Exhibit 10.2

NOTE

(Mortgage Loan)

 

New York, New York   $120,000,000   October 6, 2006

NOTE, dated as of October 6, 2006 (this “Note”), by SHC Michigan Avenue, LLC, a
Delaware limited liability company (the “Borrower”), having an office at
c/o Strategic Hotel Funding, L.L.C., 77 West Wacker Drive, Suite 4600, Chicago,
Illinois 60601, in favor of CITIGROUP GLOBAL MARKETS REALTY CORP., a New York
corporation (together with its successors and assigns, “Lender”), having an
address at 388 Greenwich Street, New York, New York 10013.

NOW, THEREFORE, FOR VALUE RECEIVED, Borrower promises to pay to the order of
Lender the Principal Amount (as defined below), together with interest from the
date hereof and other fees, expenses and charges as provided in this Note.

Section 1. Defined Terms.

a. Capitalized terns used but not otherwise defined herein shall have the
respective meanings given thereto in the Loan Agreement (as defined below),
unless otherwise expressly provided herein. All references to sections shall be
deemed to be references to sections of this Note, unless otherwise indicated.

b. The following terms shall have the meanings ascribed thereto:

“Borrower” shall have the meaning provided in the first paragraph hereof.

“Default Rate” shall mean, with respect to an acceleration of the Loan, a rate
per annum equal to the lesser of (a) the Maximum Legal Rate and (b) three
percent (3%) above the LIBOR Rate, adjusted from time to time as set forth
herein.

“Extension Notice” shall mean the First Extension Notice, the Second Extension
Notice or the Third Extension Notice, as applicable.

“Extension Option” shall mean the First Extension Option, the Second Extension
Option and the Third Extension Option, as applicable.

“First Extended Maturity Date” shall have the meaning set forth in Section 5(a).

“First Extension Notice” shall have the meaning set forth in Section 5(a).

“First Extension Option” shall have the meaning set forth in Section 5(a).

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“Initial Maturity Date” shall mean October 9, 2008.

“Interest Determination Date” shall mean, with respect to each Interest Period,
the date which is two (2) Business Days prior to the fifteenth (15th) day of
each calendar month.

“Interest Period” shall mean each interest period commencing on the fifteenth
(15th) calendar day of a calendar month and ending on (and including) the
fourteenth (14th) calendar day of the following calendar month; provided that
the first interest period shall commence on the date hereof.

“Lender” shall have the meaning provided in the first paragraph hereof.

“LIBOR” shall mean, with respect to any Interest Determination Date, the rate
(expressed as a percentage per annum rounded upwards, if necessary, to the
nearest one thousandth (1/1000) of one percent (1%)) for deposits in U.S.
Dollars for a one (1) month period that appears on Telerate Page 3750 (as
defined below) as of 11:00 a.m., London time, on such Interest Determination
Date. If such rate does not appear on Telerate Page 3750 as of 11:00 a.m.,
London time, on the applicable Interest Determination Date, the Lender shall
request the principal London office of any four (4) prime banks in the London
interbank market selected by the Lender to provide such banks’ quotations of the
rates at which deposits in U.S. Dollars are offered by such banks at
approximately 11:00 a.m., London time, to prime banks in the London interbank
market for a one (1) month period commencing on the first day of the related
Interest Period and in a principal amount that is representative for a single
transaction in the relevant market at the relevant time. If at least two
(2) such offered quotations are so provided, LIBOR will be the arithmetic mean
of such quotations (expressed as a percentage and rounded upwards, if necessary,
to the nearest one thousandth (1/1000) of one percent (1%)). If fewer than two
(2) such quotations are so provided, the Lender will request major banks in New
York City selected by the Lender to quote such banks’ rates for loans in U.S.
Dollars to leading European banks as of approximately 11:00 a.m., New York City
time, on the applicable Interest Determination Date for a one (1) month period
commencing on the first day of the related Interest Period and in an amount that
is representative for a single transaction in the relevant market at the
relevant time. If at least two (2) such rates are so provided, LIBOR will be the
arithmetic mean of such rates (expressed as a percentage and rounded upwards, if
necessary, to the nearest one thousandth (1/1000) of one percent (1%)). If fewer
than two (2) rates are so provided, then LIBOR will be LIBOR used to determine
the LIBOR Rate during the immediately preceding Interest Period.

“LIBOR Margin” shall mean Thirty-One basis points (0.31%) per annum.

