Exhibit 10.10

THIS DOCUMENT

PREPARED BY AND UPON

RECORDING, RETURN TO:

Alan J. Robin, Esq.

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, CA 94111

SUBORDINATE MORTGAGE, SECURITY AGREEMENT AND

FIXTURE FILING

BY

SHC Columbus Drive, LLC

a Delaware limited liability company,

as Affiliated Guarantor

and

DTRS Columbus Drive, LLC, a Delaware limited liability,

Operating Lessee

TO

METROPOLITAN LIFE INSURANCE COMPANY,

a New York corporation,

as Lender

May 5, 2010

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TABLE OF CONTENTS

          Page ARTICLE I    GRANT OF SECURITY    4

Section 1.1

   REAL PROPERTY GRANT    4

Section 1.2

   PERSONAL PROPERTY GRANT    6

Section 1.3

   CONDITIONS TO GRANT    8 ARTICLE II    AFFILIATED GUARANTOR COVENANTS    8

Section 2.1

   DUE AUTHORIZATION, EXECUTION, AND DELIVERY    8

Section 2.2

   PERFORMANCE BY AFFILIATED GUARANTOR; HOTEL LICENSES AND PERMITS    8

Section 2.3

   WARRANTY OF TITLE TO REAL PROPERTY AND FF&E    9

Section 2.4

   TAXES, LIENS AND OTHER CHARGES    9

Section 2.5

   ESCROW DEPOSITS    10

Section 2.6

   CARE AND USE OF THE PROPERTY    11

Section 2.7

   COLLATERAL SECURITY INSTRUMENTS    12

Section 2.8

   MANAGEMENT AGREEMENT    13

Section 2.9

   FF&E    13

Section 2.10

   SUITS AND OTHER ACTS TO PROTECT THE PROPERTY    14

Section 2.11

   LIENS AND ENCUMBRANCES    14

Section 2.12

   INTENTIONALLY OMITTED    14

Section 2.13

   PROCEEDS DEPOSIT ACCOUNT    14 ARTICLE III    INSURANCE    15

Section 3.1

   REQUIRED INSURANCE AND TERMS OF INSURANCE POLICIES    15

Section 3.2

   ADJUSTMENT OF CLAIMS    19

Section 3.3

   ASSIGNMENT TO LENDER    19 ARTICLE IV    BOOKS, RECORDS AND ACCOUNTS    19

Section 4.1

   BOOKS AND RECORDS    19

Section 4.2

   PROPERTY REPORTS    20

Section 4.3

   ADDITIONAL MATTERS    20

 

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TABLE OF CONTENTS

(continued)

 

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ARTICLE V    LEASES AND OTHER AGREEMENTS AFFECTING THE PROPERTY

   21

Section 5.1

   AFFILIATED GUARANTOR’S REPRESENTATIONS AND WARRANTIES    21

Section 5.2

   REPRESENTATIONS AND COVENANTS WITH RESPECT TO THE OPERATING LEASE.    21

Section 5.3

   ASSIGNMENT OF LEASES    22

Section 5.4

   PERFORMANCE OF OBLIGATIONS    22

Section 5.5

   SUBORDINATE LEASES    23

Section 5.6

   LEASING COMMISSIONS    23

Section 5.7

   REPRESENTATIONS AND COVENANTS WITH RESPECT TO THE OWNER AGREEMENT.    23
ARTICLE VI    ENVIRONMENTAL HAZARDS    24

Section 6.1

   REPRESENTATIONS AND WARRANTIES    24

Section 6.2

   REMEDIAL WORK    25

Section 6.3

   ENVIRONMENTAL SITE ASSESSMENT    25

Section 6.4

   INTENTIONALLY OMITTED    25

Section 6.5

   HAZARDOUS MATERIALS    25

Section 6.6

   REQUIREMENTS OF ENVIRONMENTAL LAWS    26 ARTICLE VII    CASUALTY,
CONDEMNATION AND RESTORATION    26

Section 7.1

   AFFILIATED GUARANTOR’S REPRESENTATIONS    26

Section 7.2

   RESTORATION    27

Section 7.3

   CONDEMNATION    28

Section 7.4

   CASUALTY AND CONDEMNATION RESTORATION PURSUANT TO MANAGEMENT AGREEMENT.    29

Section 7.5

   REQUIREMENTS FOR RESTORATION    30 ARTICLE    VIII REPRESENTATIONS,
WARRANTIES AND COVENANTS OF AFFILIATED GUARANTOR    31

Section 8.1

   ERISA    31

Section 8.2

   NON-RELATIONSHIP    31

Section 8.3

   NO ADVERSE CHANGE    32

 

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TABLE OF CONTENTS

(continued)

 

           Page

Section 8.4

   AFFILIATED GUARANTOR’S REPRESENTATIONS AND WARRANTIES    32

Section 8.5

   INTENTIONALLY OMITTED    32

Section 8.6

   FOREIGN INVESTOR    32

Section 8.7

   US PATRIOT ACT    33 ARTICLE IX    EXCULPATION AND LIABILITY    33

Section 9.1

   LIABILITY OF AFFILIATED GUARANTOR    33

Section 9.2

   RECOURSE LOAN    34

ARTICLE X     SINGLE PURPOSE ENTITY; CHANGE IN OWNERSHIP, CONVEYANCE OF
PROPERTY;

     PROHIBITIONS ON FINANCING AND DEBT

   36

Section 10.1

   SINGLE PURPOSE ENTITY; INDEPENDENT DIRECTOR; AFFILIATED GUARANTY AND
SUBORDINATE MORTGAGE    36

Section 10.2

   CONVEYANCE OF PROPERTY, CHANGE IN OWNERSHIP AND COMPOSITION    36

Section 10.3

   ONE TIME TRANSFER RIGHT    37

Section 10.4

   OTHER PERMITTED TRANSFERS    37

Section 10.5

   PROHIBITION ON SUBORDINATE FINANCING    39

Section 10.6

   PERMITTED DEBT    39

Section 10.7

   PERMITTED LIENS    39

Section 10.8

   RESTRICTIONS ON ADDITIONAL OBLIGATIONS    40

Section 10.9

   RELEASE OF AFFILIATED GUARANTY    40

Section 10.10

   STATEMENTS REGARDING OWNERSHIP    41

ARTICLE XI    DEFAULTS AND REMEDIES

   42

Section 11.1

   EVENTS OF DEFAULT    42

Section 11.2

   REMEDIES UPON DEFAULT    43

Section 11.3

   APPLICATION OF PROCEEDS OF SALE    44

Section 11.4

   WAIVER OF JURY TRIAL    44

Section 11.5

   LENDER’S RIGHT TO PERFORM AFFILIATED GUARANTOR’S OBLIGATIONS    44

Section 11.6

   LENDER REIMBURSEMENT    44

 

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TABLE OF CONTENTS

(continued)

 

          Page

Section 11.7

   FEES AND EXPENSES    44

Section 11.8

   WAIVER OF CONSEQUENTIAL DAMAGES    44 ARTICLE XII    AFFILIATED GUARANTOR’S
AGREEMENTS AND FURTHER ASSURANCES    45

Section 12.1

   INTENTIONALLY OMITTED    45

Section 12.2

   REPLACEMENT OF AFFILIATED GUARANTY    45

Section 12.3

   AFFILIATED GUARANTOR’S ESTOPPEL    45

Section 12.4

   FURTHER ASSURANCES    45

Section 12.5

   SUBROGATION    45 ARTICLE XIII    SECURITY AGREEMENT    46

Section 13.1

   SECURITY AGREEMENT    46

Section 13.2

   REPRESENTATIONS AND WARRANTIES    46

Section 13.3

   CHARACTERIZATION OF PROPERTY    46

Section 13.4

   PROTECTION AGAINST PURCHASE MONEY SECURITY INTERESTS    47
ARTICLE XIV    MISCELLANEOUS COVENANTS    47

Section 14.1

   NO WAIVER    47

Section 14.2

   NOTICES    47

Section 14.3

   HEIRS AND ASSIGNS; TERMINOLOGY    48

Section 14.4

   SEVERABILITY    48

Section 14.5

   APPLICABLE LAW    48

Section 14.6

   CAPTIONS    48

Section 14.7

   TIME OF THE ESSENCE    49

Section 14.8

   NO MERGER    49

Section 14.9

   NO MODIFICATIONS    49

Section 14.10

   USE OF PROCEEDS    49

Section 14.11

   LIMITATION ON GUARANTEED OBLIGATIONS    49

Section 14.12

   WAIVER OF HOMESTEAD AND REDEMPTION    49

 

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SUBORDINATE MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

DEFINED TERMS

Execution Date: May 5, 2010

Affiliated Guaranty: The Affiliated Guaranty dated as of the Execution Date
executed by Affiliated Guarantor for the benefit of Lender irrevocably and
unconditionally guaranteeing the full and prompt payment and performance of any
and all obligations, indebtedness, or liabilities of any kind or character owed
by St. Francis Borrower to Lender under the St. Francis Note and the St. Francis
Deed of Trust or any of the other documents evidencing or securing the St.
Francis Loan (collectively, the “St. Francis Loan Documents”), as more
particularly set forth therein (collectively, the “Guaranteed Obligations”)

Security Documents: The Affiliated Guaranty and this Mortgage and any other
documents related to the Affiliated Guaranty and/or this Mortgage and all
renewals, amendments, modifications, restatements and extensions of these
documents.

Fairmont Loan: A first mortgage loan in the aggregate principal amount of
$97,750,000.00 from Lender to Affiliated Guarantor.

Fairmont Note: A Promissory Note executed by Affiliated Guarantor in favor of
Lender in the amount of the Fairmont Loan and dated as of the Execution Date.

Senior Mortgage: that certain Mortgage, Security Agreement and Fixture Filing
dated of even date herewith (the “Senior Mortgage”) by and among Affiliated
Guarantor, as borrower, Operating Lessee and Lender and securing Affiliated
Guarantor’s payment of the indebtedness evidenced by the Fairmont Note, as more
particularly set forth in the Senior Mortgage.

Lender & Address:

Metropolitan Life Insurance Company,

a New York corporation (“MetLife”)

10 Park Avenue

Morristown, New Jersey 07962

Attention: Senior Vice President

Real Estate Investments

and:

Metropolitan Life Insurance Company

125 South Wacker Drive, Suite 1100

Chicago, Illinois 60606-4478

Attention: Director

 

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Affiliated Guarantor & Address:

SHC Columbus Drive, LLC,

200 West Madison Street, Suite 1700

Chicago, Illinois 60606

with a copy to:

Perkins Coie LLP

131 South Dearborn Avenue, Suite 1700

Chicago, Illinois 60603

Attn: Bruce A. Bonjour

Operating Lessee & Address:

DTRS Columbus Drive, LLC

200 West Madison Street, Suite 1700

Chicago, Illinois 60606

with a copy to:

Perkins Coie LLP

131 South Dearborn Avenue, Suite 1700

Chicago, Illinois 60603

Attn: Bruce A. Bonjour

St. Francis Borrower & Address:

SHR St. Francis, L.L.C.,

200 West Madison Street, Suite 1700

Chicago, Illinois 60606

with a copy to:

Perkins Coie LLP

131 South Dearborn Avenue, Suite 1700

Chicago, Illinois 60603

Attn: Bruce A. Bonjour

Property: The Fairmont Hotel consisting of 685 guest rooms, including
approximately 1,500 square feet of retail space, 62,000 square feet of meeting
space and an underground parking garage containing approximately 243 spaces.

County: Cook County

State: Illinois

 

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Use: Hotel, retail and related uses

St. Francis Loan: A first mortgage loan in the aggregate principal amount of
$220,000,000.00 from Lender to St. Francis Borrower.

St. Francis Note: A Promissory Note executed by St. Francis Borrower in favor of
Lender in the amount of the St. Francis Loan and dated as of the Execution Date.

St. Francis Deed of Trust: A Deed of Trust, Security Agreement and Fixture
Filing dated as of the Execution Date executed by St. Francis Borrower and
Operating Lessee (as defined therein), to Fidelity National Title Insurance
Company as Trustee, for the benefit of Lender securing the payment of St.
Francis Note and encumbering the property and improvements located at 335 Powell
Street, San Francisco, California known as the St. Francis Hotel and more
particularly described therein (the “St. Francis Property”). The St. Francis
Deed of Trust will be recorded in the official records of San Francisco County,
California.

Insurance:

Commercial General Liability Required Liability Limits —$50,000,000.00

Auto Liability: $1,000,000.00 owned/hired/non-owned

Address for Insurance Notification:

Metropolitan Life Insurance Company

Its affiliates and/or successors and assigns

10 Park Avenue

Morristown, New Jersey, 07962

Attention: Real Estate Investments Insurance Risk Manager

This MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (this “Mortgage”) is
entered into as of the Execution Date by Affiliated Guarantor to Lender with
reference to the following Recitals:

RECITALS

A. This Mortgage secures Affiliated Guarantor’s irrevocable and unconditional
guarantee of the full and prompt payment and performance of the Guaranteed
Obligations to Lender and its successors and assigns and affiliates and their
respective officers, directors, shareholders and employees.

B. Affiliated Guarantor makes the following covenants and agreements for the
benefit of Lender or any party designated by Lender.

C. Operating Lessee is executing this Mortgage for the purpose of (i) confirming
and agreeing to be bound by the representations, warranties, covenants and
agreements of Operating Lessee herein and (ii) confirming the Grant of Security
by Operating Lessee in Article I of this Mortgage.

 

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D. This Mortgage, and the obligations of Affiliated Guarantor hereunder, shall
at all times be subject to, and subordinate to, the Senior Mortgage and the lien
created thereby. To the extent that any of the obligations, terms, conditions
and covenants (collectively, the “Subordinate Obligations”) of Affiliated
Guarantor and/or Operating Lessee under this Mortgage are the same as the
obligations, terms, conditions and covenants of Affiliated Guarantor and/or
Operating Lessee under the Senior Mortgage (the “Senior Obligations”),
Affiliated Guarantor and/or Operating Lessee’s performance and satisfaction of
such Senior Obligations under the Senior Mortgage shall be deemed to be
satisfaction of the applicable Subordinate Obligations under this Mortgage. Any
consents, approvals or waivers provided by Lender under the Senior Mortgage
shall be deemed to be a consent, approval or waiver provided by Lender under
this Mortgage. Nothing contained in this Mortgage is intended to or shall, in
any way, limit or modify any of the rights, duties and obligations of the
parties under the Fairmont Note, the Senior Mortgage or any of the documents
evidencing or securing the Fairmont Loan.

NOW, THEREFORE, IN CONSIDERATION of the Recitals and for other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Affiliated
Guarantor and Operating Lessee, respectively as the case may be, agree as
follows:

ARTICLE I

GRANT OF SECURITY

Section 1.1 REAL PROPERTY GRANT. Affiliated Guarantor and/or Operating Lessee,
as applicable, irrevocably mortgages, sells, transfers, grants, conveys, assigns
and warrants to Lender, its successors and assigns, in trust, with power of sale
and right of entry and possession, all of Affiliated Guarantor’s and Operating
Lessee’s present and future estate, right, title and interest in and to the
following which are collectively referred to as the “Real Property”:

(1) that certain real property located in the County and State which is more
particularly described in Exhibit “A” attached to this Mortgage or any portion
of the real property; all easements, rights-of-way, gaps, strips and gores of
land; streets and alleys; sewers and water rights; privileges, licenses,
tenements, and appurtenances appertaining to the real property, and the
reversion(s), remainder(s), and claims of Affiliated Guarantor and/or Operating
Lessee as applicable with respect to these items, and the benefits of any
existing or future conditions, covenants and restrictions affecting the real
property (collectively, the “Land”);

(2) all things now or hereafter affixed to or placed on the Land, including all
buildings, structures and improvements, all Fixtures (as defined below) and all
machinery, elevators, boilers, building service equipment (including, without
limitation, all equipment for the generation or distribution of air, water,
heat, electricity, light, fuel or for ventilating or air conditioning purposes
or for sanitary or drainage purposes or for the removal of dust, refuse or
garbage), partitions, appliances, furniture, furnishings, building materials,
supplies, computers and software, restaurant equipment, window coverings and
floor coverings, lobby furnishings, and other property now or in the future
attached, or installed in the improvements and all replacements, repairs,
additions, or substitutions to these items (collectively, the “Improvements”);

 

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(3) all equipment, machinery, fixtures, and other items of property required for
or incidental to the use of the Property as a hotel, including all components
thereof, now or hereafter permanently affixed to or incorporated into the
Improvements, including, without limitation, all furnaces, boilers, heaters,
electrical equipment, heating, plumbing, lighting, ventilating, refrigerating,
incineration, air and water pollution control, waste disposal, air-cooling and
air-conditioning systems and apparatus, sprinkler systems and fire and theft
protection equipment, all of which to the greatest extent permitted by law are
hereby deemed by the parties hereto to constitute real estate, together with all
replacements, modifications, alterations and additions thereto (collectively,
the “Fixtures”);

(4) all present and future income, rents, revenue, profits, proceeds, hotel room
income, and income of any kind derived directly or indirectly by Affiliated
Guarantor, or Operating Lessee from or in connection with the Property,
(including, without limitation, all revenues from (w) rentals or other payments
from hotel guests, tenants, lessees, licensees or concessionaires whether on a
cash basis or credit, paid or collected, and (x) the sale of food and beverages
that are prepared at the Property and sold or delivered on or off the Property
(including, without limitation, revenues from mini-bars), whether for cash or
for credit, including in respect of guest rooms, banquet rooms, meeting rooms
and other similar rooms and (y) gross revenue from the rental of banquet,
meeting and other similar rooms, and (z) parking income and revenues), and all
other benefits from the Land and/or Improvements and all deposits made with
respect to the Land and/or Improvements, including, but not limited to, any
security given to utility companies by Affiliated Guarantor and/or Operating
Lessee as applicable, any advance payment of real estate taxes or assessments,
or insurance premiums made by Affiliated Guarantor and/or Operating Lessee as
applicable and all claims or demands relating to such deposits and other
security, including claims for refunds of tax payments or assessments, and all
insurance proceeds payable to Affiliated Guarantor and/or Operating Lessee as
applicable in connection with the Land and/or Improvements whether or not such
insurance coverage is specifically required under the terms of this Mortgage
(“Insurance Proceeds”) (all of the items set forth in this paragraph are
referred to collectively as “Rents and Profits”);

(5) all rights of Affiliated Guarantor and/or Operating Lessee as applicable
under that certain Amended and Restated Management Agreement dated as of
December 11, 2009, between Operating Lessee and Fairmont Hotels & Resorts (U.S.)
Inc., (the “Manager”) (the “Management Agreement”);

(6) all rights of Affiliated Guarantor under that certain Operating Lease dated
September 1, 2005, between Affiliated Guarantor and Operating Lessee, as amended
by First Amendment to Lease Agreement dated as of December 31, 2009 and as
hereafter further amended or supplemented (the “Operating Lease”).

(7) all rights of Affiliated Guarantor under that certain Owner Agreement dated
September 1, 2005, between Affiliated Guarantor, Operating Lessee and Manager,
as hereafter amended or supplemented (the “Owner Agreement”).

(8) all rights of Affiliated Guarantor or Operating Lessee in and to accounts
receivables, arising from the operation of the Property, to payment for goods
sold or leased, for services rendered, or for the rental or use of the Property,
whether or not yet earned by performance, including, without limiting the
generality of the foregoing, (i) all

 

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accounts arising from the operation of the Property, and (ii) all rights to
payment from any consumer credit or charge card organization or entity (such as
or similar to the organizations or entities which sponsor and administer the
American Express Card, the Visa Card, the Carte Blanche Card and the Master
Card). Accounts Receivable shall include all of the foregoing rights to payment,
whether now existing or hereafter created, and all substitutions therefor,
proceeds thereof (whether cash or non-cash, movable or immovable, tangible or
intangible) received upon the sale, exchange, transfer, collection or other
disposition thereof or substitution therefor, and all of the proceeds from all
of the foregoing, subject however to the rights of Manager under the Management
Agreement;

(9) all damages, payments and revenue of every kind that Affiliated Guarantor
and/or Operating Lessee as applicable may be entitled to receive, from any
person owning or acquiring a right to the oil, gas or mineral rights and
reservations of the Land;

(10) all proceeds and claims arising on account of any damage to, or
Condemnation (as hereinafter defined) of any part of the Land and/or
Improvements, and all causes of action and recoveries for any diminution in the
value of the Land and/or Improvements;

(11) all authorizations, licenses and permits, including without limitation,
operating permits, liquor licenses and all other authorizations or permits
necessary or appropriate for the Improvements to be fully operated as a
first-class hotel (“Hotel Licenses and Permits”);

(12) all, guaranties, warranties, franchise agreements, permits, or certificates
relating to the ownership, use, operation or maintenance of the Land and/or
Improvements; and

(13) all names by which the Land and/or Improvements may be operated or known,
and all rights to carry on business under those names, and all trademarks, trade
names, and goodwill relating to the Land and/or Improvements.

