EXHIBIT 10.2
 
AMENDED AND RESTATED LOAN AGREEMENT
Dated as of June 6, 2008
between
PGRT ESH, INC.,
as Borrower,
and
CITICORP USA, INC.,
as Lender
 

 

 

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TABLE OF CONTENTS

              Page  
 
       
I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
    1  
Section 1.1 Definitions
    1  
Section 1.2 Principles of Construction
    13  
II. GENERAL TERMS
    13  
Section 2.1 Loan
    13  
Section 2.2 Interest; Payments; Late Payment Charge; Restructuring Fee; Exit Fee
    14  
Section 2.3 Prepayments
    17  
Section 2.4 Release on Payment in Full
    20  
Section 2.5 Due Diligence Deposit Fee
    20  
III. CASH MANAGEMENT
    21  
Section 3.1 Establishment of Blocked Account
    21  
IV. REPRESENTATIONS AND WARRANTIES
    21  
Section 4.1 Borrower Representations
    21  
Section 4.2 Survival of Representations
    26  
V. BORROWER COVENANTS
    27  
Section 5.1 Affirmative Covenants
    27  
Section 5.2 Negative Covenants
    31  
VI. DEFAULTS
    34  
Section 6.1 Event of Default
    34  
Section 6.2 Remedies
    37  
Section 6.3 Remedies Cumulative; Waivers
    39  
Section 6.4 Rights to Cure Defaults
    39  
Section 6.5 Power of Attorney
    40  
VII. SPECIAL PROVISIONS
    40  
Section 7.1 Sale of Note
    40  
Section 7.2 Servicer
    40  
Section 7.3 Reinstatement
    40  
VIII. MISCELLANEOUS
    40  
Section 8.1 Survival
    40  

 

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              Page  
 
       
Section 8.2 Lender’s Discretion
    40  
Section 8.3 Governing Law
    41  
Section 8.4 Modification, Waiver in Writing
    41  
Section 8.5 Delay Not a Waiver
    41  
Section 8.6 Notices
    42  
Section 8.7 Trial by Jury
    43  
Section 8.8 Headings
    43  
Section 8.9 Severability
    43  
Section 8.10 Preferences
    43  
Section 8.11 Waiver of Notice
    44  
Section 8.12 Remedies of Borrower
    44  
Section 8.13 Expenses; Indemnity
    44  
Section 8.14 Offsets, Counterclaims and Defenses
    45  
Section 8.15 No Joint Venture or Partnership; No Third Party Beneficiaries
    46  
Section 8.16 Publicity
    46  
Section 8.17 Waiver of Marshalling of Assets
    46  
Section 8.18 Waiver of Counterclaim
    46  
Section 8.19 Conflict; Construction of Documents; Reliance
    46  
Section 8.20 Brokers and Financial Advisors
    47  
Section 8.21 Prior Agreements
    47  
Section 8.22 Counterparts: Telecopied Signatures
    47  
IX. CONDITIONS OF EFFECTIVENESS
    47  
Section 9.1 Conditions to Effectiveness
    47  

     
Schedule
   
 
   
Schedule 2.3.2(b)
  Scheduled Property
 
   
Schedule 4.1.26
  Collateral Entities
 
   
Schedule 4.1.28
  Certain Defaults
 
   
Exhibit
   
 
   
Exhibit A
  Pledge Agreement

 

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AMENDED AND RESTATED LOAN AGREEMENT
THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of June 6, 2008 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between CITICORP USA, INC., a Delaware corporation having an
address at 101 John F. Kennedy Parkway, Short Hills, New Jersey 07078
(“Lender”), and PGRT ESH, INC., a Delaware corporation, having its principal
place of business at 77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
(“Borrower”).
W I T N E S S E T H:
WHEREAS, pursuant to a Loan Agreement dated as of June 29, 2007 (the “2007 Loan
Agreement”) between Borrower and Lender, Borrower borrowed $120,000,000 from
Lender, to be repaid in full on June 10, 2008 (the “Original Maturity Date”);
WHEREAS, Borrower has requested Lender to extend the Original Maturity Date for
approximately one year, which Lender is willing to do, subject to amending
certain other terms of the 2007 Loan Agreement; and
WHEREAS, Borrower and Lender have agreed to amend and restate in its entirety
the 2007 Loan Agreement.
NOW, THEREFORE, in consideration of Lender’s agreement to extend the Original
Maturity Date and the other covenants, agreements, representations and
warranties set forth in this Agreement, the parties hereto hereby covenant,
agree, represent and warrant as follows:
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:
“Adjusted Base Rate” shall mean an interest rate per annum equal to four percent
(4.00%) (but during the Deferral Period, six percent (6.00%), which shall be
applicable to all the Obligations outstanding during the Deferral Period) above
the Base Rate in effect from time to time, but in no event less than eight
percent (8.00%) per annum.
“Affiliate” shall mean, as to any Person, any other Person that, directly or
indirectly, is in Control of, is Controlled by or is under common Control with
such Person or is a director or officer of such Person or of an Affiliate of
such Person.
“Agreement” shall have the meaning set forth in the introductory paragraph
hereto.
“Applicable Interest Rate” shall mean for each Interest Period through and
including the date on which the Debt is paid in full, an interest rate per annum
equal to (i) the Eurodollar Rate, or (ii) the Adjusted Base Rate, as Borrower
may elect from time to time.

 

 

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“Applicable Law” shall mean collectively all existing and future federal, state
and local laws, orders, ordinances, governmental rules and regulations and court
orders.
“Appraised Value” shall mean the value of the applicable Collateral Entity
Properties, determined by a member of the Appraisal Institute in accordance with
the Financial Institutions Recovery, Reform and Enforcement Act of 1989, as
amended, and as it may be further amended from time to time, and any successor
statutes thereto.
“Bankruptcy Code” shall mean Title 11 U.S.C. § 101 et seq., and the regulations
adopted and promulgated pursuant thereto (as the same may be amended from time
to time).
“Base Rate” shall mean, on a particular date, a rate per annum equal at all
times to the rate of interest announced publicly by Citibank in New York, from
time to time, as Citibank’s base rate.
“BHAC” shall mean BHAC Capital IV, L.L.C., a Delaware limited liability company.
“Blocked Account” shall have the meaning set forth in Section 3.1 hereof.
“Borrower” shall have the meaning set forth in the introductory paragraph
hereto, together with its successors and assigns.
“Borrower Pledge Agreement” shall mean that certain Amended and Restated Pledge
Agreement together with all exhibits attached thereto dated as of the Closing
Date, executed and delivered by Borrower to Lender as security for the Loan and
for other obligations of Borrower and certain of its Affiliates, as the same may
be amended, restated, replaced, supplemented or otherwise modified from time to
time.
“Breakage Costs” shall have the meaning set forth in Section 2.2.3(d) hereof.
“Business Day” shall mean any day (i) other than a Saturday, Sunday or any other
day on which national banks in New York, New York are not open for business, and
(ii) on which banks are open for dealing in foreign currency and exchange in
London, England.
“Cap Rate Value” shall mean the present value, determined by applying a discount
rate of 7.5% (or such other discount rate as Lender may reasonably deem
appropriate under prevailing market conditions) per annum, of the Net Operating
Income of the Person related to the applicable Collateral Entity Properties.
“Citibank” shall mean Citibank, N.A., a national banking association.
“Closing Date” shall mean the date of this Agreement.
“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be
further amended from time to time, and any successor statutes thereto, and all
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

 

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“Collateral” shall mean (i) the Collateral as defined in the Pledge Agreements,
including, without limitation, the Specified Equity Interests pledged thereby,
(ii) cash and cash equivalents on deposit in or credited to the Blocked Account
or other accounts at Citibank (or as otherwise agreed to by Lender) under the
sole dominion and control of Lender and otherwise subject to a valid, perfected
first priority security interest in favor of Lender, and (iii) any and all other
collateral for the Loan granted under the Loan Documents.
“Collateral Entity” or “Collateral Entities” shall mean each of Borrower, the
Guarantors and their respective Affiliates, individually or collectively, as the
context requires, that directly or indirectly owns any legal or beneficial
interest in any of Prime Retail Outlets, Prime Office Chicago or Extended Stay
of America Hotels.
“Collateral Entity Properties” shall have the meaning set forth in
Section 2.3.2(b) hereof.
“Collateral Proceeds” shall mean all dividends, distributions or other payments
or disbursements made or required to be made on account of or under, and all net
proceeds of sale, lease, refinancing or other disposition of, the Specified
Equity Interests or the Collateral Entity Properties.
“Collateral Value” shall mean, at any time, the value at such time of all of the
Specified Equity Interests and other Collateral, as determined by Lender (i) in
its reasonable discretion, without duplication, based on, (A) in the case of
Specified Equity Interests in respect of (I) Prime Retail Outlets or Prime
Office Chicago, the lower of the most recent Appraised Value or the Cap Rate
Value of such Interests (which shall be determined by reference to the
applicable Collateral Entity Properties) and (II) Extended Stay of America
Hotels, such multiple of the EBITDA with respect to Extended Stay of America
Hotels for the most recent twelve-month period reported by Borrower pursuant to
Section 5.1.7(g) as shall be reasonably determined by Lender based upon
applicable marketable data, and, in the case of the value of all Specified
Equity Interests included in the Collateral, which value shall be reduced (x) by
all Indebtedness secured by the Collateral Entity Properties owned indirectly
through such Specified Equity Interests, (y) by the value of any equity
interests entitled to dividends or other distributions with a payment preference
over dividends or distributions payable on account of such Specified Equity
Interests and (z) to the percentage of such value equal to the percentage of the
applicable Collateral Entity’s indirect ownership interest in the applicable
Collateral Entity Properties, provided that, for purposes hereof, (1) the
aggregate Collateral Value of all Specified Equity Interests in respect of
Extended Stay of America Hotels and its Affiliates shall be deemed to be zero
(0) on the Closing Date and, in any event, shall not be deemed to exceed
$100,000,000 at any time and (2) no Specified Equity Interest shall have any
Collateral Value unless it constitutes, together with all other Specified Equity
Interests pledged to Lender, a controlling, majority interest in the applicable
issuer, and (B) in the case of any other Collateral, such factors and
information as Lender may reasonably consider, and (ii) as of the Closing Date
and as of the last day of each calendar quarter thereafter through the Maturity
Date, commencing June 30, 2008, based upon valuations and other information
proposed by Borrower but subject to adjustment by Lender in its reasonable
discretion, taking into consideration quarterly negative assurance by the
Valuation Firm received by Lender with respect to the fair market value of any
applicable Collateral Entity Properties; provided, however, that (a) in
determining the Appraised Value as of any date, Lender shall not be required to
use any appraisal conducted more than three months before such date, (b) if
Borrower fails to provide any information necessary to Lender’s determination of
the Collateral Value, Lender may, in its sole discretion, assign any value or
use any information Lender deems appropriate in making such Collateral Value
determination and (c) the Collateral Value of all cash and cash equivalents in
any Deposit Account covered by a Control Agreement shall be 100% of the face
amount thereof.

 

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“Contingent Liability” shall mean any direct, indirect, contingent or
non-contingent guaranty or other obligation for the Indebtedness of another
Person (except endorsements in the ordinary course of business).
“Control” (and the correlative terms “controlled by” and “controlling”) shall
mean the possession, directly or indirectly, of the power to direct or cause the
direction of management and policies of the business and affairs of the entity
in question by reason of the ownership of beneficial interests, by contract or
otherwise.
“Control Agreement” shall mean an agreement, in form and substance satisfactory
to Lender, among Citibank, Lender and one or more Collateral Entities governing
the deposits to and disbursements from a Deposit Account, which shall provide
that (i) so long as no Event of Default has occurred and is continuing, Citibank
shall (A) disburse from such Deposit Account all amounts required from time to
time to pay Indebtedness secured by first mortgages on Collateral Entity
Properties, but only to the extent that such Deposit Account contains Collateral
Proceeds relating to such Collateral Entity Properties, (B) establish, and
re-establish, on a monthly basis, reserves from such Deposit Account for the
payment of such Indebtedness as Lender shall determine in its reasonable
discretion (to the extent such reserves are not then held by the holders of such
first mortgages), (C) pay from such Deposit Account, first, all amounts of
interest due and payable on account of the Obligations from time to time under
Section 2.2 hereof and, second, all amounts of principal, fees, costs, expenses
and other amounts due and payable hereunder including, without limitation, all
prepayments required to be made from time to time under Section 2.3.2, and
(D) so long as the aggregate outstanding principal amount of the Loan is equal
to or less than $60,000,000, transfer, on a monthly basis, fifty percent (50%)
of all surplus amounts to one or more other deposit accounts as such Collateral
Entity or Collateral Entities direct, and (ii) at any time that an Event of
Default has occurred and is continuing, Lender may apply all amounts in such
Deposit Account to such of the Obligations and in such order as Lender may elect
in its sole and absolute discretion.
“Debt” shall mean the outstanding principal amount set forth in, and evidenced
by, this Agreement and the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the Note,
this Agreement, the Pledge Agreements or any other Loan Document.
“Default” shall mean 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 constitute an Event of Default.
“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to
the lesser of (i) the Maximum Legal Rate, or (ii) four percent (4%) above the
Applicable Interest Rate.
“Deferral Period” shall have the meaning set forth in Section 2.2.4 hereof.
“Deferred Amount” shall have the meaning set forth in Section 2.2.4 hereof.