“LIBOR Rate” shall mean, with respect to each Interest Period, an interest rate
per annum equal to the sum of (a) LIBOR, determined as of the Interest
Determination Date immediately preceding the commencement of such Interest
Period, plus (b) the LIBOR Margin.

“Loan Agreement” shall mean the Loan and Security Agreement, dated the date
hereof, between Borrower and Lender.

“Maturity Date” shall mean the initial Maturity Date, provided that (a) in the
event of the exercise by Borrower of the First Extension Option pursuant to
Section 5(a) of this Note, the Maturity Date shall be the First Extended
Maturity Date, (b) in the event of the

 

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exercise by Borrower of the Second Extension Option pursuant to Section 5(a) of
this Note, the Maturity Date shall be the Second Extended Maturity Date, and
(c) in the event of the exercise by Borrower of the Third Extension Option
pursuant to Section 5(a) of this Note, the Maturity Date shall be the Third
Extended Maturity Date, or such earlier date on which the final payment of
principal of this Note becomes due and payable as provided in the Loan Agreement
or this Note, whether at such stated maturity date, by declaration of
acceleration, or otherwise (including, without limitation, as a result of an
acceleration thereof, a refinancing or otherwise).

“Maturity Date Payment” shall have the meaning set forth in Section 3(d).

“Note” shall have the meaning provided in the first paragraph hereof.

“Origination Fee” shall mean an amount equal to 0.5% of the Principal Amount.

“Payment Date” shall be the ninth (9th) calendar day of each calendar month and
if such day is not a Business Day, then the Business Day immediately preceding
such day, commencing on November 9, 2006 and continuing to and including the
Maturity Date.

“Prepayment Date” shall have the meaning provided in Section 4(a)(i).

“Prepayment Fee” shall mean a non-refundable fee equal to, in connection with
Borrower’s payment of the Loan (or any part thereof, to the extent permitted by
the Loan Documents) after the Payment Date in April, 2007 to the Payment Date in
April, 2008, the Spread Maintenance Premium. No Prepayment Fee shall be due on
any payments (i) on or after Closing Date to and including the Payment Date in
April, 2007 and (ii) on or after the Payment Date in April, 2008. The Prepayment
Fee shall be payable simultaneously with Borrower’s payment of the Principal
Amount.

“Prepayment Notice” shall have the meaning provided in Section 4(a)(i).

“Principal Amount” shall mean One Hundred and Twenty Million Dollars
($120,000,000) or so much as may be outstanding under this Note from time to
time.

“Second Extended Maturity Date” shall have the meaning set forth in
Section 5(a).

“Second Extension Notice” shall have the meaning set forth in Section 5(a).

“Second Extension Option” shall have the meaning set forth in Section 5(a).

“Spread Maintenance Premium” shall mean with respect to any repayment of the
outstanding principal amount of the Loan after the Payment Date in April, 2007
to the Payment Date in April, 2008, a payment to Lender in an amount equal to
the sum of the present value of each future installment of interest that would
be payable under this Note on the outstanding principal amount of the Loan from
the date of such prepayment through, but excluding, the Initial Maturity Date
assuming an interest rate equal to the LIBOR Margin, discounted at an interest
rate per annum equal to LIBOR as of the date of such payment.

 

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“Telerate Page 3750” shall mean the display designated as “Page 3750” on the Dow
Jones Telerate Service (or such other page as may replace Page 3750 on that
service) or such other service as may be nominated by the British Bankers’
Association as the information vendor for the purpose of displaying British
Bankers’ Association Interest Settlement Rates for U.S. Dollar deposits.

“Third Extended Maturity Date” shall have the meaning set forth in Section 5(a).

“Third Extension Notice” shall have the meaning set forth in Section 5(a).

“Third Extension Option” shall have the meaning set forth in Section 5(a).

Section 2. Interest.

a. Prior to the Maturity Date, interest shall accrue on the Principal Amount as
follows:

i. From and including the date hereof to, but not including, October 15, 2006,
at a rate per annum equal to 5.63000%; and

ii. From and including October 15, 2006, and thereafter during each Interest
Period during the term of this Note, at the LIBOR Rate.

b. From and after the Maturity Date and from and after the occurrence and during
the continuance of any Event of Default, interest shall accrue on the Principal
Amount at the Default Rate.

c. Except as expressly set forth in the Loan Agreement to the contrary, interest
shall accrue on all amounts advanced by Lender pursuant to the Loan Documents
(other than the Principal Amount, which shall accrue interest in accordance with
clauses a. and b. above) at the Default Rate.

d. Interest, for any given Interest Period, shall be computed on the Principal
Amount on the basis of a fraction, the denominator of which shall be 360 and the
numerator of which shall be the actual number of days in the relevant Interest
Period.

e. The provisions of this Section 2 are subject in all events to the provisions
of Section 2.2.4 of the Loan Agreement.

