Exhibit 10.35

Loan No: 7253

 

 

MEZZANINE A LOAN AGREEMENT

 

 

Dated as of February 6, 2014

Among

HUDSON DELANO SENIOR MEZZ LLC, as Borrower

and

CITIGROUP GLOBAL MARKETS REALTY CORP. and BANK OF AMERICA, N.A.,

collectively, as Lender

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TABLE OF CONTENTS

 

ARTICLE 1 DEFINITIONS; PRINCIPLES OF CONSTRUCTION

     2   

Section 1.1.

  Definitions      2   

Section 1.2.

  Principles of Construction      32   

ARTICLE 2 GENERAL TERMS

     32   

Section 2.1.

  Loan Commitment; Disbursement to Borrower      32   

Section 2.2.

  The Loan      32   

Section 2.3.

  Disbursement to Borrower      33   

Section 2.4.

  The Note and the Other Loan Documents      33   

Section 2.5.

  Interest Rate      33   

Section 2.6.

  Loan Payments      36   

Section 2.7.

  Prepayments      37   

Section 2.8.

  Interest Rate Cap Agreement      39   

Section 2.9.

  Extension of the Maturity Date      41   

Section 2.10.

  Release of Collateral      42   

ARTICLE 3 REPRESENTATIONS AND WARRANTIES

     44   

Section 3.1.

  Legal Status and Authority      44   

Section 3.2.

  Validity of Documents      44   

Section 3.3.

  Litigation      45   

Section 3.4.

  Agreements      45   

Section 3.5.

  Financial Condition      46   

Section 3.6.

  Disclosure      46   

Section 3.7.

  No Plan Assets      46   

Section 3.8.

  Not a Foreign Person      47   

Section 3.9.

  Warranty of Title      47   

Section 3.10.

  Business Purposes      47   

Section 3.11.

  Borrower’s Principal Place of Business      47   

Section 3.12.

  Status of Property      47   

Section 3.13.

  Financial Information      49   

Section 3.14.

  Condemnation      50   

Section 3.15.

  Separate Lots      50   

Section 3.16.

  Insurance      50   

Section 3.17.

  Use of Property      50   

Section 3.18.

  Leases and Rent Roll      50   

Section 3.19.

  Filing and Recording Taxes      51   

Section 3.20.

  Management Agreement/Special Management Agreement      51   

Section 3.21.

  Illegal Activity/Forfeiture      51   

Section 3.22.

  Taxes      52   

Section 3.23.

  Permitted Encumbrances      52   

Section 3.24.

  Third Party Representations      52   

Section 3.25.

  Non-Consolidation Opinion Assumptions      52   

Section 3.26.

  Federal Reserve Regulations      52   

 

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TABLE OF CONTENTS

(continued)

 

Section 3.27.

  Investment Company Act      52   

Section 3.28.

  Fraudulent Conveyance      53   

Section 3.29.

  Embargoed Person      53   

Section 3.30.

  Anti-Money Laundering and Economic Sanctions      53   

Section 3.31.

  Organizational Chart      54   

Section 3.32.

  Bank Holding Company      54   

Section 3.33.

  Contractual Obligations      54   

Section 3.34.

  Operating Lease      54   

Section 3.35.

  Property Document Representations      55   

Section 3.36.

  Hotel Matters      55   

Section 3.37.

  No Change in Facts or Circumstances; Disclosure      56   

Section 3.38.

  Liquor Licenses      56   

Section 3.39.

  Ground Lease Representations      56   

Section 3.40.

  Condominium Representations      58   

Section 3.41.

  SRO Units      59   

Section 3.42.

  Material Contracts      59   

Section 3.43.

  Mortgage Loan Representations and Warranties      59   

Section 3.44.

  Affiliates      59   

ARTICLE 4 BORROWER COVENANTS

     60   

Section 4.1.

  Existence      60   

Section 4.2.

  Legal Requirements      60   

Section 4.3.

  Maintenance and Use of Property      61   

Section 4.4.

  Waste      62   

Section 4.5.

  Taxes and Other Charges      62   

Section 4.6.

  Litigation      63   

Section 4.7.

  Access to Property      63   

Section 4.8.

  Notice of Default      63   

Section 4.9.

  Cooperate in Legal Proceedings      63   

Section 4.10.

  Performance by Borrower      63   

Section 4.11.

  Awards      63   

Section 4.12.

  Books and Records      64   

Section 4.13.

  Estoppel Certificates      67   

Section 4.14.

  Leases and Rents      67   

Section 4.15.

  Management Agreement      69   

Section 4.16.

  Payment for Labor and Materials      71   

Section 4.17.

  Performance of Other Agreements      72   

Section 4.18.

  Debt Cancellation      72   

Section 4.19.

  ERISA      72   

Section 4.20.

  No Joint Assessment      73   

Section 4.21.

  Alterations      73   

Section 4.22.

  Property Document Covenants      74   

Section 4.23.

  Ground Lease Covenants      74   

 

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TABLE OF CONTENTS

(continued)

 

Section 4.24.

  Permits; Intellectual Property      76   

Section 4.25.

  Condominium Covenants      77   

Section 4.26.

  Operating Lease      79   

Section 4.27.

  SRO Units      80   

Section 4.28.

  Special Management Agreement      81   

Section 4.29.

  Collective Bargaining Agreement      83   

Section 4.30.

  Material Agreements      84   

Section 4.31.

  Limitation on Securities Issuances      84   

Section 4.32.

  Mortgage Borrower Covenants      84   

Section 4.33.

  Curing      84   

Section 4.34.

  Special Distributions      84   

Section 4.35.

  Closing Delano Property Work      84   

ARTICLE 5 ENTITY COVENANTS

     84   

Section 5.1.

  Single Purpose Entity/Separateness      84   

Section 5.2.

  Independent Director      89   

Section 5.3.

  Change of Name, Identity or Structure      90   

Section 5.4.

  Business and Operations      90   

ARTICLE 6 NO SALE OR ENCUMBRANCE

     90   

Section 6.1.

  Transfer Definitions      90   

Section 6.2.

  No Sale/Encumbrance      91   

Section 6.3.

  Permitted Equity Transfers      92   

Section 6.4.

  Permitted Property Transfer (Assumption)      95   

Section 6.5.

  Lender’s Rights      98   

Section 6.6.

  Economic Sanctions, Anti-Money Laundering and Transfers      99   

ARTICLE 7 INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

     99   

Section 7.1.

  Insurance      99   

Section 7.2.

  Casualty      99   

Section 7.3.

  Condemnation      100   

Section 7.4.

  Restoration      100   

ARTICLE 8 RESERVE FUNDS

     101   

Section 8.1.

  Reserve Funds      101   

Section 8.2.

  The Accounts Generally      101   

Section 8.3.

  Letters of Credit      104   

ARTICLE 9 CASH MANAGEMENT

     105   

Section 9.1.

  Mortgage Loan Cash Management; Establishment of Certain Accounts      105   

 

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TABLE OF CONTENTS

(continued)

 

ARTICLE 10 EVENTS OF DEFAULT; REMEDIES

     106   

Section 10.1.

  Event of Default      106   

Section 10.2.

  Remedies      110   

ARTICLE 11 SECONDARY MARKET

     112   

Section 11.1.

  Securitization      112   

Section 11.2.

  Disclosure      115   

Section 11.3.

  Reserves/Escrows      119   

Section 11.4.

  Servicer      120   

Section 11.5.

  Rating Agency Costs      120   

Section 11.6.

  Mezzanine Option      120   

Section 11.7.

  Registered Form      120   

Section 11.8.

  Syndication      121   

Section 11.9.

  Intentionally Omitted      125   

Section 11.10.

  Intercreditor Agreement      125   

ARTICLE 12 INDEMNIFICATIONS

     126   

Section 12.1.

  General Indemnification      126   

Section 12.2.

  Mortgage and Intangible Tax Indemnification      126   

Section 12.3.

  ERISA Indemnification      126   

Section 12.4.

  Duty to Defend, Legal Fees and Other Fees and Expenses      127   

Section 12.5.

  Survival      127   

Section 12.6.

  Environmental Indemnity      127   

ARTICLE 13 EXCULPATION

     127   

Section 13.1.

  Exculpation      127   

ARTICLE 14 NOTICES

     131   

Section 14.1.

  Notices      131   

ARTICLE 15 FURTHER ASSURANCES

     132   

Section 15.1.

  Replacement Documents      132   

Section 15.2.

  Execution of Pledge Agreement      132   

Section 15.3.

  Further Acts, etc      133   

Section 15.4.

  Changes in Tax, Debt, Credit and Documentary Stamp Laws      133   

ARTICLE 16 WAIVERS

     134   

Section 16.1.

  Remedies Cumulative; Waivers      134   

Section 16.2.

  Modification, Waiver in Writing      134   

Section 16.3.

  Delay Not a Waiver      134   

Section 16.4.

  Waiver of Trial by Jury      134   

Section 16.5.

  Waiver of Notice      135   

Section 16.6.

  Remedies of Borrower      135   

Section 16.7.

  Marshalling and Other Matters      135   

Section 16.8.

  Waiver of Statute of Limitations      135   

Section 16.9.

  Waiver of Counterclaim      135   

Section 16.10.

  Sole Discretion of Lender      136   

 

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(continued)

 

ARTICLE 17 MISCELLANEOUS

     136   

Section 17.1.

  Survival      136   

Section 17.2.

  Governing Law      136   

Section 17.3.

  Headings      138   

Section 17.4.

  Severability      138   

Section 17.5.

  Preferences      138   

Section 17.6.

  Expenses      138   

Section 17.7.

  Cost of Enforcement      139   

Section 17.8.

  Schedules Incorporated      139   

Section 17.9.

  Offsets, Counterclaims and Defenses      140   

Section 17.10.

  No Joint Venture or Partnership; No Third Party Beneficiaries      140   

Section 17.11.

  Publicity      141   

Section 17.12.

  Limitation of Liability      141   

Section 17.13.

  Conflict; Construction of Documents; Reliance      141   

Section 17.14.

  Entire Agreement      142   

Section 17.15.

  Liability      142   

Section 17.16.

  Duplicate Originals; Counterparts      142   

Section 17.17.

  Brokers      142   

Section 17.18.

  Set-Off      143   

Section 17.19.

  Waiver of Rights, Defenses and Claims      143   

Section 17.20.

  Additional Provisions      143   

Schedule I – Mortgage Borrower

Schedule II – Condominium Documents

Schedule III – Organizational Chart

Schedule IV – REA

Schedule V – Allocated Loan Amounts

Schedule VI – Manager

Schedule VII – Intentionally Omitted

Schedule VIII – Operating Lease/Operating Lessee

Schedule IX – Liquor Licenses

Schedule X – Intentionally omitted

Schedule XI – Intentionally omitted

Schedule XII – Intentionally omitted

Schedule XIII – Borrower Organizational Identification Number/Tax Identification
Number

Schedule XIV – Condominium Units

Schedule XV – Board

Schedule XVI – SRO Units

 

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TABLE OF CONTENTS

(continued)

 

Schedule XVII – Occupied SRO Units

Schedule XVIII – Private Company Transfer – Additional Recourse Guaranty
Covenants

Schedule XIX – Public Company Transfer – Additional Recourse Guaranty Covenants

Schedule XX – Assumption – Additional Recourse Guaranty Covenants

Schedule XXI – Guarantor Litigation Representation Exceptions

Schedule XXII – Collective Bargaining Agreement

Schedule XXIII – Additional Recourse Guaranty Covenants

Schedule XXIV – ERISA Representation Exceptions

Schedule XXV – Status of Property Representation Exceptions

 

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MEZZANINE A LOAN AGREEMENT

THIS MEZZANINE A LOAN AGREEMENT, dated as of February 6, 2014 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, this
“Agreement”), between CITIGROUP GLOBAL MARKETS REALTY CORP., a New York
corporation, having an address at 388 Greenwich Street, 19th Floor, New York,
New York 10013 (together with its successors and/or assigns, “Citi”) and BANK OF
AMERICA, N.A., a national banking association, having an address at One Bryant
Park, New York, New York 10036 (together with its successors and/or assigns,
“BOA” and together with Citi and their respective successors and/or assigns,
“Lender”) and HUDSON DELANO SENIOR MEZZ LLC, a Delaware limited liability
company, having its principal place of business at c/o Morgans Hotel Group, 475
Tenth Avenue, New York, New York 10018 together with its successors and/or
assigns, “Borrower”).

RECITALS:

Citi, in its capacity as a mortgage lender and Bank of America, N.A., in its
capacity as a mortgage lender (together with each of their respective successors
and assigns, each in their capacity as a mortgage lender, collectively,
“Mortgage Lender”), are making a certain mortgage loan in the original principal
amount of $300,000,000 (the “Mortgage Loan”) to each of the Persons listed on
Schedule I hereto (individually and/or collectively, as the context may require,
“Mortgage Borrower”) pursuant to that certain Loan Agreement, dated as of the
date hereof, by and among Mortgage Borrower and Mortgage Lender (as amended,
supplemented or otherwise modified from time to time, the “Mortgage Loan
Agreement”), and secured by, among other things, that certain first priority
Amended and Restated Mortgage and Security Agreement, by Beach Hotel Associates
LLC and that certain first priority Consolidated, Amended and Restated Fee and
Leasehold Mortgage and Security Agreement, by Henry Hudson Holdings LLC, 58th
Street Bar Company LLC and Hudson Leaseco LLC, each in favor of Mortgage Lender
(individually and/or collectively, as the context may require, as amended,
restated, replaced, supplemented or otherwise modified from time to time, the
“Security Instrument”), pursuant to which Mortgage Borrower has granted to
Mortgage Lender a first priority security interest on, among other things, the
real property and other collateral as more fully described in the Security
Instrument.

Borrower is the legal and beneficial owner of all of the ownership interests in
the Individual Properties, consisting of 100% of the limited liability company
interests in Henry Hudson Holdings LLC and 100% of the limited liability company
interests in Beach Hotel Associates LLC. Henry Hudson Holdings LLC is the owner
of 100% of the limited liability company interests in Hudson Managing Member
LLC, is the owner of 100% of the corporate shares in Hudson Residual Interests,
Inc. and is the owner of 100% of the limited liability company interests in
Hudson Pledgor LLC. Hudson Pledgor LLC is the owner of 100% of the limited
liability company interests in 58th Street Bar Company LLC. Hudson Managing
Member LLC is the owner of 99.99% of the limited liability company interests in
Hudson Leaseco LLC. Hudson Residual Interests, Inc. is the owner of 0.01% of the
limited liability company interests in Hudson Leaseco LLC.

Borrower desires to obtain the Loan (defined below) from Lender.

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As a condition precedent to the obligation of Lender to make the Loan to
Borrower, Borrower has entered into that certain Pledge and Security Agreement
(Mezzanine A Loan) dated as of the date hereof, in favor of Lender (as amended,
supplemented or otherwise modified from time to time, the “Pledge Agreement”),
pursuant to which Borrower has granted to Lender a first priority security
interest in the Collateral (as hereinafter defined) as collateral security for
the Debt (as hereinafter defined).

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

In consideration of the making of the Loan by Lender and the covenants,
agreements, representations and warranties set forth in this Agreement, the
parties hereto hereby covenant, agree, represent and warrant as follows:

ARTICLE 1

DEFINITIONS; PRINCIPLES OF CONSTRUCTION

Section 1.1. Definitions.

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

“Acceptable LLC” shall mean a limited liability company formed under Delaware
law which (i) has at least one springing member, which, upon the dissolution of
all of the members or the withdrawal or the disassociation of all of the members
from such limited liability company, shall immediately become the sole member of
such limited liability company, and (ii) otherwise meets the Rating Agency
criteria then applicable to such entities.

“Account Collateral” shall mean (i) the Accounts, and all cash, checks, drafts,
certificates and instruments, if any, from time to time deposited or held in the
Accounts from time to time; (ii) any and all amounts invested in Permitted
Investments; (iii) all interest, dividends, cash, instruments and other property
from time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing; and (iv) to the extent not covered by
clauses (i) - (iii) above, all “proceeds” (as defined under the UCC as in effect
in the state in which the Accounts are located) of any or all of the foregoing.

“Accounts” shall mean any account established by this Agreement or the other
Loan Documents (including without limitation, any Substitute Cash Management
Accounts and any accounts containing Substitute Reserves).

“Act” shall have the meaning set forth in Section 5.1 hereof.

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

 

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“Affiliated Manager” shall mean any managing agent of any Individual Property in
which Borrower, Mortgage Borrower, Guarantor, any SPE Component Entity (as
defined herein and in the Mortgage Loan Agreement) (if any) or any Affiliate of
such entities has, directly or indirectly, any legal, beneficial or economic
interest.

“Agent” shall have the meaning set forth in Section 11.8(a)(iv) hereof.

“Agreement” shall have the meaning set forth in the preamble hereof.

“Allocated Loan Amount” shall mean the portion of the principal amount of the
Loan allocated to any applicable Individual Property as set forth on Schedule V
hereof.

“ALTA” shall mean American Land Title Association, or any successor thereto.

“Alteration Threshold” shall mean, with respect to each Individual Property, an
amount equal to 5% of the Allocated Loan Amount (as defined in the Mortgage Loan
Agreement) attributable to such Individual Property.

“Approved Accounting Method” shall mean GAAP, federal tax basis accounting
(consistently applied) or such other method of accounting, consistently applied,
as may be reasonably acceptable to Lender.

“Approved Annual Budget” shall have the meaning set forth in Section 4.12
hereof.

“Approved Bank” means (a) a bank or other financial institution which has the
Required Rating, (b) if a Securitization has not occurred, a bank or other
financial institution acceptable to Lender or (c) if a Securitization has
occurred, a bank or other financial institution with respect to which Lender
shall have received a Rating Agency Confirmation.

“Approved ID Provider” shall mean each of CT Corporation, Corporation Service
Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart
Management Company and Lord Securities Corporation; provided, that, (A) the
foregoing shall only be deemed Approved ID Providers unless and until
disapproved by the Rating Agencies and (B) additional national providers of
Independent Directors may be deemed added to the foregoing hereunder to the
extent approved in writing by Lender and the Rating Agencies.

“Assignment and Assumption” shall have the meaning set forth in
Section 11.8(a)(i) hereof.

“Award” shall mean any compensation paid by any Governmental Authority in
connection with a Condemnation in respect of all or any part of the Property.

“Bankruptcy Code” shall mean Title 11 of the United States Code entitled
“Bankruptcy”, as amended from time to time, and any successor statute or
statutes and all rules and regulations from time to time promulgated thereunder,
and any comparable foreign laws relating to bankruptcy, insolvency or creditors’
rights.

 

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“Bankruptcy Event” shall mean the occurrence of any one or more the of the
following: (i) Borrower, Mortgage Borrower, Affiliated Manager, any Hudson
Intermediate Entity or any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement) shall commence any case, proceeding or other action
(A) under the Bankruptcy Code and/or any Creditors Rights Laws seeking to have
an order for relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, liquidation or dissolution or
(B) seeking appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets;
(ii) Borrower, Mortgage Borrower, Affiliated Manager, any Hudson Intermediate
Entity or any SPE Component Entity (as defined herein and in the Mortgage Loan
Agreement) shall make a general assignment for the benefit of its creditors;
(iii) any Restricted Party (or Affiliate thereof) files, or joins or colludes in
the filing of, (A) an involuntary petition against Borrower, Mortgage Borrower,
Affiliated Manager, any Hudson Intermediate Entity or any SPE Component Entity
(as defined herein and in the Mortgage Loan Agreement) under the Bankruptcy Code
or any other Creditors Rights Laws, or solicits or causes to be solicited or
colludes with petitioning creditors for any involuntary petition under the
Bankruptcy Code or any other Creditors Rights Laws against Borrower, Mortgage
Borrower, Affiliated Manager, any Hudson Intermediate Entity or any SPE
Component Entity (as defined herein and in the Mortgage Loan Agreement) or
(B) any case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of Borrower’s, Mortgage Borrower, Affiliated Manager’s, any
Hudson Intermediate Entity’s or any SPE Component Entity’s (as defined herein
and in the Mortgage Loan Agreement) assets; (iv) Borrower, Mortgage Borrower,
Affiliated Manager, any Hudson Intermediate Entity or any SPE Component Entity
(as defined herein and in the Mortgage Loan Agreement) files an answer
consenting to or otherwise acquiescing in or joining in any involuntary petition
filed against it, by any other Person under the Bankruptcy Code or any other
Creditors Rights Laws, or solicits or causes to be solicited or colludes with
petitioning creditors for any involuntary petition from any Person; (v) any
Restricted Party (or Affiliate thereof) consents to or acquiesces in or joins in
an application for the appointment of a custodian, receiver, trustee, or
examiner for Borrower, Mortgage Borrower, Affiliated Manager, any Hudson
Intermediate Entity, any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement) or any portion of the Property or any portion of the
Collateral; (vi) Borrower, Mortgage Borrower, Affiliated Manager, any Hudson
Intermediate Entity or any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement) makes an assignment for the benefit of creditors, or
admits, in writing or in any legal proceeding, its insolvency or inability to
pay its debts as they become due; (vii) any Restricted Party (or Affiliate
thereof) contesting or opposing any motion made by Lender to obtain relief from
the automatic stay or seeking to reinstate the automatic stay in the event of
any proceeding under the Bankruptcy Code or any other Creditors Rights Laws
involving Guarantor or its subsidiaries; and (viii) any Restricted Party (or
Affiliate thereof) taking any action in furtherance of, in collusion with
respect to or indicating its consent to, approval of, or acquiescence in, any of
the acts set forth in items (i) through (vii) above.

“BOA” shall have the meaning set forth in the preamble hereof.

“Board” shall mean the “Board of Managers” as defined in the Condominium
Documents.

 

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“Borrower Party” and “Borrower Parties” shall mean each of Borrower, Mortgage
Borrower, any SPE Component Entity (as defined herein and in the Mortgage Loan
Agreement), any Affiliated Manager, any Hudson Intermediate Entity and
Guarantor.

“Breakage Costs” shall have the meaning set forth in Section 2.5(b)(viii)
hereof.

“Business Day” shall mean any day other than a Saturday, Sunday or any other day
on which commercial banks in New York, New York or the place of business of the
trustee under a Securitization (or, if no Securitization has occurred, Lender)
or any Servicer or the financial institution that maintains any collection
account for or on behalf of any Servicer or any Reserve Funds or the New York
Stock Exchange or the Federal Reserve Bank of New York is not open for business.

“Cash and Cash Equivalents” shall mean: (1) United States dollars and (2) any of
the following which may be liquidated without restrictions within five
(5) Business Days or less: (A) securities issued or directly and fully
guaranteed or insured by the United States government or any agency or
instrumentality thereof having maturities of not more than six (6) months from
the date of acquisition; (B) certificates of deposit and Eurodollar time
deposits with maturities of six (6) months or less from the date of acquisition,
bankers’ acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having capital and
surplus in excess of $500 million and an S&P Certificate of Deposit Rating
(short term) of A-1 or better or the equivalent by Moody’s; (C) repurchase
obligations with a term of not more than seven (7) days for underlying
securities of the types described in clauses (2)(A) and (B) above entered into
with any financial institution meeting the qualifications specified in clause
(2) (B) above; (D) commercial paper having the highest rating obtainable from
Moody’s or S&P, and in each case maturing within six months after the date of
acquisition; and (E) money market funds substantially all the assets of which
are comprised of securities and other obligations of the types described in
clauses (1) and (2)(A) through (D) above.

“Cash Flow Adjustments” shall mean reasonable adjustments made by Lender in its
calculation of Net Cash Flow and the components thereof, which shall include
adjustments:

 

  (A) for (i) underwritten occupancy, average daily room rate and RevPAR for the
Properties shall be based on the actual occupancy, average daily room rate and
RevPAR for the Properties for the preceding twelve (12) month period,
(ii) departmental revenue and expenses shall be underwritten based upon the
preceding twelve (12) month period, (iii) management fees shall be underwritten
in an amount equal to the greater of (I) the product of (1) 3% and (2) Gross
Rents plus Operating Income and (II) the actual amount of management fees paid
by the Borrower (provided, that, until the end of the August 2014 calendar
month, the actual amount of management fees for the preceding twelve (12) month
period shall be calculated based on the management fee payable under the
Management Agreement in effect as of the Closing Date (unless such Management
Agreement is amended subsequent to the Closing Date)), (iv) Taxes, Insurance
Premiums and Ground Rent shall be underwritten at the greater of (I) actual
amount of Taxes, Insurance Premiums and Ground Rent (including imminent
increases to Taxes, Insurance Premiums and Ground Rent) and (II) amounts for
Taxes, Insurance Premiums and Ground Rent set forth on the Approved Annual
Budget, and (v) deposits into the FF&E Reserve Account equal to the greater of
(I) the product of (1) 4.0% and (2) Gross Rents plus Operating Income and (II)
the actual amount of FF&E Expenditures stipulated in the Management Agreements;

 

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  (B) to exclude rental income attributable to any Tenant (1) in bankruptcy that
has not affirmed its Lease in the applicable bankruptcy proceeding pursuant to a
final, non-appealable order of a court of competent jurisdiction, (2) not paying
rent under its Lease for more than thirty (30) days or otherwise in default
under its Lease beyond any applicable notice and cure periods, (3) that has
expressed its intention (directly, constructively or otherwise) to not renew,
terminate, cancel and/or reject its applicable Lease, and/or (4) under a Lease
which expires within 60 days or less of the applicable date of calculation
hereunder;

 

  (C) to exclude rental income attributable to any Tenant under a Major Lease
whose tenancy at the Property is month to month; and

 

  (D) to reflect the Properties secured by the liens of the Security Instruments
at the time of such calculation of Net Cash Flow.

“Casualty” shall have the meaning set forth in Section 7.2 hereof.

“CBA Multiemployer Plans” shall mean multi-employer pension and welfare plans to
which an employer is obligated to contribute pursuant to the terms of the
collective bargaining agreement set forth on Schedule XXII hereto.

“Citi” shall have the meaning set forth in the preamble hereof.

“Closing Date” shall mean the date of the funding of the Loan.

“Closing Date Debt Yield” shall mean 6.60%.

“Co-Lender” shall have the meaning set forth in Section 11.8(a)(i) hereof.

“Co-Lending Agreement” shall mean the co-lending agreement entered into between
Citi, individually as a Co-Lender and as Agent, BOA and the other Co-Lenders in
the event of a Syndication, as the same may be further supplemented modified,
amended or restated.

“Collateral” shall mean the “Collateral” as such term is defined in the Pledge
Agreement and shall also include all amounts on deposit in any Account and any
and all other property or collateral in which Lender is granted a security
interest under any of the Loan Documents, in each case whether existing on the
date hereof or hereafter pledged or assigned to Lender.

 

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“Collateral Assignment of Interest Rate Cap Agreement” shall mean that certain
Collateral Assignment of Interest Rate Cap Agreement (Mezzanine A Loan), dated
as of the date hereof, executed by Borrower in connection with the Loan for the
benefit of Lender, as the same may be amended, restated, replaced, supplemented
or otherwise modified from time to time. Borrower shall deliver to Lender a new
Collateral Assignment of Interest Rate Cap Agreement acceptable to Lender in
connection with each Replacement Interest Rate Cap Agreement.

“Common Charges” shall have the meaning set forth in Section 3.39 hereof.

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

“Condominium” shall have the meaning set forth in the Condominium Documents.

“Condominium Documents” shall mean those certain documents set forth on Schedule
II attached hereto, as each of the same may be amended, restated, replaced or
otherwise modified from time to time in accordance with the terms and conditions
of this Agreement.

“Contractual Obligation” shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or undertaking to
which such Person is a party or by which it or any of its property is bound, or
any provision of the foregoing.

“Control” shall mean the power to direct the management and policies of an
entity, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise. The terms
“Controlled” and “Controlling” shall have correlative meanings.

“Convertible Notes” shall mean the 2.375% Senior Subordinated Convertible Notes
Due 2014 of Guarantor issued on October 17, 2007, as such convertible notes may
be amended, supplemented or otherwise modified, and any notes, securities or
other obligations of Guarantor, any Borrower Party or any of their affiliates
that refinance, supplement or replace such convertible notes

“Counterparty” shall mean the counterparty under any Interest Rate Cap Agreement
or Replacement Interest Rate Cap Agreement, which counterparty shall satisfy the
Minimum Counterparty Rating and otherwise be acceptable to Lender.

“Covered Rating Agency Information” shall mean any Provided Information
furnished to the Rating Agencies in connection with issuing, monitoring and/or
maintaining the Securities.

“Creditors Rights Laws” shall mean any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, conservatorship, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to debts or
debtors.

 

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“Debt” shall mean the outstanding principal amount set forth in, and evidenced
by, this Agreement and the Note together with all interest accrued and unpaid
thereon and all other sums due to Lender in respect of the Loan under the Note,
this Agreement or the other Loan Documents (including, without limitation, all
costs and expenses payable to Lender thereunder).

“Debt Service” shall mean, with respect to any particular period of time,
scheduled principal (if applicable) and interest payments under the Loan.

“Debt Service Coverage Ratio” shall mean the ratio calculated by Lender on the
date of determination of (i) the Net Cash Flow for the trailing twelve
(12) calendar month period ending with the most recent calendar month reporting
provided by Borrower to Lender pursuant to the terms and conditions of
Section 4.12 hereof (or if Borrower has failed to provide such reporting to
Lender as required pursuant to Section 4.12 hereof, such Net Cash Flow for such
trailing twelve (12) calendar month period shall be calculated by Lender in
accordance with the provisions set forth in this Agreement) to (ii) the
Aggregate Debt Service which will be due for the twelve (12) calendar month
period immediately following the date of calculation, calculated assuming an
amount of debt equal to the outstanding principal balance of the Loan, the
Mortgage Loan and the Mezzanine B Loan on the date of calculation and an
interest rate equal to the sum of the weighted averages (weighted by the
outstanding balance of (1) the Loan, (2) each Component (as defined in the
Mortgage Loan Agreement) of Note A (as defined in the Mortgage Loan Agreement),
(3) Note B (as defined in the Mortgage Loan Agreement) and (4) the Mezzanine B
Loan) of the LIBOR Spread plus the Strike Rate that will be in effect for the
applicable Extension Period for the Loan, the LIBOR Spread (as defined in the
Mortgage Loan Agreement) plus the Strike Rate (as defined in the Mortgage Loan
Agreement) that will be in effect for the applicable Extension Period for the
Mortgage Loan and the LIBOR Spread (as defined in the Mezzanine B Loan
Agreement) plus the Strike Rate (as defined in the Mezzanine B Loan Agreement)
that will be in effect for the applicable Extension Period for the Mezzanine B
Loan.