 

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“Deposit Account” shall mean, collectively, a deposit account, including,
without limitation, the Blocked Account, maintained by Citibank for the benefit
of Lender, as secured party of a Collateral Entity, and all sub-accounts and
ancillary accounts established and maintained in connection therewith.
“Dollars” shall mean U.S. dollars or any other lawful currency of the United
States.
“EBITDA” means, for any period, with respect to Extended Stay of America Hotels
on a consolidated basis (i) net income (as that term is determined in accordance
with GAAP) for such period, plus (ii) the amount of depreciation and
amortization of fixed and intangible assets deducted in determining such net
income for such period, plus (iii) all interest with respect to Indebtedness
(including, without limitation, the interest component of any rental obligation
which, under GAAP, is or will be required to be capitalized on the books of the
lessee) accrued or capitalized during such period (whether or not actually paid
during such period) determined in accordance with GAAP and all fees for the use
of money or the availability of money, including commitment, facility and like
fees and charges upon Indebtedness (including Indebtedness to Lender) paid or
payable during such period, without duplication, plus (iv) all tax liabilities
paid or accrued during such period, without duplication, less (v) the amount of
all gains (or plus the amount of all losses) realized during such period upon
the sale or other disposition of property or assets that are sold or otherwise
disposed of outside the ordinary course of business that is included in the
calculation of net income for such period.
“Embargoed Person” shall have the meaning set forth in Section 4.1.24 hereof.
“Eurodollar Rate” shall mean with respect to any Interest Period, an interest
rate per annum equal to LIBOR plus six percent (6.00%) (but during the Deferral
Period, eight percent (8.00%), which shall be applicable to all the Obligations
outstanding during the Deferral Period), but in no event less than eight percent
(8.00%) per annum.
“Event of Default” shall have the meaning set forth in Section 6.1(a) hereof.
“Executive Order” shall have the meaning set forth in the definition of
“Prohibited Person” in this Section 1.1.
“Exit Fee” shall have the meaning set forth in Section 2.2.8 hereof.
“Extended Stay of America Hotels” shall mean, collectively, BHAC and Homestead
Village L.L.C., a Delaware limited liability company, and their Subsidiaries.
“Fiscal Year” shall mean each twelve (12) month period commencing on January 1
and ending on December 31 during the term of the Loan.
“GAAP” shall mean generally accepted accounting principles in the United States
of America as of the date of the applicable financial report.
“Governmental Authority” shall mean any court, board, agency, commission,
office, central bank or other authority of any nature whatsoever for any
governmental unit (federal, State, county, district, municipal, city, country or
otherwise) or quasi-governmental unit whether now or hereafter in existence.

 

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“Guarantors” shall mean, collectively, Lichtenstein and Lightstone, and
“Guarantor” shall mean either of them individually.
“Guaranty” shall mean, individually, an Amended and Restated Continuing Guaranty
dated as of the Closing Date from a Guarantor to Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, and “Guaranties” shall mean both such Continuing Guaranties collectively.
“Immediate Family” shall have the meaning set forth in the definition of
“Qualified Lichtenstein Entity” in this Section 1.1.
“Indebtedness” means, with respect to any Person, as of the date of
determination thereof (without duplication of the same obligation under any
other clause hereof), (i) all obligations of such Person for borrowed money of
any kind or nature, whether senior or subordinated, including funded and
unfunded debt, whether or not evidenced by a promissory note or other
instrument, (ii) all obligations of such Person under or in respect of any
interest rate protection agreement, foreign currency exchange agreement,
commodity price protection agreement or other interest or currency exchange rate
or commodity price hedging agreement, (iii) all obligations of such Person to
pay the deferred purchase price of property or services (other than current
trade accounts payable under normal trade terms and accrued expenses and which
are incurred in the ordinary course of business that are not overdue for a
period greater than six months or that are contested in good faith by
appropriate proceedings), (iv) all obligations of such Person to acquire or for
the acquisition or use of any fixed asset, including capitalized lease
obligations (other than, in any such case, any portion thereof representing
interest or deemed interest or payments in respect of taxes, insurance,
maintenance or service), or improvements which are payable over a period longer
than one year, regardless of the term thereof or the Person or Persons to whom
the same are payable, (v) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right to be secured) a Lien on
any asset of such Person whether or not the Indebtedness is assumed by such
Person, (vi) all Indebtedness of others to the extent guaranteed by such Person,
(vii) all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreements in the event of default are limited to repossession or sale of
such property), and (viii) all reimbursement or other obligations of such Person
in respect of letters of credit, bankers acceptances, surety bonds, performance
bonds or similar instruments issued or accepted by banks or other financial
institutions for the account of such Person, whether or not matured.
“Indemnified Liabilities” shall have the meaning set forth in Section 8.13(b)
hereof.
“Indemnified Party” shall mean each of Lender and any Affiliate of Lender 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, any Person in whose name
any encumbrance created by any Pledge Agreement is or will have been recorded,
Persons who may hold or acquire or will have held a full or partial interest in
the Loan (as well as custodians, trustees and other fiduciaries who hold or have
held a full or partial interest in the Loan for the benefit of third parties) as
well as the respective directors, officers, shareholders, partners, members,
employees, agents, servants, representatives, contractors, subcontractors,
Affiliates, Subsidiaries, participants, successors and assigns of any and all of
the foregoing (including but not limited to any other Person who holds or
acquires or will have held a participation or other full or partial interest in
the Loan or the Collateral, whether during the term of the Loan, as a part of or
following foreclosure of the Lien on any Collateral or upon an acceleration of
the Loan, and including, but not limited to, any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender’s assets
and business).

 

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“Interest Period” shall mean the period commencing on the Closing Date and
ending one or three months thereafter as Borrower may elect, and each subsequent
period of one or three months commencing on the last day of the preceding
Interest Period, as Borrower may elect; provided, however, that (i) Borrower may
not select any Interest Period that ends after the Maturity Date; (ii) whenever
the last day of an Interest Period would otherwise occur on a day other than a
Business Day, the last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, except that, if such extension would cause the
last day of such Interest Period to occur in the next following calendar month,
then the last day of such Interest Period shall occur on the next preceding
Business Day; and (iii) if there is no corresponding date of the month that is
one or three months, as the case may be, after the first day of an Interest
Period, such Interest Period shall end on the last Business Day of such first or
third month, as the case may be.
“Interest Shortfall” shall have the meaning set forth in Section 2.3.1(b)
hereof.
“Investor” shall have the meaning set forth in Section 5.1.7(j) hereof.
“Legal Requirements” shall mean all federal, State, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities of the United States of
America (or political subdivision thereof) affecting the Collateral or any part
thereof, or the zoning, construction, use, alteration, occupancy or operation of
any of the Collateral Entity Properties, 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, at any time in force affecting the Collateral or any Collateral Entity
Properties or any part thereof.
“Lender” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.
“LIBOR” shall mean the rate per annum calculated as set forth below. With
respect to each Interest Period, LIBOR shall mean the rate for deposits in
Dollars, for a period equal to such Interest Period, which appears on the Dow
Jones Market Service (formerly Telerate) Page 3750 as of 11:00 a.m., London
time, on the related LIBOR Determination Date. If such rate does not appear on
Dow Jones Market Service Page 3750, LIBOR for that Interest Period shall be
determined on the basis of the rates at which deposits in Dollars are offered by
any four major reference banks in the London interbank market selected by Lender
to provide such bank’s offered quotation of such rates at approximately
11:00 a.m., London time, on the related LIBOR Determination Date to prime banks
in the London interbank market for a period equal to such Interest Period,
commencing on the first day of such Interest Period and in an amount that is
representative for a single such transaction in the relevant market at the
relevant time. Lender shall request the principal London office of any four
major reference banks in the London interbank market selected by Lender to
provide a quotation of such rates, as offered by each such bank.

 

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If at least two such quotations are provided, LIBOR for that Interest Period
shall be the arithmetic mean of the quotations. If fewer than two quotations are
provided as requested, LIBOR for that Interest Period shall be the arithmetic
mean of the rates quoted by major banks in New York City selected by Lender, at
approximately 11:00 a.m., New York City time, on the LIBOR Determination Date
with respect to such Interest Period for loans in Dollars to leading European
banks for a period equal to such Interest Period, commencing on the first day of
such Interest Period and in an amount that is representative for a single
transaction in the relevant market at the relevant time. Lender shall determine
LIBOR for each Interest Period and the determination of LIBOR by Lender shall be
binding upon Borrower absent manifest error.
“LIBOR Determination Date” shall mean two (2) Business Days before the
commencement of each Interest Period.
“Lichtenstein” shall mean David Lichtenstein, an individual residing at 5 Grand
Park Drive, Monsey, New York 10952.
“Lichtenstein Credit Agreement” shall have the meaning set forth in
Section 6.1(a)(xvi)(A) hereof.
“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of,
on or affecting Borrower, the Collateral, any portion thereof or any interest
therein, including, without limitation, 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.
“Lightstone” shall mean Lightstone Holdings LLC, a Delaware limited liability
company.
“Loan” shall have the meaning set forth in Section 2.1.1 hereof.
“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge
Agreements, the Control Agreements, the Guaranties and all other documents
executed from time to time in connection with the Loan.
“Loan Party” shall mean, individually or collectively, as the context requires,
Borrower, each Guarantor, each Pledgor and each other Collateral Entity.
“Market Rate” shall have the meaning set forth in Section 2.3.1(b) hereof.
“Material Adverse Effect” means (i) a material adverse effect on the business,
prospects, operations, results of operations, assets, liabilities or condition
(financial or otherwise) of a Loan Party, (ii) the impairment of (A) a Loan
Party’s ability to perform its obligations under the Loan Documents to which it
is a party or (B) the ability of Lender to enforce the Obligations or realize
upon the Collateral or (iii) a material adverse effect on the value of the
Collateral or the amount that Lender would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of the Collateral.

 

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“Material Indebtedness” shall mean Indebtedness in an amount in excess of
$250,000, whether or not such amount has been declared immediately due and
payable.
“Maturity Date” shall mean June 15, 2009 or such other date on which the final
payment of the principal of the Note becomes due and payable as in the Note or
herein provided, whether at such stated maturity date, by declaration of
acceleration, or otherwise.
“Maximum Legal Rate” shall mean the maximum nonusurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the Indebtedness evidenced by the Note and as provided
for herein or in the other Loan Documents, under the laws of such State or
States whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.
“Net Cash Proceeds” means the aggregate cash proceeds received by any Person in
respect of (i) any sale of assets of such Person, (ii) any refinancing of
Indebtedness of such Person, or (iii) any issuance of Indebtedness or equity
securities of such Person, in each case net of (without duplication) (A) the
amount required to repay any Indebtedness (other than the Loan) incurred with
respect to, or secured by a Permitted Encumbrance on, any assets of a Person
that are sold in connection with any such asset sale, (B) the reasonable
out-of-pocket fees and expenses incurred in effecting such sale, refinancing or
issuance, (C) any taxes reasonably attributable to any such asset sale and
reasonably estimated by such Person to be actually payable and (D) reserves to
be taken by such Person in accordance with GAAP against any contingent
liabilities incurred by such Person in connection with such sale, refinancing or
issuance; provided, however, that (I) the calculation and determination of Net
Cash Proceeds shall be subject to the approval of Lender in its reasonable
discretion, and in connection with any such calculation and determination,
Borrower shall furnish Lender within two (2) days after receipt by the
applicable Person of such Net Cash Proceeds all accounting and transaction
documentation and information necessary to verify the amount of such Net Cash
Proceeds, as provided more fully in Section 5.1.7(f), and (II) the amount of any
reserve taken under the foregoing clause (D) that is subsequently released from
such reserve shall immediately thereupon be deemed Net Cash Proceeds.
“Net Operating Income” in respect of any Person related to Collateral Entity
Properties shall mean (i) the gross income of such Collateral Entity Properties
determined as of the end of any month, for the consecutive twelve-month period
then ended, less (ii) (A) all reasonable management fees, (B) all operating
expenses and (C) all real estate taxes, in each case paid or payable by the
owner of such Collateral Entity Properties during such twelve-month period.
“Note” shall mean that certain amended and restated promissory note of even date
herewith in the original principal amount of One Hundred Ten Million and 00/100
Dollars ($110,000,000) made by Borrower in favor of Lender, as the same may be
amended, restated, replaced, extended, renewed, supplemented, severed, split, or
otherwise modified from time to time.

