Moody National Reit II, Inc. - 8-K [mnrtii-8k_092016.htm]

 

Exhibit 10.2

 

LOAN AGREEMENT

 

Dated as of September 20, 2016

 

Between

 

MOODY NATIONAL YALE-SEATTLE HOLDING, LLC,

 

as Borrower

 

and

 

KEYBANK NATIONAL ASSOCIATION,

 

as Lender

  

Loan No. 10106606

 

 

 

 

TABLE OF CONTENTS

 

    Page       ARTICLE I DEFINITIONS; PRINCIPLES OF CONSTRUCTION 1     Section
1.1 Definitions 1 Section 1.2 Principles of Construction 31       ARTICLE II
GENERAL TERMS 32     Section 2.1 Loan Commitment; Disbursement to Borrower 32
2.1.1. Agreement to Lend and Borrow 32 2.1.2. Single Disbursement to Borrower 32
2.1.3. The Note, Security Instrument and Loan Documents 32 2.1.4. Use of
Proceeds 32 Section 2.2 Interest Rate 33 2.2.1. Interest Rate 33 2.2.2. Interest
Calculation 33 2.2.3. Default Rate 33 2.2.4. Usury Savings 33 Section 2.3 Loan
Payment 34 Section 2.4 Prepayments 34 Section 2.5 Defeasance 34 2.5.1. Voluntary
Defeasance 34 2.5.2. Collateral 36 2.5.3. Successor Borrower 36 Section 2.6
Release of Property 37 2.6.1. Release of Property 37 Section 2.7 Clearing
Account/Cash Management 38 2.7.1. Clearing Account 38 2.7.2. Cash Management
Account 40 2.7.3. Payments Received under the Cash Management Agreement 41      
ARTICLE III CONDITIONS PRECEDENT 41     Section 3.1 Conditions Precedent to
Closing 41       ARTICLE IV REPRESENTATIONS AND WARRANTIES 41   Section 4.1
Borrower Representations 41 4.1.1. Organization 41 4.1.2. Proceedings 42 4.1.3.
No Conflicts 42 4.1.4. Litigation 42 4.1.5. Agreements 42 4.1.6. Title 43 4.1.7.
Solvency 43

 

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4.1.8. Full and Accurate Disclosure 44 4.1.9. No Plan Assets 44 4.1.10.
Compliance 44 4.1.11. Financial Information 45 4.1.12. Condemnation 45 4.1.13.
Federal Reserve Regulations 45 4.1.14. Utilities and Public Access 45 4.1.15.
Not a Foreign Person 45 4.1.16. Separate Lots 45 4.1.17. Assessments 46 4.1.18.
Enforceability 46 4.1.19. No Prior Assignment 46 4.1.20. Insurance 46 4.1.21.
Use of Property 46 4.1.22. Certificate of Occupancy; Licenses 46 4.1.23. Flood
Zone 46 4.1.24. Physical Condition 47 4.1.25. Boundaries 47 4.1.26. Leases 47
4.1.27. Survey 48 4.1.28. Inventory 48 4.1.29. Filing and Recording Taxes 48
4.1.30. Special Purpose Entity/Separateness 48 4.1.31. Management Agreement 50
4.1.32. Illegal Activity 50 4.1.33. No Change in Facts or Circumstances;
Disclosure 50 4.1.34. Investment Company Act 50 4.1.35. Embargoed Person 51
4.1.36. Principal Place of Business; State of Organization 51 4.1.37.
Environmental Representations and Warranties 51 4.1.38. Cash Management Account
52 4.1.39. Franchise Agreement 52 4.1.40. Hotel Personal Property 52 4.1.41.
Labor Matters 52 4.1.42. Leases 53 4.1.43. PIP Requirements 53 Section 4.2
Survival of Representations 53       ARTICLE V BORROWER COVENANTS 53     Section
5.1 Affirmative Covenants 53 5.1.1. Existence; Compliance with Legal
Requirements 54 5.1.2. Taxes and Other Charges 55 5.1.3. Litigation 55 5.1.4.
Access to Property 55 5.1.5. Notice of Default 55 5.1.6. Cooperate in Legal
Proceedings 55

 

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5.1.7. Intentionally Omitted 55 5.1.8. Award and Insurance Benefits 56 5.1.9.
Further Assurances 56 5.1.10. Principal Place of Business, State of Organization
57 5.1.11. Financial Reporting 57 5.1.12. Business and Operations 60 5.1.13.
Title to the Property 60 5.1.14. Costs of Enforcement 60 5.1.15. Estoppel
Statement 61 5.1.16. Loan Proceeds 61 5.1.17. Performance by Borrower 61 5.1.18.
Confirmation of Representations 61 5.1.19. Environmental Covenants 62 5.1.20.
Leasing Matters 64 5.1.21. Alterations 64 5.1.22. Operation of Property 65
5.1.23. Embargoed Person 65 5.1.24. Default under Franchise Agreement 65 5.1.25.
PIP 66 5.1.26. Master Lease Documents 66 Section 5.2 Negative Covenants 67
5.2.1. Operation of Property 67 5.2.2. Liens 67 5.2.3. Dissolution 68 5.2.4.
Change In Business 68 5.2.5. Debt Cancellation 68 5.2.6. Zoning 68 5.2.7. No
Joint Assessment 68 5.2.8. Intentionally Omitted 68 5.2.9. ERISA 68 5.2.10.
Transfers 69 5.2.11. Master Lease Documents 74       ARTICLE VI INSURANCE;
CASUALTY; CONDEMNATION 75     Section 6.1 Insurance 75 Section 6.2 Casualty 79
Section 6.3 Condemnation 80 Section 6.4 Restoration 80       ARTICLE VII RESERVE
FUNDS 85   Section 7.1 Intentionally Omitted 85 Section 7.2 Tax and Insurance
Escrow Fund 85 Section 7.3 Replacements and Replacement Reserve 85 7.3.1.
Replacement Reserve Fund 85 7.3.2. Disbursements from Replacement Reserve
Account 86

 

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7.3.3. Performance of Replacements 87 7.3.4. Failure to Make Replacements 90
7.3.5. Balance in the Replacement Reserve Account 90 7.3.6. Additional PIP
Requirements 90 Section 7.4 Additional PIP Reserve Fund. 90 7.4.1. Additional
PIP Reserve Fund 90 7.4.2. Disbursements from the PIP Reserve Account 91 7.4.3.
Additional PIP Reserve, Generally. 91 Section 7.5 Excess Cash Flow Reserve Fund
92 7.5.1. Deposits to Excess Cash Flow Reserve Account 92 7.5.2. Release of
Excess Cash Flow Reserve Funds 93 Section 7.6 Reserve Funds, Generally 93
Section 7.7 Seasonality Reserve. 94 7.7.1. Deposits to Seasonality Reserve Funds
94 7.7.2. Withdrawal of Seasonality Reserve Funds 95 7.7.3. Seasonality
Reporting Requirements 95 Section 7.8 Existing PIP Reserve. 95 7.8.1. Existing
PIP Reserve Fund 95 7.8.2. Disbursements from the Existing PIP Reserve Account
96 7.8.3. Existing PIP Reserve, Generally. 96       ARTICLE VIII DEFAULTS 97    
Section 8.1 Event of Default 97 Section 8.2 Remedies 100 Section 8.3 Remedies
Cumulative; Waivers 102       ARTICLE IX SPECIAL PROVISIONS 102     Section 9.1
Securitization 102 9.1.1. Sale of Notes and Securitization 102 9.1.2.
Securitization Costs 104 Section 9.2 Right To Release Information 104 Section
9.3 Exculpation 104 Section 9.4 Matters Concerning Manager 108 Section 9.5
Servicer 108   ARTICLE X MISCELLANEOUS 108     Section 10.1 Survival 108 Section
10.2 Lender’s Discretion 109 Section 10.3 Governing Law 109 Section 10.4
Modification, Waiver in Writing 110 Section 10.5 Delay Not a Waiver 110 Section
10.6 Notices 111 Section 10.7 Trial by Jury 111 Section 10.8 Headings 112

 

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Section 10.9 Severability 112 Section 10.10 Preferences 112 Section 10.11 Waiver
of Notice 112 Section 10.12 Remedies of Borrower 112 Section 10.13 Expenses;
Indemnity 113 Section 10.14 Schedules Incorporated 113 Section 10.15 Offsets,
Counterclaims and Defenses 113 Section 10.16 No Joint Venture or Partnership; No
Third Party Beneficiaries 113 Section 10.17 Publicity 114 Section 10.18 Waiver
of Marshalling of Assets 114 Section 10.19 Waiver of Counterclaim 114 Section
10.20 Conflict; Construction of Documents; Reliance 114 Section 10.21 Brokers
and Financial Advisors 115 Section 10.22 Prior Agreements 115 Section 10.23
Liability 115 Section 10.24 Certain Additional Rights of Lender (VCOC) 115
Section 10.25 (OFAC) 116 Section 10.26 Duplicate Originals; Counterparts 116    
ARTICLE XI LOCAL LAW PROVISIONS 116     Section 11.1 Inconsistencies 116

 

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SCHEDULES

 

Schedule I – Rent Roll       Schedule II – Intentionally Omitted       Schedule
III – Organizational Chart of Borrower       Schedule IV – Tenant Direction
Letter Form       Schedule V   – Credit Card Direction Letter Form      
Schedule VI – Intentionally Omitted

 

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LOAN AGREEMENT

 

THIS LOAN AGREEMENT is made as of September 20, 2016 (this “Agreement”), between
KEYBANK NATIONAL ASSOCIATION, a national banking association, having an address
at 11501 Outlook, Suite 300, Overland Park, Kansas 66211 (“Lender”) and MOODY
NATIONAL YALE-SEATTLE HOLDING, LLC, a Delaware limited liability company, having
its principal place of business at 6363 Woodway, Suite 110, Houston, Texas 77057
(“Borrower”).

 

RECITALS:

 

A.          Borrower desires to obtain the Loan (as hereinafter defined) from
Lender.

 

B.          Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents (as
hereinafter defined).

 

NOW THEREFORE, for valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I
DEFINITIONS; PRINCIPLES OF CONSTRUCTION

 

Section 1.1          Definitions.  For all purposes of this Agreement, except as
otherwise expressly required or unless the context clearly indicates a contrary
intent:

 

“Accrual Period” means the period commencing on and including the first (1st)
day of each calendar month during the term of the Loan and ending on and
including the final calendar date of such calendar month; however, the initial
Accrual Period shall commence on and include the Closing Date and shall end on
and include the final calendar date of the calendar month in which the Closing
Date occurs.

 

“Action” has the meaning set forth in Section 10.3 hereof.

 

“Additional Insolvency Opinion” means any subsequent Insolvency Opinion.

 

“Additional Permitted Transfer” has the meaning set forth in Section 5.2.10(f)
hereof.

 

“Additional PIP Deposit” shall mean an amount equal to 110% of the estimated
costs to complete the related Additional PIP Requirements, as determined by
Lender in its sole discretion (which such cost shall be exclusive of the cost of
any Additional PIP Requirements which are duplicative of any approved
Replacements for which adequate Replacement Reserve Funds exist hereunder, as
reasonably determined by Lender (the “Duplicative Replacements”)).

 

“Additional PIP Requirements” shall mean each plan for replacing the
Replacements, remodeling, redecorating and modifying the Property required of
Borrower and/or Master Tenant (as applicable) by the Franchisor pursuant to the
Franchise Agreement (or, as applicable, any Replacement Franchise Agreement)
other than the Existing PIP Requirements.

 

 

 

 

“Additional PIP Reserve Account” shall have the meaning set forth in Section
7.4.1 hereof.

 

“Additional PIP Reserve Event” shall mean any notice from Franchisor (or the
Qualified Franchisor, as the case may be) to Borrower and/or Master Tenant that
imposes any (or modifies any previously-imposed) Additional PIP Requirements
that are required by Franchisor under the Franchise Agreement (or otherwise
pursuant to any Replacement Franchise Agreement).

 

“Additional PIP Reserve Fund” shall have the meaning set forth in Section 7.4.1
hereof.

 

“Additional PIP Reserve Monthly Deposit” shall mean an amount equal to
one-twelfth (1/12) of the Additional PIP Deposit.

 

“Affiliate” means, as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or executive officer of such Person or of an
Affiliate of such Person.

 

“Affiliated Manager” means any Manager in which Borrower, Master Tenant,
Principal, or Guarantor has, directly or indirectly, any legal, beneficial or
economic interest.

 

“Agent” means KeyBank National Association, or any successor Eligible
Institution acting as Agent under the Cash Management Agreement.

 

“Annual Budget” means an operating budget, including all planned Capital
Expenditures, for the Property prepared by or on behalf of Borrower in
accordance with Section 5.1.11(g) hereof for the applicable Fiscal Year or other
period.

 

“Approved Annual Budget” has the meaning set forth in Section 5.1.11(g) hereof.

 

“Assignment of Management Agreement” means that certain Assignment of Management
Agreement and Subordination of Management Fees, dated as of the date hereof,
among Lender, Borrower and Manager, and consented and agreed to by Master
Tenant, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.

 

“Availability Threshold” means $450,000.00.

 

“Award” means any compensation paid by any Governmental Authority in connection
with a Condemnation.

 

“Bankruptcy Action” means with respect to any Person (a) such Person filing a
voluntary petition under the Bankruptcy Code or any other Federal or state
bankruptcy or insolvency law; (b) the filing of an involuntary petition against
such Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law; (c) such Person filing an answer consenting to or otherwise
acquiescing in or joining in any involuntary petition filed against it, by any
other Person under the Bankruptcy Code or any other Federal or state bankruptcy
or insolvency law; (d) such Person consenting to or acquiescing in or joining in
an application for the appointment of a custodian, receiver, trustee, or
examiner for such Person or any portion of the Property; (e) such Person making
an assignment for the benefit of creditors, or (f) such Person admitting, in
writing or in any legal proceeding, its insolvency or inability to pay its debts
as they become due.

 

 2

 

 

“Bankruptcy Code” means Title 11 of the United States Code, 11 U.S.C. §101, et
seq., as the same may be amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder,
and any comparable foreign laws relating to bankruptcy, insolvency or creditors’
rights or any other Federal or state bankruptcy or insolvency law.

 

“Borrower” has the meaning set forth in the introductory paragraph hereto,
together with its successors and permitted assigns.

 

“Borrower’s Excess Cash Flow Subaccount” shall have the meaning set forth in
Section 7.5.1 hereof.

 

“Business Day” means a day upon which commercial banks are not authorized or
required by law to close in the city designated from time to time as the place
for receipt of payments.

 

“Capital Expenditures” shall mean, for any period, the amount expended for items
capitalized under GAAP and the Uniform System of Accounts (including
expenditures for building improvements or major repairs, leasing commissions and
tenant improvements).

 

“Cash Management Account” has the meaning set forth in Section 2.7.2 hereof.

 

“Cash Management Agreement” means that certain Cash Management Agreement, dated
as of the date hereof, by and among Borrower, Lender, Master Tenant and Agent,
as the same may be amended, restated, replaced, supplemented or otherwise
modified from time to time.

 

“Cash Sweep Event” means the occurrence of: (a) an Event of Default; (b) any
Bankruptcy Action of Borrower, Master Tenant, Principal or Manager; (c) a DSCR
Trigger Event; or (d) a Franchise Agreement Trigger Event.

 

“Cash Sweep Event Cure” means

 

(a)          if the Cash Sweep Event is caused solely by the occurrence of a
DSCR Trigger Event, the achievement of a Debt Service Coverage Ratio of 1.25 to
1.00 or greater for two (2) consecutive quarters based upon the trailing three
(3) month period immediately preceding the date of determination,

 

(b)          if the Cash Sweep Event is caused solely by an Event of Default,
the acceptance by Lender of a cure of such Event of Default (which cure Lender
is not obligated to accept and may reject or accept in its discretion),

 

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(c)          if the Cash Sweep Event is caused solely by a Bankruptcy Action of
Manager, if Borrower replaces the Manager with a Qualified Manager under a
Replacement Management Agreement within sixty (60) days of such Bankruptcy
Action; or

 

(d)          if the Cash Sweep Event is caused solely by the occurrence of a
Franchise Agreement Trigger Event, Borrower or Master Tenant (as applicable) has
entered into a Replacement Franchise Agreement in accordance with the terms
hereof and for a term reasonably satisfactory to Lender;

 

provided, however, that, such Cash Sweep Event Cure set forth in this definition
shall be subject to the following conditions, (i) no Event of Default shall have
occurred and be continuing under this Agreement or any of the other Loan
Documents, (ii) a Cash Sweep Event Cure may occur no more than a total of three
(3) times in the aggregate during the term of the Loan, and (iii) Borrower shall
have paid all of Lender’s reasonable expenses incurred in connection with such
Cash Sweep Event Cure including, reasonable attorney’s fees and expenses.
Notwithstanding any provision in this Agreement to the contrary, in no event
shall Borrower have the right to cure any Cash Sweep Event caused by a
Bankruptcy Action of Borrower, Master Tenant or Principal.

 

“Cash Sweep Period” means each period commencing on the occurrence of a Cash
Sweep Event and continuing until the earlier of (a) the Payment Date next
occurring following the related Cash Sweep Event Cure, or (b) payment in full of
all principal and interest on the Loan and all other amounts payable under the
Loan Documents or defeasance of the Loan in accordance with the terms and
provisions of the Loan Documents.

 

“Casualty” has the meaning set forth in Section 6.2 hereof.

 

“Casualty Consultant” has the meaning set forth in Section 6.4(b)(iii) hereof.

 

“Casualty Retainage” has the meaning set forth in Section 6.4(b)(iv) hereof.

 

“Clearing Account” has the meaning set forth in Section 2.7.1 hereof.

 

“Clearing Account Agreement” means that certain Deposit Account Control
Agreement dated the date hereof among Borrower, Lender and Clearing Bank, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time, relating to funds deposited in the Clearing Account.

 

“Clearing Bank” means the clearing bank which establishes, maintains and holds
the Clearing Account, which shall be an Eligible Institution acceptable to
Lender in its discretion.

 

“Closing Date” means the date of the funding of the Loan.

 

“Code” means the Internal Revenue Code of 1986, as amended, as it may be further
amended from time to time, and any successor statutes thereto, and applicable
U.S. Department of Treasury regulations issued pursuant thereto in temporary or
final form.

 

“Collected Taxes” shall have the meaning set forth in the Cash Management
Agreement.

 

 4

 

 

“Condemnation” means a temporary or permanent taking by any Governmental
Authority as the result or in lieu or in anticipation of the exercise of the
right of condemnation or eminent domain, of all or any part of the Property, or
any interest therein or right accruing thereto, including any right of access
thereto or any change of grade affecting the Property or any part thereof.

 

“Condemnation Proceeds” has the meaning set forth in Section 6.4(b) hereof.

 

“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of management, policies or activities of a Person,
whether through ownership of voting securities, by contract or otherwise.
“Controlled” and “Controlling” have correlative meanings.

 

“Credit Card Company” shall have the meaning set forth in the Cash Management
Agreement.

 

“Credit Card Direction Letter” means an instruction letter to Tenants
substantially in the form attached hereto as Schedule V.

 

“Crowdfunding” means, any offer or sale of equity or debt securities of
Borrower, Master Tenant, Principal or Guarantor that is (a) conducted or
proposed to be conducted via (i) the internet or through the use of other
general solicitation or advertising of the investment opportunity to prospective
investors by the issuer of such securities or (ii) an online or other funding
portal, and (b) in a transaction or series of transactions intended to be exempt
from the registration requirements of the Securities Act of 1933, as amended,
pursuant to the exemptions provided by Section 4(a)(6) thereof.

 

“Debt” means the outstanding principal amount of the Loan set forth in, and
evidenced by, this Agreement and the Note together with all interest accrued and
unpaid thereon and all other sums (including the Defeasance Payment Amount and
any Yield Maintenance Premium (as defined in the Note)) due to Lender in respect
of the Loan under the Note, this Agreement, the Security Instrument or any other
Loan Document.

 

“Debt Service” means, with respect to any particular period of time, the
scheduled principal and interest payments due under this Agreement and the Note.

 

“Debt Service Coverage Ratio” means a ratio for the applicable period in which:

 

(a)          the numerator is the Net Operating Income (excluding interest on
credit accounts and using annualized operating expenses for any recurring
expenses not paid monthly (e.g., Taxes and Insurance Premiums)) for such period
as set forth in the statements required hereunder, without deduction for (i)
actual management fees incurred in connection with the operation of the
Property, (ii) actual franchise fees incurred in connection with the operation
of the Property, or (iii) amounts paid to the Reserve Funds, less (A) management
fees equal to the greater of (1) assumed management fees of four percent (4.0%)
of Gross Income from Operations and (2) the actual management fees incurred, (B)
franchise fees (inclusive of any royalty fees and contribution fees) equal to
the greater of (1) assumed franchise fees of 5.5% of Room Revenues and (2) the
actual franchise fees incurred, and (C) annual Replacement Reserve Fund
contributions equal to four percent (4.0%) of Gross Income from Operations; and

 

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(b)         the denominator is the aggregate amount of Debt Service for such
period assuming full payments of principal and interest with amortization based
on a 30-year schedule notwithstanding any interest-only period under the Loan.

 

“Default” means the occurrence of any event hereunder or under any other Loan
Document which, but for the giving of notice or passage of time, or both, would
be an Event of Default.

 

“Default Rate” means, with respect to the Loan, a rate per annum equal to the
lesser of (a) the Maximum Legal Rate or (b) five percent (5%) above the Interest
Rate.

 

“Defeasance Date” has the meaning set forth in Section 2.5.1(a)(i) hereof.

 

“Defeasance Deposit” means an amount equal to the remaining principal amount of
the Note, the Defeasance Payment Amount, any costs and expenses incurred or to
be incurred in the purchase of U.S. Obligations necessary to meet the Scheduled
Defeasance Payments, any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection with the transfer of the Note or otherwise
required to accomplish the agreements of Sections 2.4 and 2.5 hereof (including
any fees and expenses of accountants, attorneys and the Rating Agencies incurred
in connection therewith), and a customary defeasance processing fee in an amount
determined by Lender in its discretion.

 

“Defeasance Event” has the meaning set forth in Section 2.5.1(a) hereof.

 

“Defeasance Payment Amount” means the amount which, when added to the remaining
principal amount of the Note, will be sufficient to purchase U.S. Obligations
providing the required Scheduled Defeasance Payments.

 

“Disclosure Documents” means, collectively and as applicable, any offering
circular, prospectus, prospectus supplement, private placement memorandum or
other offering document, in each case, in connection with a Securitization.

 

“DSCR Trigger Event” means, that as of the date of determination, the Debt
Service Coverage Ratio based on the trailing twelve (12) month period
immediately preceding the date of such determination is less than 1.20 to 1.00.

 

“Duplicative Replacements” shall have the meaning set forth in the definition of
Additional PIP Deposit.

 

“Easement Agreement” shall mean that certain Easement Agreement, dated as of May
5, 2000, by and between SeaFx Property, LP and Diamond Parking, Inc., recorded
on or about May 16, 2000 in the Official Records of King County, Washington
under Recording Number 20000516000769.

 

 6

 

 

“Eligible Account” means a separate and identifiable account from all other
funds held by the holding institution that is either (a) an account or accounts
maintained with a federal or state-chartered depository institution or trust
company which complies with the definition of Eligible Institution or (b) a
segregated trust account or accounts maintained with a federal or state
chartered depository institution or trust company acting in its fiduciary
capacity which, in the case of a state chartered depository institution or trust
company, is subject to regulations substantially similar to 12 C.F.R. §9.10(b),
having in either case a combined capital and surplus of at least $50,000,000.00
and subject to supervision or examination by federal and state authority. An
Eligible Account will not be evidenced by a certificate of deposit, passbook or
other instrument.

 

“Eligible Institution” means KeyBank National Association or a depository
institution or trust company insured by the Federal Deposit Insurance
Corporation, the short term unsecured debt obligations or commercial paper of
which are rated at least “A-1+” by S&P, “P-1” by Moody’s and “F-1+” by Fitch in
the case of accounts in which funds are held for thirty (30) days or less (or,
in the case of accounts in which funds are held for more than thirty (30) days,
the long-term unsecured debt obligations of which are rated at least “AA-” by
Fitch and S&P and “Aa3” by Moody’s).

 

“Embargoed Person” means any person, entity or government subject to trade
restrictions under U.S. law, including The USA PATRIOT Act (including the anti
terrorism provisions thereof), the International Emergency Economic Powers Act,
50 U.S.C. §§ 1701, et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1 et
seq., and any Executive Orders or regulations promulgated thereunder including
those related to Specially Designated Nationals and Specially Designated Global
Terrorists, with the result that the investment in Borrower, Master Tenant,
Principal or Guarantor, as applicable (whether directly or indirectly), is
prohibited by law or the Loan made by the Lender is in violation of law.

 

“Environmental Indemnity” means that certain Environmental Indemnity Agreement,
dated as of the date hereof, executed by Borrower and Guarantor in connection
with the Loan for the benefit of Lender, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

 7

 

 

“Environmental Law” means any present and future federal, state and local laws,
statutes, ordinances, rules, regulations and the like, as well as common law,
relating to protection of human health from exposure to Hazardous Substances,
relating to protection of the environment, relating to Hazardous Substances,
relating to liability for or costs of Remediation or prevention of Releases of
Hazardous Substances or relating to liability for or costs of other actual or
threatened danger to human health (from exposure to Hazardous Substances) or the
environment. Environmental Law includes, but is not limited to, the following
statutes, as amended, any successor thereto, and any regulations promulgated
pursuant thereto, and any state or local statutes, ordinances, rules,
regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including but not limited to
Subtitle I relating to underground storage tanks); the Solid Waste Disposal Act;
the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the
Safe Drinking Water Act; the Occupational Safety and Health Act (as it relates
to Hazardous Substances); the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act.
Environmental Law also includes, but is not limited to, any present and future
federal, state and local laws, statutes, ordinances, rules, regulations and the
like, as well as common law: conditioning transfer of property upon a negative
declaration or other approval of a Governmental Authority of the environmental
condition of the Property; requiring notification or disclosure of Releases of
Hazardous Substances or other environmental condition of the Property to any
Governmental Authority or other Person, whether or not in connection with
transfer of title to or interest in property; imposing conditions or
requirements in connection with Hazardous Substances or other environmental
conditions of the Property, in connection with permits or other authorization
for lawful activity; relating to nuisance, trespass or other causes of action
related to the Property, in each such case, arising from exposure to, or the
presence of, Hazardous Substances; or relating to wrongful death, personal
injury, or property or other damage in connection with any physical condition or
use of the Property, in each such case, arising from exposure to, or the
presence of, Hazardous Substances.

 

“Environmental Liens” has the meaning set forth in Section 5.1.19 hereof.

 

“Environmental Report” has the meaning set forth in Section 4.1.37 hereof.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated and the rulings issued
thereunder.

 

“Event of Default” has the meaning set forth in Section 8.1(a) hereof.

 

“Evidence of Insurance” has the meaning set forth in Section 10.28 hereof.

 

“Excess Cash Flow” has the meaning set forth in the Cash Management Agreement.

 

“Excess Cash Flow Reserve Account” has the meaning set forth in Section 7.5
hereof.

 

“Excess Cash Flow Reserve Fund” has the meaning set forth in Section 7.5 hereof.

 

“Existing PIP Requirements” shall mean the plan existing as of the Closing Date
for replacing the Replacements, remodeling, redecorating and modifying the
Property required of Borrower and/or Master Tenant (as applicable) by the
Franchisor pursuant to the Franchise Agreement.

 

“Existing PIP Reserve Account” shall have the meaning set forth in Section 7.8.1
hereof.

 

“Existing PIP Reserve Fund” shall have the meaning set forth in Section 7.8.1
hereof.

 

“Extraordinary Expense” has the meaning set forth in Section 5.1.11(h) hereof.

 

“Fiscal Year” means each twelve (12) month period commencing on January 1 and
ending on December 31 during each year of the term of the Loan.

 

 8

 

 

“Fitch” means Fitch, Inc.

 

“Foreclosure Sale” has the meaning set forth in Section 9(c) of the Note.

 

“Franchise Agreement” shall mean that certain Relicensing Franchise Agreement
dated as of May 24, 2016 between Master Tenant and Franchisor, as the same may
be further amended, supplemented or otherwise modified from time to time in
accordance with the terms and provisions of this Agreement, or, if the context
requires, the Replacement Franchise Agreement executed in accordance with the
terms and provisions of this Agreement.

 

“Franchise Agreement Trigger Event” means the date that is twelve (12) months
prior to the expiration of the Franchise Agreement (or Replacement Franchise
Agreement, as applicable).

 

“Franchise Guaranty” shall mean that certain Guaranty executed by Moody REIT II
and Brett C. Moody in favor of Franchisor, dated as of May 24, 2016 (and/or any
replacement therefor entered into pursuant to the Franchise Agreement).

 

“Franchisor” shall mean Marriott International, Inc., or, if the context
requires, a Qualified Franchisor that is the franchisor under a Replacement
Franchise Agreement.

 

“GAAP” means generally accepted accounting principles in the United States of
America as of the date of the applicable financial report.

 

“Governing State” has the meaning set forth is Section 10.3 hereof.

 

“Governmental Authority” means any court, board, agency, commission, office or
other authority of any nature whatsoever for any governmental unit (foreign,
federal, state, county, district, municipal, city or otherwise) whether now or
hereafter in existence.

 

“Gross Income from Operations” shall mean all sustainable income and proceeds
(whether in cash or on credit and computed on an accrual basis) received by
Borrower, Master Tenant or Manager for the use, occupancy or enjoyment of the
Property, or any part thereof, or received by Borrower, Master Tenant or Manager
for the sale of any goods, services or other items sold on or provided from the
Property in the ordinary course of the Property operation, including without
limitation: (i) all income and proceeds received from Leases and rental of
rooms, commercial space and meeting, conference and/or banquet space within the
Property (including net parking revenue); (ii) all income and proceeds received
from food and beverage operations and from catering services conducted from the
Property even though rendered outside of the Property; (iii) all income and
proceeds from business or rental interruption or other loss of income insurance
and use and occupancy insurance with respect to the operation of the Property
(after deducting therefrom all costs and expenses incurred in the adjustment or
collection thereof); (iv) all Awards for temporary use (after deducting
therefrom all costs and expenses incurred in the adjustment or collection
thereof and in Restoration of the Property); (v) all income and proceeds from
judgments, settlements and other resolutions of disputes with respect to matters
which would be includable in this definition of “Gross Income from Operations”
if received in the ordinary course of the Property operation (after deducting
therefrom all costs and expenses incurred in the adjustment or collection
thereof); (vi) interest on credit accounts, rent concessions or credits, and
other required pass-throughs and interest on Reserve Funds; and (vii)
intentionally omitted; but excluding, (a) gross receipts received by Tenants
(i.e., other than Master Tenant) or received by licensees or concessionaires of
the Property; (b) consideration received at the Property for hotel
accommodations, goods and services to be provided at or for the benefit of other
hotels, although arranged by, for or on behalf of Borrower, Master Tenant or
Manager; (c) income and proceeds from the sale or other disposition of goods,
capital assets and other items not in the ordinary course of the Property
operation; (d) federal, state and municipal excise, sales, use or other taxes
collected directly from patrons or guests of the Property as a part of or based
on the sales price of any goods, services or other items, such as gross
receipts, room, admission, cabaret or equivalent taxes; (e) Awards (except to
the extent provided in clause (iv) above); (f) refunds of amounts not included
in Operating Expenses at any time and uncollectible accounts; (g) gratuities
collected by, and wages paid to, the Property employees; and fees and other
amounts payable to Manager by Master Tenant or Borrower, as the case may be, in
respect of services provided by Manager to Master Tenant or Borrower pursuant to
the Management Agreement; (8) rent payable to Borrower under the Master Lease;
(h) the proceeds of any financing; (i) other income or proceeds resulting other
than from the use or occupancy of the Property, or any part thereof, or other
than from the sale of goods, services or other items sold on or provided from
the Property in the ordinary course of business; and (j) any credits or refunds
made to customers, guests or patrons in the form of allowances or adjustments to
previously recorded revenues.

 

 9

 

 

“Guarantor” means Moody National REIT II, Inc., a Maryland corporation.

 

“Guaranty” means that certain Guaranty Agreement, dated as of the date hereof,
executed and delivered by Guarantor in connection with the Loan to and for the
benefit of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time.

 

“Hazardous Substances” means any and all substances (whether solid, liquid or
gas) defined, listed, or otherwise classified as pollutants, hazardous wastes,
hazardous substances, hazardous materials, extremely hazardous wastes, or words
of similar meaning or regulatory effect under any present or future
Environmental Laws or that, by virtue of the presence thereof or exposure
thereto, may have a negative impact on human health or the environment,
including but not limited to petroleum and petroleum products, asbestos and
asbestos-containing materials, polychlorinated biphenyls, lead, radon,
radioactive materials, flammables, explosives, mold, mycotoxins, microbial
matter and airborne pathogens (naturally occurring or otherwise), but excluding
substances of kinds and in amounts ordinarily and customarily used or stored in
similar properties for the purpose of cleaning or other maintenance or
operations and otherwise in compliance with all Environmental Laws.

 

“Hotel Transactions” means (i) occupancy arrangements for customary hotel
transactions in the ordinary course of Borrower’s or Master Tenant’s business
conducted at the Property, including nightly rentals (or licensing) of
individual hotel rooms or suites, banquet room use and food and beverage
services, and (ii) informational or guest services that are terminable on one
month’s notice or less without cause and without penalty or premium, including
co-marketing, promotional services and outsourced services.

 

 10

 

 

“Improvements” has the meaning set forth in the granting clause of the Security
Instrument.

 

“Indebtedness” of a Person, at a particular date, means the sum (without
duplication) at such date of (a) all indebtedness or liability of such Person
(including amounts for borrowed money and indebtedness in the form of mezzanine
debt or preferred equity); (b) obligations evidenced by bonds, debentures,
notes, or other similar instruments; (c) obligations for the deferred purchase
price of property or services (including trade obligations); (d) obligations
under letters of credit; (e) obligations under acceptance facilities; (f) all
guaranties, endorsements (other than for collection or deposit in the ordinary
course of business) and other contingent obligations to purchase, to provide
funds for payment, to supply funds, to invest in any Person or entity, or
otherwise to assure a creditor against loss; and (g) obligations secured by any
Liens, whether or not the obligations have been assumed (other than the
Permitted Encumbrances).

 

“Indemnified Liabilities” has the meaning set forth in Section 10.13(b) hereof.

 

“Indemnified Parties” means Lender and, its designee (whether or not it is the
Lender), any Affiliate of Lender that has filed any registration statement
relating to the Securitization or has acted as the sponsor or depositor in
connection with the Securitization, any Affiliate of Lender that acts as an
underwriter, placement agent or initial purchaser of Securities issued in the
Securitization, any other co underwriters, co placement agents or co initial
purchasers of Securities issued in the Securitization, and each of their
respective officers, directors, partners, employees, representatives, agents and
Affiliates and each Person or entity who Controls any such Person within the
meaning of Section 15 of the Securities Act of 1933 as amended or Section 20 of
the Security Exchange Act of 1934 as amended, any Person who is or will have
been involved in the origination of the Loan, any Person who is or will have
been involved in the servicing of the Loan secured hereby, any Person in whose
name the encumbrance created by the Security Instrument is or will have been
recorded, any Person who may hold or acquire or will have held a full or partial
interest in the Loan secured hereby (including investors or prospective
investors in the Securities, as well as custodians, trustees and other
fiduciaries who hold or have held a full or partial interest in the Loan secured
hereby for the benefit of third parties) as well as the respective directors,
officers, shareholders, partners, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including any other Person who
holds or acquires or will have held a participation or other full or partial
interest in the Loan, whether during the term of the Loan or as a part of or
following a foreclosure of the Loan and including any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender’s assets
and business), in each case, in their respective capacities as such.

 

 11

 

 

“Independent Director” means a natural Person who (a) is not at the time of
initial appointment, or at any time while serving in such capacity, and is not,
and has never been, and shall not while serving as Independent Director be: (i)
the owner of any direct or indirect legal or beneficial interest in, or a
director (with the exception of serving as the Independent Director of Borrower
or Master Tenant, as applicable), officer, employee, partner, member (other than
a “special member” or “springing member”), manager, attorney or counsel of,
Borrower or Master Tenant, or any Affiliate of Borrower, Master Tenant or
Guarantor; (ii) a customer, supplier or other person who derives any of its
purchases or revenues from its activities with Borrower, Master Tenant or
Guarantor, or any Affiliate of Borrower, Master Tenant or Guarantor; (iii) a
Person Controlling or under common Control with any such stockholder, director,
officer, employee, partner, member, manager, attorney, counsel, customer,
supplier or other Person; or (iv) a member of the immediate family of any such
stockholder, director, officer, employee, partner, member, manager, attorney,
counsel, customer, supplier or other Person and (b) has (i) prior experience as
an independent director or independent manager for a corporation, a trust or
limited liability company whose charter documents required the unanimous consent
of all independent directors or independent managers thereof before such
corporation, trust or limited liability company could consent to the institution
of bankruptcy or insolvency proceedings against it or could file a petition
seeking relief under any applicable federal or state law relating to bankruptcy
and (ii) at least three (3) years of employment experience with one or more
nationally-recognized companies that provides, inter alia, professional
independent directors or independent managers in the ordinary course of their
respective business to issuers of securitization or structured finance
instruments, agreements or securities or lenders originating commercial real
estate loans for inclusion in securitization or structured finance instruments,
agreements or securities (a “Professional Independent Director”) and is at all
times during his or her service as an Independent Director of Borrower or Master
Tenant (as applicable) an employee of such a company or companies. A natural
Person who satisfies the foregoing definition except for being (or having been)
the independent director or independent manager of a “special purpose entity”
affiliated with Borrower or Master Tenant (provided such affiliate does not or
did not own a direct or indirect equity interest in Borrower or Master Tenant)
shall not be disqualified from serving as an Independent Director, provided that
such natural Person satisfies all other criteria set forth above and that the
fees such individual earns from serving as independent director or independent
manager of affiliates of Borrower or in any given year constitute in the
aggregate less than five percent (5%) of such individual’s annual income for
that year. A natural Person who satisfies the foregoing definition other than
subparagraph (a)(ii) shall not be disqualified from serving as an Independent
Director of Borrower or Master Tenant if such individual is a Professional
Independent Director and such individual complies with the requirements of the
previous sentence.

 

“Initial Interest Payment Per Diem” has the meaning set forth in the Loan Terms
Table of the Note.

 

“Initial Management Fees” shall have the meaning set forth in Section 9.4
hereof.

 

“Insolvency Opinion” means that certain non-consolidation opinion letter dated
the date hereof delivered by Gresham Savage Nolan & Tilden, PC in connection
with the Loan.

 

“Institutional Controls” means any legal or physical restrictions or limitations
on the use of, or access to, the Property to eliminate or minimize potential
exposures to any Hazardous Substance, to prevent activities that could interfere
with the effectiveness of any Remediation, or to ensure maintenance of a level
of risk to human health or the environment from Hazardous Materials, including
physical modifications to the Property such as slurry walls, capping, hydraulic
controls for ground water, or point of use water treatment, restrictive
covenants, environmental protection easements, or property use limitations.

 

“Insurance Premiums” has the meaning set forth in Section 6.1(b) hereof.

 

 12

 

 

“Insurance Proceeds” has the meaning set forth in Section 6.4(b) hereof.

 

“Interest Rate” means a rate of four and 38/100 percent (4.38%).

 

“Key Principal” shall mean Brett C. Moody.

 

“Land” has the meaning set forth in the granting clause of the Security
Instrument.

 

“Lease” has the meaning set forth in the Security Instrument. Notwithstanding
the foregoing, for purposes hereof, neither the Master Lease nor any Hotel
Transaction shall constitute a Lease.

 

“Legal Requirements” means, all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting Borrower or the
Property or any part thereof, or the construction, use, alteration or operation
thereof, or any part thereof, whether now or hereafter enacted and in force, and
all permits, licenses and authorizations and regulations relating thereto, and
all covenants, agreements, restrictions and encumbrances contained in any
instruments, either of record or known to Borrower or Master Tenant, at any time
in force affecting Borrower, Master Tenant, the Property or any part thereof,
including any which may (a) require repairs, modifications or alterations in or
to the Property or any part thereof, or (b) in any way limit the use and
enjoyment thereof.

 

“Lender” has the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.

 

“Lien” means, any mortgage, deed of trust, deed to secure debt, indemnity deed
of trust, lien, pledge, hypothecation, assignment, security interest, or any
other encumbrance, charge or transfer for security of, on or affecting Borrower,
the Property, any portion thereof or any interest therein, including any
conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of
any financing statement, and mechanic’s, materialmen’s and other similar liens
and encumbrances.

 

“Loan” means the loan in the Original Principal Amount made by Lender to
Borrower pursuant to this Agreement.

 

“Loan Documents” means, collectively, this Agreement, the Note, the Security
Instrument, the Environmental Indemnity, the Assignment of Management Agreement,
the Guaranty, the Clearing Account Agreement, the Cash Management Agreement, the
Master Lease Subordination Agreement, the Master Lease ALR, and all other
documents pursuant to which a Person incurs or assumes an obligation to or for
the benefit of Lender that are executed or delivered in connection with the
Loan.

 

“Loan to Value Ratio” shall mean, as of the date of its calculation, the ratio
of (i) the sum of the outstanding principal amount of the Loan as of the date of
such calculation to (ii) the fair market value of the Property, as determined,
in Lender’s sole discretion, by any commercially reasonable method permitted to
a REMIC Trust.

 

 13

 

 

“Management Agreement” means the management agreement entered into by and
between Master Tenant and Manager, pursuant to which Manager is to provide
management and other services with respect to the Property, or, if the context
requires, a Qualified Manager who is managing the Property in accordance with
the terms and provisions of this Agreement pursuant to a Replacement Management
Agreement.

 

“Manager” means Moody National Hospitality Management, LLC, a Texas limited
liability company, or, if the context requires, a Qualified Manager who is
managing the Property in accordance with the terms and provisions of this
Agreement pursuant to a Replacement Management Agreement.

 

“Master Lease” means that certain Hotel Lease Agreement, dated as of May 24,
2016, as amended by that certain First Amendment to Hotel Lease Agreement
executed in connection herewith, by and between Borrower and Master Tenant, as
the same may be amended, restated, replaced, supplemented or otherwise modified
in accordance herewith with the consent of Lender.

 

“Master Lease ALR” shall mean that certain Master Lease Assignment of Leases and
Rents and Security Agreement, dated the date hereof, executed and delivered by
Master Tenant in favor of Borrower, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

“Master Lease Documents” shall mean the Master Lease, the Master Lease ALR, and
the Master Lease Subordination Agreement.