“Debt Yield” shall mean, as of any date of calculation, a ratio conveyed as a
percentage in which: (i) the numerator is the Net Cash Flow for the trailing
twelve (12) calendar month period ending with the most recent calendar month
reporting provided by Borrower to Lender pursuant to the terms and conditions of
Section 4.12 hereof (or if Borrower has failed to provide such reporting to
Lender as required pursuant to Section 4.12 hereof, such Net Cash Flow for such
trailing twelve (12) calendar month period shall be calculated by Lender in
accordance with the provisions set forth in this Agreement); and (ii) the
denominator is sum of the then aggregate outstanding principal balance of the
Loan, the Mortgage Loan and the Mezzanine B Loan.

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

“Default Prepayment Premium” shall mean an amount equal to five percent
(5.0%) of the Debt being repaid or prepaid.

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

 

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“Delano Property” shall mean the Individual Property commonly known as The
Delano Hotel, Miami Beach, Florida.

“Determination Date” shall mean, with respect to any Interest Accrual Period,
the date that is two (2) London Business Days prior to the first day of such
Interest Accrual Period.

“DHCR” shall mean the New York State Division of Housing and Community Renewal.

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

“Eligible Account” shall mean a separate and identifiable account from all other
funds held by the holding institution that is an account or accounts maintained
with a federal or state-chartered depository institution or trust company which
(a) complies with the definition of Eligible Institution, (b) has a combined
capital and surplus of at least $50,000,000 and (c) has corporate trust powers
and is acting in its fiduciary capacity. An Eligible Account will not be
evidenced by a certificate of deposit, passbook or other instrument.

“Eligible Institution” shall mean (a) a depository institution or trust company
insured by the Federal Deposit Insurance Corporation (i) the short term
unsecured debt obligations or commercial paper of which are rated at least
“A-1+” (or its equivalent) from each of the Rating Agencies (in the case of
accounts in which funds are held for thirty (30) days or less) and (ii) the long
term unsecured debt obligations of which are rated at least “A+” (or its
equivalent) from each of the Rating Agencies (in the case of accounts in which
funds are held for more than thirty (30) days) or (b) such other depository
institution otherwise approved by the Rating Agencies from time-to-time.

“Embargoed Person” shall have the meaning set forth in Section 3.29 hereof.

“Employment Related Laws and Obligations” shall mean shall mean all federal,
state and local laws, regulations, ordinances, common law, orders, judgments,
decrees, awards, Union Documents, CBA Multiemployer Plans, or the findings of
any arbitrator, court or governmental entity, relating to, touching upon or
concerning the employment of the employees who perform work in connection with
the operation of the Property, including relating to the hiring, firing and
treatment of employees, or any legal obligation or duty regarding employment
practices, terms and conditions of employment, equal opportunity,
non-discrimination, discharge, immigration, anti-harassment, anti-retaliation,
whistle blowing, compensation, wages, overtime payments, hours, benefits,
collective bargaining, income tax withholding, the payment of social security
and other similar payroll taxes, pension plans, the modification or termination
of benefit plans and retiree health insurance plans, policies, programs,
agreements, occupational safety and health, workers compensation or other
similar benefits and payments on account of occupational illness and injuries,
employment contracts, collective bargaining agreements, grievances originating
under the collective bargaining agreements, wrongful discharge, torts such as
invasion of privacy, infliction of emotional distress, defamation, and slander.

 

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

“Environmental Laws” shall have the meaning set forth in the Environmental
Indemnity.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the
same may heretofore have been or shall be amended, restated, replaced or
otherwise modified.

“Event of Default” shall have the meaning set forth in Section 10.1 hereof.

“Excess Cash Flow” shall have the meaning set forth in the Mortgage Loan
Agreement.

“Exchange Act” shall mean the Securities and Exchange Act of 1934, as amended.

“Exchange Act Filing” shall have the meaning set forth in Section 11.1 hereof.

“Exculpated Parties” shall have the meaning set forth in Section 13.1 hereof.

“Extended Maturity Date” shall have the meaning set forth in Section 2.9 hereof.

“Extension Fee” shall mean one quarter of one percent (0.25%) of the outstanding
principal amount of the Loan on the date the related Extension Period is
commenced.

“Extension Option” shall have the meaning set forth in Section 2.9 hereof.

“Extension Period” shall have the meaning set forth in Section 2.9 hereof.

“FF&E Expenditures” shall have the meaning set forth in the Mortgage Loan
Agreement.

“Fee Estate” shall mean the fee interest of the lessor under a Ground Lease in
the Land and the Improvements demised under such Ground Lease.

“Fee Owner” shall mean the owner of the lessor’s interest in a Ground Lease and
the related Fee Estate.

“Fitch” shall mean Fitch, Inc.

“Flood Insurance Acts” shall have the meaning set forth in the Mortgage Loan
Agreement.

“Force Majeure” shall mean the failure of Borrower to perform any obligation
hereunder by reason of any act of God, enemy or hostile government action,
terrorist attacks, civil commotion, insurrection, sabotage, strikes or lockouts
or any other reason primarily due to cause or causes beyond the reasonable
control of Borrower or any Affiliate of Borrower, as the case may be.

 

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“Foreign Taxes” shall have the meaning set forth in Section 2.5 hereof.

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

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

“Gross Rents” shall have the meaning set forth in the Mortgage Loan Agreement.

“Ground Lease” shall have the meaning set forth in the Mortgage Loan Agreement.

“Guarantor” shall mean Morgans Hotel Group, Co., a Delaware corporation and any
successor to and/or replacement of the foregoing Person, in each case, pursuant
to and in accordance with the applicable terms and conditions of the Loan
Documents.

“Guarantor Control Condition” shall mean a condition which shall be deemed
satisfied to the extent that each Person that Controls (directly or indirectly)
Borrower and, if applicable, each SPE Component Entity (as defined herein and in
the Mortgage Loan Agreement) is, in each case, itself a current Guarantor (as
distinguished from any prior Guarantor that has been replaced in accordance with
the applicable terms and conditions of the Loan Documents) or Controlled
(directly or indirectly) by one or more current Guarantors (as distinguished
from any prior Guarantor that has been replaced in accordance with the
applicable terms and conditions of the Loan Documents).

“Guaranty” shall mean that certain Limited Recourse Guaranty (Mezzanine A Loan)
executed by Guarantor and dated as of the date hereof.

“Hudson Intermediate Entities” shall mean (individually and/or collectively, as
the context may require), Hudson Pledgor LLC, a Delaware limited liability
company, Hudson Managing Member LLC, a Delaware limited liability company and/or
Hudson Residual Interests, Inc., a Delaware corporation.

“Hudson Property” shall mean the Individual Property commonly known as The
Hudson Hotel, New York, New York.

“Improvements” shall mean, individually and/or collectively (as the context
requires), the “Improvements” as defined in each applicable Security Instrument.

 

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“Indebtedness” shall mean, for any Person, any indebtedness or other similar
obligation for which such Person is obligated (directly or indirectly, by
contract, operation of law or otherwise), including, without limitation, (i) all
indebtedness of such Person for borrowed money, for amounts drawn under a letter
of credit, or for the deferred purchase price of property for which such Person
or its assets is liable, (ii) all unfunded amounts under a loan agreement,
letter of credit, or other credit facility for which such Person would be liable
if such amounts were advanced thereunder, (iii) all amounts required to be paid
by such Person by contract and/or as a guaranteed payment (including, without
limitation, any such amounts required to be paid to partners and/or as a
preferred or special dividend, including any mandatory redemption of shares or
interests), (iv) all indebtedness incurred and/or guaranteed by such Person,
directly or indirectly (including, without limitation, contractual obligations
of such Person), (v) all obligations under leases that constitute capital leases
for which such Person is liable, and (vi) all obligations of such Person under
interest rate swaps, caps, floors, collars and other interest hedge agreements,
in each case whether such Person is liable contingently or otherwise, as
obligor, guarantor or otherwise, or in respect of which obligations such Person
otherwise assures a creditor against loss.

“Indemnified Parties” shall mean (a) Lender, (b) any successor owner or holder
of the Loan or participations in the Loan, (c) any Servicer or prior Servicer of
the Loan, (d) any Investor or any prior Investor in any Securities, (e) any
trustees, custodians or other fiduciaries who hold or who have held a full or
partial interest in the Loan for the benefit of any Investor or other third
party, (f) any receiver or other fiduciary appointed in a foreclosure or other
Creditors Rights Laws proceeding, (g) any officers, directors, shareholders,
partners, members, employees, agents, servants, representatives, contractors,
subcontractors, Affiliates or subsidiaries of any and all of the foregoing, and
(h) the heirs, legal representatives, successors and assigns of any and all of
the foregoing (including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of the Indemnified
Parties’ assets and business), in all cases whether during the term of the Loan
or as part of or following a foreclosure of the Loan.

“Independent Director” shall have the meaning set forth in Section 5.2 hereof.

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

“Information” shall have the meaning set forth in Section 11.8(b)(ii) hereof.

“Insurance Premiums” shall have the meaning set forth in the Mortgage Loan
Agreement.

“Intellectual Property” shall have the meaning set forth in Section 3.36 hereof.

“Intercreditor Agreement” shall have the meaning set forth in Section 11.10
hereof.

“Interest Accrual Period” shall mean the period beginning on (and including) the
fifteenth (15th) day of each calendar month during the term of the Loan and
ending on (and including) the fourteenth (14th) day of the next succeeding
calendar month. No Interest Accrual Period shall be shortened by reason of any
payment of the Loan prior to the expiration of such Interest Accrual Period.

 

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“Interest Bearing Accounts” shall mean each Reserve Account (except for any
accounts in which Substitute Reserve funds with respect to Taxes, Insurance
Premiums, Ground Rent, Excess Cash Flow, Hotel Taxes (as defined in the Mortgage
Loan Agreement), and Custodial Funds (as defined in the Mortgage Loan Agreement)
are deposited).

“Interest Rate” shall mean the rate or rates at which the outstanding principal
amount of the Loan bears interest from time to time as determined accordance
with the provisions of Section 2.5 hereof.

“Interest Rate Cap Agreement” shall mean, as applicable, any interest rate cap
agreement (together with the confirmation and schedules relating thereto) in
form and substance satisfactory to Lender between Borrower and Counterparty or
any Replacement Interest Rate Cap Agreement, in each case which also satisfies
the requirements set forth in Section 2.8.

“Interest Shortfall” shall mean, (i) with respect to any repayment or prepayment
of the Loan made on a date that is not a Monthly Payment Date, the interest
which would have accrued on the Loan (absent such repayment or prepayment)
through and including the last day of the Interest Accrual Period related to the
next succeeding Monthly Payment Date following the date of such repayment or
prepayment, and (ii) with respect to any repayment or prepayment of the Loan
(including a repayment on the Maturity Date) made on a date that is a Monthly
Payment Date, the interest which would have accrued on the Loan (absent such
repayment or prepayment) through and including the last day of the Interest
Accrual Period related to such Monthly Payment Date.

“Investor” shall mean any investor or potential investor in the Loan (or any
portion thereof or interest therein) in connection with any Secondary Market
Transaction.

“IRS Code” shall mean the Internal Revenue Code of 1986, as amended from time to
time or any successor statute.

“Land” shall mean, individually and/or collectively (as the context requires),
the “Land” as defined in each applicable Security Instrument.

“Lease” shall mean, individually and/or collectively (as the context requires),
the “Lease” as defined in each applicable Security Instrument; provided,
however, notwithstanding anything in the applicable Security Instrument to the
contrary, for purposes of this Agreement, the term Lease shall exclude (1) the
rental of hotel rooms to transient guests and the temporary, transient rental of
conference room and meeting space for special events, in each case, in the
ordinary course of business at any Individual Property, (2) SRO Arrangements,
(3) the Ground Lease and (4) any Operating Lease.

“Legal Requirements” shall mean all federal, state, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments,
decrees and injunctions of Governmental Authorities affecting Borrower, Mortgage
Borrower, the Collateral or any part thereof or any Individual Property or any
part thereof, or the construction, use, alteration or operation thereof, or any
part thereof, whether now or hereafter enacted and in force, including, without
limitation, the Americans with Disabilities Act of 1990, and all Permits,
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instruments, either of record or
known to Borrower or Mortgage Borrower, at any time in force affecting Borrower,
Mortgage Borrower, the Collateral or any part thereof or the Property or any
part thereof, including, without limitation, any which may (i) require repairs,
modifications or alterations in or to the Property or any part thereof, or
(ii) in any way limit the use and enjoyment thereof.

 

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“Lender” shall have the meaning set forth in the preamble hereof.

“Lender Affiliate” shall have the meaning set forth in Section 11.2 hereof.

“Lender Group” shall have the meaning set forth in Section 11.2 hereof.

“Letter of Credit” shall mean an irrevocable, auto-renewing, unconditional,
transferable, clean sight draft standby letter of credit having an initial term
of not less than one (1) year and with automatic renewals for one (1) year
periods (unless the obligation being secured by, or otherwise requiring the
delivery of, such letter of credit is required to be performed at least thirty
(30) days prior to the initial expiry date of such letter of credit), for which
Borrower shall have no reimbursement obligation and which reimbursement
obligation is not secured by the Collateral or any other property pledged to
secure the Note, in favor of Lender and entitling Lender to draw thereon in New
York, New York, based solely on a statement that Lender has the right to draw
thereon executed by an officer or authorized signatory of Lender. A Letter of
Credit must be issued by an Approved Bank. Borrower’s delivery of any Letter of
Credit hereunder in an amount equal to or greater than five percent (5%) of the
outstanding principal balance of the Loan shall, at Lender’s option, be
conditioned upon Lender’s receipt of a New Non-Consolidation Opinion relating to
such Letter of Credit.

“Liabilities” shall have the meaning set forth in Section 11.2 hereof.

“LIBOR” shall mean, with respect to each Interest Accrual Period, the rate
(expressed as a percentage per annum and rounded upward, as necessary, to the
next nearest 1/1000 of 1%) equal to the rate reported for deposits in U.S.
dollars, for a one-month period, that appears on Reuters Screen LIBOR01 Page (or
the successor thereto) as of 11:00 a.m., London time, on the related
Determination Date; provided that, (i) if such rate does not appear on Reuters
Screen LIBOR01 Page as of 11:00 a.m., London time, on such Determination Date,
Lender shall request the principal London office of any four major reference
banks in the London interbank market selected by Lender to provide such bank’s
offered quotation (expressed as a percentage per annum) to prime banks in the
London interbank market for deposits in U.S. dollars for a one-month period as
of 11:00 a.m., London time, on such Determination Date for the amounts for a
comparable loan at the time of such calculation and, if at least two such
offered quotations are so provided, LIBOR shall be the arithmetic mean of such
quotations; and (ii) if fewer than two such quotations in clause (i) are so
provided, Lender shall request any three major banks in New York City selected
by Lender to provide such bank’s rate (expressed as a percentage per annum) for
loans in U.S. dollars to leading European banks for a one-month period as of
approximately 11:00 a.m., New York City time on the applicable Determination
Date for the amounts for a comparable loan at the time of such calculation and,
if at least two such rates are so provided, LIBOR shall be the arithmetic mean
of such rates. Lender’s computation of LIBOR shall be conclusive and binding on
Borrower for all purposes, absent manifest error.

 

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“LIBOR Loan” shall mean the Loan at such time as interest thereon accrues at a
rate of interest based upon LIBOR.

“LIBOR Rate” shall mean the sum of (i) LIBOR and (ii) the LIBOR Spread.

“LIBOR Spread” shall mean, 7.500%.

“Liquidation Event” shall have the meaning set forth in Section 2.7(b) hereof.

“Loan” shall mean the loan made by Lender to Borrower pursuant to this
Agreement.

“Loan Bifurcation” shall have the meaning set forth in Section 11.1 hereof.

“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge
Agreement, the Environmental Indemnity, the Subordination of Management
Agreement, the Collateral Assignment of Interest Rate Cap Agreement, the
Guaranty, the Subordination of Special Management Agreement, the Post Closing
Agreement and all other documents executed and/or delivered in connection with
the Loan, as each of the same may be amended, restated, replaced, extended,
renewed, supplemented or otherwise modified from time to time.

“Loan Register” shall have the meaning set forth in Section 11.7 hereof.

“London Business Day” shall mean any day other than a Saturday, Sunday or any
other day on which commercial banks in London, England are not open for
business.

“Losses” shall mean any and all losses, damages, costs, fees, expenses, claims,
suits, judgments, awards, liabilities (including but not limited to strict
liabilities), obligations, debts, diminutions in value, fines, penalties,
charges, amounts paid in settlement, foreseeable and unforeseeable consequential
damages, litigation costs and attorneys’ fees, in the case of each of the
foregoing, of whatever kind or nature and whether or not incurred in connection
with any judicial or administrative proceedings, actions, claims, suits,
judgments or awards.

“LTIP Units” shall mean, collectively, (i) any long-term incentive plan unit
convertible into membership units in Morgans Group LLC, (ii) any outperformance
long-term incentive units reflecting a conditional potential membership interest
in Morgans Group LLC, and (iii) membership interest in Morgans Group LLC not
owned as of the Closing Date by Guarantor, which in each instance are subject to
the restrictions contained in Section 6.2(b)(ix) hereof.

“Major Lease” shall mean as to each Individual Property (i) any Lease (other
than a Lease for the sale of sundry goods to hotel guests), (ii) any Lease which
contains any option, offer, right of first refusal or other similar entitlement
to acquire or encumber all or any portion of the applicable Individual Property
and (iii) any instrument guaranteeing or providing credit support for any Lease
meeting the requirements of (i) and/or (ii) above.

 

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“Management Agreement” shall mean, individually and/or collectively (as the
context may require), each management agreement entered into by and between
Mortgage Borrower and Manager, pursuant to which Manager is to provide
management and other services with respect to the Property or any portion
thereof, as the same may be amended, restated, replaced, extended, renewed,
supplemented or otherwise modified from time to time in accordance with the
terms hereof and of the other Loan Documents.

“Manager” shall mean (i) with respect to each Individual Property, the Person
associated therewith as set forth on Schedule VI hereof or (ii) such other
Person selected as the manager of any applicable Individual Property in
accordance with the terms of this Agreement or the other Loan Documents.

“Material Action” shall mean with respect to any Person, any action to
consolidate or merge such Person with or into any Person, or sell all or
substantially all of the assets of such Person, or to institute proceedings to
have such Person be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against such Person or file
a petition seeking, or consent to, reorganization or relief with respect to such
Person under any applicable federal or state law relating to bankruptcy, or
consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of such Person or a substantial part of
its property, or make any assignment for the benefit of creditors of such
Person, or admit in writing such Person’s inability to pay its debts generally
as they become due, or, to the fullest extent permitted by law, dissolve or
liquidate such Person.

“Material Adverse Effect” shall mean a material adverse effect on (i) any
Individual Property or the Collateral or any portion thereof, (ii) the business,
profits, management, operations or condition (financial or otherwise) of
Borrower, Mortgage Borrower, Guarantor, the Collateral or any Individual
Property, (iii) the enforceability, validity, perfection or priority of the lien
of the Pledge Agreement or the other Loan Documents, or (iv) the ability of
Borrower and/or Guarantor to perform its obligations under the Pledge Agreement
or the other Loan Documents.

“Material Agreements” shall mean each contract and agreement relating to the
ownership, management, development, use, operation, leasing, maintenance, repair
or improvements of the Properties or any Individual Property, other than the
Management Agreement and the Leases, under which there is an obligation of
Mortgage Borrower to pay more than $250,000 per annum or which is neither
expressly contemplated under any Approved Annual Budget nor terminable upon 30
days notice (other than any contracts or agreements entered into with respect to
alterations in accordance with the terms and conditions of Section 4.21 hereof
or any contracts or agreements with respect to a Restoration in accordance with
the terms and conditions of Section 7.4 hereof).

“Maturity Date” shall mean February 9, 2016, as such date may be extended
pursuant to and in accordance with Section 2.9 hereof, or such other date on
which the final payment of the principal amount of the Loan becomes due and
payable as herein provided, whether at such stated maturity date, by declaration
of acceleration, or otherwise.

 

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“Maximum Legal Rate” shall mean the maximum non-usurious interest rate, if any,
that at any time or from time to time may be contracted for, taken, reserved,
charged or received on the indebtedness evidenced by the Note and as provided
for herein or the other Loan Documents, under the laws of such state or states
whose laws are held by any court of competent jurisdiction to govern the
interest rate provisions of the Loan.

“Member” is defined in Section 5.1 hereof.

“Mezzanine Loan Documents” shall mean, individually and/or collectively, as the
context may require, the Loan Documents and the Mezzanine B Loan Documents.

“Mezzanine B Borrower” shall mean Hudson Delano Junior Mezz LLC, a Delaware
limited liability company, together with its successors and permitted assigns.

“Mezzanine B Debt Service” shall have the meaning ascribed to the term “Debt
Service” in the Mezzanine B Loan Agreement as of the Closing Date.

“Mezzanine B Event of Default” shall have the meaning ascribed to the term
“Event of Default” in the Mezzanine B Loan Agreement.

“Mezzanine B Extension Option” shall have the meaning ascribed to the term
“Extension Option” in the Mezzanine B Loan Agreement”

“Mezzanine B Lender” shall mean, Citi, in its capacity as a lender under the
Mezzanine B Loan and BOA, in its capacity as a lender under the Mezzanine B
Loan, together with their respective successors and assigns.

“Mezzanine B Loan” shall mean that certain mezzanine loan made as of the date
hereof by Mezzanine B Lender to Mezzanine B Borrower in the original principal
amount of $50,000,000, and evidenced by the Mezzanine B Note and evidenced and
secured by the other Mezzanine B Loan Documents.

“Mezzanine B Loan Agreement” shall mean that certain Mezzanine B Loan Agreement,
dated as of the date hereof, by and between Mezzanine B Borrower and Mezzanine B
Lender, as the same may be amended, restated, replaced or otherwise modified
from time to time.

“Mezzanine B Loan Documents” shall have the meaning ascribed to the term “Loan
Documents” in the Mezzanine B Loan Agreement.

“Mezzanine B Note” shall have the meaning ascribed to the term “Note” in the
Mezzanine B Loan Agreement.

“Minimum Counterparty Rating” shall mean (a) a long term senior unsecured debt
rating from S&P of at least “A+”, which rating shall not include a “t” or
otherwise reflect a termination risk, (b) a long term senior unsecured debt
rating of at least “A1” from Moody’s, which rating shall not include a “t” or
otherwise reflect a termination risk and (c) a long term unsecured debt rating
from Fitch of at least “A” (and not on Rating Watch Negative) and a short term
unsecured debt rating from Fitch of at least “F1” (and not on Rating Watch
Negative) (and, after a Securitization, the equivalent of the foregoing by the
other Rating Agencies). After a Securitization of the Loan, only the ratings of
those Rating Agencies rating the Securities shall apply.

 

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“Monthly Debt Service Payment Amount” shall mean for the Monthly Payment Date
occurring in March, 2014 and for each Monthly Payment Date occurring thereafter
up to and including the Monthly Payment Date occurring in February, 2016, as
such date may be extended pursuant to the terms hereof, a payment equal to the
amount of interest which will accrue during the Interest Accrual Period in which
such Monthly Payment Date occurs computed at the Interest Rate.

“Monthly Payment Date” shall mean the ninth (9th) day of every calendar month
occurring thereafter during the term of the Loan.

“Moody’s” shall mean Moody’s Investor Service, Inc.

“Mortgage Borrower” shall have the meaning set forth in the Recitals to this
Agreement.

“Mortgage Borrower Company Agreement” shall mean, collectively, the limited
liability company agreements of each Mortgage Borrower as the same may be
amended from time to time to the extent permitted under the Mortgage Loan
Agreement and this Agreement.

“Mortgage Lender” shall have the meaning set forth in the Recitals to this
Agreement.

“Mortgage Loan” shall have the meaning set forth in the Recitals to this
Agreement.

“Mortgage Loan Agreement” shall have the meaning set forth in the Recitals to
this Agreement.

“Mortgage Loan Cash Management Accounts” shall mean, collectively, the
Restricted Account and the Cash Management Account (as each such term is defined
in the Mortgage Loan Agreement).

“Mortgage Loan Cash Management Provisions” shall mean the terms and conditions
of the Mortgage Loan Documents relating to cash management (including, without
limitation, those relating to the Restricted Account and Restricted Account
Agreement (as each such term is defined in the Mortgage Loan Agreement)).

“Mortgage Loan Debt” shall have the meaning ascribed to the term “Debt” in the
Mortgage Loan Agreement.

“Mortgage Loan Documents” shall have the meaning ascribed to the term “Loan
Documents” in the Mortgage Loan Agreement.

“Mortgage Loan Event of Default” shall have the meaning ascribed to the term
“Event of Default” in the Mortgage Loan Agreement.

 

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“Mortgage Loan Extension Option” shall have the meaning ascribed to the term
“Extension Option” in the Mortgage Loan Agreement”

“Mortgage Loan Note” shall have the meaning ascribed to the term “Note” in the
Mortgage Loan Agreement.

“Mortgage Loan Reserve Funds” shall mean the “Reserve Funds” as defined in the
Mortgage Loan Agreement.

“Mortgage Loan Restoration Provisions” shall mean the terms and conditions of
Section 7.4 of the Mortgage Loan Agreement relating to Restoration in connection
with a Casualty and/or Condemnation to a Property.

“Net Cash Flow” shall have the meaning set forth in the Mortgage Loan Agreement.

“Net Liquidation Proceeds After Debt Service” shall mean, with respect to any
Liquidation Event, all amounts paid to or received by or on behalf of Mortgage
Borrower in connection with such Liquidation Event, including, without
limitation, proceeds of any sale, refinancing or other disposition or
liquidation, less (i) Lender’s and/or Mortgage Lender’s reasonable out-of-pocket
costs incurred in connection with the recovery thereof, (ii) in the case of a
casualty or condemnation, the out-of-pocket costs incurred by Mortgage Borrower
in connection with a Restoration of all or any portion of a Property made in
accordance with the Mortgage Loan Documents, (iii) amounts required or permitted
to be deducted therefrom, and amounts paid, pursuant to the Mortgage Loan
Documents to Mortgage Lender, (iv) in the case of a foreclosure sale,
disposition or transfer of a Property in connection with realization thereon
following a Mortgage Loan Event of Default, such reasonable and customary
out-of-pocket costs and expenses of sale or other disposition (including
reasonable attorneys’ fees and brokerage commissions), (v) in the case of a
foreclosure sale, such out-of-pocket costs and expenses incurred by Mortgage
Lender under the Mortgage Loan Documents as Mortgage Lender shall be entitled to
receive reimbursement for under the terms of the Mortgage Loan Documents,
(vi) in the case of a refinancing of the Mortgage Loan, such out-of-pocket costs
and expenses (including reasonable attorneys’ fees) of such refinancing as shall
be reasonably approved by Mortgage Lender, and (vii) the amount of any
prepayments required pursuant to the Mortgage Loan Documents and/or the Loan
Documents, in connection with any such Liquidation Event.

“Net Proceeds” shall have the meaning set forth in the Mortgage Loan Agreement.

“Net Sales Proceeds” shall have the meaning set forth in the Mortgage Loan
Agreement.

“New Manager” shall mean any Person replacing or becoming the assignee of the
then current Manager, in each case, in accordance with the applicable terms and
conditions hereof.

“New Non-Consolidation Opinion” shall mean a substantive non-consolidation
opinion provided by outside counsel acceptable to Lender and the Rating Agencies
and otherwise in form and substance acceptable to Lender and the Rating
Agencies.

“Non-Consolidation Opinion” shall mean that certain substantive
non-consolidation opinion delivered to Lender by Ropes & Gray LLP in connection
with the closing of the Loan.

 

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“Note” shall mean, individually and/or collectively, as the context may require
(i) that certain Mezzanine A Promissory Note A-1 of even date herewith in the
principal amount of $37,500,000, made by Borrower in favor of Citi (“Note A-1”),
(ii) that certain Mezzanine A Promissory Note A-2 of even date herewith in the
principal amount of $37,500,000 made by Borrower in favor of BOA (“Note A-2”),
(iii) that certain Mezzanine A Promissory Note A-3 of even date herewith in the
principal amount of $12,500,000, made by Borrower in favor of Citi (“Note A-3”)
and (iv) that certain Mezzanine A Promissory Note A-4 of even date herewith in
the principal amount of $12,500,000 made by Borrower in favor of BOA (“Note
A-4”), as each of the same may be amended, restated, replaced, extended,
renewed, supplemented, severed, split, or otherwise modified from time to time.

“Note A-1” shall have the meaning set forth in the definition of “Note” in
Section 1.1 hereof.

“Note A-2” shall have the meaning set forth in the definition of “Note” in
Section 1.1 hereof.

“Note A-3” shall have the meaning set forth in the definition of “Note” in
Section 1.1 hereof.

“Note A-4” shall have the meaning set forth in the definition of “Note” in
Section 1.1 hereof.

“OFAC” shall have the meaning set forth in Section 3.30 hereof.

“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower
which is signed by Responsible Officer of Borrower.

“Operating Expenses” shall mean the total of all expenditures, computed in
accordance with the Approved Accounting Method, of whatever kind relating to the
operation, maintenance and management of the Properties that are incurred on a
regular monthly or other periodic basis, including without limitation, (and
without duplication) ground rent, utilities, ordinary repairs and maintenance,
insurance, license fees, property taxes and assessments, advertising and
marketing expenses, payroll and related taxes, computer processing charges,
management fees, franchise fees, costs of food and beverage sold or consumed,
operational equipment or other lease payments as approved by Lender, but
specifically excluding (i) depreciation, (ii) Debt Service (as defined in the
Mortgage Loan Agreement), (iii) non-recurring or extraordinary expenses, and
(iv) deposits into the Reserve Funds (as defined in the Mortgage Loan
Agreement).

 

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“Operating Income” shall mean all income, computed in accordance with the
Approved Accounting Method, derived from the ownership and operation of the
Properties from whatever source, including, without limitation (but without
duplication): (a) all income and proceeds received from rental of rooms,
commercial space, meeting, conference and/or banquet space within the
Properties; (b) all income and proceeds received from food and beverage
operations and from catering services conducted from the Properties; (c) all
income and proceeds from business interruption, rental interruption and use and
occupancy insurance with respect to the operation of the Properties (after
deducting therefrom all necessary costs and expenses incurred in the adjustment
or collection thereof); (d) all Awards for temporary use (after deducting
therefrom all costs incurred in the adjustment or collection thereof and in
Restoration of the Property or Properties, as applicable); (e) all refunds of
any items included in “Operating Expenses”; (f) all income and proceeds from
judgments, settlements and other resolutions of disputes with respect to matters
which would be includable in this definition of “Operating Income” if received
in the ordinary course of the Properties operation (after deducting therefrom
all necessary costs and expenses incurred in the adjustment or collection
thereof); and (g) all other incidental income in connection with the operation
of the Properties; but excluding (1) rental income derived from Leases, interest
income and gross receipts received by lessees, managers, licensees or
concessionaires of the Properties (including, without limitation, any Manager);
(2) consideration received at the Properties for hotel accommodations, goods and
services to be provided at other hotels, although arranged by, for or on behalf
of Borrower or Manager; (3) non-recurring or extraordinary income and proceeds
from the sale or other disposition of goods, capital assets and other items not
in the ordinary course of the Properties operation (such as the sales of
furniture, fixtures and equipment); (4) federal, state and municipal excise,
sales and use taxes collected directly from patrons or guests of the Properties
as a part of or based on the sales price of any goods, services or other items,
such as gross receipts, room, admission, cabaret or equivalent taxes; (5) Awards
(except to the extent provided in clause (d) above) or insurance proceeds
(except to the extent provided in clause (c) above); (6) refunds of amounts not
included in Operating Expenses at any time and uncollectible accounts;
(7) gratuities collected by the Properties’ employees; (8) the proceeds of any
financing; (9) other income or proceeds resulting other than from the use or
occupancy of the Properties, or any part thereof, or other than from the sale of
goods, services or other items sold on or provided from the Properties in the
ordinary course of business; (10) uncollectable accounts and any credits or
refunds made to customers, guests or patrons in the form of allowances or
adjustments to previously recorded revenues; (11) unforfeited security deposits,
utility and other similar deposits; and (12) any disbursements to Borrower from
the Reserve Funds. Operating Income shall not be diminished as a result of the
Security Instrument or the creation of any intervening estate or interest in the
Property or any part thereof. Notwithstanding the foregoing or anything to the
contrary contained herein or in any other Loan Document, “Gross Rents” and
“Operating Income” shall be calculated hereunder without duplication of one
another or of any individual item contained within the definitions thereof.