TO HAVE AND TO HOLD the Real Property, unto Lender, its successors and assigns,
in trust, for the benefit of Lender, its successors and assigns, forever subject
to the terms, covenants and conditions of this Mortgage.

Section 1.2 PERSONAL PROPERTY GRANT. Affiliated Guarantor irrevocably sells,
transfers, grants, conveys, assigns and warrants to Lender, its successors and
assigns, a security interest in Affiliated Guarantor’s interest, and to the
extent permissible under the Operating Lease and the Owner Agreement, Operating
Lessee’s interest, in the following personal property which is collectively
referred to as “Personal Property”:

(1) any portion of the Real Property which may be personal property, and all
other personal property, whether now existing or acquired in the future which is
attached to, appurtenant to, or used in the construction or operation of, or in
connection with, the Real Property;

 

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(2) all rights to the use of water, including water rights appurtenant to the
Real Property, pumping plants, ditches for irrigation, all water stock or other
evidence of ownership of any part of the Real Property that is owned by
Affiliated Guarantor and/or Operating Lessee as applicable in common with others
and all documents of membership in any owner’s association or similar group;

(3) all plans and specifications prepared for construction of the Improvements;
and all contracts and agreements of Affiliated Guarantor and/or Operating Lessee
as applicable relating to the plans and specifications or to the construction of
the Improvements;

(4) all furniture, fixtures and equipment and other items of property located on
or used in connection with the Real Property or its occupancy or operation,
including all furniture, furnishings, wall coverings, fixtures and hotel
equipment and systems located at, or used in connection with, the operation of
the Property as a Hotel, together with all replacements therefor and additions
thereto, including, without limitation, (i) all equipment and systems required
for the operation of kitchens and bars, if any, laundry and dry cleaning
facilities, (ii) office equipment, (iii) dining room wagons, materials handling
equipment, cleaning and engineering equipment, (iv) telephone and computerized
accounting systems, (v) vehicles and (vi) and any other items customarily
included within “property and equipment” for hotel properties similar to the
Property (“FF&E”);

(5) all, general intangibles, letter of credit rights, commercial tort claims,
deposit accounts, documents, instruments and chattel paper and all
substitutions, replacements of, and additions to, any of the these items;

(6) all rights of Affiliated Guarantor and Operating Lessee in and to the Hotel
Operating Account, the Fund for Replacement of and Additions to Furnishings and
Equipment and any and all other accounts held by Manager pursuant to the terms
of the Management Agreement for the benefit of Affiliated Guarantor and/or
Operating Lessee;

(7) all rights of Affiliated Guarantor and/or Operating Lessee, as applicable,
in and to that certain bank account into which all payments and distributions
from Manager to Affiliated Guarantor and/or Operating Lessee are made, which is
held by Bank of America, N.A. (“Bank”) pursuant to a Deposit Account Control
Agreement (“DAC Agreement”) entered into or which will be entered into by and
between Bank, Affiliated Guarantor, Operating Lessee and Lender (the “Proceeds
Deposit Account”)

(8) all rights of Affiliated Guarantor and/or Operating Lessee, as applicable,
in and to the DS Account (as defined in Section 2.12) and the DS Funds (as
defined in Section 2.12).

(9) all sales agreements, deposits, escrow agreements, other documents and
agreements entered into with respect to the sale of any part of the Real
Property, and all proceeds of the sale; and

(10) all proceeds from the voluntary or involuntary disposition or claim
respecting any of the foregoing items (including judgments, condemnation awards
or otherwise).

All of the Real Property and the Personal Property are collectively referred to
as the “Property.”

 

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Section 1.3 CONDITIONS TO GRANT. If Affiliated Guarantor shall pay and perform
the Guaranteed Obligations, at the times and in the manner stipulated in the
Security Documents, and if Affiliated Guarantor and/or Operating Lessee as
applicable shall perform and observe each of the terms, covenants and agreements
set forth in the Security Documents, then this Mortgage and all the rights
granted by this Mortgage shall be released by Lender in accordance with the laws
of the State.

ARTICLE II

AFFILIATED GUARANTOR COVENANTS

Section 2.1 DUE AUTHORIZATION, EXECUTION, AND DELIVERY.

(a) Affiliated Guarantor represents and warrants that the execution of the
Security Documents has been duly authorized and there is no provision in the
organizational documents of Affiliated Guarantor requiring further consent for
such action by any other entity or person.

(b) Affiliated Guarantor represents and warrants that it is duly organized,
validly existing and is in good standing under the laws of the state of its
formation and in the State, that it has all necessary licenses, authorizations,
registrations, permits and/or approvals to own its properties and to carry on
its business as presently conducted.

(c) Affiliated Guarantor represents and warrants that the execution, delivery
and performance of the Security Documents will not result in Affiliated
Guarantor’s being in default under any provision of its organizational documents
or of any mortgage, lease, credit or other agreement to which it is a party or
which affects it or the Property, including without limitation, the Revolver
Loan (as defined in Section 10.4).

(d) Affiliated Guarantor represents and warrants that the Security Documents
have been duly authorized, executed and delivered by Affiliated Guarantor and
constitute valid and binding obligations of Affiliated Guarantor which are
enforceable in accordance with their terms.

Section 2.2 PERFORMANCE BY AFFILIATED GUARANTOR; HOTEL LICENSES AND PERMITS.

(a) Affiliated Guarantor shall perform the Guaranteed Obligations and shall keep
and perform each and every other obligation, covenant and agreement of the
Security Documents.

(b) Affiliated Guarantor represents and warrants that the Hotel Licenses and
Permits necessary or appropriate for the Improvements to be fully operated as a
first-class hotel shall have been validly obtained, paid for and be in full
force and effect.

 

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Section 2.3 WARRANTY OF TITLE TO REAL PROPERTY AND FF&E.

(a) Affiliated Guarantor warrants that it holds marketable and indefeasible fee
simple absolute title to the Real Property, and that it has the right and is
lawfully authorized to sell, convey or encumber the Property subject only to
those property specific exceptions to title recorded in the real estate records
of the County and contained in Schedule B-1 and B-2 of the title insurance
policy or policies which have been approved by Lender (the “Permitted
Exceptions”). The Property is free from all due and unpaid taxes, assessments
and mechanics’ and materialmen’s liens.

(b) All FF&E have been paid for in full and there are no leases or encumbrances,
or security interests on any of the FF&E except for that certain (i) Minibar
Lease dated January 1, 2004 by and between Buckingham Fountain Hotel, LP and
Minibar North America, Inc., and (ii) Licensing and Maintenance Agreement and
Minibar Control System 6.0 dated January 1, 2004 by and between Buckingham
Fountain Hotel, LP and Minibar North America, Inc (collectively, the “Equipment
Leases”).

(c) The Equipment Leases are in full force and effect, there are no monetary or
other defaults by Manager, Affiliated Guarantor or Operating Lessee thereunder.

(d) Affiliated Guarantor further covenants to warrant and forever defend Lender
from and against all persons claiming any interest in the Property.

Section 2.4 TAXES, LIENS AND OTHER CHARGES.

(a) Unless otherwise paid to Lender as provided in Section 2.5, Affiliated
Guarantor and/or Operating Lessee, as applicable, shall pay all real estate and
other taxes and assessments which may be payable, assessed, levied, imposed upon
or become a lien on or against any portion of the Property (all of the foregoing
items are collectively referred to as the “Imposition(s)”). The Impositions
shall be paid not later than the dates on which the particular Imposition would
become delinquent and Affiliated Guarantor shall produce to Lender receipts of
the imposing authority, or other evidence reasonably satisfactory to Lender,
evidencing the payment of the Imposition in full. If Affiliated Guarantor and/or
Operating Lessee, as applicable, elects by appropriate legal action to contest
any Imposition, Affiliated Guarantor shall first deposit cash (or other security
approved by Lender such as a bond or letter of credit) with Lender as a reserve
in an amount which Lender determines is sufficient to pay the Imposition plus
all fines, interest, penalties and costs which may become due pending the
determination of the contest. If Affiliated Guarantor deposits this sum or
alternative security with Lender, Affiliated Guarantor shall not be required to
pay the Imposition provided that enforcement or collection of the Imposition, or
the sale or forfeiture of, the Property is prevented during such contest and
such contest is prosecuted with due diligence and continuity. Upon termination
of any proceeding or contest and any appeal thereof, Affiliated Guarantor shall
pay the amount of the Imposition as finally determined in the proceeding or
contest. Provided that there is not then an Event of Default (as defined in
Section 11.1), the monies or alternative security which have been deposited with
Lender pursuant to this Section shall be applied toward such payment and the
excess, if any, shall be returned to Affiliated Guarantor.

(b) In the event of the passage, after the Execution Date, of any law which
deducts from the value of the Property, for the purposes of taxation, any lien
or security interest encumbering the Property, or changing in any way the
existing laws regarding the taxation of mortgages, deeds of trust and/or
security agreements or debts secured by these instruments, or changing the
manner for the collection of any such taxes, and the law has the effect of
imposing

 

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payment of any Impositions upon Lender, at Lender’s option, the Guaranteed
Obligations may be declared by Lender to immediately become due and payable.
Notwithstanding the preceding sentence, the Lender’s election to accelerate the
Loan shall not be effective if (1) Affiliated Guarantor and/or Operating Lessee
as applicable is permitted by law (including, without limitation, applicable
interest rate laws) to, and actually does, pay the Imposition or the increased
portion of the Imposition and (2) Affiliated Guarantor agrees in writing to pay
or reimburse Lender in accordance with Section 11.6 for the payment of any such
Imposition which becomes payable at any time when the Affiliated Guaranty is
outstanding.

Section 2.5 ESCROW DEPOSITS.

(a) Without limiting the effect of Section 2.4 and Section 3.1, subject to
(b) and (c) below, Affiliated Guarantor shall pay to Lender monthly on the same
date the monthly installment is payable under the Note, an amount equal to
1/12th of the amounts Lender reasonably estimates are necessary to pay, on an
annualized basis, (1) all Impositions and (2) the premiums for the insurance
policies required under this Mortgage (collectively the “Premiums”) until such
time as Affiliated Guarantor has deposited an amount equal to the annual charges
for these items and on demand, from time to time, shall pay to Lender any
additional amounts necessary to pay the Premiums and Impositions. Affiliated
Guarantor will furnish to Lender bills for Impositions and Premiums thirty
(30) days before Impositions become delinquent and such Premiums become due for
payment. No amounts paid as Impositions or Premiums shall be deemed to be trust
funds and these funds may be commingled with the general funds of Lender. Lender
shall not pay Affiliated Guarantor interest on account of these funds. If an
Event of Default occurs, Lender shall have the right, at its election, to apply
any amounts held under this Section 2.5 in reduction of the Guaranteed
Obligations, or in payment of the Premiums or Impositions for which the amounts
were deposited.

(b) Notwithstanding the foregoing, if (i) the insurance required to be
maintained hereunder is provided under a blanket policy approved by Lender, or
(ii) Affiliated Guarantor, Operating Lessee or Manager pay, reserve or set aside
funds on a monthly basis in amounts sufficient to provide for the payment of all
Premiums when due (and such funds need not be segregated or deposited into a
specific fund or account), Lender agrees not to require these deposits unless
and until (a) there has occurred an Event of Default under the Security
Documents, (b) Affiliated Guarantor no longer owns the Property; (c) except as
and to the extent expressly permitted under Article X, there has been a change
in the general partners, stockholders or members of Affiliated Guarantor or in
the constituent general partners or controlling shareholders or controlling
members of any of the entities comprising Affiliated Guarantor; (d) such
deposits are required in connection with a securitization or participation of
the Fairmont Loan; or (e) at any time Affiliated Guarantor fails to furnish to
Lender, not later than fifteen (15) days after the dates on which any Premiums
would become delinquent, receipts for the payment of such Premiums or
appropriate proof of issuance of a new policy which continues in force the
insurance coverage of the expiring policy. In the event any of these events
described in clauses (a) through (d) occur, unless Lender agrees to an
alternative arrangement directly with the independent third party manager of the
Property, Lender reserves the right to require Premiums deposits at any time in
its absolute discretion notwithstanding the fact that the default may be cured,
or that the transfer or change be approved by Lender.

 

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(c) Notwithstanding the foregoing, so long as Affiliated Guarantor, Operating
Lessee or Manager pay, reserve or set aside funds on a monthly basis in amounts
sufficient to provide for the payment of all Impositions as and when due (which
funds need not be segregated or deposited into a specific fund or account),
Lender agrees not to require these deposits unless and until (a) there has
occurred an Event of Default under the Security Documents; (b) Affiliated
Guarantor no longer owns the Property; (c) such deposits are required in
connection with a securitization or participation of the Fairmont Loan; or
(d) except as and to the extent expressly permitted under Article X, there has
been a change in the general partners, stockholders or members of Affiliated
Guarantor or in the constituent general partners or controlling shareholders or
controlling members of any of the entities comprising Affiliated Guarantor. In
the event any of these events described in clauses (a) through (d) occur, unless
Lender agrees to an alternative arrangement directly with the independent third
party manager of the Property, Lender reserves the right to require Impositions
deposits at any time in its absolute discretion notwithstanding the fact that
the default may be cured, or that the transfer or change be approved by Lender.

Section 2.6 CARE AND USE OF THE PROPERTY.

(a) Affiliated Guarantor represents and warrants to Lender as follows:

(i) All authorizations, licenses, including without limitation liquor licenses,
if any, and operating permits required to allow the Improvements to be operated
for the Use have been obtained, paid for and are in full force and effect.

(ii) The Improvements and their Use comply with (and no notices of violation
have been received in connection with) all Requirements (as defined in this
Section) and Affiliated Guarantor and/or Operating Lessee as applicable shall at
all times comply with all present or future Requirements affecting or relating
to the Property and/or the Use. Affiliated Guarantor shall furnish Lender, on
request, proof of compliance with the Requirements. Affiliated Guarantor and/or
Operating Lessee as applicable shall not use or permit the use of the Property,
or any part thereof, for any illegal purpose. “Requirements” shall mean all
laws, ordinances, orders, covenants, conditions and restrictions and other
requirements relating to land and building design and construction, use and
maintenance, that may now or hereafter pertain to or affect the Property or any
part of the Property or the Use, including, without limitation, planning,
zoning, subdivision, environmental, air quality, flood hazard, fire safety,
handicapped facilities, building, health, fire, traffic, safety, wetlands,
coastal and other governmental or regulatory rules, laws, ordinances, statutes,
codes and requirements applicable to the Property, including permits, licenses
and/or certificates that may be necessary from time to time to comply with any
of the these requirements.

(iii) Affiliated Guarantor has complied with all requirements of all instruments
and agreements affecting the Property, whether or not of record, including
without limitation all covenants and agreements by and between Affiliated
Guarantor and any governmental or regulatory agency pertaining to the
development, use or operation of the Property. Affiliated Guarantor and/or
Operating Lessee as applicable, at its sole cost and expense, shall keep the
Property in good order, condition, and repair, and make all necessary structural
and non-structural, ordinary and extraordinary repairs to the Property and the
Improvements.

 

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(iv) Affiliated Guarantor and/or Operating Lessee as applicable shall abstain
from, and not permit, the commission of waste to the Property and shall not
remove or alter in any substantial manner, the structure or character of any
Improvements without the prior written consent of Lender.

(v) The zoning approval for the Property is not dependent upon the ownership or
use of any property which is not encumbered by this Mortgage.

(vi) Construction of the Improvements on the Property is complete.

(vii) The Property is in good repair and condition, free of any material damage.

(b) Lender shall have the right, at any time and from time to time during normal
business hours, to enter the Property in order to ascertain Affiliated
Guarantor’s and/or Operating Lessee’s, as applicable, compliance with the
Security Documents, to examine the condition of the Property, to perform an
appraisal, to undertake surveying or engineering work, and to inspect premises
occupied by tenants. Affiliated Guarantor and/or Operating Lessee as applicable
shall cooperate with Lender performing these inspections.

(c) Affiliated Guarantor and/or Operating Lessee as applicable shall use, or
cause to be used, the Property continuously for the Use. Affiliated Guarantor
and/or Operating Lessee, as applicable, shall not use, or permit the use of, the
Property for any other use without the prior written consent of Lender.
Affiliated Guarantor and/or Operating Lessee as applicable shall not file or
record a declaration of condominium, master Mortgage or mortgage or any other
similar document evidencing the imposition of a so-called “condominium regime”
whether superior or subordinate to this Mortgage and Affiliated Guarantor and/or
Operating Lessee as applicable shall not permit any part of the Property to be
converted to, or operated as, a “cooperative apartment house” whereby the
tenants or occupants participate in the ownership, management or control of any
part of the Property.

(d) Without the prior written consent of Lender, Affiliated Guarantor and/or
Operating Lessee as applicable shall not (i) initiate or acquiesce in a change
in the zoning classification of and/or restrictive covenants affecting the
Property or seek any variance under existing zoning ordinances, (ii) use or
permit the use of the Property in a manner which may result in the Use becoming
a non-conforming use under applicable zoning ordinances, or (iii) subject the
Property to restrictive covenants.

Section 2.7 COLLATERAL SECURITY INSTRUMENTS. Affiliated Guarantor covenants and
agrees that if Lender at any time holds additional security for any obligations
secured by this Mortgage, it may enforce its rights and remedies with respect to
the security, at its option, either before, concurrently or after a sale of the
Property is made pursuant to the terms of this Mortgage. Lender may apply the
proceeds of the additional security to the Guaranteed Obligations without
affecting or waiving any right to any other security, including the security
under this Mortgage, and without waiving any breach or default of Affiliated
Guarantor under this Mortgage or any other Security Document.

 

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Section 2.8 MANAGEMENT AGREEMENT.

(a) As of the Execution Date, the Management Agreement shall be in full force
and effect and Manager shall have no defenses or claims against Affiliated
Guarantor with respect thereto. Any new or subsequent agreements providing for
the management and operation of the Fairmont Hotel shall be subject to Lender’s
approval.

(b) The Management Agreement shall be subordinated to the lien of the Mortgage
pursuant to an Assignment and Subordination of Management Agreement and Consent
of Manager dated as of the date of this Mortgage and recorded, and further shall
be assigned to Lender as additional security for the Loan.

(c) Notwithstanding any provision to the contrary contained herein or in the
other Security Documents, the Affiliated Guarantor and Operating Lessee may not
amend, modify, supplement, alter or waive any right under the Management
Agreement without the written consent of Lender, provided however, without any
requirement for consent, Affiliated Guarantor and Operating Lessee may agree to
any nonmaterial modification, change, supplement, alteration or amendment to the
Management Agreement and waiver of any nonmaterial rights thereunder, including
without limitation, any such modification, change, supplement, alteration,
amendment or waiver that does not affect the cash management procedures set
forth in the Management Agreement or the Fairmont Loan Documents, decrease the
cash flow of the Property, adversely affect the marketability of the Property,
change the definitions of “default” or “event of default,” change the
definitions of “operating expense” or words of similar meaning to add additional
items to or delete items from such definitions, change the definitions of
“owner’s distribution” or “owner’s equity” or words of similar meaning so as to
reduce the payments due the Affiliated Guarantor thereunder, change the
definition of “debt service amount” or “owner indebtedness”, or “net cash flow”
or “net operating cash flow”, or words of similar meaning, change the timing of
remittances to the Affiliated Guarantor or Operating Lessee thereunder, change
the priority of distributions of “net cash flow”, or words of similar meaning,
to Affiliated Guarantor or Operating Lessee thereunder, increase or decrease
reserve requirements, change the term of the Management Agreement or increase
any Basic Fee (as defined in the Management Agreement) or Incentive Fee (as
defined in the Management Agreement) payable under such Management Agreement.

(d) Affiliated Guarantor or Operating Lessee may not enter into a new Management
Agreement unless approved by Lender in its sole and absolute discretion.

Section 2.9 FF&E. If any future acquisition of FF&E is leased, Lender shall have
the right to consent to such leasing. If Lender consents to such leasing, Lender
shall have the right to approve the terms of any leases and to receive an
assignment of the tenant’s interest in any leased equipment. Lender shall also
receive from the lessor (provided lessor is an entity unaffiliated with Lender
and its affiliates) of such equipment (i) an estoppel certificate reflecting the
lease agreement and the defaults, if any, of Affiliated Guarantor under the
lease agreement, and (ii) an agreement providing that if Lender shall ever
become the owner of the Real Property, such lessor’s lease, at Lender’s option,
may be assumed by Lender at the same rental charges, and under the same terms
and conditions as are presently contained in such lease. Any lease referred to
in this section shall be subject to Lender’s prior written approval.