 

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“Obligations” means and includes the Loan and all other debts, including,
without limitation, the Debt, liabilities, obligations, covenants and duties
owing by Borrower and the other Loan Parties to Lender of any kind or nature,
present or future, whether or not evidenced by any note, guaranty or other
instrument, which may arise under, out of, or in connection with, this
Agreement, the Note, the other Loan Documents or any other agreement executed in
connection herewith or therewith, whether or not for the payment of money,
whether arising by reason of an extension of credit, opening, guaranteeing or
confirming of a letter of credit, loan, guaranty or indemnification or in any
other manner, whether direct or indirect (including those acquired by
assignment, purchase, discount or otherwise), whether absolute or contingent,
due or to become due, and however acquired. The term includes, without
limitation, all interest (including interest accruing on or after a bankruptcy
or other insolvency event, whether or not such interest constitutes an allowed
claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, attorneys’ fees, and any other sum
properly chargeable to any of the Loan Parties under this Agreement, the Note,
the other Loan Documents or any other agreement executed in connection herewith
or therewith.
“Original Maturity Date” shall have the meaning set forth in the preamble
hereto.
“Ownership Interest” shall have the meaning set forth in the definition of
“Qualified Lichtenstein Entity” in this Section 1.1.
“Payment Date” shall mean the last day of each month, or if such day is not a
Business Day, the immediately preceding Business Day.
“Permitted Encumbrances” shall mean, collectively, (i) the Liens and security
interests created by the Loan Documents, (ii) all Liens, encumbrances and other
matters which would not, individually or in the aggregate, be reasonably
expected to have a material adverse effect on Borrower’s ability to perform its
obligations under the Loan Documents, (iii) Liens, if any, for taxes not yet
delinquent imposed by any Governmental Authority, and (iv) such other Liens or
other liabilities of which Lender is aware as of the date hereof or which Lender
has approved or may approve in writing in Lender’s sole discretion.
“Permitted Lichtenstein Owner” shall have the meaning set forth in the
definition of “Qualified Lichtenstein Entity” in this Section 1.1.
“Person” shall mean 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.
“PGRT Entities” shall mean the REIT, Prime Group Realty, L.P. and their direct
and indirect Subsidiaries. For the avoidance of uncertainty, it is agreed that
the PGRT Entities shall not include Extended Stay of America Hotels, Prime
Retail Outlets or Prime Office Chicago.
“Pledge Agreements” shall mean (a) the Borrower Pledge Agreement, (b) the
Amended and Restated Pledge Agreement together with all exhibits attached
thereto dated as of the Closing Date, executed and delivered by The Lightstone
Group, LLC to Lender as security for the Loan and for other obligations of
Borrower and certain of its Affiliates, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, (c) the Amended
and Restated Pledge Agreement together with all exhibits attached thereto dated
as of the Closing Date, executed and delivered by Lichtenstein to Lender
pledging, among other things, Lichtenstein’s membership interest in Park Avenue
Funding, LLC as security for the Loan and for other obligations of Borrower and
certain of its Affiliates, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time,

 

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(d) the Amended and Restated Pledge Agreement together with all exhibits
attached thereto dated as of the Closing Date, executed and delivered by
Lichtenstein to Lender pledging, among other things, Lichtenstein’s membership
interest in Lightstone Prime, LLC as security for the Loan and for other
obligations of Borrower and certain of its Affiliates, as the same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time, and (e) each other pledge agreement, in substantially the form of
Exhibit A and otherwise in form and substance satisfactory to Lender, by a
Collateral Entity in favor of Lender, granting to Lender a security interest in
any Specified Equity Interest, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.
“Pledgor” shall mean any pledgor under a Pledge Agreement.
“Prepayment Date” shall have the meaning set forth in Section 2.3.1(a) hereof.
“Prime Office Chicago” shall mean Prime Office Company, LLC, a Delaware limited
liability company.
“Prime Retail Outlets” shall mean Prime Outlets Acquisition Company LLC, a
Delaware limited liability company.
“Prohibited Person” shall mean any Person:
(a) listed in the Annex to, or otherwise subject to the provisions of, the
Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001,
and relating to Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (the “Executive Order”);
(b) that is owned or controlled by, or acting for or on behalf of, any Person
that is listed to the Annex to, or is otherwise subject to the provisions of,
the Executive Order;
(c) with whom Lender is prohibited from dealing or otherwise engaging in any
transaction by any terrorism or money laundering law, including the Executive
Order;
(d) who commits, threatens or conspires to commit or supports “terrorism” as
defined in the Executive Order;
(e) that is named as a “specially designated national and blocked person” on the
most current list published by the U.S. Treasury Department Office of Foreign
Assets Control at its official website, http://www.treas.gov/ofac/t11sdn.pdf or
at any replacement website or other replacement official publication of such
list; or
(f) who is an Affiliate of or affiliated with a Person listed above.

 

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“Qualified Lichtenstein Entity” shall mean a Person as to which each of the
following is true: (1) more than 49% of the Ownership Interest in such Person is
held directly or indirectly by one or more Permitted Lichtenstein Owners, and
(2) Lichtenstein shall exercise managerial and operational control over such
Person. Notwithstanding the foregoing, in the event of the death or incapacity
of Lichtenstein, a Person over which one or more of the members of the Immediate
Family of Lichtenstein shall exercise managerial and operational control shall
be deemed to fulfill the requirements of clause (2) hereof. The term “Immediate
Family” shall mean and include, with respect to any Person, his spouse, children
(including adopted children), grandchildren (including adopted grandchildren)
and the spouses of any of the foregoing. The term “Ownership Interest” in a
Person shall mean such interest (whether or not denominated as an equity
interest, and including, without limitation, a beneficial interest in a trust)
as shall entitle the owner thereof to a share in the profits, losses and
distributions of such Person. The term “Permitted Lichtenstein Owner” shall mean
Lichtenstein or members of his Immediate Family or trusts for the benefit of
Lichtenstein or members of his Immediate Family.
“REIT” shall have the meaning set forth in Section 5.2.7 hereof.
“Restricted Party” shall mean either Guarantor or any other Qualified
Lichtenstein Entity.
“Restricted Payment Event” shall have the meaning set forth in Section 5.2.7
hereof.
“Restructuring Fee” shall have the meaning set forth in Section 2.2.7 hereof.
“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance,
transfer, assignment or pledge of a direct or indirect legal or beneficial
interest.
“Scheduled Property” shall have the meaning set forth in Section 2.3.2(b)
hereof.
“Servicer” shall have the meaning set forth in Section 7.2 hereof.
“Severed Loan Documents” shall have the meaning set forth in Section 6.2(c)
hereof.
“Specified Equity Interests” shall mean the shares of capital stock, partnership
interests, limited liability company membership interests, investment trust
units and all other equity interests that are legally or beneficially owned by
Borrower, a Guarantor or any of their respective Affiliates, directly or
indirectly, in any of Prime Retail Outlets, Prime Office Chicago or Extended
Stay of America Hotels.
“State” shall mean a State or Commonwealth in the United States of America.
“Subsidiary” shall mean, as to any Person, a corporation or other entity in
which that Person directly or indirectly owns or controls the shares of stock or
other ownership interests having ordinary voting power to elect a majority of
the board of directors or other governing body, or to appoint the majority of
the managers of, such corporation or other entity.
“Transfer” shall have the meaning set forth in Section 5.2.6(a) hereof.
“2007 Loan Agreement” shall have the meaning set forth in the preamble hereto.
“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the State of New York or the State in which Borrower or the applicable
Collateral is located, as the context may require.

 

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“UCC Financing Statements” shall mean the UCC financing statements covering
Collateral pledged under the Pledge Agreements or any other Loan Document and
filed in the applicable filing offices.
“Units” shall mean those certain Series A-2 Units and Common A-2 Units in BHAC.
“Valuation Firm” shall mean Duff & Phelps, LLC or another valuation firm
satisfactory to Lender.
Section 1.2 Principles of Construction.
All references to sections and schedules are to sections and schedules in or to
this Agreement unless otherwise specified. All uses of the word “including”
shall mean “including, without limitation” unless the context shall indicate
otherwise. 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. 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.
II. GENERAL TERMS
Section 2.1 Loan.
2.1.1 Loan Amount.
Pursuant to the 2007 Loan Agreement, Lender made a loan (the “Loan”) to Borrower
in the aggregate principal amount of $120,000,000. Prior to the Closing Date,
Borrower prepaid the Loan in the aggregate principal amount of $10,000,000.
After giving effect to such prepayment, the aggregate outstanding principal
amount of the Loan on the Closing Date is $110,000,000.
2.1.2 The Note, the Pledge Agreements and Other Loan Documents.
The Loan shall be evidenced by the Note, secured by the Pledge Agreements and
certain other Loan Documents and entitled to the benefit of all the Loan
Documents.
2.1.3 Use of Proceeds.
The proceeds of the Loan were used by Borrower to fund Borrower’s acquisition of
certain equity interests in the real estate portfolio known as Extended Stay of
America Hotels and to pay fees, costs and expenses incurred in connection with
the closing of the Loan as approved by Lender.

 

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Section 2.2 Interest; Payments; Late Payment Charge; Restructuring Fee; Exit
Fee.
2.2.1 Interest; Payments.
(a) Interest on the outstanding principal balance of the Loan shall accrue from
the Closing Date to the Maturity Date at the Applicable Interest Rate and shall
be payable monthly. Not less than three Business Days prior to each Interest
Period, Borrower shall elect in writing which Applicable Interest Rate shall
apply to the Loan for such Interest Period. If Borrower shall fail to select,
prior to the expiration of any Interest Period, which Applicable Interest Rate
shall apply during the next succeeding Interest Period, Borrower shall be deemed
to have selected the Eurodollar Rate for such succeeding Interest Period. If
Borrower shall fail to select, prior to the expiration of any Interest Period,
the duration of the next succeeding Interest Period, Borrower shall be deemed to
have selected an Interest Period of one month. Interest shall be paid in arrears
on each Payment Date commencing on June 30, 2008 and on each subsequent Payment
Date thereafter up to and including the Maturity Date.
(b) All payments and other amounts due under the Note, this Agreement and the
other Loan Documents shall be made without any setoff, defense or irrespective
of, and without deduction for, counterclaims.
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 period for which the
calculation is being made, by (b) a daily rate equal to the Applicable Interest
Rate divided by 360, by (c) the outstanding principal balance.
2.2.3 Eurodollar Rate Unascertainable; Illegality; Increased Costs.
(a) (i) In the event that Lender shall have determined (which determination
shall be conclusive and binding upon Borrower absent manifest error) that by
reason of circumstances affecting the interbank eurodollar market, adequate and
reasonable means do not exist for ascertaining LIBOR, then Lender shall
forthwith give notice by telephone of such determination to Borrower with a
written confirmation of such determination promptly thereafter. If such notice
is given, the Loan shall bear interest at the Adjusted Base Rate beginning on
the first day of the next succeeding Interest Period.
(ii) If, pursuant to the terms of this Section 2.2.3, the Loan is bearing
interest at the Adjusted Base Rate and Lender shall determine (which
determination shall be conclusive and binding upon Borrower absent manifest
error) that the event(s) or circumstance(s) which resulted in such conversion
shall no longer be applicable, Lender shall give notice thereof to Borrower by
telephone of such determination, confirmed in writing, to Borrower as soon as
reasonably practical, but in no event later than three (3) Business Days prior
to the last day of the then current Interest Period. If such notice is given,
and Borrower so requests, the Loan may bear interest at the Eurodollar Rate
beginning on the first day of the next succeeding Interest Period.
(b) If any requirement of law or any change therein or in the interpretation or
application thereof, shall hereafter make it unlawful for Lender in good faith
to make or maintain the Loan bearing interest at the Eurodollar Rate, the Loan
shall automatically bear interest at the Adjusted Base Rate in the next
succeeding Interest Period or within such earlier period as required by
Applicable Law. Borrower hereby agrees promptly to pay Lender (within ten
(10) days of Lender’s written demand therefor) any additional amounts necessary
to compensate Lender for any costs incurred by Lender in making any conversion
in accordance with this Agreement, including, without limitation, any interest
or fees payable by Lender to lenders of funds obtained by it in order to make or
maintain the Loan hereunder. Lender’s written notice of such costs, as certified
to Borrower, shall be conclusive absent manifest error.

 

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(c) In the event that any change occurring after the date hereof in any
requirement of any Applicable Law or in the interpretation or application
thereof, or compliance in good faith by Lender with any request or directive
(whether or not having the force of law) hereafter issued from any Governmental
Authority which is generally applicable to all lenders subject to such
Governmental Authority’s jurisdiction:
(i) shall hereafter impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by, any office of
Lender which is not otherwise included in the determination of LIBOR hereunder;
(ii) shall, if the Loan is then bearing interest at the Eurodollar Rate,
hereafter have the effect of reducing the rate of return on Lender’s capital as
a consequence of its obligations hereunder to a level below that which Lender
could have achieved but for such adoption, change or compliance (taking into
consideration Lender’s policies with respect to capital adequacy) by any amount
deemed by Lender to be material; or
(iii) shall, if the Loan is then bearing interest at the Eurodollar Rate,
hereafter impose on Lender any other condition, the result of which is to
increase the cost to Lender of making, renewing or maintaining the Loans or to
reduce any amount receivable hereunder;
then, in any such case, Borrower shall promptly pay Lender (within ten (10) days
of Lender’s written demand therefor), any additional amounts necessary to
compensate Lender for such additional cost or reduced amount receivable on
account of the Loan which Lender deems to be material. If Lender becomes
entitled to claim any additional amounts pursuant to this Section 2.2.3(c),
Lender shall provide Borrower with written notice specifying in reasonable
detail the event or circumstance by reason of which Lender has become so
entitled and the additional amount required to fully compensate Lender for such
additional cost or reduced amount. A certificate as to any additional costs or
amounts payable pursuant to the foregoing sentence submitted by Lender to
Borrower shall be conclusive absent manifest error. This provision shall survive
payment of the Note and the satisfaction of all other obligations of Borrower
under the Note, this Agreement and the other Loan Documents.