“Operating Lease” shall mean, individually and/or collectively, as the context
may require, with respect to each Individual Property, each Lease set forth on
Schedule VIII hereto, as each of the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time in accordance with the term
of the Loan Documents.

“Operating Lessee” shall mean, individually and/or collectively, as the context
may require, with respect to each Individual Property, each Mortgage Borrower
set forth on Schedule VIII hereto.

“Organizational Chart” shall have the meaning set forth in Section 3.31 hereof.

“Other Charges” shall have the meaning set forth in the Mortgage Loan Agreement.

“Participant” shall have the meaning set forth in Section 11.8(a)(ix) hereof.

 

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“Participant Register” shall have the meaning set forth in Section 11.7 hereof.

“Patriot Act” shall have the meaning set forth in Section 3.30 hereof.

“Permits” shall mean all certificates, licenses, permits, franchises, trade
names, certificates of occupancy, consents, and other approvals (governmental
and otherwise) necessary or desirable for the operation of each Individual
Property and the Collateral and the conduct of Borrower’s and Mortgage
Borrower’s business, as applicable (including, without limitation, all required
zoning, building code, land use, environmental, public assembly and other
similar permits or approvals, as applicable).

“Permitted Encumbrances” shall mean, with respect to each Individual Property,
collectively, (a) the lien and security interests created by this Agreement and
the other Loan Documents, (b) all liens, encumbrances and other matters
disclosed in the applicable Title Insurance Policies, (c) liens, if any, for
Taxes imposed by any Governmental Authority not yet due or delinquent and
(d) existing Leases (including any SRO Arrangements) and new Leases entered into
in accordance with this Agreement, (e) any Permitted Equipment Leases, (f) such
other title and survey exceptions as Lender has approved or may approve in
writing in Lender’s sole discretion and (g) the liens and security interests
created by the Mortgage Loan Documents and the Mezzanine B Loan Documents.

“Permitted Equipment Leases” shall have the meaning set forth in the Mortgage
Loan Agreement.

“Permitted Investments” shall mean “permitted investments” as then defined and
required by the Rating Agencies.

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

“Personal Property” shall mean, individually and/or collectively (as the context
requires), the “Personal Property” as defined in each applicable Security
Instrument.

“Pledge Agreement” shall have the meaning set forth in the Recitals to this
Agreement.

“Policies” shall have the meaning set forth in the Mortgage Loan Agreement.

“Post Closing Agreement” shall mean that certain Post-Closing Obligations
Agreement (Mezzanine A Loan), dated of even date herewith, by and between
Borrower and Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time.

“Prepayment Failure” shall have the meaning specified in Section 2.7(a) hereof.

“Prepayment Notice” shall have the meaning specified in Section 2.7(a) hereof.

 

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“Prepayment Premium” shall mean with respect to any repayment or prepayment of
the Debt made (i) on or prior to the Monthly Payment Date occurring in August,
2015, an amount determined by Lender equal to the product of (a) the LIBOR
Spread in effect as of the date of such repayment or prepayment on the Loan,
weighted on the principal balance of the Loan on the date of such prepayment,
(b) the amount of the Loan being prepaid and (c) a fraction, the numerator of
which is the number of days remaining from and including the date that such
repayment or prepayment is made through the last day of the Interest Accrual
Period related to the Monthly Payment Date occurring in August, 2015 and the
denominator of which is 360, and (ii) after the Monthly Payment Date occurring
in August, 2015, an amount equal to zero dollars ($0.00). Lender’s computation
of the Prepayment Premium shall be conclusive and binding on Borrower for all
purposes, absent manifest error.

“Prime Rate” shall mean rate of interest published in The Wall Street Journal
from time to time as the “Prime Rate.” If more than one “Prime Rate” is
published in The Wall Street Journal for a day, the average of such “Prime
Rates” shall be used, and such average shall be rounded up to the nearest
1/100th of one percent (0.01%). If The Wall Street Journal ceases to publish the
“Prime Rate,” Lender shall select an equivalent publication that publishes such
“Prime Rate,” and if such “Prime Rates” are no longer generally published or are
limited, regulated or administered by a governmental or quasigovernmental body,
then Lender shall select a comparable interest rate index.

“Prime Rate Loan” shall mean the Loan at such time as interest thereon accrues
at a rate of interest based upon the Prime Rate.

“Prime Rate Spread” shall mean the difference (expressed as the number of basis
points) between (a) the LIBOR Rate on the Determination Date that LIBOR was last
applicable to the Loan and (b) the Prime Rate on the Determination Date that
LIBOR was last applicable to the Loan; provided, however, in no event shall such
difference be a negative number.

“Private Company Qualified Transferee” shall mean a Person who together with a
Private Company Replacement Guarantor and any Transferee Partner, collectively,
(i) has a net worth of at least $250,000,000 (exclusive of the Properties),
(ii) directly or indirectly owns commercial real estate, hotel and lodging,
leisure or brand assets of at least $750,000,000 (exclusive of the Properties)
and (iii) directly or indirectly owns, franchises and/or operates (or has
engaged a Qualified Manager in accordance with the terms and conditions hereof
that operates) at least five (5) full service hotels with amenities similar to
the Properties, which full service hotels are located in major metropolitan
areas similar to the areas where the Properties are located, in each case as
reasonably determined by Lender; provided, that, if a Person would satisfy the
requirements of this definition of “Private Company Qualified Transferee” but
for the requirements of the immediately preceding clause (ii), such Person shall
still qualify as a Private Company Qualified Transferee provided that (A) such
Person, together with a Private Company Replacement Guarantor and any Transferee
Partner, collectively, directly or indirectly owns, franchises and/or operates
(or has engaged a Qualified Manager in accordance with the terms and conditions
hereof that operates) at least ten (10) full service hotels with amenities
similar to the Properties, which full service hotels are located in major
metropolitan areas similar to the areas where the Properties are located and
(B) such Person, together with a Private Company Replacement Guarantor and any
Transferee Partner, collectively, directly or indirectly owns commercial real
estate, hotel and lodging, leisure or brand assets of at least $400,000,000
(exclusive of the Properties), in each case as reasonably determined by Lender.

 

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“Private Company Replacement Guarantor” shall mean a Person who (A) has (i) net
worth of not less than $100,000,000 (exclusive of the Properties), (ii) net
worth of not less than $270,000,000 (inclusive of the Properties) and
(iii) Unencumbered Liquid Assets of not less than $10,000,000, each as
reasonably determined by Lender and (B) otherwise complies with the terms,
covenants and conditions for a Private Company Replacement Guarantor set forth
in Section 6.3(b) hereof.

“Private Company Transaction” shall mean a merger, sale or other transaction
pursuant to which Guarantor becomes (i) owned directly or indirectly by a
privately traded company or companies or (ii) a privately traded company, and in
case of each of clauses (i) and (ii) is not directly or indirectly at least 50%
owned and controlled by an entity whose securities are listed and traded on a
nationally recognized securities exchange or on the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.

“Prohibited Transfer” shall have the meaning set forth in Section 6.2 hereof.

“Projections” shall have the meaning set forth in Section 11.8(b)(ii) hereof.

“Property” and “Properties” shall have the meaning set forth in the Mortgage
Loan Agreement.

“Property Document” shall mean, individually or collectively (as the context may
require), the following: (i) the REA, (ii) the Ground Lease and
(iii) Condominium Documents.

“Property Document Event” shall mean any event which would, directly or
indirectly, cause a termination right, right of first refusal, first offer or
any other similar right, cause any termination fees to be due or would cause a
Material Adverse Effect to occur under any Property Document (in each case,
beyond any applicable notice and cure periods under the applicable Property
Document); provided, however, any of the foregoing shall not be deemed a
Property Document Event to the extent Lender’s prior written consent is obtained
with respect to the same.

“Property Document Provisions” shall mean the representations, covenants and
other terms and conditions of this Agreement and the other Loan Documents
related to, in each case, any Property Document and/or other related matters
(including, without limitation, Sections 3.34, 3.38, 3.39, 4.22, 4.23 and 4.25
of this Agreement).

“Property Owner Transferee” shall have the meaning set forth in Section 6.4
hereof.

“Provided Information” shall mean any information provided by or on behalf of
any Borrower Party in connection with the Loan, the Mortgage Loan, the
Properties, the Collateral, such Borrower Party, any other Borrower Party and/or
any related matter or Person.

 

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“Prudent Lender Standard” shall, with respect to any matter, be deemed to have
been met if the matter in question (i) prior to a Securitization, is reasonably
acceptable to Lender and (ii) after a Securitization, would be acceptable to a
prudent lender of securitized commercial mortgage loans.

“Public Company Qualified Transferee” means an entity whose securities are
listed and traded on a national securities exchange who (i) has net worth of at
least $250,000,000 (exclusive of the Properties), (ii) directly or indirectly
owns, operates and/or franchises (or has engaged a Qualified Manager in
accordance with the terms and conditions hereof that operates) full service
hotels with amenities similar to the Properties, which full service hotels are
located in major metropolitan areas similar to the areas where the Properties
are located and (iii) whose leverage after the consummation of the Public
Company Transaction is no greater than sixty percent (60%), each as reasonably
determined by Lender.

“Public Company Replacement Guarantor” shall mean a Person who (A) has (i) net
worth of not less than $100,000,000 (exclusive of the Properties), (ii) net
worth of not less than $270,000,000 (inclusive of the Properties) and
(iii) Unencumbered Liquid Assets of not less than $10,000,000, each as
reasonably determined by Lender and (B) otherwise complies with the terms,
covenants and conditions for a Public Company Replacement Guarantor set forth in
Section 6.3(c) hereof.

“Public Company Transaction” shall mean a merger, sale or other transaction
pursuant to which at least 50% of Guarantor’s ownership and control is acquired
directly or indirectly by an entity whose securities are listed and traded on a
nationally recognized securities exchange or on the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.

“Qualified Management Agreement” shall mean a management agreement with a
Qualified Manager with respect to the applicable Individual Property which is
approved by Lender in writing (which such approval may be conditioned upon
Lender’s receipt of a Rating Agency Confirmation with respect to such management
agreement).

“Qualified Manager” shall mean either (a) Morgans Hotel Group Management LLC
(provided the same (A) is not being removed as Manager hereunder and (B) has not
suffered a material adverse change in its general business standing, reputation
or creditworthiness from the level thereof as of the date hereof) or (b) a
reputable and experienced manager (which may be an Affiliate of Borrower) which,
in the reasonable judgment of Lender possesses experience in managing properties
similar in location, size, class, use, operation and value as the Properties;
provided, that (1) Borrower shall have obtained a Rating Agency Confirmation
from the Rating Agencies, (2) to the extent that such Qualified Manager is an
Affiliated Manager, Borrower shall deliver to Lender a New Non-Consolidation
Opinion with respect to such Qualified Manager and such Qualified Management
Agreement and (3) (I) after giving effect to such management agreement with such
Qualified Manager, the Delano Property shall be operated under the name “Delano”
or another name or franchise acceptable to Lender and (II) after giving effect
to such management agreement with such Qualified Manager, the Hudson Property
shall be operated under the name “Hudson” or another name or franchise
acceptable to Lender.

 

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“Qualified Transferee” shall mean a Person who (i) has net worth of at least
$250,000,000 (exclusive of the Properties), (ii) directly or indirectly owns
commercial real estate, hotel and lodging, leisure or brand assets of at least
$750,000,000 (exclusive of the Properties) and (iii) directly or indirectly
owns, franchises and/or operates (or has engaged a Qualified Manager in
accordance with the terms and conditions hereof that operates) at least five
(5) full service hotels with amenities similar to the Properties, which full
service hotels are located in major metropolitan areas similar to the areas
where the Properties are located, each as reasonably determined by Lender.

“Qualified Transferee Replacement Guarantor” shall mean a Person who owns a
direct or indirect equity interest in Transferee and the Properties and controls
Transferee and the Properties that has (i) net worth of not less than
$250,000,000 (exclusive of the Properties) and (ii) Unencumbered Liquid Assets
of not less than $10,000,000, each as reasonably determined by Lender.

“Rating Agency” shall mean S&P, Moody’s, Fitch, Kroll Bond Rating Agency, Inc.,
Morningstar Credit Ratings, LLC, DBRS, Inc. or any other nationally-recognized
statistical rating agency designated by Lender or which actually rates the
Securities (and any successor to any of the foregoing) in connection with and/or
in anticipation of any Secondary Market Transaction.

“Rating Agency Condition” shall be deemed to exist if (i) any Rating Agency
fails to respond to any request for a Rating Agency Confirmation with respect to
any applicable matter or otherwise elects (orally or in writing) not to consider
any applicable matter or (ii) Lender (or its Servicer) is not required to and/or
elects not to obtain (or cause to be obtained) a Rating Agency Confirmation with
respect to any applicable matter, in each case, pursuant to and in compliance
with any pooling and servicing agreement(s) or similar agreement(s), in each
case, relating to the servicing and/or administration of the Loan.

“Rating Agency Confirmation” shall mean (i) prior to a Securitization or if the
Rating Agency Condition exists, that Lender has (in consultation with the Rating
Agencies (if required by Lender)) approved the matter in question in writing
based upon Lender’s good faith determination of applicable Rating Agency
standards and criteria and (ii) from and after a Securitization (to the extent
the Rating Agency Condition does not exist), a written affirmation from each of
the Rating Agencies (obtained at Borrower’s sole cost and expense) that the
credit rating of the Securities by such Rating Agency immediately prior to the
occurrence of the event with respect to which such Rating Agency Confirmation is
sought will not be qualified, downgraded or withdrawn as a result of the
occurrence of such event, which affirmation may be granted or withheld in such
Rating Agency’s sole and absolute discretion.

“REA” shall mean, individually or collectively (as the context requires), each
reciprocal easement or similar agreement affecting the Property (or any portion
thereof) as more particularly described on Schedule IV hereto (if any), any
amendment, restatement, replacement or other modification thereof, any future
reciprocal easement or similar agreement affecting the Property (or any portion
thereof) entered into in accordance with the applicable terms and conditions
hereof and any amendment, restatement, replacement or other modification
thereof.

 

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“Register” shall have the meaning set forth in Section 11.8(a)(viii) hereof.

“Registration Statement” shall have the meaning set forth in Section 11.2
hereof.

“Regulation AB” shall mean Regulation AB under the Securities Act and the
Exchange Act, as such Regulation may be amended from time to time.

“Related Loan” shall mean a loan to an Affiliate of Borrower or secured by a
Related Property, that is included in a Securitization with the Loan (or any
portion thereof or interest therein).

“Related Property” shall mean a parcel of real property, together with
improvements thereon and personal property related thereto, that is “related”
within the meaning of the definition of Significant Obligor, to the Property.

“Release” shall have the meaning set forth in Section 2.10 hereof.

“Release Amount” shall have the meaning set forth in Section 2.10 hereof.

“Release Approval Item” shall have the meaning set forth in Section 2.10 hereof.

“Release Notice Date” shall have the meaning set forth in Section 2.10 hereof.

“Release Price” shall mean (i) with respect to the Release Collateral associated
with the Hudson Property, 110% of the Allocated Loan Amount with respect to the
Released Collateral associated with the Hudson Property and (ii) with respect to
the Released Collateral associated with the Delano Property, the greater of
(a) 120% of the Allocated Loan Amount with respect to the Released Collateral
associated with the Delano Property and (b) the share of Net Sales Proceeds
applicable to the Delano Property and allocable to the Loan on a pro rata basis
amongst the Loan, the Mortgage Loan and the Mezzanine B Loan.

“Released Collateral” shall have the meaning set forth in Section 2.10 hereof.

“Released Property” shall have the meaning set forth in the Mortgage Loan
Agreement.

“Rent Roll” shall have the meaning set forth in Section 3.18 hereof.

“Rents” shall mean, individually and/or collectively (as the context may
require), the “Rents” as defined in each applicable Security Instrument.

“Replacement Interest Rate Cap Agreement” shall have the meaning set forth in
Section 2.8(c) hereof.

“Reporting Failure” shall have the meaning set forth in Section 4.12 hereof.

“Required Financial Item” shall have the meaning set forth in Section 4.12
hereof.

 

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“Required Rating” means (i) a rating of not less than “A-1” (or its equivalent)
from each of the Rating Agencies if the term of such Letter of Credit is no
longer than three (3) months or if the term of such Letter of Credit is in
excess of three (3) months, a rating of not less than “AA-” (or its equivalent)
from each of the Rating Agencies or (ii) such other rating with respect to which
Lender shall have received a Rating Agency Confirmation.

“Reserve Accounts” shall mean any reserve or escrow account established by this
Agreement or the other Loan Documents, including without limitation, the
accounts into which the Substitute Reserve funds (if any) are deposited.

“Reserve Funds” shall mean any reserve or escrow funds established by this
Agreement or the other Loan Documents (including, without limitation, the funds
on deposit in any Substitute Reserve).

“Responsible Officer” means with respect to a Person, the chairman of the board,
president, chief operating officer, chief financial officer, treasurer or vice
president of such Person or such other similar officer of such Person reasonably
acceptable to Lender.

“Restoration” shall have the meaning set forth in the Mortgage Loan Agreement.

“Restricted Party” shall have the meaning set forth in Section 6.1 hereof.

“Sale or Pledge” shall have the meaning set forth in Section 6.1 hereof.

“Sanctions” shall have the meaning set forth in Section 3.30 hereof.

“Satisfactory Search Results” shall mean the results of Lender’s customary “know
your customer”, credit history check, litigation, lien, bankruptcy, judgment and
other similar searches with respect to the applicable transferee and its
applicable affiliates, in each case, (i) revealing no matters which would have a
Material Adverse Effect and (ii) yielding results which are otherwise acceptable
to Lender in its reasonable discretion. Borrower shall pay all of Lender’s
costs, fees and expenses in connection with the foregoing and, notwithstanding
the foregoing, no such search results shall constitute “Satisfactory Search
Results” until such costs, fees and expenses are paid in full.

“Secondary Market Transaction” shall have the meaning set forth in Section 11.1
hereof.

“Securities” shall have the meaning set forth in Section 11.1 hereof.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Securitization” shall have the meaning set forth in Section 11.1 hereof.

“Security Instrument” and “Security Instruments” shall have the meaning set
forth in the Recitals.

“Servicer” shall have the meaning set forth in Section 11.4 hereof.

“Severed Loan Documents” shall have the meaning set forth in Article 10 hereof.

 

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“Significant Obligor” shall have the meaning set forth in Item 1101(k) of
Regulation AB under the Securities Act.

“Single Purpose Entity” shall mean an entity whose structure and organizational
and governing documents are otherwise in form and substance acceptable to the
Rating Agencies and satisfying the Prudent Lender Standard.

“Special Management Agreement” shall mean that certain Management Agreement,
dated as of December 8, 2011 between Special Manager and Beach Hotel Associates
LLC, pursuant to which Special Manager provides certain services with respect to
food and beverage related activities with respect to the Delano Property, as the
same may be amended, restated, replaced, extended, renewed, supplemented or
otherwise modified from time to time in accordance with the terms hereof and of
the other Loan Documents.

“Special Manager” shall mean LGD Management, LLC, a Nevada limited liability
company.

“Special Member” is defined in Section 5.1 hereof.

“SPE Component Entity” shall have the meaning set forth in Section 5.1 hereof.

“S&P” shall mean Standard & Poor’s Ratings Services.

“SRO Arrangement” shall mean any lease, arrangement (statutory or otherwise) or
other agreement currently in effect providing for the occupancy of an SRO Unit.

“SRO Unit” shall mean a guestroom or other single-room unit at the Hudson
Property that is leased or occupied for the use as a primary residence by the
occupant(s) thereof or that was previously leased or occupied for the use as a
primary residence by the occupant(s) thereof and that has not been converted
into a hotel room in accordance with applicable law.

“SRO Unit Conversion Work” shall mean all work necessary to convert an SRO Unit
into a hotel room (consistent with the type and quality of hotel rooms at the
Hudson Property as of the Closing Date) in accordance with applicable law.

“State” shall mean the state in which the Property or the Collateral, as
applicable, or any part of either of the foregoing is located.

“Strike Rate” shall mean (i) with respect to the initial term of the Loan, a
percentage rate equal to one and three-quarters percent (1.75%) and (ii) with
respect to any Extension Period, a percentage rate equal to a percentage rate
per annum which, when added to the LIBOR Spread, would yield a Debt Service
Coverage Ratio of at least 1.20:1.00.

“Subordination of Management Agreement” shall mean, individually and/or
collectively (as the context requires), (i) that certain Subordination of
Management Agreement (Mezzanine A Loan) dated as of the date hereof among
Lender, Hudson Leaseco LLC, Borrower and Manager, as the same may be amended,
restated, replaced, extended, renewed, supplemented or otherwise modified from
time to time and (ii) that certain Subordination of Management Agreement
(Mezzanine A Loan) dated as of the date hereof among Lender, Beach Hotel
Associates LLC, Borrower and Manager, as the same may be amended, restated,
replaced, extended, renewed, supplemented or otherwise modified from time to
time.

 

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“Subordination of Special Management Agreement” shall mean that certain
Subordination of Management Agreement (Mezzanine A Loan) dated as of the date
hereof among Lender, Borrower, Beach Hotel Associates LLC and Special Manager,
as the same may be amended, restated, replaced, extended, renewed, supplemented
or otherwise modified from time to time.

“Substitute Cash Management Accounts” shall have the meaning set forth in
Section 9.1(b) hereof.

“Substitute Reserves” shall have the meaning set forth in Section 8.1(b) hereof.

“Survey” shall mean, individually and/or collectively (as the context may
require), each survey of each Individual Property certified and delivered to
Lender in connection with the closing of the Loan.

“Syndication” shall have the meaning set forth in Section 11.8(a)(i) hereof.

“Taxes” shall mean all taxes, assessments, water rates, sewer rents, and other
governmental impositions, including, without limitation, vault charges and
license fees for the use of vaults, chutes and similar areas adjoining the Land,
now or hereafter levied or assessed or imposed against the Property or any part
thereof.

“Tenant” shall mean any Person leasing, subleasing or otherwise occupying any
portion of the Property under a Lease or other occupancy agreement.

“Title Insurance Policy” shall mean, individually and/or collectively, as the
context may require, those certain ALTA mortgagee title insurance policies
issued with respect to each Individual Property and insuring the lien of the
Security Instruments.

“TLG Promissory Notes” shall mean those certain promissory notes issued in
November 2011 by TLG Acquisition LLC to Andrew Sasson and Andy Masi , as such
promissory notes may be amended, supplemented or otherwise modified, and any
notes, securities or other obligations of Guarantor, any Borrower Party or any
of their affiliates that refinance, supplement or replace such promissory notes.

“Transferee” shall have the meaning set forth in Section 6.4 hereof.

“Transferee Partner” shall mean any joint venture partner (and its Affiliates)
who joins with a Person and/or such Person’s Affiliates to collectively invest
in and acquire the Guarantor, provided that such joint venture partner (and its
Affiliates) shall own a direct or indirect equity interest in (i) Guarantor or
Private Company Replacement Guarantor, as applicable and (ii) Private Company
Qualified Transferee following the consummation of a Private Company
Transaction.

 

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“Trigger Period” shall have the meaning set forth in the Mortgage Loan
Agreement.

“True Up Payment” shall mean a payment into the applicable Reserve Account of a
sum which, together with any applicable monthly deposits into the applicable
Reserve Account, will be sufficient to discharge the obligations and liabilities
for which such Reserve Account was established as and when reasonably
appropriate. The amount of the True Up Payment shall be determined by Lender in
its reasonable discretion and shall be final and binding absent manifest error.

“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as in
effect in the states in which perfection of a security interest in the
Collateral or the Accounts, as applicable, is made.

“Underwriter Group” shall have the meaning set forth in Section 11.2 hereof.

“Unencumbered Liquid Assets” shall be determined by Lender in its reasonable
discretion, at any time and from time to time, and shall mean the “liquid
assets” of a Person, free and clear of all liens and shall include only the
following assets of such Person as set forth on such Person’s balance sheet:
(x) all Cash and Cash Equivalents, and (y) the following, to the extent acquired
for investment or with a view to achieving trading profits (and which may be
liquidated without restrictions within five (5) Business Days or less):
marketable securities owned of record and beneficially by such Person and which
are freely tradeable, without any restriction on the New York Stock Exchange,
the American Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the London Stock
Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt Stock
Exchange.

“Union” shall mean the New York Hotel & Motel Trades Council, AFL-CIO.

“Union Documents” shall mean the collective bargaining agreements set forth on
Schedule XXII hereto.

“Units” shall mean the “Units” as defined in the Condominium Documents.

“Updated Information” shall have the meaning set forth in Section 11.1 hereof.

“U.S. Obligations” shall mean direct full faith and credit obligations of the
United States of America that are not subject to prepayment, call or early
redemption.

“Waived Cash Management Accounts” shall have the meaning set forth in
Section 9.1(b) hereof.

“Waived Cash Management Provisions” shall have the meaning set forth in
Section 9.1(b) hereof.

“Waived Reserve Funds” shall have the meaning set forth in Section 8.1(b)
hereof.

“Waived Restoration Provisions” shall have the meaning set forth in Section 7.4
hereof.

 

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Section 1.2. Principles of Construction.

All references to sections and schedules are to sections and schedules in or to
this Agreement unless otherwise specified. All uses of the word “including”
shall mean “including, without limitation” unless the context shall indicate
otherwise. Unless otherwise specified, the words “hereof,” “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified, all meanings attributed to defined terms
herein shall be equally applicable to both the singular and plural forms of the
terms so defined.

With respect to references to the Mortgage Loan Documents (including without
limitation terms defined by cross-reference to the Mortgage Loan Documents),
such references shall refer to the Mortgage Loan Documents as in effect on the
Closing Date (and any such defined terms shall have the definitions set forth in
the Mortgage Loan Documents as of the Closing Date) and no amendments,
restatements, replacements, supplements, waivers or other modifications to or of
the Mortgage Loan Documents shall have the effect of changing such references
(including without limitation any such definitions) for the purposes of this
Agreement.

Notwithstanding anything stated herein to the contrary, any provisions in this
Agreement cross-referencing or incorporating by reference provisions of the
Mortgage Loan Documents shall be effective notwithstanding the termination of
the Mortgage Loan Documents by payment in full of the Mortgage Loan or
otherwise.

To the extent that any terms, provisions or definitions of any Mortgage Loan
Documents that are incorporated herein by reference are incorporated into the
Mortgage Loan Documents by reference to any other document or instrument, such
terms, provisions or definitions that are incorporated herein by reference shall
at all times be deemed to incorporate each such term, provision and definition
of the applicable other document or instrument as the same is set forth in such
other document or instrument as of the Closing Date, without regard to any
amendments, restatements, replacements, supplements, waivers or other
modifications to or of such other document or instrument occurring after the
Closing Date.

The words “Borrower shall cause” or “Borrower shall not permit” (or words of
similar meaning) shall mean “Borrower shall cause Mortgage Borrower to” or
“Borrower shall not permit Mortgage Borrower to”, as the case may be, to so act
or not to so act, as applicable.

ARTICLE 2

GENERAL TERMS

Section 2.1. Loan Commitment; Disbursement to Borrower. Except as expressly and
specifically set forth herein, Lender has no obligation or other commitment to
loan any funds to Borrower or otherwise make disbursements to Borrower. Borrower
hereby waives any right Borrower may have to make any claim to the contrary.

Section 2.2. The Loan. Subject to and upon the terms and conditions set forth
herein, Lender hereby agrees to make and Borrower hereby agrees to accept the
Loan on the Closing Date.

 

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Section 2.3. Disbursement to Borrower. Borrower may request and receive only one
borrowing hereunder in respect of the Loan and any amount borrowed and repaid
hereunder in respect of the Loan may not be re-borrowed.

Section 2.4. The Note and the Other Loan Documents. The Loan shall be evidenced
by the Note and this Agreement and secured by this Agreement and the other Loan
Documents.

Section 2.5. Interest Rate.

(a) Generally. Interest on the outstanding principal balance of the Loan shall
accrue from the Closing Date at the Interest Rate until repaid in accordance
with the applicable terms and conditions hereof.

(b) Determination of Interest Rate.

(i) The Interest Rate with respect to the Loan shall be: (A) the LIBOR Rate with
respect to the applicable Interest Accrual Period for a LIBOR Loan or (B) the
Prime Rate plus the Prime Rate Spread for a Prime Rate Loan if the Loan is
converted to a Prime Rate Loan pursuant to the provisions hereof.
Notwithstanding any provision of this Agreement to the contrary, in no event
shall Borrower have the right to convert a LIBOR Loan to a Prime Rate Loan.

(ii) Subject to the terms and conditions hereof, the Loan shall be a LIBOR Loan
and Borrower shall pay interest on the outstanding principal amount of the Loan
at the LIBOR Rate for the applicable Interest Accrual Period. Any change in the
rate of interest hereunder due to a change in the Interest Rate shall become
effective as of the opening of business on the first day on which such change in
the Interest Rate shall become effective. Each determination by Lender of the
Interest Rate shall be conclusive and binding for all purposes, absent manifest
error.

(iii) In the event that Lender shall have determined (which determination shall
be conclusive and binding upon Borrower absent manifest error) that by reason of
circumstances affecting the interbank Eurodollar market, adequate and reasonable
means do not exist for ascertaining LIBOR, then Lender shall forthwith give
notice by telephone of such determination, confirmed in writing, to Borrower at
least one (1) day prior to the last day of the related Interest Accrual Period.
If such notice is given, the related outstanding LIBOR Loan shall be converted,
on the last day of the then current Interest Accrual Period, to a Prime Rate
Loan.