 

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Section 2.10 SUITS AND OTHER ACTS TO PROTECT THE PROPERTY.

(a) Affiliated Guarantor and/or Operating Lessee, as applicable, shall
immediately notify Lender of the commencement, or receipt of notice, of any and
all actions or proceedings or other material matter or claim affecting the
Property and/or the interest of Lender under the Security Documents
(collectively, “Actions”). Affiliated Guarantor and/or Operating Lessee as
applicable shall appear in and defend any Actions.

(b) Lender shall have the right, at the cost and expense of Affiliated
Guarantor, to institute, maintain and participate in Actions or other
proceedings and take such other action, as it may deem appropriate in the good
faith exercise of its discretion to preserve or protect the Property and/or the
interest of Lender under the Security Documents. Any money paid by Lender under
this Section shall be reimbursed to Lender in accordance with Section 11.6
hereof.

Section 2.11 LIENS AND ENCUMBRANCES. Except as and to the extent expressly set
forth in Article X to the contrary, without the prior written consent of Lender,
to be exercised in Lender’s sole and absolute discretion, other than the
Permitted Exceptions, Affiliated Guarantor and/or Operating Lessee, as
applicable, shall not create, place or allow to remain any lien or encumbrance
on the Property, including deeds of trust, mortgages, security interests,
conditional sales, mechanic liens, tax liens or assessment liens regardless of
whether or not they are subordinate to the lien created by this Mortgage
(collectively, “Liens and Encumbrances”). If any Liens and Encumbrances are
recorded against the Property or any part of the Property, Affiliated Guarantor
and/or Operating Lessee as applicable shall obtain a discharge and release of
any Liens and Encumbrances within fifteen (15) days after receipt of notice of
their existence.

Section 2.12 INTENTIONALLY OMITTED.

Section 2.13 PROCEEDS DEPOSIT ACCOUNT.

(a) On the Execution Date, Affiliated Guarantor and Operating Lessee have
established the Proceeds Deposit Account and have executed, together with Bank,
the DAC Agreement.

(b) So long as there is no Event of Default under Section 11.1(b) hereof or
under Section 11.1(a) of the St. Francis Deed of Trust, (a “Deposit Account
Event of Default”) or any event which, with the passage of time, would
constitute an Event of Default under Section 11.1(b) hereof or under
Section 11.1(a) of the St. Francis Deed of Trust (a “Pending Deposit Account
Event of Default”), the amounts in the Proceeds Deposit Account shall be
automatically distributed to Operating Lessee and Affiliated Guarantor; provided
however that upon the occurrence of an Deposit Account Event of Default or
Pending Deposit Account Event of Default under the Loan or the Affiliated
Guarantor Loan, Lender shall have the right, in its sole and absolute
discretion, subject to Section 2.13(c), to instruct Bank pursuant to the terms
of the DAC Agreement to cease all further distributions from the Proceeds
Deposit Account to Affiliated Guarantor and/or Operating Lessee for the
remainder of the term of the Affiliated Guaranty; provided, however, that the
cross reference to Section 11.1(a) of the St. Francis Deed of Trust shall be
disregarded if the St. Francis Property has been transferred pursuant to
Section 10.3 of the St. Francis Deed of Trust.

 

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(c) Notwithstanding the foregoing, if a Pending Deposit Account Event of Default
is cured prior to it becoming an Event of Default, then the amounts in the
Proceeds Deposit Account shall again be automatically released to each Operating
Lessee and Affiliated Guarantor.

ARTICLE III

INSURANCE

Section 3.1 REQUIRED INSURANCE AND TERMS OF INSURANCE POLICIES.

(a) During the term of this Mortgage, Affiliated Guarantor and Operating Lessee
at its sole cost and expense shall provide or shall cause the Manager under the
Management Agreement to provide insurance policies and certificates of insurance
satisfactory to Lender and in such amounts, and with the types of coverage,
exclusions and the companies underwriting these coverages as hereinafter
described. In no event shall such policies be terminated or otherwise allowed to
lapse unless replaced with a policy complying with the requirements set forth in
this Article III. Affiliated Guarantor shall be responsible for its own
deductibles. Affiliated Guarantor shall also pay for any insurance, or any
increase of policy limits, not described in this Mortgage which Affiliated
Guarantor requires for its own protection or for compliance with government
statutes. Affiliated Guarantor’s insurance shall be primary and without
contribution from any insurance procured by Lender.

Policies of insurance shall comply with the following requirements:

(1) Property insurance on the Improvements and the Personal Property insuring
against any peril now or hereafter included within the classification “All Risk”
or “Special Perils,” in each case (i) in an amount equal to 100% of the “Full
Replacement Cost” (as hereinafter defined) of the Improvements and Personal
Property with a waiver of depreciation and with a Replacement Cost Endorsement;
(ii) containing an agreed amount endorsement with respect to the Improvements
and Personal Property waiving all co-insurance provisions; (iii) providing for
no deductible in excess of $250,000; provided, however, the deductibles for
perils of earthquake and windstorm shall not be in excess of 5% of the total
insured value; and (iv) containing Ordinance or Law Coverage, Operation of
Building Laws, Demolition Costs and Increased Cost of Construction in an amount
reasonably required by Lender or if any of the Improvements or the use of the
Property constitute non-conforming structures then in the amount of 100% of the
Full Replacement Cost. The Full Replacement Cost shall be determined from time
to time by an appraiser or contractor designated and paid by Affiliated
Guarantor and approved by Lender or by an engineer or appraiser in the regular
employ of the insurer. The “Full Replacement Cost” for purposes of this Article
III shall mean the estimated total cost of construction required to replace the
Improvements with a substitute of like utility, and using modern materials and
current standards, design and layout. For purposes of calculating Full
Replacement Cost direct (hard) costs shall include, without limitation, labor,
materials, supervision and contractor’s profit and overhead and indirect (soft)
costs shall include, without limitation, fees for architect’s plans and
specifications, construction financing costs, permits, sales taxes, insurance
and other costs included in the Marshall Valuation Service published by
Marshall & Swifts.

 

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(2) Commercial General Liability insurance against claims for personal injury,
bodily injury, death or property damage occurring upon, in or about the
Property, such insurance (i) to be on the so-called “occurrence” form with a
combined single limit of not less than the amount set forth in the Defined
Terms; (ii) to continue at not less than this limit until required to be changed
by Lender in writing by reason of changed economic conditions making such
protection inadequate; and (iii) to cover at least the following hazards:
(a) premises and operations; (b) products and completed operations on an “if
any” basis; (c) independent contractors; (d) blanket contractual liability for
all written and oral contracts; and (e) contractual liability covering the
indemnities contained in this Mortgage to the extent available.

(3) Business Income insurance in an amount sufficient to prevent Affiliated
Guarantor from becoming a co-insurer within the terms of the applicable
policies, and sufficient to recover 24 months “Business Income” (as hereinafter
defined) and with an Extended Period of Indemnity of 12 months. The amount of
such insurance shall be increased from time to time during the term of this
Mortgage as and when new leases and renewal leases are entered into and rents
payable increase or the annual estimate of gross income from occupancy of the
Property increases to reflect such rental increases. “Business Income” shall
mean the sum of (i) the total annual estimate of gross income in connection with
the operation, use and from use and occupancy of the Property as a hotel which
is received by Manager, Operating Lessee and/or Affiliated Guarantor, including
without limitation, all hotel room revenues, restaurant food and beverage
revenues and other revenues, less any non-continuing expenses for such period,
(ii) the amount of all rent and other charges (such as, but not limited to,
operating expenses, insurance premiums and taxes) which are the obligation of
tenants or occupants to Manager, Operating Lessee and/or Affiliated Guarantor,
and (iii) any other amounts payable to Affiliated Guarantor or to any affiliate
of Affiliated Guarantor pursuant to leases or occupancy or license agreements of
any type or nature.

(4) If Lender determines at any time that any part of the Property is located in
an area identified on a Flood Hazard Boundary Map or Flood Insurance Rate Map
issued by the Federal Emergency Management Agency as having special flood
hazards and flood insurance has been made available, Affiliated Guarantor will
maintain a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration with a generally acceptable
insurance carrier, in an amount not less than the lesser of (i) the Full
Replacement Cost or (ii) the maximum amount of insurance which is available
under the National Flood Insurance Act of 1968, the Flood Disaster Protection
Act of 1973 or the National Flood Insurance Reform Act of 1994, as amended.

(5) During the period of any construction or renovation or alteration of the
Improvements, a so-called “Builder’s All Risk” insurance policy in non-reporting
form for any Improvements under construction, renovation or alteration
including, without limitation, for demolition and increased cost of construction
or renovation, in an amount approved by Lender including an Occupancy
endorsement and Worker’s Compensation Insurance covering all persons engaged in
the construction, renovation or alteration in an amount at least equal to the
minimum required by statutory limits of the State of Illinois.

(6) Workers’ Compensation insurance, subject to the statutory limits of the
State of Illinois, and employer’s liability insurance with a limit of at least
$1,000,000.00 per accident and per disease per employee, and $1,000,000.00 for
disease in the aggregate in respect of any work or operations on or about the
Property, or in connection with the Property or its operations (if applicable).

 

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(7) Boiler & Machinery, or Equipment Breakdown Coverage, insurance covering the
major components of the central heating, air conditioning and ventilating
systems, boilers, other pressure vessels, high pressure piping and machinery,
elevators and escalators, if any, and other similar equipment installed in the
Improvements, in an amount equal to one hundred percent (100%) of the full
replacement cost of all equipment installed in, on or at the Improvements with
sublimit of $150,000,000 for the Property. These policies shall insure against
physical damage to and loss of occupancy and use of the Improvements arising out
of an accident or breakdown.

(8) Insurance from and against all losses, damages, costs, expenses, claims and
liabilities related to or arising from acts of terrorism, of such types, in such
amounts, with such deductibles, issued by such companies, and on such forms of
insurance policies as required by Lender.

(9) Business Automobile Insurance with a combined single limit of not less than
$1,000,000 per occurrence for bodily injury and property damage arising out of
the use of owned, non-owned, hired and/or leased automotive equipment when such
equipment is operated by Affiliated Guarantor, Affiliated Guarantor’s employees
or Affiliated Guarantor’s agents in connection with the Property.

(10) Windstorm insurance at an amount equal to the Full Replacement Cost plus
loss of rents and EPI as above and subject to deductibles as approved by Lender.

(11) Such other insurance as may from time to time be reasonably required by
Lender against other insurable hazards, including, but not limited to,
vandalism, environmental, sinkhole and mine subsidence.

(b) Lender’s interest must be clearly stated by endorsement in the insurance
policies described in this Section 3.1 as follows:

(1) The policies of insurance referenced in Subsections (a)(1), (a)(3), (a)(4),
(a)(5), (a)(7), (a)(8), and (a)(10) of this Section 3.1 shall identify Lender
under the New York Standard Mortgagee Clause (non-contributory) endorsement.

(2) The insurance policy referenced in Section 3.1 (a)(2) shall name Lender as
an additional insured.

(3) The policies of insurance referenced in Section 3.1(a)(8) shall name Lender
in such form and manner as Lender shall require, consistent with industry
practice of institutional lenders.

(4) All of the policies referred to in Section 3.1 shall provide for at least
thirty (30) days’ written notice to Lender in the event of policy cancellation
and/or material change.

 

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(c) All the insurance companies must be authorized to do business in the State
and be approved by Lender in the good faith exercise of its discretion.
Insurance must be provided by an AM Best Excellent rated company with a
financial size X ($500mm - $750mm); provided this requirement shall be deemed
satisfied if 90% of the insurance carriers have the specified rating and
financial size and in no event shall the financial size be below VIII and,
provided further that those carriers below X are not in the primary or first
$100,000,000 of coverage. So called “Cut-through” endorsements shall not be
permitted.

(d) Affiliated Guarantor shall deliver evidence satisfactory to Lender of
payment of premiums due under the insurance policies.

(e) Certified copies of the policies, and any endorsements, shall be made
available for inspection by Lender upon request. If any policy is canceled
before the Loan is satisfied, and Affiliated Guarantor fails to immediately
procure replacement insurance, Lender reserves the right but shall not have the
obligation immediately to procure replacement insurance at Affiliated
Guarantor’s cost.

(f) Affiliated Guarantor shall be required during the term of the Affiliated
Guaranty to continue to provide Lender with evidence of original renewal
policies or replacements of the insurance policies referenced in Section 3.1(a).
Lender may accept Certificates of Insurance evidencing insurance policies
referenced in Subsections (a)(2), (a)(4), and (a)(6) of this Section 3.1 instead
of requiring the actual policies. Lender shall be provided with renewal
Certificates of Insurance, or Binders, not less than fifteen (15) days following
expiration. The failure of Affiliated Guarantor to maintain the insurance
required under this Article III shall not constitute a waiver of Affiliated
Guarantor’s obligation to fulfill these requirements.

(g) All binders, policies, endorsements, certificates, and cancellation notices
are to be sent to the Lender’s Address for Insurance Notification as set forth
in the Defined Terms until changed by notice from Lender.

(h) Pursuant to the Illinois Collateral Protection Act and the Illinois
Financial Institution Insurance Sales Law, Lender hereby notifies Affiliated
Guarantor and Operating Lessee as follows:

Affiliated Guarantor may obtain insurance required in connection with the Loan
from any insurance agent, broker, or firm that sells such insurance, provided
the insurance requirements in connection with the Loan are otherwise complied
with, including without limitation, requirements with respect to financial
strength and size of any proposed insurer. Affiliated Guarantor’s choice of
insurance provider will not affect Lender’s credit decision or Affiliated
Guarantor’s credit terms. Unless Affiliated Guarantor provides Lender with
evidence of the insurance coverage as required in this Article III, Lender may
purchase such insurance at Affiliated Guarantor’s expense to protect Lender’s
interest in Affiliated Guarantor’s collateral. This insurance may, but need not,
protect Affiliated Guarantor’s interests. The coverage Lender purchases may not
pay any claim that Affiliated Guarantor makes or any claim that is made against
Affiliated Guarantor in connection with the Property. Affiliated Guarantor may
later cancel any

 

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insurance purchased by Lender, but only after providing Lender with evidence
that Affiliated Guarantor has obtained insurance as required by this Mortgage.
If Lender purchases insurance for the collateral, Affiliated Guarantor will be
responsible for the costs of that insurance, including interest and any other
charges Lender may impose in connection with the placement of such insurance,
until the effective date of the cancellation or expiration of the insurance. The
costs of the insurance may be added to the total outstanding balance of the
Loan. The costs of the insurance acquired by Lender may be more than the cost of
insurance Affiliated Guarantor may be able to obtain on its own.

Section 3.2 ADJUSTMENT OF CLAIMS.

(a) Subject to clause (c) below, in the event of a Casualty or Condemnation
where the claim for damage to, or loss or destruction of, all or a portion of
the Property does not exceed $2,000,000.00, Affiliated Guarantor may settle and
adjust such claim; provided that such adjustment is carried out in a competent
and timely manner. In such case, Affiliated Guarantor and Operating Lessee are
authorized to collect and receive for Lender any insurance proceeds.

(b) Subject to clause (c) below, in the event of a Casualty or Condemnation
where the claim for damage to, or loss or destruction of, all or a portion of
the Property exceeds $2,000,000.00, Affiliated Guarantor may settle and adjust
such claim only with the prior written consent of the Lender (which consent
shall not be unreasonably withheld or delayed).

(c) Notwithstanding the terms of clauses (a) and (b) above, Lender shall have
the sole authority to adjust any claim with respect to a Casualty or
Condemnation and to collection all insurance proceeds during the period an Event
of Default has occurred and is continuing.

Section 3.3 ASSIGNMENT TO LENDER. In the event of the foreclosure of this
Mortgage or other transfer of the title to the Property in extinguishment of the
Guaranteed Obligations, all right, title and interest of Affiliated Guarantor
and/or Operating Lessee as applicable in and to any insurance policy, or
premiums or payments in satisfaction of claims or any other rights under these
insurance policies and any other insurance policies covering the Property shall
pass to the transferee of the Property.

ARTICLE IV

BOOKS, RECORDS AND ACCOUNTS

Section 4.1 BOOKS AND RECORDS. Affiliated Guarantor and/or Operating Lessee as
applicable shall keep adequate books and records of account in accordance with
generally accepted accounting principles (as supplemented by the Uniform System
of Accounts for the Lodging Industry, current edition) (“GAAP”), or in
accordance with other methods acceptable to Lender in its sole discretion,
consistently applied and furnish to Lender:

(a) quarterly rent rolls in electronic form if available and otherwise by hard
copy, detailing the names of all tenants of the Improvements, the portion of
Improvements occupied by each tenant, the base rent and any other charges
payable under each Lease (as defined in Section 5.2) and the term of each Lease,
including the expiration date, and any other information as is reasonably
required by Lender, within thirty (30) days after the end of each fiscal
quarter;

 

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(b) a quarterly profit and loss statements on a cash basis and operating
statement of the Property and year to date operating statements in electronic
form detailing the total revenues received, total expenses incurred, total cost
of all capital improvements, total debt service and total cash flow, to be
prepared and certified by Affiliated Guarantor in the form required by Lender,
and if available, any quarterly operating statement prepared by an independent
certified public accountant, within thirty to sixty (30-60) days after the close
of each fiscal quarter of Affiliated Guarantor;

(c) an annual balance sheet and profit and loss statement of Affiliated
Guarantor in electronic form in the form required by Lender, prepared and
certified by Affiliated Guarantor, and if required by Lender, audited financial
statements for Affiliated Guarantor prepared by an independent certified public
accountant acceptable to Lender within ninety (90) days after the close of each
fiscal year of Affiliated Guarantor;

(d) the annual operating budget (i) when and as prepared by and submitted by
Manager for approval by Affiliated Guarantor and /or Operating Lessee and
(ii) in the form when and as finally approved by Affiliated Guarantor and
Operating Lessee;

(e) copies of any appraisals obtained by Affiliated Guarantor; and

(f) Monthly STAR Reports compiled by Smith Travel Research, Inc. which shall be
submitted quarterly and/or provided to Lender upon written request.

Section 4.2 PROPERTY REPORTS. Upon request from Lender or its representatives
and designees, Affiliated Guarantor and/or Operating Lessee as applicable shall
furnish in a timely manner to Lender: an accounting of all security deposits
held in connection with any Lease of any part of the Property, including the
name and identification number of the accounts in which such security deposits
are held, the name and address of the financial institutions in which such
security deposits are held and the name of the person to contact at such
financial institution, along with any authority or release necessary for Lender
to obtain information regarding such accounts directly from such financial
institutions.

Section 4.3 ADDITIONAL MATTERS.

(a) Affiliated Guarantor shall furnish Lender with such other additional
financial or management information (including State and Federal tax returns) as
may, from time to time, be reasonably required by Lender or the rating agencies
in form and substance satisfactory to Lender or the rating agencies.

(b) Affiliated Guarantor shall furnish Lender and its agents convenient
facilities for the examination and audit of any such books and records.

(c) Lender and its representatives shall have the right upon prior written
notice to examine and audit the records, books, management and other papers of
Affiliated Guarantor and its affiliates or of any guarantor or indemnitor which
reflect upon their financial condition and/or the income, expenses and
operations of the Property, at the Property or at any office regularly
maintained by Affiliated Guarantor, its affiliates or any guarantor or
indemnitor where the books and records are located. Lender shall have the right
upon notice to make copies and extracts from the foregoing records and other
papers.

 

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ARTICLE V

LEASES AND OTHER AGREEMENTS AFFECTING THE PROPERTY

Section 5.1 AFFILIATED GUARANTOR’S REPRESENTATIONS AND WARRANTIES.

Affiliated Guarantor represents and warrants to Lender as follows:

(a) There are no leases or occupancy agreements affecting the Property except
those leases and amendments listed on Exhibit B to the Assignment of Leases
dated as of the Execution Date executed by Affiliated Guarantor in connection
with the Senior Mortgage, and Affiliated Guarantor has delivered to Lender true,
correct and complete copies of all leases, including amendments (collectively,
“Existing Leases”) and all guaranties and amendments of guaranties given in
connection with the Existing Leases, if any (the “Lease Guaranties”).

(b) There are no defaults by Affiliated Guarantor and/or Operating Lessee as
applicable under the Existing Leases and, to the best knowledge of Affiliated
Guarantor, there are no defaults by Manager or any tenants under the Existing
Leases. The Existing Leases and Lease Guaranties, if any, are in full force and
effect.