Section 3. Payments.

a. On each Payment Date, Borrower shall pay to Lender interest accruing
hereunder during the entire Interest Period in which said Payment Date occurs.

b. On the Business Day after the Payment Date in April 2007, Borrower shall pay
to Lender the Origination Fee.

 

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c. All payments made by Borrower hereunder or under any of the Loan Documents
shall be made on or before 12:00 noon New York City time. Any payments received
after such time shall be credited to the next following Business Day.

d. All amounts advanced by Lender pursuant to the Loan Documents, other than the
Principal Amount, or other charges provided in the Loan Documents, shall be due
and payable as provided in the Loan Documents. In the event any such advance or
charge is not so repaid by Borrower, Lender may, at its option, first apply any
payments received under this Note to repay such advances, together with any
interest thereon, or other charges as provided in the Loan Documents, and the
balance, if any, shall be applied in payment of any installment of interest or
principal then due and payable.

e. The entire Principal Amount of this Note, all unpaid accrued interest, all
interest that would accrue on the Principal Amount through the end of the
Interest Period during which the Maturity Date occurs (even if such period
extends beyond the Maturity Date) and all other fees and sums then payable
hereunder or under the Loan Documents, including, without limitation the
Prepayment Fee, if applicable (collectively, the “Maturity Date Payment”), shall
be due and payable in full on the Maturity Date.

f. Amounts due on this Note shall be payable, without any counterclaim, setoff
or deduction whatsoever, at the office of Lender or its agent or designee at the
address set forth on the first page of this Note or at such other place as
Lender or its agent or designee may from time to time designate in writing.

g. All amounts due under this Note, including, without limitation, interest and
the Principal Amount, shall be due and payable in lawful money of the United
States.

h. To the extent that Borrower makes a payment or Lender receives any payment or
proceeds for Borrower’s benefit, which are subsequently invalidated, declared to
be fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver, custodian or any other party under any
bankruptcy law, common law or equitable cause, then, to such extent, the
obligations of Borrower hereunder intended to be satisfied shall be revived and
continue as if such payment or proceeds had not been received by Lender.

Section 4. Prepayments.

a. Voluntary Prepayments. Borrower shall have the right on any Payment Date to
prepay the Principal Amount in whole or in part, upon satisfaction of the
following conditions:

i. Borrower shall provide prior written notice (the “Prepayment Notice”) to
Lender specifying the proposed Payment Date on which the prepayment is to be
made, which date shall be no earlier than thirty (30) days after the date of
such Prepayment Notice (the date of a prepayment pursuant to this Section 4(a)
and Section 4(b) below being the “Prepayment Date”). Any such Prepayment Notice
shall be revocable by Borrower provided, however, if Borrower elects to so
revoke a Prepayment Notice, Borrower shall reimburse Lender for the actual
out-of-pocket expenses incurred by Lender in connection with such revocation;

 

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ii. Borrower shall comply with the provisions set forth in Section 4(c) of this
Note; and

iii. No voluntary prepayment shall be permitted on any date other than a Payment
Date.

b. Mandatory Prepayments.

i. On the next occurring Payment Date following the date on which Borrower
actually receives any Proceeds (other than Proceeds with respect to business
interruption insurance maintained pursuant to Section 6.1.4 of the Loan
Agreement), if Lender is not obligated to make and does not make such Proceeds
available to Borrower for the restoration of the Property, Borrower shall prepay
the outstanding principal balance of the Note in an amount equal to one hundred
percent (100%) of such Proceeds, but in such event no Prepayment Fee shall be
payable; and

ii. Borrower shall comply with the provisions set forth in Section 4(c) of this
Note.

c. Payments in Connection with a Prepayment.