 

“Master Lease Subordination Agreement” shall mean the Master Lease Subordination
and Attornment Agreement executed by Master Tenant for the benefit of Lender, as
the same may be amended, restated, replaced, supplemented or otherwise modified
from time to time.

 

“Master Tenant” shall mean Moody National Yale-Seattle MT, LLC, a Delaware
limited liability company.

 

“Master Tenant’s Excess Cash Flow Subaccount” shall have the meaning set forth
in Section 7.5.1 hereof.

 

“Material Action” means, with respect to any Person, to file any insolvency or
reorganization case or proceeding, to institute proceedings to have such Person
be adjudicated bankrupt or insolvent, to institute proceedings under any
applicable insolvency law, to seek any relief under any law relating to relief
from debts or the protection of debtors, to consent to the filing or institution
of bankruptcy or insolvency proceedings against such Person, to file a petition
seeking, or consent to, reorganization or relief with respect to such Person
under any applicable federal or state law relating to bankruptcy or insolvency,
to seek or consent to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator, custodian, or any similar official of or for such Person
or a substantial part of its property, to make any assignment for the benefit of
creditors of such Person, to admit in writing in any legal proceeding such
Person’s inability to pay its debts generally as they become due, or to
affirmatively take action in furtherance of any of the foregoing.

 

 14

 

 

“Maturity Date” means October 1, 2026, or such other date on which the final
payment of principal of the Note becomes due and payable as therein or herein
provided, whether at such stated maturity date, by declaration of acceleration,
or otherwise.

 

“Maximum Legal Rate” has the meaning set forth in Section 7 of the Note.

 

“Memorandum of Subordination Agreement” shall mean that certain Memorandum of
Subordination Agreement, dated on or about the date hereof, by and between
Master Tenant and Lender.

 

“MNOP II” shall mean Moody National Operating Partnership II, L.P., a Delaware
limited partnership.

 

“Monthly Debt Service Payment Amount” means (i) on each Payment Date up to and
including October 1, 2018, an amount equal to interest only at the Interest Rate
on the outstanding principal balance of the Loan for the related Accrual Period,
and (ii) on each Payment Date occurring on and after November 1, 2018, a
constant monthly payment of $224,811.10.

 

“Moody’s” means Moody’s Investors Service, Inc.

 

“Moody REIT II” means Moody National REIT II, Inc., a Maryland corporation.

 

“Net Cash Flow” means, with respect to the Property for any period, the amount
obtained by subtracting Operating Expenses and Capital Expenditures for such
period from Gross Income from Operations for such period.

 

“Net Operating Income” means the amount obtained by subtracting Operating
Expenses from Gross Income from Operations.

 

“Net Proceeds” has the meaning set forth in Section 6.4(b) hereof.

 

“Net Proceeds Deficiency” has the meaning set forth in Section 6.4(b)(vi)
hereof.

 

“Note” means that certain Promissory Note, dated the date hereof, in the
principal amount of $45,000,000.00, made by Borrower in favor of Lender, as the
same may be amended, restated, replaced, supplemented or otherwise modified from
time to time.

 

“OFAC” has the meaning set forth in Section 10.25 hereof.

 

“Officer’s Certificate” means a certificate delivered to Lender by Borrower,
Master Tenant or Guarantor, as applicable, which is signed by an authorized
officer of Borrower, Master Tenant or Guarantor, or of the general partner of
(1) the sole member of Borrower, or (2) the sole member of Master Tenant, as
applicable.

 

 15

 

 

“Operating Expenses” shall mean the sum of all costs and expenses of operating,
maintaining, directing, managing and supervising the Property (excluding (i)
depreciation and amortization, (ii) any Debt Service, (iii) any Capital
Expenditures, or (iv) the costs of any other things specified to be done or
provided at Borrower’s, Master Tenant’s or Manager’s sole cost and expense),
incurred by Borrower, Master Tenant or Manager pursuant to the Management
Agreement, or as otherwise specifically provided therein, which are properly
attributable to such period under Borrower’s or Master Tenant’s system of
accounting, including, without limitation: (a) the cost of all food and
beverages sold or consumed and of all necessary chinaware, glassware, linens,
flatware, uniforms, utensils and other items of a similar nature, including such
items bearing the name or identifying characteristics of the hotel as Borrower,
Master Tenant and/or Manager shall reasonably consider appropriate
(collectively, the “Operating Equipment”) and paper supplies, cleaning materials
and similar consumable items (collectively, the “Operating Supplies”) placed in
use (other than reserve stocks thereof in storerooms). Operating Equipment and
Operating Supplies shall be considered to have been placed in use when they are
transferred from the storerooms of the Property to the appropriate operating
departments; (b) salaries and wages of personnel of the Property, including
costs of payroll taxes and employee benefits (which benefits may include,
without limitation, a pension plan, medical insurance, life insurance, travel
accident insurance and an executive bonus program) and the costs of moving (1)
employees of the Property whose primary duties consist of the management of the
Property or of a recognized department or division thereof; or (2) personnel (A)
who customarily and regularly direct the work of five (5) or more other
employees of the Property, (B) who have authority with reference to the hiring,
firing and advancement of other employees of the Property, (C) who customarily
and regularly exercise discretionary powers, (D) who devote at least ninety five
percent (95%) of their work time to activities which are directly and closely
related to the performance of the work described in clauses (A) through (C) of
clause (2) of this sentence, and (E) who are not compensated on an hourly basis
(the “Executive Hotel Personnel”), their families and their belongings to the
area in which the Property is located at the commencement of their employment at
the Property and all other expenses not otherwise specifically referred to in
this definition which are referred to as “Administrative and General Expenses”
in the Uniform System of Accounts. If the Executive Hotel Personnel are on the
payroll of Guarantor or any Affiliate of Guarantor, the cost of their salaries,
payroll taxes and employee benefits (which benefits, in the case of employees
who are not United States citizens or in the case of employees of hotels located
outside the continental United States may include, without limitation, in
addition to the foregoing benefits, reasonable home leave transportation
expenses approved by Lender) shall be billed by said Affiliate to and be
reimbursed by Borrower, Master Tenant and/or Manager monthly, and such
reimbursement shall be an Operating Expense. Except as otherwise expressly
provided under the Management Agreement with respect to employees regularly
employed at the Property, the salaries or wages of other employees or executives
of Manager, Guarantor or any of their respective Affiliates shall in no event be
Operating Expenses, but they shall be entitled to free room and board and the
free use of all facilities at such times as they visit the Property exclusively
in connection with the management of the Property. Notwithstanding the
foregoing, if it becomes necessary for an employee of Guarantor or an employee
or executive of any Affiliate of Guarantor to temporarily perform services at
the Property of a nature normally performed by personnel of the Property, his or
her salary (including payroll taxes and employee benefits) as well as his or her
traveling expenses will be Operating Expenses and he or she will be entitled to
free room, board and use of the facilities as aforesaid, while performing such
services; (c) the cost of all other goods and services obtained by Borrower,
Master Tenant or Manager in connection with its operation of the Property,
including, without limitation, heat and utilities, office supplies and all
services performed by third parties, including leasing expenses in connection
with telephone and data processing equipment, and all existing and any future
installations necessary for the operation of the Improvements for hotel purposes
(including, without limitation, heating, lighting, sanitary equipment, air
conditioning, laundry, refrigerating, built-in kitchen equipment, telephone
equipment, communications systems, computer equipment and elevators), Operating
Equipment and existing and any future furniture, furnishings, wall coverings,
fixtures and hotel equipment necessary for the operation of the Property for
hotel purposes which shall include all equipment required for the operation of
kitchens, bars, laundries (if any), and dry cleaning facilities (if any), office
equipment, cleaning and engineering equipment and vehicles; (d) the cost of
repairs to and maintenance of the Property other than of a capital nature; (e)
Insurance Premiums for general liability insurance, workers’ compensation
insurance or insurance required by similar employee benefits acts and such
business or rental interruption or other insurance as may be provided for
protection against claims, liabilities and losses arising from the operation of
the Property (as distinguished from any property damage insurance on the
Property or its contents) and losses incurred on any self-insured risks of the
foregoing types, provided that (1) Lender has specifically approved in advance
such self-insurance or (2) insurance is unavailable to cover such risks.
Premiums on policies will be pro rated over the period of insurance and premiums
under blanket policies will be allocated among properties covered; (f) all Taxes
and Other Charges (other than federal, state or local income taxes and franchise
taxes or the equivalent) payable by or assessed against Borrower, Master Tenant
or Manager with respect to the operation of the Property; (g) legal fees and
fees of any firm of independent certified public accounts designated from time
to time by Borrower and/or Master Tenant (the “Independent CPA”) for services
directly related to the operation of the Property; (h) [omitted]; (i) all
expenses for advertising the Property and all expenses of sales promotion and
public relations activities; (j) all out-of-pocket expenses and disbursements
determined by the Independent CPA to have been reasonably, properly and
specifically incurred by Borrower, Master Tenant, Manager, Guarantor or any of
their respective Affiliates pursuant to, in the course of and directly related
to, the management and operation of the Property under the Management Agreement.
Without limiting the generality of the foregoing, such charges may include all
reasonable travel, telephone, telegram, radiogram, cablegram, air express and
other incidental expenses, but, excluding costs relating to the offices
maintained by Borrower, Master Tenant, Manager, Guarantor, or any of their
respective Affiliates other than the offices maintained at the Property for the
management of the Property and excluding transportation costs of Borrower,
Master Tenant or Manager related to meetings between Borrower and/or Master
Tenant and Manager with respect to administration of the Management Agreement,
as applicable, or of the Property involving travel away from such party’s
principal offices; (k) the cost of any reservations system, any accounting
services or other group benefits, programs or services from time to time made
available to properties in the Borrower’s and/or Master Tenant’s system; (l) the
cost associated with any commercial Leases; (m) any management fees, basic and
incentive fees or other fees and reimbursables paid or payable to Manager under
the Management Agreement; (n) any franchise fees or other fees and reimbursables
paid or payable to Franchisor under the Franchise Agreement; and (o) all costs
and expenses of owning, maintaining, conducting, directing, managing and
supervising the operation of the Property to the extent such costs and expenses
are not included above.

 

 16

 

 

“Original Principal Amount” means $45,000,000.00.

 

“Other Charges” means all ground rents, maintenance charges, impositions other
than Taxes, and any other charges, including vault charges and license fees for
the use of vaults, chutes and similar areas adjoining the Property, now or
hereafter levied or assessed or imposed against the Property or any part
thereof.

 

“Other Obligations” has the meaning as set forth in the Security Instrument.

 

“Outstanding Principal Balance” or “OPB” means the portion of the Original
Principal Amount that remains outstanding from time to time

 

“Owner Agreement” shall mean that certain Owner Agreement, dated on or about May
24, 2016, by and among Franchisor, Master Tenant and Borrower.

 

“Payment Date” means the first (1st) day of each calendar month during the term
of the Loan.

 

“Permitted Defeasance Date” means the date that is two (2) years from the
“startup day” within the meaning of Section 860G(a)(9) of the Code for the REMIC
Trust which holds the portion of the Note last to be securitized.

 

“Permitted Encumbrances” means, with respect to the Property, collectively, (a)
the Liens and security interests created by the Loan Documents, (b) all Liens,
encumbrances and other matters disclosed in the Title Insurance Policy, (c)
Liens, if any, for Taxes imposed by any Governmental Authority or for other
Charges not yet delinquent or that are being contested in accordance with the
Loan Documents, (d) mechanics’, materialmen’s, and other similar Liens on the
Property that are not yet delinquent or that are being contested, or are
otherwise discharged or bonded, in accordance with the Loan Documents; (e)
Leases entered into in accordance with the Loan Documents, and (f) such other
title and survey exceptions as Lender has approved or may approve in writing in
Lender’s sole discretion, which Permitted Encumbrances individually or in the
aggregate do not materially adversely affect the value or use or operation of
the Property or the security intended to be provided by the Security Instrument
or with the current ability of the Property to generate Net Cash Flow sufficient
to service the Loan or Borrower’s ability to pay its obligations under the Loan
Documents when they become due.

 

“Permitted Indebtedness” has the meaning set forth in clause (xxiii) of the
definition of Special Purpose Entity.

 

“Permitted Investments” means any one or more of the following obligations or
securities acquired at a purchase price of not greater than par, including those
issued by Servicer, the trustee under any Securitization or any of their
respective Affiliates, payable on demand or having a maturity date not later
than the Business Day immediately prior to the first Payment Date following the
date of acquiring such investment and meeting one of the appropriate standards
set forth below:

 

 17

 

 

(i)          obligations of, or obligations fully guaranteed as to payment of
principal and interest by, the United States or any agency or instrumentality
thereof provided such obligations are backed by the full faith and credit of the
United States of America including obligations of: the U.S. Treasury (all direct
or fully guaranteed obligations), the Farmers Home Administration (certificates
of beneficial ownership), the General Services Administration (participation
certificates), the U.S. Maritime Administration (guaranteed Title XI financing),
the Small Business Administration (guaranteed participation certificates and
guaranteed pool certificates), the U.S. Department of Housing and Urban
Development (local authority bonds) and the Washington Metropolitan Area Transit
Authority (guaranteed transit bonds); provided, however, that the investments
described in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must not have
an “r” highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

 

(ii)         Federal Housing Administration debentures;

 

(iii)        obligations of the following United States government sponsored
agencies: Federal Home Loan Mortgage Corp. (debt obligations), the Farm Credit
System (consolidated systemwide bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal National Mortgage Association (debt
obligations), the Financing Corp. (debt obligations), and the Resolution Funding
Corp. (debt obligations); provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

 

(iv)        federal funds, unsecured certificates of deposit, time deposits,
bankers’ acceptances and repurchase agreements with maturities of not more than
365 days of any bank, the short term obligations of which at all times are rated
in the highest short term rating category by each Rating Agency (or, if not
rated by all Rating Agencies, rated by at least one Rating Agency in the highest
short term rating category and otherwise acceptable to each other Rating Agency,
as confirmed in writing that such investment would not, in and of itself, result
in a downgrade, qualification or withdrawal of the initial, or, if higher, then
current ratings assigned to the Securities); provided, however, that the
investments described in this clause must (A) have a predetermined fixed dollar
of principal due at maturity that cannot vary or change, (B) if rated by S&P,
must not have an “r” highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must be tied to
a single interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be subject to
liquidation prior to their maturity;

 

 18

 

 

(v)         fully Federal Deposit Insurance Corporation-insured demand and time
deposits in, or certificates of deposit of, or bankers’ acceptances issued by,
any bank or trust company, savings and loan association or savings bank, the
short term obligations of which at all times are rated in the highest short term
rating category by each Rating Agency (or, if not rated by all Rating Agencies,
rated by at least one Rating Agency in the highest short term rating category
and otherwise acceptable to each other Rating Agency, as confirmed in writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities); provided, however, that the investments described
in this clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not have an “r”
highlighter affixed to their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

 

(vi)        debt obligations with maturities of not more than 365 days and at
all times rated by each Rating Agency (or, if not rated by all Rating Agencies,
rated by at least one Rating Agency and otherwise acceptable to each other
Rating Agency, as confirmed in writing that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal of the initial, or,
if higher, then current ratings assigned to the Securities) in its highest
long-term unsecured rating category; provided, however, that the investments
described in this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must not have
an “r” highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single interest
rate index plus a fixed spread (if any) and must move proportionately with that
index, and (D) such investments must not be subject to liquidation prior to
their maturity;

 

(vii)       commercial paper (including both non interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) with maturities
of not more than 365 days and that at all times is rated by each Rating Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating Agency
and otherwise acceptable to each other Rating Agency, as confirmed in writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) in its highest short-term unsecured debt rating;
provided, however, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an “r” highlighter affixed to their
rating, (C) if such investments have a variable rate of interest, such interest
rate must be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments must not
be subject to liquidation prior to their maturity;

 

(viii)      units of taxable money market funds, which funds are regulated
investment companies, seek to maintain a constant net asset value per share and
invest solely in obligations backed by the full faith and credit of the United
States, which funds have the highest rating available from each Rating Agency
(or, if not rated by all Rating Agencies, rated by at least one Rating Agency
and otherwise acceptable to each other Rating Agency, as confirmed in writing
that such investment would not, in and of itself, result in a downgrade,
qualification or withdrawal of the initial, or, if higher, then current ratings
assigned to the Securities) for money market funds; and

 

 19

 

 

(ix)        any other security, obligation or investment which has been approved
as a Permitted Investment in writing by (a) Lender and (b) each Rating Agency,
as evidenced by a written confirmation that the designation of such security,
obligation or investment as a Permitted Investment will not, in and of itself,
result in a downgrade, qualification or withdrawal of the initial, or, if
higher, then current ratings assigned to the Securities by such Rating Agency;

 

provided, however, that no obligation or security shall be a Permitted
Investment if (A) such obligation or security evidences a right to receive only
interest payments or (B) the right to receive principal and interest payments on
such obligation or security are derived from an underlying investment that
provides a yield to maturity in excess of 120% of the yield to maturity at par
of such underlying investment.

 

“Permitted Par Prepayment Date” means June 2, 2026.

 

“Permitted Transfer” means any of the following: (a) any transfer, directly as a
result of the death of a natural person, of stock, membership interests,
partnership interests or other ownership interests previously held by the
decedent in question to the Person or Persons lawfully entitled thereto and (b)
any transfer, directly as a result of the legal incapacity of a natural person,
of stock, membership interests, partnership interests or other ownership
interests previously held by such natural person to the Person or Persons
lawfully entitled thereto.

 

“Person” means any individual, corporation, partnership, joint venture, limited
liability company, estate, trust, unincorporated association, any federal,
state, county or municipal government or any bureau, department or agency
thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.

 

“Personal Property” has the meaning set forth in the granting clause of the
Security Instrument.

 

“PIP Requirements” shall mean the Existing PIP Requirement and/or the Additional
PIP Requirements, as applicable.

 

“Policies” has the meaning specified in Section 6.1(b) hereof.

 

“Policy” has the meaning specified in Section 6.1(b) hereof.

 

“Principal” means the Special Purpose Entity that is the general partner of
Borrower or Master Tenant, if Borrower or Master Tenant is a limited
partnership, or (b) the Special Purpose Entity that is the managing member of
Borrower or Master Tenant, if Borrower or Master Tenant is a limited liability
company, provided, however, that to the extent that Borrower or Master Tenant
satisfies the requirements set forth in clause (x) of the definition of Special
Purpose Entity, neither Borrower nor Master Tenant shall be deemed to have a
“Principal” and this definition of “Principal” shall have no meaning when used
in the Loan Documents. As of the Closing Date, (a) Borrower is a Delaware
single-member limited liability company that satisfies the requirements set
forth in clause (x) of the definition of Special Purpose Entity and has no
Principal and (b) Master Tenant is a Delaware single-member limited liability
company that satisfies the requirements set forth in clause (x) of the
definition of Special Purpose Entity and has no Principal.

 

 20

 

 

“Prohibited Entity/Ownership Structure” means any direct or indirect ownership
of either the Property, Borrower, Master Tenant, or Guarantor by (a) a statutory
trust organized under 12 Del.C. § 3801 et seq., or any successor statute
thereto, or under any similar other state of federal law, (b) any one or more
Persons as tenants in common or any similar ownership structure, or (c) any one
or more Persons as a result of any Crowdfunding.

 

“Property” means the parcel of real property, the Improvements thereon and all
personal property owned by Borrower and encumbered by the Security Instrument,
together with all rights pertaining to such property and Improvements, as more
particularly described in the granting clauses of the Security Instrument and
referred to therein as the “Property.”

 

“Provided Information” means any and all financial and other information
provided at any time prepared by, or on behalf of, Borrower, Principal, Master
Tenant, Guarantor and/or Manager.

 

“Qualified Franchisor” shall mean (i) Franchisor or (ii) a reputable and
experienced franchisor which, in the reasonable judgment of Lender, possesses
experience in flagging hotel properties similar in location, size, class, use,
operation and value as the Property; provided, that, if required by Lender,
Borrower shall have obtained (i) a Rating Agency Confirmation from the
applicable Rating Agencies that franchising of the Property by such Person will
not cause a downgrade, withdrawal or qualification of the then current ratings
of the Securities or any class thereof. Lender or Servicer shall make any
required request for written confirmation directly to the Rating Agencies and
(ii) if such entity is an Affiliate of Borrower, an Additional Insolvency
Opinion.

 

“Qualified Manager” means either (a) Manager; or (b) in the reasonable judgment
of Lender, a reputable and experienced management organization (which may be an
Affiliate of Borrower or Master Tenant) possessing experience in managing
properties similar in size, scope, use and value as the Property, provided,
that, if required by Lender, Borrower shall have obtained prior written
confirmation from the applicable Rating Agencies that management of the Property
by such entity will not cause a downgrade, withdrawal or qualification of the
then current ratings of the Securities or any class thereof.

 

“Rating Agencies” means each of S&P, Moody’s, Fitch, and Morningstar Credit
Ratings, LLC, or any other nationally recognized statistical rating agency which
has been approved by Lender and designated by Lender to assign a rating to the
Securities.

 

“Related Entities” has the meaning set forth in Section 5.2.10(e) hereof.

 

“Release” shall mean any release, deposit, discharge, emission, leaking,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing or other movement of Hazardous Substances.

 

 21

 

 

“Remediation” includes any response, remedial, removal, or corrective action,
any activity to cleanup, detoxify, decontaminate, contain or otherwise remediate
any Hazardous Substance, any actions to prevent, cure or mitigate any Release of
any Hazardous Substance, any action to comply with any Environmental Laws or
with any permits issued pursuant thereto, any inspection, investigation, study,
monitoring, assessment, audit, sampling and testing, laboratory or other
analysis, or evaluation relating to any Hazardous Substances.

 

“REMIC Requirements” shall mean any applicable legal requirements relating to
any REMIC Trust (including, without limitation, those relating to the continued
treatment of the Loan (or the applicable portion thereof or interest therein) as
a “qualified mortgage” held by such REMIC Trust, the continued qualification of
such REMIC Trust as such under the Code, the non-imposition of any tax on such
REMIC Trust under the Code (including, without limitation, taxes on “prohibited
transactions” and “contributions”) and any other constraints, rules or other
regulations or requirements relating to the servicing, modification or other
similar matters with respect to the Loan (or any portion thereof and/or interest
therein) that may now or hereafter exist under applicable legal requirements
(including, without limitation under the Code)).

 

“REMIC Trust” means a “real estate mortgage investment conduit” within the
meaning of Section 860D of the Code that holds the Note or a portion thereof.

 

“Rents” shall have the meaning set forth in the Security Instrument.

 

“Replacement Franchise Agreement” shall mean, collectively, (i)(a) a franchise,
trademark and license agreement with a Qualified Franchisor substantially in the
same form and substance as the Franchise Agreement, or (b) a franchise,
trademark and license agreement with a Qualified Franchisor, which franchise,
trademark and license agreement shall be reasonably acceptable to Lender in form
and substance; provided that, with respect to this clause (b) Lender, at its
option, may require that Borrower shall have obtained, prior written
confirmation from the applicable Rating Agencies that such franchise, trademark
and license agreement will not cause a downgrade, withdrawal or qualification of
the then current rating of the Securities or any class thereof, and (ii) a
comfort letter or tri-party agreement reasonably acceptable to Lender, executed
and delivered to Lender by Borrower (or, as applicable, Master Tenant) and such
Qualified Franchisor. Lender or Servicer shall make any required request for
written confirmation directly to the Rating Agencies.

 

“Replacement Management Agreement” means, collectively, (a) either (i) a
management agreement with a Qualified Manager substantially in the same form and
substance as the Management Agreement, or (ii) a management agreement with a
Qualified Manager, which management agreement shall be reasonably acceptable to
Lender in form and substance, provided, with respect to this subclause (ii),
Lender, at its option, may require that Borrower shall have obtained prior
written confirmation from the applicable Rating Agencies that such management
agreement will not cause a downgrade, withdrawal or qualification of the then
current rating of the Securities or any class thereof and (b) an assignment of
management agreement and subordination of management fees substantially in the
form then used by Lender (or of such other form and substance reasonably
acceptable to Lender), executed and delivered to Lender by Borrower and such
Qualified Manager at Borrower’s expense.

 

 22

 

 

“Replacements Payment” means an amount equal to the greater of one-twelfth
(1/12) of four percent (4.0%) of (1) gross revenues from the Property for the
preceding calendar year, and (2) projected forward twelve (12) month
Replacements expenditures based on the Annual Budget. For the avoidance of
doubt, Lender shall calculate the Replacements Payment on an annual basis at
such time as Lender reviews and approves the Annual Budget.

 

“Replacement Reserve Account” has the meaning set forth in Section 7.3.1 hereof.

 

“Replacement Reserve Fund” has the meaning set forth in Section 7.3.1 hereof.

 

“Replacement Reserve Monthly Deposit” means (i) for each Payment Date during the
calendar year 2016, an amount equal to $43,156.00, and (ii) for each Payment
Date thereafter, an amount determined by Lender in its sole discretion in
January of each year, commencing in 2017, equal to the greater of (1) the
Replacements Payment and (2) the aggregate amount of Replacements expenditures,
if any, required to be reserved under the Management Agreement and the Franchise
Agreement (or, as applicable any Replacement Franchise Agreement).

 

“Replacements” means all furniture, fixtures, equipment and items of personal
property located on or used in connection with the operation of the hotel at the
Property.

 

“Reporting Company” shall mean a Person that is required to file, with respect
to the equity interests of such company, periodic reports with the Securities
and Exchange Commission under the Exchange Act.

 

“Reserve Funds” means, collectively, the Tax and Insurance Escrow Fund, the
Replacement Reserve Fund, the Existing PIP Reserve Fund, the Additional PIP
Reserve Fund, the Seasonality Reserve Fund, the Excess Cash Flow Reserve Fund,
and any other escrow fund established by the Loan Documents.

 

“Restoration” means the repair and restoration of the Property after a Casualty
or Condemnation as nearly as possible to the condition the Property was in
immediately prior to such Casualty or Condemnation, with such alterations as may
be reasonably approved by Lender.

 

“Restricted Party” shall mean collectively, Borrower, Master Tenant, Principal,
Guarantor, and any Affiliated Manager, Moody National Operating Partnership II,
LP, a Delaware limited partnership, and Moody OP Holdings II, LLC, a Delaware
limited liability company.

 

“Revised Management Fees” shall have the meaning set forth in Section 9.4
hereof.

 

“Room Revenue” shall mean that portion of Gross Income from Operations
attributable to the rental of hotel rooms, upon which Franchisor calculates
franchise fees.

 

“S&P” means Standard & Poor’s Ratings Group, a division of the McGraw-Hill
Companies.

 

 23

 

 

“Sale or Pledge” means a voluntary or involuntary sale, conveyance, assignment,
transfer, encumbrance, pledge, grant of option or other transfer or disposal of
a legal or beneficial interest, whether direct or indirect.

 

“Scheduled Defeasance Payments” has the meaning set forth in Section 2.5.1(b)
hereof.

 

“Seasonality Reserve Account” shall have the meaning set forth in Section 7.7.1
hereof.

 

“Seasonality Reserve Annual Cap” shall mean the amount determined by Lender in
its sole discretion in April of each year, commencing in 2017, of the aggregate
shortfall for the months of December, January and February that are immediately
prior to date on which such calculation is made, which, if added to Net Cash
Flow for such three month period (for the avoidance of doubt which Net Cash Flow
shall not include any disbursements from the Seasonality Reserve Account), would
cause the Debt Service Coverage Ratio during the immediately preceding
Seasonality Reserve Disbursement Period to equal 1.10 to 1.00.

 

“Seasonality Reserve Disbursement Period” shall have the meaning set forth in
Section 7.7.2 hereof.

 

“Seasonality Reserve Fund” shall have the meaning set forth in Section 7.7.1
hereof.

 

“Seasonality Reserve Monthly Deposit” shall mean an amount equal to one-sixth
(1/6) of the amount of the applicable Seasonality Reserve Annual Cap (less any
then-existing balance in the Seasonality Reserve Account, as determined by
Lender in its sole discretion).

 

“Seasonality Reserve Monthly Deposit Shortfall” shall have the meaning set forth
in Section 7.7.1 hereof.

 

“Seasonality Reserve Monthly Deposit Shortfall Month” shall have the meaning set
forth in Section 7.7.1 hereof.

 

“Seasonality Reserve Payment Period” shall have the meaning set forth in Section
7.7.1 hereof.

 

“Securities” has the meaning set forth in Section 9.1 hereof.

 

“Securitization” has the meaning set forth in Section 9.1 hereof.

 

“Security Agreement” has the meaning set forth in Section 2.5.1(a)(v) hereof.

 

“Security Instrument” means, that certain first priority Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated the
date hereof, executed and delivered by Borrower to Lender as security for the
Loan and encumbering the Property, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time.

 

“Servicer” has the meaning set forth in Section 9.5 hereof.

 

“Severed Loan Documents” has the meaning set forth in Section 8.2(c) hereof.

 

 24

 

 

“Special Purpose Entity” means a corporation, limited partnership or limited
liability company that, since the date of its formation and at all times on and
after the date thereof while the Loan is outstanding and undefeased, unless such
Person no longer owns any interest in the Property, has complied with and shall
at all times comply with the following requirements unless it has received
either prior consent to do otherwise from Lender or a permitted administrative
agent thereof, or, while the Loan is securitized, confirmation from each of the
applicable Rating Agencies that such noncompliance would not result in the
requalification, withdrawal, or downgrade of the ratings of any Securities or
any class thereof:

 

(i)           is and shall be organized solely for the purpose of (A) in the
case of Borrower, acquiring, developing, owning, holding, selling, leasing,
transferring, exchanging, financing, managing, operating and disposing of the
Property, entering into and performing its obligations under the Loan Documents
with Lender, refinancing the Property in connection with a permitted repayment
of the Loan, and transacting lawful business that is incident, necessary and
appropriate to accomplish the foregoing; (B) in the case of Master Tenant,
leasing, subleasing, operating, managing, maintaining, developing, and improving
the Property, entering into and performing its obligations under the Master
Lease Documents with Borrower, Hotel Transactions, the Franchise Agreement, and
subleases, operating agreements, or management agreements with third-party
operators or managers for the management and operation of the Property, and
transacting lawful business that is incident, necessary and appropriate to
accomplish the foregoing; or (C) in the case of a Principal, acting as a general
partner of the limited partnership that is the Borrower or Master Tenant, as
applicable, or as member of the limited liability company that is the Borrower
or Master Tenant, as applicable, and transacting lawful business that is
incident, necessary and appropriate to accomplish the foregoing;

 

(ii)          has not engaged and shall not engage in any business unrelated to
(A) the acquisition, development, ownership, leasing, management or operation of
the Property (including, in the case of Master Tenant, entering into the Master
Lease Documents, Hotel Transactions and subleases, operating agreements or
management agreements with third-party operators or managers for the management
and operation of the Property), or (B) in the case of a Principal, acting as
general partner of the limited partnership that is the Borrower or Master
Tenant, as applicable, or acting as a member of the limited liability company
that is the Borrower or Master Tenant, as applicable;

 

(iii)         has not owned and shall not own any real property other than (A)
in the case of Borrower, the Property; or (B) in the case of Master Tenant, the
leasehold interest in the Master Lease;

 

(iv)         does not have, shall not have and at no time had any assets other
than (A) in the case of Borrower, the Property and personal property necessary
or incidental to its ownership and operation of the Property; (B) in the case of
Master Tenant, the leasehold interest under the Master Lease and personal
property necessary or incidental to ownership of its leasehold interest in and
operation of the Property; or (C) in the case of a Principal, its partnership
interest in the limited partnership or the member interest in the limited
liability company that is the Borrower or Master Tenant, as applicable, and
personal property necessary or incidental to its ownership of such interests;

 

 25

 

 

(v)          has not engaged in, sought, consented to or permitted and shall not
engage in, seek, consent to or permit (A) any dissolution, winding up,
liquidation, consolidation or merger, (B) any sale or other transfer of all or
substantially all of its assets or any sale of assets outside the ordinary
course of its business, except as permitted by the Loan Documents, or (C) in the
case of a Principal, any transfer of its partnership or membership interests in
Borrower;

 

(vi)         shall not cause, consent to or permit any amendment of its limited
partnership agreement, articles of incorporation, articles of organization,
certificate of formation, operating agreement or other formation document or
organizational document (as applicable) with respect to the matters set forth in
this definition;

 

(vii)        if such entity is a limited partnership, has and shall have at
least one general partner and has and shall have, as its only general partners,
Special Purpose Entities each of which (A) is a corporation or single-member
Delaware limited liability company, (B) holds a direct interest as general
partner in the limited partnership of not less than one percent (1.0%); and (C)
has at least one (1) Independent Director;

 

(viii)       if such entity is a corporation, has and shall have at least one
(1) Independent Director, and shall not cause or permit the board of directors
of such entity to take any Material Action either with respect to itself or, if
the corporation is a Principal, with respect to Borrower or Master Tenant (as
applicable) or any action requiring the unanimous affirmative vote of one
hundred percent (100%) of the members of its board of directors, one hundred
percent (100%) of the members of its board of directors and each Independent
Director shall have participated in such vote and shall have voted in favor of
such action;

 

(ix)         if such entity is a limited liability company (other than a limited
liability company meeting all of the requirements applicable to a single-member
limited liability company set forth in this definition of “Special Purpose
Entity”), has and shall have at least one (1) member that is a Special Purpose
Entity, that is either a corporation or a single-member limited liability
company, that directly owns at least one percent (1.0%) of the equity of the
limited liability company and that has at least one (1) Independent Director;

 

(x)          if such entity is a single-member limited liability company, (A) is
and shall be a Delaware limited liability company, (B) has and shall have at
least one (1) Independent Director serving as manager of such company, (C) shall
not take any Material Action and shall not cause or permit the members or
managers of such entity to take any Material Action, either with respect to
itself or, if the company is a Principal, with respect to Borrower, in each case
unless one hundred percent (100%) of the members of the company and at least one
(1) Independent Director then serving as manager of the company shall have
participated consented in writing to such action, and (D) has and shall have
either (1) a member which owns no economic interest in the company, has signed
the company’s limited liability company agreement and has no obligation to make
capital contributions to the company, or (2) two natural persons or one entity
that is not a member of the company, that has signed its limited liability
company agreement and that, under the terms of such limited liability company
agreement becomes a member of the company immediately prior to the withdrawal or
dissolution of the last remaining member of the company;

 

 26

 

 

(xi)         has not and shall not (and, if such entity is (a) a limited
liability company, has and shall have a limited liability agreement or an
operating agreement, as applicable, (b) a limited partnership, has a limited
partnership agreement, or (c) a corporation, has a certificate of incorporation
or articles that, in each case, provide that such entity shall not) (1)
dissolve, merge, liquidate, consolidate; (2) sell all or substantially all of
its assets except as permitted by the Loan Documents; (3) amend its
organizational documents with respect to the matters set forth in this
definition without the consent of Lender; or (4) without the affirmative vote of
each Independent Director and one hundred percent (100%) of its members,
partners or shareholders, as applicable, of itself or the consent of a Principal
that is a member or general partner in it take any Material Action;

 

(xii)        to the extent revenues of the Property are available to it and are
sufficient therefor (or Borrower’s lack of access thereto is due to the exercise
of rights or remedies by Lender), (A) has at all times been and shall at all
times remain solvent and has paid and shall pay its debts and liabilities
(including, a fairly-allocated portion of any personnel and overhead expenses
that it shares with any Affiliate) from its assets as the same shall become due,
and (B) has maintained and shall 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;

 

(xiii)       holds itself out as a legal entity, separate and apart from any
other person or entity, has not failed and shall not fail to correct any known
misunderstanding regarding the separate identity of such entity and has not
identified and shall not identify itself as a division of any other Person;

 

(xiv)       has maintained and shall maintain (subject to clause (xvi) below)
its bank accounts, books of account, books and records separate from those of
any other Person and, to the extent that it is required to file tax returns
under applicable law, has filed and shall file its own tax returns, except to
the extent that it is a disregarded entity or otherwise is required by law to
file consolidated tax returns and, if it is a corporation, has not filed and
shall not file a consolidated federal income tax return with any other
corporation, except to the extent that it is required by law to file
consolidated tax returns;

 

(xv)        has maintained and shall maintain its own records, books,
resolutions and agreements;

 

(xvi)       except as required by the Loan Documents, has not commingled and
shall not commingle its funds or assets with those of any other Person and has
not participated and shall not participate in any cash management system with
any other Person;

 

(xvii)      except as required by the Loan Documents, has held and shall hold
its assets in its own name;

 

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(xviii)     has conducted and shall conduct its business in its name or in a
name franchised or licensed to it by an entity other than an Affiliate of itself
or (except in the case of Borrower) of Borrower, except for business conducted
on behalf of itself by another Person under a business management services
agreement that is on commercially-reasonable terms, so long as the manager, or
equivalent thereof, under such business management services agreement holds
itself out as an agent of such Person;

 

(xix)       (A) has maintained and shall maintain its financial statements,
accounting records and other entity documents separate from those of any other
Person; (B) has shown and shall show, in its financial statements, its asset and
liabilities separate and apart from those of any other Person; and (C) has not
permitted and shall not permit its assets to be listed as assets on the
financial statement of any of its Affiliates except as required (or, if such
entity is disregarded for tax purposes, permitted) by GAAP; provided, however,
that any such consolidated financial statement contains a note indicating that
the Special Purpose Entity’s separate assets and credit are not available to pay
the debts of such Affiliate and that the Special Purpose Entity’s liabilities do
not constitute obligations of the consolidated entity;

 

(xx)        to the extent that revenues of the Property are available to it and
are sufficient therefor (or Borrower’s lack of access thereto is due to the
exercise of rights or remedies by Lender), has paid and shall pay its own
liabilities and expenses, including the salaries of its own employees, out of
its own funds and assets, and has maintained and shall maintain a sufficient
number of employees in light of its contemplated business operations;

 

(xxi)       has observed and shall observe all partnership, corporate or limited
liability company formalities, as applicable;

 

(xxii)      has not incurred any Indebtedness other than (i) acquisition
financing with respect to the Property; construction financing with respect to
the Improvements and certain off-site improvements required by municipal and
other authorities as conditions to the construction of the Improvements; and
first mortgage financings secured by the Property; and Indebtedness pursuant to
letters of credit, guaranties, interest rate protection agreements and other
similar instruments executed and delivered in connection with such financings,
(ii) unsecured trade payables and operational debt not evidenced by a note, and
(iii) Indebtedness incurred in the financing of equipment and other personal
property used on the Property;

 

(xxiii)     shall have no Indebtedness (including loans (whether or not such
loans are evidenced by a written agreement) between such Person and any
Affiliates of such Person) other than (A) in the case of the Borrower, the Loan,
(B) in the case of Master Tenant, its obligations under the Master Lease, and
(C) in the case of Borrower and Master Tenant, unsecured trade payables and
operational debt incurred in the ordinary course of business relating to the
ownership of its interest in and operation of the Property and the routine
administration ofMaster Tenant and Borrower, which liabilities are (i) paid when
due and in any event not more than sixty (60) days past the later of the date
incurred or invoiced (unless disputed in accordance with applicable law or
unless revenues of the Property, net of all other amounts payable by Master
Tenant under the Master Lease or the Loan Documents, are insufficient to pay
such sums, or, to the extent they are sufficient and Lender is then sweeping
Excess Cash Flow under the Loan Documents, Lender has not released such funds to
Master Tenant), (ii) not evidenced by a note, (iii) normal and reasonable under
the circumstances, and (iv) do not exceed 2% of the original principal balance
of the Loan (unless such maximum amount is breached solely as a result of
non-payment of the liability under the circumstances described in sub-clause (i)
above), and (D) in the case of Borrower and Master Tenant, such other
liabilities as are permitted pursuant to this Agreement (the Indebtedness
described in the foregoing clauses (A) through (D) is referred to herein,
collectively, as “Permitted Indebtedness”). Except pursuant to the Master Lease
Documents or another Loan Document to which Master Tenant is a party, no
Indebtedness other than the Debt may be secured (subordinate or pari passu) by
the Property;

 

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(xxiv)     has not assumed, guaranteed or become obligated and shall not assume
or guarantee or become obligated for the debts of any other Person, has not held
out and shall not hold out its credit as being available to satisfy the
obligations of any other Person or has not pledged and shall not pledge its
assets for the benefit of any other Person, in each case except as permitted
pursuant to this Agreement;

 

(xxv)      has not acquired and shall not acquire obligations or securities of
its partners, members or shareholders or any other owner or Affiliate; provided
that no Master Lease Document shall be deemed to violate this provision;

 

(xxvi)     has allocated and shall allocate fairly and reasonably any overhead
expenses that are shared with any of its Affiliates, constituents, or owners, or
any guarantors of any of their respective obligations, or any Affiliate of any
of the foregoing, including paying for shared office space and for services
performed by any employee of an Affiliate;

 

(xxvii)    has maintained and used and shall maintain and use separate
stationery, invoices and checks bearing its name and not bearing the name of any
other entity unless such entity is clearly designated as being the Special
Purpose Entity’s agent;

 

(xxviii)   has not pledged and shall not pledge its assets to or for the benefit
of any other Person other than with respect to loans secured by the Property or,
in the case of Master Tenant, pursuant to the Master Lease Documents, and no
such pledge remains outstanding except to Lender to secure the Loan and Borrower
to secure Master Tenant’s obligations under the Master Lease Documents;

 

(xxix)     has held itself out and identified itself and shall hold itself out
and identify itself as a separate and distinct entity under its own name or in a
name franchised or licensed to it by an entity other than an Affiliate of
Borrower and not as a division or part of any other Person;

 

(xxx)      has maintained and shall maintain its assets in such a manner that it
shall not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person;

 

(xxxi)     has not made and shall not make loans to any Person and has not held
and shall not hold evidence of indebtedness issued by any other Person or entity
(other than cash and investment-grade securities issued by an entity that is not
an Affiliate of or subject to common ownership with such entity);

 

(xxxii)    has not identified and shall not identify its partners, members or
shareholders, or any Affiliate of any of them, as a division or part of it, and
has not identified itself and shall not identify itself as a division of any
other Person;

 

 29

 

 

(xxxiii)   other than the Master Lease Documents and the Management Agreement,
capital contributions, and distributions permitted under the terms of its
organizational documents, has not entered into or been a party to, and shall not
enter into or be a party to, any transaction with any of its partners, members,
shareholders or Affiliates except in the ordinary course of its business and on
terms which are commercially reasonable terms comparable to those of an
arm’s-length transaction with an unrelated third party;

 

(xxxiv)   has not had and shall not have any obligation to, and has not
indemnified and shall not indemnify its partners, officers, directors or
members, as the case may be, in each case unless such an obligation or
indemnification is fully subordinated to the Debt and shall not constitute a
claim against it if its cash flow is insufficient to pay the Debt;

 

(xxxv)    if such entity is a corporation, has considered and shall consider, to
the extent permitted under applicable law, the interests of its creditors in
connection with all corporate actions;

 

(xxxvi)   has not had and shall not have any of its obligations guaranteed by
any Affiliate except pursuant to the Franchise Guaranty, the Owner Agreement or
as otherwise provided by the Loan Documents;

 

(xxxvii)  has not formed, acquired or held and shall not form, acquire or hold
any subsidiary, except that a Principal may acquire and hold its interest in
Borrower or Master Tenant;

 

(xxxviii) has complied and shall comply with all of the terms and provisions
contained in its organizational documents relating to separateness;

 

(xxxix)   intentionally omitted;

 

(xl)         except pursuant to the Loan Documents, has not permitted and shall
not permit any Affiliate or constituent party independent access to its bank
accounts;

 

(xli)        is, has always been and, to the extent that revenues of the
Property are available to it and sufficient therefor, shall continue to be, duly
formed, validly existing, and in good standing in the state of its incorporation
or formation and in all other jurisdictions where it is required to be qualified
to do business; and

 

(xlii)       has no material contingent or actual obligations not related to the
Property.