(c) To the best knowledge of Affiliated Guarantor, none of the tenants now
occupying 10% or more of the Property or having a current lease affecting 10% or
more of the Property is the subject of any bankruptcy, reorganization or
insolvency proceeding or any other debtor-creditor proceeding.

(d) No Existing Leases may be amended terminated or canceled unilaterally by a
tenant and no tenant may be released from its obligations, except in the event
of (i) material damage to, or destruction of, the Property or (ii) condemnation.

Section 5.2 REPRESENTATIONS AND COVENANTS WITH RESPECT TO THE OPERATING LEASE.

(a) The Operating Lease shall not be amended or modified or terminated without
the prior written approval of Lender; provided however, that Affiliated
Guarantor and Operating Lessee may without Lender’s approval agree to
non-material modifications or amendments to the Operating Lease which do not
materially alter the obligations of Affiliated Guarantor as Operating Lessor,
grant Operating Lessee any rights or powers with respect to the Property that
are inconsistent with the rights and obligations of Affiliated Guarantor under
the Security Documents, or grant or confer upon any third party any of the
rights, benefits or obligations under the Operating Lease, including without
limitation any right to receive any of the income, revenue or profits of the
Property. Notwithstanding the foregoing, Affiliated Guarantor and Operating
Lessee may enter into rent schedule amendments and corresponding amendments to
the text of the Operating Lease (e.g., lease term, dates, amounts, etc.) to the
Operating Lease to the extent necessary to comply with REIT tax rules provided
that Lender is provided with a copy of all such amendments.

 

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(b) Affiliated Guarantor absolutely, presently and unconditionally grants,
assigns and transfers to Lender all of Affiliated Guarantor’s right, title,
interest and estate in, to and under the Operating Lease; provided, that Lender
acknowledges and agrees that it will not exercise its rights prior to an Event
of Default by Affiliated Guarantor hereunder.

(c) In the event of a termination, cancellation or surrender of the Operating
Lease by Operating Lessee, Affiliated Guarantor shall assume any and all
obligations of Operating Lessee under the Management Agreement and cure any and
all defaults of Operating Lessee under the Management Agreement.

Section 5.3 ASSIGNMENT OF LEASES. In order to further secure payment of the
Guaranteed Obligations and the performance of Affiliated Guarantor’s and/or
Operating Lessee’s as applicable, obligations under the Security Documents,
Affiliated Guarantor and/or Operating Lessee as applicable absolutely, presently
and unconditionally grants, assigns and transfers to Lender all of Affiliated
Guarantor’s and/or Operating Lessee’s right, title, interest and estate in, to
and under (i) all of the Existing Leases and Lease Guaranties affecting the
Property and (ii) all of the future leases, lease amendments, guaranties and
amendments of guaranties and (iii) the Rents and Profits. Lender acknowledges
and agrees that Affiliated Guarantor and Operating Lessee are permitted to
collect the Rents and Profits unless and until an Event of Default occurs. The
Existing Leases and Lease Guaranties and all future leases, lease amendments,
guaranties and amendments of guaranties are collectively referred to as the
“Leases” but such term expressly excludes the Operating Lease.

Section 5.4 PERFORMANCE OF OBLIGATIONS.

(a) Affiliated Guarantor and/or Operating Lessee as applicable shall perform all
obligations under any and all Leases. If any of the acts described in this
Section are done without the written consent of Lender, at the option of Lender,
they shall be of no force or effect and shall constitute a default under this
Mortgage.

(b) Affiliated Guarantor and/or Operating Lessee as applicable agrees to furnish
Lender executed copies of all future Leases. Affiliated Guarantor and/or
Operating Lessee as applicable shall not, without the express written consent of
Lender, (i) enter into or extend any Lease unless the Lease complies with the
Leasing Guidelines which are attached to this Mortgage as Exhibit “B”, or
(ii) cancel or terminate any Leases or Lease Guaranties except in the case of a
default unless Affiliated Guarantor has entered into a new Lease covering all of
the premises of the Lease being terminated, or (iii) modify or amend any Leases
in any material way or materially reduce the rent, or (iv) unless the tenants
remain liable under the Leases, consent to an assignment of the tenant’s
interest or to a subletting of the demised premises under any Lease, or
(v) accept payment of advance rents or security deposits in an amount in excess
of one month’s rent or (vi) enter into any options to purchase the Property.

 

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(c) Notwithstanding anything to the contrary in this Mortgage, (i) the covenants
and agreements of Affiliated Guarantor and Operating Lessee in Sections 5.4, 5.5
and 5.6 hereunder shall be subject to the limitation that Affiliated Guarantor
and Operating Lessee shall only be required to use commercially reasonable
efforts to enforce any rights they may have under the Management Agreement to
ensure that Manager takes actions under the Management Agreement consistent with
the requirements of Sections 5.4, 5.5 and 5.6 hereof; (ii) subject to the
obligation to use commercially reasonable efforts to enforce any rights under
the Management Agreement, Affiliated Guarantor and Operating Lessee shall not be
deemed in default hereunder or under the Guaranty as a result of the exercise by
Manager of any of its rights pursuant to the Management Agreement with respect
to the subject matter of Sections 5.4, 5.5 and 5.6 of this Mortgage; and
(iii) the rights of Manager under the Management Agreement with respect to the
subject matter of Sections 5.4, 5.5 and 5.6 shall not be limited or restricted
in any manner except as may be expressly provided in an instrument in writing
signed by Manager and delivered to Lender.

(d) Notwithstanding the foregoing, the Operating Lease shall not be subject to
the Leasing Guidelines or the provisions of Section 5.3, provided however that
any leasing or subleasing of all or any part of the Leased Improvements (as
defined in the Operating Lease) pursuant to the Operating Lease shall be subject
to the Leasing Guidelines.

Section 5.5 SUBORDINATE LEASES. The Operating Lease and each Lease entered into
after the Execution Date affecting the Property shall be absolutely subordinate
to the lien of this Mortgage and shall also contain a provision, satisfactory to
Lender, to the effect that in the event of the foreclosure of the Property, at
the election of the acquiring foreclosure purchaser, the particular Lease shall
not be terminated and the tenant shall attorn to the purchaser. Lender shall
have the right in its sole and absolute discretion to make any Lease superior to
the Mortgage. If requested to do so, the tenant shall agree to enter into a new
Lease for the balance of the term upon the same terms and conditions. If Lender
requests, Affiliated Guarantor and/or Operating Lessee as applicable shall cause
a tenant or tenants to enter into subordination and attornment agreements or
nondisturbance agreement with Lender on forms which have been approved by
Lender. Affiliated Guarantor shall pay or cause to be paid by Operating Lessee
all costs and expenses incurred by Lender in connection with granting a
non-disturbance agreement including reasonable attorney’s fees, and a processing
fee of $2,500.00 for each non-disturbance agreement.

Section 5.6 LEASING COMMISSIONS. Affiliated Guarantor covenants and agrees that
all contracts and agreements relating to the Property, if any, entered into by
Affiliated Guarantor or Operating Lessee requiring the payment of leasing
commissions, management fees or other similar compensation shall (i) provide
that the obligation will not be enforceable against Lender and (ii) be
subordinate to the lien of this Mortgage. Lender will be provided evidence of
Affiliated Guarantor’s compliance with this Section upon request.

Section 5.7 REPRESENTATIONS AND COVENANTS WITH RESPECT TO THE OWNER AGREEMENT.

(a) The Owner Agreement shall not be amended or modified or terminated without
the prior written approval of Lender; provided however, that Manager, Affiliated
Guarantor and Operating Lessee may without Lender’s approval agree to
non-material modifications or amendments to the Owner Agreement which do not
materially alter the obligations or rights of Affiliated Guarantor thereunder.

 

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(b) Affiliated Guarantor absolutely, presently and unconditionally grants,
assigns and transfers to Lender all of Affiliated Guarantor’s right, title,
interest and estate in, to and under the Owner Agreement; provided, however that
Lender acknowledges and agrees that it will not exercise its rights prior to an
Event of Default by Affiliated Guarantor hereunder.

(c) The Owner Agreement shall be and remain subject and subordinate to this
Mortgage and shall be terminated and of no further force and effect upon a
foreclosure of the Property by Lender or the acceptance of a deed in lieu of
foreclosure.

ARTICLE VI

ENVIRONMENTAL HAZARDS

Section 6.1 REPRESENTATIONS AND WARRANTIES. Affiliated Guarantor hereby
represents, warrants, covenants and agrees to and with Lender that (i) neither
Affiliated Guarantor nor, to the best of Affiliated Guarantor’s knowledge, after
due inquiry, any tenant, subtenant or occupant of the Property, has at any time
placed, suffered or permitted the presence of any Hazardous Materials (as
defined in Section 6.5) at, on, under, within or about the Property except as
expressly disclosed in the Phase I Environmental Report provided to Lender or as
expressly approved by Lender in writing and (ii) all operations or activities
upon the Property, and any use or occupancy of the Property by Affiliated
Guarantor and/or Operating Lessee as applicable, and any tenant, subtenant or
occupant of the Property are presently and shall in the future be in compliance
with all Requirements of Environmental Laws (as defined in Section 6.6),
(iii) Affiliated Guarantor and/or Operating Lessee as applicable will use best
efforts to assure that any tenant, subtenant or occupant of the Property shall
in the future be in compliance with all Requirements of Environmental Laws,
(iv) all operations or activities upon the Property are presently and shall in
the future be in compliance with all Requirements of Environmental Laws,
(v) Affiliated Guarantor does not know of, and has not received, any written or
oral notice of other communication from any person or entity (including, without
limitation, a governmental entity) relating to Hazardous Materials or Remedial
Work pertaining thereto, of possible liability of any person or entity pursuant
to any Requirements of Environmental Laws, other environmental conditions in
connection with the Property, or any actual administrative or judicial
proceedings in connection with any of the foregoing, (vi) Affiliated Guarantor
and/or Operating Lessee as applicable shall not do or allow any tenant or other
user of the Property to do any act that materially increases the dangers to
human health or the environment, poses an unreasonable risk of harm to any
person or entity (whether on or off the Property), impairs or may impair the
value of the Property, is contrary to any requirement of any insurer,
constitutes a public or private nuisance, constitutes waste, or violates any
covenant, condition, agreement or easement applicable to the Property, and
(vii) Affiliated Guarantor has truthfully and fully provided to Lender, in
writing, any and all information relating to environmental conditions in, on,
under or from the Property that is known to Affiliated Guarantor and that is
contained in Affiliated Guarantor’s and/or Operating Lessee’s as applicable
files and records, including, without limitation, any reports relating to
Hazardous Materials in, on, under or from the Property and/or to the
environmental condition of the Property.

 

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Section 6.2 REMEDIAL WORK. In the event any investigation or monitoring of site
conditions or any clean-up, containment, restoration, removal or other remedial
work (collectively, the “Remedial Work”) is required under any Requirements of
Environmental Laws, Affiliated Guarantor and/or Operating Lessee as applicable
shall perform or cause to be performed the Remedial Work in compliance with such
requirements. All Remedial Work shall be performed by one or more contractors,
selected by Affiliated Guarantor and/or Operating Lessee as applicable and
approved in advance in writing by Lender, and under the supervision of a
consulting engineer, selected by Affiliated Guarantor and/or Operating Lessee as
applicable and approved in advance in writing by Lender. All costs and expenses
of Remedial Work shall be paid by Affiliated Guarantor and/or Operating Lessee,
as applicable, including, without limitation, the charges of the contractor(s)
and/or the consulting engineer, and Lender’s reasonable attorneys’, architects’
and/or consultants’ fees and costs incurred in connection with monitoring or
review of the Remedial Work. In the event Affiliated Guarantor and/or Operating
Lessee as applicable shall fail to timely commence, or cause to be commenced, or
fail to diligently prosecute to completion, the Remedial Work, Lender may, but
shall not be required to, cause such Remedial Work to be performed, subject to
the provisions of Sections 11.5 and 11.6.

Section 6.3 ENVIRONMENTAL SITE ASSESSMENT. Lender shall have the right, at any
time and from time to time, if Lender has a reasonable belief that the
environmental condition of the Property has adversely changed since the date of
the Loan to undertake, at the expense of Affiliated Guarantor, an environmental
site assessment on the Property, including any testing that Lender may
determine, in its sole discretion, is necessary or desirable to ascertain the
environmental condition of the Property and the compliance of the Property with
Requirements of Environmental Laws. Affiliated Guarantor and/or Operating Lessee
as applicable shall cooperate fully with Lender and its consultants performing
such assessments and tests.

Section 6.4 INTENTIONALLY OMITTED.

Section 6.5 HAZARDOUS MATERIALS.

“Hazardous Materials” shall include without limitation:

(a) Those substances included within the definitions of “hazardous substances”,
“hazardous materials,” “toxic substances,” or “solid waste” in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended
(42 U.S.C. Sections 9601 et seq.) (“CERCLA”), as amended by Superfund Amendments
and Reauthorization Act of 1986 (Pub. L. 99-499 100 Stat. 1613) (“SARA”), the
Resource Conservation and Recovery Act of 1976, (42 U.S.C. Sections 6901 et
seq.) (“RCRA”), and the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., and in the regulations promulgated pursuant to said laws,
all as amended;

(b) Those substances listed in the United States Department of Transportation
Table (49 CFR 172.101 and amendments thereto) or by the Environmental Protection
Agency (or any successor agency) as hazardous substances (40 CFR Part 302 and
amendments thereto);

(c) Any material, waste or substance which is (A) petroleum, including crude oil
or any fraction thereof, natural gas, natural gas liquids, liquefied natural
gas, synthetic gas usable for fuel, or any mixture thereof, (B) asbestos,
(C) polychlorinated biphenyls, (D) designated as a “hazardous substance”
pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Sections 1251 et seq.
(33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water
Act (33 U.S.C. Section 1317); (E) a chemical substance or mixture regulated
under the Toxic Substances Control Act of 1976, 15 U.S.C. Sections 2601 et seq.;
(F) flammable explosives; or (G) radioactive materials;

 

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(d) Those substances defined as “hazardous substances,” “hazardous waste,” or
“hazardous materials” in the Illinois Environmental Protection Act, 415 ILCS 5/1
et seq., the Uniform Hazardous Substances Act of Illinois, 430 ILCS 35/1 et
seq., and the Illinois Hazardous Materials Transportation Act, 430 ILCS 30/1 et
seq., and in the regulations promulgated pursuant to such laws;

(e) Those chemicals known to cause cancer or reproductive toxicity, as reported
or defined pursuant to the Illinois Health and Hazardous Substance Registry Act,
410 ILCS 525/1 et seq. and the Illinois Environmental Protection Act, 415 ILCS
5/1 et seq., and the regulations promulgated pursuant to such laws;

(f) Those substances listed under Illinois Environmental Protection Act, 415
ILCS 5/1 et seq.; and,

(g) Such other substances, materials and wastes which are or become regulated as
hazardous or toxic under applicable local, state or federal law, or the United
States government, or which are classified as hazardous or toxic under federal,
state, or local laws or regulations.

Section 6.6 REQUIREMENTS OF ENVIRONMENTAL LAWS. “Requirements of Environmental
Laws” means all requirements of environmental, ecological, health, or industrial
hygiene laws or regulations or rules of common law related to the Property,
including, without limitation, all requirements imposed by any environmental
permit, law, rule, order, or regulation of any federal, state, or local
executive, legislative, judicial, regulatory, or administrative agency, which
relate to (i) exposure to Hazardous Materials; (ii) pollution or protection of
the air, surface water, ground water, land; (iii) solid, gaseous, or liquid
waste generation, treatment, storage, disposal, or transportation; or
(iv) regulation of the manufacture, processing, distribution and commerce, use,
or storage of Hazardous Materials.

ARTICLE VII

CASUALTY, CONDEMNATION AND RESTORATION

Section 7.1 AFFILIATED GUARANTOR’S REPRESENTATIONS.

Affiliated Guarantor represents and warrants as follows:

(a) Except as expressly approved by Lender in writing, no casualty or damage to
any part of the Property which would cost more than $500,000.00 to restore or
replace has occurred which has not been fully restored or replaced.

(b) No part of the Property has been taken in condemnation or other similar
proceeding or transferred in lieu of condemnation, nor has Affiliated Guarantor
received notice of any proposed condemnation or other similar proceeding
affecting the Property.

 

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(c) There is no pending proceeding for the total or partial condemnation of the
Property.

Section 7.2 RESTORATION.

(a) Affiliated Guarantor and/or Operating Lessee as applicable shall give prompt
written notice of any casualty to the Property which would cost more than
$500,000.00 to repair to Lender whether or not required to be insured against.
The notice shall describe the nature and cause of the casualty and the extent of
the damage to the Property. Affiliated Guarantor and/or Operating Lessee as
applicable covenants and agrees to commence and diligently pursue to completion
the Restoration (as defined in (b) below).

(b) Affiliated Guarantor assigns to Lender all Insurance Proceeds which
Affiliated Guarantor and/or Operating Lessee as applicable is entitled to
receive in connection with a casualty whether or not such insurance is required
under this Mortgage. Except as and to the extent provided in Section 7.4, in the
event of any damage to or destruction of the Property, and provided (1) an Event
of Default does not currently exist, and (2) Lender has determined that
(i) there has not been an Impairment of the Security (as defined in Section 7.2
(c)), and (ii) the repair, restoration and rebuilding of any portion of the
Property that has been partially damaged or destroyed (the “Restoration”) can be
accomplished in full compliance with all Requirements to the same condition,
character and general utility as nearly as possible to that existing prior to
the casualty and at least equal in value as that existing prior to the casualty,
the Net Insurance Proceeds shall be applied to the cost of Restoration in
accordance with the terms of this Article. Lender shall hold and disburse the
Insurance Proceeds less the cost, if any, to Lender of recovering the Insurance
Proceeds including, without limitation, reasonable attorneys’ fees and expenses,
and adjusters’ fees (the “Net Insurance Proceeds”) to the Restoration.

(c) For the purpose of this Article, “Impairment of the Security” shall mean any
or all of the following: (i) the casualty or damage occurs during the last year
of the term of the St. Francis Loan, including any extensions; or
(ii) restoration of the Property is estimated to require more than one year to
complete from the date of the occurrence; or (iii) the occurrence of a Material
Casualty (as defined in 7.4(b)) or a Material Condemnation (as defined in
Section 7.4(b)), if the Management Agreement does not require Operating Lessee
or Affiliated Guarantor to restore the Property, and/or Operating Lessee and/or
Affiliated Guarantor have the right to terminate the Management Agreement
pursuant to the terms of the Management Agreement as a result of such Casualty
or Condemnation.

(d) If the Net Insurance Proceeds are to be used for the Restoration in
accordance with this Article, Affiliated Guarantor and/or Operating Lessee as
applicable shall comply with Lender’s Requirements For Restoration as defined in
Section 7.5 below. Upon Affiliated Guarantor’s and/or Operating Lessee’s, as
applicable, satisfaction and completion of the Requirements For Restoration and
upon confirmation that there is no Event of Default then existing, Lender shall
pay any remaining Restoration Funds (as defined in Section 7.5 below) then held
by Lender to Affiliated Guarantor.

 

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(e) In the event that the conditions for Restoration set forth in this Section
have not been met and subject to the provisions of Section 7.4 if applicable,
Lender may, at its option, apply the Net Insurance Proceeds to the reduction of
the Fairmont Loan in such order as Lender may determine and Lender may declare
all of the Fairmont Loan immediately due and payable. After payment in full of
the Guaranteed Obligations, any remaining Restoration Funds shall be paid to
Affiliated Guarantor.

Section 7.3 CONDEMNATION.

(a) If the Property or any part of the Property is taken by reason of any
condemnation or similar eminent domain proceeding, or by a grant or conveyance
in lieu of condemnation or eminent domain (each a “Condemnation”), Lender shall
be entitled to all compensation, awards, damages, proceeds and payments or
relief for the Condemnation (the “Condemnation Proceeds”). At its option, Lender
shall be entitled to commence, appear in and prosecute in its own name any
action or proceeding or to make any compromise or settlement in connection with
such Condemnation. Affiliated Guarantor hereby irrevocably constitutes and
appoints Lender as its attorney-in-fact, which appointment is coupled with an
interest, to commence, appear in and prosecute any action or proceeding or to
make any compromise or settlement in connection with any such Condemnation.