 

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(d) Borrower agrees to indemnify Lender and to hold Lender harmless from any
loss or expense which Lender sustains or incurs directly as a consequence of
(i) any default by Borrower in payment of the principal of or interest on the
Loan while bearing interest at the Eurodollar Rate, including, without
limitation, any such loss or expense arising from interest or fees payable by
Lender to lenders of funds obtained by it in order to maintain the Eurodollar
Rate, (ii) any prepayment (whether voluntary or mandatory) of the Loan while
bearing interest at the Eurodollar Rate on a day that is not the last day of the
Interest Period with respect thereto, and (iii) the conversion (for any reason
whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate
from the Eurodollar Rate to the Adjusted Base Rate with respect to the Loan
while bearing interest at the Eurodollar Rate on a date other than the last day
of the Interest Period with respect thereto, including, without limitation, such
loss or expenses arising from interest or fees payable by Lender to lenders of
funds obtained by Lender in order to maintain the Eurodollar Rate hereunder (the
amounts referred to in clauses (i), (ii) and (iii) are herein referred to
collectively as the “Breakage Costs”). This provision shall survive payment of
the Note and the satisfaction of all other obligations of Borrower under this
Agreement and the other Loan Documents.
2.2.4 Scheduled Principal Payments.
Borrower shall make the following principal installment payments to Lender on
account of the Loan in accordance with the following amortization schedule:

         
June 30, 2008
  $ 15,000,000  
 
       
July 31, 2008
  $ 5,000,000  
 
       
September 30, 2008
  $ 20,000,000  
 
       
December 31, 2008
  $ 20,000,000  
 
       
March 31, 2009
  $ 20,000,000  

provided, however, that Borrower may, on written notice to Lender received by
Lender at least ten (10) days prior to September 30, 2008, elect to defer until
not later than December 31, 2008 (the period, if Borrower makes such deferral
election, from September 30, 2008 to the earlier of (a) December 31, 2008 and
(b) the date on which the Deferred Amount is repaid in full, the “Deferral
Period”) up to $10,000,000 of the principal installment of the Loan otherwise
due and payable on September 30, 2008 (the principal amount which Borrower
elects to defer, the “Deferred Amount”). Notwithstanding anything to the
contrary herein, Borrower shall pay to Lender on the Maturity Date the remaining
outstanding principal balance of the Loan, all accrued and unpaid interest
thereon, and all other amounts due hereunder and under the Note and the other
Loan Documents.
2.2.5 Payments after Default.
Upon the occurrence and during the continuance of an Event of Default, interest
on the outstanding principal balance of the Loan and, to the extent permitted by
Applicable Law, overdue interest and other amounts due in respect of the Loan,
shall accrue at the Default Rate, calculated from the date such payment was due
after giving effect to any grace or cure periods contained herein. Interest at
the Default Rate shall be computed from the occurrence of the default until the
actual receipt and collection of the Debt (or that portion thereof that is then
due). To the extent permitted by Applicable Law, interest at the Default Rate
shall be added to the Debt, shall itself accrue interest at the same rate as the
Loan and shall be secured by the Pledge Agreements. This paragraph shall not be
construed as an agreement or privilege to extend the date of the payment of the
Debt, nor as a waiver of any other right or remedy accruing to Lender by reason
of the occurrence of any Event of Default.

 

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2.2.6 Usury Savings.
This Agreement and the Note 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 Applicable 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. 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.
2.2.7 Restructuring Fee.
Borrower shall pay to Lender a fully-earned and non-refundable restructuring fee
in the aggregate amount of $3,000,000 (the “Restructuring Fee”) in accordance
with the following schedule: $1,000,000 at the time of the execution of the
Summary of Terms dated April 28, 2008 accepted by Borrower on April 28, 2008
(which amount Lender acknowledges and agrees that Borrower has paid), $1,000,000
on June 30, 2008, and $1,000,000 on September 30, 2008.
2.2.8 Exit Fee.
Borrower shall pay to Lender, upon the earliest of (a) the Maturity Date,
(b) the date of the prepayment of the Loan in full, or (c) the date of the
occurrence of an Event of Default, whether or not the Loan has been declared
immediately due and payable, a fully earned and non-refundable exit fee in the
amount of $1,100,000 (the “Exit Fee”).
Section 2.3 Prepayments.
2.3.1 Voluntary Prepayments.
Borrower shall have the right to prepay the Loan in whole or in part at any time
(so long as any partial payment is not less than $250,000) upon satisfaction of
the following conditions:
(a) Borrower shall provide prior written notice to Lender specifying the amount
of such prepayment and the date (the “Prepayment Date”) upon which the
prepayment is to be made, which notice shall be delivered to Lender not less
than three days prior to such prepayment; and

 

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(b) Borrower shall pay to Lender, simultaneously with such prepayment, (i) all
accrued and unpaid interest calculated at the Applicable Interest Rate on the
amount of principal being prepaid through and including the Prepayment Date,
together with, if the Loan is then bearing interest by reference to the
Eurodollar Rate and the payment is not being made on the last day of the
applicable Interest Period, an amount equal to (A) the interest that would have
accrued at the Eurodollar Rate on the then outstanding principal balance of the
Loan through the end of the Interest Period in which such prepayment occurs less
(B) the amount of interest that would accrue on such amount prepaid for the
remainder of such Interest Period at the Market Rate (as defined below) (the
“Interest Shortfall”); (ii) Breakage Costs, if any, without duplication of any
sums paid pursuant to the preceding clause (i); and (iii) all other sums then
due under this Agreement, the Note or the other Loan Documents, without
duplication. The term “Market Rate” means the rate of interest per annum at
which deposits in United States dollars are offered by Citibank’s principal
office in London, England, to prime banks in the London interbank market at
11:00 a.m. (London time) two Business Days before the date of such prepayment in
an amount substantially equal to the amount of such prepayment and for a deposit
period comparable to the remaining Interest Period, as determined by Lender in
its sole discretion, which determination shall be conclusive absent manifest
error.
2.3.2 Mandatory Prepayments.
(a) If, as of the end of any calendar quarter, commencing June 30, 2008, the
then outstanding principal amount of the Loan exceeds an amount equal to thirty
percent (30%) of the Collateral Value most recently determined, Borrower shall,
within ten (10) days after Lender’s notice to Borrower that such excess exists,
prepay the Loan by an amount equal to or greater than such excess amount.
(b) If any of Borrower, the Guarantors or any of their Affiliates sells all or
any portion of the Specified Equity Interests, Borrower shall prepay the Loan by
an amount equal to the Net Cash Proceeds of such sale (but after the aggregate
outstanding principal amount of the Loan is equal to or less than $60,000,000,
if such a sale occurs, Borrower shall prepay the Loan by an amount equal to
fifty percent (50%) of the Net Cash Proceeds of such sale). If (i)(A) any of the
real estate interests owned directly or indirectly by Prime Retail Outlets,
Prime Office Chicago or Extended Stay of America Hotels (the “Collateral Entity
Properties”) is sold, or (B) any of the real property specified in Schedule
2.3.2(b) (the “Scheduled Property”) is sold, or (ii) any of Borrower, the
Guarantors or any of their Affiliates refinances any Indebtedness secured by any
of the Specified Equity Interests, the Collateral Entity Properties or the
Scheduled Property, Borrower shall prepay the Loan by an amount equal to the Net
Cash Proceeds of such sale or such refinancing (but after the aggregate
outstanding principal amount of the Loan is equal to or less than $60,000,000,
if such a sale or refinancing occurs, Borrower shall prepay the Loan by an
amount equal to fifty percent (50%) of the Net Cash Proceeds of such sale or
such refinancing).

 

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(c) If any of Borrower, Lightstone or any of their Affiliates issues any
Indebtedness or equity securities in a private or public offering, Borrower
shall prepay the Loan by an amount equal to the Net Cash Proceeds of such
issuance received by Borrower or Lightstone, or in the case of any of their
Affiliates, equal to the maximum amount of such Net Cash Proceeds that is
permitted to be declared and paid to Borrower or Lightstone as dividends or
other distributions by Applicable Law (but after the aggregate outstanding
principal amount of the Loan is equal to or less than $60,000,000, if such an
issuance occurs, Borrower shall prepay the Loan by an amount equal to fifty
percent (50%) of the Net Cash Proceeds of such issuance).
(d) If any of Borrower, the Guarantors or any of their Affiliates receives any
cash dividends or other distributions on account of the Specified Equity
Interests, Borrower shall prepay the Loan by an amount equal to the amount of
such dividends or other distributions (but after the aggregate outstanding
principal amount of the Loan is equal to or less than $60,000,000, if such
dividends or other distributions are received, Borrower shall prepay the Loan by
an amount equal to fifty percent (50%) of the amount of such dividends or other
distributions).
(e) All Net Cash Proceeds of asset sales, refinancings and Indebtedness and
equity offerings and all dividends and other distributions (or, if applicable,
50% thereof) subject to the terms of this Section 2.3.2 shall be deposited in or
otherwise credited to the Blocked Account within two (2) days after receipt by
the applicable Person of such Net Cash Proceeds or such dividends or other
distributions.
(f) If an Affiliate of the Borrower or a Guarantor that is not a Pledgor effects
an asset sale, refinancing or issuance of Indebtedness or equity securities or
receives dividends or other distributions and any such transaction would require
a mandatory prepayment pursuant to the terms of this Section 2.3.2,
notwithstanding anything to the contrary herein, the prepayment required by this
Section 2.3.2 shall be in the amount of Net Cash Proceeds or dividends or other
distributions that such Affiliate actually pays to a Pledgor as contemplated by
Section 5.1.13 hereof.
(g) Borrower shall pay to Lender, simultaneously with any prepayment under this
Section 2.3.2, all accrued and unpaid interest calculated at the Applicable
Interest Rate on the amount of principal being prepaid through and including the
date such principal is prepaid, plus, if the Loan is then bearing interest by
reference to the Eurodollar Rate and the terms of Section 2.3.6 do not apply,
the amount of any Interest Shortfall and, without duplication thereof, all
Breakage Costs.
2.3.3 Prepayments After Default.
If, following an Event of Default, Borrower tenders payment of all or any part
of the Debt, or if all or any portion of the Debt is recovered by Lender after
such Event of Default, such tender or recovery shall be deemed a voluntary
prepayment by Borrower, and Borrower shall pay, in addition to the Debt, (i) all
accrued and unpaid interest calculated at the Applicable Interest Rate on the
amount of principal being prepaid through and including the Prepayment Date,
(ii) the Interest Shortfall, if applicable, with respect to the amount prepaid,
(iii) Breakage Costs, if any, without duplication of any sums paid pursuant to
the preceding clause (ii), (iv) if all of the Debt is paid or recovered by
Lender, the Exit Fee, and (v) all other sums due under this Agreement, the Note
or the other Loan Documents in connection with a partial or total prepayment.

 

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2.3.4 Making of Payments.
Each payment by Borrower hereunder or under the Note shall be made in federal
funds or other funds immediately available to Lender by 12:00 p.m., New York
City time, on or prior to the date such payment is due, to Lender by deposit to
such account as Lender may designate by written notice to Borrower. Whenever any
payment hereunder or under the Note shall be stated to be due on a day which is
not a Business Day, such payment shall be made on the first Business Day
succeeding such scheduled due date.
2.3.5 Application of Prepayments.
All prepayments received pursuant to this Section 2.3 shall be applied first, to
interest on the outstanding principal balance being prepaid that accrued through
and including the Prepayment Date or mandatory date of prepayment, as the case
may be, second, to the Interest Shortfall and Breakage Costs, if any, and third,
to the payment of principal due under the Loan in the regular order of maturity,
provided that, if there is any Deferred Amount then outstanding, principal
payments shall be applied to the Deferred Amount first, and any other amounts
due under this Agreement, the Note or the other Loan Documents, including, if
the Loan is being prepaid in full, the Exit Fee.
2.3.6 Escrow of Certain Prepayments.
Notwithstanding anything to the contrary in this Section 2.3, so long as no
Event of Default has occurred and is continuing, at Borrower’s option, Lender
shall hold in escrow for its own benefit all amounts intended or required to be
applied as prepayments of any principal amounts of the Loan that bear interest
by reference to the Eurodollar Rate and shall release such amounts from escrow
and apply them to such principal amounts upon the next applicable Payment
Date(s) in prepayment thereof, it being understood and agreed that interest
shall continue to accrue on such principal amounts until such time as such
prepayments are released from escrow and applied to reduce such principal
amounts; provided, however, that, upon the occurrence and during the continuance
of an Event of Default, such escrowed amounts may be immediately applied to any
of the Obligations without regard to any such Payment Date(s).
Section 2.4 Release on Payment in Full.
Lender shall, upon the written request and at the expense of Borrower, upon
payment in full of all principal and interest on the Loan and all other amounts
due and payable under the Loan Documents, including, without limitation, the
Exit Fee, in accordance with the terms and provisions of the Note and this
Agreement, (i) release the Lien of the Pledge Agreements and any other Loan
Documents on the Collateral, and (ii) terminate the other Loan Documents.
Section 2.5 Due Diligence Deposit Fee.
Borrower has paid, prior to the Closing Date, a fully earned and non-refundable
due diligence deposit fee in the amount of $100,000. If the amount of the due
diligence deposit fee is not sufficient to reimburse Lender in full for its
legal and other out-of-pocket costs and expenses incurred in connection with the
preparation, execution and delivery of this Agreement and the other Loan
Documents, Borrower shall promptly pay any additional amount required to
reimburse Lender in full for such costs and expenses. If the amount of the due
diligence deposit fee exceeds Lender’s legal and other out-of-pocket costs and
expenses incurred in connection with the preparation, execution and delivery of
this Agreement and the other Loan Documents, Lender shall return such excess to
Borrower.

