; 656-441-18, 21, 24, 25, 27;
656-191-39

 
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EXHIBIT B
LIST OF OPERATING AGREEMENTS
1.     The Management Agreement.
2.     That certain Development Agreement dated as of October 7, 1999, executed
by the City of Laguna Beach and Five Star Resort LLC, a Delaware limited
liability company, and recorded on November 3, 1999 as Instrument No.
19990770847, as amended by that certain Operating Memorandum No. 1 dated as of
June 12, 2002, executed by the City and Five Star, and recorded in the Official
Records on June 20, 2002 as Instrument No. 20020519675 (the “Development
Agreement”).

 
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EXHIBIT C
LIST OF EASEMENT AGREEMENTS
1.     Development Agreement.
2.    The Parking Lot Easement.
3.     CC&Rs.
4.     That certain easement agreement recorded in the Official Records on March
5, 1986 as Instrument No. 86-088089.
5.     That certain easement agreement recorded in the Official Records on March
7, 2002 as Instrument No. 20020192711.    
6.     Those certain easements shown on that certain map/plat for Tract No.
15497, recorded in the Official Records on April 5, 2002, in Book 827, Pages 16
through 26 of Tract Map.
7.     That certain easement agreement recorded in the Official Records on April
24, 2002 as Instrument No. 20020343774.
8.     That certain easement agreement recorded in the Official Records on June
20, 2002 as Instrument No. 20020519672.
9.     That certain easement agreement recorded in the Official Records on April
21, 2003 as Instrument No. 2003000442394
10.     That certain easement agreement recorded in the Official Records on
April 21, 2003 as Instrument No. 2003000442396.
11.     That certain easement agreement recorded in the Official Records on
April 21, 2003 as Instrument No. 2003000442398.
12.     That certain easement agreement recorded in the Official Records on
April 21, 2003 as Instrument No. 2003000442401.
13.     That certain easement agreement recorded in the Official Records on May
19, 2003 as Instrument No. 2003000574494.
14.     That certain easement agreement recorded in the Official Records on May
19, 2003 as Instrument No. 2003000574495.
15.     That certain easement agreement recorded in the Official Records on May
20, 2003 as Instrument No. 2003000581892.
16.     That certain easement agreement recorded in the Official Records on
April 12, 1940 In Book 1042, Page 141.

 
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17.     That certain easement agreement recorded in the Official Records on June
16, 1943 in Book 1189, Page 559 of Official Records.
18.     That certain easement agreement recorded in the Official Records on
April 13, 1955 in Book 3030, Page 79.
19.     That certain easement agreement recorded in the Official Records on
February 17, 1967 in Book 8179, Page 283.
20.    That certain Agreement Regarding Reserved Easement for Ingress and Egress
recorded in the Official Records on August 6, 2014 as Instrument No.
2014000316578.

 
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EXHIBIT D

FORM OF CONSENT AND JOINDER

DTRS MLB, LLC, a Delaware limited liability company (“Master Tenant”), as of
January 29, 2015, hereby consents to that certain Amended and Restated Loan
Agreement (the “Agreement”) dated as of the date hereof, executed by SHR MLB,
LLC, a Delaware limited liability company (“Borrower”), in favor of
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, a Massachusetts corporation
(“Lender”). Master Tenant acknowledges the express terms of the Agreement and
agrees that it shall cooperate with Borrower in connection with the performance
of Borrower’s obligations under the Agreement, shall perform and comply with all
of the covenants to be undertaken by the Master Tenant set forth in the
Agreement, and shall not take any action which is inconsistent with the exercise
of Lender’s rights thereunder.

DTRS MLB, LLC,
a Delaware limited liability company

By:    
Name:    
Its:    

 
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