 

“State” means, the State or Commonwealth in which the Land or any part thereof
is located.

 

“Successor Borrower” has the meaning set forth in Section 2.5.3 hereof.

 

“Survey” means a survey of the Property prepared by a surveyor licensed in the
State and satisfactory to Lender and the company or companies issuing the Title
Insurance Policy, and containing a certification of such surveyor satisfactory
to Lender.

 

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“Tax and Insurance Escrow Fund” has the meaning set forth in Section 7.2 hereof.

 

“Taxes” means all real estate and personal property taxes, assessments, water
rates or sewer rents, now or hereafter levied or assessed or imposed against the
Property or part thereof.

 

“Tenant” means the lessee of all or a portion of the Property under a Lease
(other than Master Tenant).

 

“Tenant Direction Letter” means an instruction letter to Tenants substantially
in the form attached hereto as Schedule IV.

 

“Threshold Amount” has the meaning set forth in Section 5.1.21 hereof.

 

“Title Insurance Policy” means the mortgagee title insurance policy issued with
respect to the Property and insuring the lien of the Security Instrument.

 

“Transfer” has the meaning set forth in Section 5.2.10(b) hereof.

 

“Transferee” has the meaning set forth in Section 5.2.10(e) hereof.

 

“Transferee’s Principals” means collectively, (A) Transferee’s managing members,
general partners or principal shareholders and (B) such other members, partners
or shareholders which directly or indirectly shall own a fifty-one percent (51%)
or greater economic and voting interest in Transferee.

 

“TRIPRA” shall have the meaning set forth in Section 6.1(a)(ix) hereof.

 

“UCC” or “Uniform Commercial Code” means the Uniform Commercial Code as in
effect in the State in which the Property is located.

 

“Uniform System of Accounts” shall mean the most recent edition of the Uniform
System of Accounts for Hotels, as adopted by the American Hotel and Motel
Association.

 

“U.S. Obligations” means non redeemable, non prepayable, non callable securities
evidencing an obligation to timely pay principal or interest in a full and
timely manner that constitute “government securities” within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940, as amended, and are (a)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged, or (b) to the extent acceptable to the Rating
Agencies, other “government securities” within the meaning of Section 2(a)(16)
of the Investment Company Act of 1940, as amended.

 

Section 1.2          Principles of Construction.  The following rules of
construction shall be applicable for all purposes of this Agreement and all
documents or instruments supplemental hereto, unless the context otherwise
clearly requires:

 

(a)          any pronoun used herein shall be deemed to cover all genders, and
words importing the singular number shall mean and include the plural number,
and vice versa;

 

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(b)          the term “or” has, except where otherwise indicated, the inclusive
meaning represented by the phrase “and/or”;

 

(c)          an Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in writing by Lender;

 

(d)          no inference in favor of or against any party shall be drawn from
the fact that such party has drafted any portion hereof or any other Loan
Document;

 

(e)          the cover page (if any) of, all recitals set forth in, and all
Exhibits to, this Agreement are hereby incorporated herein;

 

(f)           all references to sections and schedules are to sections and
schedules in or to this Agreement unless otherwise specified;

 

(g)          all uses of the words “include,” “including” and similar terms
shall be construed as if followed by the phrase “without being limited to”
unless the context shall indicate otherwise;

 

(h)          unless otherwise specified, the words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement; and

 

(i)           unless otherwise specified, all meanings attributed to defined
terms herein shall be equally applicable to both the singular and plural forms
of the terms so defined.

 

ARTICLE II
GENERAL TERMS

 

Section 2.1          Loan Commitment; Disbursement to Borrower.

 

2.1.1.      Agreement to Lend and Borrow. Subject to and upon the terms and
conditions set forth herein, Lender hereby agrees to make and Borrower hereby
agrees to accept the Loan on the Closing Date.

 

2.1.2.      Single Disbursement to Borrower.  Borrower may request and receive
only one (1) borrowing hereunder in respect of the Loan and any amount borrowed
and repaid or defeased hereunder in respect of the Loan may not be reborrowed.
Borrower acknowledges and agrees that the Loan has been fully funded as of the
Closing Date.

 

2.1.3.      The Note, Security Instrument and Loan Documents.  The Loan shall be
evidenced by the Note and secured or supported, as the case may be, by the
Security Instrument and the other Loan Documents.

 

2.1.4.      Use of Proceeds.  Borrower shall use the proceeds of the Loan to (a)
acquire the Property or repay and discharge any existing loans relating to the
Property, (b) pay all past due basic carrying costs, if any, with respect to the
Property, (c) make deposits into the Reserve Funds on the Closing Date in the
amounts provided herein, (d) pay costs and expenses incurred in connection with
the closing of the Loan, as approved by Lender, (e) fund any working capital
requirements of the Property and (f) distribute the balance, if any, to
Borrower.

 

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Section 2.2          Interest Rate.

 

2.2.1.      Interest Rate.  Interest on the outstanding principal balance of the
Loan shall accrue at the Interest Rate or as otherwise set forth in this
Agreement or in the Note from (and including) the Closing Date to but excluding
the Maturity Date.

 

2.2.2.      Interest Calculation.  Interest on the outstanding principal balance
of the Loan shall be calculated by multiplying (a) the actual number of days
elapsed in the relevant Accrual Period by (b) a daily rate based on the Interest
Rate and a three hundred sixty (360) day year by (c) the outstanding principal
balance of the Loan. Borrower acknowledges that the calculation method for
interest described herein results in a higher effective interest rate than the
numeric Interest Rate and Borrower hereby agrees to this calculation method.

 

2.2.3.      Default Rate.  Upon the occurrence of an Event of Default (including
the failure of Borrower to make full payment on the Maturity Date), Lender shall
be entitled to receive and Borrower shall pay interest on the Outstanding
Principal Balance at the Default Rate. Interest shall accrue and be payable at
the Default Rate from the occurrence of an Event of Default until all Events of
Default have been waived in writing by Lender in its discretion. Such accrued
interest shall be added to the Outstanding Principal Balance, and interest shall
accrue thereon on a daily basis at the Default Rate until fully paid. Such
accrued interest shall be secured by the Security Instrument and other Loan
Documents. Borrower agrees that Lender’s right to collect interest at the
Default Rate is given for the purpose of compensating Lender at reasonable
amounts for Lender’s added costs and expenses that occur as a result of
Borrower’s default and that are difficult to predict in amount, such as
increased general overhead, concentration of management resources on problem
loans, and increased cost of funds. Lender and Borrower agree that Lender’s
collection of interest at the Default Rate is not a fine or penalty, but is
intended to be and shall be deemed to be reasonable compensation to Lender for
increased costs and expenses that Lender will incur if there occurs an Event of
Default hereunder. Collection of interest at the Default Rate shall not be
construed as an agreement or privilege to extend the Maturity Date or to limit
or impair any rights and remedies of Lender under any Loan Documents. If
judgment is entered on the Note, interest shall continue to accrue post-judgment
at the greater of (a) the Default Rate or (b) the applicable statutory judgment
rate.

 

2.2.4.      Usury Savings.  This Agreement, the Note and the other Loan
Documents are subject to the express condition that at no time shall Borrower be
obligated or required to pay interest on the principal balance of the Loan at a
rate which could subject Lender to either civil or criminal liability as a
result of being in excess of the Maximum Legal Rate. If, by the terms of this
Agreement or the other Loan Documents, Borrower is at any time required or
obligated to pay interest on the principal balance due hereunder at a rate in
excess of the Maximum Legal Rate, the Interest Rate or the Default Rate, as the
case may be, shall be deemed to be immediately reduced to the Maximum Legal Rate
and all previous payments in excess of the Maximum Legal Rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder or, if the Loan has been repaid in full, such excess shall be
promptly returned to Borrower. All sums paid or agreed to be paid to Lender for
the use, forbearance, or detention of the sums due under the Loan, shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Loan until payment in full so that
the rate or amount of interest on account of the Loan does not exceed the
Maximum Legal Rate of interest from time to time in effect and applicable to the
Loan for so long as the Loan is outstanding.

 

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Section 2.3          Loan Payment.  Payments of principal, interest, and Late
Charges (as defined in the Note) shall be made as provided in the Note.

 

Section 2.4          Prepayments.  Except as otherwise provided in Section 9 of
the Note, Borrower shall not have the right to prepay the Loan in whole or in
part prior to the Maturity Date.

 

Section 2.5          Defeasance.

 

2.5.1.      Voluntary Defeasance.  (a) Provided no Event of Default shall then
exist, Borrower shall have the right at any time after the Permitted Defeasance
Date and prior to the Permitted Par Prepayment Date to voluntarily defease all,
but not part, of the Loan by and upon satisfaction of the following conditions
(such event being a “Defeasance Event”):

 

(i)          Borrower shall provide not less than thirty (30) days prior written
notice to Lender specifying the Payment Date (the “Defeasance Date”) on which
the Defeasance Event is to occur;

 

(ii)         Borrower shall pay to Lender all accrued and unpaid interest on the
principal balance of the Loan to and including the Defeasance Date. If for any
reason the Defeasance Date is not a Payment Date, the Borrower shall also pay
interest that would have accrued on the Note through and including the next
Payment Date, provided, however, if the Defeasance Deposit shall include (or if
the U.S. Obligations purchased with such Defeasance Deposit shall provide for
payment of) all principal and interest computed from the Payment Date prior to
the Defeasance Date through the next succeeding Payment Date, Borrower shall not
be required to pay such short term interest pursuant to this sentence;

 

(iii)        Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, then due under the Note, this
Agreement, the Security Instrument and the other Loan Documents;

 

(iv)        Borrower shall pay to Lender the required Defeasance Deposit for the
Defeasance Event and complies with and satisfies the requirements of Section
2.5.1(b) below;

 

(v)         Borrower shall execute and deliver a pledge and security agreement,
in form and substance that would be reasonably satisfactory to a prudent lender
creating a first priority lien on the Defeasance Deposit and the U.S.
Obligations purchased with the Defeasance Deposit in accordance with the
provisions of this Section 2.5 (the “Security Agreement”);

 

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(vi)        Borrower shall deliver one or more opinions from counsel reasonably
satisfactory to Lender that are standard in commercial lending transactions and
subject only to customary qualifications, assumptions and exceptions opining,
among other things, that Borrower has legally and validly transferred and
assigned the U.S. Obligations and all obligations, rights and duties under and
to the Note to the Successor Borrower, that Lender has a perfected first
priority security interest in the U.S. Obligations purchased with the Defeasance
Deposit and that the Security Agreement is enforceable against Borrower in
accordance with its terms, and (b) the defeasance or any other transaction that
occurs pursuant to the provisions of this Section 2.5.1(a) will not cause the
failure of any REMIC Trust or any other entity that holds the Note to maintain
its tax status;

 

(vii)       If required by pursuant to the applicable pooling and servicing
agreement, Borrower shall deliver confirmation in writing from each of the
applicable Rating Agencies to the effect that such release will not result in a
downgrade, withdrawal or qualification of the respective ratings in effect
immediately prior to such Defeasance Event for the Securities issued in
connection with the Securitization which are then outstanding. Borrower shall
also deliver or cause to be delivered an Additional Insolvency Opinion with
respect to the Successor Borrower from counsel satisfactory to Lender in form
and substance satisfactory to Lender and the applicable Rating Agencies

 

(viii)      Borrower shall deliver an Officer’s Certificate certifying that the
requirements set forth in this Section 2.5.1(a) (except for such, if any, as
have been specifically waived in writing in connection with the Defeasance
Event) have been satisfied;

 

(ix)        Borrower shall deliver a certificate of a certified public
accountant reasonably acceptable to Lender (which may be an employee of Borrower
or its Affiliates) certifying that the U.S. Obligations purchased with the
Defeasance Deposit generate monthly amounts equal to or greater than the
Scheduled Defeasance Payments;

 

(x)         Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and

 

(xi)        Borrower shall pay all costs and expenses of Lender incurred in
connection with the Defeasance Event, including (A) any costs and expenses
associated with a release of the Lien of the Security Instrument as provided in
Section 2.6 hereof, (B) reasonable attorneys’ fees and expenses incurred in
connection with the Defeasance Event, (C) the costs and expenses of the Rating
Agencies, (D) any revenue, documentary stamp or intangible taxes or any other
tax or charge due in connection with the assumption of the Note by the Successor
Borrower, or otherwise required to accomplish the defeasance and (E) the costs
and expenses of Servicer and any trustee, including reasonable attorneys’ fees
and expenses.

 

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(b)          In connection with the Defeasance Event, Borrower shall use the
Defeasance Deposit, or cause it to be used, to purchase U.S. Obligations which
provide payments on or prior to, but as close as possible to, all successive
scheduled Payment Dates after the Defeasance Date upon which interest and
principal payments are required under this Agreement and the Note, and in
amounts equal to or more than the scheduled payments due on such Payment Dates
under this Agreement and the Note (including scheduled payments of principal,
interest, and any other amounts due under the Loan Documents on such Payment
Dates) and assuming the Note is repaid in full on the Maturity Date (the
“Scheduled Defeasance Payments”). Notwithstanding the foregoing, at Lender’s
option, Lender, acting on Borrower’s behalf as Borrower’s agent and
attorney-in-fact, shall use the Defeasance Deposit to purchase, or cause to be
purchased, the above-referenced U.S. Obligations that Borrower is required to
purchase pursuant to this Section 2.5.1(b). By depositing the Defeasance Deposit
with Lender, Borrower shall thereby appoint Lender or Lender’s servicer or other
agent as Borrower’s agent and attorney-in-fact, with full power of substitution,
for the purpose of purchasing the U.S. Obligations with the Defeasance Deposit
and delivering the U.S. Obligations to Lender. Borrower, pursuant to the
Security Agreement or other appropriate document, shall authorize and direct
that the payments received from the U.S. Obligations may be applied to satisfy
the Debt Service obligations of Borrower under this Agreement and the Note. Any
portion of the Defeasance Deposit in excess of the amount necessary to purchase
the U.S. Obligations required by this Section 2.5 and satisfy Borrower’s other
obligations under this Section 2.5 and Section 2.6 shall be remitted to
Borrower.

 

(c)          If any notice of defeasance is given pursuant to
Section 2.5.1(a)(i), Borrower shall be required to defease the Loan on the
Defeasance Date (unless such notice is revoked by Borrower prior to the
Defeasance Date in which event Borrower shall immediately reimburse Lender for
any and all reasonable costs and expenses incurred by Lender in connection with
Borrower’s giving of such notice and revocation).

 

2.5.2.      Collateral.  Each of the U.S. Obligations that are part of the
defeasance collateral shall be duly endorsed by the holder thereof as directed
by Lender or accompanied by a written instrument of transfer in form and
substance that would be satisfactory to a prudent lender (including such
instruments as may be required by the depository institution holding such
securities or by the issuer thereof, as the case may be, to effectuate book
entry transfers and pledges through the book entry facilities of such
institution) in order to perfect upon the delivery of the defeasance collateral
a first priority security interest therein in favor of Lender in conformity with
all applicable state and federal laws governing the granting of such security
interests.

 

2.5.3.      Successor Borrower.  In connection with any Defeasance Event,
Borrower shall establish or designate a successor entity (the “Successor
Borrower”) acceptable to Lender in its reasonable discretion, which shall be a
special purpose entity, which shall not own any other assets or have any other
liabilities or operate other property (except in connection with other defeased
loans held in the same securitized loan pool with the Loan). Borrower shall
transfer and assign all obligations, rights and duties under and to the Note,
together with the pledged U.S. Obligations to such Successor Borrower. Such
Successor Borrower shall assume the obligations under the Note and the Security
Agreement and Borrower shall be relieved of its obligations under such
documents, and each of Guarantor and Master Tenant shall be released from its
obligations under the other Loan Documents, except with respect to matters
occurring prior to such release. Borrower shall pay $1,000 to any such Successor
Borrower as consideration for assuming the obligations under the Note and the
Security Agreement. Notwithstanding anything in this Agreement to the contrary,
no other assumption fee shall be payable upon a transfer of the Note in
accordance with this Section 2.5.3, but Borrower shall pay all costs and
expenses incurred by Lender, including Lender’s attorneys’ fees and expenses and
any fees and expenses of any Rating Agencies, incurred in connection therewith.

 

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Section 2.6          Release of Property.  Except as set forth in this Section
2.6 or upon repayment of the Loan in full on or after the Maturity Date, no
repayment, prepayment or defeasance of all or any portion of the Loan shall
cause, give rise to a right to require, or otherwise result in, the release of
the Lien of the Security Instrument on all or any portion of the Property and
any other Loan Document pursuant to which a Lien thereon exists.

 

2.6.1.      Release of Property.  (a) If Borrower has the right to and has
elected to prepay in full or defease the Loan in accordance with this Agreement
and the Note, upon satisfaction of the requirements of Section 2.4 and Section 9
of the Note (in the case of a prepayment, if then permitted under this Agreement
and the Note) or Section 2.5 (in the case of a full defeasance, if then
permitted under this Agreement and the Note), as applicable, and this Section
2.6, all of the Property shall be released from the Liens of the Loan Documents.

 

(b)          In connection with the release of the Security Instrument in
connection with a Defeasance Event, Borrower shall submit to Lender, not less
than thirty (30) days (or such shorter time period as Lender may agree to in its
sole discretion) prior to the Defeasance Date, a release of Lien (and related
Loan Documents) for the Property for execution by Lender. Such release shall be
in a form appropriate in the jurisdiction in which the Property is located and
that would be satisfactory to a prudent lender and contains standard provisions,
if any, protecting the rights of the releasing lender. In addition, Borrower
shall provide all other documentation Lender reasonably requires to be delivered
by Borrower in connection with such release, together with an Officer’s
Certificate certifying that such documentation (i) is in compliance with all
Legal Requirements, and (ii) will effect such releases in accordance with the
terms of this Agreement. Borrower shall reimburse Lender and Servicer for any
costs and expenses Lender and Servicer incur arising from such release
(including reasonable attorneys’ fees and expenses) and Borrower shall pay, in
connection with such release, (i) all recording charges, filing fees, taxes or
other expenses payable in connection therewith, and (ii) the lesser of the
current fee then generally being assessed by such Servicer to effect such
release and the maximum amount permitted under applicable law to be assessed as
a fee therefor. Upon the release of the Property in accordance with this Section
2.6.1 following a defeasance, Borrower shall have no further right to prepay the
Note.

 

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Section 2.7          Clearing Account/Cash Management.

 

2.7.1.      Clearing Account.  (a) Upon the occurrence of a Cash Sweep Event,
Borrower shall establish and maintain an Eligible Account (the “Clearing
Account”) with Clearing Bank for the benefit of Lender, which Clearing Account
shall be under the sole dominion and control of Lender. The Clearing Account
shall be entitled in the name of Master Tenant for the benefit of Lender. Master
Tenant shall grant to Borrower, as security for Master Tenant’s obligations
under the Master Lease, a first-priority security interest in the Clearing
Account and all deposits at any time contained therein and the proceeds thereof
and will take all actions necessary to maintain in favor of Borrower and of
Lender, as Borrower’s assignee, a perfected first priority security interest in
the Clearing Account, including, without limitation, authorizing the filing
UCC-1 Financing Statements and continuations thereof. Borrower hereby grants to
Lender a first-priority security interest in all of Borrower’s right, title and
interest in and to the Clearing Account and all deposits at any time contained
therein and the proceeds thereof and shall take all actions deemed necessary or
desirable by Lender to maintain in favor of Lender a perfected first priority
security interest in the Clearing Account, including authorizing the filing of
UCC-1 Financing Statements and continuations thereof. All costs and expenses for
establishing and maintaining the Clearing Account shall be paid by Borrower or
Master Tenant. All monies now or hereafter deposited into the Clearing Account
shall be deemed additional security for Master Tenant’s obligations under the
Master Lease, and, to the extent of Borrower’s interest therein, additional
security for the Debt. All funds in the Clearing Account, less the reasonable
fees of the Clearing Bank and any minimum balance required to be maintained
therein, shall be wire transferred each Business Day (i) during the existence of
a Cash Sweep Period, to the Cash Management Account and (ii) if a Cash Sweep
Period does not then exist, to Master Tenant’s operating account specified
pursuant to the Clearing Agreement. Upon the occurrence of a Cash Sweep Event,
the Clearing Account Agreement and Clearing Account shall remain in effect until
the Loan has been repaid or defeased in full.

 

(b)          On or before the Closing Date, Borrower shall, or shall cause
Master Tenant to (or cause Manager to), execute and deliver to Lender (i) Credit
Card Direction Letters to each of the Credit Card Companies to deliver all
receipts payable with respect to the Property directly to the Clearing Account,
and (ii) with respect to commercial Leases in existence on the date hereof (if
any), execute and deliver Tenant Direction Letters to all Tenants under such
commercial Leases to deliver all Rents payable under their respective Leases
directly to the Clearing Account, and deposit all Rents payable under the Master
Lease directly to the Clearing Account. In connection with each commercial Lease
executed after the date hereof, Borrower shall simultaneously deliver to Lender
an executed Tenant Direction Letter. Lender shall hold the Credit Card Direction
Letters and the Tenant Direction Letters in escrow and shall not complete and
deliver them to Credit Card Companies or Tenants unless (i) a Cash Sweep Event
occurs and (ii) Borrower shall have failed promptly thereafter to provide
satisfactory written evidence to Lender that Borrower has delivered, or has
caused Master Tenant and/or Manager to deliver, completed Credit Card Direction
Letters to Credit Card Companies and Tenant Direction Letters to Tenants.
Without the prior written consent of Lender, neither Borrower, Master Tenant nor
Manager shall (i) terminate, amend, revoke or modify any Credit Card Direction
Letter or any Tenant Direction Letter in any manner or (ii) direct or cause any
Credit Card Company, Tenant or Master Tenant to pay any amount in any manner
other than as provided in the Credit Card Direction Letter or Tenant Direction
Letter, as applicable. After the occurrence of a Cash Sweep Event, Borrower
shall, and shall cause Master Tenant to or to cause Manager to, deposit all
amounts received by Borrower, Master Tenant or Manager constituting Rents (other
than operating cash, not in excess of $5,000, retained for the purpose of the
day-to-day operations of the Property) into the Clearing Account within two (2)
Business Days after receipt thereof. Until so deposited, all Rents received by
Borrower or Manager shall be held in trust for the benefit of Lender and shall
not be commingled with any other funds or property of Borrower or Manager.

 

(c)          Master Tenant shall obtain from Clearing Bank its agreement to
transfer on each Business Day all amounts on deposit in the Clearing Account (i)
during the existence of a Cash Sweep Period, to the Cash Management Account and
(ii) if a Cash Sweep Period does not then exist, to Master Tenant’s operating
account specified pursuant to the Clearing Account Agreement.

 

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(d)          If Lender has accelerated the Loan as a result of an Event of
Default or any Bankruptcy Action of Borrower, Master Tenant, Principal or
Manager, Lender may, in addition to any and all other rights and remedies
available to Lender, apply any sums then present in the Clearing Account to the
payment of the Debt in any order in its sole discretion. If Lender has not
accelerated the Loan notwithstanding the existence of an Event of Default or any
Bankruptcy Action of Borrower, Master Tenant, Principal or Manager, Lender shall
have the continuing exclusive control of, and right to withdraw and apply, the
funds in the Clearing Account that would constitute rent under the Master Lease
to payment of any and all debts, liabilities and obligations of Borrower to
Lender pursuant to or in connection with this Agreement and the other Loan
Documents, in such order, proportion and priority as Lender may determine in its
sole discretion. Notwithstanding anything to the contrary contained in this
Section 2.7.1(d), Lender shall make any Collected Taxes available for payment to
the relevant tax authorities to the extent such Collected Taxes are required to
be so remitted.

 

(e)          The Clearing Account shall not be commingled with other monies held
by Borrower, Master Tenant, Manager or Clearing Bank and shall be an Eligible
Account.

 

(f)           Neither Borrower nor Master Tenant shall further pledge, assign or
grant any security interest in the Clearing Account or the monies deposited
therein or permit any lien or encumbrance to attach thereto, or any levy to be
made thereon, or authorize any UCC-1 Financing Statements, except those naming
Lender as the secured party and Borrower as Lender’s assignor, to be filed with
respect thereto.

 

(g)          Borrower shall indemnify Lender and hold Lender harmless from and
against any and all actions, suits, claims, demands, liabilities, losses,
damages, obligations and costs and expenses (including litigation costs and
reasonable attorneys’ fees and expenses) arising from or in any way connected
with the Clearing Account or the Clearing Account Agreement (unless arising from
the gross negligence or willful misconduct of Lender) or the performance of the
obligations for which the Clearing Account was established.

 

(h)          Upon (i) Clearing Bank ceasing to be an Eligible Institution,
(ii) the Clearing Account ceasing to be an Eligible Account, (iii) any
resignation by Clearing Bank or termination of the Clearing Account Agreement by
Clearing Bank or Lender or (iv) the occurrence and continuance of an Event of
Default, Borrower and/or Master Tenant, as applicable, shall, within fifteen
(15) days of Lender’s written request, (A) terminate the existing Clearing
Account Agreement, (B) appoint a new Clearing Bank (which such Clearing Bank
shall (I) be an Eligible Institution, (II) other than during the continuance of
an Event of Default, be selected by Borrower and approved by Lender and
(III) during the continuance of an Event of Default, be selected by Lender),
(C) cause such Clearing Bank to open a new Clearing Account (which such account
shall be an Eligible Account) and enter into a new Clearing Account Agreement
with Lender on substantially the same terms and conditions as the previous
Clearing Account Agreement and (D) provide new Tenant Direction Notices and
Credit Card Direction Letters and the other notices required pursuant to the
terms hereof relating to such new Clearing Account Agreement and Clearing
Account. Each of Borrower and Master Tenant constitutes and appoints Lender its
true and lawful attorney-in-fact with full power of substitution to complete or
undertake any action required of Borrower and/or Master Tenant under this
Section 2.7.1 in the name of Borrower and/or Master Tenant (as applicable) in
the event Borrower and/or Master Tenant fails to do the same. Such power of
attorney shall be deemed to be a power coupled with an interest and cannot be
revoked.

 

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2.7.2.      Cash Management Account.  (a) Upon the occurrence of a Cash Sweep
Event, Borrower shall cause Master Tenant to establish and maintain a segregated
Eligible Account (the “Cash Management Account”) to be held by Agent in trust
and for the benefit of Borrower and Lender and to which, during a Cash Sweep
Period, all amounts that otherwise would have been wired to Master Tenant
pursuant to the Clearing Account Agreement shall be transferred instead, which
Cash Management Account shall be under the sole dominion and control of Lender.
The Cash Management Account shall be entitled in the name of Master Tenant for
the benefit of Lender. Master Tenant shall grant to Borrower a first-priority
security interest in the Cash Management Account and all deposits at any time
contained therein and the proceeds thereof and will take all actions deemed
necessary or desirable by Lender to maintain in favor of Borrower and of Lender,
as Borrower’s assignee, a perfected first priority security interest in the Cash
Management Account, including, without limitation, authorizing the filing of
UCC-1 Financing Statements and continuations thereof. Borrower hereby grants to
Lender a first priority security interest in all of Borrower’s right, title and
interest in and to the Cash Management Account and all deposits at any time
contained therein and the proceeds thereof and shall take all actions deemed
necessary or desirable by Lender to maintain in favor of Lender a perfected
first priority security interest in the Cash Management Account, including,
without limitation, authorizing the filing of UCC-1 Financing Statements and
continuations thereof. Borrower will not, and will not permit Master Tenant to,
in any way alter or modify the Cash Management Account and will notify Lender of
the account number thereof. Lender and Servicer shall have the sole right to
make withdrawals from the Cash Management Account, and all costs and expenses
for establishing and maintaining the Cash Management Account shall be paid by
Borrower or Master Tenant.

 

(b)          The insufficiency of funds on deposit in the Cash Management
Account shall not relieve Borrower from the obligation to make any payments, as
and when due pursuant to this Agreement and the other Loan Documents, and such
obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.

 

(c)          All funds on deposit in the Cash Management Account following the
occurrence of an Event of Default or any Bankruptcy Action of Borrower or
Manager and the acceleration of the Loan by Lender may be applied by Lender in
such order and priority as Lender shall determine. If Lender has not accelerated
the Loan notwithstanding the existence of an Event of Default or any Bankruptcy
Action of Borrower, Master Tenant, Principal or Manager, Lender shall have the
continuing exclusive control of, and right to withdraw and apply, funds in the
Cash Management Account that would constitute rent under the Master Lease and
all of Borrower’s Excess Cash Flow (excluding, for the avoidance of doubt,
Master Tenant’s Excess Cash Flow) to payment of any and all debts, liabilities
and obligations of Borrower to Lender pursuant to or in connection with this
Agreement and the other Loan Documents, in such order, proportion and priority
as Lender may determine in its sole discretion. Notwithstanding anything to the
contrary contained in this Section 2.7.2(c), Lender shall make any Collected
Taxes available for payment to the relevant tax authorities to the extent such
Collected Taxes are required to be so remitted.

 

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(d)          Borrower hereby agrees that Lender may modify the Cash Management
Agreement for the purpose of establishing additional sub-accounts in connection
with any payments otherwise required under this Agreement and the other Loan
Documents and Lender shall provide notice thereof to Borrower.

 

2.7.3.      Payments Received under the Cash Management
Agreement.  Notwithstanding anything to the contrary contained in this Agreement
or the other Loan Documents, and provided no Event of Default has occurred and
is continuing, Borrower’s obligations with respect to the payment of the Monthly
Debt Service Payment Amount and amounts required to be deposited into the
Reserve Funds, if any, shall be deemed satisfied to the extent sufficient
amounts are deposited in the Cash Management Account to satisfy such obligations
pursuant to this Agreement on the dates each such payment is required,
regardless of whether any of such amounts are so applied by Lender.

 

ARTICLE III
CONDITIONS PRECEDENT

 

Section 3.1          Conditions Precedent to Closing.  The obligation of Lender
to make the Loan hereunder is subject to the fulfillment by Borrower or waiver
by Lender of all of the conditions precedent to closing set forth in the
application or term sheet for the Loan delivered by Borrower to Lender and the
commitment or commitment rider, if any, to the application or term sheet for the
Loan issued by Lender.

 

ARTICLE IV
REPRESENTATIONS AND WARRANTIES

 

Section 4.1          Borrower Representations.  Borrower represents and warrants
as of the date hereof that:

 

4.1.1.      Organization.  Borrower and Master Tenant have been duly organized
and are validly existing and in good standing in their respective jurisdictions
of organization with requisite power and authority to own or lease the Property
as the case may be and to transact the businesses in which it is now engaged.
Each of Borrower and Master Tenant is duly qualified to do business and is in
good standing in the State in which the Property is located, and each of
Borrower and Master Tenant possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own the
interest in the Property and to transact the businesses in which it is now
engaged, and the sole business each of Borrower and Master Tenant is as set
forth with respect to it in the definition of “Special Purpose Entity.” The
ownership interests in Borrower and Master Tenant are as set forth on the
organizational chart attached hereto as Schedule III, and the direct and
indirect ownership interests in Borrower, Master Tenant, Guarantor or the
Property do not include any Prohibited Entity/Ownership Structure.

 

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4.1.2.      Proceedings.  Each of Borrower, Master Tenant and Guarantor has each
taken all necessary action to authorize the execution, delivery and performance,
as applicable, of this Agreement and/or the other Loan Documents to which it is
a party. This Agreement and such other Loan Documents to which Borrower is a
party have been duly executed and delivered by or on behalf of Borrower and
constitute legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms, subject only to applicable
bankruptcy, insolvency, fraudulent transfer, reorganization or other similar
laws affecting the enforcement of creditors’ rights generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

4.1.3.      No Conflicts.  The execution, delivery and performance of this
Agreement and the other Loan Documents to which Borrower and/or Master Tenant is
a party by Borrower and/or Master Tenant, as applicable, will not conflict with
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to the Loan Documents and the Master Lease
Documents) upon any of the property or assets of Borrower and/or Master Tenant
pursuant to the terms of any indenture, mortgage, deed of trust, loan agreement,
partnership agreement, management agreement or other agreement or instrument to
which Borrower and/or Master Tenant is a party or by which any of the Property,
Borrower’s or Master Tenant’s assets is subject, nor will such action result in
any violation of the provisions of any statute or any order, rule or regulation
of any Governmental Authority having jurisdiction over Borrower or Master Tenant
or any of Borrower’s or Master Tenant’s properties or assets, and any consent,
approval, authorization, order, registration or qualification of or with any
court or any such Governmental Authority required for the execution, delivery
and performance by Borrower and/or Master Tenant of this Agreement or any other
Loan Documents has been obtained and is in full force and effect.

 

4.1.4.      Litigation.  There are no actions, suits or proceedings at law or in
equity, arbitrations, or governmental investigations by or before any
Governmental Authority or other agency now pending, filed, or, to Borrower’s
knowledge, threatened against or affecting Borrower, Guarantor, Master Tenant,
Principal or the Property, which actions, suits or proceedings, or governmental
investigations, if determined against Borrower, Guarantor, Master Tenant,
Principal or the Property, could reasonably be expected to materially adversely
affect (a) title to the Property; (b) the validity or enforceability of the
Security Instrument; (c) Borrower’s ability to perform under the Loan;
(d) Guarantor’s ability to perform under the Guaranty; (e) Master Tenant’s
ability to perform under the Master Lease and/or the Loan Documents to which
Master Tenant is a party, (f) the use, operation or value of the Property; (g)
the principal benefit of the security intended to be provided by the Loan
Documents; (h) the current ability of the Property to generate Net Cash Flow
sufficient to service the Loan; or (i) the current principal use of the
Property.

 

4.1.5.      Agreements.  Neither Borrower nor Master Tenant is a party to any
agreement or instrument or subject to any restriction (to Borrower’s knowledge,
with respect to any Permitted Encumbrance reflected in the Title Insurance
Policy) which could reasonably be expected to materially and adversely affect
Borrower, Master Tenant, or the Property, or Borrower’s or Master Tenant’s
business, properties or assets, operations or condition, financial or otherwise.
Neither Borrower nor Master Tenant is in default in any material respect in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any agreement or instrument to which it is a party or by
which Borrower, Master Tenant or the Property is bound. Neither Borrower nor
Master Tenant has any material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Borrower or Master Tenant is a party or by which Borrower, Master Tenant
or the Property is otherwise bound, other than (a) Permitted Indebtedness and
(b) obligations under the Loan Documents, the Master Lease Documents, the
Franchise Agreement, and the Management Agreement.

 

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4.1.6.      Title.  Borrower has good, marketable and insurable fee simple title
to the real property comprising part of the Property and owns the balance of the
Property, free and clear of all Liens whatsoever except the Permitted
Encumbrances, such other Liens as are expressly permitted pursuant to the Loan
Documents and the Liens created by the Loan Documents. The Permitted
Encumbrances in the aggregate do not materially and adversely affect the value,
operation or use of the Property (as currently used) or Borrower’s ability to
repay the Loan. The Security Instrument, when properly recorded in the
appropriate records, together with any Uniform Commercial Code financing
statements required to be filed in connection therewith, will create (a) a
valid, perfected first priority lien on that portion of the Property
constituting an interest in real property, subject only to Permitted
Encumbrances and the Liens created by the Loan Documents and (b) to the extent
that a security interest therein may be created under the Uniform Commercial
Code and perfected by the filing of a financing statement under the Uniform
Commercial Code, as enacted in the State of Delaware, perfected security
interests in all personalty (including, to the extent that they constitute an in
interest in personal property subject to the Uniform Commercial Code the
Leases), all in accordance with the terms thereof, in each case subject only to
any applicable Permitted Encumbrances, such other Liens as are permitted
pursuant to the Loan Documents and the Liens created by the Loan Documents.
There are no claims for payment for work, labor or materials affecting the
Property which are or may become a Lien prior to, or of equal priority with, the
Liens created by the Loan Documents.

 

4.1.7.      Solvency.  Borrower has (a) not entered into this transaction or
executed the Note, this Agreement or any other Loan Documents with the actual
intent to hinder, delay or defraud any creditor and (b) received reasonably
equivalent value in exchange for its obligations under such Loan Documents.
Giving effect to the Loan and the transactions contemplated by the Master Lease
Documents, the fair saleable value of Borrower’s assets exceeds and will,
immediately following the making of the Loan and the transactions contemplated
by the Master Lease Documents, 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 and the transactions contemplated by the Master Lease
Documents, be greater than Borrower’s probable liabilities, including the
probably 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 to carry
out its business as conducted or as proposed to be conducted. Neither Borrower
nor Master Tenant intends to, and does not believe that it will, incur debt and
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 Borrower or Master Tenant,
respectively, and the amounts to be payable on or in respect of obligations of
Borrower or Master Tenant, respectively, and the anticipated need to refinance
the Loan in order to repay it on the Maturity Date). No petition in bankruptcy
has been filed against Borrower, Master Tenant or any constituent Person of
Borrower or Master Tenant in the last seven (7) years, and neither Borrower,
Master Tenant nor any constituent Person in the last seven (7) years has ever
made an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors. Neither Borrower, Master Tenant nor
any of its constituent Persons are contemplating either the filing of a petition
by it under any state or federal bankruptcy or insolvency laws or the
liquidation of all or a major portion of Borrower’s or Master Tenant’s assets or
property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it or Master Tenant, and the transactions
contemplated by the Master Lease Documents or such constituent Persons.

 

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4.1.8.      Full and Accurate Disclosure.  No statement of fact made by Borrower
in this Agreement or in any of the other Loan Documents contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained herein or therein not misleading. With the exception
of risk factors applicable generally to the ownership and operation of hotels
such as the Property located in the same geographic region as the Property,
there is no material fact presently known to Borrower which has not been
disclosed to Lender, which materially adversely affects, nor as far as Borrower
can foresee, could reasonably be expected to materially adversely affect, the
Property or the business, operations or condition (financial or otherwise) of
Borrower.

 

4.1.9.      No Plan Assets.  Neither Borrower nor Master Tenant sponsors, is
obligated to contribute to, and is itself an “employee benefit plan,” as defined
in Section 3(3) of ERISA, subject to Title I of ERISA or Section 4975 of the
Code, and none of the assets of Borrower or Master Tenant constitutes or will
constitute “plan assets” of one or more such plans within the meaning of 29
C.F.R. Section 2510.3-101. In addition, (a) neither Borrower nor Master Tenant
is a “governmental plan” within the meaning of Section 3(32) of ERISA and (b)
transactions by or with Borrower or Master Tenant are not subject to any state
or other statute , regulation or other restriction regulating investments of, or
fiduciary obligations with respect to, governmental plans within the meaning of
Section 3(32) of ERISA which is similar to the provisions of Section 406 of
ERISA or Section 4975 of the Code and which prohibit or otherwise restrict the
transactions contemplated by this Agreement, including the exercise by Lender of
any of its rights under the Loan Documents.

 

4.1.10.    Compliance.  Except as disclosed in the zoning report delivered to
Lender in connection with the origination of the Loan, the Borrower, Master
Tenant and the Property and the use thereof comply in all material respects with
all applicable Legal Requirements, including building and zoning ordinances and
codes. Neither Borrower nor Master Tenant is in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority. There
has not been committed by Borrower, Master Tenant or, to Borrower’s knowledge,
any other Person in occupancy of or involved with the operation or use of the
Property any act or omission affording the federal government or any other
Governmental Authority the right of forfeiture as against the Property or any
part thereof or any monies paid in performance of Borrower’s obligations under
any of the Loan Documents or the transactions contemplated by the Master Lease
Documents. On the Closing Date, the Improvements at the Property were in
material compliance with applicable law.

 

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4.1.11.    Financial Information.  All financial data, including the statements
of cash flow and income and operating expense, that have been delivered to
Lender in connection with the Loan (a) are true, complete and correct in all
material respects, (b) accurately represent the financial condition of Borrower,
Master Tenant and the Property, as applicable, as of the date of such reports,
and (c) to the extent prepared or audited by an independent certified public
accounting firm, have been prepared in accordance with GAAP and the Uniform
System of Accounts throughout the periods covered, except as disclosed therein;
provided, however, that if any financial data is delivered to Lender by any
Person other than Borrower, Guarantor, Master Tenant or any Affiliate of
Borrower, Guarantor or Master Tenant, or if such financial data has been
prepared by or at the direction of any Person other than Borrower, Guarantor,
Master Tenant or any Affiliate of Borrower, Master Tenant or Guarantor, then the
foregoing representations with respect to such financial data shall be to the
best of Borrower’s knowledge, after due inquiry. Except for Permitted
Encumbrances, neither Borrower nor Master Tenant has any contingent liabilities,
liabilities for taxes, unusual forward or long-term commitments or unrealized or
anticipated losses from any unfavorable commitments that are known to Borrower
or Master Tenant and reasonably likely to have a material adverse effect on the
Property or the current operation thereof, except as referred to or reflected in
said financial statements. Since the date of such financial statements delivered
with respect to Borrower and Master Tenant, there has been no material adverse
change in the financial condition, operations or business of Borrower or Master
Tenant from that set forth in said financial statements.

 

4.1.12.    Condemnation.  No Condemnation or other similar proceeding has been
commenced or, to Borrower’s best knowledge, is threatened or contemplated with
respect to all or any portion of the Property or for the relocation of roadways
providing access to the Property.

 

4.1.13.    Federal Reserve Regulations.  No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this
Agreement or the other Loan Documents.

 

4.1.14.    Utilities and Public Access.  The Property has rights of access to
public ways and is served by water, sewer, sanitary sewer and storm drain
facilities adequate to service the Property for its intended uses. All public
utilities necessary or convenient to the full use and enjoyment of the Property
are located either in the public right of way abutting the Property (which are
connected so as to serve the Property without passing over other property) or in
recorded easements serving the Property and such easements are set forth in and
insured by the Title Insurance Policy. All roads necessary for the use of the
Property for its current purposes have been completed and dedicated to public
use and accepted by all Governmental Authorities.