 

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III. CASH MANAGEMENT
Section 3.1 Establishment of Blocked Account.
Borrower shall establish and maintain with and at Citibank a segregated account
(the “Blocked Account”) in accordance with Citibank’s standard account documents
for the benefit of Lender, which Blocked Account shall be under the sole
dominion and control of Lender and shall be subject to a valid, perfected first
priority security interest in favor of Lender. Borrower shall cause all payments
made in respect of the Units to be made to the Blocked Account, unless and until
otherwise directed by Lender, and shall deposit into the Blocked Account an
amount equal to the principal or interest due and payable hereunder no later
than one Business Day before such payment is due and owing to Lender. Lender and
its servicer, if any, shall have the sole right at all times to make withdrawals
from the Blocked Account, and Borrower hereby authorizes Lender to instruct
Citibank to debit the Blocked Account by the amount of the principal and
interest payment due on each date on which such principal or interest is due
(and Lender will make withdrawals therefrom to make payments of accrued interest
and/or principal due and unpaid hereunder without duplication). If Lender or its
servicer withdraws from the Blocked Account an amount sufficient to pay accrued
interest on any Payment Date or any principal then due and there are any amounts
remaining in the Blocked Account after such payment of accrued interest or such
principal amount, Lender shall, so long as no Deferred Amount is outstanding and
the aggregate outstanding principal amount of the Loan is equal to or less than
$60,000,000, transfer, on a monthly basis, fifty percent (50%) of such remaining
amounts to any account to which Borrower directs promptly upon receipt of such
direction. Borrower shall pay all costs and expenses for establishing and
maintaining the Blocked Account. If, on any Payment Date or any other principal
payment date, the amount then on deposit in the Blocked Account is less than the
amount of the accrued interest or principal required to be paid to Lender under
this Agreement and the Note on such Payment Date or other principal payment
date, Borrower shall deposit in a deposit account of Borrower maintained with
and at Citibank the amount of such deficiency. Borrower shall have ten (10) days
following Borrower’s receipt of notice from Lender of such deficiency to pay
such deficiency except that any such deficiency shall be paid immediately on the
Maturity Date.
IV. REPRESENTATIONS AND WARRANTIES
Section 4.1 Borrower Representations.
Borrower represents and warrants as of the Closing Date that:
4.1.1 Organization.
Borrower is duly organized, with requisite power and authority to own its
assets, to transact the businesses in which it is now engaged and to execute,
deliver and perform this Agreement and the other Loan Documents to which it is
or will be a party. Borrower possesses all rights, licenses, permits and
authorizations, governmental or otherwise, necessary to entitle it to own its
assets and to transact the businesses in which it is now engaged.

 

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4.1.2 Proceedings.
Borrower has taken all necessary action to authorize the execution, delivery and
performance of this Agreement and the other Loan Documents to which it is or
will be a party. This Agreement and the other Loan Documents to which it is or
will be 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 and similar laws affecting rights of
creditors 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 by Borrower of this Agreement and the
other Loan Documents to which it is or will be a party 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) upon any of the property
or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of
trust, loan agreement, partnership agreement, management agreement or other
agreement or instrument (including, without limitation, its charter or by-laws)
to which Borrower is or will be a party or by which any of Borrower’s property
or 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 court or
governmental agency or body having jurisdiction over Borrower or any of
Borrower’s assets, or any license or other approval required to own and manage
its assets, and any consent, approval, authorization, order, registration or
qualification of or with any Governmental Authority required for the execution,
delivery and performance by Borrower of this Agreement or any other Loan
Documents to which it is or will be a party 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 by or before any
Governmental Authority or other agency now pending or threatened against or
affecting Borrower or the Collateral which actions, suits or proceedings, if
determined against Borrower or the Collateral, might materially adversely affect
the condition (financial or otherwise) or business of Borrower or the
Collateral.
4.1.5 Agreements.
Borrower is not a party to any agreement or instrument or subject to any
restriction which might materially and adversely affect Borrower or the
Collateral or Borrower’s business, properties or assets, operations or
condition, financial or otherwise. Borrower is not 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 or the Collateral is bound.

 

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4.1.6 Solvency.
Borrower (a) has not entered into the 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) has received reasonably equivalent value in
exchange for its obligations under the Loan Documents. The fair saleable value
of Borrower’s assets exceeds Borrower’s total liabilities, including, without
limitation, subordinated, unliquidated, disputed and contingent liabilities.
Borrower’s assets do not constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Borrower does not intend
to 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
and the amounts to be payable on or in respect of obligations of Borrower). No
petition under the Bankruptcy Code or similar state bankruptcy or insolvency law
has been filed against Borrower in the last seven (7) years, and Borrower has
not made an assignment for the benefit of creditors or taken advantage of any
insolvency act for the benefit of debtors during such period. Borrower is not
contemplating either the filing of a petition by it under the Bankruptcy Code or
similar state bankruptcy or insolvency law or the liquidation of all or a major
portion of Borrower’s assets or property, and Borrower has no knowledge of any
Person contemplating the filing of any such petition against it.
4.1.7 Full and Accurate Disclosure.
No statement of fact made by Borrower in this Agreement or 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.
4.1.8 Compliance.
Borrower is not in default or violation of any order, writ, injunction, decree
or demand of any Governmental Authority.
4.1.9 Financial Information.
All financial data including, without limitation, the statements of cash flow
and income and operating expense, if any, that have been delivered by Borrower
to Lender in respect of Borrower and the Collateral (i) are true, complete and
correct in all material respects, (ii) accurately represent the financial
condition of Borrower and the Collateral, as of the date of such reports, and
(iii) have been prepared in accordance with GAAP throughout the periods covered,
except as disclosed therein. Except for Permitted Encumbrances, Borrower does
not have 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 and reasonably likely to have a
materially adverse effect on Borrower or the Collateral except as referred to or
reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower from that set forth in such
financial statements provided by Borrower.
4.1.10 Federal Reserve Regulations.
No part of the proceeds of the Loan were 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 is
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.

 

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4.1.11 Not a Foreign Person.
Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of
the Code.
4.1.12 Enforceability.
The Loan Documents are not subject to any right of rescission, set-off,
counterclaim or defense by Borrower, including the defense of usury, and
Borrower has not asserted any right of rescission, set-off, counterclaim or
defense with respect thereto.
4.1.13 No Prior Assignment.
There are no prior assignments or pledges of the Collateral which are currently
outstanding.
4.1.14 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 Borrower under applicable Legal
Requirements currently in effect in connection with the making of the Loan have
been paid. All stamp, intangible or other similar tax required to be paid under
applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of the Pledge Agreements, the Control Agreements or the UCC
Financing Statements in existence on the Closing Date have been paid.
4.1.15 Illegal Activity.
No portion of the Collateral has been or will be purchased with proceeds of any
illegal activity.
4.1.16 No Change in Facts or Circumstances; Disclosure.
All material information submitted by Borrower to Lender and in all financial
statements, reports, certificates and other documents submitted by Borrower in
connection with the Loan or in satisfaction of the terms hereof and all
statements of fact made by Borrower in this Agreement or any other Loan Document
are accurate, complete and correct in all material respects. To the best of
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 might materially and adversely
affect the use, operation or value of the Collateral or the business operations
or the financial condition of Borrower.
4.1.17 Investment Company Act.
Borrower is not (a) an “investment company” or a company “controlled” by an
“investment company,” within the meaning of the Investment Company Act of 1940,
as amended; or (b) 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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4.1.18 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 is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware.
4.1.19 Business Purposes.
The Loan was made solely for the business purpose of Borrower.
4.1.20 Taxes.
Borrower has filed all federal, State, county, municipal, and city income and
other tax returns required to have been filed by it and has paid all taxes and
related liabilities which have become due pursuant to such returns or pursuant
to any assessments received by it. Borrower knows of no basis for any additional
assessment in respect of any such taxes and related liabilities for prior years.
4.1.21 Forfeiture.
Borrower has not committed any act or omission affording the federal government
or any State or local government the right of forfeiture as against any monies
paid in performance of Borrower’s obligations under the Note, this Agreement or
the other Loan Documents. Borrower hereby covenants and agrees not to commit,
permit or suffer to exist any act or omission affording such right of
forfeiture.
4.1.22 Taxpayer Identification Number.
Borrower’s United States taxpayer identification number is 26-0304375.
4.1.23 OFAC.
Borrower represents and warrants that neither Borrower nor any of its Affiliates
is a Prohibited Person, and Borrower and its Affiliates are in full compliance
with all applicable orders, rules, regulations and recommendations of The Office
of Foreign Assets Control of the U.S. Department of the Treasury.
4.1.24 Embargoed Person.
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 constitute property
of, or are beneficially owned, directly or indirectly, by any person, entity or
government subject to trade restrictions under U.S. law (such a person, entity
or government, an “Embargoed Person”), including but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders
or regulations promulgated thereunder, with the result that an investment in
Borrower (whether directly or indirectly) is prohibited by law or the Loan made
by Lender is in violation of law; (b) to the knowledge of Borrower, after due
inquiry, no Embargoed Person has any interest of any nature whatsoever in
Borrower, with the result that the investment in BHAC (whether directly or
indirectly) is prohibited by law or the Loan is in violation of law; and
(c) none of the funds of Borrower have been derived from any unlawful activity
with the result that an investment in Borrower (whether directly or indirectly)
is prohibited by law or the Loan is in violation of law.

 

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4.1.25 Collateral.
The Pledge Agreements and the Control Agreements in existence on the Closing
Date create valid, perfected first priority security interests in and to the
collateral described therein, all in accordance with such Loan Documents, for
which a Lien can be perfected pursuant to and in accordance with the UCC.
4.1.26 Collateral Entities.
Schedule 4.1.26 sets forth all of the Affiliates of Borrower and Guarantors that
own, directly or indirectly, any Specified Equity Interests.
4.1.27 Contingent Obligations.
None of Borrower, either Guarantor, any Pledgor or any of their respective
Affiliates has incurred any Contingent Liability since March 31, 2008, other
than guaranties or other such obligations disclosed in their financial
statements dated as of and for the period ended December 31, 2007 and previously
delivered to Lender.
4.1.28 Certain Defaults.
Except as specified in Schedule 4.1.28, none of Borrower, either Guarantor, any
Pledgor or any of their respective Affiliates is in default under any loan
agreement, mortgage or other instrument or agreement relating, directly or
indirectly, to any of the Collateral Entity Properties.
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 the other Loan
Documents shall survive for so long as any amount remains owing to Lender under
this Agreement or any of the other Loan Documents by Borrower or any other Loan
Party. All representations, warranties, covenants and agreements made in this
Agreement and 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.

 

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V. BORROWER COVENANTS
Section 5.1 Affirmative Covenants.
From the date hereof and until payment and performance in full of all
obligations of Borrower and the other Loan Parties under the Loan Documents and
the release of Lender’s Liens encumbering the Collateral (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:
5.1.1 Existence; Compliance with Legal Requirements.
(a) Borrower shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect its existence, rights, licenses, permits
and franchises and comply in all material respects with all Legal Requirements
applicable to it and the Collateral. There shall never be committed by Borrower
any act or omission affording the federal government or any State or local
government the right of forfeiture against any monies paid in performance of
Borrower’s obligations under any of the Loan Documents.
(b) After prior written notice to Lender, Borrower, at its 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 any alleged violation of
any Legal Requirement, provided that (i) no Default or 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 is subject and shall not constitute a default thereunder and such
proceeding shall be conducted in accordance with Applicable Law; (iii) neither
the Collateral nor any part thereof or interest therein will be in danger of
being sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall
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; and (vi) Borrower shall furnish such
security as may be required in the proceeding, or as may be reasonably requested
by Lender, to insure compliance with such Legal Requirement, together with all
interest and penalties payable in connection therewith. Lender may apply any
such security or part thereof as necessary to cause compliance with such Legal
Requirement at any time when, in the judgment of Lender, the validity,
applicability or violation of such Legal Requirement is finally established.
5.1.2 Litigation.
Borrower shall give prompt written notice to Lender of any litigation or
governmental proceedings pending or threatened against Borrower which might
materially adversely affect Borrower’s condition (financial or otherwise) or
business or the Collateral.
5.1.3 Notice of Default.
Borrower shall promptly advise Lender of any material adverse change in
Borrower’s condition, financial or otherwise, of the occurrence of any Default
or Event of Default of which Borrower has knowledge or of the occurrence of any
default under any loan agreement, mortgage or other material instrument or
agreement to which Borrower, either Guarantor or any of their respective
Affiliates is a party relating, directly or indirectly, to any of the Collateral
Entity Properties.
5.1.4 Cooperate in Legal Proceedings.
Borrower shall cooperate fully with Lender with respect to any proceedings
before any court, board or other Governmental Authority which may in any way
adversely 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.

 

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5.1.5 Further Assurances.
Borrower shall, at Borrower’s sole cost and expense:
(a) furnish to Lender each and every document, certificate, agreement and
instrument required to be furnished by Borrower pursuant to the terms of the
Loan Documents or reasonably requested by Lender in connection therewith;
(b) execute and deliver 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 as Lender may reasonably
require, including, without limitation, the authorization by Borrower of UCC
Financing Statements and any other financing statements; 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.
5.1.6 Intangible Taxes.
Borrower shall pay all State, county and municipal recording, and intangible,
and all other taxes imposed upon the execution and recordation of UCC Financing
Statements and/or upon the execution and delivery of the Note.
5.1.7 Financial and Other Reporting.
(a) Borrower will keep and maintain on a Fiscal Year basis, in accordance with
GAAP or on a federal income tax basis (or such other accounting basis reasonably
acceptable to Lender), proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items of income and
expense in connection with the Collateral owned by Borrower. 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 of an Event of Default, Borrower shall pay any costs and expenses
incurred by Lender to examine Borrower’s accounting records with respect to the
Collateral owned by Borrower as Lender shall determine to be necessary or
appropriate in the protection of Lender’s interest. Borrower shall permit Lender
and its authorized agents to inspect from time to time any part of the
Collateral owned by Borrower.