(iv) If, pursuant to the terms hereof, any portion of the Loan has been
converted to a Prime Rate Loan and Lender shall determine (which determination
shall be conclusive and binding upon Borrower absent manifest error) that the
event(s) or circumstance(s) which resulted in such conversion shall no longer be
applicable, Lender shall give notice by telephone of such determination,
confirmed in writing, to Borrower at least one (1) day prior to the last day of
the related Interest Accrual Period. If such notice is given, the related
outstanding Prime Rate Loan shall be converted to a LIBOR Loan on the last day
of the then current Interest Accrual Period.

 

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(v) All payments made by Borrower hereunder shall be made free and clear of, and
without reduction for or on account of, income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions, reserves or withholdings imposed,
levied, collected, withheld or assessed by any Governmental Authority, which are
imposed, enacted or become effective after the date hereof (such non-excluded
taxes being referred to collectively as “Foreign Taxes”), excluding income and
franchise taxes of the United States of America imposed by the jurisdiction
under the laws of which Lender is organized or any political subdivision or
taxing authority thereof or therein or imposed by the jurisdiction of Lender’s
applicable lending office where Lender is resident or engaged in business or any
political subdivision or taking authority thereof or therein. If any Foreign
Taxes are required to be withheld from any amounts payable to Lender hereunder,
the amounts so payable to Lender shall be increased to the extent necessary to
yield to Lender (after payment of all Foreign Taxes) interest or any such other
amounts payable hereunder at the rate or in the amounts specified hereunder.
Whenever any Foreign Tax is payable pursuant to applicable law by Borrower, as
promptly as possible thereafter, Borrower shall send to Lender an original
official receipt, if available, or certified copy thereof showing payment of
such Foreign Tax. Borrower hereby indemnifies Lender for any incremental taxes,
interest or penalties that may become payable by Lender which may result from
any failure by Borrower to pay any such Foreign Tax when due to the appropriate
taxing authority or any failure by Borrower to remit to Lender the required
receipts or other required documentary evidence.

(vi) If any requirement of law or any change therein or in the interpretation or
application thereof, shall hereafter make it unlawful for Lender to make or
maintain a LIBOR Loan as contemplated hereunder (A) the obligation of Lender
hereunder to make a LIBOR Loan or to convert a Prime Rate Loan to a LIBOR Loan
shall be canceled forthwith and (B) any outstanding LIBOR Loan shall be
converted automatically to a Prime Rate Loan on the last day of the then current
Interest Accrual Period or within such earlier period as required by law.
Borrower hereby agrees to promptly pay to Lender, upon demand, any additional
amounts necessary to compensate Lender for any reasonable costs incurred by
Lender in making any conversion in accordance with this Agreement, including,
without limitation, any interest or fees payable by Lender to lenders of funds
obtained by it in order to make or maintain the LIBOR Loan hereunder. Lender’s
notice of such costs, as certified to Borrower, shall be conclusive absent
manifest error.

(vii) In the event that any change in any requirement of law or in the
interpretation or application thereof, or compliance by Lender with any request
or directive (whether or not having the force of law) hereafter issued from any
central bank or other Governmental Authority:

(A) shall hereafter impose, modify or hold applicable any reserve, capital
adequacy, tax, special deposit, compulsory loan or similar requirement against
assets held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other acquisition of
funds by, any office of Lender which is not otherwise included in the
determination of LIBOR hereunder;

 

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(B) shall hereafter have the effect of reducing the rate of return on Lender’s
capital as a consequence of its obligations hereunder to a level below that
which Lender could have achieved but for such adoption, change or compliance
(taking into consideration Lender’s policies with respect to capital adequacy)
by any amount deemed by Lender to be material; or

(C) shall hereafter impose on Lender any other condition and the result of any
of the foregoing is to increase the cost to Lender of making, renewing or
maintaining loans or extensions of credit or to reduce any amount receivable
hereunder;

then, in any such case, Borrower shall promptly pay Lender, upon demand, any
additional amounts necessary to compensate Lender for such additional cost or
reduced amount receivable as determined by Lender. If Lender becomes entitled to
claim any additional amounts pursuant to this subsection, Lender shall provide
Borrower with not less than thirty (30) days notice specifying in reasonable
detail the event by reason of which it has become so entitled and the additional
amount required to fully compensate Lender for such additional cost or reduced
amount. A certificate as to any additional costs or amounts payable pursuant to
the foregoing sentence submitted by Lender to Borrower shall be conclusive in
the absence of manifest error. This provision shall survive payment of the Note
and the satisfaction of all other obligations of Borrower under this Agreement
and the Loan Documents.

(viii) Borrower agrees to indemnify Lender and to hold Lender harmless from any
loss or expense which Lender sustains or incurs as a consequence of (A) any
default by Borrower in payment of the principal of or interest on a LIBOR Loan,
including, without limitation, any such loss or expense arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to maintain a
LIBOR Loan hereunder, (B) any prepayment (whether voluntary or mandatory) of the
LIBOR Loan on a day that is not the last day of an Interest Accrual Period,
including, without limitation, such loss or expense arising from interest or
fees payable by Lender to lenders of funds obtained by it in order to maintain
the LIBOR Loan hereunder and (C) the conversion (for any reason whatsoever,
whether voluntary or involuntary) of the Interest Rate from the LIBOR Rate to
the Prime Rate plus the Prime Rate Spread with respect to any portion of the
outstanding principal amount of the Loan then bearing interest at the LIBOR Rate
on a date other than the last day of an Interest Accrual Period, including,
without limitation, such loss or expenses arising from interest or fees payable
by Lender to lenders of funds obtained by it in order to maintain a LIBOR Loan
hereunder (the amounts referred to in clauses (A), (B) and (C) are herein
referred to collectively as the “Breakage Costs”); provided, however, Borrower
shall not indemnify Lender from any loss or expense arising from Lender’s
willful misconduct or gross negligence. This provision shall survive payment of
the Note in full and the satisfaction of all other obligations of Borrower under
this Agreement and the other Loan Documents.

 

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(c) Default Rate. In the event that, and for so long as, any Event of Default
shall have occurred and be continuing, (i) the then outstanding principal
balance of the Loan and, to the extent permitted by applicable law, overdue
interest in respect of the Loan, shall each accrue interest at the Default Rate,
calculated from the date the applicable Default occurred without regard to any
grace or cure periods contained herein, (ii) without limitation of any rights or
remedies contained herein and/or in any other Loan Document, any interest
accrued at the Default Rate in excess of the interest component of the Monthly
Debt Service Payment Amount shall, to the extent not already paid and/or due and
payable hereunder, be due and payable on each Monthly Payment Date and (iii) all
references herein and/or in any other Loan Document to the “Interest Rate” shall
be deemed to refer to the Default Rate.

(d) Interest Calculation. Interest on the outstanding principal balance of the
Loan shall be calculated by multiplying (a) the actual number of days elapsed in
the period for which the calculation is being made by (b) a daily rate based on
a three hundred sixty (360) day year (that is, the Interest Rate or the Default
Rate, as then applicable, expressed as an annual rate divided by 360) by (c) the
outstanding principal balance. The accrual period for calculating interest due
on each Monthly Payment Date shall be the Interest Accrual Period in which the
related Monthly Payment Date occurs. Borrower understands and acknowledges that
such interest accrual requirement results in more interest accruing on the Loan
than if either a thirty (30) day month and a three hundred sixty (360) day year
or the actual number of days and a three hundred sixty-five (365) day year were
used to compute the accrual of interest on the Loan.

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

Section 2.6. Loan Payments.

(a) Borrower shall make a payment to Lender of interest only on the Closing Date
for the period from (and including) the Closing Date through (and including) the
fourteenth (14th) day of either (i) the month in which the Closing Date occurs
(if the Closing Date occurs on or before the fourteenth (14th) day of such
month, or (ii) the month following the month in which the Closing Date occurs
(if the Closing Date occurs on or after the fifteenth (15th) day of the then
current calendar month; provided, however, if the Closing Date is the fourteenth
(14th) day of a calendar month, no such separate payment of interest shall be
due. Borrower shall make a payment to Lender of interest in the amount of the
Monthly Debt Service Payment Amount on the Monthly Payment Date occurring in
March, 2014 and on each Monthly Payment Date occurring thereafter to and
including the Maturity Date.

 

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(b) Reserved.

(c) Borrower shall pay to Lender on the Maturity Date the outstanding principal
balance of the Loan, all accrued and unpaid interest (including interest through
and including the last day of the Interest Accrual Period related to the
Maturity Date) and all other amounts due hereunder and under the Note, the
Pledge Agreement and the other Loan Documents.

(d) If any principal, interest or any other sum due under the Loan Documents,
other than the payment of principal due on the Maturity Date, is not paid by
Borrower on the date on which it is due, Borrower shall pay to Lender upon
demand an amount equal to the lesser of four percent (4%) of such unpaid sum or
the maximum amount permitted by applicable law in order to defray the expense
incurred by Lender in handling and processing such delinquent payment and to
compensate Lender for the loss of the use of such delinquent payment. Any such
amount shall be secured by the Pledge Agreement and the other Loan Documents.

(e)

(i) Except as otherwise specifically provided herein, all payments and
prepayments under this Agreement and the Note shall be made to Lender not later
than 1:00 P.M., New York City time, on the date when due and shall be made in
lawful money of the United States of America in immediately available funds at
Lender’s office, and any funds received by Lender after such time shall, for all
purposes hereof, be deemed to have been paid on the next succeeding Business
Day.

(ii) Whenever any payment to be made hereunder or under any other Loan Document
shall be stated to be due on a day which is not a Business Day, the due date
thereof shall be deemed to be the immediately preceding Business Day.

(iii) All payments required to be made by Borrower hereunder or under the Note
or the other Loan Documents shall be made irrespective of, and without deduction
for, any setoff, claim or counterclaim and shall be made irrespective of any
defense thereto.

Section 2.7. Prepayments.

(a) Voluntary Prepayment. Except as provided in this Section 2.7 and Section
2.10 hereof, Borrower shall not have the right to prepay the Loan in whole or in
part. Borrower may, provided no Event of Default has occurred and is continuing,
at its option and upon prior notice to Lender as set forth herein, prepay the
Debt in whole or in part on any Business Day; provided that (i) the Mortgage
Loan and the Mezzanine B Loan shall be simultaneously prepaid on a pro-rata
basis with the Loan in connection with such prepayment in accordance with the
terms and conditions of Section 2.7(a) of the Mortgage Loan Agreement and
Section 2.7(a) of the Mezzanine B Loan Agreement, respectively, and (ii) such
prepayment is accompanied by payment of the Breakage Costs, the Prepayment
Premium and the applicable Interest Shortfall. Lender shall not be obligated to
accept any prepayment pursuant to this Section 2.7(a) unless it is accompanied
by payment of the Breakage Costs, the Prepayment Premium and the applicable
Interest

 

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Shortfall (if any) due in connection therewith. In the event that Borrower shall
prepay the Debt in accordance with the terms and conditions of this
Section 2.7(a) on a date from (and including) the tenth (10th) day of a calendar
month through (and including) the fourteenth (14th) day of a calendar month,
Borrower shall pay to Lender (together with all other amounts owed to Lender
pursuant to this Section 2.7(a)) the Interest Shortfall estimated by Lender to
be due in connection with such prepayment; provided, that, once the Interest
Rate for the next occurring Interest Accrual Period can be determined, Lender
shall calculate the actual Interest Shortfall required to be paid by Borrower
for such prepayment and (x) if the Interest Shortfall paid to Lender is in
excess of the amount required to be paid pursuant to this Section 2.7(a), Lender
shall promptly return to Borrower such excess amount and (y) if the Interest
Shortfall is less than the amount required to be paid to Lender pursuant to this
Section 2.7(a), Borrower shall pay to Lender the amount of such deficiency
within three (3) Business Days of notice to Borrower from Lender. Any prepayment
received by Lender on a date other than a Monthly Payment Date shall be held by
Lender as collateral security for the Loan in an interest bearing Eligible
Account at an Eligible Institution, with interest accruing on such amounts to
the benefit of Borrower; such amounts prepaid shall be applied to the Loan on
the next Monthly Payment Date, with any interest on such funds paid to Borrower
on such date provided no Event of Default then exists. As a condition to any
voluntary prepayment pursuant to this Section 2.7(a), Borrower shall give Lender
revocable written notice (a “Prepayment Notice”) of its intent to prepay, which
notice must be given at least thirty (30) days prior to the Business Day upon
which prepayment is to be made and must specify the Business Day on which such
prepayment is to be made, provided, that, if such voluntary prepayment in
accordance with the terms and conditions of this Section 2.7(a) is being made in
order to satisfy either (i) the Debt Yield requirement for Borrower’s exercise
of its Extension Option in accordance with the terms and conditions of
Section 2.9 hereof or (ii) the Debt Yield test in connection with the Release of
an Individual Property in accordance with the terms and conditions of
Section 2.10 hereof, Borrower shall give Lender a Prepayment Notice of its
intent to prepay at least seven (7) days prior to the then applicable Maturity
Date or the date of the proposed Release, as applicable, and Borrower must
specify the Business Day on which such prepayment is to be made. Borrower shall
be permitted to revoke its Prepayment Notice upon three (3) Business Days prior
written notice to Lender provided that Borrower pays to Lender all of Lender’s
reasonable out-of-pocket costs and expenses in connection with such revocation,
including, without limitation, any Breakage Costs or similar expenses. Borrower
hereby agrees that, in the event Borrower delivers a Prepayment Notice and fails
to prepay the Loan in accordance with the Prepayment Notice and the terms of
this Section 2.7(a), Borrower shall pay Lender all reasonable out-of-pocket
costs and expenses incurred by Lender, including, without limitation, any
Breakage Costs or similar expenses, as a result of such failure to prepay the
Loan.

(b) Liquidation Events; Mandatory Prepayment. In the event of (i) any Casualty
to all or any portion of a Property, (ii) any Condemnation of all or any portion
of a Property, (iii) a Sale or Pledge of all or any portion of a Property in
connection with, or as a result of, a foreclosure proceeding, (iv) any
refinancing of a Property or the Mortgage Loan, or (v) the receipt by Mortgage
Borrower of any excess proceeds realized under its owner’s title insurance
policy after application of such proceeds by Mortgage Borrower to cure any title
defect (each, a “Liquidation Event”), Borrower shall cause the related Net
Liquidation Proceeds After Debt Service

 

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to be paid directly to Lender. On each date on which Lender actually receives a
distribution of Net Liquidation Proceeds After Debt Service, Lender shall apply
such Net Liquidation Proceeds After Debt Service to the outstanding principal
balance of the Loan in an amount up to the applicable Release Price relating to
a Property or Properties subject to the Liquidation Event together with payment
of any applicable Breakage Costs, Prepayment Premium (except in connection with
a Casualty or Condemnation) and Interest Shortfall. Any amounts of Net
Liquidation Proceeds After Debt Service in excess of the applicable Release
Price relating to a Property or Properties subject to the Liquidation Event
shall be paid by Lender to Mezzanine B Lender. Once Borrower has knowledge that
a Liquidation Event has occurred, Borrower shall, or shall cause Mortgage
Borrower, to promptly deliver written notice of such Liquidation Event to
Lender. Borrower shall be deemed to have knowledge of (i) a foreclosure sale on
the date notice of such foreclosure sale is given and (ii) a refinancing of all
or any portion of a Property, on the date on which a commitment for such
refinancing has been entered into. The provisions of this Section 2.7(b) shall
not be construed to contravene in any manner the restrictions and other
provisions regarding refinancing of the Mortgage Loan or the Sale or Pledge of
the Properties (or any portion thereof) set forth in this Agreement (including,
without limitation, in Section 2.10), the other Loan Documents and the Mortgage
Loan Documents. The Release Price with respect to any Individual Property
subject to a prepayment in accordance with this Section 2.7(b) shall be reduced
in an amount equal to the principal portion of such prepayment applied to the
Loan.

(c) Prepayments After Default. If concurrently with or after an Event of
Default, payment of all or any part of the principal of the Loan is tendered by
Borrower, a purchaser at foreclosure or any other Person, (i) such tender shall
be deemed an attempt to circumvent the prohibition against prepayment set forth
herein, and (ii) Borrower, such purchaser at foreclosure or other Person shall
pay the Default Prepayment Premium (to the extent such payment is made on or
prior to the Monthly Payment Date occurring in August, 2015), the Breakage Costs
and the Interest Shortfall, in addition to the outstanding principal balance,
all accrued and unpaid interest and other amounts payable under the Loan
Documents. Notwithstanding anything to the contrary contained herein or in any
other Loan Document, any prepayment of the Debt shall be applied to the Debt in
such order and priority as may be determined by Lender in its sole discretion.

Section 2.8. Interest Rate Cap Agreement.

(a) Prior to or contemporaneously with the Closing Date, Borrower shall enter
into an Interest Rate Cap Agreement with a LIBOR strike rate equal to the Strike
Rate. The Interest Rate Cap Agreement (i) shall at all times be in a form and
substance reasonably acceptable to Lender, (ii) shall at all times be with a
Counterparty, (iii) shall at all times be for a period up to and including the
end of the Interest Accrual Period applicable to the then applicable Maturity
Date, and (iv) shall at all times have a notional amount equal to or greater
than the principal balance of the Loan and shall at all times provide for the
applicable LIBOR strike rate to be equal to the Strike Rate. Borrower shall
direct such Counterparty to deposit directly into the Cash Management Account
(as defined in the Mortgage Loan Agreement) any amounts due Borrower under such
Interest Rate Cap Agreement so long as any portion of the Debt is outstanding,
provided that the Debt shall be deemed to be outstanding if the Collateral is
transferred by judicial or non-judicial foreclosure or assignment-in-lieu
thereof. Additionally, Borrower shall collaterally assign to Lender, pursuant to
the Collateral Assignment of Interest Rate Cap Agreement, all of its right,
title and interest in and to the Interest Rate Cap Agreement (and any
replacements thereof), including, without limitation, its right to receive any
and all payments under the Interest Rate Cap Agreement (and any replacements
thereof), and Borrower shall, and shall cause Counterparty to, deliver to Lender
a fully executed Interest Rate Cap Agreement (which shall, by its terms,
authorize the assignment to Lender and require that payments be deposited
directly into the Cash Management Account (as defined in the Mortgage Loan
Agreement).

 

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(b) Borrower shall comply with all of its obligations under the terms and
provisions of the Interest Rate Cap Agreement. All amounts paid by the
Counterparty under the Interest Rate Cap Agreement to Borrower or Lender shall
be deposited immediately into the Cash Management Account (as defined in the
Mortgage Loan Agreement). Borrower shall take all actions reasonably requested
by Lender to enforce Lender’s rights under the Interest Rate Cap Agreement in
the event of a default by the Counterparty and shall not waive, amend or
otherwise modify any of its rights thereunder.

(c) In the event of any downgrade, withdrawal or qualification of the rating of
the Counterparty by any Rating Agency below the Minimum Counterparty Rating,
Borrower shall replace the Interest Rate Protection Agreement not later than ten
(10) Business Days following receipt of notice of such downgrade, withdrawal or
qualification with an Interest Rate Protection Agreement in form and substance
reasonably satisfactory to Lender (and meeting the requirements set forth in
this Section 2.8) (a “Replacement Interest Rate Cap Agreement”) from a
Counterparty reasonably acceptable to Lender having a Minimum Counterparty
Rating.

(d) In the event that Borrower fails to purchase and deliver to Lender the
Interest Rate Cap Agreement or fails to maintain the Interest Rate Cap Agreement
in accordance with the terms and provisions of this Agreement, Lender may
purchase the Interest Rate Cap Agreement and the cost incurred by Lender in
purchasing such Interest Rate Cap Agreement shall be paid by Borrower to Lender
with interest thereon at the Default Rate from the date such cost was incurred
by Lender until such cost is reimbursed by Borrower to Lender.

(e) Each Interest Rate Cap Agreement shall contain the following language or its
equivalent: “In the event of any downgrade, withdrawal or qualification of the
rating of the Counterparty below (i) a long term senior unsecured debt rating
from S&P of at least “A+”, which rating shall not include a “t” or otherwise
reflect a termination risk, (ii) a long term senior unsecured debt rating of at
least “A1” from Moody’s, which rating shall not include a “t” or otherwise
reflect a termination risk or (iii) a long term unsecured debt rating from Fitch
of at least “A” (and not on Rating Watch Negative) and a short term unsecured
debt rating from Fitch of at least “F1” (and not on Rating Watch Negative) (and,
after a Securitization, the equivalent of the foregoing by the other Rating
Agencies), the Counterparty must, within ten (10) business days, find a
replacement Counterparty, at the Counterparty’s sole cost and expense,
acceptable to each Rating Agency and Borrower; provided that, notwithstanding
such a downgrade, withdrawal or qualification, unless and until the Counterparty
transfers the Interest Rate Cap Agreement to a replacement Counterparty, the
Counterparty will continue to perform its obligations under the Interest Rate
Cap Agreement. Failure to satisfy the foregoing shall constitute an “Additional
Termination Event” as defined by Section 5(b)(v) of the ISDA Master Agreement,
with the Counterparty as the “Affected Party.” In the event that a Counterparty
is required pursuant to the terms of an Interest Rate Cap Agreement to find a
replacement Counterparty, Borrower covenants and agrees that Borrower shall seek
Lender’s approval with respect thereto and shall not approve or consent to the
foregoing unless and until Borrower receives Lender’s prior written approval and
shall approve or consent to the foregoing upon receipt of Lender’s prior written
approval. Borrower’s failure to comply with the requirements of this
Section 2.8(e) shall constitute, at Lender’s option, an immediate Event of
Default.

 

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(f) Borrower shall obtain and deliver to Lender an opinion from counsel (which
counsel may be in house counsel for the Counterparty) for the Counterparty (upon
which Lender and its successors and assigns may rely) which shall provide, in
relevant part, that:

(i) the Counterparty is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation and has the organizational
power and authority to execute and deliver, and to perform its obligations
under, the Interest Rate Cap Agreement;

(ii) the execution and delivery of the Interest Rate Cap Agreement by the
Counterparty, and any other agreement which the Counterparty has executed and
delivered pursuant thereto, and the performance of its obligations thereunder
have been and remain duly authorized by all necessary action and do not
contravene any provision of its certificate of incorporation or by-laws (or
equivalent organizational documents) or any law, regulation or contractual
restriction binding on or affecting it or its property;

(iii) all consents, authorizations and approvals required for the execution and
delivery by the Counterparty of the Interest Rate Cap Agreement, and any other
agreement which the Counterparty has executed and delivered pursuant thereto,
and the performance of its obligations thereunder have been obtained and remain
in full force and effect, all conditions thereof have been duly complied with,
and no other action by, and no notice to or filing with any governmental
authority or regulatory body is required for such execution, delivery or
performance; and

(iv) the Interest Rate Cap Agreement, and any other agreement which the
Counterparty has executed and delivered pursuant thereto, has been duly executed
and delivered by the Counterparty and constitutes the legal, valid and binding
obligation of the Counterparty, enforceable against the Counterparty in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

Section 2.9. Extension of the Maturity Date. Borrower shall have the option to
extend the term of the Loan beyond the initial Maturity Date for three
(3) successive terms (the “Extension Option”) of one (1) year each (each, an
“Extension Period”) to the Monthly Payment Date occuring in (i) February, 2017
if the first Extension Option is exercised, (ii) February, 2018 if the second
Extension Option is exercised, and (iii) February, 2019 if the third Extension
Option is exercised (each such date, the “Extended Maturity Date”) upon
satisfaction of the following terms and conditions (in each case as determined
by Lender):

(a) no Event of Default shall have occurred and be continuing at the time an
Extension Option is exercised and on the date that the applicable Extension
Period is commenced;

 

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(b) Borrower shall notify Lender of its irrevocable election to extend the
Maturity Date as aforesaid not earlier than sixty (60) days and no later than
thirty (30) days prior to the applicable Maturity Date;

(c) Borrower shall obtain and deliver to Lender prior to exercise of such
Extension Option, a Replacement Interest Rate Cap Agreement, which Replacement
Interest Rate Cap Agreement shall be effective commencing on the first day of
the related Extension Period and shall have a maturity date not earlier than the
last day of the Interest Accrual Period related to the then applicable Extended
Maturity Date;

(d) Solely with respect to Borrower’s exercise of the second Extension Option
and third Extension Option, Borrower shall have paid to Lender the Extension Fee
on the date the related Extension Period is commenced;

(e) in connection with the first Extension Option, the Debt Yield shall not be
less than 7.25% at the time such Extension Option is exercised and on the date
that such Extension Period is commenced, in connection with the second Extension
Option, the Debt Yield shall not be less than 7.75% at the time such Extension
Option is exercised and on the date that such Extension Period is commenced, and
in connection with the third Extension Option, the Debt Yield shall not be less
than 8.00% at the time such Extension Option is exercised and on the date that
such Extension Period is commenced;

(f) the Mortgage Loan Extension Option corresponding to the applicable Extension
Period shall have been exercised in accordance with the terms of the Mortgage
Loan Agreement;

(g) the Mezzanine B Extension Option corresponding to the applicable Extension
Period shall have been exercised in accordance with the terms of the Mezzanine B
Loan Agreement;

(h) if the TLG Promissory Notes and/or the Convertible Notes are extended so
that they are scheduled to become due during the applicable Extension Period,
Guarantor shall have provided to Lender an amendment to the Guaranty, in form
and substance reasonably acceptable to Lender, to add to the Guaranty the
covenants set forth on Schedule XXIII attached hereto; and

(i) Borrower shall have paid to Lender all of Lender’s reasonable out of pocket
costs and expenses associated with Borrower’s exercise of such Extension Option.

All references in this Agreement and in the other Loan Documents to the Maturity
Date shall mean the Extended Maturity Date in the event the applicable Extension
Option is exercised.

Section 2.10. Release of Collateral.

Except as set forth this Section 2.10, no repayment or prepayment of all or any
portion of the Loan shall cause, or give rise to a right to require, or
otherwise result in, the release of any lien on the Collateral or any portion
thereof.

 

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Provided no Event of Default shall have occurred and be continuing, Borrower
shall have the right at any time to obtain the release (the “Release”) of an
Individual Property and the release of Lender’s lien with respect to a portion
of the Collateral related to an Individual Property (such portion of the
Collateral, the “Released Collateral”) from the lien of the Pledge Agreement
thereon (and the related Loan Documents) and the release of Borrower’s
obligations under the Loan Documents with respect to such Released Collateral
(other than those expressly stated to survive), upon the satisfaction of the
following conditions precedent:

(a) Borrower shall provide Lender with thirty (30) days (or a shorter period of
time if permitted by Lender in its sole discretion) prior written notice of the
proposed Release (the date of Lender’s receipt of such notice shall be referred
to herein as the “Release Notice Date”), which notice shall be revocable by
Borrower prior to the consummation of a Release provided that Borrower pays to
Lender all of Lender’s reasonable out-of-pocket costs and expenses in connection
with such revocation, including, without limitation, any Breakage Costs or
similar expenses;

(b) Borrower shall submit to Lender, not less than ten (10) Business Days prior
to the date of such Release, a release of lien of the Pledge Agreement (and
related Loan Documents) for the Released Collateral for execution by Lender.
Such release shall be in a form appropriate in each jurisdiction in which the
Released Collateral is located and shall contain standard provisions, if any,
protecting the rights of Lender. In addition, Borrower shall provide to Lender
all other documentation of a ministerial or administrative nature that Lender
reasonably requires to be delivered by Borrower in connection with such release,
together with an Officer’s Certificate certifying that such documentation (i) is
in compliance with all applicable Legal Requirements, (ii) will effect such
release in accordance with the terms of this Agreement, and (iii) will not
impair or otherwise adversely affect the liens, security interests and other
rights of Lender under the Loan Documents not being released (or as to the
parties to the Loan Documents and Collateral subject to the Loan Documents not
being released);

(c) The Released Property related to the Released Collateral shall be conveyed
to a Person other than Borrower, Mortgage Borrower, Guarantor or their
respective Affiliates pursuant to a sale of the Released Property related to
such Released Collateral in an arm’s length transaction;

(d) As of the date of consummation of the Release, after giving effect to the
release of the lien of the Pledge Agreement encumbering the Released Collateral
(and the release of the related Security Instrument(s) encumbering the Released
Property associated therewith (and after giving effect to (i) the prepayment
required pursuant to Section 2.10(e) hereof and (ii) any prepayment made by
Borrower pursuant to the terms and conditions of Section 2.7(a) hereof prior to
the consummation of the Release), the Debt Yield with respect to the remaining
Individual Properties shall be equal to or greater than the greater of (1) the
Closing Date Debt Yield and (2) the Debt Yield of all Individual Properties
encumbered by the Security Instruments immediately prior to the consummation of
the Release;

(e) Borrower shall (A) partially prepay the Debt in accordance with Section 2.7
hereof in an amount equal to the Release Price for the Released Collateral (the
“Release Amount”), (B) pay the Breakage Costs and any applicable Interest
Shortfall due hereunder in connection therewith, and (C) pay any Prepayment
Premium due in connection therewith;

 

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(f) Intentionally Omitted;

(g) Borrower shall pay all of Lender’s reasonable costs and expenses and the
costs and expenses of the Rating Agencies in connection with the Release,
including, without limitation, counsel fees; and

(h) Borrower shall have delivered to Lender evidence satisfactory to Lender that
Mortgage Borrower and Mezzanine B Borrower have complied with all of the terms
and conditions set forth in the Mortgage Loan Agreement and the Mezzanine B Loan
Agreement, as applicable, with respect to a release of the security interest
corresponding to the Release requested pursuant to this Section 2.10.

Notwithstanding anything to the contrary contained in this Section 2.10, the
parties hereto hereby acknowledge and agree that after the Securitization of the
Loan (or any portion thereof or interest therein), with respect to any Lender
approval or similar discretionary rights over any matters contained in this
Section 2.10 (any such matter, a “Release Approval Item”), such rights shall be
construed such that Lender shall only be permitted to withhold its consent or
approval with respect to any Release Approval Item if the same fails to meet the
Prudent Lender Standard.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as of the Closing Date that:

Section 3.1. Legal Status and Authority. Borrower (a) is duly organized, validly
existing and in good standing under the laws of its state of formation; (b) is
duly qualified to transact business and is in good standing in each jurisdiction
where it is required to be so qualified in connection with its assets,
businesses and operations; and (c) has all necessary approvals, governmental and
otherwise, and full power and authority to own the applicable Collateral.
Borrower has full power, authority and legal right to mortgage, grant, bargain,
sell, pledge, assign, warrant, transfer and convey the applicable Collateral
pursuant to the terms hereof and to keep and observe all of the terms of this
Agreement, the Note, the Pledge Agreement and the other Loan Documents on
Borrower’s part to be performed.