 

4.1.15.    Not a Foreign Person.  Neither Borrower nor Master Tenant is a
“foreign person” within the meaning of §1445(f)(3) of the Code.

 

4.1.16.    Separate Lots.  The Property is comprised of one (1) or more parcels
which constitute a separate tax lot or lots and does not constitute a portion of
any other tax lot not a part of the Property.

 

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4.1.17.    Assessments.  There are no pending or, to Borrower’s knowledge,
proposed special or other assessments for public improvements or otherwise
affecting the Property, nor are there any contemplated improvements to the
Property that may result in such special or other assessments.

 

4.1.18.    Enforceability.  The Loan Documents are enforceable by Lender (or any
subsequent holder thereof) in accordance with their respective terms, subject to
principles of equity and bankruptcy, insolvency and other laws generally
applicable to creditors’ rights and the enforcement of debtors’ obligations. To
the best of Borrower’s knowledge, the Loan Documents are not subject to any
right of rescission, set off, counterclaim or defense by Borrower, Master Tenant
or Guarantor, including the defense of usury, nor would the operation of any of
the terms of the Loan Documents, or the exercise of any right thereunder in
accordance with applicable law, render the Loan Documents unenforceable (subject
to principles of equity and bankruptcy, insolvency and other laws generally
affecting creditors’ rights and the enforcement of debtors’ obligations), and
neither Borrower, Master Tenant nor Guarantor has asserted any right of
rescission, set off, counterclaim or defense with respect thereto.

 

4.1.19.    No Prior Assignment.  There are no prior assignments of the Leases or
any portion of the Rents due and payable or to become due and payable which ,
upon the funding of the Loan and the application of the proceeds thereof in
accordance with this Agreement, will be outstanding, other than from the Master
Tenant to Borrower and from Borrower to Lender.

 

4.1.20.    Insurance.  Borrower has obtained and has delivered to Lender
evidence reasonably satisfactory to Lender that Policies reflecting the
insurance coverages, amounts and other requirements set forth in this Agreement
are in place. No claims with respect to the Property have been made or are
currently pending, outstanding or otherwise remain unsatisfied under any such
Policy, and neither Borrower nor, to Borrower’s knowledge, any other Person, has
done, by act or omission, anything which would impair the coverage of any such
Policy.

 

4.1.21.    Use of Property.  The Property is used exclusively for hotel purposes
and other appurtenant and related uses, including, without limitation, uses
permitted under commercial leases permitted under the Loan Documents.

 

4.1.22.    Certificate of Occupancy; Licenses.  All certifications, permits,
franchises, licenses, consents, authorizations, and approvals, including without
limitation, certificates of completion, occupancy permits, and any applicable
liquor license, required for the legal use, occupancy and operation of the
Property by Borrower and Master Tenant have been obtained and are in full force
and effect. The use being made of the Property is in conformity with the
certificate of occupancy issued for the Property.

 

4.1.23.    Flood Zone.  None of the Improvements on the Property are located in
an area as identified by the Federal Emergency Management Agency as an area
having special flood hazards, or, if so located, the flood insurance required
pursuant to Section 6.1(a) is in full force and effect with respect to the
Property.

 

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4.1.24.    Physical Condition.  Subject to any physical condition report
delivered to Lender in connection with its underwriting of the Loan, to
Borrower’s knowledge, the Property, including, without limitation, all
buildings, Improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects; there exists no structural or other
material defects or damages in the Property, whether latent or otherwise, and
neither Borrower nor Master Tenant has received notice from any insurance
company or bonding company of any defects or inadequacies in the Property, or
any part thereof, which would adversely affect the insurability of the same or
cause the imposition of extraordinary premiums or charges thereon or of any
termination or threatened termination of any policy of insurance or bond.

 

4.1.25.    Boundaries.  To Borrower’s knowledge, except, if applicable, as
otherwise disclosed in the survey of the Property delivered to Lender in
connection with the closing of the Loan, all of the improvements which were
included in determining the appraised value of the Property lie wholly within
the boundaries and building restriction lines of the Property, and no
improvements on adjoining properties encroach upon the Property, and no
easements or other encumbrances upon the Property encroach upon any of the
Improvements, so as to affect the value or marketability of the Property except
those which are insured against by the Title Insurance Policy.

 

4.1.26.    Leases.  The Property is not subject to any leases other than the
Master Lease and the Leases described in the rent roll attached hereto as
Schedule I and made a part hereof, which rent roll is true, complete and
accurate in all respects as of the Closing Date. Borrower is the owner of
landlord’s interest in, and is lessor under, the Master Lease, and Master Tenant
is the owner of landlord’s interest in, and is lessor under, the Leases.
Borrower is the holder of an assignee’s interest of the Rents from Leases
pursuant to the Master Lease ALR. No Person has any possessory interest in the
Property or right to occupy the same except under and pursuant to the provisions
of the Master Lease, the Leases and Hotel Transactions. The Master Lease is in
full force and effect and there is no Event of Default (as defined in the Master
Lease) thereunder by either party and there are no conditions that, with the
passage of time or the giving of notice, or both, would constitute such an Event
of Default. The Leases are in full force and effect and there are no defaults
thereunder by either party and to Borrower’s knowledge, there are no conditions
that, with the passage of time or the giving of notice, or both, would
constitute defaults thereunder. No Rent or any amounts payable by Master Tenant
to Borrower under the Master Lease has been paid more than one (1) month in
advance of its due date. All security deposits are held by Borrower or Master
Tenant (as applicable) in accordance with applicable law. Except as disclosed in
the tenant estoppels delivered to Lender in connection with the closing of the
Loan or as disclosed in the rent roll, all work to be performed by Borrower
under the Master Lease and Master Tenant under each Lease has been performed as
required and has been accepted by Master or the relevant Tenant (as applicable),
and any payments, free rent, partial rent, rebate of rent or other payments,
credits, allowances or abatements required to be given by Borrower to Master
Tenant or by Master Tenant to any Tenant has already been received by Master
Tenant or such Tenant (as applicable). Except pursuant to the Master Lease ALR,
there has been no prior sale, transfer or assignment, hypothecation or pledge of
the Master Lease, any Lease, the rents payable under the Master Lease, or of the
Rents received under the Leases which is outstanding. No Tenant listed on
Schedule I has assigned its Lease or sublet all or any portion of the premises
demised thereby, no such Tenant holds its leased premises under assignment or
sublease (other than with respect to the Master Lease), nor does anyone except
such Tenant and its employees occupy such leased premises (other than Master
Tenant pursuant to the Master Lease). Neither Master Tenant nor any Tenant under
any Lease has a right or option pursuant to the Master Lease or such Lease or
otherwise to purchase all or any part of the leased premises or the building of
which the leased premises are a part. No Tenant under any Lease has any right or
option for additional space in the Improvements.

 

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4.1.27.    Survey.  To Borrower’s knowledge, the Survey for the Property
delivered to Lender in connection with this Agreement does not fail to reflect
any material matter affecting the Property or the title thereto.

 

4.1.28.    Inventory.  Borrower or Master Tenant is the owner of all of the
Equipment, Fixtures and Personal Property (as such terms are defined in the
Security Instrument) located on or at the Property and constituting collateral
for the Loan, and shall not lease any Equipment, Fixtures or Personal Property
other than as permitted hereunder. All of the Equipment, Fixtures and Personal
Property are sufficient to operate the Property in the manner required hereunder
and in the manner in which it is currently operated.

 

4.1.29.    Filing and Recording Taxes.  All transfer taxes, deed stamps,
intangible taxes or other amounts in the nature of transfer taxes required to be
paid by any Person under applicable Legal Requirements in connection with the
transfer of the Property to Borrower have been, or concurrently with the
recording of the Security Instrument are being, paid. All mortgage, mortgage
recording, stamp, intangible or other similar tax required to be paid by any
Person under applicable Legal Requirements currently in effect in connection
with the execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents, including, without limitation, the
Security Instrument, have been, or concurrently with the recording of the
Security Instrument will be, paid.

 

4.1.30.    Special Purpose Entity/Separateness/ No Prohibited Entity/Ownership
Structure.  (a) Borrower hereby represents and warrants and until the Debt has
been paid or defeased in full, covenants that (i) Borrower is, shall be and
shall continue to be a Special Purpose Entity, (ii) so long as the Master Lease
is in effect, Master Tenant is, shall be and shall continue to be a Special
Purpose Entity, (iii) (if applicable) Principal is, shall be and shall continue
to be a Special Purpose Entity, and (iv) no direct or indirect ownership
interests in Borrower, Master Tenant, Guarantor or the Property shall include
any Prohibited Entity/Ownership Structure. Lender acknowledges that the single
purpose entity provisions contained in the limited liability company agreements
of each of Borrower and Master Tenant as of the Closing Date satisfy the
requirements of a Special Purpose Entity.

 

(b)          The representations, warranties and covenants set forth in Section
4.1.30(a) and Section 4.1.30(c) shall survive until the Loan is defeased or
until no amount remains payable to Lender under this Agreement or any other Loan
Document (other than with respect to surviving indemnity obligations as to which
no claim is then pending).

 

(c)          Borrower hereby represents and warrants to Lender that:

 

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(i)          Borrower is and always has been duly formed and validly existing in
the state in which it was formed and in any other jurisdictions where it is
qualified to do business;

 

(ii)         Except as disclosed to Lender in writing, has no judgments or
existing liens (other than taxes not yet due and payable and liens in favor of
Lender in connection with the Loan);

 

(iii)        To the best of Borrower’s knowledge is and, prior to the amendment
and restatement of Borrower’s organizational documents, was in compliance with
all applicable laws;

 

(iv)        Except as disclosed to Lender in writing, has no pending or, to the
best of Borrower’s knowledge, threatened litigation involving Borrower that, if
determined against Borrower, might materially adversely affect the condition or
business of Borrower;

 

(v)         Except as disclosed to Lender in writing, Borrower is current on all
taxes and is not aware of any dispute with any taxing authority;

 

(vi)        Borrower has never owned any property other than the Property and
has never engaged in any business except the ownership and operation of the
Property;

 

(vii)       Borrower has provided Lender with financial information that is, to
the best of Borrower’s knowledge, true, correct and complete in all material
respects;

 

(viii)      At all times since its formation, Borrower has complied with the
separateness covenants of a Special Purpose Entity; and

 

(ix)        Borrower has no material financial obligation under any indenture,
mortgage, deed of trust, loan agreement or other agreement or instrument to
which Borrower is a party or by which Borrower or the Property is otherwise
bound, other than (a) obligations incurred in the ordinary course of the
operation of the Property as permitted pursuant to clause (xxiii) of the
definition of “Special Purpose Entity” set forth in Section 1.1 of the Loan
Agreement and (b) obligations under the Loan Documents or otherwise addressed by
the Loan Agreement.

 

(d)          Any and all of the stated facts and assumptions made in any
Insolvency Opinion, including any exhibits attached thereto, will have been and
shall be true and correct in all respects, and Borrower and Master Tenant will
have complied and will comply with all of the stated facts and assumptions made
with respect to it in any Insolvency Opinion. Each entity other than Borrower
and Master Tenant with respect to which an assumption is made or a fact stated
in any Insolvency Opinion will have complied and shall comply with all of the
assumptions made and facts stated with respect to it in any such Insolvency
Opinion. Borrower covenants that in connection with any Additional Insolvency
Opinion delivered in connection with this Agreement it shall provide an updated
certification regarding compliance with the facts and assumptions made therein.

 

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(e)          Borrower covenants and agrees that Borrower shall provide Lender
with thirty (30) days’ prior written notice prior to the removal of an
Independent Director of either of Borrower or Master Tenant.

 

4.1.31.    Management Agreement.  The Management Agreement is in full force and
effect and there is no default thereunder by any party thereto and no event has
occurred that, with the passage of time and/or the giving of notice would
constitute a default thereunder. The Management Agreement was entered into on
commercially reasonable terms.

 

4.1.32.    Illegal Activity.  No portion of the Property has been or will be
purchased with proceeds of any illegal activity.

 

4.1.33.    No Change in Facts or Circumstances; Disclosure.  All information
submitted by and on behalf of Borrower or Master Tenant to Lender and in all
financial statements, rent rolls (including the rent roll attached hereto as
Schedule I), reports, certificates and other documents submitted in connection
with the Loan or in satisfaction of the terms thereof and all statements of fact
made by Borrower in this Agreement or in any other Loan Document, are true,
complete and correct in all material respects, provided, however, that if such
information was provided to Borrower or Master Tenant by non-affiliated third
parties, Borrower represents that such information is, to the best of its
knowledge after due inquiry, true, complete and correct in all material
respects. To Borrower’s knowledge, there has been no material adverse change in
any condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise materially and adversely affects or could reasonably be expected to
materially and adversely affect the use, operation or value of the Property or
the business operations or the financial condition of Borrower or Master Tenant.
Borrower has disclosed to Lender all material facts known to it and has not
failed to disclose any material fact known to it that could cause any Provided
Information or representation or warranty made herein to be materially
misleading.

 

4.1.34.    Investment Company Act.  Neither Borrower nor Master Tenant is (a) an
“investment company” or a company “controlled” by an “investment company,”
within the meaning of the Investment Company Act of 1940, as amended; (b) a
“holding company” or a “subsidiary company” of a “holding company” or an
“affiliate” of either a “holding company” or a “subsidiary company” within the
meaning of the Public Utility Holding Company Act of 1935, as amended; or
(c) subject to any other federal or state law or regulation which purports to
restrict or regulate its ability to borrow money.

 

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4.1.35.    Embargoed Person.  To the best of Borrower’s knowledge, as of the
date hereof and at all times throughout the term of the Loan, including after
giving effect to any Transfers permitted pursuant to the Loan Documents, (a)
none of the funds or other assets of Borrower, Master Tenant and Guarantor
constitute property of, or are beneficially owned, directly or indirectly, by
any Embargoed Person; (b) no Embargoed Person has any interest of any nature
whatsoever in Borrower, Master Tenant or Guarantor, as applicable, with the
result that the investment in Borrower, Master Tenant or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan is
in violation of law; and (c) none of the funds of Borrower, Master Tenant or
Guarantor, as applicable, have been derived from any unlawful activity with the
result that the investment in Borrower, Master Tenant or Guarantor, as
applicable (whether directly or indirectly), is prohibited by law or the Loan is
in violation of law. Notwithstanding the foregoing, to the extent that an
Embargoed Person acquires a non-controlling interest in Borrower or Master
Tenant, either (1) without the knowledge of Borrower, Master Tenant, Key
Principal or Guarantor, through a transaction brokered by a FINRA licensed
broker dealer not affiliated with Guarantor, provided such broker dealer has
executed a dealer agreement or selling agreement with Guarantor or an affiliate
of Guarantor in which it covenants to, among other things, comply with The USA
PATRIOT Act (or any successor legislation), or (2) without the knowledge of
Borrower, Master Tenant, Key Principal or Guarantor, after the initial sale or
offering of such interests in Borrower, the resulting breach of the foregoing
representations shall be deemed to be unintentional and not willful or grossly
negligent for purposes of Section 9.3 hereof.

  

4.1.36.    Principal Place of Business; State of Organization.  Borrower’s
principal place of business as of the date hereof is the address set forth in
the introductory paragraph of this Agreement. Borrower’s state of organization
is as set forth in the introductory paragraph of this Agreement.

 

4.1.37.    Environmental Representations and Warranties.  Except as otherwise
disclosed by that certain Phase I environmental report (or Phase II
environmental report, if required) delivered to Lender by Borrower in connection
with the origination of the Loan (such report is referred to as the
“Environmental Report”), (a) to Borrower’s knowledge, there are no Hazardous
Substances or underground storage tanks in, on, or under the Property and no
Hazardous Substances have been handled, manufactured, generated, stored,
processed, or disposed of on or released or discharged from the Property, except
those that are (i) in compliance with Environmental Laws and with permits issued
pursuant thereto (to the extent such permits are required under Environmental
Law), and (ii) commercially reasonable amounts necessary to operate and maintain
the Property for the purposes set forth in this Agreement which will not result
in an environmental condition in, on or under the Property and which are
otherwise permitted under (if required to be so permitted under) and used in
compliance with Environmental Law; (b) to Borrower’s knowledge, there are no
past, present or threatened Releases of Hazardous Substances in, on, under or
from the Property which has not been fully remediated in accordance with
Environmental Law; (c) to Borrower’s knowledge, there is no threat of any
Release of Hazardous Substances migrating to the Property; (d) to Borrower’s
knowledge, there is no past or present non-compliance with Environmental Laws,
or with permits issued pursuant thereto, in connection with the Property which
has not been fully remediated in accordance with Environmental Law; (e) Borrower
does not know of, and has not received, any written notice or other written
communication from any Person (including a Governmental Authority) relating to
Hazardous Substances or Remediation thereof with respect to the Property, of
possible liability of any Person with respect to the Property pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or potential administrative or judicial proceedings in
connection with any of the foregoing; (f) Borrower has truthfully and fully
disclosed to Lender, in writing, any and all information relating to
environmental conditions in, on, under or from the Property that is known to
Borrower and has provided to Lender all information that is contained in
Borrower’s and/or Master Tenant’s files and records, including any reports
relating to Hazardous Substances in, on, under or from the Property or to the
environmental condition of the Property; and (g) there are no Institutional
Controls on or affecting the Property.

 

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4.1.38.    Cash Management Account.  Borrower hereby represents and warrants to
Lender that:

 

(a)          This Agreement, together with the other Loan Documents, create a
valid and continuing security interest (as defined in the Uniform Commercial
Code) in, once established, Borrower’s interest in each of the Clearing Account
and the Cash Management Account in favor of Lender, which security interest is
prior to all other Liens, other than Permitted Encumbrances, and is enforceable
as such against creditors of and purchasers from Borrower. Other than in
connection with the Loan Documents and except for Permitted Encumbrances,
neither Borrower nor Master Tenant has sold, pledged, transferred or otherwise
conveyed any interest in the Clearing Account or Cash Management Account (and
shall not take any of the foregoing actions);

 

(b)          Once established, each of the Clearing Account and Cash Management
Account shall constitute a “deposit account” or “securities account” within the
meaning of the Uniform Commercial Code);

 

(c)          Pursuant and subject to the terms hereof and the other applicable
Loan Documents or Master Lease Documents, the Clearing Bank and Agent have
agreed to comply with all instructions originated by Lender, without further
consent by Borrower or Master Tenant, directing disposition of the Clearing
Account and Cash Management Account and all sums at any time held, deposited or
invested therein, together with any interest or other earnings thereon, and all
proceeds thereof (including proceeds of sales and other dispositions), whether
accounts, general intangibles, chattel paper, deposit accounts, instruments,
documents or securities;

 

(d)          The Clearing Account and Cash Management Account shall not be in
the name of any Person other than Master Tenant, as pledgor, or Lender, as
pledgee. Neither Borrower nor Master Tenant has consented to the Clearing Bank
and Agent complying with instructions with respect to the Clearing Account and
Cash Management Account from any Person other than Lender, except that, unless a
Cash Sweep Period is in effect, the Clearing Bank is instructed to remit funds
to Master Tenant’s operating account as set forth in Section 2.7.1; and

 

(e)          The Property is not subject to any cash management system (other
than pursuant to the Loan Documents), and any and all existing tenant
instruction letters issued in connection with any previous financing have been
duly terminated prior to the date hereof.

 

4.1.39.    Franchise Agreement.  The Franchise Agreement is in full force and
effect and there is no default thereunder by Master Tenant or, to Borrower’s
knowledge, Franchisor, and no event has occurred that, with the passage of time
and/or giving of notice, would constitute a default thereunder (to Borrower’s
knowledge, as to the obligations of Franchisor).

 

4.1.40.    Hotel Personal Property.  The Property includes all personal property
necessary to operate the Property as a hotel in a manner consistent with
operations at the Property on the date hereof.

 

4.1.41.    Labor Matters.  There are no collective bargaining agreements or
similar agreement to which Borrower is a party or which affect or relate to the
Property.

 

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4.1.42.    Leases.  There are no Leases with respect to residential space or
guest rooms at the Property with terms of more than thirty (30) days.

 

4.1.43.    PIP Requirements.  Other than the Existing PIP Requirements, there
currently are no PIP Requirements or other similar requirements currently due or
pending pursuant to the Franchise Agreement.

 

Section 4.2          Survival of Representations.  Borrower agrees that all of
the representations and warranties of Borrower set forth in Section 4.1 hereof
and elsewhere in this Agreement and in the other Loan Documents shall survive
for so long as the Loan has not been defeased in full and any amount remains
owing to Lender under this Agreement or any of the other Loan Documents by
Borrower (other than surviving indemnity obligations as to which no claim is
then pending). All representations, warranties, covenants and agreements made in
this Agreement or in the other Loan Documents by Borrower shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf.

 

ARTICLE V
BORROWER COVENANTS

 

Section 5.1          Affirmative Covenants.  From the date hereof and until
payment and performance in full of all obligations of Borrower under the Loan
Documents, other than surviving indemnity obligations as to which no claim is
then pending, or the earlier release of the Lien of the Security Instrument
encumbering the Property (and all related obligations) in accordance with the
terms of this Agreement and the other Loan Documents, Borrower hereby covenants
and agrees with Lender that:

 

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5.1.1.      Existence; Compliance with Legal Requirements.  Each of Borrower and
Master Tenant shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect Borrower’s and Master Tenant’s
existence, rights, licenses, permits, authorizations and franchises,
respectively, to the extent necessary to the ownership and/or operation of the
Property, as the case may be, and comply in all material respects with all Legal
Requirements applicable to Borrower, Master Tenant and the Property, including
all regulations, building and zoning codes and certificates of occupancy. There
shall never be committed by Borrower or Master Tenant, and Borrower shall never
knowingly and intentionally permit any other Person in occupancy of or involved
with the operation or use of the Property to commit any act or omission
affording the federal government or any state or local government the right of
forfeiture against the Property or any part thereof or any monies paid in
performance of Borrower’s obligations under any of the Loan Documents. Borrower
hereby covenants and agrees not to commit, or knowingly to permit or suffer to
exist any act or omission affording such right of forfeiture. Borrower shall, or
shall cause Master Tenant to, at all times maintain, (x) preserve and protect
all franchises and trade names used in the operation of the Property and
preserve all the remainder of its property used or useful in the conduct of its
business and (y) keep the Property in good working order and repair, and from
time to time make, or cause to be made, all reasonably necessary repairs,
renewals, replacements, betterments and improvements thereto, all as more fully
provided in the Loan Documents. Borrower shall, or shall cause Master Tenant to,
keep the Property insured at all times by financially sound and reputable
insurers, to such extent and against such risks, and maintain liability and such
other insurance, as is more fully provided in this Agreement. Borrower shall
from time to time, upon Lender’s request, provide Lender (or cause to be
provided to Lender) with evidence reasonably satisfactory to Lender that the
Property complies with all Legal Requirements or is exempt from compliance with
Legal Requirements. Borrower shall give prompt notice to Lender of the receipt
by Borrower, Master Tenant and/or Manager of any notice related to a violation
of any Legal Requirements and of the commencement of any proceedings or
investigations which relate to compliance with Legal Requirements. After prior
written notice to Lender, Borrower or Master Tenant, at Borrower’s or Master
Tenant’s own expense, may contest by appropriate legal proceeding promptly
initiated and conducted in good faith and with due diligence, the validity of
any Legal Requirement, the applicability of any Legal Requirement to Borrower or
Master Tenant or the Property or any alleged violation of any Legal Requirement,
provided that (i) no Event of Default has occurred and remains uncured; (ii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any instrument to which Borrower or Master Tenant is subject and
shall not constitute a default thereunder and such proceeding shall be conducted
in accordance with all applicable statutes, laws and ordinances; (iii) neither
the Property nor any part thereof or interest therein will be in impending
danger of being sold, forfeited, terminated, cancelled or lost; (iv) Borrower
shall, and shall cause Master Tenant to, promptly upon final determination
thereof comply with any such Legal Requirement determined to be valid or
applicable or cure any violation of any Legal Requirement; (v) such proceeding
shall suspend the enforcement of the contested Legal Requirement against
Borrower, Master Tenant and/or the Property, as applicable; and (vi) Borrower
shall furnish, or shall cause Master Tenant to furnish, such security as may be
required in the proceeding, or (if no security is required in the proceeding) as
may be requested by Lender, to insure compliance with such Legal Requirement,
together with all interest and penalties payable in connection therewith. Lender
(x) may apply any such security, as necessary to cause compliance with such
Legal Requirement at any time when, in the reasonable judgment of Lender, the
validity, applicability or violation of such Legal Requirement is finally
established or the Property (or any part thereof or interest therein) shall be
in danger of being sold, forfeited, terminated, cancelled or lost, (y) shall
make such security available to Borrower or Master Tenant, as the case may be,
to satisfy any obligation that may be payable by it in connection with the
matter so contested, and (z) provided that no Event of Default has occurred and
is continuing, shall release any balance of such security to Borrower or Master
Tenant, as the case may be.

 

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5.1.2.      Taxes and Other Charges.  Borrower shall, or shall cause Master
Tenant to, pay all Taxes and Other Charges now or hereafter levied or assessed
or imposed against the Property or any part thereof as the same become due and
payable; provided, however, Borrower’s obligation to directly pay Taxes shall be
suspended for so long as Borrower complies with the terms and provisions of
Section 7.2 hereof. Borrower shall deliver to Lender receipts for payment or
other evidence satisfactory to Lender that the Taxes and Other Charges have been
so paid or are not then delinquent prior to the date on which the Taxes or Other
Charges would otherwise be delinquent if not paid. Borrower shall furnish or
cause Master Tenant to furnish to Lender receipts for the payment of the Taxes
and the Other Charges prior to the date the same shall become delinquent
(provided, however, Borrower is not required to furnish such receipts for
payment of Taxes if such Taxes have been paid by Lender pursuant to Section 7.2
hereof and Lender has received receipts from the relevant taxing authority).
Borrower shall not suffer and shall promptly cause to be paid and discharged any
Lien or charge whatsoever which may be or become a Lien or charge against the
Property, and shall promptly pay or cause Master Tenant to pay for all utility
services provided to the Property. After prior written notice to Lender,
Borrower or Master Tenant, at Borrower’s or Master Tenant’s own expense, may
contest by appropriate legal proceeding, promptly initiated and conducted in
good faith and with due diligence, the amount or validity or application in
whole or in part of any Taxes or Other Charges, provided that (i) no Event of
Default has occurred and remains uncured; (ii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower and/or Master Tenant is subject and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable statutes, laws and ordinances; (iii) neither the
Property nor any part thereof or interest therein will be in impending danger of
being sold, forfeited, terminated, cancelled or lost; (iv) Borrower or Master
Tenant shall promptly upon final determination thereof pay the amount of any
such Taxes or Other Charges, together with all costs, interest and penalties
which may be payable in connection therewith; (v) such proceeding shall suspend
the collection of such contested Taxes or Other Charges from the Property; and
(vi) Borrower shall furnish such security as may be required in the proceeding,
or (if no security is required in the proceeding) as may be requested by Lender,
to insure the payment of any such Taxes or Other Charges, together with all
interest and penalties thereon. Lender (x) may pay over any such cash deposit or
part thereof held by Lender to the claimant entitled thereto at any time when,
in the judgment of Lender, the entitlement of such claimant is established or
the Property (or part thereof or interest therein) shall be in danger of being
sold, forfeited, terminated, cancelled or lost or there shall be any danger of
the Lien of the Security Instrument being primed by any related Lien, (y) shall
make such security available to Borrower or Master Tenant, as the case may be,
to satisfy any obligation that may be payable by it in connection with the
matter so contested, and (z) provided that no Event of Default has occurred and
is continuing, shall release any balance of such security to Borrower or Master
Tenant, as the case may be.

 

5.1.3.      Litigation.  Borrower shall, after becoming aware thereof, give
prompt written notice to Lender of any litigation or governmental proceedings
pending or threatened in writing against Borrower, Master Tenant and/or
Guarantor which could reasonably be expected to materially adversely affect
Borrower’s, Master Tenant’s or Guarantor’s condition (financial or otherwise) or
business or the Property.

 

5.1.4.      Access to Property.  Borrower shall, and shall cause Master Tenant
to, permit agents, representatives and employees of Lender to inspect the
Property or any part thereof at reasonable hours upon reasonable advance notice.

 

5.1.5.      Notice of Default.  Upon becoming aware thereof, Borrower shall
promptly advise Lender of the occurrence of any Default or Event of Default.

 

5.1.6.      Cooperate in Legal Proceedings.  Borrower shall cooperate, and shall
cause Master Tenant to cooperate, fully with Lender with respect to any
proceedings before any court, board or other Governmental Authority which may in
any way affect the rights of Lender hereunder or any rights obtained by Lender
under any of the other Loan Documents and, in connection therewith, permit
Lender, at its election, to participate in any such proceedings.

 

5.1.7.      Intentionally Omitted.

 

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5.1.8.      Award and Insurance Benefits.  Borrower shall, and shall cause
Master Tenant to, cooperate with Lender in obtaining for Lender the benefits of
any Awards or Insurance Proceeds lawfully or equitably payable in connection
with the Property, and Lender shall be reimbursed for any reasonable expenses
incurred in connection therewith (including reasonably attorneys’ fees and
disbursements, and the payment by Borrower of the expense of an appraisal on
behalf of Lender in case of Casualty or Condemnation affecting the Property or
any part thereof) out of such Insurance Proceeds.

 

5.1.9.      Further Assurances.  Borrower shall, at Borrower’s sole cost and
expense:

 

(a)          furnish to Lender all instruments, documents, boundary surveys,
footing or foundation surveys, certificates, plans and specifications,
appraisals, title and other insurance reports and agreements, and each and every
other document, certificate, agreement and instrument required to be furnished
by Borrower pursuant to the terms of the Loan Documents or which are reasonably
requested by Lender in connection therewith;

 

(b)          execute and deliver (or cause to be executed and delivered) to
Lender such documents, instruments, certificates, assignments and other
writings, and do such other acts necessary or desirable, to evidence, preserve
and/or protect the collateral at any time securing or intended to secure the
obligations of Borrower and/or Master Tenant under the Loan Documents, as Lender
may reasonably require including, without limitation, the execution and delivery
of all such writings necessary to transfer any liquor licenses with respect to
the Property into the name of Lender or its designee upon acceleration of the
Loan or the commencement of any action by Lender to foreclose the Lien of the
Security Instrument or for the appointment of a receiver for the Property; and

 

(c)          do and execute all and such further lawful and reasonable acts,
conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents, as Lender
shall reasonably require from time to time.

 

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5.1.10.    Principal Place of Business, State of Organization.  Neither Borrower
nor Master Tenant shall cause or permit any change to be made in Borrower’s or
Master Tenant’s name, identity (including its trade name or names), place of
organization or formation (as set forth in Section 4.1.36 hereof) or Borrower’s
or Master Tenant’s corporate or partnership or other structure unless Borrower
or Master Tenant, as applicable, shall have first notified Lender in writing of
such change at least thirty (30) days prior to the effective date of such
change, and shall have first taken all action required by Lender for the purpose
of perfecting or protecting the lien and security interests of Lender pursuant
to this Agreement, and the other Loan Documents and, in the case of a change in
Borrower’s or Master Tenant’s structure, without first obtaining the prior
written consent of Lender, which consent may be given or denied in Lender’s
discretion. Upon Lender’s request, Borrower shall (or shall cause Master Tenant
to), at Borrower’s sole cost and expense, execute and deliver additional
security agreements and other instruments which may be necessary to effectively
evidence or perfect Lender’s security interest in the Property as a result of
any such change of principal place of business or place of organization. Each of
Borrower’s and Master Tenant’s principal place of business and chief executive
office, and the place where Borrower or Master Tenant keeps its respective books
and records, including recorded data of any kind or nature, regardless of the
medium or recording, including software, writings, plans, specifications and
schematics, has been for the preceding four months (or, if less, the entire
period of the existence of Borrower and Master Tenant) and will continue to be
(i) in the case of Borrower, the address of Borrower set forth at the
introductory paragraph of this Agreement (unless Borrower notifies Lender in
writing at least thirty (30) days prior to the date of such change), and (ii) in
the case of Master Tenant, as set forth in the Master Lease Documents. Borrower
shall promptly notify Lender of any change in its or Master Tenant’s
organizational identification number. If Borrower or Master Tenant does not now
have an organizational identification number and later obtains one, Borrower
promptly shall notify Lender of such organizational identification number.

 

5.1.11.    Financial Reporting.  (a) Borrower shall keep and maintain or shall
cause to be kept and maintained on a Fiscal Year basis, in accordance with the
requirements for a Special Purpose Entity set forth herein the Uniform System of
Accounts and reconciled in accordance with GAAP (or such other accounting basis
acceptable to Lender), proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and Master Tenant and all
items of income and expense in connection with the operation of the Property.
Lender shall have the right from time to time at all times during normal
business hours upon reasonable notice to examine such books, records and
accounts at the office of Borrower or any other Person maintaining such books,
records and accounts and to make such copies or extracts thereof as Lender shall
desire. After the occurrence and during the continuation of an Event of Default,
Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower’s and Master Tenant’s accounting records with respect to the Property,
as Lender shall determine to be necessary or appropriate in the protection of
Lender’s interest.

 

(b)          Borrower shall furnish (or shall cause Master Tenant to furnish) to
Lender annually, within ninety (90) days following the end of each Fiscal Year
of Borrower, a complete copy of Borrower’s and Master Tenant’s annual financial
statements prepared by a certified public accountant acceptable to Lender (which
may be an employee of Borrower or its Affiliates) in accordance with the Uniform
System of Accounts and reconciled in accordance with GAAP (or such other
accounting basis acceptable to Lender) covering the Property for such Fiscal
Year and containing statements of profit and loss for Borrower, Master Tenant
and the Property, an annual rent roll and a balance sheet for Borrower and
Master Tenant, which statements shall be accompanied by an Officer’s Certificate
stating that such items are true, correct, accurate, and complete in all
material respects and fairly present the financial condition and results of the
operations of Borrower, Master Tenant and the Property. Such statements shall
set forth the financial condition and the results of operations for the Property
for such Fiscal Year, and shall include amounts representing annual net
operating income, Net Cash Flow, gross income, and operating expenses.

 

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(c)          Borrower shall furnish, or cause to be furnished, to Lender on or
before forty five (45) days after the end of each calendar quarter the following
items, accompanied by an Officer’s Certificate stating that such items are true,
correct, accurate, and complete in all material respects and fairly present the
financial condition and results of the operations of Borrower, Master Tenant and
the Property (subject to normal year-end adjustments) as applicable: (i) an
occupancy report (including an average daily rate) and a rent roll for the
subject quarter; (ii) quarterly and year-to-date operating statements (including
Capital Expenditures) prepared for each calendar quarter, noting net operating
income, gross income, and operating expenses (not including any contributions to
the Replacement Reserve Fund and the Seasonality Reserve Fund), and other
information necessary and sufficient to fairly represent the financial position
and results of operation of the Property during such calendar quarter, and
containing a comparison of budgeted income and expenses and the actual income
and expenses; (iii) provided in each case that Borrower has owned the Property
for sufficiently long to permit such calculation to be made, a calculation
reflecting the annual Debt Service Coverage Ratio for the immediately preceding
three (3), six (6), and twelve (12) month periods as of the last day of such
quarter, and (iv) occupancy statistic for the Property. In addition, such
certificate shall also be accompanied by an Officer’s Certificate stating that
the representations and warranties of Borrower set forth in Section 4.1.30 are
true and correct as of the date of such certificate. On or before thirty (30)
days after the end of each calendar month, Borrower also will furnish, or cause
to be furnished, to Lender (x) the most current Smith Travel Research Reports
then available to Borrower reflecting market penetration and relevant hotel
properties competing with the Property, and (y) if not contained in the
quarterly financial statements referred to above, the monthly operating
statement for the immediately preceding calendar month, for the purposes of
determining the Replacement Reserve Monthly Deposit.

 

(d)          Until the earlier of Securitization or twelve (12) months after the
date of this Agreement, Borrower shall furnish, or cause to be furnished, to
Lender on or before twenty (20) days after the end of each calendar month, all
of the following items with respect to the previous calendar month, accompanied
by an Officer’s Certificate stating that such items are true, correct, accurate,
and complete in all material respects and fairly present the financial condition
and results of the operations of Borrower, Master Tenant and the Property
(subject to normal year-end adjustments) as applicable: (A) a rent roll for the
subject month; (B) monthly operating statement(s) of the Property; and
(C) year-to-date operating statement(s) of the Property.

 

(e)          Intentionally omitted.

 

(f)           Intentionally omitted.

 

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(g)          The operating budget for the Property for the partial year period
commencing on the date hereof, as delivered to Lender in connection with
Lender’s underwriting of the Loan, shall constitute the initial Annual Budget
hereunder. For each Fiscal Year thereafter, Borrower shall (or shall cause
Master Tenant to) submit to Lender an Annual Budget not later than thirty (30)
days prior to the commencement of such Fiscal Year in form reasonably
satisfactory to Lender. The Annual Budget shall be subject to Lender’s written
approval, not to be unreasonably withheld, conditioned or delayed unless an
Event of Default then exists (each such Annual Budget, an “Approved Annual
Budget”). If Lender objects to a proposed Annual Budget submitted by Borrower,
Lender shall advise Borrower and Master Tenant of such objections within fifteen
(15) days after receipt thereof (and deliver to Borrower a reasonably detailed
description of such objections) and Borrower shall promptly revise such Annual
Budget and resubmit the same to Lender. Borrower’s and/or Master Tenant’s
written request therefor shall be delivered together with such materials
reasonably requested by Lender in order to evaluate such request (it being
acknowledged and agreed that no request for consent shall be effective unless
and until such materials have been delivered to Lender) and shall conspicuously
state, in large bold type, that “PURSUANT TO SECTION 5.1.11(g) OF THE LOAN
AGREEMENT, THIS IS A REQUEST FOR LENDER’S CONSENT. LENDER’S RESPONSE IS
REQUESTED WITHIN FIFTEEN (15) DAYS. LENDER’S FAILURE TO RESPOND WITHIN SUCH TIME
PERIOD WILL ENABLE BORROWER TO DELIVER A SECOND NOTICE REQUESTING LENDER’S
CONSENT”“. In the event that Lender objects to a proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within
fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall promptly revise such
Annual Budget and resubmit the same to Lender. In the event that Lender fails to
approve or disapprove the foregoing written request within such fifteen (15) day
period, then Borrower shall be entitled to deliver a second notice. Such notice
shall conspicuously state, in large bold type, that “PURSUANT TO SECTION
5.1.11(g) OF THE LOAN AGREEMENT, THIS IS A REQUEST FOR LENDER’S CONSENT. THE
PROPOSED ANNUAL BUDGET SHALL BE DEEMED APPROVED IF LENDER DOES NOT RESPOND TO
THE CONTRARY WITHIN FIFTEEN (15) DAYS’ OF LENDER’S RECEIPT OF THIS WRITTEN
NOTICE”. Unless an Event of Default shall then exist, in the event that Lender
fails to approve or disapprove the second written request within such fifteen
(15) day period, then Lender’s consent shall be deemed to have been granted.
Lender shall advise Borrower of any objections to such revised Annual Budget
within fifteen (15) days after receipt thereof (and deliver to Borrower a
reasonably detailed description of such objections) and Borrower shall promptly
revise and resubmit the same to Lender until Lender approves the Annual Budget.
Until such time that Lender approves a proposed Annual Budget (or such proposed
Annual Budget is deemed approved pursuant to this Section 5.1.11(g)), the most
recently Approved Annual Budget shall apply; provided that, such Approved Annual
Budget shall be adjusted to reflect actual increases in Taxes, Insurance
Premiums and Other Charges and for increases in occupancy.

 

(h)          If Borrower must incur an extraordinary operating expense or
capital expense not set forth in the Approved Annual Budget (each an
“Extraordinary Expense”), then Borrower shall promptly deliver to Lender a
reasonably detailed explanation of such proposed Extraordinary Expense for
Lender’s approval, which approval shall not be unreasonably withheld,
conditioned or delayed unless an Event of Default then exists.

 

(i)           Borrower shall furnish, or cause to be furnished, to Lender,
within ten (10) Business Days after request (or as soon thereafter as may be
reasonably possible), such further detailed information with respect to the
operation of the Property and the financial affairs of Borrower and/or Master
Tenant as may be reasonably requested by Lender.

 

(j)           Borrower shall furnish, or cause to be furnished, to Lender,
within ten (10) Business Days after Lender’s request (or as soon thereafter as
may be reasonably possible), financial and sales information from any commercial
Tenant designated by Lender (to the extent such financial and sales information
is required to be provided under the applicable Lease and same is received by
Borrower or Master Tenant after request therefor).

 

(k)          Borrower shall cause Guarantor to furnish to Lender annually,
within ninety (90) days following the end of each Fiscal Year of Guarantor,
financial statements audited by an independent certified public accountant
satisfying the requirements applicable to the annual financial statements
required to be filed by a Reporting Company.

 

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(l)           If requested by Lender, Borrower shall use commercially reasonable
efforts to provide, or cause to be provided to, Lender, as soon after Lender’s
request as practicable, with any financial statements, or financial, statistical
or operating information, as Lender shall determine to be required pursuant to
Regulation AB under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or any amendment,
modification or replacement thereto or other legal requirements in connection
with any private placement memorandum, prospectus or other disclosure documents
or any filing pursuant to the Exchange Act in connection with the Securitization
or as shall otherwise be reasonably requested by Lender.

 

(m)         Any reports, statements or other information required to be
delivered under this Agreement shall be delivered (i) in electronic format (if,
within the capabilities of Guarantor’s or Borrower’s data systems, as
applicable, without change or modification thereto, prepared using Microsoft
Word for Windows files (which files may be prepared using a spreadsheet program
and saved as word processing files)), and (ii) if requested by Lender, in paper
form and/or on a diskette. Borrower agrees that Lender may disclose information
regarding the Property and Borrower that is provided to Lender pursuant to this
Section 5.1.11 in connection with the Securitization to such parties requesting
such information in connection with such Securitization.

 

5.1.12.    Business and Operations.  Borrower shall continue, and shall cause
Master Tenant to continue, to engage in the businesses presently conducted by it
as and to the extent the same are necessary for the ownership, maintenance,
management and operation of the Property. Borrower shall, and shall cause Master
Tenant to, qualify to do business and to remain in good standing under the laws
of the jurisdiction of its formation as and to the extent the same are required
for the ownership, maintenance, management and operation of the Property.
Borrower or Master Tenant shall, at all times during the term of the Loan,
continue to own all of Equipment, Fixtures and Personal Property which are
necessary to operate the Property in the manner required hereunder and in the
manner in which it is currently operated.