(b) Affiliated Guarantor assigns to Lender all Condemnation Proceeds which
Affiliated Guarantor and/or Operating Lessee as applicable is entitled to
receive. Except as and to the extent provided in Section 7.4, in the event of
any Condemnation, and provided (1) an Event of Default does not currently exist,
and (2) Lender has determined that (i) there has not been an Impairment of the
Security, and (ii) the Restoration of any portion of the Property that has not
been taken can be accomplished in full compliance with all Requirements to the
same condition, character and general utility as nearly as possible to that
existing prior to the taking and at least equal in value as that existing prior
to the taking, then Affiliated Guarantor and/or Operating Lessee as applicable
shall commence and diligently pursue to completion the Restoration. Lender shall
hold and disburse the Condemnation Proceeds less the cost, if any, to Lender of
recovering the Condemnation Proceeds including, without limitation, reasonable
attorneys’ fees and expenses, and adjusters’ fees (the “Net Condemnation
Proceeds”) to the Restoration.

(c) In the event the Net Condemnation Proceeds are to be used for the
Restoration, Affiliated Guarantor and/or Operating Lessee as applicable shall
comply with Lender’s Requirements For Restoration as set forth in Section 7.5
below. Upon Affiliated Guarantor and/or Operating Lessee as applicable’s
satisfaction and completion of the Requirements For Restoration and upon
confirmation that there is no Event of Default then existing, Lender shall pay
any remaining Restoration Funds (as defined in Section 7.5 below) then held by
Lender to Affiliated Guarantor.

(d) In the event that the conditions for Restoration set forth in this Section
have not been met and subject to the provisions of Section 7.4, if applicable,
Lender may, at its option, apply the Net Condemnation Proceeds to the reduction
of the Fairmont Loan in such order as Lender may determine and Lender may
declare all of the Fairmont Loan immediately due and payable. After payment in
full of the Guaranteed Obligations, any remaining Restoration Funds shall be
paid to Affiliated Guarantor.

 

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Section 7.4 CASUALTY AND CONDEMNATION RESTORATION PURSUANT TO MANAGEMENT
AGREEMENT.

(a) Notwithstanding any provision of the Mortgage or any other Security
Document, in the event of a Material Casualty or Material Condemnation, if the
Management Agreement provides that the Operating Lessee or Affiliated Guarantor
is required to restore the Property and such Operating Lessee or Affiliated
Guarantor does not have the right to terminate the Management Agreement pursuant
to the terms of the Management Agreement as a result of such Casualty or
Condemnation or otherwise, then Lender shall make such proceeds available to
Affiliated Guarantor for the restoration of the Property (which shall be applied
in accordance with the Requirements for Restoration) as set forth in
Section 7.5, provided that: (i) an Event of Default does not then currently
exist, (ii) the repair, restoration and rebuilding of any portion of the
Property that has been damaged or destroyed or which remains after a Material
Condemnation, can be accomplished in full compliance with all Requirements for
Restoration and other requirements relating to land and building design and
construction, use and maintenance, that pertain to or affect the Property or any
part of the Property to the same condition, character and general utility as
nearly as possible to that existing prior to the casualty and at least equal in
value as that existing prior to the casualty (the repair, restoration and
rebuilding to the condition described in this clause (ii) is referred to herein
as the “Restoration Standard”), (iii) the Casualty or Condemnation occurs more
than one year prior to the Maturity Date; and (iv) restoration of the Property
in accordance with the terms herein is estimated to require not more than one
year to complete from the date of the occurrence of the Casualty or
Condemnation; and (v) the estimated cost to restore the Property in accordance
with the terms herein, as approved by Lender in its commercially reasonable
discretion, does not exceed the amount of the Net Insurance Proceeds available
for restoration and other amounts, if any, committed to the costs of the
restoration by Affiliated Guarantor, evidenced by documents satisfactory to
Lender, and with respect to which Lender has been granted a security interest as
evidenced by such documents required by Lender satisfactory in form and content
to Lender.

(b) For purposes of this Section 7.4, the following terms have the following
meanings:

(i) “Material Casualty” shall mean a Casualty where the loss (a) is in an
aggregate amount equal to or in excess of thirty percent (30%) of the
outstanding principal amount of the Loan or (b) has caused thirty percent
(30%) or more of the hotel rooms or common areas (including banquet and
conference facilities) in the Property to be unavailable for its applicable use.

(ii) “Material Condemnation” shall mean a Condemnation where the loss (a) is in
an aggregate amount equal to or in excess of thirty percent (30%) of the
outstanding principal amount of the Loan or (b) has caused thirty percent
(30%) or more of the hotel rooms or common areas (including banquet and
conference facilities) in the applicable Property to be unavailable for its
applicable use.

 

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Section 7.5 REQUIREMENTS FOR RESTORATION. Unless otherwise expressly agreed in a
writing signed by Lender, the following are the “Requirements For Restoration”:

(a) If the Net Insurance Proceeds or Net Condemnation Proceeds are to be used
for the Restoration, prior to the commencement of any Restoration work (other
than activities required to protect the Property from further damage or to
provide for the health and/or safety of the public or workers) (the “Work”),
Affiliated Guarantor and/or Operating Lessee as applicable shall provide Lender
for its review and written approval (i) complete plans and specifications for
the Work which (A) have been approved by all required governmental authorities,
(B) have been approved by an architect satisfactory to Lender (the “Architect”)
and (C) are accompanied by Architect’s signed statement of the total estimated
cost of the Work (the “Approved Plans and Specifications”); (ii) an estimate of
the amount of money which Lender reasonably determines will be sufficient when
added to the Net Insurance Proceeds or Condemnation Proceeds to pay the entire
cost of the Restoration (collectively referred to as the “Restoration Funds”);
(iii) evidence that the Approved Plans and Specifications and the Work are in
compliance with all Requirements; (iv) an executed contract for construction
with a contractor satisfactory to Lender (the “Contractor”) in a form approved
by Lender in writing; and (v) a completion guaranty of such Work by Liable Party
(as defined in the Senior Mortgage) in a form reasonably satisfactory to Lender.

(b) Affiliated Guarantor and/or Operating Lessee as applicable shall not
commence the Work, other than temporary work to protect the Property, protect
the health or safety of the public or workers, or prevent interference with
business, until Affiliated Guarantor and/or Operating Lessee as applicable shall
have complied with the requirements of subsection (a) of this Section 7.5. So
long as there does not currently exist an Event of Default and the following
conditions have been complied with or, in Lender’s discretion, waived, Lender
shall disburse the Restoration Funds in increments to Affiliated Guarantor, from
time to time as the Work progresses:

(i) Architect or another person approved by Lender shall be in charge of the
Work.

(ii) Lender shall disburse the Restoration Funds directly or through escrow with
a title company selected by Affiliated Guarantor and approved by Lender, upon
not less than ten (10) days’ prior written notice from Affiliated Guarantor to
Lender and Affiliated Guarantor’s delivery to Lender of (A) Affiliated
Guarantor’s written request for payment (a “Request for Payment”) accompanied by
a certificate by Architect in a form satisfactory to Lender which states that
(a) all of the Work completed to that date has been completed in compliance with
the Approved Plans and Specifications and in accordance with all Requirements,
(b) the amount requested has been paid or is then due and payable and is
properly a part of the cost of the Work, and (c) when added to all sums
previously paid by Lender, the requested amount does not exceed the value of the
Work completed to the date of such certificate; and (B) evidence satisfactory to
Lender that the balance of the Restoration Funds remaining after making the
payments shall be sufficient to pay the balance of the cost of the Work. Each
Request for Payment shall be accompanied by (x) waivers of liens covering that
part of the Work previously paid for, if any (y) a title search or by other
evidence satisfactory to Lender that no mechanic’s or materialmen’s liens or
other similar liens for labor or materials supplied in connection with the Work
have been filed against the Property and not discharged of record, and (z) an
endorsement to Lender’s title policy insuring that no encumbrance exists on or
affects the Property other than the Permitted Exceptions.

 

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(iii) The final Request for Payment shall be accompanied by (i) a final
certificate of occupancy or other evidence of approval of appropriate
governmental authorities for the use and occupancy of the Improvements,
(ii) evidence that the Restoration has been completed in accordance with the
Approved Plans and Specifications and all Requirements, (iii) evidence that the
costs of the Restoration have been paid in full, and (iv) evidence that no
mechanic’s or similar liens for labor or material supplied in connection with
the Restoration are outstanding against the Property, including final waivers of
liens covering all of the Work and an endorsement to Lender’s title policy
insuring that no encumbrance exists on or affects the Property other than the
Permitted Exceptions.

(c) If (i) within one hundred eighty (180) days after the occurrence of any
damage, destruction or condemnation requiring Restoration, Affiliated Guarantor
fails to submit to Lender and receive Lender’s approval of Affiliated
Guarantor’s preliminary plans and specifications or fails to deposit with Lender
the additional amount necessary to accomplish the Restoration as provided in
subparagraph (a) above, or (ii) after such plans and specifications are
finalized and approved by all such governmental authorities and Lender,
Affiliated Guarantor and/or Operating Lessee as applicable fails to commence
promptly or diligently continue to completion the Restoration, or
(iii) Affiliated Guarantor and/or Operating Lessee as applicable becomes
delinquent in payment to mechanics, materialmen or others for the costs incurred
in connection with the Restoration, or (iv) there exists an Event of Default,
then, in addition to all of the rights herein set forth and after ten (10) days’
written notice of the nonfulfillment of one or more of these conditions, Lender
may apply the Restoration Funds to reduce the Fairmont Loan in such order as
Lender may determine, and at Lender’s option and in its sole discretion, Lender
may declare the Fairmont Loan immediately due and payable together with the
Prepayment Fee.

ARTICLE VIII

REPRESENTATIONS, WARRANTIES AND COVENANTS OF AFFILIATED GUARANTOR

Section 8.1 ERISA. Affiliated Guarantor hereby represents, warrants and agrees
that: (i) it is acting on its own behalf and that it is not an employee benefit
plan as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”), which is subject to Title 1 of ERISA, nor a plan
as defined in Section 4975(e)(1) of the Internal Revenue Code of 1986, as
amended (each of the foregoing hereinafter referred to collectively as a
“Plan”); (ii) Affiliated Guarantor’s assets do not constitute “plan assets” of
one or more such Plans within the meaning of Department of Labor Regulation
Section 2510.3-101; and (iii) it will not be reconstituted as a Plan or as an
entity whose assets constitute “plan assets.”

Section 8.2 NON-RELATIONSHIP. Neither Affiliated Guarantor nor any general
partner, director, member or officer of Affiliated Guarantor nor, to Affiliated
Guarantor’s knowledge, any person who is a Affiliated Guarantor’s Constituent
(as defined in Section 8.4) is (i) a director or officer of Lender, (ii) a
parent, son or daughter of a director or officer of Lender or a descendent of
any of them, (iii) a stepparent, adopted child, step-son or step-daughter of a
director or officer of Lender or (iv) a spouse of a director or officer of
Lender.

 

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Section 8.3 NO ADVERSE CHANGE. Affiliated Guarantor represents and warrants that
there has been no material adverse change from the conditions shown in the
application submitted for the St. Francis Loan by St. Francis Borrower and
Affiliated Guarantor (“Application”) or in the materials submitted in connection
with the Application.

Section 8.4 AFFILIATED GUARANTOR’S REPRESENTATIONS AND WARRANTIES.

(a) Affiliated Guarantor represents and warrants that it has delivered to Lender
true and correct copies of all Affiliated Guarantor’s and Operating Lessee’s
organizational documents and except for the Affiliated Guaranty and as expressly
approved by Lender in writing, there have been no changes in Affiliated
Guarantor’s members or Operating Lessee’s members (“Affiliated Guarantor’s
Constituents”) since the date that the Application was executed by Affiliated
Guarantor and Strategic Hotels & Resorts Inc. and/or its legally permitted
successors and assigns (“SHRI”) continues to Control (as defined in
Section 10.4(c)) Strategic Hotel Funding L.L.C.

(b) Affiliated Guarantor represents and warrants that neither Affiliated
Guarantor, nor any of the Affiliated Guarantor’s Constituents, is involved in
any litigation, arbitration or other proceeding nor is there any governmental
investigation pending which if determined adversely would materially adversely
affect Affiliated Guarantor’s ability to perform in accordance with the Security
Documents, and to the best knowledge of Affiliated Guarantor, no such proceeding
is contemplated or threatened.

(c) Affiliated Guarantor represents and warrants that Affiliated Guarantor has
received reasonably equivalent value for the granting of this Mortgage.

(d) Affiliated Guarantor represents and warrants that neither Affiliated
Guarantor, nor any of the Affiliated Guarantor’s Constituents, is involved in
any bankruptcy, reorganization, insolvency, dissolution or liquidation
proceeding, and to the best knowledge of Affiliated Guarantor, no such
proceeding is contemplated or threatened.

(e) Affiliated Guarantor represents and warrants that neither Affiliated
Guarantor nor any partner, member or stockholder of Affiliated Guarantor has
been convicted of, or been indicted for a felony criminal offense.

(f) Affiliated Guarantor represents and warrants that neither Affiliated
Guarantor nor any partner, member or stockholder of Affiliated Guarantor is in
default under the Revolver Loan (as defined in Section 10.4) or any mortgage,
deed of trust, note, loan or credit agreement.

Section 8.5 INTENTIONALLY OMITTED.

Section 8.6 FOREIGN INVESTOR. Neither Affiliated Guarantor nor any partner,
member or stockholder of Affiliated Guarantor is, and no legal or beneficial
interest in a partner, member or stockholder of Affiliated Guarantor is or will
be held, directly or indirectly by, a “foreign person” within the meaning of
Sections 1445 and 7701 of the Internal Revenue Code of l986, as amended and
Affiliated Guarantor is not a “disregarded entity” within the meaning of such
Code of Regulations.

 

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Section 8.7 US PATRIOT ACT. Neither Affiliated Guarantor nor any partner, member
or stockholder of Affiliated Guarantor is, and no legal of beneficial interest
in a partner, member or stockholder of Affiliated Guarantor is or will be held,
directly or indirectly, by a person or entity that appears on a list of
individuals and/or entities for which transactions are prohibited by the US
Treasury Office of Foreign Assets Control or any similar list maintained by any
other governmental authority, with respect to which entering into transactions
with such person or entity would violate the US Patriot Act or regulations or
any Presidential Executive Order or any other similar applicable law, ordinance,
order, rule or regulation.

ARTICLE IX

EXCULPATION AND LIABILITY

Section 9.1 LIABILITY OF AFFILIATED GUARANTOR. Except as expressly set forth in
the balance of this Section, anything contained herein or in any other Security
Documents to the contrary notwithstanding, no recourse shall be had for the any
obligation hereunder or under the Security Documents against (i) any affiliate,
parent company, trustee or advisor of Affiliated Guarantor or Operating Lessee,
or owner of a direct or indirect beneficial or equitable interest in Affiliated
Guarantor or Operating Lessee, any member in Affiliated Guarantor or Operating
Lessee, or any partner, shareholder or member therein (other than against
Strategic Hotel Funding, L.L.C. (the “St Francis Liable Party”) pursuant to the
Guaranty (as defined in the St. Francis Deed of Trust) or the Indemnity
Agreement (as defined in the St. Francis Deed of Trust)); (ii) any legal
representative, heir, estate, successor or assign of any thereof; (iii) any
corporation (or any officer, director, employee or shareholder thereof),
individual or entity to which any ownership interest in Affiliated Guarantor or
Operating Lessee shall have been transferred; (iv) any purchaser of any asset of
Affiliated Guarantor or Operating Lessee; or (v) any other Person (except for
St. Francis Borrower) for any deficiency or other sum owing with respect to the
Guaranteed Obligations. It is understood that the Guaranteed Obligations may not
be enforced against any person described in clauses (i) through (v) above (other
than against the St. Francis Borrower) unless such person is independently
liable for the Guaranteed Obligations, and Lender agrees not to sue or bring any
legal action or proceeding against any such person in such respect. However,
nothing contained in this Section or the Loan Documents shall:

(a) prevent recourse to the Affiliated Guarantor or, if and to the extent
applicable, the St. Francis Liable Party or the assets of the Affiliated
Guarantor, or, if and to the extent applicable, the assets of the St. Francis
Liable Party, or enforcement of the Security Documents or other instrument or
document by which Affiliated Guarantor is bound pursuant to the Affiliated
Guaranty;

(b) limit Lender’s rights to institute or prosecute a legal action or proceeding
or otherwise make a claim against Affiliated Guarantor, Operating Lessee and/or
St. Francis Liable Party for damages and losses to the extent arising directly
or indirectly from any of the following or against the person or persons
committing any of the following:

(i) fraud or intentional misrepresentation by Affiliated Guarantor, Operating
Lessee and/or Fairmont Liable Party,

 

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(ii) the misappropriation by Affiliated Guarantor or Operating Lessee of any
proceeds (including, without limitation, any Rents, security deposits, tenant
letters of credit, insurance proceeds and condemnation proceeds), including
(x) the failure to pay any such amounts to Lender as and to the extent required
under this Mortgage, (y) the collection of Rents for a period of more than 30
days in advance, and (z) such amounts received after an Event of Default and not
applied to the Fairmont Loan or to operating and maintenance expenses of the
Property,

(iii) the breach of any representation, warranty, covenant or indemnification
provision in the Mortgage with respect to Hazardous Materials,

(iv) physical damage to the Property from intentional waste committed by
Affiliated Guarantor, Operating Lessee or any affiliate of Affiliated Guarantor
or Operating Lessee,

(v) any and all liabilities, obligations, losses, damages, costs and expenses
(including, without limitation, reasonable attorneys’ fees, causes of action,
suits, claims, demands and adjustments of any nature or description whatsoever)
which may at any time be imposed upon, incurred by or awarded against Lender, in
the event (and arising out of such circumstances) that Affiliated Guarantor
should raise any defense, counterclaim and/or allegation in any foreclosure
action by Lender relative to the Property, which is found by a court of
competent jurisdiction to have been raised by Affiliated Guarantor or Operating
Lessee in bad faith or to be without basis in fact or law,

(c) limit Lender’s rights to recover damages to the extent arising from
Affiliated Guarantor’s or Operating Lessee’s failure to comply with the
provisions of the Mortgage pertaining to ERISA,

(d) limit Lender’s rights to recover all amounts due and payable pursuant to
Sections 11.6 and 11.7 of this Mortgage and any amount expended by Lender in
connection with the foreclosure of this Mortgage,

(e) limit Lender’s rights to enforce any leases entered into by Affiliated
Guarantor or its affiliates as tenant, guarantees, or other agreements entered
into by Affiliated Guarantor in a capacity other than as borrower or any
policies of insurance; or

(f) limit Lender’s rights to recover costs and damages arising from Affiliated
Guarantor’s or Operating Lessee’s failure to pay any Premiums or Impositions in
the event Affiliated Guarantor is not required to deposit such amounts with
Lender pursuant to Section 2.5 of this Mortgage.

Section 9.2 RECOURSE GUARANTY. Notwithstanding the foregoing, this limitation of
liability shall not apply and the Guaranteed Obligations will be a fully
recourse to Affiliated Guarantor:

(a) in the event of any Transfer of the Property in violation of this Mortgage
or in the event Affiliated Guarantor or Operating Lessee enters into any
indebtedness for borrowed money which is secured by a lien, security interest or
other encumbrance of any part of the Property other than the Guaranteed
Obligations or the Fairmont Loan, or except either as allowed by the Mortgage or
approved by Lender; or,

 

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(b) if (i) Affiliated Guarantor, Operating Lessee or St. Francis Liable Party
commences a voluntary bankruptcy or insolvency proceeding under the Bankruptcy
Code which is not dismissed within 90 days of filing, or (ii) an involuntary
case is commenced against Affiliated Guarantor, Operating Lessee or St. Francis
Liable Party under the Bankruptcy Code which is not dismissed within 90 days of
filing, or (iii) an involuntary case is commenced against Affiliated Guarantor,
Operating Lessee or Fairmont Liable Party under the Bankruptcy Code with the
collusion of Affiliated Guarantor, Operating Lessee or any of their affiliates
or related entities, or (iv) a petition for relief is filed with respect to
Affiliated Guarantor, Operating Lessee or Fairmont Liable Party under the
Bankruptcy Code through the actions of Affiliated Guarantor, Operating Lessee or
any of their affiliates or related entities which is not dismissed within 90
days of filing. Notwithstanding the previous sentence, neither Affiliated
Guarantor nor St. Francis Liable Party shall be personally liable for payment of
the Guaranteed Obligations merely by reason of an involuntary bankruptcy
(irrespective of its duration) as to which the following conditions are
satisfied (1) such involuntary bankruptcy is not solicited, procured or
supported by Affiliated Guarantor or any Related Person (as such term is defined
below); (2) there is no debt or other obligation and there are no creditors, in
any case which are prohibited by the Security Documents; (3) Affiliated
Guarantor and each Related Person in such involuntary bankruptcy proceeding will
consent to and support and perform all actions requested by Lender to obtain
relief from the automatic stay and to obtain adequate protection for Lender;
(4) none of the Affiliated Guarantor nor any Related Persons shall propose or in
any way support any plan of reorganization which in any way modifies or seeks to
modify any provisions of the Loan Documents or any of Lender’s rights under the
Loan Documents; and (5) none of Affiliated Guarantor nor any Related Persons
shall propose or consent to any use of cash collateral except with Lender’s
consent, which may be withheld in Lender’s sole discretion. As used herein, a
“Related Person” shall mean (a) the Affiliated Guarantor and any guarantor or
other person or entity which is liable in any way (including contingently
liable) for any part of the Guaranteed Obligations, (b) person or entity which
has any direct or indirect interest in Affiliated Guarantor or in which
Affiliated Guarantor has any direct or indirect interest, or (c) any person who,
by reason of any relationship with any of the foregoing, would be reasonably
expected to act in accordance with the request of any of the foregoing.