Section 3.2. Validity of Documents. (a) The execution, delivery and performance
of this Agreement, the Note, the Pledge Agreement and the other Loan Documents
by Borrower and Guarantor and the borrowing evidenced by the Note and this
Agreement (i) are within the power and authority of such parties; (ii) have been
authorized by all requisite organizational action of such parties; (iii) have
received all necessary approvals and consents, corporate, governmental or
otherwise; (iv) will not violate, conflict with, result in a breach of or
constitute (with notice or lapse of time, or both) a material default under any
provision of law, any order or judgment of any court or Governmental Authority,
any license, certificate or other approval required to operate any Individual
Property or any portion thereof or in connection with the ownership of the
Collateral or any portion thereof, any applicable organizational documents, or
any applicable indenture, agreement or other instrument to which Borrower or
Mortgage Borrower is a party or which Borrower, Mortgage Borrower, any
Individual Property, or the Collateral (or any part thereof) may be bound,

 

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including, without limitation, the Management Agreement; (v) will not result in
the creation or imposition of any lien, charge or encumbrance whatsoever upon
any of its assets, except the lien and security interest created hereby and by
the other Loan Documents; and (vi) will not require any authorization or license
from, or any filing with, any Governmental Authority (except for Uniform
Commercial Code filings relating to the security interest created hereby),
(b) this Agreement, the Note, the Pledge Agreement and the other Loan Documents
have been duly executed and delivered by Borrower and Guarantor and (c) this
Agreement, the Note, the Pledge Agreement and the other Loan Documents
constitute the legal, valid and binding obligations of Borrower and Guarantor.
The Loan Documents are not subject to any right of rescission, setoff,
counterclaim or defense by Borrower or Guarantor, including the defense of
usury, nor would the operation of any of the terms of the Loan Documents, or the
exercise of any right thereunder, render the Loan Documents unenforceable
(except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar Creditors Rights Laws, and by
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law)). Neither Borrower nor Guarantor
has asserted any right of rescission, setoff, counterclaim or defense with
respect to the Loan Documents.

Section 3.3. Litigation. There is no action, suit, proceeding or governmental
investigation, in each case, judicial, administrative or otherwise (including
any condemnation or similar proceeding), pending or, to Borrower’s knowledge,
threatened or contemplated against Borrower or Mortgage Borrower or against or
affecting any Individual Property or any portion thereof or the Collateral or
any portion thereof that would be reasonably likely to have a Material Adverse
Effect. There is no action, suit, proceeding or governmental investigation, in
each case, judicial, administrative or otherwise, pending or, to Borrower’s
knowledge, threatened or contemplated against Guarantor that would be reasonably
likely to have a Material Adverse Effect with respect to Borrower, Mortgage
Borrower, any Individual Property or any portion of the Collateral. Except as
set forth on Schedule XXI, there is no action, suit, proceeding or governmental
investigation, in each case, judicial, administrative or otherwise, pending or,
to Borrower’s knowledge, threatened or contemplated against Guarantor that would
be reasonably likely to have a Material Adverse Effect with respect to
Guarantor.

Section 3.4. Agreements. Neither Borrower nor Mortgage Borrower is a party to
any agreement or instrument or subject to any restriction which would have a
Material Adverse Effect. Neither Borrower nor Mortgage Borrower has received
notice that it is in default in any material respect in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which it is a party or by which
Borrower, Mortgage Borrower, any Individual Property (or any portion thereof),
or the Collateral (or any portion thereof) is bound. Neither Borrower nor
Mortgage Borrower has any material financial obligation under any agreement or
instrument to which Borrower or Mortgage Borrower is a party or by which
Borrower, Mortgage Borrower, any Individual Property (or any portion thereof),
or the Collateral (or any portion thereof) is otherwise bound, other than (a)
Permitted Equipment Leases, (b) obligations incurred in the ordinary course of
the operation of each Individual Property and (c) obligations under this
Agreement, the Pledge Agreement, the Note, the other Loan Documents, and the
Mortgage Loan Documents. There is no agreement or instrument to which Borrower
or Mortgage Borrower is a party or by which Borrower or Mortgage Borrower is
bound that would require the subordination in right of payment of any of
Borrower’s obligations hereunder or under the Note or Mortgage Borrower’s
obligations under the Mortgage Loan Documents (including the Mortgage Loan
Note), as applicable, to an obligation owed to another party.

 

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Section 3.5. Financial Condition.

(a) Borrower is solvent and Borrower has received reasonably equivalent value
for the granting of the Pledge Agreement. No proceeding under Creditors Rights
Laws with respect to any Borrower Party has been initiated

(b) In the last ten (10) years, no (i) petition in bankruptcy has been filed by
or against any Borrower Party and (ii) Borrower Party has ever made any
assignment for the benefit of creditors or taken advantage of any Creditors
Rights Laws.

(c) No Borrower Party is contemplating either the filing of a petition by it
under any Creditors Rights Laws or the liquidation of its assets or property and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against any Borrower Party.

(d) With respect to any loan or financing in which any Borrower Party or any
Affiliate thereof (other than a director or officer of any Borrower Party or any
Affiliate thereof in an individual capacity and not in a capacity as a director
or officer of, or related to their obligations and duties as a director or
officer of, any Borrower Party or any Affiliate thereof) has been directly or
directly obligated for or has, in connection therewith, otherwise provided any
guaranty, indemnity or similar surety , including, without limitation and to the
extent applicable, the loan which is being refinanced by the Loan, except as
disclosed to Lender, none of such loans or financings has ever been (i) more
than 30 days in default or (ii) transferred to special servicing.

Section 3.6. Disclosure. Borrower has disclosed to Lender all material facts and
has not failed to disclose any material fact that could cause any representation
or warranty made herein to be materially misleading

Section 3.7. No Plan Assets.

(a) As of the date hereof and until the Debt is repaid in accordance with the
applicable terms and conditions hereof, (a) Borrower is not and will not be an
“employee benefit plan,” as defined in Section 3(3) of ERISA, subject to Title I
of ERISA, (b) Borrower is not and will not be a “governmental plan” within the
meaning of Section 3(32) of ERISA, (c) transactions by or with Borrower are not
and will not be subject to any state statute regulating investments of, or
fiduciary obligations with respect to, governmental plans and (d) none of the
assets of Borrower constitutes or will constitute “plan assets” of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101. Except as set
forth on Schedule XXIV hereto, as of the date hereof, neither Borrower, nor any
member of a “controlled group of corporations” (within the meaning of
Section 414 of the IRS Code), maintains, sponsors or contributes to a “defined
benefit plan” (within the meaning of Section 3(35) of ERISA) or a “multiemployer
pension plan” (within the meaning of Section 3(37)(A) of ERISA).

 

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(b) With respect to each “multiemployer plan” within the meaning of
Section 4001(a)(3) of ERISA (a “Multiemployer Plan”) to which the Borrower or
any entity that is treated as a single employer with the Borrower under
Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of
ERISA and Section 412 of the Code, is treated as a single employer with the
Borrower under Section 414(m) of the Code (the “ERISA Group”) is making or has
an obligation to make contributions, or made or had an obligation to make
contributions during the preceding five (5)-year period, except as would not,
individually or in the aggregate, result in a Material Adverse Effect: (i) the
Borrower and each member of the ERISA Group has fulfilled its obligations to
make any contribution or payment to any Multiemployer Plan, (ii) neither the
Borrower nor any member of the ERISA Group has incurred any material liability
under Title IV of ERISA, and (iii) neither the Borrower nor any member of the
ERISA Group has received notice of or incurred a complete or partial withdrawal
from or default with respect to any Multiemployer Plan or received notice that
any Multiemployer Plan is in reorganization, is insolvent or has been
terminated.

Section 3.8. Not a Foreign Person. Borrower is not a “foreign person” within the
meaning of § 1445(f)(3) of the IRS Code.

Section 3.9. Warranty of Title. Each pledgor under the Pledge Agreement is the
record and beneficial owner of, and has good title to, the applicable
Collateral, free and clear of all liens whatsoever, except for Liens created by
this Agreement and the other Loan Documents. The Pledge Agreement, together with
the Uniform Commercial Code filings relating to the Collateral when properly
filed in the appropriate records, will create valid, perfected first priority
security interests in and to the Collateral, all in accordance with the terms
thereof. Borrower’s delivery of the certificates, together with the applicable
undated limited liability company membership power, limited partnership power,
or trust power, as the case may be, if any, to Lender as set forth in Section 3
of the Pledge Agreement creates a first priority valid and perfected security
interest in the Collateral.

Section 3.10. Business Purposes. The Loan is solely for the business purpose of
Borrower, and is not for personal, family, household, or agricultural purposes.

Section 3.11. Borrower’s Principal Place of Business. Borrower’s principal place
of business and its chief executive office as of the date hereof is c/o Morgans
Hotel Group, 475 Tenth Avenue, New York, New York 10018. Borrower’s mailing
address, as set forth in the opening paragraph hereof or as changed in
accordance with the provisions hereof, is true and correct. Borrower’s
organizational identification number, if any, assigned by the state of its
incorporation or organization is set forth on Schedule XIII hereto. Borrower’s
federal tax identification number is set forth on Schedule XIII hereto. Borrower
is not subject to any back-up withholding taxes.

Section 3.12. Status of Property.

(a) Each of Borrower and Mortgage Borrower has obtained all Permits, all of
which are in full force and effect as of the date hereof and not subject to
revocation, suspension, forfeiture or modification, except where the failure to
obtain or keep in full force and effect such Permits would not reasonably be
expected to have a Material Adverse Effect.

 

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(b) Except as set forth on Schedule XXV attached hereto (with respect to the
building violations at the Hudson Property which are also addressed in the Post
Closing Agreement), each Individual Property and the present and contemplated
use and occupancy thereof are in full compliance with all applicable zoning
ordinances, building codes, land use laws, Environmental Laws and other similar
Legal Requirements.

(c) Each Individual Property is served by all utilities required for the current
or contemplated use thereof. Except as set forth on Schedule XXV attached hereto
(with respect to certain waste disposal services identified on such Schedule),
all utility service is provided by public utilities and the Property has
accepted or is equipped to accept such utility service.

(d) All public roads and streets necessary for service of and access to each
Individual Property for the current or contemplated use thereof have been
completed, are serviceable and all-weather and are physically and legally open
for use by the public. Each Individual Property has either direct access to such
public roads or streets or access to such public roads or streets by virtue of a
perpetual easement or similar agreement inuring in favor of Mortgage Borrower
and any subsequent owners of applicable Individual Property.

(e) Each Individual Property is served by public water and sewer systems.

(f) Each Individual Property is free from damage caused by fire or other
casualty. Each Individual Property, including, without limitation, all
buildings, improvements, parking facilities, sidewalks, storm drainage systems,
roofs, plumbing systems, HVAC systems, fire protection systems, electrical
systems, equipment, elevators, exterior sidings and doors, landscaping,
irrigation systems and all structural components, are in good condition, order
and repair in all material respects; there exists no structural or other
material defects or damages in such Individual Property, whether latent or
otherwise, and neither Borrower nor Mortgage Borrower has received notice from
any insurance company or bonding company of any defects or inadequacies in such
Individual Property, or any part thereof, which would adversely affect the
insurability of the same or cause the imposition of extraordinary premiums or
charges thereon or of any termination or threatened termination of any policy of
insurance or bond.

(g) All costs and expenses of any and all labor, materials, supplies and
equipment used in the construction of the Improvements have been paid in full.
There are no mechanics’ or similar liens or claims which have been filed for
work, labor or material (and no rights are outstanding that under applicable
Legal Requirements could give rise to any such liens) affecting any Individual
Property which are or may be prior to or equal to the lien of the related
Security Instrument or the Pledge Agreement

(h) Each Mortgage Borrower has paid in full for, and is the owner of, all
furnishings, fixtures and equipment (other than Tenants’ property or the
property subject to a Permitted Equipment Lease) used in connection with the
operation of the related Individual Property, free and clear of any and all
security interests, liens or encumbrances, except as set forth on Schedule XXV
attached hereto (with respect to the UCC filing against the copiers and fax
machines identified on such Schedule) and except for the lien and security
interest created by the Mortgage Loan Documents.

 

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(i) To Borrower’s knowledge, all liquid and solid waste disposal, septic and
sewer systems located on each Individual Property are in a good and safe
condition and repair and in compliance with all Legal Requirements.

(j) Except as expressly disclosed on the Survey, no portion of the Improvements
is located in an area identified by the Federal Emergency Management Agency or
any successor thereto as an area having special flood hazards pursuant to the
Flood Insurance Acts. No part of any Individual Property consists of or is
classified as wetlands, tidelands or swamp and overflow lands.

(k) Except as set forth on the Survey, all the Improvements lie within the
boundaries of the Land and any building restriction lines applicable to the
Land.

(l) To Borrower’s knowledge, there are no pending or proposed special or other
assessments for public improvements or otherwise affecting any Individual
Property, nor are there any contemplated improvements to any Individual Property
that may result in such special or other assessments.

(m) Mortgage Borrower has not (i) made, ordered or contracted for any
construction, alterations or improvements to be made on or to any Individual
Property which have not been completed and paid for in full, (ii) ordered
materials for any such construction, alterations or improvements which have not
been paid for in full or (iii) attached any fixtures to any Individual Property
which have not been paid for in full. Except as set forth on Schedule XXV
attached hereto (with respect to identified work at the Delano Property), there
is no such construction, alterations or improvements ongoing at the Property as
of the Closing Date. There are no outstanding or disputed claims for any Work
Charges and there are no outstanding liens or security interests in connection
with any Work Charges.

(n) Mortgage Borrower has no direct employees. All other personnel employed at
or in connection with the Property are the direct employees of Manager.

Section 3.13. Financial Information. All financial data, including, without
limitation, the balance sheets, statements of cash flow, statements of income
and operating expense and rent rolls, that have been delivered to Lender in
respect of Borrower, Mortgage Borrower, Guarantor, any Individual Property (or
any portion thereof) and/or the Collateral (or any portion thereof) (a) are
true, complete and correct in all material respects, (b) accurately represent
the financial condition of Borrower, Mortgage Borrower, Guarantor, any
Individual Property (or any portion thereof) and the Collateral (or any portion
thereof), as applicable, as of the date of such reports, and (c) to the extent
prepared or audited by an independent certified public accounting firm, have
been prepared in accordance with the Approved Accounting Method throughout the
periods covered, except as disclosed therein. Neither Borrower nor Mortgage
Borrower has any contingent liabilities, liabilities for taxes, unusual forward
or long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that are known to Borrower or Mortgage Borrower and
reasonably likely to have a Material Adverse Effect, except as referred to or
reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial
condition, operations or business of Borrower, Mortgage Borrower or Guarantor
from that set forth in said financial statements.

 

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Section 3.14. Condemnation. No Condemnation or other proceeding has been
commenced or, to Borrower’s knowledge, is threatened or contemplated with
respect to all or any portion of any Individual Property or for the relocation
of the access to any Individual Property.

Section 3.15. Separate Lots. Each Individual Property is assessed for real
estate tax purposes as one or more wholly independent tax lot or lots, separate
from any adjoining land or improvements not constituting a part of such lot or
lots, and no other land or improvements is assessed and taxed together with such
Individual Property or any portion thereof.

Section 3.16. Insurance. Borrower has obtained and has delivered to Lender (or
has caused to be obtained and delivered to Lender) certified copies of all
Policies (or such other evidence acceptable to Lender) reflecting the insurance
coverages, amounts and other requirements set forth in this Agreement. Neither
Borrower nor Mortgage Borrower has received notice of any present claims of any
material nature under any of the Policies, and to Borrower’s knowledge, no
Person, including Borrower and Mortgage Borrower, has done, by act or omission,
anything which would impair the coverage of any of the Policies.

Section 3.17. Use of Property. Except with respect to the SRO Units at the
Hudson Property, each Individual Property is used exclusively as a hotel and
other appurtenant and related uses.

Section 3.18. Leases and Rent Roll. Except as disclosed in the rent roll for
each Individual Property delivered to, certified to and approved by Lender in
connection with the closing of the Loan (the “Rent Roll”), (a) Mortgage Borrower
is the sole owner of the entire lessor’s interest in the Leases; (b) the Leases
are valid and enforceable and in full force and effect; (c) all of the Leases
are arms-length agreements with bona fide, independent third parties; (d) to
Borrower’s knowledge, no party under any Lease is in default; (e) all Rents due
have been paid in full and no Tenant is in arrears in its payment of Rent;
(f) the terms of all alterations, modifications and amendments to the Leases are
reflected in the certified occupancy statement delivered to and approved by
Lender; (g) none of the Rents reserved in the Leases have been assigned or
otherwise pledged or hypothecated; (h) none of the Rents have been collected for
more than one (1) month in advance (except a security deposit shall not be
deemed rent collected in advance); (i) the premises demised under the Leases
have been completed, all improvements, repairs, alterations or other work
required to be furnished on the part of Mortgage Borrower under the Leases have
been completed, the Tenants under the Leases have accepted the premises demised
thereunder and have taken possession of the same on a rent-paying basis and any
payments, credits or abatements required to be given by Mortgage Borrower to the
Tenants under the Leases have been made in full; (j) to Borrower’s knowledge,
there exist no offsets or defenses to the payment of any portion of the Rents
and Borrower has no monetary obligation to any Tenant under any Lease; (k)
neither Borrower nor Mortgage Borrower has received any notice from any Tenant
challenging the validity or enforceability of any Lease; (l) there are no
agreements with the Tenants under the Leases other than expressly set forth in
each

 

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Lease; (m) Intentionally Omitted; (n) no Lease contains an option to purchase,
right of first refusal to purchase, right of first refusal to lease additional
space at any Individual Property, or any other similar provision; (o) no Person
has any possessory interest in, or right to occupy, any Individual Property
except under and pursuant to a Lease; (p) all security deposits relating to the
Leases are reflected on the Rent Roll and have been collected by Mortgage
Borrower; (q) no brokerage commissions or finders fees are due and payable
regarding any Lease; (r) each Tenant is in actual, physical occupancy of the
premises demised under its Lease; (s) to Borrower’s knowledge, there are no
actions or proceedings (voluntary or otherwise) pending against any Tenants or
guarantors under Leases, in each case, under bankruptcy or similar insolvency
laws or regulations; and (t) to Borrower’s knowledge, no event has occurred
giving any Tenant the right to cease operations at its leased premises (i.e.,
“go dark”), terminate its Lease or pay reduced or alternative Rent to Mortgage
Borrower under any of the terms of such Lease, such as a co-tenancy provision.

Section 3.19. Filing and Recording Taxes. All mortgage, mortgage recording,
stamp, intangible or other similar tax required to be paid by any Person with
respect to each Individual Property under applicable Legal Requirements
currently in effect in connection with the execution, delivery, recordation,
filing, registration, perfection or enforcement of any of this Agreement, the
Pledge Agreement, the Note and the other Loan Documents, have been paid or will
be paid, and, under current Legal Requirements, the Pledge Agreement and the
other Loan Documents are enforceable in accordance with their terms by Lender
(or any subsequent holder thereof), except as such enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Creditors
Rights Laws, and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

Section 3.20. Management Agreement/Special Management Agreement.

(a) Each Management Agreement is in full force and effect and there is no
default thereunder by any party thereto and no event has occurred that, with the
passage of time and/or the giving of notice would constitute a default
thereunder. As of the date hereof, no management fees under any Management
Agreement are due and payable.

(b) The Special Management Agreement is in full force and effect and there is no
default thereunder by any party thereto and no event has occurred that, with the
passage of time and/or the giving of notice would constitute a default
thereunder. As of the date hereof, no management fees under the Special
Management Agreement are due and payable in excess of thirty (30) days.

Section 3.21. Illegal Activity/Forfeiture.

(a) No portion of the Collateral has been or will be purchased, improved,
equipped or furnished with proceeds of any illegal activity and no portion of
any Individual Property has been or will be purchased, improved, equipped or
furnished with proceeds of any illegal activity and to Borrower’s knowledge,
there are no illegal activities or activities relating to controlled substances
at the Property.

 

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(b) There has not been and shall never be committed by Borrower, Mortgage
Borrower or, to Borrower’s knowledge, any other Person in occupancy of or
involved with the operation or use of any Individual Property or the ownership
of the Collateral any act or omission affording the federal government or any
state or local government the right of forfeiture as against such Individual
Property or any part thereof, the Collateral or any part thereof or any monies
paid in performance of Borrower’s obligations under this Agreement, the Note,
the Pledge Agreement or the other Loan Documents. Borrower hereby covenants and
agrees not to commit, permit or suffer to exist any act or omission affording
such right of forfeiture.

Section 3.22. Taxes. Borrower has filed all federal, state, county, municipal,
and city income, personal property and other tax returns required to have been
filed by it and has paid all taxes and related liabilities which have become due
pursuant to such returns or pursuant to any assessments received by it. Borrower
has no knowledge of any basis for any additional assessment in respect of any
such taxes and related liabilities for prior years.

Section 3.23. Permitted Encumbrances. None of the Permitted Encumbrances,
individually or in the aggregate, materially interferes with the benefits of the
security intended to be provided by this Agreement, the Pledge Agreement, the
Note and the other Loan Documents or would result in a Material Adverse Effect.

Section 3.24. Third Party Representations. Each of the representations and the
warranties made by Guarantor in the other Loan Documents (if any) are true,
complete and correct in all material respects.

Section 3.25. Non-Consolidation Opinion Assumptions. All of the assumptions made
in the Non-Consolidation Opinion, including, but not limited to, any exhibits
attached thereto and/or certificates delivered in connection therewith, are
true, complete and correct.

Section 3.26. Federal Reserve Regulations. No part of the proceeds of the Loan
will be used for the purpose of purchasing or acquiring any “margin stock”
within the meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulation U or any other Regulations of such Board of Governors, or for any
purposes prohibited by Legal Requirements or by the terms and conditions of this
Agreement, the Pledge Agreement, the Note or the other Loan Documents.

Section 3.27. Investment Company Act. Borrower is not (a) an “investment
company” or a company “controlled” by an “investment company,” within the
meaning of the Investment Company Act of 1940, as amended; (b) a “holding
company” or a “subsidiary company” of a “holding company” or an “affiliate” of
either a “holding company” or a “subsidiary company” within the meaning of the
Public Utility Holding Company Act of 1935, as amended; or (c) subject to any
other federal or state law or regulation which purports to restrict or regulate
its ability to borrow money.

 

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Section 3.28. Fraudulent Conveyance. Borrower (a) has not entered into the Loan
or any Loan Document with the actual intent to hinder, delay, or defraud any
creditor and (b) received reasonably equivalent value in exchange for its
obligations under the Loan Documents. Giving effect to the Loan, the fair
saleable value of Borrower’s assets exceeds and will, immediately following the
execution and delivery of the Loan Documents, exceed Borrower’s total
liabilities, including, without limitation, subordinated, unliquidated, disputed
or contingent liabilities. The fair saleable value of Borrower’s assets is and
will, immediately following the execution and delivery of the Loan Documents, be
greater than Borrower’s probable liabilities, including the maximum amount of
its contingent liabilities or its debts as such debts become absolute and
matured. Borrower’s assets do not and, immediately following the execution and
delivery of the Loan Documents will not, constitute unreasonably small capital
to carry out its business as conducted or as proposed to be conducted. Borrower
does not intend to, and does not believe that it will, incur debts and
liabilities (including, without limitation, contingent liabilities and other
commitments) beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of obligations of
Borrower).

Section 3.29. Embargoed Person. As of the date hereof and at all times
throughout the term of the Loan, including after giving effect to any transfers
of interests permitted pursuant to the Loan Documents, (a) none of the funds or
other assets of any Borrower Party constitute (or will constitute) property of,
or are (or will be) beneficially owned, directly or indirectly, by any Person or
government that is the subject of economic sanctions under U.S. law, including
but not limited to, the International Emergency Economic Powers Act, 50 U.S.C.
§§ 1701 et seq., the Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and
any Executive Orders or regulations promulgated thereunder with the result that
transactions involving or the investment in any such Borrower Party (whether
directly or indirectly) is prohibited by applicable law or the Loan made by
Lender is in violation of applicable law (“Embargoed Person”); (b) no Embargoed
Person has (or will have) any interest of any nature whatsoever in any Borrower
Party, with the result that transactions involving or the investment in any such
Borrower Party (whether directly or indirectly), is prohibited by applicable law
or the Loan is in violation of applicable law; and (c) none of the funds of any
Borrower Party have been (or will be) derived from any unlawful activity with
the result that transactions involving or the investment in any such Borrower
Party (whether directly or indirectly), is prohibited by applicable law or the
Loan is in violation of applicable law. Any violation of the foregoing shall, at
Lender’s option, constitute an Event of Default hereunder.

Section 3.30. Anti-Money Laundering and Economic Sanctions. Borrower hereby
represents and warrants that each Borrower Party, each and every Person
Affiliated with any such Borrower Party and, to Borrower’s knowledge, their
directors, officers, employees or agents and any Person that has an economic
interest in any such Borrower Party, in each case, has not, and at all times
throughout the term of the Loan, including after giving effect to any transfers
of interests permitted pursuant to the Loan Documents, shall not: (i) itself be
(or have been), be (or have been) owned or controlled by, or act for or on
behalf of a Person or government that is the subject of, in each case, economic
sanctions administered or enforced by the Office of Foreign Assets Control
(“OFAC”) of the Department of the Treasury, the Department of State, or other
relevant sanctions authority (“Sanctions”); (ii) fail to be (or have been) in
full compliance with the requirements of the USA PATRIOT Act or other applicable
anti-money laundering laws and regulations and all Sanctions; (iii) fail to
operate (or have operated) under policies, procedures and practices, if any,
that are (A) in compliance with applicable anti-money laundering laws and
regulations and Sanctions and (B) available to Lender for Lender’s review and
inspection during normal business hours and upon reasonable prior notice;
(iv) be (or have been) in receipt of any notice from OFAC, the Secretary of
State or the Attorney General of the United States or any other department,
agency or office of the United States, in each case, claiming a violation or
possible violation of applicable anti-money laundering laws and regulations
and/or

 

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Sanctions; (v) be (or have been) the subject of Sanctions, including those
listed as a Specially Designated National or as a “blocked” Person on any lists
issued by OFAC and those owned or controlled by or acting for or on behalf of
such Specially Designated National or “blocked” Person; (vi) be (or have been) a
Person who has been determined by competent authority to be subject to any of
the prohibitions contained in the USA PATRIOT Act; or (vii) be (or have been)
owned or controlled by or be (or have been) acting for or on behalf of, in each
case, any Person who has been determined to be subject to the prohibitions
contained in the USA PATRIOT Act. Borrower covenants and agrees that in the
event Borrower receives any notice that any Borrower Party (or any of their
respective beneficial owners or Affiliates) became the subject of Sanctions or
is indicted, arraigned, or custodially detained on charges involving Sanctions,
money laundering or predicate crimes to money laundering, Borrower shall
immediately notify Lender. It shall be an Event of Default hereunder if any
Borrower Party or any other party to any Loan Document becomes the subject of
Sanctions or is indicted, arraigned or custodially detained on charges involving
Sanctions, money laundering or predicate crimes to money laundering. All
capitalized words and phrases and all defined terms used in the USA PATRIOT Act
of 2001, 107 Public Law 56 (October 26, 2001) and in other statutes and all
orders, rules and regulations of the United States government and its various
executive departments, agencies and offices related to applicable anti-money
laundering laws and regulations (collectively referred as the “Patriot Act”) are
incorporated into this Section.

Section 3.31. Organizational Chart. The organizational chart attached as
Schedule III hereto (the “Organizational Chart”), relating to Borrower, Mortgage
Borrower and certain Affiliates and other parties, is true, complete and correct
on and as of the date hereof.

Section 3.32. Bank Holding Company. Borrower is not a “bank holding company” or
a direct or indirect subsidiary of a “bank holding company” as defined in the
Bank Holding Company Act of 1956, as amended, and Regulation Y thereunder of the
Board of Governors of the Federal Reserve System.

Section 3.33. Contractual Obligations. Other than the Loan Documents, the
organizational documents of Borrower, and the organizational documents of
Mortgage Borrower, as of the date of this Agreement, Borrower is not subject to
any Contractual Obligations and has not entered into any agreement, instrument
or undertaking by which it or its assets are bound, or has incurred any
Indebtedness, except for Contractual Obligations or liabilities (not material in
the aggregate) that are incidental to its activities as a member of Mortgage
Borrower.

Section 3.34. Operating Lease. Mortgage Borrower is the owner and lessor of
landlord’s interest in each Operating Lease. Each Operating Lease is in full
force and effect and there is no default thereunder by either party and there
are no conditions that would constitute defaults thereunder. No rent under any
Operating Lease has been paid more than one (1) month in advance of its due
date. All security deposits (if any) are held by Mortgage Borrower in accordance
with applicable law. All work (if any) to be performed by Mortgage Borrower
under each Operating Lease has been performed as required and has been accepted
by Operating Lessee, and any payments, free rent, partial rent, rebate of rent
or other payments, credits, allowances or abatements required to be given by
Mortgage Borrower to Operating Lessee has already been received by Operating
Lessee. There has been no prior sale, transfer or assignment, hypothecation or
pledge of any Operating Lease or of the rent thereunder which is outstanding.
Each Operating Lessee has not assigned the applicable Operating Lease or sublet
all or any portion of the premises demised thereby other than pursuant to a
Lease. Operating Lessee has no right or option pursuant to the Operating Lease
or otherwise to purchase all or any part of the leased premises or the building
of which the leased premised are a part.

 

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Section 3.35. Property Document Representations. With respect to each Property
Document (other than the Ground Lease), Borrower hereby represents that (a) each
Property Document is in full force and effect and has not been amended,
restated, replaced or otherwise modified (except, in each case, as expressly set
forth herein), (b) to Borrower’s knowledge, there are no defaults under any
Property Document by any party thereto and no event has occurred which, but for
the passage of time, the giving of notice, or both, would constitute a default
under any Property Document, (c) all rents, additional rents and other sums due
and payable under the Property Documents have been paid in full, (d) to
Borrower’s knowledge, no party to any Property Document has commenced any action
or given or received any notice for the purpose of terminating any Property
Document, and (e) to Borrower’s knowledge, the representations made in any
estoppel or similar document delivered with respect to any Property Document in
connection with the Loan are true, complete and correct and the representations
are hereby incorporated by reference as if fully set forth herein.

Section 3.36. Hotel Matters.

(a) The Properties are not subject to equipment leases or any other similar
leases or agreements, except for Permitted Equipment Leases, SRO Arrangements
and the Operating Leases.

(b) Mortgage Borrower has the right to use all patents, licenses, franchises,
trademarks, trademark rights, trade names, trade name rights, trade secrets and
copyrights (collectively, the “Intellectual Property”) necessary to the conduct
of its businesses, without known conflict with any patent, license, franchise,
trademark, trade secret, trade name, copyright, or other proprietary right of
any other Person. To Borrower’s knowledge, all such Intellectual Property is
fully protected and/or duly and properly registered, filed or issued in the
appropriate office and jurisdictions for such registrations, filing or
issuances. To Borrower’s knowledge, no material claim has been asserted by any
Person with respect to the use of any such Intellectual Property, or challenging
or questioning the validity or effectiveness of any such Intellectual Property.