 

5.1.13.    Title to the Property.  Borrower shall warrant and defend (a) the
title to the Property and every part thereof, subject only to Liens permitted
hereunder (including Permitted Encumbrances) and (b) the validity and priority
of the Lien of the Security Instrument on the Property, subject only to Liens
permitted hereunder (including Permitted Encumbrances), in each case against the
claims of all Persons whomsoever. Borrower shall reimburse Lender for any
losses, costs, damages or expenses (including reasonable attorneys’ fees and
expenses) incurred by Lender if an interest in the Property, other than as
permitted hereunder, is claimed by another Person.

 

5.1.14.    Costs of Enforcement.  In the event (a) that the Security Instrument
encumbering the Property is foreclosed in whole or in part or that the Security
Instrument is put into the hands of an attorney for collection, suit, action or
foreclosure, (b) of the foreclosure of any mortgage encumbering the Property
prior to or subsequent to the Security Instrument in which proceeding Lender is
made a party, or (c) of the bankruptcy, insolvency, rehabilitation or other
similar proceeding in respect of Borrower, Master Tenant or any of their
respective constituent Persons or an assignment by Borrower, Master Tenant or
any of their respective constituent Persons for the benefit of its creditors,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay
all costs of collection and defense, including reasonable attorneys’ fees and
expenses, incurred by Lender or Borrower in connection therewith and in
connection with any appellate proceeding or post judgment action involved
therein, together with all required service or use taxes.

 

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5.1.15.    Estoppel Statement.  (a) After request by Lender, Borrower shall
within ten (10) days furnish Lender with a statement, duly acknowledged and
certified, setting forth (i) the original principal amount of the Note, (ii) the
unpaid principal amount of the Note, (iii) the Interest Rate of the Note, (iv)
the terms of payment and Maturity Date, (v) the date installments of interest or
principal were last paid, (vi) that, except as provided in such statement, there
are no Defaults or Events of Default under this Agreement or any of the other
Loan Documents, (vii) that the Loan Documents are valid, legal and binding
obligations and have not been modified, or if any of them has been modified,
giving particulars of such modification, (viii) whether any offsets or defenses
exist against the obligations secured hereby and, if any are alleged to exist, a
detailed description thereof, (ix) that all Leases and the Master Lease are in
full force and effect and (provided the Property is not a residential
multifamily property) have not been modified (or if any of them has been
modified, setting forth all modifications), (x) the date to which the Rents
thereunder have been paid pursuant to the Leases and the Master Lease, (xi)
whether or not, to the best knowledge of Borrower, any of the lessees under the
Leases or the Master Tenant under the Master Lease are in default under the
Leases, and, if any of the lessees are in default, setting forth the specific
nature of all such defaults, (xii) the amount of security deposits held by
Borrower or Master Tenant (as applicable) under each Lease and that such amounts
are consistent with the amounts required under each Lease, and (xiii) as to any
other matters reasonably requested by Lender and reasonably related to the
Leases, the obligations secured hereby, the Property or the Security Instrument.

 

(b)          Borrower shall cause Master Tenant to use commercially reasonable
efforts to obtain and deliver, or caused to be delivered, to Lender, upon
request, tenant estoppel certificates from each commercial Tenant leasing space
at the Property in form and substance reasonably satisfactory to Lender provided
that Borrower shall not be required to request that Master Tenant obtain such
certificates more frequently than two (2) times in any calendar year, unless an
Event of Default then exists.

 

(c)          Borrower shall, upon request by Lender, direct Master Tenant to use
best efforts to cause Franchisor to replace and/or re-issue any comfort letter
or tri-party agreement delivered in connection with the Loan.

 

(d)          Borrower shall, promptly upon request of Lender deliver an estoppel
certificate from the Master Tenant stating that (i) the Master Lease is in full
force and effect and has not been modified, amended or assigned (or listing the
modifications, amendments or assignments, if any), (ii) no Event of Default (as
defined in the Master Lease) by Master Tenant exists under the Master Lease (or
describing in reasonable detail any Event of Default that does exist), (iii)
neither Master Tenant nor Borrower has commenced any action or given or received
any notice for the purpose of terminating the Master Lease and (iv) all sums due
and payable under the Master Lease have been paid in full (or describing in
reasonable detail any amounts then remaining due and unpaid).

 

5.1.16.    Loan Proceeds.  Borrower shall use the proceeds of the Loan received
by it on the Closing Date only for the purposes set forth in Section 2.1.4
hereof.

 

5.1.17.    Performance by Borrower.  Borrower shall in a timely manner observe,
perform and fulfill each and every covenant, term and provision of each Loan
Document executed and delivered by, or applicable to, Borrower, and shall not
enter into or otherwise suffer or permit any amendment, waiver (other than
waivers by Borrower with respect to obligations of Lender), supplement,
termination or other modification of any Loan Document executed and delivered
by, or applicable to, Borrower without the prior written consent of Lender.

 

5.1.18.    Confirmation of Representations.  If requested by Lender, Borrower
shall deliver, in connection with any Securitization, (a) one (1) or more
Officer’s Certificates certifying as to the accuracy of (or specifying any
inaccuracy in) all representations made by Borrower in the Loan Documents as of
the date of the closing of such Securitization in all relevant jurisdictions,
and (b) certificates of the relevant Governmental Authorities in all relevant
jurisdictions indicating the good standing and qualification of Borrower,
Principal, Master Tenant and Guarantor as of the date of the Securitization.

 

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5.1.19.    Environmental Covenants.  (a) Borrower covenants and agrees that: (i)
all uses and operations on or of the Property, whether by Borrower, Master
Tenant or any other Person, shall be in compliance with all Environmental Laws
and permits issued pursuant thereto; (ii) there shall be no Releases of
Hazardous Substances in, on, under or from the Property; (iii) there shall be no
Hazardous Substances in, on, or under the Property, except those that are (A) in
compliance with all Environmental Laws and with permits issued pursuant thereto
(to the extent such permits are required by Environmental Law), and (B)
commercially reasonable amounts necessary to operate and maintain the Property
for the purposes set forth in the Loan Agreement which will not result in an
environmental condition in, on or under the Property and which are otherwise
permitted under (if required to be so permitted) and used in compliance with
Environmental Law; (iv) Borrower shall, and shall cause Master Tenant to, keep
the Property free and clear of all liens and other encumbrances imposed pursuant
to any Environmental Law, whether due to any act or omission of Borrower, Master
Tenant or any other Person (the “Environmental Liens”), provided that Borrower
and/or Master Tenant may contest any Environmental Law in accordance with the
provisions of Section 5.1.1 applicable to contests of Legal Requirements; (v)
Borrower shall, and shall cause Master Tenant to, at its or Master Tenant’s sole
cost and expense, fully and expeditiously cooperate in all activities pursuant
to subsection (b) below, including providing all relevant information and making
knowledgeable persons available for interviews; (vi) Borrower shall, and shall
cause Master Tenant to, at its or Master Tenant’s sole cost and expense, perform
any environmental site assessment or other investigation of environmental
conditions in connection with the Property, pursuant to any reasonable written
request of Lender made if Lender has reason to believe that an environmental
hazard exists on the Property (including sampling, testing and analysis of soil,
water, air, building materials and other materials and substances whether solid,
liquid or gas), and share with Lender the reports and other results thereof, and
Lender and other Indemnified Parties shall be entitled to rely on such reports
and other results thereof; (vii) Borrower shall, and shall cause Master Tenant
to, at its or Master Tenant’s sole cost and expense, comply with all reasonable
written requests of Lender made if Lender has reason to believe that an
environmental hazard exists on the Property (A) reasonably effectuate
Remediation of any condition (including a Release of a Hazardous Substance) in,
on, under or from the Property; (B) comply with any Environmental Law; (C)
comply with any directive from any Governmental Authority; and (D) take any
other reasonable action necessary or appropriate for protection of human health
(from exposure to Hazardous Substances) or the environment; (viii) Borrower
shall not do or allow Master Tenant or any Tenant or other user of the Property
to do any act with respect to Hazardous Substances that (A) materially increases
the dangers to human health (from exposure to Hazardous Substances) or the
environment, (B) poses an unreasonable risk of harm from exposure to Hazardous
Substances to any Person (whether on or off the Property), or (C) due to the
presence of Hazardous Substances or any Release thereof, (1) impairs or could
reasonably be expected to impair the value of the Property, (2) is contrary to
any requirement of any insurer, with respect to Hazardous Substances, (3)
constitutes a public or private nuisance, (4) constitutes waste, or (5) violates
any covenant, condition, agreement or easement applicable to the Property; and
(ix) Borrower shall immediately notify Lender in writing of (A) any presence or
Releases or threatened Releases of Hazardous Substances in, on, under, from or
migrating towards (and reasonably likely to affect) the Property; (B) any
non-compliance with any Environmental Laws related in any way to the Property;
(C) any actual or potential Environmental Lien; (D) any required or proposed
Remediation of environmental conditions relating to the Property; and (E) any
written notice or other written communication of which Borrower becomes aware
from any source whatsoever (including a Governmental Authority) relating in any
way to the release or potential release of Hazardous Substances on, under, or
above the Property or Remediation thereof, likely to result in liability of any
Person pursuant to any Environmental Law, other environmental conditions in
connection with the Property, or any actual or potential administrative or
judicial proceedings in connection with anything referred to in this Section;
(x) Borrower shall not install, use, generate, manufacture, store, treat,
release or dispose of, nor permit the installation, use, generation, storage,
treatment, release or disposal of, any Hazardous Substances (except commercially
reasonable amounts necessary to operate and maintain the Property for the
purposes set forth in the Loan Agreement which will not result in an
environmental condition in, on or under the Property and which are otherwise
permitted (if required to be so permitted) under and used in compliance with
Environmental Law) on, under or about the Property, and all uses and operations
on or of the Property, whether by Borrower or any other person or entity, shall
be in compliance with all Environmental Laws and permits issued pursuant
thereto; (xi) Borrower shall not make any change in the use or condition of the
Property which (A) could reasonably be expected to lead to the presence on,
under or about the Property of any Hazardous Substances which is not in
accordance with any applicable Environmental Law, or (B) would require, under
any applicable Environmental Law, notice be given to or approval be obtained
from any governmental agency in the event of a transfer of ownership or control
of the Property, in each case without the prior written consent of Lender; (xii)
Borrower shall not allow any Institutional Control on or to affect the Property;
and (xiii) Borrower shall take all acts necessary to preserve its status, if
applicable, as an “innocent landowner,” “contiguous property owner,” or
“prospective purchaser” as to the Property and as those terms are defined in
CERCLA; provided, however, that this covenant does not limit or modify any of
Borrower’s other duties or obligations under this Agreement.

 

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(b)          If Lender has reason to believe that an environmental hazard exists
on the Property that could reasonably be expected, in Lender’s discretion, to
endanger any Tenants or other occupants of the Property or their guests or the
general public or may materially and adversely affect the value of the Property,
upon reasonable notice from Lender, Borrower shall, at Borrower’s expense,
promptly cause an engineer or consultant satisfactory to Lender to conduct an
environmental assessment or audit (the scope of which shall be determined in
Lender’s discretion) and take any samples of soil, groundwater or other water,
air, or building materials or any other invasive testing requested by Lender and
promptly deliver the results of any such assessment, audit, sampling or other
testing; provided, however, if such results are not delivered to Lender within a
reasonable period or if Lender has reason to believe that an environmental
hazard exists on the Property that, in Lender’s sole judgment, endangers any
Tenant or other occupant of the Property or their guests or the general public
or could reasonably be expected to materially and adversely affect the value of
the Property, upon reasonable notice to Borrower, Lender and any other Person
designated by Lender, including any receiver, any representative of a
Governmental Authority, and any environmental consultant, shall have the right,
but not the obligation, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including conducting any environmental assessment or audit (the scope
of which shall be determined in Lender’s discretion) and taking samples of soil,
groundwater or other water, air, or building materials, and reasonably
conducting other invasive testing. Borrower shall, and shall cause Master Tenant
to, cooperate with and provide Lender and any such Person designated by Lender
with access to the Property.

 

(c)          Intentionally omitted.

 

(d)          Intentionally omitted.

 

(e)          Borrower shall promptly perform, or cause to be performed, all
necessary remedial work in response to the presence of any Hazardous Substances
on the Property, any violation of any Environmental Laws, or any claims or
requirements made by any governmental agency or authority. All such work shall
be conducted by licensed and reputable contractors pursuant to written plans
approved by the agency or authority in question (if applicable), under proper
permits and licenses (if applicable) with such insurance coverage as is
customarily maintained by prudent property owners in similar situations. If the
cost of the work exceeds $100,000, then Lender shall have the right of prior
approval over the environmental contractor and plans, which shall not be
unreasonably withheld or delayed. All costs and expenses of the remedial work
shall be promptly paid by Borrower or Master Tenant, as applicable, in
accordance with the provisions of the Master Lease. In the event Borrower fails
to undertake (or cause to be undertaken) the remedial work, or fails to complete
(or cause the completion of) the same within a reasonable time period after the
same is undertaken, and if Lender is of the good faith opinion that Lender’s
security in the Property is jeopardized thereby, then Lender shall have the
right to undertake or complete the remedial work itself. In such event all costs
of Lender in doing so, including all fees and expenses of environmental
consultants, engineers, attorneys, accountants and other professional advisors,
shall become a part of the Loan and shall be due and payable from Borrower upon
demand. Such amount shall be secured by the Loan Documents, and failure to pay
the same shall be an Event of Default under the Loan Documents. In the event any
Hazardous Substances are removed from the Property, by any of Borrower, Master
Tenant or Lender, the number assigned by the United States Environmental
Protection Agency to such Hazardous Substances shall be solely in the name of
Borrower, and Borrower shall have any and all liability for such removed
Hazardous Substances.

 

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5.1.20.    Leasing Matters.  All commercial Leases with respect to the Property
written after the date hereof shall be subject to the prior written approval of
Lender, which approval shall not be unreasonably withheld, conditioned or
delayed. Upon request, Borrower shall furnish Lender with executed copies of all
commercial Leases. All renewals of commercial Leases and all proposed commercial
Leases shall provide for rental rates comparable to existing local market rates.
All proposed commercial Leases shall be on commercially reasonable terms and
shall not contain any terms which would materially affect Lender’s rights under
the Loan Documents. All commercial Leases executed after the date hereof shall
provide that they are subordinate to the Security Instrument and that the lessee
agrees to attorn to Lender or any purchaser at a sale by foreclosure or power of
sale. Borrower shall, or shall cause Master Tenant to, (i) observe and perform
the obligations imposed upon the lessor under the Leases in a commercially
reasonable manner; (ii) shall enforce and may amend or terminate the terms,
covenants and conditions contained in the Leases upon the part of the lessee
thereunder to be observed or performed in a commercially reasonable manner and
in a manner not to impair the value of the Property involved except that no
termination by Borrower or Master Tenant, as the case may be, or acceptance of
surrender by a Tenant of any Leases shall be permitted unless by reason of a
tenant default and then only in a commercially reasonable manner to preserve and
protect the Property; provided, however, that no such termination or surrender
of any Lease will be permitted without the prior written consent of Lender;
(iii) shall not collect any of the rents more than one (1) month in advance
(other than security deposits); (iv) shall not execute any other assignment of
lessor’s interest in the Leases or the Rents (except as contemplated by the Loan
Documents); (v) shall not alter, modify or change the terms of any commercial
Lease in a manner inconsistent with the provisions of the Loan Documents; and
(vi) shall execute and deliver at the request of Lender all such further
assurances, confirmations and assignments in connection with the Leases as
Lender shall from time to time reasonably require. Notwithstanding anything to
the contrary contained herein, (i) neither Borrower nor Master Tenant shall
enter into a lease of all or substantially all of the Property without Lender’s
prior written consent, which may be granted or withheld in Lender’s sole
discretion, and (ii) all new Leases and all amendments, modifications,
extensions, and renewals of existing Leases with Tenants that are Affiliates of
Borrower and/or Master Tenant shall be subject to the prior written consent of
Lender, which may be granted in Lender’s sole discretion.

 

5.1.21.    Alterations.  Borrower shall obtain, and shall require Master Tenant
to obtain, Lender’s prior written consent to any alterations to any Improvements
(it being understood that Replacements do not constitute “alterations” subject
to this Section 5.1.21), which consent shall not be unreasonably withheld or
delayed except with respect to alterations that could reasonably be expected to
have a material adverse effect on Borrower’s financial condition, the value of
the Property or the Property’s Net Operating Income. Notwithstanding the
foregoing, Lender’s consent shall not be required in connection with any
alterations that (a) are required to comply with the Franchise Agreement, unless
the aggregate cost of such alterations is reasonably anticipated to exceed five
percent (5%) of the original principal amount of the Debt or (b) will not have a
material adverse effect on Borrower’s financial condition, the value of the
Property or the Property’s Net Operating Income and (i) are made in connection
with (a) tenant improvement work performed pursuant to the terms of any Lease
executed on or before the date hereof, (b) tenant improvement work performed
pursuant to the terms and provisions of a Lease and not adversely affecting any
structural component of any Improvements, any utility or HVAC system contained
in any Improvements or the exterior of any building constituting a part of any
Improvements, or (c) are alterations performed in connection with the
Restoration of the Property after the occurrence of a Casualty or Condemnation
in accordance with the terms and provisions of this Agreement; or (ii) the cost
of which (including any related alteration, improvement or replacement) is
reasonably anticipated not to exceed $1,000,000.00 (the “Threshold Amount”). If
the total unpaid amounts due and payable with respect to alterations to the
Improvements at the Property (other than such amounts to be paid or reimbursed
by Tenants under the Leases) shall at any time exceed the Threshold Amount,
Borrower shall promptly deliver to Lender as security for the payment of such
amounts and as additional security for Borrower’s obligations under the Loan
Documents any of the following: (A) cash, (B) U.S. Obligations, (C) other
securities having a rating acceptable to Lender and that, at Lender’s option,
the applicable Rating Agencies have confirmed in writing will not, in and of
itself, result in a downgrade, withdrawal or qualification of the initial, or,
if higher, then current ratings assigned to any Securities or any class thereof
in connection with any Securitization or (D) a completion and performance bond
or an irrevocable letter of credit (payable on sight draft only) issued by a
financial institution having a rating by S&P of not less than “A-1+” if the term
of such bond or letter of credit is no longer than three (3) months or, if such
term is in excess of three (3) months, issued by a financial institution having
a rating that is acceptable to Lender and that, at Lender’s option, the
applicable Rating Agencies have confirmed in writing will not, in and of itself,
result in a downgrade, withdrawal or qualification of the initial, or, if
higher, then current ratings assigned to any Securities or class thereof in
connection with any Securitization. Such security shall be in an amount equal to
the excess of the total unpaid amounts with respect to alterations to the
Improvements on the Property (other than such amounts to be paid or reimbursed
by Tenants under the Leases) over the Threshold Amount and Lender shall make
such security available to pay, or to reimburse Borrower or Master Tenant for,
the costs of such alteration, in accordance with the disbursement procedures
applicable to disbursements from the Replacement Reserve Fund; and, upon
presentation by Borrower or Master Tenant of satisfactory completion of such
alteration, Lender shall release any remaining portion of such security to
Borrower or Master Tenant, as either of them may direct, provided that no Event
of Default has occurred and is continuing.

 

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5.1.22.    Operation of Property.  (a) Borrower shall, and shall cause Master
Tenant to, cause the Property to be operated in all material respects, in
accordance with the Management Agreement (or Replacement Management Agreement)
and the Franchise Agreement (or Replacement Franchise Agreement) as applicable.
In the event that the Management Agreement or Franchise Agreement expires or is
terminated (without limiting any obligation of Borrower to obtain Lender’s
consent to any termination or modification of the Management Agreement or
Franchise Agreement in accordance with the terms and provisions of this
Agreement), Borrower shall promptly cause Master Tenant to enter into a
Replacement Management Agreement with Manager or another Qualified Manager, or a
Replacement Franchise Agreement with Franchisor or another Qualified Franchisor,
as applicable.

 

(b)          Borrower shall, and shall cause Master Tenant to: (i) promptly
perform and/or observe, in all material respects, all of the covenants and
agreements required to be performed and observed by it under the Management
Agreement and the Franchise Agreement and do all things necessary to preserve
and to keep unimpaired its material rights thereunder; (ii) promptly notify
Lender of any material default under the Management Agreement or the Franchise
Agreement of which it is aware; (iii) upon request by Lender, promptly deliver
to Lender a copy of each of the following received by Borrower or Master Tenant,
as applicable, under the Management Agreement: (A) completed financial
statement, business plan, capital expenditures plan or report required to be
delivered to Borrower by Manager pursuant to the Management Agreement, (B)
notice of default, or (C) estimate delivered to Borrower for its approval with
respect to the contemplated expenditure of an amount in excess of $25,000; and
(iv) 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 Manager under the Management Agreement and Franchisor under
the Franchise Agreement.

 

5.1.23.    Embargoed Person.  Borrower has performed and shall perform (or shall
cause Master Tenant to perform) reasonable due diligence to insure that to the
best of Borrower’s knowledge at all times throughout the term of the Loan,
including after giving effect to any Transfers permitted pursuant to the Loan
Documents, (a) none of the funds or other assets of Borrower, Master Tenant,
Principal and Guarantor constitute property of, or are beneficially owned,
directly or indirectly, by any Embargoed Person; (b) no Embargoed Person has any
interest of any nature whatsoever in Borrower, Master Tenant, Principal or
Guarantor, as applicable, with the result that the investment in Borrower,
Master Tenant, Principal or Guarantor, as applicable (whether directly or
indirectly), is prohibited by law or the Loan is in violation of law; and (c)
none of the funds of Borrower, Master Tenant, Principal or Guarantor, as
applicable, have been derived from, or are the proceeds of, any unlawful
activity, including money laundering, terrorism or terrorism activities, with
the result that the investment in Borrower, Master Tenant, Principal or
Guarantor, as applicable (whether directly or indirectly), is prohibited by law
or the Loan is in violation of law, or may cause the Property to be subject to
forfeiture or seizure. Notwithstanding the foregoing, to the extent that an
Embargoed Person acquires a non-controlling interest in Borrower or Master
Tenant, either (1) without the knowledge of Borrower, Master Tenant, Key
Principal or Guarantor, through a transaction brokered by a FINRA licensed
broker dealer not affiliated with Guarantor, provided such broker dealer has
executed a dealer agreement or selling agreement with Guarantor or an affiliate
of Guarantor in which it covenants to, among other things, comply with The USA
PATRIOT Act (or any successor legislation), or (2) provided Borrower performs
reasonable due diligence, without the knowledge of Borrower, Master Tenant, Key
Principal or Guarantor, after the initial sale or offering of such interests in
Borrower, the resulting breach of the foregoing representations shall be deemed
to be unintentional and not willful or grossly negligent for purposes of Section
9.3 hereof.

 

5.1.24.    Default under Franchise Agreement.  If Borrower or Master Tenant
shall be in default under the Franchise Agreement, then, without limiting the
generality of the other provisions of this Agreement, and without waiving or
releasing Borrower from any of its obligations hereunder, Lender shall have the
right, but shall be under no obligation, to pay any sums and to perform any act
or take any action as may be appropriate to cause all the terms, covenants and
conditions of the Franchise Agreement on the part of Borrower or Master Tenant
to be performed or observed. Lender and any Person designated by Lender shall
have, and are hereby granted, the right to enter upon the Property at any time
and from time to time for the purpose of taking any such action. If the
Franchisor shall deliver to Lender a copy of any notice sent to Borrower, Master
Tenant and/or Manager concerning a default under the Franchise Agreement, such
notice shall constitute full protection to Lender for any action taken or
omitted to be taken by Lender in good faith, in reliance thereon. Any sums
expended by Lender pursuant to this Section 5.1.24 shall bear interest at the
Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Debt, shall be secured by
the Lien of the Security Instrument and the other Loan Documents, and shall be
immediately due and payable upon demand by Lender therefore.

 

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5.1.25.    PIP Requirements.  (a) Borrower shall provide (or shall cause Master
Tenant to provide) Lender with written notice of any modifications to the
Existing PIP Requirements (including, without limitation, any renewal, extension
or replacement thereof). Promptly upon the occurrence of an Additional PIP
Reserve Event, Borrower shall provide (or shall cause Master Tenant to provide)
Lender with written notice of any Additional PIP Requirements required in
connection with the Franchise Agreement (including, without limitation, any
renewal, extension or replacement thereof).

 

(b)          Borrower shall complete and pay (or shall cause Master Tenant to
complete and pay) in full any PIP Requirements in a good, workmanlike and lien
free manner within the time-frame set forth in the PIP Requirements (as such
time-frames may be modified by Franchisor from time to time). Lender shall
disburse available Existing PIP Reserve Funds or Additional PIP Reserve Funds
(or, as applicable and to the extent set forth in Section 7.3.6 hereof,
available Replacement Reserve Funds), as applicable, to Borrower or Master
Tenant, as the case may be, for such purpose pursuant to the terms and
conditions of Section 7.4 or Section 7.8 hereof, as applicable. To the extent
that Borrower or Master Tenant fails to perform any obligation under the
Franchise Agreement (including, without limitation, any obligation to perform
any PIP Requirements) beyond any applicable cure period thereunder, Lender shall
have the right, as each of Borrower’s and Master Tenant’s attorney-in-fact
(which power of attorney shall be irrevocable and shall be deemed to be coupled
with an interest), to perform any such obligation and, if required, to enter the
Property in order to perform the same. The aforesaid right of Lender shall be
exercisable by Lender at Lender’s option and in Lender’s sole discretion.

 

5.1.26.    Master Lease Documents.  Borrower shall (a) promptly perform and/or
observe in all material respects all of the covenants, agreements and
obligations required to be performed and observed by Borrower under the Master
Lease Documents and do all things necessary to preserve and to keep unimpaired
its material rights thereunder; (b) promptly notify Lender of any material
default under the Master Lease Documents; (c) upon written request from Lender,
promptly deliver to lender a copy of each financial statement, business plan,
capital expenditures plan, notice, report and estimate received by Borrower
under the Master Lease; (d) promptly 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 Master Tenant under the Master Lease
Documents; and (e) cause Master Tenant to deposit or cause to be deposited all
Rents into the Clearing Account in accordance with the provisions of the Loan
Documents.

 

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Section 5.2          Negative Covenants.  From the date hereof until payment and
performance in full of all obligations of Borrower (other than surviving
indemnity obligations as to which no claim is then pending) under the Loan
Documents or the earlier release of the Lien of the Security Instrument and any
other collateral in accordance with the terms of this Agreement and the other
Loan Documents, Borrower covenants and agrees with Lender that it shall not do,
directly or indirectly, any of the following:

 

5.2.1.      Operation of Property.  (a) Borrower shall not (and shall cause
Master Tenant to not), without Lender’s prior written consent (which consent
shall not be unreasonably withheld unless an Event of Default then exists): (i)
surrender, terminate, cancel, amend or modify the Management Agreement;
provided, that Borrower or Master Tenant may, without Lender’s consent, replace
the Manager so long as the replacement manager is a Qualified Manager pursuant
to a Replacement Management Agreement; (ii) surrender, terminate, cancel, amend
or modify the Franchise Agreement; (iii) reduce or consent to the reduction of
the term of the Management Agreement or Franchise Agreement; (iv) increase or
consent to the increase of the amount of any charges under the Management
Agreement or Franchise Agreement, or (v) otherwise modify, change, supplement,
alter or amend, or waive or release any of its rights and remedies under, the
Management Agreement or Franchise Agreement in any material respect; provided,
however, that Borrower and/or Master Tenant, as applicable, may modify,
supplement or amend the Franchise Agreement so long as such modification,
supplement, or amendment (A) does not materially increase the obligations (or
materially decrease the rights) of Borrower and/or Master Tenant thereunder, (B)
add any additional restrictions on Borrower, Master Tenant or the Property, (C)
materially increase the rights (or materially decrease the obligations) of
Franchisor thereunder, or (D) include or modify any restriction on Lender’s
ability to sell the Loan (provided that customary releases of claims that might
exist against the Franchisor required in connection with a waiver, consent,
forbearance or other modification entered into for the benefit of Borrower or
Master Tenant shall not be deemed to violate the foregoing limitations). Any
such surrender of the Management Agreement and/or the Franchise Agreement or
termination, cancellation, modification, change, supplement, alteration or
amendment of the Management Agreement and/or the Franchise Agreement without the
prior consent of Lender (to the extent such consent is required) shall be void
and of no force and effect.

 

(b)          Following the occurrence and during the continuance of an Event of
Default, if so instructed by Lender, Borrower shall not cause or permit Master
Tenant to exercise any rights, make any decisions, grant any approvals or
otherwise take any action under the Management Agreement or Franchise Agreement
without the prior written consent of Lender, which consent may be granted,
conditioned or withheld in Lender’s discretion.

 

(c)          If under applicable zoning provisions the use of all or any portion
of the Property is or shall become a nonconforming use, Borrower shall not cause
or permit the nonconforming use or Improvement to be discontinued or abandoned
without the express written consent of Lender.

 

5.2.2.      Liens.  Borrower shall not create, incur, assume or suffer to exist
any Lien on any portion of the Property or permit any such action to be taken,
except for Permitted Encumbrances.

 

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5.2.3.      Dissolution.  Borrower shall not (and shall cause Master Tenant to
not) (a) engage in any dissolution, liquidation or consolidation or merger with
or into any other business entity, (b) engage in any business activity not
related to the ownership (with respect to Borrower only) and operation of the
Property, or (c) transfer, lease or sell, in one transaction or any combination
of transactions, the assets or all or substantially all of the properties or
assets of Borrower or Master Tenant except to the extent permitted by the Loan
Documents.

 

5.2.4.      Change In Business.  Neither Borrower nor Master Tenant shall enter
into any line of business other than the ownership (with respect to Borrower
only) and operation of the Property, or make any material change in the scope or
nature of its business objectives, purposes or operations, or undertake or
participate in activities other than the continuance of its present business.
Nothing contained in this Section 5.2.4 is intended to expand the rights of
Borrower contained in Section 5.2.10(d) hereof.

 

5.2.5.      Debt Cancellation.  Neither Borrower nor Master Tenant shall cancel
or otherwise forgive or release any material claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower or Master Tenant
by any Person, except for adequate consideration and in the ordinary course of
Borrower’s or Master Tenant’s business, and except that (if applicable)
cancellation, forgiveness or releases in respect of Hotel Transactions may be
effected in Borrower’s reasonable business judgment.

 

5.2.6.      Zoning.  Borrower shall not, and shall cause Master Tenant to not,
initiate or consent to any zoning reclassification of any portion of the
Property or seek any variance under any existing zoning ordinance or use or
permit the use of any portion of the Property in any manner that could result in
such use becoming a non conforming use under any zoning ordinance or any other
applicable land use law, rule or regulation, without the prior written consent
of Lender.

 

5.2.7.      No Joint Assessment.  Borrower shall not, and shall cause Master
Tenant to not, suffer, permit or initiate the joint assessment of the Property
(a) with any other real property constituting a tax lot separate from the
Property, and (b) which constitutes real property with any portion of the
Property which may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to such real property
portion of the Property.

 

5.2.8.      Intentionally Omitted.

 

5.2.9.      ERISA.  (a) Borrower shall not, and shall cause Master Tenant to
not, 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 Note, this Agreement or the other Loan Documents) to be a non-exempt (under
a statutory or administrative class exemption) prohibited transaction under
ERISA.

 

(b)          Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Loan, as requested by Lender in its discretion, that (A) Borrower and Master
Tenant are not and do not maintain an “employee benefit plan” as defined in
Section 3(3) of ERISA, which is subject to Title I of ERISA, or a “governmental
plan” within the meaning of Section 3(32) of ERISA; (B) Borrower and Master
Tenant are not subject to any state statute regulating investment of, or
fiduciary obligations with respect to governmental plans and (C) one or more of
the following circumstances is true:

 

(i)          Equity interests in Borrower and Master Tenant are publicly offered
securities, within the meaning of 29 C.F.R. §2510.3-101(b)(2);

 

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(ii)         Less than twenty-five percent (25%) of each outstanding class of
equity interests in Borrower and Master Tenant are held by “benefit plan
investors” within the meaning of 29 C.F.R. §2510.3-101(f)(2); or

 

(iii)        Borrower and Master Tenant qualify as an “operating company” or a
“real estate operating company” within the meaning of 29 C.F.R. §2510.3-101(c)
or (e).

 

5.2.10.    Transfers.  (a) Borrower acknowledges that Lender has examined and
relied on the experience of Borrower, Master Tenant and its and Master Tenant’s
stockholders, general partners, members, principals and (if Borrower is a trust)
beneficial owners in owning and operating properties such as the Property in
agreeing to make the Loan, and will continue to rely on Borrower’s ownership of
the Property as a means of maintaining the value of the Property as security for
repayment of the Debt and the performance of the Other Obligations. Borrower
acknowledges that Lender has a valid interest in maintaining the value of the
Property so as to ensure that, should Borrower default in the repayment of the
Debt or the performance of the Other Obligations, Lender can recover the Debt by
a sale of the Property.

 

(b)          Without the prior written consent of Lender, and except to the
extent otherwise set forth in this Section 5.2.10, Borrower shall not, and shall
not permit Master Tenant or any Restricted Party to do any of the following
(collectively, a “Transfer”): (i) sell, convey, mortgage, grant, bargain,
encumber, pledge, assign, grant options with respect to, or otherwise transfer
or dispose of (directly or indirectly, voluntarily or involuntarily, by
operation of law or otherwise, and whether or not for consideration or of
record) the Property or any part thereof or any legal or beneficial interest
therein or (ii) permit a Sale or Pledge of an interest in any Restricted Party,
other than (A) pursuant to Leases of space in the Improvements to Tenants in
accordance with the provisions of Section 5.1.20, (B) Hotel Transactions, and
(C) Permitted Transfers.

 

(c)          A Transfer shall include, but not be limited to, (i) an installment
sales agreement wherein Borrower or Master Tenant agrees to sell the Property or
any part thereof for a price to be paid in installments; (ii) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space Tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower’s right, title and interest
in and to any Leases or any Rents; (iii) if a Restricted Party is a corporation,
any merger, consolidation or Sale or Pledge of such corporation’s stock or the
creation or issuance of new stock; (iv) if a Restricted Party is a limited or
general partnership or joint venture, any merger or consolidation or the change,
removal, resignation or addition of a general partner or the Sale or Pledge of
the partnership interest of any general partner or any profits or proceeds
relating to such partnership interest, or the Sale or Pledge of limited
partnership interests or any profits or proceeds relating to such limited
partnership interest or the creation or issuance of new limited partnership
interests; (v) if a Restricted Party is a limited liability company, any merger
or consolidation or the change, removal, resignation or addition of a managing
member or non member manager (or if no managing member, any member) or the Sale
or Pledge of the membership interest of a managing member (or if no managing
member, any member) or any profits or proceeds relating to such membership
interest, or the Sale or Pledge of non managing membership interests or the
creation or issuance of new non managing membership interests; or (vi) if a
Restricted Party is a trust or nominee trust, any merger, consolidation or the
Sale or Pledge of the legal or beneficial interest in a Restricted Party or the
creation or issuance of new legal or beneficial interests.

 

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(d)          Notwithstanding anything to the contrary contained in the Loan
Documents.

 

(i)          Lender’s consent shall not be required in connection with one (1)
or a series of Transfers of up to forty-nine percent (49%) in the aggregate of
the direct or indirect ownership interests in any Restricted Party provided that
(a) no Event of Default shall have occurred and remain uncured or would occur as
a result of such Transfer, (b) such Transfer shall not (i) cause the transferee
(together with its Affiliates) to acquire Control of any Restricted Party unless
such transferee is Guarantor, (ii) result in any Restricted Party that is as of
the Closing Date controlled by Guarantor no longer being controlled by
Guarantor, or (iii) cause the transferee (together with its Affiliates) to
increase its direct or indirect interest in any Restricted Party to an amount
which exceeds forty-nine percent (49%) in the aggregate, unless such transferee
owned more than forty-nine percent (49%) of the direct or indirect ownership
interests in such Restricted Party on the Closing Date or as a result of a
Transfer previously made in accordance with the terms and provisions of this
Agreement, (c) the Property shall continue to be managed by Manager or a
Qualified Manager, (d) after giving effect to such Transfer, Guarantor shall
continue to own, directly or indirectly, at least fifty-one percent (51%) of all
legal, beneficial and economic interests in each of Borrower and Master Tenant,
(e) if, immediately following such Transfer, the transferee owns ten percent
(10%) or more of the direct or indirect ownership interests in Borrower or
Master Tenant then, to the extent such transferee did not own ten percent (10%)
or more of the direct or indirect ownership interests in Borrower or Master
Tenant on the Closing Date, Borrower shall deliver, or cause to be delivered, at
Borrower’s sole cost and expense, such searches (including credit, negative
news, OFAC, litigation, judgment, lien and bankruptcy searches) as Lender may
reasonably require with respect to such transferee and its Controlling Persons,
the results of which must be reasonably acceptable to Lender (unless such
transferee and Controlling Persons were previously the subject of searches by
Lender which were reasonably acceptable to Lender, in which case Borrower’s
obligation to deliver or cause the delivery of such searches under this Section
5.2.10(d) shall be satisfied to the extent reasonably acceptable updates to such
searches are delivered to Lender), and such transferee, its Borrowers and
controlling Persons shall otherwise satisfy Lender’s then current applicable
underwriting criteria and requirements, (f) Borrower shall give Lender notice of
such Transfer together with copies of all instruments effecting such Transfer
(or final drafts thereof with signed copies to follow upon the effect date of
such transfer) and the organizational documents of the transferee and its
constituent parties reasonably required by Lender not less than ten (10) days
prior to the date of such Transfer), and (g) the legal and financial structure
of Borrower, Master Tenant and their respective stockholders, members or
partners, as applicable, and the single purpose nature and bankruptcy remoteness
of Borrower, Master Tenant and their respective stockholders, members or
partners, as applicable, after such Transfer, shall satisfy Lender’s then
current applicable underwriting criteria and requirements. Notwithstanding
anything in this Section 5.2.10(d) to the contrary, and without limiting any of
the foregoing requirements of this Section 5.2.10(d), if after giving effect to
any such Transfer, more than forty-nine percent (49%) in the aggregate of direct
or indirect ownership interests in any Restricted Party are owned by any Person
(together with its Affiliates) that owned less than forty-nine percent (49%) of
the direct or indirect ownership interests in such Restricted Party as of the
Closing Date or as a result of a Transfer previously made in accordance with the
terms and provisions of this Agreement, then Borrower shall, prior to the
effective date of any such Transfer, deliver (or cause to be delivered) to
Lender (x) a written confirmation from the applicable Rating Agencies that such
change in ownership will not cause a downgrade, withdrawal or qualification of
the then current rating of the Securities or any class thereof and (y) an
Additional Insolvency Opinion acceptable to Lender and the Rating Agencies; and

 

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(ii)         The sale, conveyance, transfer, disposition, alienation,
hypothecation, pledge or encumbering of all or any portion of the direct or
indirect ownership interests in Moody REIT II (each a “Permitted REIT Transfer”)
shall be permitted at any and all times without (1) Lender’s consent, (2) notice
to Lender, or (3) the payment of any fee, premium, penalty or other payment to
Lender other than payment of Lender’s actual out-of-pocket expenses, if any,
provided, however, that upon completion of such Permitted REIT Transfer (a)
except with the Lender’s prior written consent, Moody REIT II is a Reporting
Company, (b) there is no change of Control of Borrower, Master Tenant, Principal
or Moody REIT II, (c) no Person together with such Person’s Affiliates, other
than the Key Principal and his Affiliates, owns more than forty-nine percent
(49%) of the direct or indirect ownership interests in Moody REIT II, (d) Moody
REIT II continues to own, directly or indirectly, at least seventy-five percent
(75%) of the ownership interests in MNOP II and MNOP II continues to own,
directly or indirectly, one hundred percent (100%) of the ownership interests in
Borrower and Master Tenant, and (e) if the Franchise Agreement will be
terminated as a result of any such Permitted REIT Transfer, the Property shall
be operated in accordance with a Replacement Franchise Agreement.

 

(e)          No Transfer of the Property and assumption of the Loan shall occur
during the period that is sixty (60) days prior to and sixty (60) days after a
Securitization. Otherwise, Lender’s consent to a one (1) time Transfer of the
Property and assumption of the Loan shall not be unreasonably withheld provided
that Lender receives sixty (60) days prior written notice of such Transfer and
no Event of Default has occurred and is continuing, and further provided that
the following additional requirements are satisfied:

 

(i)          Borrower shall pay Lender a transfer fee equal to one percent (1%)
of the outstanding principal balance of the Loan at the time of such transfer;

 

(ii)         Borrower shall pay any and all reasonable out-of-pocket costs
incurred in connection with such Transfer (including, without limitation,
Lender’s counsel fees and disbursements and all recording fees, title insurance
premiums and mortgage and intangible taxes and the fees and expenses of the
Rating Agencies pursuant to clause (x) below);

 

(iii)        The proposed transferee (the “Transferee”) or Transferee’s
Principals must have demonstrated expertise in owning and operating properties
similar in location, size, class and operation to the Property, which expertise
shall be reasonably determined by Lender;

 

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(iv)        Transferee and Transferee’s Principals shall, as of the date of such
transfer, have an aggregate net worth and liquidity reasonably acceptable to
Lender;

 

(v)         Transferee, Transferee’s Principals, and any other entities which
may be owned or Controlled directly or indirectly by Transferee’s Principals
(“Related Entities”), either (I) shall not have (x) been party to any bankruptcy
proceedings, voluntary or involuntary, (y) made an assignment for the benefit of
creditors, or (z) taken advantage of any insolvency act, or any act for the
benefit of debtors, in each case within seven (7) years prior to the date of the
proposed Transfer or (y) shall be acceptable to Lender in its sole discretion;

 

(vi)        Transferee shall assume all of the obligations of Borrower under the
Loan Documents in a manner satisfactory to Lender in all respects, including,
without limitation, by entering into an assumption agreement in form and
substance satisfactory to Lender;

 

(vii)       There shall be no material litigation or regulatory action pending
or threatened against Transferee, Transferee’s Principals or Related Entities
which is not reasonably acceptable to Lender;

 

(viii)      Neither Transferee, nor Transferee’s Principals nor Related Entities
shall not have defaulted under its or their obligations with respect to any
other Indebtedness in a manner which is not reasonably acceptable to Lender;

 

(ix)        Transferee and Transferee’s Principals must be able to satisfy all
the representations and covenants set forth in Sections 4.1.30, 4.1.35, 5.1.23
and 5.2.9 of this Agreement, no Default or Event of Default shall otherwise
occur as a result of such Transfer, and Transferee and Transferee’s Principals
shall deliver (A) all organizational documentation reasonably requested by
Lender, which shall be reasonably satisfactory to Lender and (B) all
certificates, agreements, covenants and legal opinions reasonably required by
Lender;

 

(x)         If required by Lender, Transferee shall be approved by the Rating
Agencies selected by Lender, which approval, if required by Lender, shall take
the form of a confirmation in writing from such Rating Agencies to the effect
that such Transfer will not result in a requalification, reduction, downgrade or
withdrawal of the ratings in effect immediately prior to such assumption or
transfer for the Securities or any class thereof issued in connection with a
Securitization which are then outstanding;

 

(xi)        Prior to any release of Guarantor, one (1) or more substitute
guarantors reasonably acceptable to Lender shall have assumed all of the
liabilities and obligations of Guarantor under the Guaranty and Environmental
Indemnity executed by Guarantor or executed a replacement guaranty and
environmental indemnity satisfactory to Lender;

 

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(xii)       Borrower shall deliver, or cause to be delivered, at Borrower’s or
Transferee’s sole cost and expense, an endorsement to the Title Insurance
Policy, as modified by the assumption agreement, as a valid first lien on the
Property and naming the Transferee as owner of the Property, which endorsement
shall insure that, as of the date of the recording of the assumption agreement,
the Property shall not be subject to any additional exceptions or liens other
than those contained in the Title Insurance Policy issued on the date hereof and
the Permitted Encumbrances;

 

(xiii)      The Property shall be managed by Manager pursuant to the Management
Agreement or by a Qualified Manager pursuant to a Replacement Management
Agreement;

 

(xiv)      If the Franchise Agreement will be terminated as a result of such
Transfer, the Property shall be operated in accordance with a Replacement
Franchise Agreement; and

 

(xv)       Borrower or Transferee, at its sole cost and expense, shall deliver
to Lender an Additional Insolvency Opinion reflecting such Transfer satisfactory
in form and substance to Lender.