i. On the date on which a prepayment, voluntary or mandatory, is made under this
Note or as required under the Loan Agreement, Borrower shall pay to Lender all
unpaid interest on the Principal Amount prepaid, such unpaid interest
calculated, (1) in the event prepayment is made from the fifteenth (15th) day of
any calendar month through the ninth (9th) day of the succeeding calendar month,
through the end of the Interest Period during which such prepayment occurs and
(2) in the event such prepayment is made from the Interest Determination Date in
any calendar month through the fourteenth (14th) day of any calendar month,
through the end of the Interest Period next succeeding the Interest Period in
which such prepayment occurs. In either case, accrued interest shall be
calculated as if such Interest Period extends beyond the date of such prepayment
and be calculated as if the Loan has not been prepaid on such date.

ii. On the Prepayment Date, Borrower shall pay to Lender all other sums, not
including scheduled interest payments but including and not limited to, the
Prepayment Fee, then due under the Note, the Loan Agreement, the Security
Instrument, and the other Loan Documents; and

d. Borrower shall pay all costs and expenses of Lender incurred in connection
with the prepayment (including without limitation, any costs and expenses
associated with a release of the Lien of the related Security Instrument as set
forth in Section 2.3.3 of the Loan Agreement as well as reasonable attorneys’
fees and expenses).

Section 5. Extension Option.

a. Extension Option. Subject to the provisions of this Section 5, Borrower shall
have the option (the “First Extension Option”), by irrevocable written notice
(the “First Extension Notice”) delivered to Lender no later than thirty
(30) days prior to the Initial Maturity

 

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Date, to extend the Maturity Date to October 9, 2009 (the “First Extended
Maturity Date”). In the event Borrower shall have exercised the First Extension
Option, Borrower shall have the option (the “Second Extension Option”), by
irrevocable written notice (the “Second Extension Notice”) delivered to Lender
no later than thirty (30) days prior to the First Extended Maturity Date, to
extend the First Extended Maturity Date to October 9, 2010 (the “Second Extended
Maturity Date”). In the event Borrower shall have exercised the Second Extension
Option, Borrower shall have the option (the “Third Extension Option”), by
irrevocable written notice (the “Third Extension Notice”) delivered to Lender no
later than thirty (30) days prior to the Second Extended Maturity Date, to
extend the Second Extended Maturity Date to October 9, 2011 (the “Third Extended
Maturity Date”). Borrower’s right to so extend the Maturity Date shall be
subject to the satisfaction of the following conditions precedent prior to each
extension hereunder:

i. No Monetary Default or Event of Default shall have occurred and be continuing
both on (A) the date Borrower delivers the First Extension Notice, the Second
Extension Notice or the Third Extension Notice, as applicable, and (B) on the
Initial Maturity Date, the First Extended Maturity Date and the Second Extended
Maturity Date, as applicable;

ii. Borrower shall obtain and deliver to Lender not later than one (1) Business
Day prior to the first day of the term of the Loan as extended one or more
Extension Interest Rate Cap Agreements from an Acceptable Counterparty which
Extension Interest Rate Cap Agreement(s) shall have a strike rate equal to the
Maximum Pay Rate and shall be effective for the period commencing on the day
immediately following the then applicable Maturity Date (prior to giving effect
to the applicable Extension Option) and ending on the last day of the Interest
Period in which the applicable extended Maturity Date occurs; and

iii. Borrower shall deliver (or shall commit to deliver within five (5) Business
Days thereafter) a Counterparty Opinion with respect to the Extension Interest
Rate Agreement and the related Acknowledgment.

b. Extension Documentation. As soon as practicable following an extension of the
Maturity Date pursuant to this Section 5, Borrower shall, if requested by
Lender, execute and deliver an amendment of and/or restatement of the Note and
shall, if requested by Lender, enter into such amendments to the related Loan
Documents as may be necessary or appropriate to evidence the extension of the
Maturity Date as provided in this Section 5; provided, however, that no failure
by Borrower to enter into any such amendments and/or restatements shall affect
the rights or obligations of Borrower or Lender with respect to the extension of
the Maturity Date.

Section 6. Miscellaneous.

a. Waiver. Borrower and all endorsers, sureties and guarantors hereby jointly
and severally waive all applicable exemption rights, valuation and appraisement,
presentment for payment, demand, notice of demand, notice of nonpayment or
dishonor, protest and notice of protest of this Note, and, except as otherwise
expressly provided in the Loan

 

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Documents, all other notices in connection with the delivery, acceptance,
performance, default or enforcement of the payment of this Note. Borrower and
all endorsers, sureties and guarantors consent to any and all extensions of
time, renewals, waivers or modifications that may be granted by Lender with
respect to the payment or other provisions of this Note and to the release of
the collateral securing this Note or any part thereof, with or without
substitution, and agree that additional makers, endorsers, guarantors or
sureties may become parties hereto without notice to them or affecting their
liability under this Note.