 

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(c) There are no: (i) collective bargaining agreements and/or other labor
agreements to which Mortgage Borrower is a party or to which Mortgage Borrower
may be bound except as set forth on Schedule XXII; (ii) except as set forth on
Schedule XXII hereof, collective bargaining agreements and/or other labor
agreements to which the Properties, or any portion thereof, is bound,
(iii) employment, profit sharing, deferred compensation, bonus, stock option,
stock purchase, pension, retainer, consulting, retirement, health, welfare, or
incentive plans and/or contracts to which Mortgage Borrower or the Properties,
or any portion thereof is a party, or by which either is or may be bound; or
(iv) plans and/or agreements under which “fringe benefits” (including, but not
limited to, vacation plans or programs, and related or similar dental or medical
plans or programs, and related or similar benefits) are afforded to employees of
Mortgage Borrower or the Properties, or any portion thereof. To Borrower’s
knowledge, neither Mortgage Borrower nor Borrower has violated any material
aspects of applicable laws, rules and regulations relating to the employment of
labor, including those relating to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by appropriate
Governmental Authorities. To Borrower’s knowledge, (i) neither Mortgage Borrower
nor Borrower has violated any material provisions of applicable laws, rules and
regulations relating to the employment of labor, including those relating to
wages, hours, collective bargaining and the payment and withholding of taxes and
other sums as required by appropriate Governmental Authorities and (ii) with
respect to the collective bargaining agreement set forth on Schedule XXII
hereof, no party to such collective bargaining agreement nor any such party’s
affiliated or related entities have breached any of its material obligations
under the collective bargaining agreement. To Borrower’s knowledge, Manager and
its affiliated and related entities have complied with the Employment Related
Laws and Obligations. To Borrower’s knowledge, no employee employed at the
Property nor the Union has asserted any material claim of violation of the
collective bargaining agreement listed on Schedule XXII hereto or the Employment
Related Laws and Obligations against Manager or any or its affiliated or related
entities that would reasonably be expected to have a Material Adverse Effect.

Section 3.37. No Change in Facts or Circumstances; Disclosure.

All information submitted by (or on behalf of) Borrower, Mortgage Borrower or
Guarantor to Lender and in all financial statements, rent rolls, reports,
certificates and other documents submitted in connection with the Loan or in
satisfaction of the terms thereof and all statements of fact made by Borrower,
Mortgage Borrower and/or Guarantor in this Agreement, in the other Loan
Documents or in the Mortgage Loan Documents, are accurate, complete and correct
in all material respects. There has been no material adverse change in any
condition, fact, circumstance or event that would make any such information
inaccurate, incomplete or otherwise misleading in any material respect or that
otherwise have a Material Adverse Effect. Borrower has disclosed to Lender all
material facts and has not failed to disclose any material fact that could cause
any representation or warranty made herein to be materially misleading.

Section 3.38. Liquor Licenses. Schedule IX attached hereto and made a part
hereof is a true, correct and complete summary of all liquor licenses relating
to the Properties.

Section 3.39. Ground Lease Representations.

(a) Each Ground Lease is in full force and effect and has not been modified or
amended in any manner whatsoever, (ii) there are no defaults under any Ground
Lease by Mortgage Borrower, or, to Borrower’s knowledge, the applicable landlord
thereunder, and, to the best of Borrower’s knowledge, no event has occurred
which but for the passage of time, or notice, or both would constitute a default
under any Ground Lease, (iii) all rents, additional rents and other sums due and
payable under each Ground Lease have been paid in full, (iv) neither Mortgage
Borrower nor the landlord under any Ground Lease has commenced any action or
given or received any notice for the purpose of terminating any Ground Lease,
(v) each Fee Owner, as debtor in possession or by a trustee for such Fee Owner,
has not given any notice of, and neither Mortgage Borrower nor Borrower has
consented to, any attempt to transfer any Fee Estate free and clear of the
Ground Lease under section 363(f) of the Bankruptcy Code, and (vi) to Borrower’s
knowledge, each Fee Owner under each Ground Lease is not subject to any
voluntary or involuntary bankruptcy, reorganization or insolvency proceeding and
the applicable Fee Estate under each Ground Lease is not an asset in any
voluntary or involuntary bankruptcy, reorganization or insolvency proceeding;

 

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(b) Each Ground Lease or a memorandum thereof has been duly recorded, each
Ground Lease permits the interest of the lessee thereunder to be encumbered by
the related Security Instrument and does not restrict the use of the related
Individual Property by such lessee, its successors or assigns in a manner that
would adversely affect the security provided by the related Security Instrument
and there has not been any modifications, amendments or other changes in the
terms of any Ground Lease since its recordation;

(c) Except as indicated in the related Title Insurance Policy, the applicable
Mortgage Borrower’s interest in each Ground Lease is not subject to any lien
superior to, or of equal priority with, the related Security Instrument;

(d) Each Ground Lease itself provides and/or the related Fee Owner has agreed in
a writing for the benefit of Lender, its successors and assigns that such Ground
Lease may not be amended, modified, canceled, surrendered or terminated without
the prior written consent of Lender and that any such action without such
consent is not binding on Lender, its successors or assigns;

(e) Except as indicated in each such Ground Lease, each Ground Lease does not
place commercially unreasonable restrictions on the identity of Lender and
Mortgage Borrower’s interest in each Ground Lease is assignable upon notice to,
but without the consent of, the related Fee Owner and, in the event that it is
so assigned, it is further assignable upon notice to, but without the need to
obtain the consent of, the related Fee Owner;

(f) To the extent provided in each such Ground Lease, each Ground Lease requires
the related Fee Owner to give notice of any default by Mortgage Borrower to
Lender and each Ground Lease further provides that notice of default or
termination given under such Ground Lease is not effective against Lender unless
a copy of the notice has been delivered to Lender in the manner described in
such Ground Lease, and requires that the related Fee Owner will supply an
estoppel certificate to Lender in form and substance acceptable to Lender;

(g) To the extent provided in each such Ground Lease and subject to the rights
of Mortgage Lender pursuant to the Mortgage Loan Documents and except as
indicated in each such Ground Lease, Lender is permitted a reasonable
opportunity (including, where necessary, sufficient time to gain possession of
the interest of Borrower under each Ground Lease) to cure any default under such
Ground Lease, which is curable after the receipt of notice of any default before
the related Fee Owner may terminate such Ground Lease;

(h) Each Ground Lease has a term which extends not less than twenty (20) years
beyond the Maturity Date (including any extensions thereof in accordance with
the terms and conditions of this Agreement);

 

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(i) Except as indicated in each such Ground Lease, each Ground Lease requires
the related Fee Owner to enter into a new lease upon termination of such Ground
Lease for any reason, including rejection of such Ground Lease in a bankruptcy
proceeding;

(j) Under the terms of each Ground Lease and the applicable Mortgage Loan
Documents, taken together, any Net Proceeds will be applied either to the
Restoration of all or part of the related Individual Property, with Mortgage
Lender having the right to hold and disburse such Net Proceeds as the
Restoration progresses, or to the payment of the outstanding principal balance
of the Loan together with any accrued interest thereon; and

(k) To Borrower’s knowledge, each Ground Lease does not impose restrictions on
subletting that would be viewed as commercially unreasonable by a prudent
commercial mortgage lender.

Section 3.40. Condominium Representations.

(a) The Condominium has been legally and validly created pursuant to all Legal
Requirements and the Condominium Documents. The Condominium Documents are valid
and enforceable and there currently exists no default or event of default
thereunder by Mortgage Borrower or, to Borrower’s knowledge, by any other party
thereto. All fees, dues, charges and assessments, whether annual, monthly,
regular, special or otherwise, including, any “Common Charges” (as such term is
defined in the Condominium Documents) (collectively, the “Common Charges”)
payable by Mortgage Borrower to date have been fully paid. Henry Hudson Holdings
LLC is one of the “Declarants” (as such term is defined in the Condominium
Documents) and is the owner of the Units each as set forth on Schedule XIV
attached hereto. No Affiliate of Borrower (other than Mortgage Borrower) owns
any Units. There are currently no special or other extraordinary Common Charges
pending (other than regular, monthly Common Charges). The Board has not
established a working capital or any other similar type of reserve. There are no
judgments, suits or claims pending, filed or threatened against the Board or the
Association. Neither the Board nor any other Person has any right of first
refusal or option to purchase the Individual Property subject to the Condominium
Documents. All of the members and officers of the Board are listed on Schedule
XV attached hereto. The members of the Board appointed by Mortgage Borrower are
designated as such on Schedule XV. The Board has the sole power and authority to
act on behalf of, and bind, the Condominium.

(b) The amount of Common Charges payable by Mortgage Borrower on an annual basis
is $0.00.

(c) The Board and the Condominium are controlled by members thereof appointed by
Mortgage Borrower. Neither the Board nor the Condominium are party to any loan,
credit agreement or other arrangement for any extension of credit, whether
funded or to be funded.

 

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Section 3.41. SRO Units.

(a) Attached hereto as Schedule XVI is a list of all SRO Units at the Hudson
Property, and attached hereto as Schedule XVII is a list of all occupied SRO
Units and the current rent payable with respect to each such occupied SRO Unit.
Except with respect to any written agreements relating to the relocation of any
occupant of an SRO Unit, there are no written agreements with respect to leasing
any of the SRO Units and Borrower shall not cause Mortgage Borrower to enter
into any written agreements with respect to leasing any SRO Unit other than any
such written agreement that is (i) required by Legal Requirements, (ii) in
respect of a termination of such SRO Unit in accordance with Legal Requirements
or the relocation of any occupant of such SRO Unit, or (iii) consented to by
Lender, provided that in no event shall Mortgage Borrower increase the number of
units at the Hudson Property occupied as SRO Units beyond those set forth in the
list attached as Schedule XVII hereto. Mortgage Borrower and the Hudson Property
are in compliance with all Legal Requirements applicable to the SRO Units,
except to the extent that the Hudson Property has only been issued a temporary
certificate of occupancy. Borrower represents and warrants that Mortgage
Borrower’s failure to have a final certificate of occupancy with respect to the
Hudson Property would not be reasonably expected to result in a Material Adverse
Effect. No rents or other amounts have been collected with respect to any SRO
Unit or any portion of the Hudson Property that was previously leased or
occupied as a single room occupancy unit in excess of the legal maximum
collectible rents for any period prior to the date hereof. There are no SRO
Units at the Delano Property.

(b) With respect to those SRO Units at the Hudson Property which are subject to
the New York City Rent Stabilization Law: (i) the rents shown on the rent
schedules delivered to Lender in connection with the Loan are not in excess of
the legal maximum collectible rents under the New York City Rent Stabilization
Law, and (ii) there are no proceedings with any occupant of any SRO Unit
presently pending before the DHCR in which such occupant has alleged an
overcharge of rent or diminution of services or similar grievance, and there are
no outstanding orders of the DHCR that have not been complied with by the
Mortgage Borrower or any prior owner of all or any portion of the Hudson
Property.

(c) With respect to those SRO Units at the Hudson Property which are subject to
the New York City Emergency Rent and Rehabilitation Law: (i) the rents shown on
the rent schedules delivered to Lender in connection with the closing of the
Loan are not in excess of the legal maximum collectible rents, (ii) no occupants
of any such SRO Units are entitled to abatements as senior citizens, (iii) there
are no proceedings presently pending in which any occupant of an SRO Unit has
alleged an overcharge of rent or diminution of services or similar grievance,
and (iv) there are no outstanding orders that have not been complied with by the
Mortgage Borrower or any prior owner of all or any portions of the Hudson
Property.

Section 3.42. Mortgage Loan Representations and Warranties. All of the
representations and warranties contained in the Mortgage Loan Documents are
(i) true and correct in all respects and (ii) hereby incorporated into this
Agreement and deemed made hereunder as and when made thereunder and shall remain
incorporated without regard to any waiver, amendment or other modification
thereof by the Mortgage Lender or to whether the related Mortgage Loan Document
has been repaid or otherwise terminated, unless otherwise consented to in
writing by Lender

Section 3.43. Affiliates. Borrower does not have any subsidiaries except
Mortgage Borrower, Hudson Pledgor LLC, Hudson Managing Member LLC and Hudson
Residual Interests, Inc.

 

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Borrower agrees that, unless expressly provided otherwise, all of the
representations and warranties of Borrower set forth in this Article 3 and
elsewhere in this Agreement and the other Loan Documents shall survive for so
long as any portion of the Debt remains owing to Lender (except with respect to
any Individual Property or portion of the Collateral that is released in
accordance with the terms and conditions of this Agreement and the Mortgage Loan
Agreement (except for those representations and warranties with respect to such
Individual Property or portion of the Collateral which survive the release of
such Individual Property or portion of the Collateral and/or the repayment of
the Debt)). All representations, warranties, covenants and agreements made in
this Agreement and in the other Loan Documents shall be deemed to have been
relied upon by Lender notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf.

ARTICLE 4

BORROWER COVENANTS

From the date hereof and until payment and performance in full of all
obligations of Borrower under this Agreement, the Pledge Agreement, the Note and
the other Loan Documents or the earlier release of the lien of the Pledge
Agreement (and all related obligations) in accordance with the terms of this
Agreement, the Pledge Agreement, the Note and the other Loan Documents, Borrower
hereby covenants and agrees with Lender that:

Section 4.1. Existence. Borrower will continuously maintain (a) its existence
and shall not dissolve or permit its dissolution, (b) its qualification to do
business and good standing in each jurisdiction where it is required to be so
qualified in connection with its assets, businesses and operations and (c) its
franchises and trade names, if any.

Section 4.2. Legal Requirements.

(a) Borrower shall promptly comply and shall cause each of Mortgage Borrower,
each Individual Property and the Collateral to comply with all Legal
Requirements affecting such Individual Property or the use thereof and the
Collateral or the use thereof (which such covenant shall be deemed to
(i) include Environmental Laws and (ii) require Mortgage Borrower to keep all
Permits in full force and effect).

(b) Borrower shall from time to time, upon Lender’s request, but not more than
twice in a calendar year unless an Event of Default has occurred and is
continuing, provide Lender with evidence reasonably satisfactory to Lender that
each Mortgage Borrower, Borrower, each Individual Property and the Collateral
complies with all Legal Requirements or is exempt from compliance with Legal
Requirements.

(c) Borrower shall give prompt notice to Lender of the receipt by Borrower or
Mortgage Borrower of any notice related to a violation of any Legal Requirements
and of the commencement of any proceedings or investigations which relate to
compliance with Legal Requirements.

 

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(d) After prior written notice to Lender, Borrower, at its own expense, may
contest (or cause to be contested) by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the validity of
any Legal Requirement, the applicability of any Legal Requirement to Borrower,
Mortgage Borrower, any Individual Property or the Collateral or any alleged
violation of any Legal Requirement, provided that (i) no Event of Default has
occurred and remains uncured; (ii) such proceeding shall be permitted under and
be conducted in accordance with the provisions of any instrument to which
Borrower or Mortgage Borrower is subject (including, without limitation, the
Mortgage Loan Documents) and shall not constitute a default thereunder and such
proceeding shall be permitted by and conducted in accordance with all applicable
Legal Requirements; (iii) neither the applicable Individual Property, the
Collateral nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly
upon final determination thereof comply (or cause compliance) with any such
Legal Requirement determined to be valid or applicable or cure any violation of
any Legal Requirement; (v) such proceeding shall suspend the enforcement of the
contested Legal Requirement against Mortgage Borrower, Borrower, the Collateral
or the applicable Individual Property; and (vi) Borrower shall furnish (or cause
to be furnished) such security as may be required in the proceeding, or as may
be reasonably requested by Lender, to insure compliance with such Legal
Requirement, together with all interest and penalties payable in connection
therewith. Lender may apply any such security or part thereof, as necessary to
cause compliance with such Legal Requirement at any time when, in the reasonable
judgment of Lender, the validity, applicability or violation of such Legal
Requirement is finally established or the applicable Individual Property (or any
part thereof or interest therein) or the Collateral (or any part thereof or
interest therein) shall be in danger of being sold, forfeited, terminated,
cancelled or lost.

Section 4.3. Maintenance and Use of Property. Borrower shall cause Mortgage
Borrower to cause each Individual Property to be maintained in a good and safe
condition and repair. The Improvements and the Personal Property shall not be
removed, demolished or materially altered (except for normal replacement of the
Personal Property) without the consent of Lender (not to be unreasonably
withheld) or as otherwise permitted pursuant to Section 4.21 hereof. Borrower
shall perform (or shall cause to be performed) the prompt repair, replacement
and/or rebuilding of any part of any Individual Property which may be destroyed
by any casualty, or become damaged, worn or dilapidated or which may be affected
by any proceeding of the character referred to in Section 3.14 hereof and shall
complete and pay for (or cause the completion and payment for) any structure at
any time in the process of construction or repair on the Land. Borrower shall
cause Mortgage Borrower to operate each Individual Property for the same uses as
such Individual Property is currently operated and Borrower shall not (and shall
not permit Mortgage Borrower to), without the prior written consent of Lender
(not to be unreasonably withheld with respect to a request pursuant to the
immediately succeeding clause (ii)), (i) change the use of such Individual
Property or (ii) initiate, join in, acquiesce in, or consent to any change in
any private restrictive covenant, zoning law or other public or private
restriction, limiting or defining the uses which may be made of such Individual
Property or any part thereof. If under applicable zoning provisions the use of
all or any portion of any Individual Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use to be discontinued
or the nonconforming Improvement to be abandoned without the express written
consent of Lender.

 

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Section 4.4. Waste. Borrower shall not commit or suffer (or permit Mortgage
Borrower to commit or suffer) any waste of any Individual Property or make any
change (or permit Mortgage Borrower to make any change) in the use of any
Individual Property which will in any way materially increase the risk of fire
or other hazard arising out of the operation of any Individual Property, or take
any action (or permit Mortgage Borrower to take any action) that is reasonably
likely to invalidate or give cause for cancellation of any Policy, or do or
permit to be done thereon anything that may in any way impair the security for
the Loan. Borrower will not, without the prior written consent of Lender, permit
(or cause Mortgage Borrower to permit) any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of any Individual Property, regardless of the depth thereof or the
method of mining or extraction thereof.

Section 4.5. Taxes and Other Charges.

(a) Borrower shall pay (or cause to be paid) all Taxes and Other Charges now or
hereafter levied or assessed or imposed against each Individual Property or any
part thereof as the same become due and payable; provided, however, prior to the
occurrence and continuance of an Event of Default, Borrower’s obligation to
directly pay (or cause to be paid) Taxes shall be suspended for so long as
Mortgage Borrower complies with the terms and provisions of the Mortgage Loan
Documents relating to reserving sums for the same. Borrower shall furnish (or
cause Mortgage Borrower to furnish) to Lender receipts for the payment of the
Taxes and the Other Charges prior to the date the same shall become delinquent
(provided, however, that Borrower is not required to furnish (or cause to be
furnished) such receipts for payment of Taxes in the event that such Taxes have
been paid by Mortgage Lender pursuant to the terms and conditions of the
Mortgage Loan Agreement). Borrower shall not suffer (and shall not permit
Mortgage Borrower to suffer) and shall promptly cause to be paid and discharged
(or shall cause Mortgage Borrower to promptly pay and discharge) any lien or
charge whatsoever which may be or become a lien or charge against any Individual
Property (or any portion thereof) (provided, that, for so long as sums are
available for payment thereof in the Tax Account (as defined in the Mortgage
Loan Agreement) in accordance with the terms and conditions of the Mortgage Loan
Agreement, such lien or charge may be paid from the Tax Account, in accordance
with the terms and conditions of the Mortgage Loan Agreement), and shall
promptly pay for, or cause to be paid for, all utility services provided to such
Individual Property (or any portion thereof).

(b) After prior written notice to Lender, Borrower, at its own expense, may
contest (or permit to be contested) by appropriate legal proceeding, promptly
initiated and conducted in good faith and with due diligence, the amount or
validity or application in whole or in part of any Taxes or Other Charges,
provided that (i) no Event of Default has occurred and remains uncured;
(ii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower or Mortgage
Borrower is subject (including, without limitation, the Mortgage Loan Documents)
and shall not constitute a default thereunder and such proceeding shall be
permitted by and conducted in accordance with all applicable Legal Requirements;
(iii) neither the applicable Individual Property (or any part thereof) nor the
Collateral (or any part thereof) or any interest in any Individual Property or
the Collateral will be in danger of being sold, forfeited, terminated, canceled
or lost; (iv) Borrower shall promptly upon final determination thereof pay (or
cause to be paid) the amount of any such Taxes or Other Charges, together with
all costs, interest and penalties which may be payable in connection therewith;
(v) such proceeding shall suspend the collection of such contested Taxes or
Other Charges from the applicable Individual Property; and (vi) Borrower shall
furnish (or cause to be furnished) such security as may be reasonably required
in the proceeding, or deliver (or cause to be delivered) to Lender such reserve
deposits as may be requested by Lender, to insure the payment of any such Taxes
or Other Charges, together with all interest and penalties thereon. Lender may
pay over any such cash deposit or part thereof held by Lender to the claimant
entitled thereto at any time when, in the reasonable judgment of Lender, the
entitlement of such claimant is established or the applicable Individual
Property (or part thereof or interest therein) shall be in danger of being sold,
forfeited, terminated, canceled or lost or there shall be any danger of the lien
of the Security Instrument or the Pledge Agreement being primed by any related
lien.

 

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Section 4.6. Litigation. Borrower shall give prompt written notice to Lender of
any litigation or governmental proceedings pending or threatened in writing
against Borrower or Mortgage Borrower which might have a Material Adverse
Effect.

Section 4.7. Access to Property. Borrower shall permit (or shall cause Mortgage
Borrower to permit) agents, representatives and employees of Lender to inspect
each Individual Property or any part thereof at reasonable hours upon reasonable
advance notice.

Section 4.8. Notice of Default. Borrower shall promptly advise Lender of any
change in Borrower’s, Mortgage Borrower’s and/or Guarantor’s condition
(financial or otherwise) that would result in a Material Adverse Effect or of
the occurrence of any Default or Event of Default of which Borrower has
knowledge.

Section 4.9. Cooperate in Legal Proceedings. Borrower shall cooperate fully with
Lender with respect to any proceedings before any court, board or other
Governmental Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the Note, the Pledge
Agreement or the other Loan Documents and, in connection therewith, permit
Lender, at its election, to participate in any such proceedings.

Section 4.10. Performance by Borrower. Borrower hereby acknowledges and agrees
that Borrower’s observance, performance and fulfillment of each and every
covenant, term and provision to be observed and performed by Borrower under this
Agreement, the Pledge Agreement, the Note and the other Loan Documents is a
material inducement to Lender in making the Loan.

Section 4.11. Awards. Subject to the Mortgage Loan Documents and the rights of
Mortgage Lender thereunder, Borrower shall cooperate with Lender in obtaining
for Lender the benefits of any Awards or insurance proceeds lawfully or
equitably payable in connection with the Properties (or any portion thereof),
and Lender shall be reimbursed for any reasonable expenses incurred in
connection therewith (including reasonable, actual attorneys’ fees and
disbursements, and the payment by Borrower of the expense of an appraisal on
behalf of Lender in case of a Casualty or Condemnation affecting the Properties
or any part thereof) out of such Awards or insurance proceeds.

 

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Section 4.12. Books and Records.

(a) Borrower shall furnish (or cause Mortgage Borrower to furnish) to Lender:

(i) monthly, through and including the Monthly Payment Date in September, 2014,
and thereafter quarterly (unless after the Monthly Payment Date in September
2014 a Securitization has not occurred, then (if requested by Lender), monthly)
certified rent rolls with respect to the SRO Units and all Leases within ten
(10) days after the end of each calendar month or thirty (30) days after the end
of each calendar quarter, as applicable;

(ii) (A) monthly and quarterly, (I) operating statements of each Individual
Property detailing the revenues received, the expenses incurred and the
components of Net Cash Flow before and after Debt Service and major capital
improvements for the period of calculation and containing appropriate
year-to-date information, and each such quarterly operating statement shall show
actual and budgeted amounts and show any variances between such two amounts,
(II) Smith Travel STAR Reports for each Individual Property for the subject
calendar quarter or calendar month, as applicable, (III) a report of occupancy
for the subject calendar quarter or calendar month, as applicable, including an
average daily rate and RevPar for each Individual Property and (B) quarterly
(and prior to a Securitization (if requested by Lender), monthly), to the extent
available, tenant sales reports, each within fifteen (15) days after the end of
each calendar month or thirty (30) days after the end of each calendar quarter,
as applicable (except, with respect to the Smith Travel STAR Reports, to the
extent the Smith Travel STAR Report for the subject calendar quarter or subject
calendar month has not been delivered to Borrower on or before fifteen (15) days
after the end of the applicable calendar month or on or before thirty (30) days
after the end of the applicable calendar quarter, as applicable, Borrower shall
deliver (or cause Mortgage Borrower to deliver) to Lender such Smith Travel STAR
Report within two (2) Business Days of Borrower’s or Mortgage Borrower’s receipt
thereof);

(iii) within ninety (90) days after the close of each fiscal year of Borrower,
(A) with respect to Borrower, an annual balance sheet, and statement of cash
flow (each of which shall not include any Person other than Borrower and
Mortgage Borrower) and (B) an annual operating statement of each Individual
Property (detailing the revenues received, the expenses incurred and the
components of Net Cash Flow before and after Debt Service and major capital
improvements for the period of calculation and containing appropriate
year-to-date information), and each such annual operating statement shall show
actual and budgeted amounts and show any variances between such two amounts,
which, with respect to the delivery of such financial information pursuant to
this clause (iii), shall each be audited by a “Big Four” accounting firm, BDO
USA LLP or other independent certified public accountant acceptable to Lender;

(iv) within eighty (80) days after the close of each fiscal year of Borrower,
(A) with respect to Borrower, an unaudited annual balance sheet, and statement
of cash flow (each of which shall not include any Person other than Borrower)
and (B) an annual operating statement of each Individual Property (detailing the
revenues received, the expenses incurred and the components of Net Cash Flow
before and after Debt Service and major capital improvements for the period of
calculation and containing appropriate year-to-date information);

 

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(v) by no later than November 1 of each calendar year, an annual operating
budget for the next succeeding calendar year presented on a monthly basis
consistent with the annual operating statement described above for each
Individual Property, including cash flow projections for the upcoming year and
all proposed capital replacements and improvements, which such budget shall not
take effect until approved by Lender (after such approval has been given in
writing, such approved budget shall be referred to herein, as the “Approved
Annual Budget”). Until such time that Lender approves a proposed annual budget,
(1) to the extent that an Approved Annual Budget does not exist for the
immediately preceding calendar year, all operating expenses of the Properties
for the then current calendar year shall be deemed extraordinary expenses of the
Properties and shall be subject to Lender’s prior written approval (not to be
unreasonably withheld or delayed) and (2) to the extent that an Approved Annual
Budget exists for the immediately preceding calendar year, such Approved Annual
Budget shall apply to the then current calendar year; provided, that such
Approved Annual Budget shall be adjusted to reflect actual increases in Taxes,
Insurance Premiums, Ground Rent and utilities expenses;

(vi) by no later than twenty (20) days after and as of the end of each calendar
month and by no later than thirty (30) days after and as of the end of each
calendar quarter, (A) a calculation of the then current Debt Yield, together
with such back-up information as Lender shall require and (B) after the
occurrence and during the continuance of a Trigger Period, a calculation of the
amount of Excess Cash Flow generated by each Individual Property for such period
together with such back-up information as Lender shall require; and

(vii) upon the occurrence and continuance of a Trigger Period, monthly
(I) operating statements of each Individual Property detailing the revenues
received, the expenses incurred and the components of Net Cash Flow before and
after Debt Service and major capital improvements for the period of calculation
and containing appropriate year-to-date information, (II) Smith Travel STAR
Reports for each Individual Property for the subject calendar month, and (III) a
report of occupancy for the subject calendar month, including an average daily
rate and RevPar for each Individual Property, within thirty (30) days after the
end of each calendar month.

(b) Upon request from Lender, Borrower shall furnish (or cause Mortgage Borrower
to furnish) in a timely manner to Lender:

(i) a property management report for the Property, showing the number of
inquiries made and/or rental applications received from tenants or prospective
tenants with respect to Leases and deposits received from tenants with respect
to Leases and any other information requested by Lender, but no more frequently
than quarterly;

(ii) an accounting of all security deposits held in connection with any SRO Unit
and any Lease of any part of any Individual 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;

 

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(iii) evidence reasonably acceptable to Lender of compliance with the terms and
conditions of Articles 5 and 9 hereof; and

(iv) information as may be reasonably requested by Lender with respect to any
material variances in the financial reporting delivered pursuant to
Section 4.12(a)(ii) and/or (iii) hereof.

(c) Borrower shall, within ten (10) days of request, furnish (or cause Mortgage
Borrower to furnish) Lender (and shall cause Guarantor to furnish to 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 in form and substance reasonably satisfactory to Lender. Borrower shall
furnish (or cause Mortgage Borrower to furnish) to Lender and its agents
convenient facilities for the examination and audit of any such books and
records.

(d) Borrower agrees that (i) Borrower shall keep adequate books and records of
account and (ii) all Required Financial Items (defined below) to be delivered to
Lender pursuant to Section 4.12 shall: (A) be complete and correct in all
material respects; (B) present fairly the financial condition of the applicable
Person; (C) disclose all liabilities that are required to be reflected or
reserved against; and (D) be prepared (1) in the form required by Lender and
accompanied by an Officer’s Certificate (2) in hardcopy and electronic formats
and (3) in accordance with the Approved Accounting Method. Borrower shall be
deemed to warrant and represent that, as of the date of delivery of any such
financial statement, there has been no change in financial condition that could
reasonably be expected to have a Material Adverse Effect, nor have any assets or
properties been sold, transferred, assigned, mortgaged, pledged or encumbered
since the date of such financial statement except as disclosed by Borrower in a
writing delivered to Lender. Borrower agrees that all Required Financial Items
shall not contain any misrepresentation or omission of a material fact.

(e) Borrower acknowledges the importance to Lender of the timely delivery of
each of the items required by this Section 4.12 and the other financial
reporting items required by this Agreement (each, a “Required Financial Item”
and, collectively, the “Required Financial Items”). In the event Borrower fails
to deliver to Lender any of the Required Financial Items within the time frame
specified herein and such failure shall continue for five (5) Business Days
following notice to Borrower of such failure (provided, that, Borrower shall
only have such five (5) Business Days notice and cure twice per calendar year)
(each such event, a “Reporting Failure”), the same shall, at Lender’s option,
constitute an immediate Event of Default hereunder.

 

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Section 4.13. Estoppel Certificates.