 

Immediately upon a Transfer to such Transferee and the satisfaction of all of
the above requirements, the named Borrower and Guarantor herein shall be
released from all liability under this Agreement, the Note, the Security
Instrument and the other Loan Documents accruing after such Transfer. The
foregoing release shall be effective upon the date of such Transfer, but Lender
agrees to provide written evidence thereof reasonably requested by Borrower.

 

(f)           The merger of Moody REIT II and Moody REIT I shall not be
considered a “Transfer” for purposes hereof so long as: (i) Moody REIT II is the
surviving entity following such merger and shall remain a Reporting Company;
(ii) the net worth of Moody REIT II shall equal or exceed the net worth of Moody
REIT II immediately prior to such merger, (iii) there is no change of Control of
Borrower, Master Tenant, or Principal, (iv) following such merger, (x) Brett
Moody shall remain the chief executive officer of Moody REIT II, having at least
the same power and authority to direct and/or cause the direction of the
management, policies and/or activities of Moody REIT II as of the date hereof,
and (y) at least two-thirds (2/3) of the members of the board of directors of
Moody REIT II shall remain in place, (v) no Person together with such Person’s
Affiliates, other than the Key Principal and his Affiliates, owns more than
forty-nine percent (49%) of the direct or indirect ownership interests in Moody
REIT II, (vi) Moody REIT II continues to own, directly or indirectly, at least
seventy-five percent (75%) of the ownership interests in MNOP II and MNOP II
continues to own, directly or indirectly, one hundred percent (100%) of the
ownership interests in Borrower and Master Tenant, (vii) if, immediately
following such merger, any shareholder would own ten percent (10%) or more of
the direct or indirect ownership interests in Borrower or Master Tenant then,
unless such shareholder owned ten percent (10%) or more of the direct or
indirect ownership interests in Borrower or Master Tenant on the Closing Date or
as a result of a Transfer previously made in accordance with the terms and
provisions of this Agreement, Borrower shall deliver, or cause to be delivered,
at Borrower’s sole cost and expense, such searches (including credit, negative
news, OFAC, litigation, judgment, lien and bankruptcy searches) as Lender may
reasonably require with respect to such transferee and its Controlling Persons,
the results of which must be reasonably acceptable to Lender (unless such
transferee and Controlling Persons were previously the subject of searches by
Lender which were reasonably acceptable to Lender, in which case Borrower’s
obligation to deliver or cause the delivery of such searches under this Section
5.2.10(f) shall be satisfied to the extent reasonably acceptable updates to such
searches are delivered to Lender), and such transferee and its Controlling
Persons shall otherwise satisfy Lender’s then current applicable underwriting
criteria and requirements, (viii) Borrower, at its own expense, shall have
delivered to Lender an Additional Insolvency Opinion reflecting such merger
acceptable to Lender and the Rating Agencies, (ix) if the Franchise Agreement
will be terminated as a result of such merger, the Property shall be operated in
accordance with a Replacement Franchise Agreement, and (x) Borrower shall pay
any and all reasonable out-of-pocket costs incurred by Lender in connection with
such merger.

 

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(g)          Borrower, without the consent of Lender, may grant easements,
restrictions, covenants, reservations and rights of way in the ordinary course
of business for water and sewer lines, telephone and telegraph lines, electric
lines and other utilities or for other similar purposes, provided that no
transfer, conveyance or encumbrance shall materially impair the utility and
operation of the Property or materially adversely affect the value of the
Property or the Net Operating Income of the Property. If Borrower shall receive
any consideration in connection with any of said described transfers or
conveyances, provided no Event of Default then exists, Borrower shall have the
right to use any such proceeds in connection with any alterations performed in
connection therewith, or required thereby. In connection with any transfer,
conveyance or encumbrance permitted above, Lender shall, unless it reasonably
determines that the foregoing conditions have not been satisfied, execute and
deliver any instrument reasonably necessary or appropriate to evidence its
consent to said action or to subordinate the Lien of the Security Instrument to
such easements, restrictions, covenants, reservations and rights of way or other
similar grants upon receipt by the Lender of: (A) a copy of the instrument of
transfer; and (B) an Officer’s Certificate stating with respect to any transfer
described above, that such transfer does not materially impair the utility and
operation of the Property or materially reduce the value of the Property or the
Net Operating Income of the Property. Borrower shall pay all of Lender’s
reasonable expenses incurred in connection with the foregoing including,
reasonable attorney’s fees and expenses.

 

(h)          Without Lender’s prior written consent thereto, in its sole
discretion, any Transfer, Permitted Transfer, or Permitted REIT Transfer
resulting in any direct or indirect ownership interests in Borrower, Master
Tenant, Guarantor or the Property being held in any Prohibited Entity/Ownership
Structure is prohibited, even if the same would be otherwise allowed pursuant to
this Section 5.2.10, the definition of a Permitted Transfer or any other
provision of any Loan Document.

 

Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the Debt
immediately due and payable upon Borrower’s Transfer without Lender’s consent.
This provision shall apply to every Transfer regardless of whether voluntary or
not, or whether or not Lender has consented to any previous Transfer.

 

5.2.11.    Master Lease Documents.  Without Lender’s prior written consent,
Borrower shall not (and shall cause Master Tenant to not) (i) surrender, assign
any interest in, terminate or cancel the Master Lease Documents; (ii) reduce or
consent to the reduction of the term of the Master Lease; (iii) if the
then-scheduled termination date of the Master Lease falls before the scheduled
Maturity Date, fail to exercise, or fail to cause Master Tenant to exercise, any
option or right to renew or extend the term of the Master Lease; (iv) surrender,
terminate, forfeit, or suffer or permit the surrender, termination or forfeiture
of the Master Lease Documents; (v) increase or consent to the increase of the
amount of any charges to Borrower under the Master Lease Documents; or (vi) in
each case, to any material extent, modify, change, supplement, alter or amend
the Master Lease or waive or release any of Borrower’s rights and remedies under
the Master Lease Documents.

 

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ARTICLE VI
INSURANCE; CASUALTY; CONDEMNATION

 

Section 6.1         Insurance.  (a) Borrower shall obtain and maintain, or cause
to be maintained, insurance for Borrower, Master Tenant and the Property
providing at least the following coverages:

 

(i)          comprehensive all risk “special form” insurance including loss
caused by any type of windstorm, windstorm related perils, “named storms,” or
hail on the Improvements and the Personal Property, including contingent
liability from Operation of Building Laws, Demolition Costs and Increased Cost
of Construction Endorsements, (A) in an amount equal to one hundred percent
(100%) of the “Full Replacement Cost,” which for purposes of this Agreement
means actual replacement value (exclusive of costs of excavations, foundations,
underground utilities and footings) with a waiver of depreciation; (B)
containing an agreed amount endorsement with respect to the Improvements and
Personal Property waiving all co-insurance provisions or to be written on a no
co-insurance form; (C) providing for no deductible in excess of 5% of Net Cash
Flow of the Property for all such insurance coverage; provided however with
respect to windstorm and earthquake coverage, providing for a deductible
satisfactory to Lender in its discretion; and (D) if any of the Improvements or
the use of the Property shall at any time constitute legal non-conforming
structures or uses, coverage for loss due to operation of law in an amount equal
to the full Replacement Cost, coverage for demolition costs and coverage for
increased costs of construction. In addition, Borrower shall obtain: (y) if any
material portion of the Improvements is currently or at any time in the future
located in a federally designated “special flood hazard area,” flood hazard
insurance in an amount equal to the maximum amount of such insurance available
under the National Flood Insurance Act of 1968, the Flood Disaster Protection
Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be
amended, plus excess flood coverage in an amount equal to the “probable maximum
loss” for the Improvements, as determined by an engineer satisfactory to Lender,
or such greater amount as Lender shall require, and (z) earthquake insurance in
amounts and in form and substance satisfactory to Lender (but in any event, in
an amount not less than 150% of the “probable maximum loss”) in the event the
Property is located in an area with a high degree of seismic activity and the
“probable maximum loss” for the Improvements, as determined by an engineer
satisfactory to Lender, is 20% or greater (based on a 475-year return period, an
exposure period of 50 years and a 10% probability of exceedance), provided that
the insurance pursuant to clauses (y) and (z) hereof shall be on terms
consistent with the comprehensive all risk insurance policy required under this
subsection (i);

 

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(ii)         business income or rental loss insurance (A) with loss payable to
Lender; (B) covering all risks required to be covered by the insurance provided
for in subsection (i) above; (C) in an amount equal to one hundred percent
(100%) of the projected gross revenues from the operation of the Property (as
reduced to reflect expenses not incurred during a period of Restoration) for a
period of (1) not less than twelve (12) months from the date of casualty or loss
if the amount of the Loan is less than $35,000,000, or (2) not less than
eighteen (18) months from the date of casualty or loss if the amount of the Loan
is $35,000,000 or more; and (D) if the amount of the Loan is $50,000,000 or
more, containing an extended period of indemnity endorsement which provides that
after the physical loss to the Improvements and Personal Property has been
repaired, the continued loss of income will be insured until such income either
returns to the same level it was at prior to the loss, or the expiration of 180
days from the date that the Property is repaired or replaced and operations are
resumed, whichever first occurs, and notwithstanding that the policy may expire
prior to the end of such period. The amount of such business income or rental
loss insurance shall be determined prior to the date hereof and at least once
each year thereafter based on Borrower’s reasonable estimate of the gross
revenues from the Property for the succeeding twelve (12) month period.
Notwithstanding the provisions of Section 2.7.1 hereof, all proceeds payable to
Lender pursuant to this subsection shall be held by Lender and shall be applied
to the obligations secured by the Loan Documents from time to time due and
payable hereunder and under the Note; provided, however, that nothing herein
contained shall be deemed to relieve Borrower of its obligations to pay the
obligations secured by the Loan Documents on the respective dates of payment
provided for in this Agreement and the other Loan Documents except to the extent
such amounts are actually paid out of the proceeds of such business income
insurance;

 

(iii)        at all times during which structural construction, repairs or
alterations are being made with respect to the Improvements, and only if the
Property coverage form does not otherwise apply, (A) owner’s contingent or
protective liability insurance, otherwise known as Owner Contractor’s Protective
Liability, covering claims not covered by or under the terms or provisions of
the above mentioned commercial general liability insurance policy and (B) the
insurance provided for in subsection (i) above written in a so-called builder’s
risk completed value form (1) on a non-reporting basis, (2) against all risks
insured against pursuant to subsection (i) above, (3) including permission to
occupy the Property and (4) with an agreed amount endorsement waiving
co-insurance provisions;

 

(iv)        comprehensive boiler and machinery insurance, if steam boilers,
other pressure-fixed vessels, large air conditioning systems, elevators or other
large machinery are in operation, in amounts as shall be reasonably required by
Lender on terms consistent with the commercial property insurance policy
required under subsection (i) above;

 

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(v)         commercial general liability insurance against claims for personal
injury, bodily injury, death, contractual damage or property damage occurring
upon, in or about the Property, such insurance (A) to be on the so-called
“occurrence” form with a combined limit of not less than $2,000,000.00 in the
aggregate and $1,000,000.00 per occurrence; (B) to continue at not less than the
aforesaid limit until required to be changed by Lender in writing by reason of
changed economic conditions making such protection inadequate and (C) to cover
at least the following hazards: (1) premises and operations; (2) products and
completed operations on an “if any” basis; (3) independent contractors; (4)
blanket contractual liability for all written contracts and (5) contractual
liability covering the indemnities contained in Article 9 of the Security
Instrument to the extent the same is available;

 

(vi)        automobile liability coverage for all owned and non-owned vehicles,
including rented and leased vehicles containing minimum limits per occurrence of
$1,000,000.00;

 

(vii)       worker’s compensation and employee’s liability subject to the
worker’s compensation laws of the applicable state;

 

(viii)      umbrella and excess liability insurance in an amount not less than:
(A) $5,000,000.00 per occurrence if the amount of the Loan is less than
$35,000,000, or (B) $25,000,000.00 per occurrence, if the amount of the Loan is
$35,000,000 or more, on terms consistent with the commercial general liability
insurance policy required under subsection (v) above, including supplemental
coverage for employer liability and automobile liability, which umbrella
liability coverage shall apply in excess of the automobile liability coverage in
clause (vi) above;

 

(ix)        the insurance required under this Section 6.1(a) above shall cover
perils of terrorism and acts of terrorism and Borrower shall maintain insurance
for loss resulting from perils and acts of terrorism on terms (including
amounts) consistent with those required under Sections 6.1(a) above at all times
during the term of the Loan. Notwithstanding the foregoing, if the Terrorism
Risk Insurance Program Reauthorization Act of 2007 or a similar or subsequent
statute (“TRIPRA”) is not in effect, Borrower shall be required to carry
terrorism insurance throughout the term of the Loan as required by the preceding
sentence, but in such event Borrower shall not be required to spend on terrorism
insurance coverage more than two times the amount of the insurance premium that
is payable at such time in respect of the property and business
interruption/rental loss insurance required hereunder on a stand-alone-basis
(without giving effect to the cost of the terrorism component of such casualty
and business interruption/rental loss insurance), and if the cost of terrorism
insurance exceeds such amount, Borrower shall purchase the maximum amount of
terrorism insurance available with funds equal to such amount;

 

(x)          if applicable, insurance against employee dishonesty containing
minimum limits in an amount reasonably acceptable to Lender;

 

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(xi)         if applicable, liquor liability coverage containing minimum limits
per occurrence in an amount reasonably acceptable to Lender; and

 

(xii)       upon sixty (60) days written notice, such other reasonable
insurance, including sinkhole or land subsidence insurance, and in such
reasonable amounts as Lender from time to time may reasonably request against
such other insurable hazards which at the time are commonly insured against for
property similar to the Property located in or around the region in which the
Property is located.

 

(b)          All insurance provided for in Section 6.1(a) hereof, shall be
obtained under valid and enforceable policies (collectively, the “Policies” or
in the singular, the “Policy”), and shall be subject to the approval of Lender
as to insurance companies, amounts, deductibles, loss payees and insureds. The
Policies shall be issued by financially sound and responsible insurance
companies authorized to do business in the State and having a rating of (A) if
the amount of the Loan is $35,000,000 or more, “A:VIII” or better in the current
Best’s Insurance Reports and a claims paying ability rating of “A-” or better by
S&P, and “A3” or better by Moody’s or (B) if the amount of the Loan is less than
$35,000,000, “A-:VIII” or better in the current Best’s Insurance Reports and a
claims paying ability rating of “A-” or better by S&P, and “A3” or better by
Moody’s. Notwithstanding the foregoing, any required earthquake insurance must
satisfy the requirements of subsection (A) hereof regardless of the amount of
the Loan. The Policies described in Section 6.1 hereof (other than those
strictly limited to liability protection) shall designate Lender as loss payee.
Borrower shall deliver, or cause to be delivered, to Lender certificates of
insurance evidencing the Policies, to be followed by complete copies of the
Policies upon issuance (redacted, as necessary, to remove information regarding
other properties covered by blanket policies), accompanied by evidence
satisfactory to Lender of payment of the premiums due thereunder (the “Insurance
Premiums”). Notwithstanding the foregoing, Borrower shall not be required to
provide proof of payment of the Insurance Premiums to the extent such Insurance
Premiums are being escrowed. Borrower shall promptly forward to Lender a copy of
each written notice received by Borrower of any modification, reduction or
cancellation of any of the Policies or of any of the coverages afforded under
any of the Policies.

 

(c)          Any blanket insurance Policy shall specifically allocate to the
Property the amount of coverage from time to time required hereunder and shall
otherwise provide the same protection as would a separate Policy insuring only
the Property in compliance with the provisions of Section 6.1(a) hereof.

 

(d)          All Policies provided for or contemplated by Section 6.1(a) hereof,
except for the Policy referenced in Section 6.1(a)(vii) of this Agreement, shall
name Borrower as the insured and Lender as the additional insured, as its
interests may appear, and in the case of property damage, boiler and machinery,
flood and earthquake insurance, shall contain a so-called New York standard
non-contributing mortgagee clause in favor of Lender providing that the loss
thereunder shall be payable to Lender.

 

(e)          All property Policies shall contain clauses or endorsements to the
effect that:

 

(i)          no act or negligence of Borrower, or Master Tenant, or anyone
acting for Borrower or Master Tenant, or of any Tenant or other occupant, or
failure to comply with the provisions of any Policy, which might otherwise
result in a forfeiture of the insurance or any part thereof, or foreclosure or
similar action, shall in any way affect the validity or enforceability of the
insurance insofar as Lender is concerned;

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(ii)         to the extent that such endorsement is obtainable by the exercise
of commercially reasonable efforts, the Policy shall not be canceled without at
least thirty (30) days written notice to Lender, except ten (10) days’ notice
for non-payment of premium;

 

(iii)        the issuers thereof shall give written notice to Lender if the
Policy has not been renewed thirty (30) days prior to its expiration; and

 

(iv)        Lender shall not be liable for any Insurance Premiums thereon or
subject to any assessments thereunder.

 

(f)           If at any time Lender is not in receipt of written evidence that
all insurance required hereunder is in full force and effect, Lender shall have
the right, without notice to Borrower, to take such action as Lender deems
necessary to protect its interest in the Property, including the obtaining of
such insurance coverage as Lender in its discretion deems appropriate after
fifteen (15) Business Days notice to Borrower if prior to the date upon which
any such coverage will lapse or at any time Lender deems necessary (regardless
of prior notice to Borrower) to avoid the lapse of any such coverage. All
premiums incurred by Lender in connection with such action or in obtaining such
insurance and keeping it in effect shall be paid by Borrower to Lender upon
demand and, until paid, shall be secured by the Security Instrument and shall
bear interest at the Default Rate.

 

Section 6.2          Casualty.  If the Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty (a “Casualty”), estimated by
Borrower to cost more than $50,000 to repair, Borrower shall give prompt written
notice of such damage to Lender and shall promptly commence and diligently
prosecute (or shall cause the prompt commencements and diligent prosecution of)
the completion of the Restoration of the Property pursuant to Section 6.4 hereof
as nearly as possible to the condition the Property was in immediately prior to
such Casualty, with such alterations as may be reasonably approved by Lender and
otherwise in accordance with Section 6.4 hereof. Borrower shall pay or cause to
be paid all costs of such Restoration whether or not such costs are covered by
insurance. Lender may, but shall not be obligated to make proof of loss if not
made promptly by Borrower. In addition, Lender may participate in any settlement
discussions with any insurance companies (and shall approve the final
settlement, which approval shall not be unreasonably withheld or delayed) with
respect to any Casualty in which the Net Proceeds or the costs of completing the
Restoration are equal to or greater than the Availability Threshold and Borrower
shall deliver (or shall cause to be delivered) to Lender all instruments
required by Lender to permit such participation.

 

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Section 6.3          Condemnation.  Borrower shall give Lender notice of the
actual or threatened commencement of any proceeding for the Condemnation of the
Property promptly after becoming aware thereof, and shall deliver to Lender
copies of any and all papers served in connection with such proceedings. Lender
may participate in any such proceedings if an Event of Default exists or if the
amount of the Award exceeds the Threshold Amount, and Borrower shall from time
to time deliver (or cause to be delivered) to Lender all instruments requested
by it to permit such participation. Borrower shall, at its expense, diligently
prosecute (or cause the diligent prosecution of) any such proceedings, and shall
consult with Lender, its attorneys and experts, and cooperate with them in the
carrying on or defense of any such proceedings. Notwithstanding any taking by
any public or quasi-public authority through Condemnation or otherwise
(including any transfer made in lieu of or in anticipation of the exercise of
such taking), Borrower shall continue to pay the Debt at the time and in the
manner provided for its payment in the Note and in this Agreement and the Debt
shall not be reduced until any Award shall have been actually received and
applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt (provided that Awards in respect of any
temporary taking of the Property, unless an Event of Default shall have occurred
and be continuing, shall be applied as if they constituted Rent). Lender shall
not be limited to the interest paid on the Award by the condemning authority but
shall be entitled to receive out of the Award interest at the rate or rates
provided herein or in the Note. If any portion of the Property is taken by a
condemning authority, Borrower shall promptly commence and diligently prosecute
(or shall cause the prompt commencement and diligent prosecution of) the
Restoration of the Property pursuant to Section 6.4 hereof and otherwise comply
with the provisions of Section 6.4 hereof. If the Property is sold, through
foreclosure or otherwise, prior to the receipt by Lender of the Award, Lender
shall have the right, whether or not a deficiency judgment on the Note shall
have been sought, recovered or denied, to receive the Award, or a portion
thereof sufficient to pay the Debt. Notwithstanding the foregoing provisions of
this Section 6.3, and Section 6.4 hereof, if the Loan or any portion thereof is
included in a REMIC Trust and, immediately following a release of any portion of
the Lien of the Security Instrument in connection with a Condemnation (but
taking into account any proposed Restoration on the remaining portion of the
Property), the Loan to Value Ratio is greater than 125% (such value to be
determined, in Lender’s sole discretion, by any commercially reasonable method
permitted to a REMIC Trust), the principal balance of the Loan must be paid down
in an amount sufficient to satisfy the REMIC Requirements, unless the Lender
receives an opinion of counsel that if such amount is not paid, the
Securitization will not fail to maintain its status as a REMIC Trust as a result
of the related release of such portion of the Lien of the Security Instrument.
In connection with the foregoing, the Net Proceeds shall not be available for
Restoration and shall be used to pay down the principal balance of the Loan,
without Yield Maintenance Premium or other penalty or perjury, to the extent set
forth above.

 

Section 6.4          Restoration.  The following provisions shall apply in
connection with the Restoration of the Property:

 

(a)          If the Net Proceeds shall be less than the Availability Threshold
and the costs of completing the Restoration shall be less than the Availability
Threshold, the Net Proceeds shall be disbursed by Lender to Borrower upon
receipt, provided that all of the conditions set forth in Section 6.4(b)(i)
hereof are met and Borrower delivers to Lender a written undertaking to
expeditiously commence and to satisfactorily complete with due diligence the
Restoration in accordance with the terms of this Agreement.

 

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(b)          If the Net Proceeds are equal to or greater than the Availability
Threshold or the costs of completing the Restoration are equal to or greater
than the Availability Threshold, Lender shall make the Net Proceeds available
for the Restoration in accordance with the provisions of this Section 6.4. The
term “Net Proceeds” for purposes of this Section 6.4 means: (i) the net amount
of all insurance proceeds received by Lender pursuant to Section 6.1(a)(i),
(iv), (ix) and (x) as a result of such damage or destruction, after deduction of
its reasonable costs and expenses (including reasonable counsel fees), if any,
in collecting same (“Insurance Proceeds”), or (ii) the net amount of the Award,
after deduction of its reasonable costs and expenses (including reasonable
counsel fees), if any, in collecting same (“Condemnation Proceeds”), whichever
the case may be.

 

(i)          The Net Proceeds shall be made available to Borrower for
Restoration provided that each of the following conditions are met:

 

(A)          no Default or Event of Default shall have occurred and be
continuing;

 

(B)          (1) in the event the Net Proceeds are Insurance Proceeds, less than
thirty-five percent (35%) of the total floor area of the Improvements on the
Property has been damaged, destroyed or rendered unusable as a result of such
Casualty or (2) in the event the Net Proceeds are Condemnation Proceeds, less
than fifteen percent (15%) of the land constituting the Property is taken, and
such land is located along the perimeter or periphery of the Property, and no
portion of the Improvements is located on such land;

 

(C)          The Master Lease shall remain in full force and effect during and
after the completion of the Restoration, notwithstanding the occurrence of any
such Casualty or Condemnation, whichever the case may be, and Borrower and/or
Master Tenant, as applicable under the Master Lease, shall make all necessary
repairs and restorations thereto at their sole cost and expense.

 

(D)          Borrower shall commence (or cause the commencement of) the
Restoration as soon as reasonably practicable (but in no event later than the
later of (i) one hundred twenty (120) days after such Casualty or Condemnation,
whichever the case may be, and (ii) thirty (30) days after receipt of the first
installment of insurance proceeds or Award, whichever the case may be) and shall
diligently pursue the same to satisfactory completion;

 

(E)           Lender shall be satisfied that any operating deficits, including
all scheduled payments of principal and interest under the Note, which will be
incurred with respect to the Property as a result of the occurrence of any such
Casualty or Condemnation, whichever the case may be, will be covered out of
(1) the Net Proceeds, (2) the insurance coverage referred to in Section
6.1(a)(ii) hereof, if applicable, or (3) by other funds of Borrower or Master
Tenant;

 

(F)           Lender shall be satisfied that the Restoration will be completed
on or before the earliest to occur of (1) six (6) months prior to the Maturity
Date, (2) the earliest date required for such completion under the terms of any
Leases, the Master Lease and the Franchise Agreement or Replacement Franchise
Agreement, as applicable, (3) such time as may be required under all applicable
Legal Requirements in order to repair and restore the Property to the condition
it was in immediately prior to such Casualty or to as nearly as possible the
condition it was in immediately prior to such Condemnation, as applicable, or
(4) the expiration of the insurance coverage referred to in Section 6.1(a)(ii)
hereof;

 

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(G)           the Property and the use thereof after the Restoration will be in
compliance with and permitted under all applicable Legal Requirements;

 

(H)           the Restoration will not result in a permanent reduction of guest
rooms at the Property and the shall be done and completed by Borrower in an
expeditious and diligent fashion and in compliance with all applicable Legal
Requirements;

 

(I)            such Casualty or Condemnation, as applicable, does not result in
the loss of access to the Property or the Improvements;

 

(J)            the Debt Service Coverage Ratio for the Property, after giving
effect to the Restoration, shall be equal to or greater than 1.20 to 1.0;

 

(K)          Borrower shall deliver, or cause to be delivered, to Lender a
signed detailed budget approved in writing by Borrower’s architect or engineer
stating the entire cost of completing the Restoration, which budget shall be
subject to Lender’s approval, which shall not be unreasonably withheld unless an
Event of Default then exists;

 

(L)           the Net Proceeds (including any undisbursed insurance proceeds
that the relevant insurer has agreed to disburse as restoration work
progresses), together with any cash or cash equivalent deposited by Borrower
with Lender are sufficient in Lender’s discretion to cover the cost of the
Restoration; and

 

(M)          the Management Agreement and the Franchise Agreement (or a
Replacement Franchise Agreement) shall remain in full force and effect
notwithstanding the occurrence of such Casualty or Condemnation.

 

(ii)         The Net Proceeds, as paid out by the relevant insurer, shall be
held by Lender in an interest-bearing Eligible Account and, until disbursed in
accordance with the provisions of this Section 6.4(b), shall constitute
additional security for the Debt and Other Obligations under the Loan Documents.
The Net Proceeds shall be disbursed by Lender to, or as directed by, Borrower
from time to time during the course of the Restoration, upon receipt of evidence
satisfactory to Lender that (A) all materials installed and work and labor
performed (except to the extent that they are to be paid for out of the
requested disbursement or are subject to a Casualty Retainage) in connection
with the Restoration have been paid for in full, and (B) there exist no notices
of pendency, stop orders, mechanic’s or materialman’s liens or notices of
intention to file same, or any other liens or encumbrances of any nature
whatsoever on the Property which have not either been fully bonded to the
satisfaction of Lender and discharged of record or in the alternative fully
insured to the satisfaction of Lender by the title company issuing the Title
Insurance Policy.

 

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(iii)        All plans and specifications required in connection with a
Restoration the cost of which shall exceed the Threshold Amount shall be subject
to prior review and acceptance in all respects by Lender and, at Lender’s
election, by an independent consulting engineer selected by Lender (the
“Casualty Consultant”), such review and acceptance not to be unreasonably
withheld unless an Event of Default then exists. Lender shall have the use of
the plans and specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the contractors,
subcontractors and materialmen engaged in the Restoration in respect of any
contract pursuant to which they are to receive compensation in excess of
$100,000, as well as the contracts under which they have been engaged, shall be
subject to prior review and approval by Lender and the Casualty Consultant, not
to be unreasonably withheld. All reasonable costs and expenses incurred by
Lender in connection with making the Net Proceeds available for the Restoration
including, without limitation, reasonable counsel fees and disbursements and the
Casualty Consultant’s fees, shall be paid by Borrower.

 

(iv)        In no event shall Lender be obligated to make disbursements of the
Net Proceeds in excess of an amount equal to the costs actually incurred from
time to time for work in place as part of the Restoration, as certified by the
Casualty Consultant, minus the Casualty Retainage. The term “Casualty Retainage”
means an amount equal to ten percent (10%) of the costs actually incurred for
work in place as part of the Restoration, as certified by the Casualty
Consultant, until the Restoration has been completed. The Casualty Retainage
shall in no event, and notwithstanding anything to the contrary set forth above
in this Section 6.4(b), be less than the amount actually held back by Borrower
and/or Master Tenant from contractors, subcontractors and materialmen engaged in
the Restoration. The Casualty Retainage shall not be released until the Casualty
Consultant certifies to Lender that the Restoration has been completed in
accordance with the provisions of this Section 6.4(b) and that all approvals
necessary for the re-occupancy and use of the Property have been obtained from
all appropriate governmental and quasi-governmental authorities, and Lender
receives evidence satisfactory to Lender that the costs of the Restoration have
been paid in full or will be paid in full out of the Casualty Retainage;
provided, however, that Lender shall release the portion of the Casualty
Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the Casualty
Consultant certifies to Lender that the contractor, subcontractor or materialman
has satisfactorily completed all work and has supplied all materials in
accordance with the provisions of the contractor’s, subcontractor’s or
materialman’s contract, the contractor, subcontractor or materialman delivers
the lien waivers (or conditional lien waivers) and evidence of payment in full,
upon application of the funds so released, of all sums due to the contractor,
subcontractor or materialman as may be reasonably requested by Lender or by the
title company issuing the Title Insurance Policy, and, if requested by Lender,
Lender receives an endorsement to the Title Insurance Policy insuring the
continued priority of the lien of the Security Instrument and evidence of
payment of any premium payable for such endorsement. If required by Lender, the
release of any such portion of the Casualty Retainage shall be approved by the
surety company, if any, which has issued a payment or performance bond with
respect to the contractor, subcontractor or materialman.

 

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(v)         Lender shall not be obligated to make disbursements of the Net
Proceeds more frequently than once every calendar month.

 

(vi)        If at any time the Net Proceeds or the undisbursed balance thereof
shall not, in the opinion of Lender in consultation with the Casualty
Consultant, be sufficient to pay in full the balance of the costs which are
estimated by the Casualty Consultant to be incurred in connection with the
completion of the Restoration, Borrower shall deposit the deficiency (the “Net
Proceeds Deficiency”) with Lender before any further disbursement of the Net
Proceeds shall be made. The Net Proceeds Deficiency deposited with Lender shall
be held by Lender and shall be disbursed for costs actually incurred in
connection with the Restoration on the same conditions applicable to the
disbursement of the Net Proceeds, and until so disbursed pursuant to this
Section 6.4(b) shall constitute additional security for the Debt and Other
Obligations under the Loan Documents.

 

(vii)       Provided no continuing Event of Default shall then exist, after the
Casualty Consultant certifies to Lender that the Restoration has been completed
in accordance with the provisions of this Section 6.4(b), and the receipt by
Lender of evidence satisfactory to Lender that all costs incurred in connection
with the Restoration have been paid in full, the excess, if any, of the Net
Proceeds (and the remaining balance, if any, of the Net Proceeds Deficiency)
deposited with Lender shall be (1) if a Cash Sweep Period then exists, deposited
in the Cash Management Account to be disbursed in accordance with this
Agreement, and (2) if no Cash Sweep Period then exists, disbursed to or in
accordance with the instructions of Borrower.

 

(c)          All Net Proceeds not required (i) to be made available for the
Restoration or (ii) to be returned to Borrower as excess Net Proceeds pursuant
to Section 6.4(b)(vii) hereof may be retained and applied by Lender toward the
payment of the Debt in accordance with Section 9(b) of the Note, whether or not
then due and payable in such order, priority and proportions as Lender in its
discretion shall deem proper (provided that, other than during the existence of
an Event of Default, no prepayment premium shall be payable in connection
therewith), or, at the discretion of Lender, the same may be paid, either in
whole or in part, to or at the direction of Borrower for such purposes as Lender
shall approve, in its discretion.

 

(d)          In the event of foreclosure of the Security Instrument, or other
transfer of title to the Property in extinguishment in whole or in part of the
Debt all right, title and interest of Borrower in and to the Policies that are
not blanket Policies then in force concerning the Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or
Lender or other transferee in the event of such other transfer of title.

 

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ARTICLE VII
RESERVE FUNDS

 

Section 7.1          Intentionally Omitted.

 

Section 7.2          Tax and Insurance Escrow Fund.  Borrower shall pay to
Lender (a) on the Closing Date an initial deposit and (b) on each Payment Date
thereafter (i) one-twelfth (1/12) of the Taxes and Other Charges that Lender
estimates will be payable during the next ensuing twelve (12) months in order to
accumulate with Lender sufficient funds to pay all such Taxes and Other Charges
at least thirty (30) days prior to their respective delinquency dates, and (ii)
one-twelfth (1/12) of the Insurance Premiums that Lender estimates will be
payable for the renewal of the coverage afforded by the Policies upon the
expiration thereof in order to accumulate with Lender sufficient funds to pay
all such Insurance Premiums at least thirty (30) days prior to the expiration of
the Policies (said amounts in (a) and (b) above hereinafter called the “Tax and
Insurance Escrow Fund”). Provided, however, so long as (x) Borrower provides
Lender with satisfactory evidence (as determined by Lender) that Guarantor
maintains blanket policies of insurance covering substantially all real property
owned directly or indirectly by Guarantor, including, without limitation, the
Property and in accordance with Section 6.1 hereof and (x) no monetary Event of
Default shall have occurred, the provisions of this Section with regard to
Insurance Premiums shall not be applicable, until and unless Lender elects to
apply such provisions following (i) the issuance by any insurer or its agent of
any notice of cancellation, termination, or lapse of any insurance coverage
required under Section 6.1 hereof, (ii) any cancellation, termination, or lapse
of any insurance coverage required under Section 6.1 hereof whether or not any
notice is issued, (iii) Lender having not received from Borrower evidence of
insurance coverages as required by and in accordance with the terms of Section
6.1 hereof, or (iv) during the existence of any Event of Default. Lender shall
apply the Tax and Insurance Escrow Fund to payments of Taxes and Insurance
Premiums required to be made by Borrower pursuant to Section 5.1.2 hereof and
under the Security Instrument. In making any payment relating to the Tax and
Insurance Escrow Fund, Lender may do so according to any bill, statement or
estimate procured from the appropriate public office (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax,
assessment, sale, forfeiture, tax lien or title or claim thereof. If the amount
of the Tax and Insurance Escrow Fund shall exceed the amounts due for Taxes,
Other Charges and Insurance Premiums pursuant to Section 5.1.2 hereof, Lender
shall, in its discretion, return any excess to Borrower or credit such excess
against future payments to be made to the Tax and Insurance Escrow Fund. If at
any time Lender reasonably determines that the Tax and Insurance Escrow Fund is
not or will not be sufficient to pay Taxes, Other Charges and Insurance Premiums
by the dates set forth in (a) and (b) above, Lender shall notify Borrower of
such determination and Borrower shall increase its monthly payments to Lender by
the amount that Lender estimates is sufficient to make up the deficiency at
least thirty (30) days prior to the delinquency date of the Taxes and Other
Charges or thirty (30) days prior to expiration of the Policies, as the case may
be.

  

Section 7.3          Replacements and Replacement Reserve.

 

7.3.1.      Replacement Reserve Fund.  Borrower shall pay to Lender on each
Payment Date the Replacement Reserve Monthly Deposit for expenses with respect
to Replacement incurred after the date hereof. Amounts so deposited shall
hereinafter be referred to as Borrower’s “Replacement Reserve Fund” and the
account in which such amounts are held shall hereinafter be referred to as
Borrower’s “Replacement Reserve Account.” Lender may reassess its estimate of
the amount necessary for the Replacement Reserve Fund from time to time, and may
increase the monthly amounts required to be deposited into the Replacement
Reserve Fund upon thirty (30) days’ notice to Borrower if Lender determines in
its discretion that an increase is necessary to maintain the proper maintenance
and operation of the Property.

 

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7.3.2.      Disbursements from Replacement Reserve Account.  (a) Lender shall
make disbursements from the Replacement Reserve Account to pay, or to reimburse
Borrower or Master Tenant, for the costs of the Replacements only. Lender shall
not be obligated to make disbursements from the Replacement Reserve Account to
pay, or to reimburse Borrower or Master Tenant, for the costs of routine
maintenance to the Property, replacements of inventory or for costs of a type
not typically accounted for as an “FF&E” expense or of inventory consumed in the
ordinary course of the operation of the Property.

 

(b)          Lender shall, upon written request from Borrower or Master Tenant
and satisfaction of the requirements set forth in this Section 7.3.2, disburse
to Borrower or Master Tenant, as the case may be, amounts from the Replacement
Reserve Account necessary to pay for the actual approved costs of Replacements
or to reimburse Borrower or Master Tenant therefor, upon completion of such
Replacements (or to pay vendors’ required deposits as provided under the terms
of the contract relating to Borrower’s purchase of such Replacements, or upon
partial completion, or to pay required installment payments, in the case of
Replacements made pursuant to Section 7.3.2(e) hereof) as determined by Lender.
In no event shall Lender be obligated to disburse funds from the Replacement
Reserve Account if a Default or an Event of Default exists.

 

(c)          Each request for disbursement from the Replacement Reserve Account
shall be in a form specified or approved by Lender and shall specify (i) the
specific Replacements for which the disbursement is requested, (ii) the quantity
and price of each item purchased, if the Replacement includes the purchase or
replacement of specific items, (iii) the price of all materials (grouped by type
or category) used in any Replacement other than the purchase or replacement of
specific items, and (iv) the cost of all contracted labor or other services
applicable to each Replacement for which such request for disbursement is made.
With each request Borrower, or Master Tenant, shall certify that all
Replacements for which such disbursement is requested have been or will be made
in accordance with all applicable Legal Requirements of any Governmental
Authority having jurisdiction over the Property (or, in the case of a vendor’s
required deposit, that such deposit is due and payable). Each request for
disbursement shall include copies of invoices for all items or materials
purchased and all contracted labor or services provided, or for the relevant
required vendor’s deposit and, if Borrower or Master Tenant is seeking
reimbursement rather than payment, evidence satisfactory to Lender of payment of
all such amounts. Except as provided in this Section 7.3.2 with respect to
required vendor’s deposits or in Section 7.3.2(e) hereof, each request for
disbursement from the Replacement Reserve Account shall be made only after
completion of the Replacement for which disbursement is requested. Borrower
shall provide, or cause Master Tenant to provide, Lender evidence of completion
of the subject Replacement satisfactory to Lender in its reasonable judgment.

 

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(d)          Borrower shall pay, or shall cause Master Tenant to pay, all
invoices in connection with the Replacements with respect to which a
disbursement is requested prior to submitting such request for disbursement from
the Replacement Reserve Account or, at the request of Borrower or Master Tenant,
Lender shall issue checks, payable to Borrower or Master Tenant, as applicable
(or, in respect of any requested check in excess of $25,000, joint checks
payable to Borrower or Master Tenant (as applicable) and the contractor,
supplier, materialman, mechanic, subcontractor or other party to whom payment is
due in connection with a Replacement. In the case of payments made by joint
check, Lender may require a conditional waiver of lien from each Person who is
to receive payment from such payment prior to Lender’s disbursement thereof from
the Replacement Reserve Account. In addition, as a condition to any
disbursement, Lender may require Borrower to obtain lien waivers, or conditional
lien waivers, from each contractor, supplier, materialman, mechanic or
subcontractor who receives payment in an amount equal to or greater than
$100,000.00 for completion of its work or delivery of its materials. Any lien
waiver or conditional lien waiver delivered hereunder shall conform to the
requirements of applicable law and shall cover all work performed and materials
supplied (including equipment and fixtures) for the Property by that contractor,
supplier, subcontractor, mechanic or materialman through the date covered by the
current reimbursement request (or, if payment to such contractor, supplier,
subcontractor, mechanic or materialmen is to be made by a joint check, the
release of lien shall be effective through the date covered by the previous
release of funds request).

 

(e)          If (i) the contractor performing such Replacement requires periodic
payments pursuant to terms of a written contract, and (ii) in the case of a
Replacement the cost of which exceeds $100,000.00, Lender has approved in
writing in advance (such approval not to be unreasonably withheld, conditioned
or delayed) such periodic payments, a request for reimbursement from the
Replacement Reserve Account may be made after completion of a portion of the
work under such contract, provided (A) such contract requires payment upon
completion of such portion of the work or payment of a final installment prior
to delivery of the Replacements to which such contract relates, (B) the
materials for which the request is made are on site at the Property and are
properly secured or have been installed in the Property, or delivery thereof is
conditioned upon payment of the requested disbursement, (C) all other conditions
in this Agreement for disbursement have been satisfied, (D) funds remaining in
the Replacement Reserve Account are, in Lender’s reasonable judgment, sufficient
to complete such Replacement, and (E) if required by Lender in respect of any
Replacement the cost of which exceeds $100,000 and which involves the
performance of work to the Property by a contractor engaged for such purpose,
each contractor or subcontractor receiving payments under such contract shall
provide a waiver of lien with respect to amounts which have been paid to that
contractor or subcontractor.