 

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(b) Borrower will furnish to Lender by April 10, 2009, a complete copy of
Borrower’s, each Guarantor’s, each Pledgor’s and each of their Affiliates’
unaudited consolidated and consolidating annual financial statements for the
Fiscal Year ended December 31, 2008 including statements of profit and loss and
balance sheets, in each case prepared in accordance with GAAP or on a federal
income tax basis on a consolidated and consolidating basis and certified by the
chief financial officer of Borrower.
(c) Borrower will furnish to Lender a copy of each annual Federal income tax
return of Borrower, each Guarantor and each Pledgor within thirty (30) days
after the filing thereof.
(d) Borrower will furnish to Lender, within ten (10) Business Days after
request, a statement of the administrative expenses incurred by Borrower in any
month and any such further detailed information with respect the financial
affairs of Borrower as may be reasonably requested by Lender.
(e) Borrower shall furnish to Lender, within ten (10) days after the end of each
month, (i) detailed reports as to the status of any projected sale of Specified
Equity Interests, Collateral Entity Properties or Scheduled Property or any
refinancing of Indebtedness secured by any Specified Equity Interests,
Collateral Entity Properties or Scheduled Property and (ii) an update to
Schedule 2.3.2(b) reflecting the addition to such Schedule of all other real
estate that the Borrower, the Guarantors and their Affiliates thereafter intend
to sell at such time.
(f) Borrower shall furnish to Lender, within two (2) days after the consummation
of any (i) sale by Borrower, either Guarantor or any of their Affiliates of any
Specified Equity Interests, (ii) sale by any Person of any of the Collateral
Entity Properties or of any of the Scheduled Property, (iii) refinancing of any
Indebtedness of Borrower, either Guarantor or any of their Affiliates secured by
any of the Specified Equity Interests, the Collateral Entity Properties or the
Scheduled Property or (iv) issuance by Borrower, Lightstone or any of their
Affiliance of any Indebtedness or equity securities in a private or public
offering, a description of such sale, refinancing or issuance and an accounting
of the distribution of all Net Cash Proceeds thereof including without
limitation, the amount of such Net Cash Proceeds (if any) required to be
deposited to the Blocked Account, in form, substance and detail satisfactory to
Lender.
(g) Borrower shall furnish to Lender, within forty-five (45) days of each
calendar quarter, operating statements and rent rolls for the Collateral Entity
Properties, together with evidence, in form and substance satisfactory to
Lender, of the Collateral Value as of the end of such calendar quarter, in each
case certified by the chief financial officer of Lightstone.
(h) Borrower shall furnish to Lender, within thirty (30) days after the end of
each month, financial statements of Extended Stay of America Hotels as of the
end of or for such month including income statements and cash flow statements
reflecting, among other things, a calculation of the EBITDA and revenue per
average room of Extended Stay of America Hotels for such month and for the
twelve-month period ending on the last day of such month, together with a
comparison of such financial statements to the projected financial statements of
Extended Stay of America Hotels previously provided by the Loan Parties to
Lender for such month, in a form consistent with the form of financial
statements of Extended Stay of America Hotels previously furnished to Lender,
certified by the chief financial officer of Lightstone.

 

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(i) Any reports, statements or other information required to be delivered under
this Agreement shall be delivered (i) in paper form, (ii) on a diskette, and
(iii) if requested by Lender and within the capabilities of Borrower’s data
systems without change or modification thereto, in electronic form and prepared
using a Microsoft Word for Windows or WordPerfect for Windows files (which files
may be prepared using a spreadsheet program and saved as word processing files).
(j) Borrower agrees that Lender may forward to each purchaser, transferee,
assignee, servicer, participant or investor in all or any portion of the Loan
(collectively, an “Investor”) and each prospective Investor, all documents and
information which Lender now has or may hereafter acquire relating to the Debt
and to Borrower, Guarantors and the other Loan Parties, whether furnished by
Borrower or either Guarantor or otherwise, as Lender determines necessary or
desirable provided that such disclosure is subject to written confidentiality
arrangements customary for assignment, servicing, participation or other
investment transactions of such type. Borrower irrevocably waives any and all
rights it may have under Applicable Law to prohibit such disclosure, including,
but not limited, to any right of privacy.
5.1.8 Costs of Enforcement.
In the event (a) that Lender exercises any of its rights or remedies under any
of the Pledge Agreements or the other Loan Documents as and when permitted
thereby, (b) of the bankruptcy, insolvency, rehabilitation or other similar
proceeding in respect of Borrower or an assignment by Borrower for the benefit
of its creditors, or (c) Lender incurs any costs or expenses in connection with
any refinancing or restructuring of the Loan in the nature of a workout,
Borrower, its successors or assigns, shall be chargeable with and agrees to pay
all costs of collection and defense, including reasonable attorneys’ fees and
costs, 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.
5.1.9 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 amount
of the original principal amount of the Note, (ii) the unpaid principal amount
of the Note, (iii) the Applicable Interest Rate on the Note as of the date of
such statement, (iv) the date interest and/or principal were last paid, (v) any
offsets or defenses to the payment of the Debt, and (vi) that the Note, this
Agreement, the Pledge Agreements and the other Loan Documents to which Borrower
is a party are valid, legal and binding obligations of Borrower and have not
been modified or if modified, giving particulars of such modification.
(b) After written request by Borrower, Lender shall furnish to Borrower a
statement setting forth (i) the amount of the original principal amount of the
Note, (ii) the unpaid principal amount of the Note, (iii) that there are no
currently outstanding notices of Default sent to Borrower (or listing such
notices, if applicable), and (iv) the date the last interest and, if applicable,
principal has been paid.

 

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5.1.10 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, supplement, termination or other modification of any Loan
Document executed and delivered by, or applicable to, Borrower without the prior
written consent of Lender.
5.1.11 OFAC.
At all times throughout the term of the Loan, Borrower shall be in full
compliance with all applicable orders, rules, regulations and recommendations of
The Office of Foreign Assets Control of the U.S. Department of the Treasury.
5.1.12 Periodic Inspections.
Borrower shall permit Lender and its agents and representatives to conduct
periodic inspections and appraisals of the Collateral Entity Properties (which
shall be at Borrower’s expense at any time that an Event of Default has occurred
and is continuing or as required by Applicable Law) and information relating to
the Collateral.
5.1.13 Payment of Dividends and Distributions.
Borrower shall cause BHAC and other issuers of Specified Equity Interests
pledged to Lender pursuant to one or more Pledge Agreements to declare and pay
dividends and other distributions in the maximum amounts allowed, and as
frequently as permitted, by Applicable Law such that such dividends and other
distributions, shall be sufficient, in the aggregate, to make timely payment of
accrued interest on, and regularly-scheduled principal installment payments in
respect of, the Loan, together with fees, costs, expenses and other amounts
required to be paid by the Loan Parties pursuant to the Loan Documents.
Section 5.2 Negative Covenants.
From the date hereof until payment and performance in full of all obligations of
Borrower and the other Loan Parties under the Loan Documents or the earlier
release of Lender’s Liens on the Collateral (and all related obligations) in
accordance with the terms of this Agreement and the other Loan Documents,
Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:
5.2.1 Liens.
Borrower shall not create, incur, assume or suffer to exist any Lien on any
portion of the Collateral or any other assets now owned or hereafter acquired,
other than Permitted Encumbrances described in parts (i), (iii) or (iv) of the
definition thereof.

 

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5.2.2 Dissolution.
Borrower shall not (a) engage in any dissolution, liquidation or consolidation
or merger with or into any other business entity or (b) transfer, lease or sell,
in one transaction or any combination of transactions, all or substantially all
of the properties or assets of Borrower except to the extent expressly permitted
by the Loan Documents.
5.2.3 Indebtedness.
Borrower shall not, and shall not permit any of its Affiliates with direct or
indirect interests in the Collateral Entity Properties to, incur, create or
suffer to exist any Indebtedness or Contingent Liability, other than (a) the
Indebtedness created hereunder, (b) unsecured trade debt incurred in the
ordinary course of business, (c) Indebtedness incurred solely to refinance
existing Indebtedness, so long as the principal amount of such new Indebtedness
does not exceed the principal amount of the refinanced Indebtedness,
(d) Indebtedness incurred after the Closing Date so long as all the Net Cash
Proceeds thereof received by Borrower or either Guarantor or, in the case of any
of their Affiliates, the maximum amount of such Net Cash Proceeds that is
permitted to be declared and paid to Borrower or either Guarantor as dividends
or other distributions by Applicable Law (or, if applicable, 50% thereof), are
applied to repay or prepay the Loan within two (2) days following receipt of
such Net Cash Proceeds, or (e) other Indebtedness to Lender and its Affiliates.
5.2.4 Name, Identity, Structure, or Principal Place of Business.
Borrower shall not change its name, identity (including its trade name or
names), place or form of organization or chief executive office, without, in
each case, first giving Lender thirty (30) days prior written notice.
5.2.5 Affiliate Transactions.
Borrower shall not enter into, or be a party to, any transaction with an
Affiliate of Borrower or either Guarantor or any of the shareholders of Borrower
except in the ordinary course of business and on terms which are no less
favorable to Borrower than would be obtained in a comparable arm’s-length
transaction with an unrelated third party.

 

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5.2.6 Transfers.
(a) Borrower shall not effect, permit or suffer a Sale or Pledge by Borrower of
an interest in any of the Collateral, the Collateral Entity Properties or any
other assets now owned or hereafter acquired (collectively, a “Transfer”), other
than Permitted Encumbrances, without the prior written consent of Lender which
shall not be unreasonably withheld or delayed.
(b) Notwithstanding the provisions of Section 5.2.6(a) hereof, a transfer to a
Restricted Party or by devise or descent or by operation of law upon the death
of a grantor, trustee, beneficiary, member, partner or shareholder to a
Restricted Party shall not be deemed to be a Transfer, so long as such Transfer
does not relate to any of the Collateral without Lender’s prior written consent
and does not impair or limit the first priority Liens in favor of Lender
pursuant to any Pledge Agreement or other Loan Document.
(c) 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 a Transfer in violation of this Section 5.2.6.
This provision shall apply to every Transfer regardless of whether voluntary or
not, or whether or not Lender has consented to any previous Transfer.
Notwithstanding anything to the contrary contained in this Section 5.2.6, no
transfer (whether or not such transfer shall constitute a Transfer) shall be
made to a Prohibited Person.
5.2.7 Distributions and Payments.
Borrower will not, directly or indirectly, pay any dividends or distributions
on, purchase, redeem or retire any shares of any class of its capital stock or
other equity interests or any warrants, options or rights to purchase any such
capital stock or other equity interests, whether now or hereafter outstanding,
or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property, or make any other payment or transfer
of cash to a third party (other than the payment of expenses in the ordinary
course of business), without Lender’s prior written consent; provided, however,
that so long as there is no then-existing Default or Event of Default, Borrower
shall be permitted to declare and pay dividends and distributions on its capital
stock from time to time, provided that in the case of a Default, such dividends
and distributions shall not constitute a violation of the terms of this
Section 5.2.7 so long as such Default does not become an Event of Default.
Notwithstanding the foregoing, even if a Default or Event of Default exists, so
long as no “Restricted Payment Event” exists Borrower shall be permitted to
declare and pay dividends and distributions on its capital stock from time to
time in an amount necessary for Prime Group Realty Trust (the “REIT”) to
maintain its status as a real estate investment trust under the Code and to
avoid the imposition of any corporate level tax on the REIT on the net income
attributable to the Units (the amount of such permitted distribution being
determined by the total net income of the REIT attributable to the Units). As
used herein, “Restricted Payment Event” shall mean any of the following: (i) the
non-payment of any principal payment due hereunder or under the Note when due
(whether by acceleration or otherwise), (ii) non-payment of any principal
payment required pursuant to Section 2.3.2 hereof, (iii) nonpayment of interest
upon the Note or of any fee or other payment Obligations under any of the Loan
Documents when due, (iv) the breach of any of the terms or provisions of
Sections 5.2.1 or 5.2.6, (v) an Event of Default under clauses (iv) or (v) of
Section 6.1(a) hereof, or (vi) a default under paragraph IV(c) or (d) of either
Guaranty. If any Restricted Payment Event occurs that is not an immediate Event
of Default because a grace or notice period has not expired, and such Restricted
Payment Event is cured prior to the time the Restricted Payment Event would
constitute an Event of Default, then for purposes of this Section 5.2.7, such
Restricted Payment Event shall be deemed not to have occurred.