(a) After request by Lender, Borrower, within ten (10) Business Days of such
request, shall furnish Lender or any proposed assignee with a statement, duly
acknowledged and certified, setting forth (i) the original principal amount of
the Loan and the Mortgage Loan, (ii) the unpaid principal amount of the Loan and
the Mortgage Loan, (iii) the rate of interest of the Loan and the Mortgage Loan,
(iv) the terms of payment and maturity date of the Loan and the Mortgage Loan,
(v) the date installments of interest and/or principal were last paid under the
Loan and the Mortgage Loan, (vi) that, except as provided in such statement, no
Event of Default exists, (vii) that this Agreement, the Note, the Pledge
Agreement and the other Loan Documents are valid, legal and binding obligations
and have not been modified or if modified, giving particulars of such
modification, (viii) whether any offsets or defenses exist against the
obligations secured hereby and by the Mortgage Loan Documents and, if any are
alleged to exist, a detailed description thereof, (ix) that all Leases are in
full force and effect and have not been modified (or if modified, setting forth
all modifications), (x) the date to which the Rents thereunder have been paid
pursuant to the Leases, (xi) whether or not, to the best knowledge of Borrower,
any of the lessees under the Leases are in default under the Leases, and, if any
of the lessees are in default, setting forth the specific nature of all such
defaults, (xii) the amount of security deposits held by Mortgage Borrower under
each Lease and that such amounts are consistent with the amounts required under
each Lease, and (xiii) as to any other matters reasonably requested by Lender
and reasonably related to the Leases, the obligations created and evidenced
hereby and by the Mortgage Loan Documents or the Property or the Collateral.

(b) Borrower shall use commercially reasonable efforts to cause Mortgage
Borrower to deliver to Lender, promptly upon request, duly executed estoppel
certificates from any one or more Tenants as required by Lender attesting to
such facts regarding the Lease as Lender may require, including, but not limited
to, attestations that each Lease covered thereby is in full force and effect
with no defaults thereunder on the part of any party, that none of the Rents
have been paid more than one month in advance, except as security, no free rent
or other concessions are due lessee and that the lessee claims no defense or
offset against the full and timely performance of its obligations under the
Lease.

(c) In connection with any Secondary Market Transaction, at Lender’s request,
Borrower shall cause Mortgage Borrower to provide an estoppel certificate to any
Investor or any prospective Investor in such form, substance and detail as
Lender, such Investor or prospective Investor may require.

(d) Borrower shall use commercially reasonable efforts to cause Mortgage
Borrower to deliver to Lender, within ten (10) Business Days of request,
estoppel certificates from each party under any Property Document in form and
substance reasonably acceptable to Lender.

Section 4.14. Leases and Rents.

(a) All Leases and all renewals of Leases executed after the date hereof shall
(i) provide for rental rates comparable to existing local market rates for
similar properties, (ii) be on commercially reasonable terms with unaffiliated,
third parties (unless otherwise consented to by Lender), (iii) provide that such
Lease is subordinate to the Security Instrument and that the lessee will attorn
to Lender and any purchaser at a foreclosure sale and (iv) not contain any terms
which would have a Material Adverse Effect. Notwithstanding anything to the
contrary contained herein, Borrower shall not, without the prior written
approval of Lender (which approval shall not be unreasonably withheld or
delayed), cause Mortgage Borrower to enter into, renew, extend, amend, modify,
permit any assignment of or subletting under, waive any provisions of, release
any party to, terminate, reduce rents under, accept a surrender of space under,
or shorten the term of, in each case, any Major Lease.

 

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(b) Without limitation of subsection (a) above, Borrower (i) shall cause
Mortgage Borrower to observe and perform the obligations imposed upon the lessor
under the Leases in a commercially reasonable manner; (ii) shall cause Mortgage
Borrower to enforce the terms, covenants and conditions contained in the Leases
upon the part of the lessee thereunder to be observed or performed in a
commercially reasonable manner; (iii) shall not cause Mortgage Borrower to
collect any of the Rents more than one (1) month in advance (other than security
deposits); (iv) shall not cause Mortgage Borrower to execute any assignment of
lessor’s interest in the Leases or the Rents (except as contemplated by the Loan
Documents); (v) shall not, without Lender’s prior written consent, cause
Mortgage Borrower to alter, modify or change any Lease to the extent the same
would, individually or in the aggregate, (A) cause any such Lease to violate
4.14(a)(i) through (iii) above or (B) have a Material Adverse Effect; and
(vi) shall cause Mortgage Borrower to hold all security deposits under all
Leases in accordance with Legal Requirements. Upon request, Borrower shall
furnish (or cause Mortgage Borrower to furnish) Lender with executed copies of
all Leases.

(c) Notwithstanding anything contained herein to the contrary, Borrower shall
not willfully withhold from Lender any information regarding renewal, extension,
amendment, modification, waiver of provisions of, termination, rental reduction
of, surrender of space of, or shortening of the term of, any Lease during the
term of the Loan. Borrower further agrees to provide Lender with written notice
of a Tenant “going dark” under a Major Lease within five (5) Business Days after
such Tenant “goes dark” and Borrower’s failure to provide such notice shall
constitute an Event of Default.

(d) Borrower shall notify Lender in writing, within two (2) Business Days
following receipt thereof, of Borrower’s or Mortgage Borrower’s receipt of any
early termination fee or payment or other termination fee or payment paid by any
Tenant under any Lease, and Borrower further covenants and agrees that, subject
to the rights of Mortgage Lender under the Mortgage Loan Documents, Borrower
shall hold any such termination fee or payment in trust for the benefit of
Lender and that any use of such termination fee or payment shall be subject in
all respects to Lender’s prior written consent in Lender’s sole discretion
(which consent may include, without limitation, a requirement by Lender that
such termination fee or payment be placed in reserve with Lender to be disbursed
by Lender for tenant improvement and leasing commission costs with respect to
the Property and/or for payment of the Debt or otherwise in connection with the
Loan evidenced by the Note and/or the Collateral, as so determined by Lender).
The foregoing consent right of Lender (including, without limitation, any
reserve requirement) shall not be subject to any “cap” or similar limit on the
amount of Reserve Funds held by Lender.

 

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Section 4.15. Management Agreement.

(a) Borrower shall cause Mortgage Borrower to (i) diligently and promptly
perform, observe and enforce all of the terms, covenants and conditions of each
Management Agreement on the part of Mortgage Borrower to be performed, observed
and enforced to the end that all things shall be done which are necessary to
keep unimpaired the rights of Mortgage Borrower under each Management Agreement,
(ii) promptly notify Lender of any default under the Management Agreement;
(iii) promptly deliver to Lender a copy of any notice of default or other
material notice received by Mortgage Borrower under any Management Agreement;
(iv) promptly give notice to Lender of any notice or information that Borrower
or Mortgage Borrower receives which indicates that any Manager is terminating
the applicable Management Agreement or that any Manager is otherwise
discontinuing its management of the applicable Individual Property; and
(v) promptly enforce the performance and observance of all of the covenants
required to be performed and observed by each Manager under each Management
Agreement.

(b) Borrower shall not cause Mortgage Borrower to, without the prior written
consent of Lender, (i) surrender, terminate or cancel any Management Agreement,
consent to any assignment of any Manager’s interest under such Management
Agreement or otherwise replace any Manager or renew or extend any Management
Agreement (exclusive of, in each case, any automatic renewal or extension in
accordance with its terms) or enter into any other new or replacement management
agreement with respect to any Individual Property; provided, however, that
Borrower may (or may cause Mortgage Borrower to) replace any Manager and/or
consent to the assignment of such Manager’s interest under the applicable
Management Agreement, in each case, in accordance with the applicable terms and
conditions hereof and of the other Loan Documents; (ii) reduce or consent to the
reduction of the term of any Management Agreement; (iii) increase or consent to
the increase of the amount of any charges under any Management Agreement; or
(iv) otherwise modify, change, alter or amend, in any material respect, or waive
or release any of its material rights and remedies under, any Management
Agreement in any material respect. In no instance shall management fees under
any Management Agreement, when aggregated with management fees under the Special
Management Agreement, exceed an amount equal to the product of (1) 3% and
(2) Gross Rents plus Operating Income.

(c) Subject to the rights of Mortgage Lender under the Mortgage Loan Documents,
if Mortgage Borrower shall default beyond the expiration of any applicable
notice and cure period in the performance or observance of any material term,
covenant or condition of any Management Agreement on the part of Mortgage
Borrower to be performed or observed, then, without limiting the generality of
the other provisions of this Agreement, and without waiving or releasing
Borrower from any of its obligations hereunder, Lender shall have the right, but
shall be under no obligation, to pay any sums and to perform any act or take any
action as may be appropriate to cause all the terms, covenants and conditions of
such Management Agreement on the part of Mortgage Borrower to be performed or
observed to be promptly performed or observed on behalf of Mortgage Borrower, to
the end that the rights of Mortgage Borrower in, to and under any Management
Agreement shall be kept unimpaired and free from default. Subject to the rights
of Mortgage Lender under the Mortgage Loan Documents, Lender and any Person
designated by Lender shall have, and are hereby granted, the right to enter upon
any applicable Individual Property at any time and from time to time for the
purpose of taking any such action. If any Manager shall deliver to Lender a copy
of any notice sent to Mortgage Borrower of default under any Management
Agreement, such notice shall constitute full protection to Lender for any action
taken or omitted to be taken by Lender in good faith, in reliance thereon.
Borrower shall (and shall cause Mortgage Borrower to) notify Lender if any
Manager sub-contracts to a third party or an Affiliate any or all of its
management responsibilities under any Management Agreement.

 

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(d) Borrower shall, from time to time, use commercially reasonable efforts to
cause Mortgage Borrower to obtain from each Manager under each Management
Agreement such certificates of estoppel with respect to compliance by Mortgage
Borrower with the terms of such Management Agreement as may be reasonably
requested by Lender. Borrower shall cause Mortgage Borrower to exercise each
individual option, if any, to extend or renew the term of any Management
Agreement upon demand by Lender made at any time within one (1) year of the last
day upon which any such option may be exercised, and, subject to the rights of
Mortgage Lender under the Mortgage Loan Documents, Borrower hereby expressly
authorizes and appoints Lender its attorney in fact (exercisable upon the
occurrence and during the continuance of an Event of Default) to exercise any
such option in name of and upon behalf of Borrower to cause Mortgage Borrower to
exercise each individual option, which power of attorney shall be irrevocable
and shall be deemed to be coupled with an interest.

(e) In the event that any Management Agreement is scheduled to expire at any
time during the term of the Loan, Borrower shall submit (or cause Mortgage
Borrower to submit) to Lender by no later than 30 days prior to such expiration
a draft replacement management agreement for approval in accordance with the
terms and conditions hereof. The failure to submit the same within such
time-frame shall, at Lender’s option, constitute an immediate Event of Default.

(f) Borrower shall have the right to cause Mortgage Borrower to replace any
Manager or consent to the assignment of any Manager’s rights under the
applicable Management Agreement, in each case, to the extent that (i) no Event
of Default has occurred and is continuing, (ii) Lender receives at least sixty
(60) days prior written notice of the same, (iii) such replacement or assignment
(as applicable) will not result in a Property Document Event and (iv) the
applicable New Manager is a Qualified Manager engaged pursuant to a Qualified
Management Agreement. No Manager shall (and Borrower shall not permit (and shall
not allow Mortgage Borrower to permit) any Manager to) resign as Manager or
otherwise cease managing any Individual Property until a New Manager is engaged
to manage such Individual Property in accordance with the applicable terms and
conditions hereof and of the other Loan Documents.

(g) Without limitation of the foregoing, if any Management Agreement is
terminated or expires (including, without limitation, pursuant to the applicable
Subordination of Management Agreement), comes up for renewal or extension
(exclusive of, in each case, any automatic renewal or extension in accordance
with its terms), ceases to be in full force or effect or is for any other reason
no longer in effect (including, without limitation, in connection with any Sale
or Pledge), then Lender, at its option, may require Borrower to cause Mortgage
Borrower to engage, in accordance with the terms and conditions set forth herein
and in the applicable Subordination of Management Agreement, a New Manager to
manage the applicable Individual Property, which such New Manager shall (i) to
the extent a Trigger Period is continuing and if opted by Lender, selected by
Lender and (ii) be a Qualified Manager and shall be engaged pursuant to a
Qualified Management Agreement.

(h) As conditions precedent to any engagement of a New Manager hereunder,
(i) New Manager, Borrower and Mortgage Borrower shall execute a Subordination of
Management Agreement in the form required by Lender (with such changes thereto
as may be required by the Rating Agencies), (ii) to the extent that such New
Manager is an Affiliated Manager, Borrower shall deliver to Lender a New
Non-Consolidation Opinion with respect to such New Manager and new management
agreement and (iii) if requested by Lender, Borrower shall deliver to Lender
evidence that the engagement of such New Manager will not result in a Property
Document Event.

 

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(i) Borrower shall notify Lender in writing, within two (2) Business Days
following receipt thereof, of Borrower’s or Mortgage Borrower’s receipt of any
early termination fee or similar payment or other termination fee or similar
payment paid by any Manager, and Borrower further covenants and agrees that
subject to the rights of Mortgage Lender under the Mortgage Loan Documents,
Borrower shall hold (and shall cause Mortgage Borrower to hold) any such
termination fee or payment in trust for the benefit of Lender and that any use
of such termination fee or payment shall be subject in all respects to Lender’s
prior written consent in Lender’s sole discretion (which consent may include,
without limitation, a requirement by Lender that such termination fee or payment
be placed in reserve with Lender to be disbursed by Lender for replacing such
Manager and/or for payment of the Debt or otherwise in connection with the Loan
evidenced by the Note, as so determined by Lender). The foregoing consent right
of Lender (including, without limitation, any reserve requirement) shall not be
subject to any “cap” or similar limit on the amount of Reserve Funds held by
Lender.

(j) Any sums expended by Lender pursuant to this Section shall bear interest at
the Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Debt, shall be secured by
the lien of the Pledge Agreement and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

Section 4.16. Payment for Labor and Materials.

(a) Subject to Section 4.16(b) below, Borrower will promptly pay (or cause to be
paid) when due all bills and costs for labor, materials, and specifically
fabricated materials incurred in connection with any Individual Property (any
such bills and costs, a “Work Charge”) and all other trade payables and never
permit to exist (and never allow Mortgage Borrower to permit to exist) in
respect of any Individual Property or any part thereof any lien or security
interest, even though inferior to the liens and the security interests hereof,
and in any event never permit to be created or exist (and never allow Mortgage
Borrower to permit to be created or exist) in respect of any Individual Property
or any part thereof any other or additional lien or security interest other than
the liens or security interests created by the Security Instrument and the
Mortgage Loan Documents, except for the Permitted Encumbrances.

 

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(b) After prior written notice to Lender, Borrower, at its own expense, may
contest (or permit Mortgage Borrower to contest) by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the validity of any Work Charge and/or any other trade payable, the
applicability of any Work Charge and/or any other trade payable to Borrower,
Mortgage Borrower or to any Individual Property or any alleged non-payment of
any Work Charge and/or any other trade payable and defer paying the same,
provided that (i) no Event of Default has occurred and is continuing; (ii) such
proceeding shall be permitted under and be conducted in accordance with the
provisions of any instrument to which Borrower or Mortgage Borrower is subject
(including, without limitation, the Mortgage Loan Documents) and shall not
constitute a default thereunder and such proceeding shall be conducted in
accordance with all applicable Legal Requirements; (iii) neither any Individual
Property nor any part thereof or interest therein, nor the Collateral, nor any
part thereof or interest therein will be in imminent danger of being sold,
forfeited, terminated, cancelled or lost; (iv) Borrower shall promptly upon
final determination thereof pay (or cause to be paid) any such contested Work
Charge and/or other trade payable determined to be valid, applicable or unpaid;
(v) such proceeding shall suspend the collection of such contested Work Charge
and/or other trade payable from the applicable Individual Property or Borrower
shall have paid the same (or shall have caused the same to be paid) under
protest; and (vi) Borrower shall furnish (or cause to be furnished) such
security as may be required in the proceeding, or as may be reasonably requested
by Lender, to insure payment of such Work Charge and/or other trade payable,
together with all interest and penalties payable in connection therewith. Lender
may apply any such security or part thereof, as necessary to pay for such Work
Charge and/or other trade payable at any time when, in the judgment of Lender,
the validity, applicability or non-payment of such Work Charge and/or other
trade payable is finally established or any Individual Property (or any part
thereof or interest therein) or the applicable Collateral (or any part thereof
or interest therein) shall be in present danger of being sold, forfeited,
terminated, cancelled or lost.

Section 4.17. Performance of Other Agreements. Borrower shall (and shall cause
Mortgage Borrower to) observe and perform each and every term to be observed or
performed by Borrower or Mortgage Borrower pursuant to the terms of any
agreement or recorded instrument affecting or pertaining to each Individual
Property (or any portion thereof) or the Collateral (or any portion thereof), or
given by Borrower to Lender or Mortgage Borrower to Mortgage Lender for the
purpose of further securing the Debt and the Mortgage Loan Debt and any
amendments, modifications or changes thereto.

Section 4.18. Debt Cancellation. Borrower shall not cancel or otherwise forgive
or release any claim or debt (other than termination of Leases in accordance
with this Agreement and the Mortgage Loan Agreement) owed to Borrower or
Mortgage Borrower by any Person, except for adequate consideration and in the
ordinary course of Borrower’s or Mortgage Borrower’s business.

Section 4.19. ERISA

(a) Borrower shall not engage in any transaction which would cause any
obligation, or action taken or to be taken, hereunder (or the exercise by Lender
of any of its rights hereunder or under the other Loan Documents) to be a non
exempt (under a statutory or administrative class exemption) prohibited
transaction under ERISA.

(b) Borrower further covenants and agrees to deliver to Lender such
certifications or other evidence from time to time throughout the term of the
Pledge Agreement, as requested by Lender in its reasonable discretion, that
(i) Borrower is not an “employee benefit plan” as defined in Section 3(3) of
ERISA, or other retirement arrangement, which is subject to Title I of ERISA or
Section 4975 of the IRS Code, or a “governmental plan” within the meaning of
Section 3(32) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:

 

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

 

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

 

  (C) Borrower qualifies as an “operating company” or a “real estate operating
company” within the meaning of 29 C.F.R § 2510.3 101(c) or (e) or an investment
company registered under The Investment Company Act of 1940, as amended.

(c) Borrower shall not maintain, sponsor, contribute to or become obligated to
contribute to, or suffer or permit any member of Borrower’s “controlled group of
corporations” to maintain, sponsor, contribute to or become obligated to
contribute to a “defined benefit plan” or a “multiemployer pension plan”. The
terms in quotes above are defined in Section 3.7 of this Agreement.

Section 4.20. No Joint Assessment. Borrower shall not (and shall not permit
Mortgage Borrower to) suffer, permit or initiate the joint assessment of any
Individual Property with (a) any other real property constituting a tax lot
separate from the applicable Individual Property, or (b) any portion of the
applicable Individual Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be
levied against such personal property shall be assessed or levied or charged to
the applicable Individual Property.

Section 4.21. Alterations. Notwithstanding anything contained herein to the
contrary, Lender’s prior approval shall be required in connection with any
alterations to any Improvements (which alterations shall not include the SRO
Unit Conversion Work solely to the extent that funds have been reserved for such
SRO Unit Conversion Work pursuant to the Mortgage Loan Documents) (a) that may
have a Material Adverse Effect, (b) the cost of which (including any related
alteration, improvement or replacement) is reasonably anticipated to exceed the
applicable Alteration Threshold or (c) that are structural in nature, which
approval may be granted or withheld in Lender’s sole discretion. If the total
unpaid amounts incurred and to be incurred with respect to any alterations to
the Improvements (which alterations shall not include the SRO Unit Conversion
Work solely to the extent that funds have been reserved for such SRO Unit
Conversion Work pursuant to the Mortgage Loan Documents) shall at any time
exceed the applicable Alteration Threshold, Borrower shall (or shall cause
Mortgage Borrower to) promptly deliver to Lender as security for the payment of
such amounts and as additional security for Borrower’s obligations under the
Loan Documents any of the following: (i) cash, (ii) U.S. Obligations,
(iii) other security acceptable to Lender, (provided that Lender shall have
received a Rating Agency Confirmation as to the form and issuer of same), or
(iv) a completion bond (provided that Lender shall have received a Rating Agency
Confirmation as to the form and issuer of same). Such security shall be in an
amount equal to the excess of the total unpaid amounts incurred and to be
incurred with respect to such alterations to the Improvements (which alterations
shall not include the SRO Unit Conversion Work solely to the extent that funds
have been reserved for such SRO Unit Conversion Work pursuant to the Mortgage
Loan Documents) over the Alteration Threshold.

 

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Section 4.22. Property Document Covenants. Without limiting the other provisions
of this Agreement and the other Loan Documents, Borrower shall and shall cause
Mortgage Borrower to (i) promptly perform and/or observe, in all material
respects, all of the covenants and agreements required to be performed and
observed by Borrower and by Mortgage Borrower under the Property Documents and
do all things necessary to preserve and to keep unimpaired its material rights
thereunder; (ii) promptly notify Lender of any material default under the
Property Documents of which Borrower and Mortgage Borrower is aware;
(iii) promptly deliver to Lender a copy of each financial statement, business
plan, capital expenditures plan, notice, report and estimate received by
Borrower and/or Mortgage Borrower under the Property Documents; (iv) enforce the
performance and observance of all of the material covenants and agreements
required to be performed and/or observed under the Property Documents in a
commercially reasonable manner; (v) cause the applicable Individual Property to
be operated, in all material respects, in accordance with the Property
Documents; and (vi) not, without the prior written consent of Lender, which
consent shall not be unreasonably withheld, conditioned or delayed, (A) enter
into any new Property Document or replace or execute material modifications to
any existing Property Documents or renew or extend the same (exclusive of, in
each case, any automatic renewal or extension in accordance with its terms),
(B) surrender, terminate or cancel the Property Documents, (C) reduce or consent
to the reduction of the term of the Property Documents, (D) increase or consent
to the increase of the amount of any charges under the Property Documents,
(E) otherwise modify, change, supplement, alter or amend, or waive or release
any of its rights and remedies under, the Property Documents in any material
respect or (F) following the occurrence and during the continuance of an Event
of Default, exercise any rights, make any decisions, grant any approvals or
otherwise take any action under the Property Documents.

Section 4.23. Ground Lease Covenants. Without limitation of the other provisions
herein (including, without limitation, Section 4.22 hereof), Borrower makes the
following covenants with respect to the Ground Lease:

(a) Borrower shall cause Mortgage Borrower to (i) pay (or cause to be paid) all
rents, additional rents and other sums required to be paid by Mortgage Borrower,
as tenant under and pursuant to the provisions of the Ground Lease,
(ii) diligently perform and observe (or cause to be performed and observed) all
of the terms, covenants and conditions of the Ground Lease on the part of
Mortgage Borrower, as tenant thereunder, (iii) promptly notify Lender of the
giving of any notice by the landlord under the Ground Lease to Borrower or
Mortgage Borrower of any default by Mortgage Borrower and deliver to Lender a
true copy of each such notice within five (5) Business Days of receipt, and
(iv) promptly notify Lender of any bankruptcy, reorganization or insolvency of
the landlord under the Ground Lease or of any notice thereof, and deliver to
Lender a true copy of such notice within five (5) Business Days of Borrower’s or
Mortgage Borrower’sreceipt.

 

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(b) Borrower shall not, without the prior consent of Lender, cause Mortgage
Borrower to surrender the leasehold estate created by the Ground Lease or
terminate or cancel the Ground Lease or modify, change, supplement, alter or
amend the Ground Lease, either orally or in writing, and if Mortgage Borrower
shall default in the performance or observance of any term, covenant or
condition of the Ground Lease on the part of Mortgage Borrower and shall fail to
cure the same prior to the expiration of any applicable cure period provided
thereunder, Lender shall, subject to the rights of Mortgage Lender under the
Mortgage Loan Documents, have the right, but shall be under no obligation, to
pay any sums and to perform any act or take any action as may be appropriate to
cause all of the terms, covenants and conditions of the Ground Lease on the part
of Mortgage Borrower to be performed or observed on behalf of Mortgage Borrower,
to the end that the rights of Mortgage Borrower in, to and under the Ground
Lease shall be kept unimpaired and free from default. If the landlord under the
Ground Lease shall deliver to Lender a copy of any notice of default under the
Ground Lease, such notice shall constitute full protection to Lender for any
action taken or omitted to be taken by Lender, in good faith, in reliance
thereon.

(c) Borrower shall cause Mortgage Borrower to exercise each individual option,
if any, to extend or renew the term of the Ground Lease no less than sixty
(60) days prior to the expiration of such Ground Lease (the “Renewal Deadline”),
and subject to the rights of Mortgage Lender under the Mortgage Loan Documents,
Borrower hereby expressly authorizes and appoints Lender its attorney-in-fact to
exercise any such option in the name of and upon behalf of Borrower to cause
Mortgage Borrower to take such action, which power of attorney shall be
irrevocable and shall be deemed to be coupled with an interest. Borrower’s
failure to cause Mortgage Borrower to exercise the aforesaid renewal option
within the aforesaid period shall, at Lender’s option, constitute an immediate
Event of Default hereunder. Additionally, Borrower acknowledges that Borrower
has delivered to Lender an original executed but undated notice to the landlord
under the Ground Lease exercising Mortgage Borrower’s renewal rights thereunder
(such notice, the “Renewal Notice”). Subject to the rights of Mortgage Lender
under the Mortgage Loan Documents, Borrower hereby irrevocably grants Lender the
right to date and transmit the Renewal Notice to the landlord under the Ground
Lease; provided, however, Lender shall only do so if, as of the Renewal
Deadline, Lender is not in receipt of evidence reasonably acceptable to Lender
that Mortgage Borrower has exercised its right to renew the Ground Lease.

(d) Notwithstanding anything contained in the Ground Lease to the contrary,
Borrower shall not, without prior written consent of Lender, cause Mortgage
Borrower to sublet any portion of the leasehold estate created by the Ground
Lease except in accordance with the express terms and conditions of this
Agreement

 

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Section 4.24. Permits; Intellectual Property.

(a) Without limiting the other provisions of this Agreement and the other Loan
Documents, Borrower shall keep all Permits applicable to Borrower in full force
and effect and, during the continuance of an Event of Default, Borrower will, at
the cost of Borrower, and without expense to Lender, execute, acknowledge and
deliver all such writings and take any all further actions necessary or
reasonably requested by Lender to transfer any Permits with respect to the
Collateral into the name of Lender or its designee. To the extent any such
Permits applicable to Borrower cannot be so transferred to Lender or its
designee under applicable law, Borrower shall continue to hold and maintain such
Permits in full force and effect for the benefit of Lender until such time as
Lender can obtain such Permits applicable to Borrower in its own name or the
name of a designee. Borrower shall cause Mortgage Borrower to keep all Permits
(including, without limitation, any liquor licenses and any trademark or other
Permits applicable to any Management Agreement) applicable to Mortgage Borrower
in full force and effect and, during the continuance of an Event of Default,
subject to the rights of Mortgage Lender under the Mortgage Loan Documents,
Borrower will, at the cost of Borrower, and without expense to Lender, cause
Mortgage Borrower to execute, acknowledge and deliver all such writings and take
any all further actions necessary or reasonably requested by Lender to transfer
any Permits (including, without limitation, any liquor licenses or other Permits
applicable to any franchise agreement but excluding any trademarks or trade
names) applicable to Mortgage Borrower with respect to the Properties into the
name of Lender or its designee. To the extent any such Permits (including,
without limitation, any liquor licenses or other Permits applicable to any
franchise agreement but excluding any trademarks or trade names) applicable to
Mortgage Borrower cannot be so transferred to Lender or its designee under
applicable law, subject to the rights of Mortgage Lender under the Mortgage Loan
Documents, Borrower shall cause Mortgage Borrower to continue to hold and
maintain such Permits applicable to Mortgage Borrower in full force and effect
for the benefit of Lender until such time as Lender can obtain such Permits
applicable to Mortgage Borrower in its own name or the name of a designee.
Without limiting the foregoing, subject to the rights of Mortgage Lender under
the Mortgage Loan Documents, Borrower shall cause Mortgage Borrower to execute
such interim management, leasing or other agreements (which shall be in form and
substance (i) reasonably satisfactory to Lender and satisfactory to the
applicable licensing authorities and (ii) reasonably satisfactory to Borrower,
which such approval by Borrower shall not be unreasonably withheld, conditioned
or delayed) as may be required for Lender to continue operations at the
Properties pursuant to such Permits applicable to Mortgage Borrower (excluding
any trademarks or trade names other than as set forth in the Subordination of
Management Agreement) until such Permits applicable to Mortgage Borrower are
transferred to, or are otherwise obtained by, Lender or its designee. Subject to
the rights of Mortgage Lender under the Mortgage Loan Documents, Borrower
constitutes and appoints Lender its true and lawful attorney-in-fact with full
power of substitution to complete or undertake any action required of Borrower
to cause Mortgage Borrower to take such action under this Section in the name of
Borrower in the event Borrower fails to do the same; provided, however, Lender
shall not exercise such power of attorney (unless an Event of Default has
occurred and is continuing) without five (5) Business Days prior written notice
to Borrower.

(b) Borrower shall cause Mortgage Borrower to keep and maintain all Intellectual
Property relating to the use or operation of the Property and all Intellectual
Property (other than any Intellectual Property used by Mortgage Borrower
pursuant to any franchise agreement entered into in accordance with the
applicable terms and conditions hereof or any Management Agreement) shall be
held by and (if applicable) registered in the name of Mortgage Borrower.
Borrower shall not cause Mortgage Borrower to transfer or let lapse any
Intellectual Property without Lender’s prior consent unless such transfer or
lapse is in the ordinary course of business and would not reasonably be expected
to result in a Material Adverse Effect. Lender acknowledges that it has no
security interest in any Intellectual Property or right to use any of
Borrower’s, Mortgage Borrower’s (or any of Borrower’s Affiliates) trade names or
trademarks in connection with the Loan (other than as set forth in the
Subordination of Management Agreement).

 

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Section 4.25. Condominium Covenants. With respect to the Condominium, Borrower
hereby covenants as follows:

(a) Borrower shall cause Mortgage Borrower to promptly pay (or cause to be paid)
all Common Charges imposed pursuant to the Condominium Documents when the same
become due and payable with respect to the Units owned by Mortgage Borrower. The
amount of Common Charges payable by Mortgage Borrower on an annual basis is
$0.00. Borrower shall cause Mortgage Borrower to deliver to Lender, promptly
upon Lender’s request, evidence satisfactory to Lender that the Common Charges
have been so paid or are not then delinquent with respect to the Units owned by
Mortgage Borrower. Borrower shall (or shall cause Mortgage Borrower to) promptly
notify Lender of (I) any adjustments made to the amount of Common Charges due
under the Condominium Documents and (II) the imposition of any additional Common
Charges under the Condominium Documents.