 

(f)           Borrower shall not make a request for disbursement from the
Replacement Reserve Account more frequently than once in any calendar month and
(except in connection with the final disbursement) the total cost of all
Replacements in any request shall not be less than $5,000.00.

 

7.3.3.      Performance of Replacements.  (a) Borrower shall make or cause
Master Tenant to make Replacements when required in order to keep the Property
in condition and repair consistent with other comparable properties in the same
market segment in the metropolitan area in which the Property is located, the
brand standards provided in the Franchise Agreement and to keep the Property or
any portion thereof from deteriorating. Borrower shall complete or cause Master
Tenant to complete all Replacements in a good and workmanlike manner as soon as
practicable following the commencement of making each such Replacement.

 

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(b)          Lender reserves the right, at its option, to approve each contract
or work order with any materialman, mechanic, supplier, subcontractor,
contractor or other party providing labor or materials in connection with the
Replacements the total contracted-for payments to which exceed $100,000. Upon
Lender’s request, Borrower shall assign to Lender any such contract or
subcontract to which Borrower is a party, or cause Master Tenant to assign to
Borrower, and then shall assign to Lender, any such contract or subcontract to
which Master Tenant is a party.

 

(c)          In the event Lender determines in its reasonable discretion that
any Replacement is not being performed in a workmanlike or timely manner or that
any Replacement has not been completed in a workmanlike or timely manner or any
Replacement does not comply with brand standards under the Franchise Agreement
and such failure continues for more than thirty (30) days after notice from
Lender to Borrower, Lender shall have the option (upon five (5) Business Days’
notice to Borrower, except in the case of an emergency) to withhold disbursement
for such unsatisfactory Replacement and to proceed under existing contracts or
to contract with third parties to complete such Replacement and to apply the
Replacement Reserve Fund toward the labor and materials necessary to complete
such Replacement, without providing any further notice to Borrower and to
exercise any and all other remedies available to Lender upon an Event of Default
hereunder.

 

(d)          In order to facilitate Lender’s completion or making of such
Replacements pursuant to Section 7.3.3(c) above, Borrower grants Lender the
right, during the existence of an Event of Default or as necessary to respond to
emergency conditions, to enter onto the Property and perform any and all work
and labor necessary to complete or make such Replacements or employ watchmen to
protect the Property from damage. All sums so expended by Lender, to the extent
not from the Replacement Reserve Fund, shall be deemed to have been advanced
under the Loan to Borrower and secured by the Security Instrument. For this
purpose Borrower constitutes and appoints Lender its true and lawful attorney in
fact with full power of substitution to complete or undertake such Replacements
in the name of Borrower. Such power of attorney shall be deemed to be a power
coupled with an interest and cannot be revoked. Borrower empowers said attorney
in fact as follows: (i) to use any funds in the Replacement Reserve Account for
the purpose of making or completing such Replacements; (ii) to make such
additions, changes and corrections to such Replacements as shall be necessary or
desirable to complete such Replacements; (iii) to employ such contractors,
subcontractors, agents, architects and inspectors as shall be required for such
purposes; (iv) to pay, settle or compromise all existing bills and claims which
are or may become Liens against the Property, or as may be necessary or
desirable for the completion of such Replacements, or for clearance of title;
(v) to execute all applications and certificates in the name of Borrower which
may be required by any of the contract documents; (vi) to prosecute and defend
all actions or proceedings in connection with the Property or the rehabilitation
and repair of the Property; and (vii) to do any and every act which Borrower
might do in its own behalf to fulfill the terms of this Agreement.

 

(e)          Nothing in this Section 7.3.3 shall: (i) make Lender responsible
for making or completing any Replacements; (ii) require Lender to expend funds
in addition to the Replacement Reserve Fund to make or complete any Replacement;
(iii) obligate Lender to proceed with any Replacements; or (iv) obligate Lender
to demand from Borrower additional sums to make or complete any Replacement.

 

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(f)           Borrower shall permit, and shall cause Master Tenant to permit,
Lender and Lender’s agents and representatives (including Lender’s engineer,
architect, or inspector) or third parties making Replacements pursuant to this
Section 7.3.3 to enter onto the Property during normal business hours (subject
to the rights of Tenants under their Leases or Hotel Transactions) to inspect
the progress of any Replacements and all materials being used in connection
therewith, to examine all plans and shop drawings relating to such Replacements
which are or may be kept at the Property, and to complete any Replacements made
pursuant to this Section 7.3.3. Borrower shall cause, or shall cause Master
Tenant to cause, all contractors and subcontractors to cooperate with Lender or
Lender’s representatives or such other persons described above in connection
with inspections described in this Section 7.3.3(f) or the completion of
Replacements pursuant to this Section 7.3.3.

 

(g)          Lender may require an inspection of the Property at Borrower’s
expense prior to making a disbursement in excess of $100,000 from the
Replacement Reserve Account in respect of any completed Replacement in in order
to verify completion of the Replacements for which reimbursement is sought.
Lender may require that such inspection be conducted by an appropriate
independent qualified professional selected by Lender or may require a copy of a
certificate of completion by an independent qualified professional acceptable to
Lender prior to the disbursement of any amount in excess of $100,000 from the
Replacement Reserve Account. Borrower shall pay the expense of the inspection as
required hereunder, whether such inspection is conducted by Lender or by an
independent qualified professional.

 

(h)          The Replacements and all materials, equipment, fixtures, or any
other item comprising a part of any Replacement shall be constructed, installed
or completed, as applicable, free and clear of all mechanic’s, materialmen’s or
other liens (except for those Liens existing on the date of this Agreement which
have been approved in writing by Lender or otherwise exist in compliance with
the Loan Documents).

 

(i)           Before each disbursement from the Replacement Reserve Account,
Lender may require Borrower to provide Lender with a search of title to the
Property effective to the date of the disbursement, which search shows that no
mechanic’s or materialmen’s liens or other liens of any nature have been placed
against the Property since the date of recordation of the related Security
Instrument and that title to the Property is free and clear of all Liens (other
than the lien of the related Security Instrument and any other Liens previously
approved in writing by Lender, if any).

 

(j)           All Replacements shall comply with all applicable Legal
Requirements of all Governmental Authorities having jurisdiction over the
Property and applicable insurance requirements including applicable building
codes, special use permits, environmental regulations, and requirements of
insurance underwriters.

 

(k)          In addition to any insurance required under the Loan Documents,
Borrower shall to the extent applicable provide or cause to be provided
workmen’s compensation insurance, builder’s risk, and public liability insurance
and other insurance to the extent required under applicable law in connection
with a particular Replacement. All such policies shall be in form and amount
reasonably satisfactory to Lender. All such policies which can be endorsed with
standard mortgagee clauses making loss payable to Lender or its assigns shall be
so endorsed. Certified copies of such policies shall be delivered to Lender.

 

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7.3.4.      Failure to Make Replacements.  (a) It shall be an Event of Default
under this Agreement if Borrower fails to comply with any provision of this
Section 7.3 and such failure is not cured within thirty (30) days after notice
from Lender; provided, however, if such failure is not capable of being cured
within said thirty (30) day period, then provided that Borrower commences, or
causes commencement of, action to complete such cure and thereafter diligently
proceeds to complete such cure (or causes it to be so completed), such thirty
(30) day period shall be extended for such time as is reasonably necessary for
Borrower or Master Tenant, in the exercise of due diligence, to cure such
failure, but such additional period of time shall not exceed ninety (90) days.
Subject to Section 7.6(b) hereof, upon the occurrence and during the
continuation of such an Event of Default, Lender may use the Replacement Reserve
Fund (or any portion thereof) for any purpose, including completion of the
Replacements as provided in Section 7.3.3, or for any other repair or
replacement to the Property or toward payment of the Debt in such order,
proportion and priority as Lender may determine in its sole discretion. Lender’s
right to withdraw and apply the Replacement Reserve Fund shall be in addition to
all other rights and remedies provided to Lender under this Agreement and the
other Loan Documents.

 

(b)          Nothing in this Agreement shall obligate Lender to apply all or any
portion of the Replacement Reserve Fund on account of an Event of Default to
payment of the Debt or in any specific order or priority.

 

7.3.5.      Balance in the Replacement Reserve Account.  The insufficiency of
any balance in the Replacement Reserve Account shall not relieve Borrower from
its obligation to fulfill all preservation and maintenance covenants in the Loan
Documents and the Franchise Agreement. Notwithstanding anything to the contrary
contained herein, unless agreed to in writing by Lender in advance, Replacement
Reserve Funds attributable to the Duplicative Replacements shall only be
disbursed for work or costs associated with such Duplicative Replacements and
not for any other Replacements.

 

7.3.6.      Additional PIP Requirements.  Upon Borrower’s request, to the extent
Lender determines that sufficient Replacement Reserve Funds remain following
disbursements for Replacements in accordance with this Section 7.3, Replacement
Reserve Funds may be disbursed to Borrower to pay or reimburse Borrower for
Existing PIP Requirements or Additional PIP Requirements in accordance with, as
applicable, Section 7.4 or Section 7.8 below (and subject to the disbursement
provisions contained in Section 7.4 or Section 7.8 below, as applicable) as if
such Replacement Reserve Funds had been deposited into the Existing PIP Reserve
or the Additional PIP Reserve Account.

 

Section 7.4          Additional PIP Reserve Fund.

 

7.4.1.      Additional PIP Reserve Fund.  Upon the occurrence of an Additional
PIP Reserve Event, Borrower shall pay to Lender an amount equal to the
Additional PIP Reserve Monthly Deposit in respect of such Additional PIP
Requirements on each of the following twelve (12) Payment Dates. Amounts
deposited pursuant to this Section 7.4 are referred to herein as the “Additional
PIP Reserve Fund” and the account in which such amounts are held by Lender shall
hereinafter be referred to as the “Additional PIP Reserve Account.” Lender may
from time to time reassess its estimate of the amount necessary for Additional
PIP Requirements, and may require Borrower to increase the Additional PIP
Reserve Funds by making one or more additional deposits thereto upon thirty (30)
days’ notice to Borrower if Lender determines in its reasonable discretion that
an increase is necessary to maintain proper operation of the Property.

 

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7.4.2.      Disbursements from the PIP Reserve Account.  Lender shall disburse
Additional PIP Reserve Funds only for Additional PIP Requirements or upon
completion of Additional PIP Requirements. Provided no Event of Default has
occurred and is continuing, Lender shall disburse Additional PIP Reserve Funds
to Borrower or Master Tenant, as the case may be, within fifteen (15) Business
Days after the delivery by Borrower or Master Tenant to Lender of a request
therefor (but not more often than once per month), in increments of at least
$10,000 (or a lesser amount if the total amount of the Additional PIP Reserve
Funds is less than $10,000, in which case only one disbursement of the amount
remaining shall be made), accompanied by the following items (which items shall
be in form and substance satisfactory to Lender): (i) an Officer’s Certificate
(A) stating that the items to be funded by the requested disbursement are
Additional PIP Requirements, (B) stating that all Additional PIP Requirements at
the Property to be funded by the requested disbursement have been completed in a
good and workmanlike manner and in accordance with all Legal Requirements, (C)
identifying each Person that supplied materials or labor in connection with the
Additional PIP Requirements to be funded by the requested disbursement, (D)
stating that each such Person has been paid in full or will be paid in full upon
such disbursement, or to pay vendors’ required deposits or installment payments
as provided under the terms of the contract relating to Borrower’s or Master
Tenant’s purchase of such Additional PIP Requirements (and certifying that such
deposit is due and payable), or, if such payment is a progress payment, that
such payment represents full payment to such Person, less any applicable
retention amount, for work completed through the date of the relevant invoice
from such Person, (E) stating that the Additional PIP Requirements (or relevant
portion thereof) to be funded have not been the subject of a previous
disbursement, and (F) stating that all previous disbursements for Additional PIP
Requirements have been used to pay the previously identified Additional PIP
Requirements, (ii) as to any completed Additional PIP Requirements, a copy of
any license, permit or other approval by any Governmental Authority required, if
any, in connection with such Additional PIP Requirement and not previously
delivered to Lender, (iii) copies of appropriate lien waivers (or conditional
lien waivers) or other evidence of payment or entitlement to payment
satisfactory to Lender, (iv) at Lender’s option, if the cost of the Additional
PIP Requirements to be funded exceeds $50,000, a title search for the Property
indicating that the Property is free from all Liens, claims and other
encumbrances not previously approved by Lender, (v) intentionally omitted, and
(vi) such other evidence as Lender shall reasonably request to demonstrate that
the Additional PIP Requirements to be funded by the requested disbursement have
been completed (or completed to the extent of the requested payment) and are
paid for or will be paid upon such disbursement to Borrower or Master Tenant, as
the case may be.

 

7.4.3.      Additional PIP Reserve, Generally.

 

(a)          Nothing in this Section 7.4 shall (i) make Lender responsible for
making or completing the Additional PIP Requirements; (ii) require Lender to
expend funds in addition to the Additional PIP Reserve Funds to complete any
Additional PIP Requirements; (iii) obligate Lender to proceed with the
Additional PIP Requirements; or (iv) obligate Lender to demand from Borrower
additional sums to complete any Additional PIP Requirements.

 

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(b)          Borrower shall permit, and shall cause Master Tenant to permit,
Lender and Lender’s agents and representatives (including Lender’s engineer,
architect, or inspector) or third parties pursuant to this Section 7.4 to enter
onto the Property during normal business hours (subject to the rights of Tenants
under their Leases or Hotel Transactions) to inspect the progress of any
Additional PIP Requirements and all materials being used in connection therewith
and to examine all plans and shop drawings relating to such Additional PIP
Requirements which are or may be kept at the Property. Borrower shall cause, or
shall cause Master Tenant to cause, all contractors and subcontractors to
cooperate with Lender or Lender’s representatives or such other Persons
described above in connection with inspections described in this Section.

 

(c)          In addition to any insurance required under the Loan Documents,
Borrower shall to the extent applicable provide or cause to be provided
workmen’s compensation insurance, builder’s risk, and public liability insurance
and other insurance to the extent required under applicable law in connection
with the Additional PIP Requirements. All such policies shall be in form and
amount reasonably satisfactory to Lender. All such policies which can be
endorsed with standard mortgagee clauses making loss payable to Lender or its
assigns shall be so endorsed. Certified copies of such policies shall be
delivered to Lender.

 

(d)          On the Monthly Payment Date following Lender’s receipt of evidence
acceptable to Lender confirming that all Additional PIP Requirements have been
completed, and provided no Event of Default has occurred and is continuing,
Lender shall release remaining Additional PIP Reserve Funds, if any, to or at
the direction of Borrower.

 

Section 7.5          Excess Cash Flow Reserve Fund.

 

7.5.1.      Deposits to Excess Cash Flow Reserve Account.  During a Cash Sweep
Period Borrower shall deposit with Lender, or shall cause to be deposited with
Lender, all Excess Cash Flow in the Cash Management Account, which shall be held
by Lender as additional security for the Master Lease (in the case of funds
belonging to Master Tenant (“Master Tenant’s Excess Cash Flow”)) or the Loan (in
the case of funds belonging to Borrower (“Borrower’s Excess Cash Flow”)), and
amounts so held shall be hereinafter referred to as the “Excess Cash Flow
Reserve Fund” and the account to which such amounts are held shall hereinafter
be referred to as the “Excess Cash Flow Reserve Account”. Lender shall establish
sub-accounts within the Excess Cash Flow Reserve Account for Borrower’s Excess
Cash Flow (“Borrower’s Excess Cash Flow Subaccount”) and for Master Tenant’s
Excess Cash Flow (“Master Tenant’s Excess Cash Flow Subaccount”). Pursuant to
the terms of the Cash Management Agreement, Excess Cash Flow shall be allocated
between Master Tenant’s Excess Cash Flow and Borrower’s Excess Cash Flow as set
forth in written instructions from Master Tenant to Borrower and Lender. All
funds in the Borrower’s Excess Cash Flow Subaccount shall be held as additional
collateral for the Loan. All funds in the Master Tenant’s Excess Cash Flow
Subaccount shall be held as additional collateral for Master Tenant’s
obligations under the Master Lease (which has been collaterally assigned by
Borrower to Lender).

 

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7.5.2.      Release of Excess Cash Flow Reserve Funds.  During a Cash Sweep
Period caused solely by a DSCR Trigger Event, Lender shall, upon Borrower’s or
Master Tenant’s request, make Master Tenant’s Excess Cash Flow available for the
payment of payroll, utilities and food services for up to six (6) consecutive
months (but in any event, not more than twelve (12) months in the aggregate
during the term of the Loan) to the extent that there is insufficient current
cash flow from the Property for the payment of same, provided that (a) the total
amount disbursed to Borrower or Master Tenant, as applicable, for each such
expenditure shall not exceed 110% of the proportionate monthly amount set forth
in the Approved Annual Budget and (b) no Event of Default then exists. Upon the
occurrence of a Cash Sweep Event Cure, all Excess Cash Flow Reserve Funds shall
be deposited into the Cash Management Account to be disbursed in accordance with
the Cash Management Agreement. Any Excess Cash Flow Reserve Funds remaining
after the Debt has been paid in full or the Loan has been defeased shall be paid
to Borrower or Master Tenant, as either of them may direct.

 

Section 7.6          Reserve Funds, Generally.  (a) Borrower grants to Lender a
first-priority perfected security interest in all of its right, title and
interest in and to each of the Reserve Funds and any and all monies now or
hereafter deposited in each Reserve Fund (provided that, in the case of the
Master Tenant’s Excess Cash Flow or other funds belonging to Master Tenant
pursuant to Sections 4.2 and 5.1(a) of the Cash Management Agreement, Borrower
collaterally assigns to Lender Borrower’s security interest therein, Borrower
collaterally assigns to Lender Borrower’s security interest therein) as
additional security for payment of the Debt. Until expended or applied in
accordance herewith, the Reserve Funds, to the extent of Borrower’s interest
therein shall constitute additional security for the Debt, and in the case of
Master Tenant’s Excess Cash Flow, for the obligations of Master Tenant under the
Master Lease.

 

(b)          Upon the occurrence of an Event of Default and the acceleration of
the Loan by Lender, Lender may, in addition to any and all other rights and
remedies available to Lender, apply any sums then present in any or all of the
Reserve Funds (including, without limitation, any and all Master Tenant’s Excess
Cash Flow and/or the Seasonality Reserve Funds) to the payment of the Debt in
any order in its sole discretion. To the extent of any outstanding obligations
of Master Tenant under the Master Lease, such application shall be deemed to
have been paid in respect of such obligations. If an Event of Default then
exists but Lender has not accelerated the Loan, Lender may, in addition to any
and all other rights and remedies available to Lender, apply any sums then
present in any or all of the Reserve Funds that would constitute rent under the
Master Lease (including, without limitation, any and all Borrower’s Excess Cash
Flow) to the payment of the Debt in any order in its sole discretion.

 

(c)          The Reserve Funds shall not constitute trust funds and may be
commingled with other monies held by Lender. The Reserve Funds shall be held in
an Eligible Account in Permitted Investments as directed by Lender or Lender’s
Servicer. Unless expressly provided for in this Article VII, all interest on a
Reserve Fund shall not be added to or become a part thereof and shall be the
sole property of and shall be paid to Lender. Borrower or Master Tenant, as the
case may be, shall be responsible for payment of any federal, state or local
income or other tax applicable to the interest earned on the Reserve Funds
credited or paid to it.

 

(d)          Neither Borrower nor Master Tenant shall, without obtaining the
prior written consent of Lender, further pledge, assign or grant any security
interest in any Reserve Fund or the monies deposited therein or permit any lien
or encumbrance to attach thereto, or any levy to be made thereon, or authorize
any UCC-1 Financing Statements, except those naming Lender as the secured party,
to be filed with respect thereto.

 

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(e)          Lender and Servicer shall not be liable for any loss sustained on
the investment of any funds constituting the Reserve Funds provided that they
are invested in Permitted Investments. Borrower shall indemnify Lender and
Servicer and hold Lender and Servicer harmless from and against any and all
actions, suits, claims, demands, liabilities, losses, damages, obligations and
costs and expenses (including litigation costs and reasonable attorneys’ fees
and expenses) arising from or in any way connected with the Reserve Funds or the
performance of the obligations for which the Reserve Funds were established,
except to the extent due to Lender’s or Servicer’s willful misconduct or gross
negligence. At Lender’s request, Borrower shall assign, or shall cause Master
Tenant to assign, to Borrower upon which Borrower shall collaterally assign to
Lender all rights and claims Borrower may have against all Persons supplying
labor, materials or other services which are to be paid from or secured by the
Reserve Funds; provided, however, that Lender may not pursue any such right or
claim unless an Event of Default has occurred and remains uncured.

 

(f)           Except as may otherwise be provided in the Cash Management
Agreement, the required monthly deposits into the Reserve Funds and the Monthly
Debt Service Payment Amount shall be added together and shall be paid, or caused
to be paid, as an aggregate sum by Borrower to Lender.

 

(g)          Any amount remaining in the Reserve Funds after the Debt has been
paid in full or defeased shall be returned to Borrower or Master Tenant, at the
direction of either of them.

 

Section 7.7          Seasonality Reserve.

 

7.7.1.      Deposits to Seasonality Reserve Funds.  Borrower shall pay (or shall
cause to be paid) to Lender (i) on the Closing Date an initial deposit of
$234,000.00, and (ii) on the Payment Dates occurring each May through October
(inclusive) of each year (the “Seasonality Reserve Payment Period”) during the
term of the Loan, commencing on the Payment Date in May 2017, the Seasonality
Reserve Monthly Deposit. Amounts so deposited shall hereinafter be referred to
as the “Seasonality Reserve Fund” and the account in which such amounts are held
shall hereinafter be referred to as the “Seasonality Reserve Account”. For the
avoidance of doubt, Seasonality Reserve Funds shall constitute Master Tenant
funds and any deposit made by Master Tenant into the Seasonality Reserve Fund
shall be paid (x) from funds that do not constitute rent under the Master Lease
and (y) after Master Tenant has paid to Borrower all rent then due under the
Master Lease; provided, further, that Master Tenant has transferred, assigned
and granted to Borrower a first-priority security interest in all of Master
Tenant’s right, title and interest in and to, among other things, its interest
in the Seasonality Reserve Funds, which right, title and interest in turn has
been collaterally assigned by Borrower in favor of Lender pursuant to, inter
alia, the Security Instrument. Notwithstanding anything herein to the contrary,
in the event the deposit by (or on behalf of) Borrower to the Seasonality
Reserve Fund in any given month during the Seasonality Reserve Payment Period is
less than the Seasonality Reserve Monthly Deposit due to an insufficiency in Net
Cash Flow (each such shortfall, the “Seasonality Reserve Monthly Deposit
Shortfall”, and each such month a “Seasonality Reserve Monthly Deposit Shortfall
Month”), Borrower may increase (or may cause to be increased) the deposit to the
Seasonality Reserve Fund in the month immediately following the Seasonality
Reserve Monthly Deposit Shortfall Month by the amount of the Seasonality Reserve
Monthly Deposit Shortfall for the prior month such that the aggregate amount
deposited to the Seasonality Reserve Account shall equal the aggregate amount of
the Seasonality Reserve Monthly Deposit required for such months. In the event
that on the Payment Date in October of each calendar year the amount of the
Seasonality Reserve Funds is less than the applicable Seasonality Reserve Annual
Cap, Borrower shall immediately deposit (or shall cause to be immediately
deposited) with Lender the amount of the difference between the applicable
Seasonality Reserve Annual Cap and the Seasonality Reserve Funds then on
deposit, and any failure to make such payment shall be an Event of Default
hereunder. If, as of April 1st of each calendar year, funds then on deposit in
the Seasonality Reserve Account exceed the Seasonality Reserve Annual Cap for
the succeeding Seasonality Reserve Payment Period, then (x) the obligation for
Borrower to deposit (or to cause the deposit of) the Seasonality Reserve Monthly
Deposits shall be suspended for such Seasonality Reserve Payment Period and (y)
provided no Event of Default then exists, Lender shall disburse to (or at the
direction of) Master Tenant any such excess funds then on deposit in the
Seasonality Reserve Account.

 

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7.7.2.      Withdrawal of Seasonality Reserve Funds.  Provided no Event of
Default then exists, on the Payment Dates occurring each January through March
(inclusive) (the “Seasonality Reserve Disbursement Period”) during the term of
the Loan, Lender shall, upon a written request by Borrower, disburse funds on
deposit in the Seasonality Reserve Account in the amount so requested, provided
that (i) any such request shall be accompanied by an Officer’s Certificate from
Borrower certifying that the amount requested represents the projected shortfall
in Net Cash Flow for such month, (ii) any such request shall be made at least
ten (10) Business Days prior to the Payment Date of each month during the
Seasonality Disbursement Period, and (iii) no such disbursement may exceed 125%
of the shortfall for the corresponding month during the preceding year as
determined by Lender in connection with its calculation of the applicable
Seasonality Reserve Annual Cap.

 

7.7.3.      Seasonality Reporting Requirements.  In addition to the financial
statements required by Section 5.1.11 hereof, on or before April 1st of each
year, commencing on April 1, 2017, Borrower will furnish, or cause to be
furnished, to Lender the following items, accompanied by an Officer’s
Certificate stating that such items are true, correct, accurate, and complete
and fairly present the financial condition and results of the operations of
Borrower, Master Tenant and the Property (subject to normal year-end
adjustments) as applicable: (i) a calculation reflecting the Debt Service
Coverage Ratio for the immediately preceding Seasonality Disbursement Period and
(ii) monthly and year-to-date operating statements (including Capital
Expenditures) prepared for the immediately preceding Seasonality Disbursement
Period, noting net operating income, gross income, and operating expenses (not
including any contributions to the Replacement Reserve Fund, Existing PIP
Reserve or Additional PIP Reserve Fund), and other information necessary and
sufficient to fairly represent the financial position and results of operation
of the Property during such Seasonality Disbursement Period, and containing a
comparison of budgeted income and expenses and the actual income and expenses
during such Seasonality Disbursement Period.

 

Section 7.8          Existing PIP Reserve.

 

7.8.1.      Existing PIP Reserve Fund.  Borrower shall deposit with Lender on
the date hereof the amount of $1,200,000.00 in respect of the Existing PIP
Requirements. Amounts deposited pursuant to this Section 7.8 are referred to
herein as the “Existing PIP Reserve Fund” and the account in which such amounts
are held by Lender shall hereinafter be referred to as the “Existing PIP Reserve
Account.” Lender may from time to time reassess its estimate of the amount
necessary for Existing PIP Requirements, and may require Borrower to increase
the Existing PIP Reserve Funds by making one or more additional deposits thereto
upon thirty (30) days’ notice to Borrower if Lender determines in its reasonable
discretion that an increase is necessary to maintain proper operation of the
Property.

 

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7.8.2.      Disbursements from the Existing PIP Reserve Account.  Lender shall
disburse Existing PIP Reserve Funds only for Existing PIP Requirements or upon
completion of Existing PIP Requirements. Provided no Event of Default has
occurred and is continuing, Lender shall disburse Existing PIP Reserve Funds to
Borrower or Master Tenant, as the case may be, within fifteen (15) Business Days
after the delivery by Borrower or Master Tenant to Lender of a request therefor
(but not more often than once per month), in increments of at least $10,000 (or
a lesser amount if the total amount of the Existing PIP Reserve Funds is less
than $10,000, in which case only one disbursement of the amount remaining shall
be made), accompanied by the following items (which items shall be in form and
substance satisfactory to Lender): (i) an Officer’s Certificate (A) stating that
the items to be funded by the requested disbursement are Existing PIP
Requirements, (B) stating that all Existing PIP Requirements at the Property to
be funded by the requested disbursement have been completed in a good and
workmanlike manner and in accordance with all Legal Requirements, (C)
identifying each Person that supplied materials or labor in connection with the
Existing PIP Requirements to be funded by the requested disbursement, (D)
stating that each such Person has been paid in full or will be paid in full upon
such disbursement, or to pay vendors’ required deposits or installment payments
as provided under the terms of the contract relating to Borrower’s or Master
Tenant’s purchase of such Existing PIP Requirements (and certifying that such
deposit is due and payable), or, if such payment is a progress payment, that
such payment represents full payment to such Person, less any applicable
retention amount, for work completed through the date of the relevant invoice
from such Person, (E) stating that the Existing PIP Requirements (or relevant
portion thereof) to be funded have not been the subject of a previous
disbursement, and (F) stating that all previous disbursements for Existing PIP
Requirements have been used to pay the previously identified Existing PIP
Requirements, (ii) as to any completed Existing PIP Requirements, a copy of any
license, permit or other approval by any Governmental Authority required, if
any, in connection with such Existing PIP Requirement and not previously
delivered to Lender, (iii) copies of appropriate lien waivers (or conditional
lien waivers) or other evidence of payment or entitlement to payment
satisfactory to Lender, (iv) at Lender’s option, if the cost of the Existing PIP
Requirements to be funded exceeds $50,000, a title search for the Property
indicating that the Property is free from all Liens, claims and other
encumbrances not previously approved by Lender, (v) intentionally omitted, and
(vi) such other evidence as Lender shall reasonably request to demonstrate that
the Existing PIP Requirements to be funded by the requested disbursement have
been completed (or completed to the extent of the requested payment) and are
paid for or will be paid upon such disbursement to Borrower or Master Tenant, as
the case may be.

 

7.8.3.      Existing PIP Reserve, Generally.

 

(a)          Nothing in this Section 7.8 shall (i) make Lender responsible for
making or completing the Existing PIP Requirements; (ii) require Lender to
expend funds in addition to the Existing PIP Reserve Funds to complete any
Existing PIP Requirements; (iii) obligate Lender to proceed with the Existing
PIP Requirements; or (iv) obligate Lender to demand from Borrower additional
sums to complete any Existing PIP Requirements.

 

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(b)          Borrower shall permit, and shall cause Master Tenant to permit,
Lender and Lender’s agents and representatives (including Lender’s engineer,
architect, or inspector) or third parties pursuant to this Section 7.4 to enter
onto the Property during normal business hours (subject to the rights of Tenants
under their Leases or Hotel Transactions) to inspect the progress of any
Existing PIP Requirements and all materials being used in connection therewith
and to examine all plans and shop drawings relating to such Existing PIP
Requirements which are or may be kept at the Property. Borrower shall cause, or
shall cause Master Tenant to cause, all contractors and subcontractors to
cooperate with Lender or Lender’s representatives or such other Persons
described above in connection with inspections described in this Section.

 

(c)          In addition to any insurance required under the Loan Documents,
Borrower shall to the extent applicable provide or cause to be provided
workmen’s compensation insurance, builder’s risk, and public liability insurance
and other insurance to the extent required under applicable law in connection
with the Existing PIP Requirements. All such policies shall be in form and
amount reasonably satisfactory to Lender. All such policies which can be
endorsed with standard mortgagee clauses making loss payable to Lender or its
assigns shall be so endorsed. Certified copies of such policies shall be
delivered to Lender.

 

(d)          On the Monthly Payment Date following Lender’s receipt of evidence
acceptable to Lender confirming that all Existing PIP Requirements have been
completed, and provided no Event of Default has occurred and is continuing,
Lender shall release remaining Existing PIP Reserve Funds, if any, to or at the
direction of Borrower.

 

ARTICLE VIII
DEFAULTS

 

Section 8.1          Event of Default.  (a) Each of the following events shall
constitute an event of default hereunder (an “Event of Default”):

 

(i)          if (A) any scheduled payment of principal or interest (including
all amounts due on the Maturity Date) or any payment to a Reserve Fund is not
paid when due or (B) any other payment of any portion of the Debt is not paid
within five (5) days after notice to Borrower;

 

(ii)         if any of the Taxes or Other Charges, unless being contested in
accordance with the Loan Documents, are not paid prior to delinquency;

 

(iii)        if the Policies are not kept in full force and effect, or if
certified copies of the Policies (or other evidence of coverage satisfactory to
Lender and as may be expressly permitted hereunder) are not delivered to Lender
upon request within the applicable time periods as provided herein, provided,
that Borrower shall have the right to cure such failure to deliver the certified
copies (or other evidence reasonably satisfactory to Lender) of the Policies to
Lender, within five (5) Business Days of receipt of notice from Lender;

 

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(iv)        if, except with Lender’s prior written consent, a Transfer occurs in
violation of the provisions of this Agreement and Article 6 of the Security
Instrument;

 

(v)         if (subject to Section 8.1(a)(ix)) any representation or warranty
made by Borrower or Master Tenant herein or in any other Loan Document, or in
any report, certificate, financial statement or other instrument, agreement or
document furnished to Lender shall have been false or misleading in any material
respect as of the date the representation or warranty was made;

 

(vi)        if Borrower, Master Tenant or Principal shall make an assignment for
the benefit of creditors;

 

(vii)       if (A) Borrower, Principal, Master Tenant, Guarantor or any other
guarantor or indemnitor under any guarantee issued in connection with the Loan
shall commence any case, proceeding or other action (I) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, conservatorship or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to adjudicate it
a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with respect
to it or its debts, or (II) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower, Principal, Master Tenant,
Guarantor or any other guarantor or indemnitor shall make a general assignment
for the benefit of its creditors; or (B) there shall be commenced against
Borrower, Principal, Master Tenant, Guarantor or any other guarantor or
indemnitor any case, proceeding or other action of a nature referred to in
clause (A) above that is not dismissed within sixty (60) days of filing; or
(C) there shall be commenced against the Borrower, Principal, Master Tenant,
Guarantor or any other guarantor or indemnitor any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets; or (D) the
Borrower, Principal, Master Tenant, Guarantor or any other guarantor or
indemnitor shall take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set forth in clause (A),
(B), or (C) above; or (E) the Borrower, Principal, Master Tenant, Guarantor or
any other guarantor or indemnitor shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;

 

(viii)      if Borrower attempts to assign its rights under this Agreement or
any of the other Loan Documents or any interest herein or therein in
contravention of the Loan Documents;

 

(ix)         if (1) any of the representations contained in Section 4.1.30 were
breached, violated and/or false when made, or (2) Borrower or Master Tenant
breaches (A) any covenant contained in Section 4.1.30 hereof (provided that (a)
if such event was inadvertent or unintentional, (b) does not impair the status
of Borrower, Master Tenant or Principal as a single purpose, bankruptcy remote
entity, and (c) is not likely to increase the risk of substantive consolidation
of the assets and liability of Borrower, Master Tenant or Principal with any
other Person as evidenced in a substantive non-consolidation opinion in form and
substance satisfactory to Lender, then such event or breach shall not constitute
an Event of Default if Borrower shall cure (or shall cause to be cured) the same
within ten (10) Business Days of Borrower, Master Tenant and/or Principal
becoming aware of such breach or violation (via written notice or otherwise)) or
(B) there occurs any breach of any negative covenant contained in Section 5.2
hereof;

 

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(x)         with respect to any term, covenant or provision set forth herein
which specifically contains a notice requirement or grace period, if Borrower
shall be in default under such term, covenant or condition after the giving of
such notice or the expiration of such grace period;

 

(xi)        if any of the assumptions contained in the Insolvency Opinion
delivered to Lender in connection with the Loan, or in any Additional Insolvency
Opinion delivered subsequent to the closing of the Loan, is or shall become
untrue in any material respect;

 

(xii)       if a material default has occurred and continues beyond any
applicable cure period under the Management Agreement (or any Replacement
Management Agreement) and as a result of which default the Manager thereunder
gives notice of termination or cancellation of the Management Agreement or if
the Management Agreement is canceled, terminated or surrendered or expires
pursuant to its terms, unless in such case Borrower and/or Master Tenant, as
applicable, shall enter into a new management agreement with a Qualified Manager
in accordance with the applicable terms and provisions hereof;

 

(xiii)      if Borrower shall continue to be in Default under any of the terms,
covenants or conditions of Section 9.1 hereof (provided that Borrower shall not
be deemed to be in default under Section 9.1 hereof if Borrower’s inability to
satisfy any requirement thereof is due to circumstances beyond its control, such
as the unavailability of information requested by Lender), or fails to cooperate
with Lender in connection with a Securitization pursuant to the provisions of
Section 9.1 hereof, for ten (10) Business Days after notice to Borrower from
Lender;

 

(xiv)      if there shall be default under any of the other Loan Documents
beyond any applicable cure periods contained in such documents, whether as to
Borrower, Master Tenant or the Property;

 

(xv)       if (A) an Event of Default (as defined in the Master Lease) occurs
under the Master Lease, or (B) if any of the Master Lease Documents are amended,
modified or terminated without the prior written consent of Lender; and/or

 

(xvi)      if a material default by Master Tenant has occurred and continues
beyond any applicable cure period under the Franchise Agreement (or any
Replacement Franchise Agreement), as a result of which default the Franchisor
thereunder gives notice of termination or cancellation of the Franchise
Agreement (or any Replacement Franchise Agreement), or any expiration or other
termination of the Franchise Agreement (or any Replacement Franchise Agreement)
unless prior to or concurrently with any such expiration or termination Borrower
has entered into a Replacement Franchise Agreement;

 

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(xvii)     if Borrower, Master Tenant or Guarantor shall continue to be in
Default under any of the other terms, covenants or conditions of this Agreement
or any Loan Document not specified in subsections (i) to (xvi) above or
subsection (xviii) below, for ten (10) days after notice to Borrower or such
other Person from Lender, in the case of any Default which can be cured by the
payment of a sum of money, or for thirty (30) days after notice from Lender in
the case of any other Default; provided, however, that if Lender determines that
(A) such non monetary Default is susceptible of cure but cannot reasonably be
cured within such thirty (30) day period, (B) Borrower or such other Person, as
applicable, shall have commenced to cure such Default within such thirty (30)
day period and thereafter diligently and expeditiously proceeds to cure the
same, and (C) there is no material impairment to the value, use or operation of
the Property, then such thirty (30) day period shall be extended for such time
as is reasonably necessary for Borrower or such other Person, as applicable, in
the exercise of due diligence to cure such Default, such additional period not
to exceed sixty (60) days;

 

(xviii)    if there shall occur any other Event of Default, as defined in any
other Loan Document; or

 

(xix)      Borrower shall be in default under any other deed of trust, mortgage
or security agreement covering any part of the Property whether it be superior
or junior in priority to the Security Instrument (it not being implied by this
clause that any such encumbrance will be permitted).

 

(b)          Upon the occurrence of an Event of Default (other than an Event of
Default described in clauses (vi), (vii) or (viii) above) and at any time
thereafter, in addition to any other rights or remedies available to it pursuant
to this Agreement and the other Loan Documents or at law or in equity, Lender
may take such action, without notice or demand, that Lender deems advisable to
protect and enforce its rights against Borrower and the Property, including
declaring the Debt to be immediately due and payable, and Lender may enforce or
avail itself of any or all rights or remedies provided in the Loan Documents
against Borrower and any or all of the Property, including all rights or
remedies available at law or in equity; and upon any Event of Default described
in clauses (vi), (vii) or (viii) above, the Debt and Other Obligations of
Borrower hereunder and under the other Loan Documents shall immediately and
automatically become due and payable, without notice or demand, and Borrower
hereby expressly waives any such notice or demand, anything contained herein or
in any other Loan Document to the contrary notwithstanding.

 

Section 8.2          Remedies.  (a) Upon the occurrence of an Event of Default
and during the continuation thereof, all or any one or more of the rights,
powers, privileges and other remedies available to Lender against Borrower under
this Agreement or any of the other Loan Documents executed and delivered by, or
applicable to, Borrower or at law or in equity may be exercised by Lender at any
time and from time to time, whether or not all or any part of the Debt shall be
declared due and payable, and whether or not Lender shall have commenced any
foreclosure proceeding or other action for the enforcement of its rights and
remedies under any of the Loan Documents with respect to all or any part of the
Property. Any such actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singularly, successively, together or
otherwise, at such time and in such order as Lender may determine in its sole
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Without limiting the generality of the foregoing, Borrower agrees, to the extent
permitted under applicable law, that if an Event of Default is continuing (i)
Lender is not subject to any “one action” or “election of remedies” law or rule,
and (ii) all liens and other rights, remedies or privileges provided to Lender
shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property and the Security Instrument has been foreclosed
upon, sold and/or otherwise realized upon in satisfaction of the Debt or the
Debt has been paid in full.

 

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(b)          With respect to Borrower and the Property, nothing contained herein
or in any other Loan Document, except to the extent specifically limiting
Lender’s right to take a specified action or specifically requiring Lender to
take a specific action, shall be construed as requiring Lender to resort to the
Property for the satisfaction of any of the Debt in any preference or priority,
and Lender may seek satisfaction out of the Property, or any part thereof, in
its discretion in respect of the Debt. In addition, Lender shall have the right
from time to time to partially foreclose the Security Instrument in any manner
and for any amounts secured by the Security Instrument then due and payable as
determined by Lender in its discretion including the following circumstances:
(i) in the event Borrower defaults beyond any applicable grace period in the
payment of one or more scheduled payments of principal and interest, Lender may
foreclose the Security Instrument to recover such delinquent payments or (ii) in
the event Lender elects to accelerate less than the entire outstanding principal
balance of the Loan, Lender may foreclose the Security Instrument to recover so
much of the principal balance of the Loan as Lender may accelerate and such
other sums secured by the Security Instrument as Lender may elect.
Notwithstanding one or more partial foreclosures, the Property shall remain
subject to the Security Instrument to secure payment of sums secured by the
Security Instrument and not previously recovered.

 

(c)          Lender shall have the right from time to time during the
continuance of an Event of Default to sever the Note and the other Loan
Documents into one or more separate notes, mortgages and other security
documents (the “Severed Loan Documents”) in such denominations as Lender shall
determine in its discretion for purposes of evidencing and enforcing its rights
and remedies provided hereunder. Borrower shall execute and deliver to Lender
from time to time, promptly after the request of Lender, a severance agreement
and such other documents as Lender shall reasonably request in order to effect
the severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Lender. Borrower hereby absolutely and irrevocably
appoints Lender as its true and lawful attorney, coupled with an interest, in
its name and stead to make and execute all documents necessary or desirable to
effect the aforesaid severance, Borrower ratifying all that its said attorney
shall lawfully do by virtue thereof; provided, however, Lender shall not make or
execute any such documents under such power until five (5) Business Days after
notice has been given to Borrower by Lender of Lender’s intent to exercise its
rights under such power. Borrower shall be obligated to pay any reasonable costs
or expenses incurred in connection with the preparation, execution, recording or
filing of the Severed Loan Documents, and the Severed Loan Documents shall not
contain any representations, warranties or covenants not contained in the Loan
Documents and any such representations and warranties contained in the Severed
Loan Documents will be given by Borrower only as of the Closing Date.