 

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VI. DEFAULTS
Section 6.1 Event of Default.
(a) Each of the following events shall constitute an event of default hereunder
(an “Event of Default”):
(i) if any portion of the Debt is not paid on or before the date the same is due
and payable and remains unpaid for ten (10) Business Days following written
notice thereof by Lender to Borrower, except that all the Debt shall be paid in
full on the Maturity Date;
(ii) if Borrower or any other Loan Party transfers or encumbers any portion of
the Collateral in violation of any Pledge Agreement or other Loan Document;
(iii) if any representation or warranty made by Borrower, either Guarantor or
any other Loan Party 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;
(iv) if Borrower, either Guarantor or any other Loan Party shall make an
assignment for the benefit of creditors;
(v) if a receiver, liquidator or trustee shall be appointed for Borrower, either
Guarantor or any other Loan Party, or if Borrower, either Guarantor or any other
Loan Party shall be adjudicated a bankrupt or insolvent, or if any petition for
bankruptcy, reorganization or arrangement pursuant to the Bankruptcy Code, or
any similar federal or State law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, either Guarantor or any other Loan Party, or if any
proceeding for the dissolution or liquidation of Borrower, either Guarantor or
any other Loan Party shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not
consented to by Borrower, either Guarantor or such other Loan Party, upon the
same not being discharged, stayed or dismissed within ninety (90) days, provided
that any reference in Section 4.1.6 or 5.1.8 hereof or this clause (v) to the
commencement of a bankruptcy case by or against Borrower, either Guarantor or
any other Loan Party shall not be deemed to constitute an admission by Lender as
to the eligibility of Borrower, either Guarantor or any other Loan Party for
relief as a debtor under the Bankruptcy Code;

 

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(vi) if Borrower or any other Loan Party attempts to assign such Loan Party’s
rights under this Agreement or any of the other Loan Documents or any interest
herein or therein in contravention of the Loan Documents;
(vii) if Borrower breaches any of its covenants contained in (A) Section 5.1.11,
or (B) any other provision of this Agreement and such breach under this clause
(B) is not cured within fifteen (15) days of notice thereof by Lender to
Borrower;
(viii) if any federal tax Lien or State or local income tax Lien is filed
against Borrower, either Guarantor or any other Loan Party or any of the
Collateral and same is not discharged of record within forty-five (45) days
after same is filed;
(ix) Lichtenstein shall die, be declared incompetent or be incapacitated;
(x) if any default occurs under either Guaranty and, other than in the case of a
breach under paragraph IV(c), (d) or (e) thereof or under the second sentence of
paragraph IV thereof (which shall not be subject to cure), such default is not
cured within fifteen (15) days of notice thereof by Lender to Borrower and
Guarantors, or either Guarantor shall dispute or contest his or its liability
under the applicable Guaranty;
(xi) with respect to any term, covenant or provision set forth herein or in any
of the other Loan Documents, which specifically contains a notice requirement or
grace period, if Borrower or any other Loan Party shall be in default under such
term, covenant or condition after the giving of such notice or the expiration of
such grace period;
(xii) if Borrower or any other Loan Party shall continue to be in default under
any of the other terms, covenants or conditions of this Agreement or any other
Loan Document not specified in subsections (i) through (xi) above, for ten
(10) days after notice to Borrower or such other Loan Party 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 such non-monetary default is susceptible of cure but
cannot reasonably be cured within such thirty (30) day period and provided,
further, that Borrower or such other Loan Party shall have commenced to cure
such default within such thirty (30) day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30) day period shall be
extended for such time as is reasonably necessary for Borrower in the exercise
of due diligence to cure such default;
(xiii) Lichtenstein (A) shall cease to control day-to-day operations and
management of Lightstone, Borrower and each of the other Loan Parties, or
(B) shall cease to own, directly or indirectly, a majority of the equity
interests of Lightstone, Borrower or any of the other Loan Parties;

 

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(xiv) if any default occurs under any Control Agreement or any Pledge Agreement,
whether as to Borrower, another Loan Party or the Collateral, and, other than in
the case of a breach under Section 4(c) of any Pledge Agreement (which shall not
be subject to cure), such default is not cured within fifteen (15) days of
notice thereof by Lender to Borrower, or any Control Agreement or any Pledge
Agreement shall cease to be in full force and effect, or any of the Loan Parties
shall so assert or dispute or contest any Loan Document to which such Loan Party
is a party, or any Control Agreement or any Pledge Agreement shall cease to
create in favor of Lender a valid, perfected, first priority Lien on the
Collateral purported to be covered thereby;
(xv) Borrower, either Guarantor, any other Loan Party or any of their Affiliates
(including, without limitation, Prime Office Chicago and Prime Retail Outlets)
shall fail to make any payment (whether of principal, interest or otherwise and
regardless of amount) in respect of any Material Indebtedness of Borrower,
either Guarantor, such other Loan Party or any of their Affiliates (but in the
case of Prime Office Chicago and Prime Retail Outlets, only any senior
Indebtedness thereof) to any lender or creditor, including, without limitation,
Lender or any of Lender’s Affiliates, when due (whether at scheduled maturity or
by required prepayment, acceleration, demand or otherwise, but subject to
applicable grace periods), or any event or condition occurs that results in any
Material Indebtedness of Borrower, either Guarantor, any other Loan Party or any
of their Affiliates (but in the case of Prime Office Chicago and Prime Retail
Outlets, only any senior Indebtedness thereof) to any lender or creditor,
including, without limitation, Lender or any of Lender’s Affiliates, becoming
due prior to its scheduled maturity or that enables or permits any lender or
creditor, including, without limitation, Lender or any of Lender’s Affiliates,
to declare any Material Indebtedness of Borrower, either Guarantor, such other
Loan Party or any of their Affiliates (but in the case of Prime Office Chicago
and Prime Retail Outlets, only any senior Indebtedness thereof) to such lender
or creditor to be due, or to require the prepayment, repurchase, redemption or
defeasance thereof, prior to its scheduled maturity;
(xvi) (A) an Event of Default under and as defined in the Revolving Line of
Credit Agreement dated as of August 10, 2001 among Lichtenstein, Shifra
Lichtenstein and Lender, as amended, restated, replaced, supplemented or
otherwise modified from time to time (the “Lichtenstein Credit Agreement”),
shall occur and be continuing or (B) a default or event of default under any
agreement, instrument or other document evidencing any other Indebtedness of any
Affiliate of either Guarantor in favor of Lender or Citibank or any of their
respective Affiliates shall occur and be continuing;
(xvii) the occurrence of any event or condition or change therein that, in
Lender’s reasonable judgment, could reasonably be expected to have a material
adverse effect on (A) the business, prospects, operations, results of
operations, assets, liabilities or condition (financial or otherwise) of
Borrower, either Guarantor or any other Loan Party, (B) (I) Borrower’s, either
Guarantor’s or any other Loan Party’s ability to perform its or his material
obligations under the Loan Documents to which it or he is a party or (II) the
ability of Lender to enforce the Debt or realize upon the Collateral, or (C) the
value of the Collateral or the amount that Lender would be likely to receive
(after giving consideration to delays in payment and costs of enforcement) in
the liquidation of the Collateral;

 

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(xviii) any judgment or order for the payment of money which, when taken
together with all other judgments and orders rendered against the Loan Parties
taken together, exceeds $250,000 in the aggregate shall be rendered against the
Loan Parties and shall not be stayed (pending appeal or otherwise), vacated,
bonded or discharged within thirty days; or
(xix) the Collateral Value at any time shall be less than $250,000,000 as
determined by Lender.
(b) Upon the occurrence of an Event of Default (other than an Event of Default
described in clauses (iv) or (v) above) and at any time thereafter while such
Event of Default is continuing, in addition to any other rights or remedies
available to Lender 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 or the
other Loan Parties and the Collateral, including, without limitation, declaring
the Debt and all other Obligations 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 or the other Loan Parties and may exercise all
the rights and remedies of a secured party under the Uniform Commercial Code
against Borrower and the Collateral, including, without limitation, all rights
or remedies available at law or in equity; and upon any Event of Default
described in clauses (iv) or (v) above, the Debt and all other Obligations of
Borrower and the other Loan Parties 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 6.2 Remedies.
(a) During the continuance of an Event of Default, all or any one or more of the
rights, powers, privileges and other remedies available to Lender against
Borrower or the other Loan Parties under this Agreement or any of the other Loan
Documents executed and delivered by, or applicable to, Borrower or the other
Loan Parties 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 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 the Collateral. Any such actions taken
by Lender shall be cumulative and concurrent and may be pursued independently,
singly, successively, together or otherwise, at such time and in such order as
Lender may determine in its sole discretion, to the fullest extent permitted by
Applicable Law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by Applicable Law, equity or contract or as set
forth herein or in the other Loan Documents. Without limiting the generality of
the foregoing, Borrower agrees that if an Event of Default is continuing (i) to
the extent permitted by Applicable Laws, 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 Collateral and
the Collateral has been foreclosed, 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 Collateral, nothing contained herein or in
any other Loan Document shall be construed as requiring Lender to resort to the
Collateral for the satisfaction of any of the Debt in preference or priority to
any other collateral, and Lender may seek satisfaction out of the Collateral or
any part thereof, in its absolute discretion in respect of the Debt. In
addition, Lender shall have the right from time to time to partially foreclose
upon the Collateral in any manner and for any amounts secured by any Control
Agreement or any Pledge Agreement then due and payable as determined by Lender
in its sole discretion, including, without limitation, 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 upon the Collateral 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 upon the
Collateral to recover so much of the principal balance of the Loan as Lender may
accelerate and such other sums secured by the Control Agreements or the Pledge
Agreements as Lender may elect. Notwithstanding one or more partial
foreclosures, the Collateral shall remain subject to the Control Agreements and
the Pledge Agreements to secure payment of sums secured by the Control
Agreements and the Pledge Agreements not previously recovered.
(c) Lender shall have the right, from time to time (at Lender’s cost and expense
or, if an Event of Default has occurred and is continuing, at Borrower’s sole
cost and expense), to sever the Note and the other Loan Documents into one or
more separate notes, pledges and other security documents (the “Severed Loan
Documents”) in such denominations as Lender shall determine in its sole
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 request in order to effect the severance described in
the preceding sentence, all in form and substance reasonably satisfactory to
Lender and Borrower. The Severed Loan Documents shall not contain any
representations, warranties or covenants not contained in the Loan Documents,
any such representations and warranties contained in the Severed Loan Documents
will be given by Borrower only as of the Closing Date, and the Severed Loan
Documents shall not increase Borrower’s obligations or decrease Borrower’s
rights under the Loan Documents.
(d) Any amounts recovered from the Collateral after an Event of Default may be
applied by Lender toward the payment of any interest on and/or principal of the
Loan and/or any other amounts due under the Loan Documents in such order,
priority and proportions as Lender in its sole discretion shall determine.

 

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(e) Notwithstanding anything herein or in any other Loan Document to the
contrary, Borrower shall be fully liable for repayment of all the Obligations,
provided that Lender agrees not to enforce any judgment it may obtain against
Borrower with respect to the Obligations against any of Borrower’s assets other
than the Collateral pledged by Borrower. Lender further agrees that it shall not
have or seek recourse to the PGRT Entities (other than to realize on pledges of
the equity interests in the REIT and Prime Group Realty, L.P.) or their
respective assets, other than to Borrower to the extent described in the
previous sentence as to the Collateral pledged by Borrower, for the payment of
the Obligations. Lender’s recourse against Guarantors under the Guaranties, and
Lender’s rights and remedies against all other Collateral Entities and all other
Collateral, shall in no way be limited or otherwise be affected hereby.
Section 6.3 Remedies Cumulative; Waivers.
Subject to Section 6.2(e) above, 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 or the other Loan Parties
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 sole 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 or more Defaults or Events 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.
Section 6.4 Rights to Cure Defaults.
Upon the occurrence and during the continuance of any Event of Default, Lender
may, but without any obligation to do so and without notice to or demand on
Borrower and without releasing Borrower from any obligation hereunder or any
other Loan Party from any obligation under any other Loan Document, make any
payment or do any act required of Borrower hereunder in such manner and to such
extent as Lender may deem reasonably necessary to protect the security hereof.
All such costs and expenses incurred by Lender in remedying such Event of
Default or such failed payment or act or in appearing in, defending, or bringing
any action or proceeding shall bear interest at the Default Rate, for the period
after notice from Lender that such cost or expense was incurred to the date of
payment to Lender. All such costs and expenses incurred by Lender together with
interest thereon calculated at the Default Rate shall be deemed to constitute a
portion of the Debt and be secured by the liens, claims and security interests
provided to Lender under the Loan Documents and shall be immediately due and
payable upon demand by Lender therefor.

 

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Section 6.5 Power of Attorney.
For the purpose of carrying out the provisions and exercising the rights, powers
and privileges granted in this Article VI, Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney-in-fact to execute,
acknowledge and deliver any instruments and do and perform any acts as are
referred to in this Article VI in the name and on behalf of Borrower; provided,
however, that Lender shall not make or execute any such instruments or do or
perform any such acts until ten (10) days after notice has been given to
Borrower by Lender of Lender’s intent to exercise its rights under such power.
This power of attorney is a power coupled with an interest and cannot be
revoked.
VII. SPECIAL PROVISIONS
Section 7.1 Sale of Note.
Lender may, at any time, sell, transfer pledge or assign the Note, this
Agreement, the Pledge Agreements and the other Loan Documents, and any or all
servicing rights with respect thereto, or grant participations therein.
Section 7.2 Servicer.
At the option of Lender, the Loan may be serviced by a servicer/trustee (the
“Servicer”) selected by Lender, and Lender may delegate all or any portion of
its responsibilities under this Agreement and the other Loan Documents to the
Servicer pursuant to a servicing agreement between Lender and Servicer.
Section 7.3 Reinstatement.
This Agreement and each other Loan Document shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Debt or any part thereof, is, pursuant to Applicable Law, rescinded or reduced
in amount, or must otherwise be restored or returned by Borrower, whether as a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Debt shall be
reinstated and deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.
VIII. MISCELLANEOUS
Section 8.1 Survival.
This Agreement and all covenants, agreements, representations and warranties
made herein and in the certificates delivered pursuant hereto shall survive the
execution and delivery to Lender of the Note, and shall continue in full force
and effect so long as all or any of the Debt is outstanding and unpaid, 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.
Section 8.2 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.