(c) Notwithstanding the foregoing, Lender agrees that its sole recourse against
the Operating Lessee for the Operating Lessee’s obligations hereunder or under
the other Security Documents shall be to the collateral owned by the Operating
Lessee and pledged to Lender pursuant to the terms of the Security Documents;
provided however, the foregoing shall not limit Lender’s rights against
Affiliated Guarantor and/or St. Francis Liable Party with respect to the
obligations of Operating Lessee to the extent otherwise permitted under the
Security Documents.

 

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ARTICLE X

SINGLE PURPOSE ENTITY; CHANGE IN OWNERSHIP, CONVEYANCE OF

PROPERTY; PROHIBITIONS ON FINANCING AND DEBT

Section 10.1 SINGLE PURPOSE ENTITY; INDEPENDENT DIRECTOR; AFFILIATED GUARANTY
AND SUBORDINATE MORTGAGE.

(a) During the term of the Affiliated Guaranty, Affiliated Guarantor and
Operating Lessee shall each be a single purpose entity (“Single Purpose Entity”)
and Affiliated Guarantor’s and Operating Lessee’s organizational documents shall
provide that Affiliated Guarantor (and Operating Lessee, if and to the extent
applicable) shall not: (i) engage in business other than owning and operating
the Property; (ii) acquire or own a material asset other than the Property and
incidental personal property; (iii) maintain assets in a way difficult to
segregate and identify or commingle its assets with the assets of any other
person or entity; (iv) fail to hold itself out to the public as a legal entity
separate from any other; (v) fail to conduct business solely in its name or fail
to maintain records, accounts or bank accounts separate from any other person or
entity; (vi) file or consent to a petition pursuant to applicable bankruptcy,
insolvency, liquidation or reorganization statutes, or make an assignment for
benefit of creditors without the unanimous consent of its partners or members,
as applicable; (vii) except to the extent expressly permitted by this Mortgage,
incur additional indebtedness except for trade payables in the ordinary course
of business of owning and operating the Property, provided that such
indebtedness is paid within ninety (90) days of when incurred; (viii) dissolve,
liquidate, consolidate, merge or sell all or substantially all of its assets
(except following a transfer of the Property which is expressly permitted under
Section 10.3 or Section 10.9, and (ix) modify, amend or revise its
organizational documents in a manner which would change any of the foregoing
restrictions. During the term of the Affiliated Guaranty, Affiliated Guarantor
and Operating Lessee shall each have at least one member (or, if Affiliated
Guarantor or Operating Lessee is an entity other than a limited liability
company, a member of its board of directors) which is not reemployed by, related
to or affiliated with Affiliated Guarantor or any Related Entities (“Independent
Entity”) which Independent Entity shall be subject to the prior written approval
of Lender and any replacements or substitutions of such Independent Entity shall
be subject to the prior written approval of Lender. All of the foregoing
requirements of this Section 10.1(a) shall be referred to herein as the “Single
Purpose Entity Covenants and Representations”.

(b) Notwithstanding anything contained herein to the contrary, Affiliated
Guarantor shall be authorized (i) to enter into the Affiliated Guaranty and
(ii) the Fairmont Loan.

Section 10.2 CONVEYANCE OF PROPERTY, CHANGE IN OWNERSHIP AND COMPOSITION.

(a) Affiliated Guarantor shall not cause or permit: (i) the Property or any
interest in the Property, to be conveyed, transferred, assigned, encumbered,
sold or otherwise disposed of; or (ii) any transfer, assignment or conveyance of
any interest in Affiliated Guarantor or in Operating Lessee or in the partners,
or stockholders, or members or beneficiaries of, Affiliated Guarantor or
Operating Lessee or of any of Affiliated Guarantor’s Constituents; or (iii) any
merger, reorganization, dissolution or other change in the ownership structure
of Affiliated Guarantor, Operating Lessee or any of the general partners or
members of Affiliated

 

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Guarantor or Operating Lessee, including, without limitation, any conversion of
Affiliated Guarantor or Operating Lessee or any general partner or member of
Affiliated Guarantor or Operating Lessee to limited partnership, a limited
liability partnership or a limited liability company (collectively,
“Transfers”).

(b) The prohibitions on transfer shall not be applicable to (i) Transfers as a
result of the death of a natural person who is Affiliated Guarantor; or
(ii) Transfers in connection with estate planning by a natural person to a
spouse, son or daughter or descendant of either, a stepson or stepdaughter or
descendant of either or (iii) subject to the applicable provisions of Article V,
any sublease of space at the Leased Improvements (as defined in the Operating
Lease) in accordance with the terms and conditions of the Operating Lease; or
(iv) transfers of interests in SHRI, as and to the extent permitted under
Section 10.4 of this Mortgage.

(c) Affiliated Guarantor or transferee shall pay all costs and expenses incurred
by Lender in connection with any Transfer, including title insurance premiums,
documentation costs and reasonable attorneys’ fees.

Section 10.3 ONE TIME TRANSFER RIGHT. Upon the exercise of the right to transfer
the Property and/or the St. Francis Property to a Permitted Transferee (as
defined in the Senior Mortgage) pursuant to Section 10.3 of the Senior Mortgage,
the Affiliated Guaranty shall be released and this Mortgage reconveyed as
provided in Section 10.9 below.

Section 10.4 OTHER PERMITTED TRANSFERS.

(a) Notwithstanding anything in this Mortgage to the contrary, (1) under no
circumstances shall there be any restriction or limitation with respect to the
transfer of any direct or indirect legal, beneficial, or direct or indirect
equitable interest in SHRI, and (2) subject to the terms and provisions of this
Section, there shall be no restriction or limitation in any respect to (and no
Event of Default shall result or arise from) the sale, assignment, conveyance,
or transfer, mortgage, hypothecation or other disposition or other encumbering
of any direct or indirect legal, beneficial or direct or indirect equitable
interest in St. Francis Liable Party or any person or entity owning a direct or
indirect interest therein provided that:

(i) Affiliated Guarantor shall provide Lender with notice of such transaction
simultaneously with its occurrence;

(ii) at all times, prior to a transfer pursuant to Section 10.3(a) of the Senior
Mortgage, and execution of a guaranty for the St. Francis Loan by a new liable
party, Strategic Hotel Funding, L.L.C. remains the St. Francis Liable Party
under the St. Francis Loan, and the St. Francis Liable Party or a Close
Affiliate of St. Francis Liable Party Controls Affiliated Guarantor and
Operating Lessee;

(iii) at all times, SHRI shall (a) own at least seventy-five percent (75%) of
the equity of St. Francis Liable Party and shall Control the St. Francis Liable
Party and (b) the Consolidated Group shall be in compliance with the Minimum Net
Worth Requirements;

(iv) if there shall be a pledge, hypothecation or other encumbering of a direct
or indirect ownership interest in St. Francis Liable Party or any person or
entity owning a direct or indirect interest therein (collectively, “Pledge”),
such Pledge shall be in connection only

 

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with financing provided by a Qualified Institutional Lender (as defined below),
and any transfer of any direct or indirect legal, beneficial or direct or
indirect equitable interest in St. Francis Liable Party or any person or entity
owning a direct or indirect interest therein as a result of default under such
financing shall be to a Qualified Institutional Lender; and

(v) Affiliated Guarantor or transferee shall pay all costs and expenses incurred
by Lender in connection with the transfer, including title insurance premiums,
documentation costs and reasonable attorneys’ fees.

(b) Specifically, subject to the conditions of sub-clauses (i) through (v) of
Section 10.4(a) above, the provisions of Section 10.2 and Section 10.5 shall not
apply to the Revolver Loan (as hereinafter defined) or any guaranty thereof or
pledge of ownership interest in St. Francis Liable Party or its Affiliates in
connection therewith in favor of the lenders thereunder. “Revolver Loan” shall
mean that certain revolving credit facility from various financial institutions,
as lenders, Deutsche Bank Trust Company of Americas as Administrative Agent and
Deutsche Bank Securities Inc. and Citigroup Global Markets Inc., as Co-Lead
Arrangers and Joint Book Running Managers to Strategic Hotel Funding, L.L.C.,
evidenced by that certain Credit Agreement, dated as of March 9, 2007, as the
same may be amended, restated, supplemented or otherwise modified or replaced
from time to time, which Revolver Loan shall not at any time be secured by a
lien, pledge or security interest or other encumbrance of any part of the
Property and/or Affiliated Guarantor.

(c) Unless otherwise specifically referenced, the following terms shall have the
following meanings for purposes of this Section only:

(i) “Affiliate” shall mean a Person or Persons directly or indirectly, through
one or more intermediaries, that Controls, is Controlled by or is under common
Control with the Person or Persons in question.

(ii) “Control” and “Controlling” shall mean the ability, directly or indirectly,
whether through the ownership of voting securities, by contract, or otherwise
(including by being a managing member, general partner, officer or director of
the person or entity in question), to both (A) direct or cause the direction of
the management and policies of the Person in question, and (B) conduct the
day-to-day business operations of the Person in question.

(iii) “Close Affiliate” shall mean with respect to any Person (the “First
Person”) any other Person (each, a “Second Person”) which is an Affiliate of the
First Person and in respect of which any of the following are true: (a) the
Second Person owns, directly or indirectly, at least 75% of all of the legal,
beneficial and/or equitable interest in such First Person, (b) the First Person
owns, directly or indirectly, at least 75% of all of the legal, beneficial
and/or equitable interest in such Second Person, or (c) a third Person owns,
directly or indirectly, at least 75% of all of the legal, beneficial and/or
equitable interest in both the First Person and the Second Person.

(iv) “Qualified Institutional Lender” shall mean any insurance company, bank,
investment bank, savings and loan association, trust company, commercial credit
corporation, pension plan, pension fund or pension fund advisory firm, mutual
fund or other

 

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investment company, government entity or plan, or real estate investment trust,
in each case having, together with their Close Affiliates, at least one billion
dollars ($1,000,000,000) in capital/statutory surplus, shareholder’s equity or
net worth, as applicable, (the “Lender Net Worth Requirement”) and being
experienced in making commercial real estate loans or otherwise investing in
commercial real estate; provided, however, if a loan is made or credit is
otherwise extended by a syndicate or group of lenders, then and in such event,
more than fifty percent (50%) of the loan must be held by entities (including
their Close Affiliates) that each meet the Minimum Net Worth Requirement.

Section 10.5 PROHIBITION ON SUBORDINATE FINANCING. Except as and to the extent
expressly permitted in Section 10.4 or Section 10.6, Affiliated Guarantor shall
not incur or permit the incurring of (i) any financing in addition to the Loan
that is secured by a lien, security interest or other encumbrance of any part of
the Property or (ii) any pledge or encumbrance of a partnership, member or
shareholder or beneficial interest in Affiliated Guarantor.

Section 10.6 PERMITTED DEBT. Affiliated Guarantor and Operating Lessee shall be
allowed to incur the following indebtedness and obligations (herein “Permitted
Debt”), which other than the Fairmont Loan and the Guaranteed Obligations under
the following clause (i) shall not be secured by the Property: (i) the Fairmont
Note, the Senior Mortgage and any related obligations to Lender under the
documents evidencing and/or securing the Fairmont Loan (the “Fairmont Loan
Documents”) and the Affiliated Guaranty and this Mortgage, (ii) unsecured
amounts payable for or in respect of the operation of the Property incurred in
the ordinary course of Affiliated Guarantor’s business (“Trade Payables”), paid
by Affiliated Guarantor within sixty (60) days of incurrence, provided that in
no event shall the aggregate amount of such Trade Payables incurred by
Affiliated Guarantor exceed three percent (3%) of the aggregate Loan Amount,
(iii) purchase money indebtedness and capital lease obligations incurred in the
ordinary course of business and operation of the Property, but in no event shall
the annual scheduled debt service on such indebtedness or obligations exceed the
aggregate amount of Five Hundred Thousand Dollars ($500,000.00), (iv) any
management fees accrued in accordance with the terms of the Management Agreement
but which are not yet due and payable, (v) Impositions not yet due and payable
or delinquent or which are being diligently contested in good faith in
accordance with the terms and conditions of Section 2.4 of the Mortgage, and
(vi) indebtedness relating to liens in respect of property or assets imposed by
law which were incurred in the ordinary course of business, such as carriers’,
warehousemen’s, landlord’s, mechanic’s, materialmen’s, repairmen’s and other
similar liens arising in the ordinary course of business, and liens for workers’
compensation, unemployment insurance and similar programs, in each case arising
in the ordinary course of business which are either not yet due and payable or
being diligently contested in good faith in accordance with Section 2.4 of the
Mortgage. In addition, Affiliated Guarantor shall be allowed to enter into
guarantees or provide similar assurances or undertakings in favor of the Manager
with respect to the obligations of the Operating Lessee under the Management
Agreement provided that such obligations shall not be secured by any mortgage or
other lien on the Property except as may be permitted in this Mortgage.

Section 10.7 PERMITTED LIENS. Affiliated Guarantor and Operating Lessee shall be
allowed to create, suffer to exist or otherwise permit the following
encumbrances or other liens with respect to the Property (“Permitted Liens”)
subject to the terms of the Security Documents as to priority thereof: (i) the
liens and security interests created by the Fairmont Loan Documents, (ii) those
property specific exceptions to title recorded in the real estate records of the

 

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County and contained in Schedule B-1 of the title insurance policy or policies
which have been approved by Lender as of the Execution Date (“Permitted
Exceptions”) (iii) liens, if any, for Impositions not yet due and payable or
delinquent or which are being diligently contested in good faith in accordance
with the terms and conditions of Section 2.4 of the Mortgage, (iv) liens in
respect of property or assets imposed by law which were incurred in the ordinary
course of business, such as carriers’, warehousemen’s, landlord’s, mechanic’s,
materialmen’s, repairmen’s and other similar liens arising in the ordinary
course of business, and liens for workers’ compensation, unemployment insurance
and similar programs, in each case arising in the ordinary course of business
which are either not yet due and payable or being diligently contested in good
faith in accordance with the Mortgage, (v) Leases and the Management Agreement,
(vi) easements, rights of way, or restrictions incurred or entered into by
Affiliated Guarantor and/or Operating Lessee as applicable in the ordinary
course of business, which in each case could not be reasonably expected to have
a material adverse effect, do not diminish in any material respect the value of
the Property or affect in any material respect the validity, enforceability or
priority of the liens created by the Security Documents, (vii) liens securing
indebtedness permitted under clause (iii) of the definition of Permitted Debt in
Section 10.6, so long as such lien is only in respect of the specific property
relating to such obligation and notwithstanding the introductory clause to
Section 10.6 to the contrary, is not secured by other portions of the Property,
(viii) deposits securing or in lieu of surety, appeal or custom bonds in
processing to which Affiliated Guarantor and/or Operating Lessee as applicable
is a party, (ix) any judgment lien provided that the judgment it secures shall
have been discharged of record or the execution thereof stayed pending appeal
within thirty (30) days after entry thereof or within thirty (30) days after the
expiration of any stay, as applicable in either case provided there is no
imminent risk of forfeiture during such thirty (30) day period, and (x) such
other title and survey exceptions as Lender has approved or may approve in
writing.

Section 10.8 RESTRICTIONS ON ADDITIONAL OBLIGATIONS. Except as and to the extent
expressly provided to the contrary herein, during the term of the Affiliated
Guaranty, Affiliated Guarantor and/or Operating Lessee as applicable shall not,
without the prior written consent of Lender, become liable with respect to any
indebtedness or other obligation except for (i) the Loan, (ii) Leases entered
into in the ordinary course of owning and operating the Property for the Use,
(iii) other liabilities incurred in the ordinary course of owning and operating
the Property for the Use but excluding any loans or borrowings, (iv) liabilities
or indebtedness disclosed in writing to and approved by Lender on or before the
Execution Date, (v) any other single item of indebtedness or liability which
does not exceed $25,000.00 or, when aggregated with other items or indebtedness
or liability, does not exceed $100,000.00, and (vi) Permitted Debt.

Section 10.9 RELEASE OF AFFILIATED GUARANTY. The obligations of Affiliated
Guarantor under the Affiliated Guaranty shall terminate and this Mortgage shall
be released and reconveyed (“Affiliated Guaranty Termination”) upon the first to
occur of:

(i) The full payment and satisfaction of all obligations of Affiliated Guarantor
under the Fairmont Loan Documents and all obligations of the St. Francis
Borrower under the St. Francis Loan Documents in accordance with their
respective terms.

 

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(ii) The exercise of the transfer right pursuant to and in accordance with
Section 10.3 of the Senior Mortgage with respect to either or both of the
Property or the St. Francis Property.

(iii) The occurrence of the events described in either Section 10.9 (ii) or
10.9(iv) of the St. Francis Deed of Trust.

(iv) The full payment and satisfaction of all obligations of Affiliated
Guarantor under the Fairmont Loan Documents in connection with a sale of the
Property and the prepayment of the Fairmont Note; provided, however, that in the
event of such full payment and satisfaction, all of the following conditions
precedent to the Affiliated Guaranty Termination shall have occurred and be true
at the time of the Affiliated Guaranty Termination:

(1) There shall be no pending Event of Default under the Fairmont Loan Documents
or the St. Francis Loan Documents;

(2) The loan-to-value ratio (“Loan to Value Ratio”) for the St. Francis Property
encumbered by the St. Francis Deed of Trust shall not be greater than 60% as
determined by Lender in its sole and absolute discretion; provided however, that
a principal reduction payment may be made under the St. Francis Note in
accordance with the terms of the St. Francis Note, including the payment of any
applicable prepayment fee, in order to meet the Loan to Value Ratio;

(3) The debt service coverage ratio for the St. Francis Property encumbered by
the St. Francis Deed of Trust (the “DSC”) shall not be less than 1.50x as
determined by Lender in its sole and absolute discretion; provided however, that
a principal reduction payment may be made under the St. Francis Note in
accordance with the terms of the St. Francis Note, including the payment of any
applicable prepayment fee, in order to meet the DSC; and,

(v) Affiliated Guarantor shall pay all costs and expenses incurred by Lender in
connection with the Affiliated Guaranty Termination and the release of the
Subordinate Mortgage, including without limitation, documentation costs, and
reasonable attorneys’ fees.

Section 10.10 STATEMENTS REGARDING OWNERSHIP. Affiliated Guarantor agrees to
submit or cause to be submitted to Lender within thirty (30) days after
December 3lst of each calendar year during the term of this Mortgage and ten
(10) days after any written request by Lender, a sworn, notarized certificate,
signed by an authorized (i) individual who is Affiliated Guarantor or one of the
individuals comprising Affiliated Guarantor, (ii) member of Affiliated
Guarantor, (iii) partner of Affiliated Guarantor or (iv) officer of Affiliated
Guarantor, as the case may be, stating whether (x) any part of the Property, or
any interest in the Property, has been conveyed, transferred, assigned,
encumbered, or sold, and if so, to whom; (y) any conveyance, transfer, pledge or
encumbrance of any interest in Affiliated Guarantor has been made by Affiliated
Guarantor and if so, to whom; or (z) there has been any change in the
individual(s) comprising Affiliated Guarantor or in the partners, members
stockholders or beneficiaries of Affiliated Guarantor from those on the
Execution Date, and if so, a description of such change or changes.