 

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(d)          If an Event of Default exists, Borrower shall terminate (or shall
cause Master Tenant to terminate) the Franchise Agreement upon the written
request of Lender or any receiver of the Property. If for any reason the
Franchise Agreement is not terminated upon such request, Lender may terminate
the Franchise Agreement upon its acquisition of the Property by foreclosure or
deed in lieu thereof, notwithstanding any requirement of the Franchisor that
Lender assume the Franchise Agreement or enter into a replacement Franchise
Agreement. Borrower shall pay (or shall cause Master Tenant to pay) any
liquidated damages owed to Franchisor in connection with any termination of the
Franchise Agreement pursuant to this Section 8.2(d).

 

(e)          As used in this Section 8.2, a “foreclosure” shall include, without
limitation, any sale by power of sale.

 

Section 8.3          Remedies Cumulative; Waivers.  The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents, or existing at law or in equity
or otherwise. Lender’s rights, powers and remedies may be pursued singularly,
concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s discretion. No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default shall impair any such remedy,
right or power or shall be construed as a waiver thereof, but any such remedy,
right or power may be exercised from time to time and as often as may be deemed
expedient. A waiver of one Default or Event of Default with respect to Borrower
shall not be construed to be a waiver of any subsequent Default or Event of
Default by Borrower or to impair any remedy, right or power consequent thereon.

 

ARTICLE IX
SPECIAL PROVISIONS

 

Section 9.1          Securitization.

 

9.1.1.      Sale of Notes and Securitization.  (a) Borrower acknowledges and
agrees that Lender may sell all or any portion of the Loan and the Loan
Documents, or issue one or more participations therein, or consummate one or
more private or public securitizations of rated single- or multi-class
securities (the “Securities”) secured by or evidencing ownership interests in
all or any portion of the Loan and the Loan Documents or a pool of assets that
include the Loan and the Loan Documents (such sales, participations or
securitizations, collectively, a “Securitization”).

 

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(b)          At the request of Lender, and to the extent not already required to
be provided by or on behalf of Borrower under this Agreement, Borrower shall use
reasonable efforts to provide information not in the possession of Lender or
which may be reasonably required by Lender or take other actions reasonably
required by Lender, in each case in order to satisfy the market standards to
which Lender customarily adheres or which may be reasonably required by
prospective investors or the Rating Agencies in connection with any such
Securitization. Lender shall have the right to provide to prospective investors
and the Rating Agencies any information in its possession, including financial
statements relating to Borrower, Guarantor, if any, the Property and any Tenant
of the Improvements. Borrower acknowledges that certain information regarding
the Loan and the parties thereto and the Property may be included in a private
placement memorandum, prospectus or other disclosure documents. Borrower agrees
that each of Borrower, Principal, Guarantor and their respective officers and
representatives, shall, at Lender’s request, cooperate with Lender’s efforts to
arrange for a Securitization in accordance with the market standards to which
Lender customarily adheres or which may be required by prospective investors or
the Rating Agencies in connection with any such Securitization. Borrower,
Principal and Guarantor agree to review, at Lender’s request in connection with
the Securitization, the Disclosure Documents as such Disclosure Documents relate
to Borrower, Principal, Master Tenant, Guarantor, the Property and the Loan,
including, the sections entitled “Risk Factors,” “Special Considerations,”
“Description of the Security Instrument,” “Description of the Mortgage Loan and
Mortgaged Property,” “The Manager,” “The Borrower,” and “Certain Legal Aspects
of the Mortgage Loan,” and shall confirm that the factual statements and
representations contained in such sections and such other information in the
Disclosure Documents (to the extent such information relates to, or is based on,
or includes any information regarding the Property, Borrower, Master Tenant,
Guarantor, Manager or the Loan) do not, to such Person’s knowledge, contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not misleading.

 

(c)          Borrower agrees to make upon Lender’s written request, without
limitation, all structural or other changes to the Loan (including delivery of
one or more new component notes to replace the original note or modify the
original note to reflect multiple components of the Loan and such new notes or
modified note may have different interest rates and amortization schedules),
modifications to any documents evidencing or securing the Loan, creation of one
or more mezzanine loans (including amending Borrower’s organizational structure
to provide for one or more mezzanine borrowers), delivery of opinions of counsel
acceptable to the Rating Agencies or potential investors and addressing such
matters as the Rating Agencies or potential investors may require; provided,
however, that in creating such new notes or modified notes or mezzanine notes
Borrower shall not be required to modify (i) the initial weighted average
interest rate payable under the Note, (ii) the stated maturity of the Note,
(iii) the aggregate amortization of principal of the Note, (iv) any other
material economic term of the Loan, or (v) decrease the time periods during
which Borrower is permitted to perform its obligations under the Loan Documents;
and such modifications shall not, in the aggregate, have a material adverse
effect on the economics of the Loan to Borrower. In connection with the
foregoing, Borrower covenants and agrees to modify the Cash Management Agreement
to reflect the newly created components or mezzanine loans.

 

(d)          Intentionally Omitted.

 

(e)          Borrower hereby appoints Lender its attorney-in-fact with full
power of substitution (which appointment shall be deemed to be coupled with an
interest and to be irrevocable until the Loan is paid and the Security
Instrument is discharged of record, with Borrower hereby ratifying all that its
said attorney shall do by virtue thereof) to execute and deliver all documents
and do all other acts and things necessary or desirable to effect any
Securitization authorized hereunder; provided, however, that unless an Event of
Default exists, Lender shall not execute or deliver any such documents or do any
such acts or things under such power until five (5) days after written notice
has been given to Borrower by Lender of Lender’s intent to exercise its rights
under such power. Borrower’s failure to deliver any document or to take any
other action Borrower is obligated to take hereunder with respect to any
Securitization for a period of ten (10) Business Days after such notice by
Lender shall, at Lender’s option, constitute an Event of Default hereunder.

 

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9.1.2.      Securitization Costs.  All reasonable third party costs and expenses
incurred by Borrower and Guarantor in connection with Borrower’s compliance with
this Section 9.1 (including the fees and expenses of the Rating Agencies) shall
be paid or reimbursed by Borrower.

 

Section 9.2          Right To Release Information.  Following the occurrence of
any Event of Default, Lender may forward to any broker, prospective purchaser of
the Property or the Loan, or other person or entity all documents and
information which Lender now has or may hereafter acquire relating to the Debt,
Borrower, Master Tenant, any Guarantor, any indemnitor, the Property and any
other matter in connection with the Loan, whether furnished by Borrower, Master
Tenant, any Guarantor, any indemnitor or otherwise, as Lender determines
necessary or desirable. Borrower irrevocably waives any and all rights it may
have to limit or prevent such disclosure, including any right of privacy or any
claims arising therefrom.

 

Section 9.3          Exculpation.  (a) Subject to the qualifications below,
Lender shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Note, this Agreement, the Security
Instrument or the other Loan Documents by any action or proceeding wherein a
money judgment shall be sought against Borrower, except that Lender may bring a
foreclosure action, an action for specific performance or any other appropriate
action or proceeding to enable Lender to enforce and realize upon its interest
under the Note, this Agreement, the Security Instrument and the other Loan
Documents, or in the Property, the Rents, or any other collateral given to
Lender pursuant to the Loan Documents; provided, however, that, except as
specifically provided herein, any judgment in any such action or proceeding
shall be enforceable against Borrower only to the extent of Borrower’s interest
in the Property, in the Rents and in any other collateral given to Lender, and
Lender, by accepting the Note, this Agreement, the Security Instrument and the
other Loan Documents, agrees that it shall not sue for, seek or demand any
deficiency judgment against Borrower in any such action or proceeding under or
by reason of or under or in connection with the Note, this Agreement, the
Security Instrument or the other Loan Documents. The provisions of this Section
shall not, however, (i) constitute a waiver, release or impairment of any
obligation evidenced or secured by any of the Loan Documents; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Security Instrument; (iii) affect the validity or
enforceability of the Guaranty or Environmental Indemnity or any of the rights
and remedies of Lender thereunder; (iv) impair the right of Lender to obtain the
appointment of a receiver; (v) impair the enforcement of any assignment of
leases and rents contained in the Security Instrument and any other Loan
Documents; or (vi) constitute a prohibition against Lender to seek a deficiency
judgment against Borrower in order to fully realize the security granted by the
Security Instrument or to commence any other appropriate action or proceeding in
order for Lender to exercise its remedies against the Property.

 

(b)          Nothing contained herein shall in any manner or way release, affect
or impair the right of Lender to recover, and Borrower shall be fully and
personally liable and subject to legal action, for any loss, cost, expense,
damage, claim or other obligation (including reasonable attorneys’ fees and
court costs) incurred or suffered by Lender arising out of or in connection with
the following:

 

(i)          fraud or material willful misrepresentation by Borrower, Master
Tenant , Principal or Guarantor (or any of their respective Affiliates which are
controlled by Borrower, Master Tenant, Principal and/or Guarantor) or any agent,
employee or other person with actual or apparent authority to make statements or
representations on behalf of Borrower, Master Tenant, Principal, or Guarantor
(or any of their respective Affiliates which are controlled by Borrower, Master
Tenant, Principal and/or Guarantor) in connection with the Loan (“apparent
authority” meaning such authority as the principal knowingly or negligently
permits the agent to assume, or which he holds the agent out as possessing);

 

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(ii)         the gross negligence or willful misconduct of Borrower, Principal,
Master Tenant or Guarantor (or any of their respective Affiliates which are
controlled by Borrower, Master Tenant, Principal and/or Guarantor), agent, or
employee of the foregoing;

 

(iii)        material physical waste of the Property;

 

(iv)        the removal or disposal of any portion of the Property during the
continuation of an Event of Default without the replacement of same, to the
extent the same is material to the operation of the Property;

 

(v)         the misapplication, misappropriation, or conversion by Borrower (or
any of its Affiliates which are controlled by Borrower, Master Tenant, Principal
and/or Guarantor), Principal, Master Tenant or Guarantor of (A) any Insurance
Proceeds paid by reason of any loss, damage or destruction to the Property, (B)
any Awards received in connection with a Condemnation of all or a portion of the
Property, (C) any Rents or other Property income or collateral proceeds, or (D)
any Rents paid more than one month in advance (including, but not limited to,
security deposits);

 

(vi)        during the continuation of an Event of Default, the failure to
either apply rents or other Property income, whether collected before or after
such Event of Default, to the ordinary, customary, and necessary expenses of
operating the Property or, upon demand, to deliver such rents or other Property
income to Lender;

 

(vii)       failure to maintain insurance or to pay taxes and assessments
(unless Lender is escrowing funds therefor and fails to make such payments or
has taken possession of the Property following an Event of Default, has received
all Rents from the Property applicable to the period for which such insurance,
taxes or other items are due, and thereafter fails to make such payments) to the
extent that the revenue from the Property is sufficient to pay such amounts as
well as other costs of servicing the Debt and of operating the Property;

 

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(viii)      failure to pay charges for labor or materials or other charges or
judgments that can create Liens on any portion of the Property, to the extent
that the revenue from the Property is sufficient to pay such amounts as well as
other costs of servicing the Debt and of operating the Property (and other than
any election by Lender not to make funds held in any applicable Reserve Fund
available therefor, so long as no Event of Default then exists and Borrower has
otherwise complied with the applicable terms of the Loan Documents related to
such disbursement);

 

(ix)        any security deposits, advance deposits or any other deposits
collected with respect to the Property which are not delivered to Lender upon a
foreclosure of the Property or action in lieu thereof, except to the extent any
such security deposits were applied in accordance with the terms and conditions
of any of the Leases prior to the occurrence of the Event of Default that gave
rise to such foreclosure or action in lieu thereof;

 

(x)         any failure by Borrower to comply with any of the representations,
warranties or covenants set forth in Sections 4.1.37 or 5.1.19 hereof;

 

(xi)        Borrower and/or Master Tenant fails to permit on-site inspections of
the Property, fails to maintain its status as a Special Purpose Entity or comply
with any representation, warranty or covenant set forth in Section 4.1.30 hereof
or fails to appoint a new property manager upon the request of Lender as
permitted under this Agreement, each as required by, and in accordance with, the
terms and provisions of this Agreement or the Security Instrument;

 

(xii)       Borrower and/or Master Tenant’s failure to comply with Section 2.7
hereof, the Cash Management Agreement and/or the Clearing Account Agreement
relating to the establishment of a Clearing Account, a Cash Management Account,
and/or the institution of cash management generally;

 

(xiii)      any amendment, modification or termination of the Master Lease
without Lender’s consent;

 

(xiv)      any amendment or modification of the Franchise Agreement without
Lender’s consent (to the extent such consent is required under the Loan
Documents);

 

(xv)       the termination, surrender or cancellation of the Franchise Agreement
by Master Tenant without Lender’s prior written consent or the termination or
cancellation of the Franchise Agreement by Franchisor (as a result of the action
or omission of Borrower or Master Tenant) prior to the expiration date of the
Franchise Agreement unless such termination or cancellation is solely the result
of Master Tenant’s failure to pay the franchise fees and other charges due under
the Franchise Agreement and such failure to pay is solely the result of revenue
from the Property being insufficient to pay such amounts as well as other costs
of servicing the Debt and of operating the Property provided that the foregoing
shall not apply to the extent that (A) Borrower would otherwise be liable under
this subsection (xv) and (B) during the continuance of a Cash Sweep Period,
Lender has not made funds available to Borrower to pay the charges described
above; and/or

 

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(xvi)      any loss, cost, expense, damage, claim or other obligation (including
reasonable attorneys’ fees and court costs) incurred or suffered by Lender
related, directly or indirectly, to the removal and/or modification of any
shoring mechanisms located at or adjacent to the Property (including, without
limitation, any tie-back rods and anchors and/or pins) pursuant to the Easement
Agreement.

 

(c)          Notwithstanding anything to the contrary in this Agreement, the
Note or any of the other Loan Documents,

 

(i)          Borrower and any general partner of Borrower shall be personally
liable for the Debt if (A) Borrower fails to obtain Lender’s prior written
consent to any voluntary Transfer as required by this Agreement or the Security
Instrument, which Transfer results in (x) the transfer of the Property, (y) a
change in control of Borrower and/or Master Tenant, and/or (z) a transfer of a
fifty percent (50%) or greater direct or indirect interest in Borrower or Master
Tenant; (B) Borrower fails to obtain Lender’s prior written consent to any
Indebtedness or voluntary Lien encumbering the Property; (C) Borrower and/or
Master Tenant shall at any time hereafter make an assignment for the benefit of
its creditors; (D) Borrower and/or Master Tenant fails to maintain its status as
a Special Purpose Entity or comply with any representation, warranty or covenant
set forth in Section 4.1.30 hereof as required by, and in accordance with, the
terms and provisions of this Agreement or the Security Instrument, and such
failure is cited as a factor in the substantive consolidation of Borrower and/or
Master Tenant with any other person; (E) other than at Lender’s written request,
Borrower, Master Tenant or any Principal admits, in writing or in any legal
proceeding, its insolvency or inability to pay its debts as they become due; (F)
Borrower fails to make the first full monthly payment of principal and interest
on or before the first Payment Date; (G) Borrower and/or Master Tenant files
(other than at Lender’s request), consents to, or acquiesces in a petition for
bankruptcy, insolvency, dissolution or liquidation under the Bankruptcy Code or
any other Federal or State bankruptcy or insolvency law, or there is a filing of
an involuntary petition against Borrower, Master Tenant or any Principal under
the Bankruptcy Code or any other Federal or state bankruptcy or insolvency law
in which Borrower, Master Tenant or Guarantor or any Principal colludes with, or
otherwise assists any party in connection with such filing, or solicits or
causes to be solicited petitioning creditors for any involuntary petition
against Borrower, Master Tenant or such Principal from any party; or (H) there
is substantive consolidation of Borrower, Master Tenant or any Restricted Party
with any other Person in connection with any federal or state bankruptcy
proceeding involving Guarantor or any of Affiliate of Guarantor and one of the
factors cited as the bases therefor is a breach by Borrower or Master Tenant of
any representation, warranty or covenant contained in Section 4.1.30 of this
Agreement.

 

(d)          Nothing herein shall be deemed to constitute a waiver by Lender of
any right Lender may have under Sections 506(a), 506(b), 1111(b) or any other
provision of the Bankruptcy Code to file a claim for the full amount of the Debt
or to require that all collateral shall continue to secure all of the Debt.

 

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Section 9.4          Matters Concerning Manager.  If (i) an Event of Default
hereunder has occurred and remains uncured, (ii) Manager shall become subject to
a Bankruptcy Action, (iii) a default by Manager occurs under the Management
Agreement that would permit Master Tenant to terminate the Management Agreement,
or (iv) a DSCR Trigger Event occurs and Lender reasonably determines that the
Property is performing at less than eighty percent (80%) of the performance of
other hotels generally in the same competitive set, Borrower shall, at the
request of Lender, cause Master Tenant to terminate the Management Agreement and
replace the Manager with a Qualified Manager pursuant to a Replacement
Management Agreement, it being understood and agreed that the management fee for
such Qualified Manager shall not exceed then prevailing market rates.

 

Section 9.5          Servicer.  At the option of Lender, the Loan may be
serviced by a master servicer, primary servicer, special servicer and/or trustee
(any such master servicer, primary servicer, special servicer, and trustee,
together with its agents, nominees or designees, are collectively referred to as
“Servicer”) selected by Lender and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to Servicer
pursuant to a pooling and servicing agreement, servicing agreement, special
servicing agreement or other agreement providing for the servicing of one or
more mortgage loans (collectively, the “Servicing Agreement”) between Lender and
Servicer. Borrower shall not be responsible for any set up fees or any other
initial costs relating to or arising under the Servicing Agreement, nor shall
Borrower be responsible for payment of the regular monthly master servicing fee
or trustee fee due to Servicer under the Servicing Agreement or any fees or
expenses required to be borne by, and not reimbursable to, Servicer.
Notwithstanding the foregoing, Borrower shall promptly reimburse Lender on
demand for the following costs and expenses payable by Lender to Servicer as a
result of the Loan becoming specially serviced: (i) any liquidation fees that
are due and payable to Servicer under the Servicing Agreement in connection with
the exercise of any or all remedies permitted under this Agreement, (ii) any
workout fees and special servicing fees that are due and payable to Servicer
under the Servicing Agreement, which fees may be due and payable under the
Servicing Agreement on a periodic or continuing basis, and (iii) the costs of
all property inspections and/or appraisals of the Property (or any updates to
any existing inspection or appraisal) that Servicer may be required to obtain
(other than the cost of regular annual inspections required to be borne by
Servicer under the Servicing Agreement).

 

ARTICLE X
MISCELLANEOUS

 

Section 10.1        Survival.  This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and all such covenants and agreements shall
continue in full force and effect so long as all or any of the Debt is
outstanding and unpaid (or, in the case of a defeasance, defeased) unless a
longer period is expressly set forth herein or in the other Loan Documents.
Whenever in this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the legal representatives, successors and
assigns of such party. All covenants, promises and agreements in this Agreement,
by or on behalf of Borrower, shall inure to the benefit of the legal
representatives, successors and assigns of Lender.

 

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Section 10.2        Lender’s Discretion.  Whenever pursuant to this Agreement,
Lender exercises any right given to it to approve or disapprove, or any
arrangement or term is to be satisfactory to Lender, the decision of Lender to
approve or disapprove or to decide whether arrangements or terms are
satisfactory or not satisfactory shall (except as is otherwise specifically
herein provided) be in the sole discretion of Lender and shall be final and
conclusive.

 

Section 10.3        Governing Law.

 

(a)          LENDER HAS OFFICES IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE
LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK
(“GOVERNING STATE”), WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIEN AND SECURITY INTEREST CREATED
PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY
AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS
LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF
SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION,
VALIDITY AND ENFORCEABILITY OF ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS
ARISING HEREUNDER OR THEREUNDER. TO THE FULLEST EXTENT PERMITTED BY LAW,
BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT
THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER
LOAN DOCUMENTS, AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK PURSUANT TO SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

(b)          ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS
(“ACTION”) MAY AT LENDER’S OPTION BE INSTITUTED IN (AND IF ANY ACTION IS
ORIGINALLY BROUGHT IN ANOTHER VENUE, THE ACTION SHALL AT THE ELECTION OF LENDER
BE TRANSFERRED TO) ANY FEDERAL OR STATE COURT IN THE CITY OF NEW YORK, COUNTY OF
NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW AND
BORROWER WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE BASED ON VENUE
OR FORUM NON CONVENIENS OF ANY SUCH ACTION, AND BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT IN ANY ACTION. BORROWER DOES
HEREBY DESIGNATE AND APPOINT:

 

Sneed, Vine & Perry, P.C.
900 Congress Avenue, Suite 300
Austin, Texas 78701
Attention: Adam S. Wilk, Esq.
Facsimile: (512) 476-1825

 

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AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION IN ANY FEDERAL OR STATE
COURT IN NEW YORK, NEW YORK, 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 ACTION IN THE STATE OF
NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS
OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND FROM TIME TO TIME
DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH SUBSTITUTE AGENT AND OFFICE SHALL
BE DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.

 

Section 10.4        Modification, Waiver in Writing.  No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, or of the Note, or of any other Loan Document, nor consent to any
departure by Borrower therefrom, shall in any event be effective unless the same
shall be in a writing signed by the party against whom enforcement is sought,
and then such waiver or consent shall be effective only in the specific
instance, and for the purpose, for which given. Except as otherwise expressly
provided herein, no notice to, or demand on Borrower, shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.

 

Section 10.5        Delay Not a Waiver.  Neither any failure nor any delay on
the part of Lender in insisting upon strict performance of any term, condition,
covenant or agreement, or exercising any right, power, remedy or privilege
hereunder, or under the Note or under any other Loan Document, or any other
instrument given as security therefor, shall operate as or constitute a waiver
thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege.
In particular, and not by way of limitation, by accepting payment after the due
date of any amount payable under this Agreement, the Note or any other Loan
Document, Lender shall not be deemed to have waived any right either to require
prompt payment when due of all other amounts due under this Agreement, the Note
or the other Loan Documents, or to declare a default for failure to effect
prompt payment of any such other amount.

 

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Section 10.6        Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document shall be given
in writing and shall be effective for all purposes if hand delivered or sent by
(a) certified or registered United States mail, postage prepaid, return receipt
requested or (b) expedited prepaid delivery service, either commercial or United
States Postal Service, with proof of attempted delivery, or (c) by telecopier
(with answer back acknowledged) and with a second copy to be sent to the
intended recipient by any other means permitted under this Section, addressed as
follows (or at such other address and Person as shall be designated from time to
time by any party hereto, as the case may be, in a written notice to the other
parties hereto in the manner provided for in this Section):

 

  If to Lender: KeyBank National Association     11501 Outlook, Suite 300    
Overland Park, Kansas 66211     Facsimile No.: 877-379-1625     Attention: Loan
Servicing         with a copy to: Katten Muchin Rosenman LLP     550 South Tryon
Street, Suite 2900     Charlotte, North Carolina 28202     Attention: Daniel S.
Huffenus, Esq.    

  

 If to Borrower:Moody National Yale-Seattle Holding, LLC 6363 Woodway, Suite 110
Houston, Texas 77057 Attention: Brett C. Moody   Facsimile No.: (713) 997-7505
     With a copy to:Gresham Savage Nolan & Tilden, PC   501 W. Broadway, Suite
800   San Diego, California 92101   Attention: Jerome A. Grossman   Facsimile
No.: (619) 615-2180

 

A notice shall be deemed to have been given: in the case of hand delivery, at
the time of delivery; in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; or in the case of
expedited prepaid delivery, upon the first attempted delivery on a Business Day;
or in the case of telecopy, upon sender’s receipt of a machine-generated
confirmation of successful transmission after advice by telephone to recipient
that a telecopy notice is forthcoming.

 

Section 10.7      Trial by Jury.  TO THE FULLEST EXTENT NOW OR HEREAFTER
PERMITTED BY APPLICABLE LAW, EACH OF BORROWER AND LENDER HEREBY AGREES NOT TO
ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVES ANY
RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR
HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY
JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY EACH OF BORROWER AND LENDER, AND IS
INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE
RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. EACH OF BORROWER AND LENDER IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS
CONCLUSIVE EVIDENCE OF THIS WAIVER BY SUCH OTHER PARTY.

 

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Section 10.8        Headings.  The Article and/or Section headings and the Table
of Contents in this Agreement are included herein for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.

 

Section 10.9        Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.

 

Section 10.10      Preferences.  Lender shall have the continuing and exclusive
right to apply or reverse and reapply any and all payments by Borrower received
during the continuation of any Event of Default to any portion of the
obligations of Borrower hereunder. To the extent Borrower makes a payment or
payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds received, the obligations hereunder or
part thereof intended to be satisfied shall be revived and continue in full
force and effect, as if such payment or proceeds had not been received by
Lender.

 

Section 10.11      Waiver of Notice.  Borrower shall not be entitled to any
notices of any nature whatsoever from Lender except with respect to matters for
which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect
to matters for which Borrower is not, pursuant to applicable Legal Requirements,
permitted to waive the giving of notice. Borrower hereby expressly waives the
right to receive any notice from Lender with respect to any matter for which
this Agreement or the other Loan Documents do not specifically and expressly
provide for the giving of notice by Lender to Borrower or which are required by
law and which cannot be waived in accordance therewith.

 

Section 10.12      Remedies of Borrower.  If a claim or adjudication is made
that Lender or its agents have acted unreasonably or unreasonably delayed acting
in any case where by law or under this Agreement or the other Loan Documents,
Lender or such agent, as the case may be, has an obligation to act reasonably or
promptly, Borrower agrees that neither Lender nor its agents shall be liable for
any monetary damages, and Borrower’s sole remedies shall be limited to
commencing an action seeking injunctive relief or declaratory judgment. The
parties hereto agree that any action or proceeding to determine whether Lender
has acted reasonably shall be determined by an action seeking declaratory
judgment.

 

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Section 10.13      Expenses; Indemnity.  (a) Except to the extent otherwise
provided in Article 9: (b) Borrower covenants and agrees to pay or, if Borrower
fails to pay, to reimburse, Lender upon receipt of written notice from Lender
for all costs and expenses (including reasonable attorneys’ fees and expenses)
incurred by Lender in connection with (i) the preparation, negotiation,
execution and delivery of this Agreement and the other Loan Documents and the
consummation of the transactions contemplated hereby and thereby and all the
costs of furnishing all opinions by counsel for Borrower (including without
limitation other than as provided in Article 9, any opinions requested by Lender
as to any legal matters arising under this Agreement or the other Loan Documents
with respect to the Property); (ii) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date, including, without limitation, confirming
compliance with environmental and insurance requirements; (iii) Lender’s ongoing
performance and compliance with all agreements and conditions contained in this
Agreement and the other Loan Documents on its part to be performed or complied
with after the Closing Date (provided that nothing herein shall require Borrower
to reimburse Lender in respect of its overhead expenses); (iv) the negotiation,
preparation, execution, delivery and administration of any consents, amendments,
waivers or other modifications to this Agreement and the other Loan Documents
and any other documents or matters requested by Lender; (v) securing Borrower’s
compliance with any requests made pursuant to the provisions of this Agreement;
(vi) the filing and recording fees and expenses, title insurance and fees and
expenses of counsel for providing to Lender all required legal opinions, and
other similar expenses incurred in creating and perfecting the Lien in favor of
Lender pursuant to this Agreement and the other Loan Documents; (vii) enforcing
or preserving any rights, in response to third party claims or the prosecuting
or defending of any action or proceeding or other litigation, in each case
against, under or affecting Borrower, this Agreement, the other Loan Documents,
the Property, or any other security given for the Loan; and (viii) enforcing any
obligations of or collecting any payments due from Borrower under this
Agreement, the other Loan Documents or with respect to the Property (including
any fees incurred by Servicer in connection with the transfer of the Loan to a
special servicer prior to a Default or Event of Default) or in connection with
any refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a “work out” or of any insolvency or bankruptcy
proceedings; provided, however, that Borrower shall not be liable for the
payment of any such costs and expenses to the extent the same arise by reason of
the gross negligence, illegal acts, fraud or willful misconduct of Lender.
Subject to Section 5.2 of the Cash Management Agreement, any cost and expenses
due and payable to Lender may be paid from any amounts in the Clearing Account
or Cash Management Account, as applicable.

 

(c)          Borrower shall indemnify, defend and hold harmless the Indemnified
Parties from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, claims, costs, expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel in connection with any investigative,
administrative or judicial proceeding commenced or threatened, whether or not an
Indemnified Party shall be designated a party thereto), that may be imposed on,
incurred by, or asserted against any Indemnified Party in any manner relating to
or arising out of (i) any breach by Borrower of its obligations under, or any
material misrepresentation by Borrower contained in, this Agreement or the other
Loan Documents, or (ii) the use or intended use of the proceeds of the Loan
(collectively, the “Indemnified Liabilities”); provided, however, that Borrower
shall not have any obligation to any Indemnified Party hereunder to the extent
that such Indemnified Liabilities arise from the gross negligence, illegal acts,
fraud or willful misconduct of such Indemnified Party. To the extent that the
undertaking to indemnify, defend and hold harmless set forth in the preceding
sentence may be unenforceable because it violates any law or public policy,
Borrower shall pay the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all Indemnified
Liabilities incurred by the Indemnified Parties.

 

(d)          Borrower covenants and agrees to pay for or, if Borrower fails to
pay, to reimburse Lender for, any fees and expenses incurred by any Rating
Agency, after any Securitization (and excluding any such fees and expenses
incurred by such Rating Agency in connection with any Rating Agency review of
the Loan, the Loan Documents or any transaction contemplated thereby as part of
a Securitization), in connection such Rating Agency’s review of the Loan, the
Loan documents or any transaction contemplated thereby in connection with any
consent, approval, waiver or confirmation obtained from such Rating Agency
pursuant to the terms and conditions of this Agreement or any other Loan
Document, and Lender shall be entitled to require payment of such fees and
expenses as a condition precedent to the obtaining of any such consent,
approval, waiver or confirmation.

 

Section 10.14      Schedules Incorporated.  The Schedules annexed hereto are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.

 

Section 10.15      Offsets, Counterclaims and Defenses.  Any assignee of
Lender’s interest in and to this Agreement, the Note and the other Loan
Documents shall take the same free and clear of all offsets, counterclaims or
defenses which are unrelated to such documents which Borrower may otherwise have
against any assignor of such documents, and no such unrelated counterclaim or
defense shall be interposed or asserted by Borrower in any action or proceeding
brought by any such assignee upon such documents and any such right to interpose
or assert any such unrelated offset, counterclaim or defense in any such action
or proceeding is hereby expressly waived by Borrower.

 

Section 10.16      No Joint Venture or Partnership; No Third Party
Beneficiaries.  (a) Borrower and Lender intend that the relationships created
hereunder and under the other Loan Documents be solely that of borrower and
lender. Nothing herein or therein is intended to create a joint venture,
partnership, tenancy in common, or joint tenancy relationship between Borrower
and Lender nor to grant Lender any interest in the Property other than that of
mortgagee, beneficiary or lender.

 

(b)          This Agreement and the other Loan Documents are solely for the
benefit of Lender, Borrower and the other Persons party thereto, and nothing
contained in this Agreement or the other Loan Documents shall be deemed to
confer upon anyone other than Lender and Borrower, or another Party to any Loan
Document, any right to insist upon or to enforce the performance or observance
of any of the obligations contained herein or therein. All conditions to the
obligations of Lender to make the Loan hereunder are imposed solely and
exclusively for the benefit of Lender and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make the Loan in the absence of
strict compliance with any or all thereof and no other Person shall under any
circumstances be deemed to be a beneficiary of such conditions, any or all of
which may be freely waived in whole or in part by Lender if, in Lender’s sole
discretion, Lender deems it advisable or desirable to do so.

 

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(c)          Borrower authorizes Lender to act upon any direction it receives
from Master Tenant incident to the Loan Documents with respect to matters for
which Master Tenant has responsibility pursuant to the Master Lease Documents
(including, without limitation, with respect to requests for, and the
application of, disbursements from any applicable Reserve Fund), and, as between
Lender and Borrower, agrees to be bound by any such direction.

 

Section 10.17      Publicity.  All news releases, publicity or advertising by
Borrower or its Affiliates through any media intended to reach the general
public which refers to the Loan Documents or the financing evidenced by the Loan
Documents, to Lender, KeyBank National Association or any of their Affiliates
shall be subject to the prior written approval of Lender and KeyBank National
Association in their commercially reasonable discretion.

 

Section 10.18      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, Borrower’s partners and
others with interests in Borrower, and of the Property, and agrees not to assert
any right under any laws pertaining to the marshalling of assets, the sale in
inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the
right of Lender under the Loan Documents to a sale of the Property for the
collection of the Debt without any prior or different resort for collection or
of the right of Lender to the payment of the Debt out of the net proceeds of the
Property in preference to every other claimant whatsoever.

 

Section 10.19      Waiver of Counterclaim.  Borrower hereby waives the right to
assert a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.

 

Section 10.20      Conflict; Construction of Documents; Reliance.  In the event
of any conflict between the provisions of this Agreement and any of the other
Loan Documents, the provisions of this Agreement shall control. The parties
hereto acknowledge that they were represented by competent counsel in connection
with the negotiation, drafting and execution of the Loan Documents and that such
Loan Documents shall not be subject to the principle of construing their meaning
against the party which drafted same. Borrower acknowledges that, with respect
to the Loan, Borrower shall rely solely on its own judgment and advisors in
entering into the Loan without relying in any manner on any statements,
representations or recommendations of Lender or any parent, subsidiary or
Affiliate of Lender. Lender shall not be subject to any limitation whatsoever in
the exercise of any rights or remedies available to it under any of the Loan
Documents or any other agreements or instruments which govern the Loan by virtue
of the ownership by it or any parent, subsidiary or Affiliate of Lender of any
equity interest any of them may acquire in Borrower, and Borrower hereby
irrevocably waives the right to raise any defense or take any action on the
basis of the foregoing with respect to Lender’s exercise of any such rights or
remedies. Borrower acknowledges that Lender engages in the business of real
estate financings and other real estate transactions and investments which may
be viewed as adverse to or competitive with the business of Borrower or its
Affiliates.

 

 114

 

 

Section 10.21      Brokers and Financial Advisors.  Borrower hereby represents
that it has dealt with no financial advisors, brokers, underwriters, placement
agents, agents or finders in connection with the transactions contemplated by
this Agreement. Borrower hereby agrees to indemnify, defend and hold Lender
harmless from and against any and all claims, liabilities, costs and expenses of
any kind (including Lender’s attorneys’ fees and expenses) in any way relating
to or arising from a claim by any Person that such Person acted on behalf of
Borrower or (unless specifically engaged by Lender in writing) Lender in
connection with the transactions contemplated herein. The provisions of this
Section 10.21 shall survive the expiration and termination of this Agreement and
the payment of the Debt.

 

Section 10.22      Prior Agreements.  This Agreement and the other Loan
Documents contain the entire agreement of the parties hereto and thereto in
respect of the transactions contemplated hereby and thereby, and all prior
agreements among or between such parties, whether oral or written, between
Borrower and Lender are superseded by the terms of this Agreement and the other
Loan Documents.

 

Section 10.23      Liability.  If Borrower consists of more than one (1) Person
the obligations and liabilities of each Person shall be joint and several. Under
no circumstances whatsoever shall Lender have any liability for punitive,
special, consequential or incidental damages in connection with, arising out of,
or in any way related to or under this Loan Agreement or any other Loan Document
or in any way related to the transactions contemplated or any relationship
established by this Agreement or any other Loan Document or any act, omission or
event occurring in connection herewith or therewith, and, to the extent not
expressly prohibited by applicable laws, Borrower for itself and its Guarantor
and indemnitors waives all claims for punitive, special, consequential or
incidental damages. Lender shall have no duties or responsibilities except those
expressly set forth in this Agreement, the Security Instrument and the other
Loan Documents and those imposed under applicable law. Neither Lender nor any of
its officers, directors, employees or agents shall be liable for any action
taken or omitted by them as such hereunder or in connection herewith, unless
caused by their gross negligence or willful misconduct. This Agreement shall be
binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns forever.

 

Section 10.24      Certain Additional Rights of Lender (VCOC).  Notwithstanding
anything to the contrary contained in this Agreement, Lender shall have:

 

(a)          the right to routinely consult with and advise Borrower’s
management regarding the significant business activities and business and
financial developments of Borrower; provided, however, that such consultations
shall not include discussions of environmental compliance programs or disposal
of hazardous substances. Consultation meetings should occur on a regular basis
(no less frequently than quarterly) with Lender having the right to call special
meetings at any reasonable times and upon reasonable advance notice;

 

(b)          the right, in accordance with the terms of this Agreement, to
examine the books and records of Borrower at any reasonable times upon
reasonable notice;

 

 115

 

 

(c)          the right, in accordance with the terms of this Agreement,
including Section 5.1.11 hereof, to receive monthly, quarterly and year end
financial reports, including balance sheets, statements of income, shareholder’s
equity and cash flow, a management report and schedules of outstanding
indebtedness; and

 

(d)          the right, without restricting any other rights of Lender under
this Agreement (including any similar right), to approve any acquisition by
Borrower of any other significant property (other than personal property
required for the day to day operation of the Property).

 

The rights described above in this Section 10.24 may be exercised by any entity
which owns and controls, directly or indirectly, substantially all of the
interests in Lender.

 

Section 10.25      (OFAC).  Borrower hereby represents, warrants and covenants
that neither Borrower nor any Guarantor is (or will be) a person with whom
Lender is restricted from doing business under regulations of the Office of
Foreign Asset Control (“OFAC”) of the Department of the Treasury of the United
States of America (including, those Persons named on OFAC’s Specially Designated
and Blocked Persons list) or under any statute, executive order (including, the
September 24, 2001 Executive Order Blocking Property and Prohibiting
Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism),
or other governmental action and is not and shall not knowingly engage in any
dealings or transactions or otherwise be associated with such persons. In
addition, Borrower hereby covenants to provide Lender with any additional
information within Borrower’s or Guarantor’s possession or control that Lender
reasonably deems necessary from time to time in order to ensure compliance with
all applicable laws concerning money laundering and similar activities.

 

Section 10.26      Duplicate Originals; Counterparts.  This Agreement may be
executed in any number of duplicate originals and each duplicate original shall
be deemed to be an original. This Agreement may be executed in several
counterparts, each of which counterpart shall be deemed an original instrument
and all of which together shall constitute a single Agreement. The failure of
any party hereto to execute this Agreement, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.

 

ARTICLE XI
LOCAL LAW PROVISIONS

 

Section 11.1        Inconsistencies.  In the event of any inconsistencies
between the terms and conditions of this Article XI and the other provisions of
this Agreement, the terms and conditions of this Article XI shall control and be
binding.

 

NONE

 

[NO FURTHER TEXT ON THIS PAGE]

 

 116

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their duly authorized representatives, all as of the day and year
first above written.

 

  BORROWER:       MOODY NATIONAL YALE-SEATTLE HOLDING, LLC,
a Delaware limited liability company

 

  By: /s/ Brett C. Moody      Name: Brett C. Moody     Title: President

  

STATE OF TEXAS   )           )  SS:       COUNTY OF HARRIS   )

 

On ________ __, 2016, before me, _______________________________________, a
Notary Public, personally appeared Brett C. Moody, President, and as Authorized
Party of Moody National Yale-Seattle Holding, LLC, a Delaware limited liability
company, personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his authorized capacity, and
that by his signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.

 

WITNESS my hand and official seal.           (Seal)                          
Notary Public in and for _________ County     Print Name:

 

 

 

 

  LENDER:       KEYBANK NATIONAL ASSOCIATION, a national banking association

 

  By:       Name:     Title:

  

 

 

 

SCHEDULE I

 

(RENT ROLL)

 

None.

 

 

 

 

SCHEDULE II

 

INTENTIONALLY OMITTED

 

 

 

 

SCHEDULE III

 

(ORGANIZATIONAL CHART OF BORROWER)

 

 

 

 

SCHEDULE IV

 

FORM OF TENANT DIRECTION LETTER

 

[BORROWER LETTERHEAD]

 

__________, 20__

 

[Tenants under Leases]

 

Re: Lease dated ________ between _______________, as Landlord, and
__________________, as Tenant, concerning premises known as _____________

 

Gentlemen:

 

This letter shall constitute notice to you that the undersigned has granted a
lien and security interest in the captioned lease and all rents, additional rent
and all other monetary obligations to landlord thereunder (collectively, “Rent”)
in favor of KeyBank National Association, its successors and assigns, as lender
(“Lender”), to secure certain of the undersigned’s obligations to Lender. The
undersigned hereby irrevocably instructs and authorizes you to disregard any and
all previous notices sent to you in connection with Rent and hereafter to
deliver all Rent to the following address:

 

  [Clearing Bank]                               Account Name: “ Clearing Account
  FBO KeyBank National Association, successors and assigns     Account No.:    
  Attention:       ABA#    

 

The instructions set forth herein are irrevocable and are not subject to
modification in any manner, except that Lender, or any successor lender so
identified by Lender, may by written notice to you rescind the instructions
contained herein.

 

  Sincerely,       [Borrower]

 

 

 

 

SCHEDULE V

 

FORM OF CREDIT CARD DIRECTION LETTER

  

[BORROWER LETTERHEAD]

 

[Date]

 

[Addressee]

 

Re:Payment Direction Letter for ___________ (the “Property”)   Loan No.
______________

 

Dear [______]:

 

MOODY NATIONAL YALE-SEATTLE HOLDING, LLC (the “Owner”), the owner of the
Property has mortgaged the Property to KeyBank National Association (together
with its successors and assigns, “Lender”) and each of the Owner and MOODY
NATIONAL YALE-SEATTLE MT, LLC (the “Lessee”) has agreed that all receipts
received with respect to the Property will be paid directly to a bank selected
by the Lender. Therefore, from and after [DATE], please remit all payments due
to the Owner and/or Lessee under that certain [REFERENCE AGREEMENT], dated
[___], [___] (the “Agreement”) between the [Owner] [Lessee] and you, as follows:

 

  [Clearing Bank]                               Account Name: “ Clearing Account
  FBO KeyBank National Association, successors and assigns     Account No.:    
  Attention:       ABA#    

 

These payment instructions cannot be withdrawn or modified without the prior
written consent of the Lender or its designee, or pursuant to a joint written
instruction from the Owner, Lessee and the Lender or its designee. Until you
receive written instructions from the Lender or its designee, continue to send
all payments due under the Agreement to ______________ (“Bank”) pursuant to the
terms hereof. All payments due under the Agreement shall be remitted to Bank no
later than the day on which such amounts are due.

 

If you have any questions concerning this letter, please contact [______] at
[______]. We appreciate your cooperation in this matter.

 

[NO FURTHER TEXT ON THIS PAGE]

 

 

 

 

  Very truly yours,           BORROWER:     ,

  a    

 

 

 

  By:         Name:     Title:

  

 

 

 

SCHEDULE VI

 

Intentionally Omitted