b. Non-Recourse. Recourse to the Borrower or any other Person with respect to
any claims arising under or in connection with this Note shall be limited to the
extent provided in Section 18 of the Loan Agreement and the terms, covenants and
conditions of Section 18 of the Loan Agreement are hereby incorporated by
reference as if fully set forth in this Note.

c. Note Secured. This Note and all obligations of Borrower hereunder are secured
by the Loan Agreement, the Security Instrument and the other Loan Documents.

d. Notices. Any notice, election, request or demand which by any provision of
this Note is required or permitted to be given or served hereunder shall be
given or served in the manner required for the delivery of notices pursuant to
the Loan Agreement.

e. Entire Agreement. This Note, together with the other Loan Documents,
constitutes the entire and final agreement between Borrower and Lender with
respect to the subject matter hereof and thereof and may only be changed,
amended, modified or waived by an instrument in writing signed by Borrower and
Lender.

f. No Waiver. No waiver of any term or condition of this Note, whether by delay,
omission or otherwise, shall be effective unless in writing and signed by the
party sought to be charged, and then such waiver shall be effective only in the
specific instance and for the purpose for which given. 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.

g. Successors and Assigns. This Note shall be binding upon and inure to the
benefit of Borrower and Lender and their respective successors and permitted
assigns. Upon any endorsement, assignment, or other transfer of this Note by
Lender or by operation of law, the term “Lender” as used herein, shall mean such
endorsee, assignee, or other transferee or successor to Lender then becoming the
holder of this Note. The term “Borrower” as used herein shall include the
respective successors and assigns, legal and personal representatives,
executors, administrators, devisees, legatees and heirs of Borrower, if any.

h. Captions. All paragraph, section, exhibit and schedule headings and captions
herein are used for reference only and in no way limit or describe the scope or
intent of, or in any way affect, this Note.

i. Severability. The provisions of this Note are severable, and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or in
part, then such invalidity or unenforceability shall affect only such clause or
provision, or part thereof, and not any other clause or provision of this Note.

 

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j. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO SECTION 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW. EACH OF BORROWER AND LENDER AGREES THAT ANY SUIT
FOR THE ENFORCEMENT OF THIS NOTE OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN
THE COURTS OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND
CONSENT TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON BORROWER OR LENDER IN THE MANNER AND AT
THE ADDRESS SPECIFIED FOR NOTICES IN THE LOAN AGREEMENT. EACH OF BORROWER AND
LENDER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE
VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH SUIT IS BROUGHT IN AN
INCONVENIENT COURT.

k. JURY TRIAL WAIVER. EACH OF BORROWER AND LENDER AND ALL PERSONS CLAIMING BY,
THROUGH OR UNDER IT HEREBY EXPRESSLY, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
(I) ARISING UNDER THIS NOTE, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR
FUTURE MODIFICATION THEREOF OR (II) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO
THIS NOTE (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION MAY BE FILED WITH ANY COURT AS
WRITTEN EVIDENCE OF THE CONSENT HERETO TO THE WAIVER OF ANY RIGHT TO TRIAL BY
JURY. BORROWER ACKNOWLEDGES THAT IT HAS CONSULTED WITH LEGAL COUNSEL REGARDING
THE MEANING OF THIS WAIVER AND ACKNOWLEDGES THAT THIS WAIVER IS AN ESSENTIAL
INDUCEMENT FOR THE MAKING OF THE LOAN. THIS WAIVER SHALL SURVIVE THE REPAYMENT
OF THE LOAN.

l. Counterclaims and other Actions. Borrower hereby expressly and
unconditionally waives, in connection with any suit, action or proceeding
brought by Lender on this Note, any and every right it may have to (i) interpose
any counterclaim therein (other than a counterclaim which can only be asserted
in the suit, action or proceeding brought by Lender on this Note and cannot be
maintained in a separate action) and (ii) have any such suit, action or
proceeding consolidated with any other or separate suit, action or proceeding.

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IN WITNESS WHEREOF, Borrower has caused this Note to be executed and delivered
as of the day and year first above written.

 

BORROWER:

SHC Michigan Avenue, LLC, a Delaware
limited liability company

By:  

/s/ Ryan M. Bowie

Name:   Ryan M. Bowie Title:   Assistant Treasurer

 

Note Execution