 

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ARTICLE XI

DEFAULTS AND REMEDIES

Section 11.1 EVENTS OF DEFAULT. Any of the following shall be deemed to be a
material breach of Affiliated Guarantor’s covenants in this Mortgage and shall
constitute a default (“Event of Default”):

(a) The occurrence of an Event of Default under the Affiliated Guaranty;

(b) The failure of Affiliated Guarantor (i) to pay any required escrow deposit,
or any other sum required to be paid under the Mortgage, whether to Lender or
otherwise, within seven (7) days of the due date of such payment or (ii) to pay
or cause to be paid any amounts as and when due to Manager under the Management
Agreement prior to the expiration of any grace period provided in the Management
Agreement;

(c) The occurrence of an Event of Default under the Fairmont Loan Documents;

(d) The occurrence of an Event of Default under the St. Francis Loan Documents;

(e) The failure of Affiliated Guarantor or Operating Lessee as applicable to
perform or observe any of the other terms, covenants or conditions of this
Mortgage not specified in Section 11.1(b) for thirty (30) days after notice;
provided, however, that if such non-monetary default is susceptible of cure but
cannot reasonably be cured within such thirty (30) day period and Affiliated
Guarantor or Operating Lessee 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 an
additional period of time as is reasonably necessary for Affiliated Guarantor or
Operating Lessee in the exercise of due diligence to cure such default, but the
aggregate cure period under this clause (b) shall not exceed ninety (90) days;

(f) The filing by Affiliated Guarantor and/or Operating Lessee as applicable (an
“Insolvent Entity”) of a voluntary petition or application for relief in
bankruptcy, the filing against an Insolvent Entity of an involuntary petition or
application for relief in bankruptcy which is not dismissed within sixty
(60) days, or an Insolvent Entity’s adjudication as a bankrupt or insolvent, or
the filing by an Insolvent Entity of any petition, application for relief or
answer seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency or other relief for debtors, or an Insolvent
Entity’s seeking or consenting to or acquiescing in the appointment of any
trustee, custodian, conservator, receiver or liquidator of an Insolvent Entity
or of all or any substantial part of the Property or of any or all of the Rents
and Profits, or the making by an Insolvent Entity of any general assignment for
the benefit of creditors, or the admission in writing by an Insolvent Entity of
its inability to pay its debts generally as they become due;

(g) If any representation, warranty certification, financial statement or other
information furnished by Affiliated Guarantor or Operating Lessee herein or in
any other Security Document shall be materially false or materially misleading
as of the date the representation or warranty was made and, such materially
false or materially misleading representation, warranty certification, financial
statement or other information is not cured within thirty (30) days after
receipt by Affiliated Guarantor of notice thereof;

 

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(h) If Affiliated Guarantor and/or Operating Lessee as applicable shall suffer
or permit the Property, or any part of the Property, to be used in a manner that
might (1) impair Affiliated Guarantor’s title to the Property, (2) create rights
of adverse use or possession, or (3) constitute an implied dedication of any
part of the Property;

(i) If an Event of Default occurs under the Management Agreement with respect to
Affiliated Guarantor and or Operating Lessee, as applicable;

(j) If an Event of Default occurs under the Operating Lease with respect to
Affiliated Guarantor or Operating Lessee; or

(k) If an Event of Default occurs under the Owner Agreement with respect to
Affiliated Guarantor or Operating Lessee or Manager.

Section 11.2 REMEDIES UPON DEFAULT. Upon the happening of an Event of Default,
without further notice or demand, and Lender may undertake any one or more of
the following remedies:

(a) Foreclosure. Institute a foreclosure action in accordance with the law of
the State, or take any other action as may be allowed, at law or in equity, for
the enforcement of the Security Documents and realization on the Property or any
other security afforded by the Security Documents. In the case of a judicial
proceeding, Lender may proceed to final judgment and execution for the amount of
the Guaranteed Obligations owed as of the date of the judgment, together with
all costs of suit, reasonable attorneys’ fees and interest on the judgment at
the maximum rate permitted by law from the date of the judgment until paid. If
Lender is the purchaser at the foreclosure sale of the Property, the foreclosure
sale price shall be applied against the total amount due Lender; and/or

(b) Entry. Enter into possession of the Property, lease the Improvements,
collect all Rents and Profits and, after deducting all costs of collection and
administration expenses, apply the remaining Rents and Profits in such order and
amounts as Lender, in Lender’s sole discretion, may elect to the payment of
Impositions, operating costs, costs of maintenance, restoration and repairs,
Premiums and other charges, including, but not limited to, costs of leasing the
Property and fees and costs of counsel and receivers, and in reduction of the
Guaranteed Obligations; and/or

(c) Receivership. Have a receiver appointed to enter into possession of the
Property, lease the Property, collect the Rents and Profits and apply them as
the appropriate court may direct. Lender shall be entitled to the appointment of
a receiver without the necessity of proving either the inadequacy of the
security or the insolvency of Affiliated Guarantor and/or Operating Lessee as
applicable. Affiliated Guarantor shall be deemed to have consented to the
appointment of the receiver. The collection or receipt of any of the Rents and
Profits by Lender or any receiver shall not affect or cure any Event of Default.

 

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Section 11.3 APPLICATION OF PROCEEDS OF SALE. In the event of a sale of the
Property pursuant to Section 11.2 of this Mortgage, to the extent permitted by
law, the Lender shall determine in its sole discretion the order in which the
proceeds from the sale shall be applied to the payment of the Guaranteed
Obligations, including without limitation, the expenses of the sale and of all
proceedings in connection with the sale, including reasonable attorneys’ fees
and expenses; Impositions, Premiums, liens, and other charges and expenses, and
any other amounts owed under any of the Security Documents.

Section 11.4 WAIVER OF JURY TRIAL. To the fullest extent permitted by law,
including laws enacted after the Execution Date, Affiliated Guarantor and Lender
HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL BY JURY in any action, proceeding
and/or hearing on any matter whatsoever arising out of, or in any way connected
with, the Affiliated Guaranty, this Mortgage or any of the Security Documents,
or the enforcement of any remedy under any law, statute, or regulation. Neither
party will seek to consolidate any such action in which a jury has been waived,
with any other action in which a jury trial cannot or has not been waived. Each
party has received the advice of counsel with respect to this waiver.

Section 11.5 LENDER’S RIGHT TO PERFORM AFFILIATED GUARANTOR’S OBLIGATIONS.
Affiliated Guarantor agrees that, if Affiliated Guarantor and/or Operating
Lessee as applicable fails to perform any act or to pay any money which
Affiliated Guarantor and/or Operating Lessee as applicable is required to
perform or pay under the Security Documents, Lender may make the payment or
perform the act at the cost and expense of Affiliated Guarantor and in
Affiliated Guarantor’s name or in its own name. Any money paid by Lender under
this Section 11.5 shall be reimbursed to Lender in accordance with Section 11.6.

Section 11.6 LENDER REIMBURSEMENT. All payments made, or funds expended or
advanced by Lender pursuant to the provisions of any Security Document, shall
(1) become a part of the Guaranteed Obligations, (2) bear interest at the
Interest Rate (as defined in the Fairmont Note) from the date such payments are
made or funds expended or advanced, (3) become due and payable by Affiliated
Guarantor upon demand by Lender, and (4) bear interest at the Default Rate (as
defined in the Fairmont Note) from the date of such demand. Affiliated Guarantor
shall reimburse Lender within ten (10) days after receipt of written demand for
such amounts.

Section 11.7 FEES AND EXPENSES. If Lender becomes a party (by intervention or
otherwise) to any action or proceeding affecting, directly or indirectly,
Affiliated Guarantor, the Property or the title thereto or Lender’s interest
under this Mortgage, or employs an attorney to collect any of the Guaranteed
Obligations or to enforce performance of the obligations, covenants and
agreements of the Security Documents, Affiliated Guarantor shall reimburse
Lender in accordance with Section 11.6 for all expenses, costs, charges and
legal fees incurred by Lender (including, without limitation, the fees and
expenses of experts and consultants), whether or not suit is commenced.

Section 11.8 WAIVER OF CONSEQUENTIAL DAMAGES. Affiliated Guarantor covenants and
agrees that in no event shall Lender be liable for consequential damages, and to
the fullest extent permitted by law, Affiliated Guarantor expressly waives all
existing and future claims that it may have against Lender for consequential
damages.

 

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ARTICLE XII

AFFILIATED GUARANTOR’S AGREEMENTS AND FURTHER ASSURANCES

Section 12.1 INTENTIONALLY OMITTED.

Section 12.2 REPLACEMENT OF AFFILIATED GUARANTY. Upon notice to Affiliated
Guarantor of the loss, theft, destruction or mutilation of the Affiliated
Guaranty, Affiliated Guarantor will execute and deliver, in lieu of the original
Affiliated Guaranty, a replacement guaranty document, identical in form and
substance to the Affiliated Guaranty and dated as of the Execution Date. Upon
the execution and delivery of the replacement guaranty document, all references
in any of the Security Documents to the Affiliated Guaranty shall refer to the
replacement guaranty document.

Section 12.3 AFFILIATED GUARANTOR’S ESTOPPEL. Within ten (10) days after receipt
of a written request by Lender, Affiliated Guarantor shall furnish an
acknowledged written statement in form satisfactory to Lender (i) setting forth
the amount of the St. Francis Loan, (ii) stating either that no offsets or
defenses exist against the Guaranteed Obligations, or if any offsets or defenses
are alleged to exist, their nature and extent, (iii) whether any default then
exists under the Security Documents, the Management Agreement or the Operating
Lease or any event has occurred and is continuing, which, with the lapse of
time, the giving of notice, or both, would constitute such a default, and
(iv) any other matters as Lender may reasonably request. If Affiliated Guarantor
does not furnish an estoppel certificate within the 10-day period, Affiliated
Guarantor appoints Lender as its attorney-in-fact to execute and deliver the
certificate on its behalf, which power of attorney shall be coupled with an
interest and shall be irrevocable.

Section 12.4 FURTHER ASSURANCES. Affiliated Guarantor shall, without expense to
Lender execute, acknowledge and deliver all further acts, deeds, conveyances,
mortgages, deeds of trust, assignments, security agreements, and financing
statements as Lender shall from time to time reasonably require, to assure,
convey, assign, transfer and confirm unto Lender the Property and rights
conveyed or assigned by this Mortgage or which Affiliated Guarantor may become
bound to convey or assign to Lender, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage or any of the other
Security Documents, or for filing, refiling, registering, reregistering,
recording or rerecording this Mortgage. If Affiliated Guarantor fails to comply
with the terms of this Section, Lender may, at Affiliated Guarantor’s expense,
perform Affiliated Guarantor’s obligations for and in the name of Affiliated
Guarantor, and Affiliated Guarantor hereby irrevocably appoints Lender as its
attorney-in-fact to do so. The appointment of Lender as attorney-in-fact is
coupled with an interest.

Section 12.5 SUBROGATION. Lender shall be subrogated to the lien of any and all
encumbrances against the Property paid out of the proceeds of the Fairmont Loan
and to all of the rights of the recipient of such payment.

 

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ARTICLE XIII

SECURITY AGREEMENT

Section 13.1 SECURITY AGREEMENT.

THIS MORTGAGE CREATES A LIEN ON THE PROPERTY IN ADDITION, TO THE EXTENT THE
PROPERTY IS PERSONAL PROPERTY OR FIXTURES UNDER APPLICABLE LAW, THIS MORTGAGE
CONSTITUTES A SECURITY AGREEMENT UNDER THE ILLINOIS UNIFORM COMMERCIAL CODE (THE
“U.C.C.”) AND ANY OTHER APPLICABLE LAW AND IS FILED AS A FIXTURE FILING. UPON
THE OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY, AT ITS OPTION, PURSUE ANY AND
ALL RIGHTS AND REMEDIES AVAILABLE TO A SECURED PARTY WITH RESPECT TO ANY PORTION
OF THE PROPERTY, AND/OR LENDER MAY, AT ITS OPTION, PROCEED AS TO ALL OR ANY PART
OF THE PROPERTY IN ACCORDANCE WITH LENDER’S RIGHTS AND REMEDIES WITH RESPECT TO
THE LIEN CREATED BY THIS MORTGAGE. THIS FINANCING STATEMENT SHALL REMAIN IN
EFFECT AS A FIXTURE FILING UNTIL THIS MORTGAGE IS RELEASED OR SATISFIED OF
RECORD.

Section 13.2 REPRESENTATIONS AND WARRANTIES.

Affiliated Guarantor warrants, represents and covenants as follows:

(a) Affiliated Guarantor and/or Operating Lessee as applicable owns the Personal
Property free from any lien, security interest, encumbrance or adverse claim,
except as otherwise expressly approved by Lender in writing or as otherwise
allowed hereunder. Affiliated Guarantor will notify Lender of, and will protect,
defend and indemnify Lender against, all claims and demands of all persons at
any time claiming any rights or interest in the Personal Property contrary to
the preceding sentence.

(b) The Personal Property has not been used and shall not be used or bought for
personal, family, or household purposes, but shall be bought and used solely for
the purpose of carrying on Affiliated Guarantor’s and/or Operating Lessee’s as
applicable business.

(c) Affiliated Guarantor and/or Operating Lessee as applicable will not remove
the Personal Property without the prior written consent of Lender, except the
items of Personal Property which are consumed or worn out in ordinary usage
shall be promptly replaced by Affiliated Guarantor and/or Operating Lessee as
applicable with other Personal Property of value equal to or greater than the
value of the replaced Personal Property.

Section 13.3 CHARACTERIZATION OF PROPERTY. The grant of a security interest to
Lender in this Mortgage shall not be construed to limit or impair the lien of
this Mortgage or the rights of Lender with respect to any property which is real
property or which the parties have agreed to treat as real property. To the
fullest extent permitted by law, everything used in connection with the
production of Rents and Profits is, and at all times and for all purposes and in
all proceedings, both legal and equitable, shall be regarded as real property,
irrespective of whether or not the same is physically attached to the Land
and/or Improvements.

 

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Section 13.4 PROTECTION AGAINST PURCHASE MONEY SECURITY INTERESTS. It is
understood and agreed that in order to protect Lender from the effect of U.C.C.
Section 9313, as amended from time to time and as enacted in the State, in the
event that Affiliated Guarantor and/or Operating Lessee as applicable intends to
purchase any goods which may become fixtures attached to the Property, or any
part of the Property, and such goods will be subject to a purchase money
security interest held by a seller or any other party:

(a) Before executing any security agreement or other document evidencing or
perfecting the security interest, Affiliated Guarantor and/or Operating Lessee
as applicable shall obtain the prior written approval of Lender. All requests
for such written approval shall be in writing and contain the following
information: (i) a description of the fixtures; (ii) the address at which the
fixtures will be located; and (iii) the name and address of the proposed holder
and proposed amount of the security interest.

(b) Affiliated Guarantor shall pay all sums and perform all obligations secured
by the security agreement. A default by Affiliated Guarantor under the security
agreement shall constitute a default under this Mortgage. If Affiliated
Guarantor fails to make any payment on an obligation secured by a purchase money
security interest in the Personal Property or any fixtures, Lender, at its
option, may pay the secured amount and Lender shall be subrogated to the rights
of the holder of the purchase money security interest.

(c) Lender shall have the right to acquire by assignment from the holder of the
security interest for the Personal Property or fixtures, all contract rights,
accounts receivable, negotiable or non-negotiable instruments, or other evidence
of indebtedness and to enforce the security interest as assignee.

(d) The provisions of subparagraphs (b) and (c) of this Section 13.4 shall not
apply if the goods which may become fixtures are of at least equivalent value
and quality as the Personal Property being replaced and if the lien is permitted
by Section 10.7(vii) or if the rights of the party holding the security interest
are expressly subordinated to the lien and security interest of this Mortgage in
a manner satisfactory to Lender.

ARTICLE XIV

MISCELLANEOUS COVENANTS

Section 14.1 NO WAIVER. No single or partial exercise by Lender, or delay or
omission in the exercise by Lender, of any right or remedy under the Security
Documents shall preclude, waive or limit the exercise of any other right or
remedy. Lender shall at all times have the right to proceed against any portion
of, or interest in, the Property without waiving any other rights or remedies
with respect to any other portion of the Property. No right or remedy under any
of the Security Documents is intended to be exclusive of any other right or
remedy but shall be cumulative and may be exercised concurrently with or
independently from any other right and remedy under any of the Security
Documents or under applicable law.

Section 14.2 NOTICES. All notices, demands and requests given or required to be
given by, pursuant to, or relating to, this Mortgage shall be in writing. All
notices shall be deemed to have been properly given if mailed by United States
registered or certified mail, with

 

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return receipt requested, postage prepaid, or by United States Express Mail or
other comparable overnight courier service to the parties at the addresses set
forth in the Defined Terms (or at such other addresses as shall be given in
writing by any party to the others) and shall be deemed complete upon receipt or
refusal to accept delivery as indicated in the return receipt or in the receipt
of such United States Express Mail or courier service.

Section 14.3 HEIRS AND ASSIGNS; TERMINOLOGY.

(a) This Mortgage applies to, inures to the benefit of, and binds Lender,
Operating Lessee and Affiliated Guarantor, and their heirs, legatees, devisees,
administrators, executors, successors and assigns. The term “Affiliated
Guarantor” shall include both the original Affiliated Guarantor and any
subsequent owner or owners of any of the Property. The term “Lender” shall
include both the original Lender and any subsequent holder or holders of the
Note. The term “St. Francis Liable Party” shall include both the original St.
Francis Liable Party and any subsequent or substituted St. Francis Liable Party.

(b) In this Mortgage, whenever the context so requires, the masculine gender
includes the feminine and/or neuter, and the singular number includes the
plural.

(c) If more than one party executes this Mortgage as Affiliated Guarantor, the
obligations of such parties shall be the joint and several obligations of each
of them.

Section 14.4 SEVERABILITY. If any provision of this Mortgage should be held
unenforceable or void, then that provision shall be separated from the remaining
provisions and shall not affect the validity of this Mortgage except that if the
unenforceable or void provision relates to the payment of any monetary sum,
then, Lender may, at its option, declare the Guaranteed Obligations immediately
due and payable.

Section 14.5 APPLICABLE LAW.

(a) IN ACCORDANCE WITH THE TERMS OF THE SECURITY DOCUMENTS, THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER THIS MORTGAGE AND UNDER THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE INTERNAL LAW OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE WITHOUT GIVING EFFECT TO THE CONFLICTS-OF-LAW RULES AND
PRINCIPLES OF SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.

(b) BORROWER AND LENDER FURTHER ACKNOWLEDGE, AGREE, AND STIPULATE THAT THE STATE
OF ILLINOIS HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES INVOLVED IN THIS
TRANSACTION AND TO THE UNDERLYING TRANSACTIONS SECURED BY THIS MORTGAGE.

Section 14.6 CAPTIONS. The captions are inserted only as a matter of convenience
and for reference, and in no way define, limit, or describe the scope or intent
of any provisions of this Mortgage.

 

48

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Section 14.7 TIME OF THE ESSENCE. Time shall be of the essence with respect to
all of Affiliated Guarantor’s and/or Operating Lessee’s as applicable
obligations under this Mortgage and the other Security Documents.

Section 14.8 NO MERGER. In the event that Lender should become the owner of the
Property, there shall be no merger of the estate created by this Mortgage with
the fee estate in the Property.

Section 14.9 NO MODIFICATIONS. This Mortgage may not be changed, amended or
modified, except in a writing expressly intended for such purpose and executed
by Affiliated Guarantor and Lender.

Section 14.10 USE OF PROCEEDS. The Borrower represents and agrees that the
Guaranteed Obligations are exempt from the limitation upon the amount of
interest that may be charged under 815 ILCS 205/4 for one or more of the reasons
set forth in such statute, and the obligations guaranteed by the Guaranteed
Obligations constitutes a business loan which comes within the purview of 815
ILCS 205/4.

Section 14.11 LIMITATION ON GUARANTEED OBLIGATIONS. It is expressly understood
and agreed that the Guaranteed Obligations will in no event exceed two hundred
percent (200%) of (i) the total face amount of the St. Francis Note plus
(ii) the total interest which may hereafter accrue under the St. Francis Note on
such face amount.

Section 14.12 WAIVER OF HOMESTEAD AND REDEMPTION. Affiliated Guarantor releases
and waives all rights under the homestead and exemption laws of the State of
Illinois. Affiliated Guarantor acknowledges that the Property does not include
“agricultural real estate” or “residential real estate” as those terms are
defined in 735 ILCS 5/15-1201 and 5/15-1219. Pursuant to 735 ILCS 5/15-1601(b)
Affiliated Guarantor waives any and all rights of redemption from sale under any
order of foreclosure of this Mortgage or other rights of redemption which may
run to Affiliated Guarantor or any other “Owner of Redemption”, as that term is
defined in 735 ILCS 5/15-1212. Affiliated Guarantor waives all rights of
reinstatement under 735 ILCS 5/15-1602 to the fullest extent permitted by
Illinois law.

[SIGNATURES ON FOLLOWING PAGE]

 

49

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IN WITNESS WHEREOF, Affiliated Guarantor and Operating Lessee have executed this
Mortgage, or has caused this Mortgage to be executed by its duly authorized
representative(s) as of the Execution Date.