 

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Section 8.3 Governing Law.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE
LAWS OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED,
APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS).
(b) WITH RESPECT TO ANY CLAIM OR ACTION ARISING HEREUNDER OR UNDER THIS
AGREEMENT, THE NOTE, OR THE OTHER LOAN DOCUMENTS, BORROWER (A) IRREVOCABLY
SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND THE UNITED STATES DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW
YORK, NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF, AND (B) IRREVOCABLY
WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS AGREEMENT, THE
NOTE OR THE OTHER LOAN DOCUMENTS INSTRUMENT WILL BE DEEMED TO PRECLUDE LENDER
FROM BRINGING AN ACTION OR PROCEEDING WITH RESPECT HERETO IN ANY OTHER
JURISDICTION.
Section 8.4 Modification, Waiver in Writing.
No modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement, the Note or 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 8.5 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 8.6 Notices.
All notices or other written communications hereunder shall be deemed to have
been properly given (i) upon delivery, if delivered in person on a Business Day
(and otherwise on the next occurring Business Day) or by facsimile transmission
with receipt acknowledged by the recipient thereof and confirmed by telephone by
sender sent on a Business Day (and otherwise on the next occurring Business
Day), (ii) one (1) Business Day after having been deposited for overnight
delivery with any reputable overnight courier service, or (iii) three
(3) Business Days after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by certified
mail, postage prepaid, return receipt requested, addressed as follows:

     
If to Borrower:
  PGRT ESH, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: Mr. Jeffrey A. Patterson
Facsimile No.: (312) 917-1597
 
   
With a copy to:
  PGRT ESH, Inc.
77 West Wacker Drive, Suite 3900
Chicago, Illinois 60601
Attention: James Hoffman, Esq.
Facsimile No.: (312) 917-3937
 
 
 
and
 
 
  The Lightstone Group
326 Third Street
Lakewood, New Jersey 08701
Attention: Joseph E. Teichman, Esq.
Facsimile No.: (732) 612-1444
 
   
If to Lender:
  Citicorp USA, Inc.
101 John F. Kennedy Parkway
Fourth Floor
Short Hills, New Jersey 07078
Attention: Ms. Diana Yusun
Facsimile No.: (973) 921-2435
 
   
With a copy to:
  Luskin, Stern & Eisler LLP
330 Madison Avenue
New York, New York 10017
Attention: Nathan M. Eisler, Esq.
Facsimile No.: (212) 293-2705

 

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or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.
Section 8.7 Trial by Jury.
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. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF THIS
SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY BORROWER.
Section 8.8 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 8.9 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 8.10 Preferences.
Lender shall have the continuing and exclusive right to apply or reverse and
reapply any and all payments by Borrower to any portion of the obligations of
Borrower hereunder. 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.

 

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Section 8.11 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.
Section 8.12 Remedies of Borrower.
In the event that 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.
Section 8.13 Expenses; Indemnity.
(a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to
reimburse Lender within five (5) days of receipt of written notice from Lender
for all reasonable costs and expenses (including reasonable attorneys’ fees and
disbursements) 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 any opinions reasonably requested by Lender as to
any legal matters arising under this Agreement and the other Loan Documents);
(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;
(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; (iv) if requested by or
on behalf of Borrower, 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
reasonably requested by Lender; (v) securing Borrower’s compliance with any
requests made pursuant to the provisions of this Agreement; (vi) the filing
(including, without limitation, UCC Financing Statements) and recording fees and
expenses, and reasonable fees and expenses of counsel for providing to Lender
all required legal opinions, and other similar expenses incurred in creating and
perfecting the Liens in favor of Lender pursuant to this Agreement and the other
Loan Documents;

 

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(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 Collateral, or any other security given for the Loan;
(viii) enforcing any obligations of or collecting any payments due from Borrower
under this Agreement, the other Loan Documents or with respect to the Collateral
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; (ix) conducting appraisals of the
Collateral Entity Properties and/or the Collateral; provided, however, that
Borrower shall not be obligated to pay or reimburse the cost of such appraisals
unless there shall then exist an Event of Default or a Default or if required
under Applicable Law; and (x) obtaining from the Valuation Firm, on a quarterly
basis, a negative assurance as to the fair market value of the Collateral Entity
Properties; provided, however, that, in the case of clauses (v), (vii) and
(viii) hereof, 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 or any other Indemnified
Party. Any cost and expenses due and payable to Lender may be paid from any
amounts in the Blocked Account.
(b) Borrower shall indemnify, defend and hold harmless each Indemnified Party
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, without limitation, the reasonable
fees and disbursements of counsel for Lender in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not Lender shall be designated a party thereto), that may be imposed
on, incurred by, or asserted against Lender 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, the 2007 Loan
Agreement or the other Loan Documents, or (ii) the use of the proceeds of the
Loan (collectively, the “Indemnified Liabilities”); provided, however, that
Borrower shall not have any obligation to Lender hereunder to the extent that
such Indemnified Liabilities arise from the gross negligence, illegal acts,
fraud or willful misconduct of Lender or any other 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 Lender.
Section 8.14 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.

 

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Section 8.15 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.
(b) This Agreement and the other Loan Documents are solely for the benefit of
Lender and Borrower and nothing contained in this Agreement or the other Loan
Documents shall be deemed to confer upon anyone other than Lender and Borrower
any right to insist upon or to enforce the performance or observance of any of
the obligations contained herein or therein.
Section 8.16 Publicity.
All news releases, publicity or advertising by Borrower, either Guarantor or
their respective 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 or any of its Affiliates shall be subject to the prior
written approval of Lender. Notwithstanding the foregoing, disclosure required
by any federal or State securities laws, rules or regulations, as determined by
Borrower’s counsel, shall not be subject to the prior written approval of
Lender.
Section 8.17 Waiver of Marshalling of Assets.
To the fullest extent permitted by Applicable Law, Borrower, for itself and its
successors and assigns, waives all rights to a marshalling of the assets of
Borrower, Borrower’s equity holders and others with interests in Borrower, and
of the Collateral, or to a sale in inverse order of alienation in the event of
foreclosure of all or part of the Collateral, and agrees not to assert any right
under any laws pertaining to the marshalling of assets, the sale in inverse
order of alienation or any other matters whatsoever to defeat, reduce or affect
the right of Lender under the Loan Documents to a sale of the Collateral 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
Collateral in preference to every other claimant whatsoever.
Section 8.18 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 8.19 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 Lender 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.

 

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Section 8.20 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 Lender in connection with the
transactions contemplated herein. The provisions of this Section 8.20 shall
survive the expiration and termination of this Agreement and the payment of the
Debt.
Section 8.21 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/or its Affiliates and Lender are
superseded by the terms of this Agreement and the other Loan Documents.
Section 8.22 Counterparts: Telecopied Signatures
This Agreement and any waiver or amendment hereto may be executed in
counterparts and by the parties hereto in separate counterparts, each of which
when so executed and delivered shall be an original, but both of which shall
together constitute one and the same instrument. This Agreement and each of the
other Loan Documents may be executed and delivered by telecopier or other
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.
IX. CONDITIONS OF EFFECTIVENESS
Section 9.1 Conditions to Effectiveness
The effectiveness of this Agreement (other than this Article IX and
Sections 8.3, 8.7 and 8.13 hereof) is subject to the satisfaction of the
following conditions:
(a) Lender shall have received the following, each dated the Closing Date or
another date acceptable to Lender, in form and substance satisfactory to Lender
and its counsel:
(i) the Note, duly executed by Borrower;
(ii) Control Agreements, each in form and substance satisfactory to Lender, duly
executed by Borrower, Lightstone Prime, LLC, Prime Office Chicago and
Lichtenstein;

 

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(iii) amendments, in form and substance satisfactory to Lender, to each of the
Pledge Agreement and the Third Party Security Agreements as defined in, and
securing the Indebtedness evidenced by, the Lichtenstein Credit Agreement,
providing that the collateral referred to in such Security Agreements shall also
secure, on a pari passu basis, the Obligations, duly executed by each of the
grantors parties thereto;
(iv) the Guaranties, duly executed by Guarantors;
(v) (A) financial statements of Guarantors for the year ended December 31, 2007,
certified by Guarantors, and (B) pro forma financial statements for Borrower in
form and substance satisfactory to Lender;
(vi) an opinion of counsel for Borrower and Guarantors covering such matters
incident to the transactions contemplated by this Agreement as Lender may
reasonably require, which such counsel is hereby requested by Borrower on behalf
of Borrower and Guarantors to provide;
(vii) copies of the certificate of incorporation and by-laws of Borrower and a
copy of the resolutions of the Board of Directors (or similar evidence of
authorization) of Borrower authorizing the execution, delivery and performance
of this Agreement and the other Loan Documents to which Borrower is or is to be
a party, and the transactions contemplated hereby and thereby, attached to which
is a certificate of the Secretary or an Assistant Secretary of Borrower
certifying (A) that such certificate of incorporation and by-laws of Borrower
and resolutions (or similar evidence of authorization) relating to Borrower are
true, complete and accurate copies thereof, have not been amended or modified
since the date of such certificate and are in full force and effect and (B) the
incumbency, names and true signatures of the officers of Borrower authorized to
sign the Loan Documents to which it is a party;
(viii) a certified copy of a certificate of the Secretary of State of the state
of incorporation of Borrower, as of a recent date, listing the certificate of
incorporation of Borrower and each amendment thereto on file in such official’s
office and certifying that (A) such amendments are the only amendments to such
certificate of incorporation on file in that office, (B) Borrower has paid all
franchise taxes to the date of such certificate, and (C) Borrower is in good
standing in that jurisdiction;
(ix) a good standing certificate from the Secretary of State of each state in
which Borrower is qualified as a foreign corporation, each dated within ten days
of the Closing Date;

 

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(x) statements from each Guarantor, in form and substance satisfactory to
Lender, detailing all distributions received by such Guarantor in 2007 and 2008
(through the Closing Date and estimated for the remainder of 2008) and cash
flows (through the Closing Date and estimated for the remainder of 2008,
including actual and estimated sources and uses of cash), with related real
estate and cash flow disclosures;
(xi) a projection of income, expenses and cash flow, in form and substance
satisfactory to Lender, in respect of the Collateral Entity Properties for the
period from the Closing Date through the Maturity Date;
(xii) an updated status report, in form and substance satisfactory to Lender, as
to any projected sale (and estimated amount of proceeds) of any of the Scheduled
Property;
(xiii) the initial negative assurance valuation from the Valuation Firm as to
the fair market value of the Collateral Entity Properties; and
(xiv) such other agreements, instruments and evidence as Lender deems necessary
in its sole and absolute discretion in connection with the transactions
contemplated hereby.
(b) There shall be no pending or, to the knowledge of Borrower after due
inquiry, threatened litigation, proceeding, inquiry or other action (i) seeking
an injunction or other restraining order, damages or other relief with respect
to the transactions contemplated by this Agreement or the other Loan Documents,
or (ii) which affects or could affect the business, prospects, operations,
assets, liabilities or condition (financial or otherwise) of any Loan Party,
except, in the case of clause (ii), where such litigation, proceeding, inquiry
or other action could not reasonably be expected to have a Material Adverse
Effect.
(c) Borrower shall have paid, or delivered evidence satisfactory to Lender in
its sole discretion that Borrower shall immediately pay, (i) all reasonable fees
and expenses of Lender in connection with the negotiation, preparation,
execution and delivery of the Loan Documents (including, without limitation, all
of Lender’s examination, audit, appraisal, valuation and travel expenses and the
fees and expenses of counsel to Lender), (ii) the fees referred to in this
Agreement that are required to be paid on or before the Closing Date, including,
without limitation, the due diligence deposit fee referred to in Section 2.5
hereof, and (iii) $1,200,000 representing the exit fee payable pursuant to
Section 2.2.9 of the 2007 Loan Agreement.
(d) Except for consents or authorizations which have been obtained under
Section 4.1.3 hereof, no consent or authorization of, filing with or other act
by or in respect of any Governmental Authority or any other Person is required
in connection with the execution, delivery, performance, validity or
enforceability of this Agreement, the Note or the other Loan Documents or the
consummation of the transactions contemplated hereby or thereby or the
continuing operations of Borrower following the consummation of such
transactions.

 

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(e) No Material Adverse Effect shall have occurred, and no change, occurrence,
event or development or event involving a prospective change that could
reasonably be expected to have a Material Adverse Effect shall have occurred and
be continuing.
(f) The Loan Parties shall be in compliance with all Legal Requirements and
material contracts, other than such noncompliance that could not reasonably be
expected to have a Material Adverse Effect.
(g) The Liens in favor of Lender under the Pledge Agreements and the Control
Agreement shall have been duly perfected and shall constitute first priority
Liens, and the Collateral subject thereto shall be free and clear of all Liens
other than Liens in favor of Lender and Permitted Encumbrances.
(h) Lender shall have received evidence satisfactory to it in its sole
discretion that Guarantors hold and maintain on a combined basis (without
duplication) at least $40,000,000 of Unencumbered Liquid Assets (as defined in
the Guaranties).
(i) No Default or Event of Default shall have occurred and be continuing or
would result from the effectiveness of this Agreement.

 

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

            BORROWER:

PGRT ESH, INC.
      By:   /s/ David Lichtenstein         David Lichtenstein        Chairman   
    LENDER:

CITICORP USA, INC.
      By:   /s/ William Bendernagel         William Bendernagel        Vice
President     

 

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Schedule 2.3.2(b)
Intentionally Omitted
Does not include any properties of Prime Group Realty Trust or its subsidiaries

 

 

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Schedule 4.1.26
Collateral Entities
Intentionally Omitted

 

 

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Schedule 4.1.28
Certain Defaults
Intentionally Omitted