 

AFFILIATED GUARANTOR:

SHC COLUMBUS DRIVE, LLC, a Delaware limited liability company By:  

/s/ Jonathan P. Stanner

  Jonathan P. Stanner   Vice President, Corporate Finance OPERATING LESSEE: DTRS
COLUMBUS DRIVE, LLC a Delaware limited liability company By:  

/s/ Jonathan P. Stanner

  Jonathan P. Stanner   Vice President, Corporate Finance

 

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STATE OF ILLINOIS   )      )    ss. COUNTY OF COOK   )   

On May 5, 2010, before me, Peggy E. Samson, a Notary Public, personally appeared
Jonathan P. Stanner, who proved to me on the basis of satisfactory evidence to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument. I certify under PENALTY OF
PERJURY under the laws of the State of Illinois that the foregoing paragraph is
true and correct.

WITNESS my hand and official seal.

 

/s/ Peggy E. Samson

Signature

(Seal)

 

STATE OF ILLINOIS   )      )    ss. COUNTY OF COOK   )   

On May 5, 2010, before me, Peggy E. Samson, a Notary Public, personally appeared
Jonathan P. Stanner, who proved to me on the basis of satisfactory evidence to
be the person whose name is subscribed to the within instrument and acknowledged
to me that he/she executed the same in his/her authorized capacity, and that by
his/her signature on the instrument the person, or the entity upon behalf of
which the person acted, executed the instrument. I certify under PENALTY OF
PERJURY under the laws of the State of Illinois that the foregoing paragraph is
true and correct.

WITNESS my hand and official seal.

 

/s/ Peggy E. Samson

Signature

(Seal)

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EXHIBIT “A”

TO MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

PROPERTY DESCRIPTION

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF CHICAGO, COUNTY OF
COOK, STATE OF ILLINOIS AND IS DESCRIBED AS FOLLOWS:

PARCEL 1:

THAT PART OF THE LANDS LYING EAST OF AND ADJOINING FORT DEARBORN ADDITION TO
CHICAGO, BEING THE WHOLE OF THE SOUTHWEST FRACTIONAL 1/4 OF SECTION 10, TOWNSHIP
39 NORTH, RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY,
ILLINOIS, BOUNDED AND DESCRIBED AS FOLLOWS:

COMMENCING AT THE POINT OF INTERSECTION OF THE EAST LINE OF NORTH STETSON
AVENUE, 74 FEET WIDE, AS SAID NORTH STETSON AVENUE IS SHOWN AND DEFINED ON THE
PLAT TITLED “PLAT OF MID-AMERICA, A RESUBDIVISION OF THE PRUDENTIAL AND ILLINOIS
CENTRAL SUBDIVISION,” AND RECORDED IN THE RECORDER’S OFFICE OF SAID COOK COUNTY,
ILLINOIS ON NOVEMBER 20, 1957, AS DOCUMENT NO. 17069914, WITH THE NORTH LINE OF
EAST LAKE STREET, 74.00 FEET WIDE, AS SAID EAST LAKE STREET WAS DEDICATED TO THE
CITY OF CHICAGO BY INSTRUMENT RECORDED IN SAID RECORDER’S OFFICE ON THE 26TH DAY
OF MARCH, 1984, AS DOCUMENT NO. 27018354 (SAID POINT OF INTERSECTION BEING
460.193 FEET, MEASURED ALONG SAID EAST LINE OF NORTH STETSON AVENUE, NORTH FROM
THE POINT OF INTERSECTION OF SAID EAST LINE WITH THE NORTH LINE OF EAST RANDOLPH
STREET, AS SAID EAST RANDOLPH STREET WAS DEDICATED AND CONVEYED TO THE CITY OF
CHICAGO BY INSTRUMENT RECORDED IN SAID RECORDER’S OFFICE ON MARCH 14, 1979 AS
DOCUMENT 24879731), AND RUNNING THENCE EAST ALONG SAID NORTH LINE OF EAST LAKE
STREET, SAID NORTH LINE BEING PERPENDICULAR TO SAID EAST LINE OF NORTH STETSON
AVENUE, A DISTANCE OF 352.541 FEET TO THE POINT OF BEGINNING AT THE SOUTHEAST
CORNER OF THE HEREINAFTER DESCRIBED PARCEL OF LAND, SAID POINT OF BEGINNING
BEING ALSO THE POINT OF INTERSECTION OF SAID NORTH LINE OF EAST LAKE STREET WITH
THE WEST LINE OF NORTH COLUMBUS DRIVE, AS SAID NORTH COLUMBUS DRIVE WAS
DEDICATED AND CONVEYED TO THE CITY OF CHICAGO BY INSTRUMENT RECORDED IN SAID
RECORDER’S OFFICE ON THE 5TH DAY OF JUNE, 1972 AS DOCUMENT NO. 21925615; THENCE
NORTH ALONG SAID WEST LINE OF NORTH COLUMBUS DRIVE, SAID WEST LINE BEING
PERPENDICULAR TO SAID NORTH LINE OF EAST LAKE STREET, A DISTANCE OF 205.542
FEET; THENCE WEST ALONG A LINE PERPENDICULAR TO SAID WEST LINE OF NORTH COLUMBUS
DRIVE A DISTANCE OF 107.541 FEET; THENCE SOUTH ALONG A LINE PARALLEL WITH SAID
WEST LINE OF NORTH COLUMBUS DRIVE A DISTANCE OF 30.00 FEET; THENCE WEST ALONG A
LINE PERPENDICULAR TO THE LAST DESCRIBED COURSE A DISTANCE OF 120.00 FEET;
THENCE SOUTH ALONG A LINE PARALLEL WITH SAID

 

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WEST LINE OF NORTH COLUMBUS DRIVE A DISTANCE OF 175.542 FEET TO AN INTERSECTION
WITH SAID NORTH LINE OF EAST LAKE STREET; THENCE EAST ALONG SAID NORTH LINE OF
EAST LAKE STREET A DISTANCE OF 227.541 FEET TO THE POINT OF BEGINNING.

EXCEPTING FROM THE ABOVE DESCRIBED PARCEL THAT PART OF THE PROPERTY AND SPACE
DEDICATED FOR EAST LAKE STREET, WHICH PART IS BOUNDED AND DESCRIBED AS FOLLOWS:

COMMENCING AT THE POINT OF INTERSECTION OF THE EAST LINE OF NORTH STETSON AVENUE
AS SHOWN AND DEFINED ON THE “PLAT OF MID-AMERICA, A RESUBDIVISION OF THE
PRUDENTIAL AND ILLINOIS CENTRAL SUBDIVISION,” AND RECORDED IN THE OFFICE OF THE
RECORDER OF COOK COUNTY, ILLINOIS, ON NOVEMBER 20, 1957 AS DOCUMENT NO.
17069914, WITH THE NORTH LINE, EXTENDED EAST OF EAST RANDOLPH STREET, AND
RUNNING THENCE NORTH ALONG SAID EAST LINE OF NORTH STETSON AVENUE (SAID EAST
LINE BEING A LINE WHICH IS 451.50 FEET, MEASURED PERPENDICULARLY, EAST FROM AND
PARALLEL WITH THE EAST LINE OF NORTH BEAUBIEN COURT), A DISTANCE OF 460.193
FEET; THENCE EAST ALONG A LINE WHICH IS PERPENDICULAR TO SAID EAST LINE OF NORTH
STETSON AVENUE, A DISTANCE OF 332.541 FEET TO THE POINT OF BEGINNING; THENCE
NORTHEASTWARDLY ALONG A STRAIGHT LINE A DISTANCE OF 28.284 FEET TO A POINT WHICH
IS 352.541 FEET, MEASURED PERPENDICULARLY, EAST FROM SAID EAST LINE OF NORTH
STETSON AVENUE AND 20.00 FEET, MEASURED PERPENDICULARLY, NORTH FROM SAID LAST
DESCRIBED COURSE EXTENDED EAST (SAID POINT BEING ON THE WEST LINE OF NORTH
COLUMBUS DRIVE AS SAID NORTH COLUMBUS DRIVE WAS DEDICATED AND CONVEYED TO THE
CITY OF CHICAGO BY INSTRUMENT RECORDED IN SAID RECORDER’S OFFICE ON THE 5TH DAY
OF JUNE, 1972, AS DOCUMENT NO. 21925615); THENCE SOUTH ALONG SAID WEST LINE OF
NORTH COLUMBUS DRIVE A DISTANCE OF 20.00 FEET; THENCE WEST ALONG A LINE WHICH IS
PERPENDICULAR TO SAID EAST LINE OF NORTH STETSON AVENUE, A DISTANCE OF 20.00
FEET TO THE POINT OF BEGINNING; AND WHICH LIES BELOW AND EXTENDS DOWNWARD FROM
AN ELEVATION OF 35.10 FEET ABOVE CHICAGO CITY DATUM AND WHICH LIES ABOVE AND
EXTENDS UPWARD FROM AN ELEVATION OF 27.60 FEET ABOVE CHICAGO CITY DATUM.

PARCEL 2:

EASEMENTS FOR THE BENEFIT OF PARCEL 1, AS CREATED IN THE TRUSTEE’S DEED DATED
AUGUST 16, 1983, AND RECORDED IN THE RECORDER’S OFFICE OF COOK COUNTY, ILLINOIS
ON AUGUST 26, 1983, AS DOCUMENT NO. 26751440 AS FOLLOWS:

PEDESTRIAN AREA EASEMENT, MADE AVAILABLE ON THE DECK, AS THEREINAFTER DEFINED,
FOR PEDESTRIAN USE (“PEDESTRIAN AREA”) HAVING A MINIMUM WIDTH OF 20 FEET AND
EXTENDING FROM THE NORTH LINE TO THE SOUTH LINE OF THE DECK. THE PEDESTRIAN AREA
SHALL PROVIDE ACCESS TO THE DECK AT THE SOUTHERLY LINE OF THE PROPERTY DEFINED
AS PARCEL 1 AND SHALL BE AT SUCH LOCATION AS DETERMINED BY GRANTEE, PURSUANT TO
THE TERMS AND PROVISIONS CONTAINED IN PARAGRAPH 2 OF SAID TRUSTEE’S DEED;

 

A-2

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ALSO

ENTRANCE AREA EASEMENT, FOR PEDESTRIAN ACCESS TO THE ADJOINING PROPERTY, (THE
APPROXIMATE LOCATION OF WHICH IS DEPICTED ON THE DRAWING ENTITLED EXHIBIT C
ATTACHED TO THE DEED) PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN
PARAGRAPH 3 OF SAID TRUSTEE’S DEED;

ALSO

A PEDESTRIAN WALKWAY (THE MID-BLOCK WALKWAY), FOR THE PURPOSE OF PROVIDING
ACCESS TO THE BUILDING ON THE REALTY PROPERTY (SOUTH AND ADJOINING) AND TO THE
BUILDING OR BUILDINGS TO BE LOCATED ON THE LAND INSURED HEREIN AS PARCEL 1, (THE
APPROXIMATE LOCATION OF WHICH IS DEPICTED ON THE DRAWING ENTITLED EXHIBIT C
ATTACHED TO THE DEED), PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN
PARAGRAPH 4 OF SAID TRUSTEE’S DEED.

PARCEL 3:

A PERPETUAL AND EXCLUSIVE EASEMENT TO CONSTRUCT, USE, OPERATE, MAINTAIN, REPAIR,
RECONSTRUCT AND REPLACE, (AT THE SOLE COST AND EXPENSE OF THE OWNER(S) OF PARCEL
1), A DRIVEWAY FOR INGRESS TO AND EGRESS, FROM THAT PART OF THE BLOCK OWNED BY
THE LC TRUST MARKED “LC PROPERTY” ON EXHIBIT “A”, FOR THE BENEFIT OF PARCEL 1,
PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN PARAGRAPH 1.2 OF A CERTAIN
RECIPROCAL EASEMENT AGREEMENT DATED SEPTEMBER 30, 1985 AND RECORDED SEPTEMBER
30, 1985 AS DOCUMENT NO. 85,211,829, AS AMENDED BY AMENDMENT TO RECIPROCAL
EASEMENT AGREEMENT DATED OCTOBER 1, 1985 AND RECORDED MARCH 25, 1986 AS DOCUMENT
NO. 86115106, AT AN ELEVATION OF APPROXIMATELY 55 FEET, 6 INCHES ABOVE THE
CHICAGO CITY DATUM AND WITHIN AN AREA OF THE BLOCK, HEREAFTER DEFINED, HAVING A
LENGTH OF 74 FEET AND A WIDTH OF 10 FEET MARKED “DRIVEWAY EASEMENT” ON EXHIBIT
“A” OF SAID RECIPROCAL EASEMENT AGREEMENT, SAID BLOCK DEFINED AS THAT PART OF
THE LANDS LYING EAST OF AND ADJOINING FORT DEARBORN ADDITION TO CHICAGO, BEING
THE WHOLE OF THE SOUTHWEST FRACTIONAL 1/4 OF SECTION 10, TOWNSHIP 39 NORTH,
RANGE 14, EAST OF THE THIRD PRINCIPAL MERIDIAN, IN COOK COUNTY, ILLINOIS,
BOUNDED AS FOLLOWS:

ON THE NORTH BY THE SOUTH LINE OF EAST SOUTH WATER STREET, ON THE EAST BY THE
WEST LINE OF NORTH COLUMBUS DRIVE, ON THE SOUTH BY THE NORTH LINE OF EAST LAKE
STREET AND ON THE WEST BY THE EAST LINE OF NORTH STETSON AVENUE.

 

A-3

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ALSO

PERPETUAL AND NON-EXCLUSIVE EASEMENTS TO USE, MAINTAIN AND REPAIR, AT THE SOLE
COST AND EXPENSE OF THE GRANTEE, TWO EMERGENCY EXITWAYS FOR PEDESTRIAN USE, FOR
THE BENEFIT OF PARCEL 1, PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN
PARAGRAPH 1.3 OF SAID RECIPROCAL EASEMENT AGREEMENT AT AN ELEVATION OF
APPROXIMATELY 57.0 FEET ABOVE CHICAGO CITY DATUM, EACH HAVING AN UNOBSTRUCTED
WIDTH OF 3 FEET 8 INCHES EXTENDING FROM THE WEST LINE OF PARCEL 1 TO NORTH
STETSON AVENUE MARKED “EXITWAY EASEMENTS” ON EXHIBIT “A” OF SAID RECIPROCAL
EASEMENT AGREEMENT.

ALSO

PERPETUAL AND NON-EXCLUSIVE EASEMENTS TO ENTER UPON THAT PART OF THE BLOCK OWNED
BY GRANTOR AS MAY BE REASONABLY NECESSARY, FOR THE PURPOSE OF WINDOW WASHING,
CAULKING, TUCKPOINTING, SEALING AND ANY OTHER MAINTENANCE OR REPAIR OF THE
IMPROVEMENTS CONSTRUCTED ON PARCEL 1 ALONG THE COMMON BOUNDARIES OF THE PROPERTY
OWNED BY GRANTOR AND GRANTEE, TO THE EXTENT REASONABLY PRACTICABLE ALL SUCH
MAINTENANCE AND REPAIR WORK WILL BE PERFORMED IN THE AIR RIGHTS, PURSUANT TO THE
TERMS AND PROVISIONS CONTAINED IN PARAGRAPH 1.5 OF SAID RECIPROCAL EASEMENT
AGREEMENT.

PARCEL 4: THE EMERGENCY EGRESS EASEMENT

A PERPETUAL EASEMENT FOR EMERGENCY EGRESS, FOR THE BENEFIT OF PARCEL 1, PURSUANT
TO THE TERMS AND PROVISIONS CONTAINED IN PARAGRAPH I OF A CERTAIN HOTEL EASEMENT
AGREEMENT DATED SEPTEMBER 30, 1985 AND RECORDED SEPTEMBER 30, 1985 AS DOCUMENT
NO. 85211830 ON AN AREA DESCRIBED AND DEFINED AS THE “DECK EASEMENT AREA” IN
SAID HOTEL EASEMENT AGREEMENT AND AMENDED BY AMENDMENT TO HOTEL EASEMENT
AGREEMENT, RECORDED MARCH 25, 1986 AS DOCUMENT NO. 86115107, AND FURTHER AMENDED
BY SECOND AMENDMENT TO HOTEL EASEMENT AGREEMENT DATED DECEMBER 30, 1993 RECORDED
JANUARY 4, 1994 AS DOCUMENT NUMBER 94007534 AMENDING SAID EASEMENT TO THE AREA
DEPICTED ON EXHIBIT “C-1” AND LEGALLY DESCRIBED ON EXHIBIT “D” ATTACHED THERETO
AND MADE A PART THEREOF.

ALSO, THE OPERATING EASEMENT

EASEMENT FOR INGRESS AND EGRESS FOR MAINTENANCE AND REPAIR OF THE SOUTH FACADE
OF THE HOTEL BUILT ON PARCEL 1, FOR THE BENEFIT OF PARCEL 1, CONTAINED IN
PARAGRAPH II OF SAID HOTEL EASEMENT AGREEMENT ONTO THE NORTH 39 INCHES, MORE OR
LESS, OF THE “AMOCO PROPERTY” AS DESCRIBED AND DEFINED IN SAID HOTEL EASEMENT
AGREEMENT RECORDED MARCH 25, 1986 AS DOCUMENT NO. 86115107.

 

A-4

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

ALSO, THE AIRSPACE EASEMENTS

A PERPETUAL EASEMENT FOR THE BENEFIT OF PARCEL 1, TO INSTALL DAVITS OR OTHER
DEVICES ONTO THE HOTEL INTO THE AIRSPACE OVER THE DECK AND TO UTILIZE SAID
AIRSPACE FOR MAINTENANCE AND REPAIR OF THE HOTEL FROM SCAFFOLDS OR OTHER DEVICES
ATTACHED THERETO, PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN PARAGRAPH
III A., OF SAID HOTEL EASEMENT AGREEMENT INTO THE AIRSPACE OVER THE “DECK” AS
DESCRIBED AND DEFINED IN SAID HOTEL EASEMENT AGREEMENT.

AND

A PERPETUAL EASEMENT, FOR THE BENEFIT OF PARCEL 1, TO PERMANENTLY ATTACH A
CORNICE AND WINDOW WASHING TRACK ONTO THE TURRET PORTION AT THE TOP OF THE HOTEL
INTO THE AIRSPACE ABOVE THE DECK (AS THEREIN DEFINED) AND TO UTILIZE SUCH
AIRSPACE FOR THE WASHING OF WINDOWS AND MAINTENANCE OF THE TURRET PORTION OF THE
HOTEL, PURSUANT TO THE TERMS AND PROVISIONS CONTAINED IN PARAGRAPH III B., OF
SAID HOTEL EASEMENT AGREEMENT.

PARCEL 5:

NON-EXCLUSIVE EASEMENT FOR THE BENEFIT OF PARCEL 1 AS CREATED IN THE STAIRWAY
AND VESTIBULE EASEMENT AGREEMENT MADE BY AND BETWEEN GO ACIC ASSOCIATES LIMITED
PARTNERSHIP, AN ILLINOIS LIMITED PARTNERSHIP AND AMERICAN NATIONAL BANK AND
TRUST COMPANY OF CHICAGO, AS TRUSTEE UNDER TRUST AGREEMENT DATED JULY 17, 1985
AND KNOWN AS TRUST NUMBER 64971 DATED OCTOBER 1, 1994 RECORDED NOVEMBER 29, 1994
AS DOCUMENT 04002367, FOR EMERGENCY PEDESTRIAN EGRESS, AND USE OF VESTIBULE
AREA, OVER, UPON AND ACROSS THAT PORTION OF THE LAND AS SHOWN ON THE EXHIBIT “C”
ATTACHED TO SAID EASEMENT AGREEMENT.

PIN-17-10-316-023

Street Address—200 North Columbus Drive, Chicago, Illinois

 

A-5

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EXHIBIT “B”

TO MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING

LEASING GUIDELINES

“Leasing Guidelines” shall mean the guidelines approved in writing by Lender,
from time to time, with respect to the leasing of the retail portions of the
Property. The following are the initial Leasing Guidelines:

(a) No Leases shall have (i) Landlord environmental indemnification provisions,
(ii) tenant purchase options, or (iii) provide for Landlord to have liability in
excess of its equity interest in the Property;

(b) All Leases shall have an initial term of not more than 10 years;

(c) All Leases shall have an annual minimum rent equal to the then prevailing
current market rate.

(d) No Leases shall be entered into if there is an Event of Default under any of
the Security Documents; and

(e) All payments of rent, additional rent or any other amounts due from a tenant
to a landlord under any Lease shall be made in money of the United States of
America that at the time of payment shall be legal tender for the payment of all
obligations.

 

B-1