(b) Borrower acknowledges and agrees that the Units owned by Mortgage Borrower
are within the definition of “Property” under this Agreement and, as such,
Borrower shall cause Mortgage Borrower to cause the same to be insured in
accordance with Article 7 of this Agreement and Article 7 of the Mortgage Loan
Agreement. Any Net Proceeds of such insurance or any Net Proceeds otherwise
obtained with respect to any condemnation of the Individual Property subject to
the Condominium Documents shall be held and applied by Lender in accordance with
the applicable terms and conditions of this Agreement and the Mortgage Loan
Documents and the Condominium and the Units shall be insured in accordance with
the provisions of Article 7 of this Agreement and Article 7 of the Mortgage Loan
Agreement. Borrower shall cause Mortgage Borrower to cause any insurance
proceeds or condemnation awards with respect to the Condominium and/or the Units
that are to be held and disbursed by the Board pursuant to the terms of the
Condominium Documents to be held by an Eligible Institution or an insurance
trustee approved by Lender and such insurance proceeds or condemnation awards
shall be applied in accordance with the terms and conditions of this Agreement.

(c) Intentionally Omitted.

(d) Borrower shall cause Mortgage Borrower to observe and perform (and shall
cause the Board to observe and perform) each and every term to be observed or
performed by Mortgage Borrower and/or the Board in all material respects
pursuant to the Condominium Documents. Borrower shall cause Mortgage Borrower to
(i) restrict the Board from taking any action with respect to the Condominium
and/or the Hudson Property that would be contrary to or inconsistent with any
applicable covenant contained in this Agreement or in any other Loan Documents,
(ii) cause the Board to comply with any applicable covenant of Mortgage Borrower
contained in the Mortgage Loan Agreement, this Agreement or in the other Loan
Documents relating to the Condominium and/or the Hudson Property, (iii) cause
the Board to hold the funds of the Condominium in an Eligible Account at an
Eligible Institution, and (iv) not permit the Board to establish any significant
working capital or similar reserves or undertaking any significant capital
expenditures. Borrower shall not permit Mortgage Borrower to, and Borrower shall
not (and shall cause Mortgage Borrower to not) permit, consent to or otherwise
allow the Board to, create any new Units or sell any Units (other than in
connection with the release of the Hudson Property in accordance with the terms
and conditions of the Mortgage Loan Documents and this Agreement). Borrower
shall cause Mortgage Borrower to obtain resignation letters from each voting
member of the Board and any officers of the Condominium appointed by Mortgage
Borrower to be held by Lender in escrow and submitted upon the occurrence and
continuance of an Event of Default and Mortgage Borrower shall obtain the
agreement of the Board and the officers of the Condominium to, subject to the
rights of Mortgage Lender under the Mortgage Loan Documents, have Lender appoint
each voting member of the Board upon the occurrence and during the continuance
of an Event of Default.

 

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(e) Borrower shall cause Mortgage Borrower to cause the Board to (i) maintain
the Condominium and the Units in good condition and repair, (ii) promptly comply
with all Legal Requirements applicable to the Condominium and the Units,
(iii) promptly repair, replace or rebuild any part of the Condominium and the
Units which may be damaged or destroyed by any casualty or which may be affected
by any condemnation proceeding and Borrower shall not cause Mortgage Borrower in
such event to vote to not repair, restore or rebuild the Condominium without the
prior written consent of Lender, and (iv) complete and pay for, within a
reasonable time, any structure at any time in the process of construction or
repair on the Condominium and the Units.

(f) Without the prior written consent of Lender, Borrower shall not allow
Mortgage Borrower to permit any of the terms or provisions of the Condominium
Documents to be modified or amended in any manner or permit the Condominium to
be terminated, withdrawn from a condominium regime, partitioned, subdivided,
expanded or otherwise modified.

(g) Borrower shall cause Mortgage Borrower to cause the Board to allow Lender to
examine the books, records and receipts of the Condominium upon ten (10) days’
prior written notice to the Borrower.

(h) Borrower shall promptly deliver (or cause to be delivered) to Lender a true
and correct copy of all notices of default or other material notices received by
Borrower or Mortgage Borrower with respect to any obligations or duty of
Mortgage Borrower under the Condominium Documents. Borrower shall deliver (or
cause to be delivered) to Lender each budget of the Condominium promptly upon
the finalization thereof. Subject to the rights of Mortgage Lender under the
Mortgage Loan Documents, Lender shall have the right, but not the obligation, to
cure any default by Mortgage Borrower under the Condominium Documents and
Borrower shall cause Mortgage Borrower to cause the Board to provide Lender
(i) forty-five (45) days to cure any monetary default and ninety (90) days to
cure any non-monetary default, (ii) in the event that any such default cannot be
cured by the payment of money or within such ninety (90) day period, such
reasonable time as may be necessary to cure the default so long as Lender
diligently pursues such cure to completion and continues to perform any monetary
obligations of Mortgage Borrower to the Board , and (iii) in the event that such
default is incapable of cure by Lender, such time as may be required for Lender
to institute foreclosure of the Collateral related to the Individual Property
subject to the Condominium and/or otherwise enforce Lender’s rights and remedies
under this Agreement, the Pledge Agreement and the other Loan Documents and
prosecute such foreclosure and/or enforcement to conclusion.

(i) To the extent that any approval rights, consent rights or other rights or
privileges are granted to a “Registered Mortgagee” in the Condominium Documents
or any other similar mortgagee protection provisions are contained in the
Condominium Documents, then such approval rights, consent rights or other
rights, protections or privileges shall be deemed to be required by this
Agreement or contained in this Agreement, as applicable.

 

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(j) Lender shall have the rights and privileges which Mortgage Borrower has as
though Lender were in fact the owner of the Units owned by Mortgage Borrower and
as if it were a “Declarant” under the Condominium Documents, and as if it were a
member of the Board elected by Mortgage Borrower, which rights and privileges
shall include, without limitation and subject to the rights of Mortgage Lender
under the Mortgage Loan Documents, all voting rights accruing to Mortgage
Borrower (and the members of the Board elected by Mortgage Borrower) under the
terms of the Condominium Documents. Upon the occurrence and continuance of an
Event of Default (and subject to the rights of Mortgage Lender under the
Mortgage Loan Documents), Lender may vote in place of Mortgage Borrower and may
exercise any and all of the rights and privileges of Mortgage Borrower. Subject
to the rights of Mortgage Lender under the Mortgage Loan Documents, Borrower
hereby irrevocably appoints Lender as its attorney-in-fact, coupled with an
interest, to vote as Borrower’s proxy and to act with respect to all of said
rights so long as such Event of Default continues hereunder or under any other
Loan Documents. Written notice from Lender to the Board shall be deemed
conclusive as to the existence of such Event of Default and as to Lender’s
rights and privileges under this Agreement. Notwithstanding anything contained
herein to the contrary, nothing contained herein or otherwise shall render
Lender liable for any Common Charges.

(k) The Board and the Condominium are not a party to any loan, credit agreement
or other arrangement for any extension of credit, whether funded or to be
funded. Borrower shall not, without Lender’s prior written consent, permit
Mortgage Borrower to permit the Board and/or the Condominium to incur any
indebtedness or to encumber the Condominium in connection therewith (other than
the Security Instrument granted by Borrower to Lender).

(l) In addition to Lender’s consent rights as specified in this Section,
Borrower shall not cause Mortgage Borrower to exercise any other approval,
consent or voting right to which it is entitled under the Condominium Documents
without obtaining Lender’s prior written consent (which consent shall not be
unreasonably withheld or delayed).

(m) Borrower shall cause Mortgage Borrower to (and shall cause the members of
the Board elected by Mortgage Borrower to) attend each duly called meeting or
special meeting of the Board. Lender shall have the right to participate in any
arbitration proceeding instituted in accordance with the provisions of the
Condominium Documents.

(n) Borrower acknowledges and agrees that any management agreement with respect
to the Condominium and/or the Units shall be required to be a Management
Agreement (as defined herein) and shall be subject to the terms and conditions
of this Agreement and the other Loan Documents.

Section 4.26. Operating Lease.

(a) Borrower represents, covenants and warrants that it is the express intent of
Borrower, Mortgage Borrower and Operating Lessee that each Operating Lease
constitute a lease under applicable real property laws and laws governing
bankruptcy, insolvency and creditors’ rights generally, and that the sole
interest of each Operating Lessee in each applicable Individual Property is as
tenant under the applicable Operating Lease. In the event that it shall be
determined that the Operating Lease is not a lease under applicable real
property laws and laws governing bankruptcy, insolvency and creditors’ rights
generally, and that the interest of any Operating Lessee in any applicable
Individual Property is other than that of tenant under an Operating Lease,
Borrower hereby covenants and agrees that it shall cause Mortgage Borrower to
cause such Operating Lessee’s interest in such Individual Property, however
characterized, to continue to be subject and subordinate to the lien of the
Security Instruments on all the same terms and conditions as contained in the
applicable Operating Lease and the applicable Security Instrument.

 

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(b) Without Lender’s prior written consent, Borrower shall not cause Mortgage
Borrower to (a) surrender, terminate or cancel any Operating Lease, (b) reduce
or consent to the reduction of the term of any Operating Lease, (c) increase or
consent to the increase of the amount of any charges under any Operating Lease,
(d) modify, change, supplement, alter or amend any Operating Lease or waive or
release any of Mortgage Borrower’s rights and remedies under the Operating
Lease; or (e) waive, excuse, condone or in any way release or discharge the
Operating Lessee of or from Operating Lessee’s obligations, covenants and/or
conditions under the Operating Lease.

(c) Borrower shall, from time to time, deliver (or cause to be delivered) to
Lender such certificates of estoppel with respect to compliance by Mortgage
Borrower with the terms of each Operating Lease as may be requested by Lender
(which request shall not be made more than twice in any calendar year prior to
the occurrence and continuance of an Event of Default).

Section 4.27. SRO Units.

(a) In the event any SRO Unit ceases to be regulated under the New York City
Rent Stabilization Law or the New York City Emergency Rent and Rehabilitation
Law, as applicable, Borrower shall cause Mortgage Borrower to convert such SRO
Unit into a hotel room in accordance with applicable law and in a manner
consistent with Borrower’s past practices.

(b) Borrower will cause Mortgage Borrower to promptly notify Lender of any
vacancy of an SRO Unit. Upon request of Lender from time to time, Borrower shall
cause Mortgage Borrower to provide Lender with a report relating to the SRO
Units listing the occupancy status, current rent, copies of any material filings
with the New York City Department of Housing Preservation and Development as
respects each such unit, and evidence that Borrower is in compliance in all
material respects with all Legal Requirements pertaining thereto. Prior to
commencing any material alterations of any such SRO Units, Borrower shall cause
Mortgage Borrower make all required filings and take all actions required under
applicable Legal Requirements and shall furnish Lender with evidence of such
compliance.

(c) Borrower shall cause Mortgage Borrower to continue to provide all services
required to be provided to each SRO Unit under applicable Legal Requirements.

(d) Borrower shall cause Mortgage Borrower to collect rent with respect to each
SRO Unit in an amount not to exceed the maximum legal rent collectible
thereunder.

 

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Section 4.28. Special Management Agreement.

(a) Borrower shall cause Mortgage Borrower to (i) diligently and promptly
perform, observe and enforce all of the terms, covenants and conditions of the
Special Management Agreement on the part of Mortgage Borrower to be performed,
observed and enforced to the end that all things shall be done which are
necessary to keep unimpaired the rights of Mortgage Borrower under the Special
Management Agreement, (ii) promptly notify Lender of any default under the
Special Management Agreement; (iii) promptly deliver to Lender a copy of any
notice of default or other material notice received by Mortgage Borrower or
Borrower under any Special Management Agreement; (iv) promptly give notice to
Lender of any notice or information that Borrower or Mortgage Borrower receives
which indicates that Special Manager is terminating the Special Management
Agreement or that Special Manager is otherwise discontinuing its management of
the food and beverage related activities at the Delano Property; and
(v) promptly enforce the performance and observance of all of the covenants
required to be performed and observed by Special Manager under the Special
Management Agreement.

(b) Borrower shall not, without the prior written consent of Lender, cause
Mortgage Borrower to (i) surrender, terminate or cancel the Special Management
Agreement, consent to any assignment of the Special Manager’s interest under the
Special Management Agreement or otherwise replace the Special Manager or renew
or extend the Special Management Agreement (exclusive of, in each case, any
automatic renewal or extension in accordance with its terms) or enter into any
other new or replacement management agreement with respect to the food and
beverage related activities at the Delano Property; provided, however, that
Mortgage Borrower may terminate the Special Management Agreement provided that
(A) such termination is in accordance with the applicable terms and conditions
hereof and the terms and conditions of the other Loan Documents and Mortgage
Loan Documents, (B) any termination fees payable to Special Manager are either
(1) paid from Excess Cash Flow which is entitled to be used for such payment in
accordance with the terms and conditions of this Agreement and the Mortgage Loan
Documents or (2) paid from an equity contribution to Mortgage Borrower from
sources other than the Properties and (C) Borrower shall have caused Mortgage
Borrower to provide to Lender evidence reasonably acceptable to Lender that the
food and beverage activities at the Delano Property shall be either be operated
(1) by Manager pursuant to a Management Agreement in accordance with the terms
and conditions of this Agreement and the other Loan Documents or (2) pursuant to
Leases entered into in accordance with the terms and conditions of this
Agreement; (ii) except pursuant to the express terms and conditions of clause
(i) above, reduce or consent to the reduction of the term of the Special
Management Agreement; (iii) increase or consent to the increase of the amount of
any charges under the Special Management Agreement; or (iv) except pursuant to
the express terms and conditions of clause (i) above, otherwise modify, change,
alter or amend, in any material respect, or waive or release any of its material
rights and remedies under, the Special Management Agreement in any material
respect.

 

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(c) If Mortgage Borrower shall default beyond the expiration of any applicable
notice and cure period in the performance or observance of any material term,
covenant or condition of the Special Management Agreement on the part of
Mortgage Borrower to be performed or observed, then, without limiting the
generality of the other provisions of this Agreement, and without waiving or
releasing Borrower from any of its obligations hereunder, subject to the rights
of Mortgage Lender under the Mortgage Loan Documents, Lender shall have the
right, but shall be under no obligation, to pay any sums and to perform any act
or take any action as may be appropriate to cause all the terms, covenants and
conditions of the Special Management Agreement on the part of Mortgage Borrower
to be performed or observed to be promptly performed or observed on behalf of
Mortgage Borrower, to the end that the rights of Mortgage Borrower in, to and
under the Special Management Agreement shall be kept unimpaired and free from
default. Subject to the rights of Mortgage Lender under the Mortgage Loan
Documents, Lender and any Person designated by Lender shall have, and are hereby
granted, the right to enter upon any applicable Individual Property at any time
and from time to time for the purpose of taking any such action. If any Special
Manager shall deliver to Lender a copy of any notice sent to Mortgage Borrower
or Borrower of default under the Special Management Agreement, such notice shall
constitute full protection to Lender for any action taken or omitted to be taken
by Lender in good faith, in reliance thereon. Borrower shall cause Mortgage
Borrower to notify Lender if any Special Manager sub-contracts to a third party
or an Affiliate any or all of its management responsibilities under the Special
Management Agreement.

(d) Borrower shall cause Mortgage Borrower, from time to time, use commercially
reasonable efforts to obtain from the Special Manager under the Special
Management Agreement such certificates of estoppel with respect to compliance by
Mortgage Borrower with the terms of the Special Management Agreement as may be
reasonably requested by Lender. Subject to the rights of Mortgage Lender under
the Mortgage Loan Documents, Borrower shall cause Mortgage Borrower to exercise
each individual option, if any, to extend or renew the term of the Special
Management Agreement upon demand by Lender made at any time within one (1) year
of the last day upon which any such option may be exercised, and Borrower hereby
expressly authorizes and appoints Lender its attorney-in-fact (exercisable upon
the occurrence and during the continuance of an Event of Default) to cause
Borrower to cause Mortgage Borrower to exercise any such option in the name of
and upon behalf of Borrower, which power of attorney shall be irrevocable and
shall be deemed to be coupled with an interest.

(e) In the event that the Special Management Agreement is scheduled to expire at
any time during the term of the Loan, Borrower shall cause Mortgage Borrower
submit to Lender by no later than 30 days prior to such expiration evidence
reasonably acceptable to Lender that the food and beverage related activities at
the Delano Property shall be either be operated (1) by Manager pursuant to a
Management Agreement in accordance with the terms and conditions of this
Agreement and the other Loan Documents or (2) pursuant to Leases entered into in
accordance with the terms and conditions of this Agreement. Borrower’s failure
to submit the same (or cause the same to be submitted) within such time-frame
shall, at Lender’s option, constitute an immediate Event of Default.

(f) Borrower shall cause Mortgage Borrower to notify Lender in writing, within
two (2) Business Days following receipt thereof, of Borrower’s or Mortgage
Borrower’s receipt of any early termination fee or similar payment or other
termination fee or similar payment paid by Special Manager, and Borrower further
covenants and agrees that subject to the rights of Mortgage Lender under the
Mortgage Loan Documents, Mortgage Borrower shall hold any such termination fee
or payment in trust for the benefit of Lender and that any use of such
termination fee or payment shall be subject in all respects to Lender’s prior
written consent in Lender’s sole discretion (which consent may include, without
limitation, a requirement by Lender that such termination fee or payment be
placed in reserve with Lender to be disbursed by Lender for finding a
replacement for Special Manager with respect to the food and beverage operations
at the Delano Property and/or for payment of the Debt or otherwise in connection
with the Loan, as so determined by Lender). The foregoing consent right of
Lender (including, without limitation, any reserve requirement) shall not be
subject to any “cap” or similar limit on the amount of Reserve Funds (as defined
in the Mortgage Loan Agreement) held by Lender or Mortgage Lender.

 

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(g) Any sums expended by Lender pursuant to this Section shall bear interest at
the Default Rate from the date such cost is incurred to the date of payment to
Lender, shall be deemed to constitute a portion of the Debt, shall be secured by
the lien of the Pledge Agreement and the other Loan Documents and shall be
immediately due and payable upon demand by Lender therefor.

Section 4.29. Collective Bargaining Agreement.

(a) Borrower shall cause Mortgage Borrower to timely comply, and, to the extent
that it has authority to do so, shall require Manager to comply, in all material
respects, with all Employment Related Laws and Obligations as the same relate to
the Properties.

(b) Borrower shall cause Mortgage Borrower to comply, and, to the extent that it
has authority to do so, shall require Manager to comply, in all material
respects with the Union Documents as the same relate to the Properties;
provided, however, that, Borrower may not permit Mortgage Borrower to take such
actions or give consent for Manager to take such actions that would trigger
multiemployer pension plan withdrawal liability to the CBA Multiemployer Plans
under Title IV of ERISA without Lender’s consent. To the extent that it is
liable, Borrower shall cause Mortgage Borrower pay any such liability in full in
accordance with the provisions of ERISA, the collective bargaining agreement set
forth on Schedule XXII hereto, the CBA Multiemployer Plans and any rules,
regulations and by-laws established by such plans. Mortgage Borrower shall
notify Lender of the occurrence of any material default or the occurrence of any
condition which, but for the passage of time or the giving of notice, could
result in a material default under the terms of the Union Documents.

(c) Borrower shall promptly notify Lender in the event Borrower, Manager or any
Affiliates of the foregoing will be the subject of an audit by a CBA
Multiemployer Plan. In the event Mortgage Borrower or Manager does not fully
fund its obligations under the CBA Multiemployer Plans, Borrower shall
continually provide Lender with up to date written information regarding
Borrower’s, Mortgage Borrower’s or Manager’s actions to remedy any such
shortfall in funding obligations under the CBA Multiemployer Plans.

(d) Promptly upon Borrower’s or Mortgage Borrower’s receipt of same, Borrower
shall provide Lender with copies of the following: (i) all notices from the CBA
Multiemployer Plan, (ii) notices from the applicable CBA Multiemployer Plan
stating that such CBA Multiemployer Plan is determined to be in critical or
endangered status, (iii) notices and demands from the CBA Multiemployer Plans
regarding actual or potential withdrawal liability under any such CBA
Multiemployer Plan, and (iv) written requests to the CBA Multiemployer Plans for
estimates of potential or actual withdrawal liability under such CBA
Multiemployer Plans along with copies of the actual estimates when received by
Borrower or Mortgage Borrower.

 

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Section 4.30. Material Agreements. Borrower shall not and shall cause Mortgage
Borrower to not, without Lender’s prior written consent, (a) enter into,
surrender or terminate any Material Agreement to which it is a party,
(b) increase or consent to the increase of the amount of any charges under any
Material Agreement to which it is a party, or (c) otherwise modify, change,
supplement, alter or amend, or waive or release any of its rights and remedies
under any Material Agreement to which it is a party in any material respect.

Section 4.31. Limitation on Securities Issuances. None of Borrower nor any of
its subsidiaries shall issue any limited liability company or partnership
interests or other securities other than those that have been issued as of the
date hereof.

Section 4.32. Mortgage Borrower Covenants. Unless otherwise consented to in
writing by Lender, Borrower shall cause Mortgage Borrower to comply with and not
to breach any covenants and agreements contained in the Mortgage Loan Documents.

Section 4.33. Curing. Subject to and to the extent permitted by the Mortgage
Loan Documents, Lender shall have the right, but shall not have the obligation,
to exercise Borrower’s rights, if any, under the Mortgage Borrower Company
Agreement, to cause Mortgage Borrower (a) to cure a “Default” or “Event of
Default” (in each case, as defined under the Mortgage Loan Documents) and (b) to
satisfy any liens, claims or judgments against the Properties (or any portion
thereof), unless Borrower or Mortgage Borrower shall be diligently pursuing
remedies to cure to Lender’s reasonable satisfaction. Borrower shall reimburse
Lender on demand for any and all out-of-pocket costs incurred by Lender in
connection with the foregoing and Borrower shall use its best efforts to
cooperate with Lender to effectuate the exercise of Lender’s rights under this
Section 4.33.

Section 4.34. Special Distributions. On each date on which amounts are required
to be disbursed to Lender pursuant to the terms of the Mortgage Loan Documents
or are required to be paid to Lender pursuant to the terms of any of the Loan
Documents, Borrower shall exercise its rights under the Mortgage Borrower
Company Agreement to cause Mortgage Borrower to make to Borrower a distribution
of all funds in Mortgage Borrower’s possession or control up to the aggregate
amount required to be so disbursed to Lender on such date.

Section 4.35. Closing Date Delano Property Work. Borrower shall use commercially
reasonable efforts to cause Mortgage Borrower to (i) complete the replacement of
the boilers at the Delano Property and (ii) complete work adding new flooring
for the solarium at the Delano Property.

ARTICLE 5

ENTITY COVENANTS

Section 5.1. Single Purpose Entity/Separateness.

(a) Borrower has not and will not:

(i) engage in any business or activity other than the ownership of the
applicable Collateral, and activities incidental thereto;

 

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(ii) acquire or own any assets other than the Collateral;

(iii) merge into or consolidate with any Person, or dissolve, terminate,
liquidate in whole or in part, transfer or otherwise dispose of all or
substantially all of its assets or change its legal structure;

(iv) fail to observe all organizational formalities in all material respects, or
fail to preserve its existence as an entity duly organized, validly existing and
in good standing (if applicable) under the applicable Legal Requirements of the
jurisdiction of its organization or formation, or amend, modify, terminate or
fail to comply with the provisions of its organizational documents (provided,
that, such organizational documents may be amended or modified to the extent
that, in addition to the satisfaction of the requirements related thereto set
forth therein, Lender’s prior written consent and, if required by Lender, a
Rating Agency Confirmation are first obtained);

(v) own any subsidiary, or make any investment in, any Person (other than any
applicable Mortgage Borrower that owns the Hudson Property or the Delano
Property);

(vi) commingle its funds or assets with the funds or assets of any other Person;

(vii) incur any Indebtedness, secured or unsecured, direct or contingent
(including guaranteeing any obligation), other than the Debt. No Indebtedness
other than the Debt may be secured (subordinate or pari passu) by the
Collateral;

(viii) fail to maintain all of its books, records, financial statements and bank
accounts separate from those of any other Person (including, without limitation,
any Affiliates). Borrower’s assets have not and will not be listed as assets on
the financial statement of any other Person; provided, however, that Borrower’s
assets may be included in a consolidated financial statement of its Affiliates
provided that (i) appropriate notation shall be made on such consolidated
financial statements to indicate the separateness of Borrower and such
Affiliates and to indicate that Borrower’s assets and credit are not available
to satisfy the debts and other obligations of such Affiliates or any other
Person and (ii) such assets shall be listed on Borrower’s own separate balance
sheet. Borrower has maintained and will maintain its books, records, resolutions
and agreements as official records;

(ix) enter into any contract or agreement with any partner, member, shareholder,
principal or Affiliate, except in each case, upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available on
an arm’s-length basis with unaffiliated third parties;

(x) maintain its assets in such a manner that it will be costly or difficult to
segregate, ascertain or identify its individual assets from those of any other
Person;

(xi) assume or guaranty the debts of any other Person, hold itself out to be
responsible for the debts of any other Person, or otherwise pledge its assets
for the benefit of any other Person or hold out its credit as being available to
satisfy the obligations of any other Person;

 

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(xii) make any loans or advances to any Person;

(xiii) fail to file its own tax returns (unless prohibited by applicable Legal
Requirements from doing so);

(xiv) fail to (A) hold itself out to the public and identify itself, in each
case, as a legal entity separate and distinct from any other Person and not as a
division or part of any other Person, (B) conduct its business solely in its own
name, (C) hold its assets in its own name or (D) correct any known
misunderstanding regarding its separate identity;

(xv) fail to maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its
contemplated business operations (to the extent there exists sufficient cash
flow from the applicable Individual Property to do so);

(xvi) without the prior unanimous written consent of all of its partners,
shareholders or members, as applicable, the prior unanimous written consent of
its board of directors or managers, as applicable, and the prior written consent
of each Independent Director (regardless of whether such Independent Director is
engaged at the Borrower or SPE Component Entity level), (a) file or consent to
the filing of any petition, either voluntary or involuntary, to take advantage
of any Creditors Rights Laws, (b) seek or consent to the appointment of a
receiver, liquidator or any similar official, (c) take any action that will
cause such entity to become insolvent, (d) make an assignment for the benefit of
creditors or (e) take any Material Action with respect to Borrower or any SPE
Component Entity (provided, that, none of any member, shareholder or partner (as
applicable) of Borrower or any SPE Component Entity or any board of directors or
managers (as applicable) of Borrower or any SPE Component Entity may vote on or
otherwise authorize the taking of any of the foregoing actions unless, in each
case, there are at least two (2) Independent Directors then serving in such
capacity in accordance with the terms of the applicable organizational documents
and each of such Independent Directors have consented to such foregoing action);

(xvii) fail to allocate shared expenses (including, without limitation, shared
office space) or fail to use separate stationery, invoices and checks;

(xviii) fail to pay its own liabilities (including, without limitation, salaries
of its own employees, if any) from its own funds or fail to maintain a
sufficient number of employees in light of its contemplated business operations
(in each case to the extent there exists sufficient cash flow from the
applicable Individual Property to do so);

(xix) acquire obligations or securities of its partners, members, shareholders
or other Affiliates, as applicable;

(xx) identify its partners, members, shareholders or other Affiliates, as
applicable, as a division or part of it; or

 

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(xxi) fail to cause Mortgage Borrower to comply with the terms and conditions of
Section 5.1 of the Mortgage Loan Agreement.

(b) If Borrower is a partnership or limited liability company (other than an
Acceptable LLC), each general partner (in the case of a partnership) and at
least one member (in the case of a limited liability company) of Borrower, as
applicable, shall be a corporation or an Acceptable LLC (each an “SPE Component
Entity”) whose sole asset is its interest in Borrower. Each SPE Component Entity
(i) will at all times comply with each of the covenants, terms and provisions
contained in Section 5.1(a)(iii)—(vi) (inclusive) and (viii) – (xx) (inclusive)
and, if such SPE Component Entity is an Acceptable LLC, Section 5.1(c) and
(d) hereof, as if such representation, warranty or covenant was made directly by
such SPE Component Entity; (ii) will not engage in any business or activity
other than owning an interest in Borrower; (iii) will not acquire or own any
assets other than its partnership, membership, or other equity interest in
Borrower; (iv) will at all times continue to own no less than a 0.1% direct
equity ownership interest in Borrower; (v) will not incur any debt, secured or
unsecured, direct or contingent (including guaranteeing any obligation); and
(vi) will cause Borrower to comply with the provisions of this Section 5.1.

(c) In the event Borrower or the SPE Component Entity is an Acceptable LLC, the
limited liability company agreement of Borrower or the SPE Component Entity (as
applicable) (the “LLC Agreement”) shall provide that (i) upon the occurrence of
any event that causes the last remaining member of Borrower or the SPE Component
Entity (as applicable) (“Member”) to cease to be the member of Borrower or the
SPE Component Entity (as applicable) (other than (A) upon an assignment by
Member of all of its limited liability company interest in Borrower or the SPE
Component Entity (as applicable) and the admission of the transferee in
accordance with the Loan Documents and the LLC Agreement, or (B) the resignation
of Member and the admission of an additional member of Borrower or the SPE
Component Entity (as applicable) in accordance with the terms of the Loan
Documents and the LLC Agreement), any person acting as Independent Director of
Borrower or the SPE Component Entity (as applicable) shall, without any action
of any other Person and simultaneously with the Member ceasing to be the member
of Borrower or the SPE Component Entity (as applicable) automatically be
admitted to Borrower or the SPE Component Entity (as applicable) as a member
with a 0% economic interest (“Special Member”) and shall continue Borrower or
the SPE Component Entity (as applicable) without dissolution and (ii) Special
Member may not resign from Borrower or the SPE Component Entity (as applicable)
or transfer its rights as Special Member unless (A) a successor Special Member
has been admitted to Borrower or the SPE Component Entity (as applicable) as a
Special Member in accordance with requirements of Delaware law and (B) after
giving effect to such resignation or transfer, there remains at least two
(2) Independent Directors of the SPE Component Entity or Borrower (as
applicable) in accordance with Section 5.2 below. The LLC Agreement shall
further provide that (i) Special Member shall automatically cease to be a member
of Borrower or the SPE Component Entity (as applicable) upon the admission to
Borrower or the SPE Component Entity (as applicable) of the first substitute
member, (ii) Special Member shall be a member of Borrower or the SPE Component
Entity (as applicable) that has no interest in the profits, losses and capital
of Borrower or the SPE Component Entity (as applicable) and has no right to
receive

 

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any distributions of the assets of Borrower or the SPE Component Entity (as
applicable), (iii) pursuant to the applicable provisions of the limited
liability company act of the State of Delaware (the “Act”), Special Member shall
not be required to make any capital contributions to Borrower or the SPE
Component Entity (as applicable) and shall not receive a limited liability
company interest in Borrower or the SPE Component Entity (as applicable),
(iv) Special Member, in its capacity as Special Member, may not bind Borrower or
the SPE Component Entity (as applicable) and (v) except as required by any
mandatory provision of the Act, Special Member, in its capacity as Special
Member, shall have no right to vote on, approve or otherwise consent to any
action by, or matter relating to, Borrower or the SPE Component Entity (as
applicable) including, without limitation, the merger, consolidation or
conversion of Borrower or the SPE Component Entity (as applicable); provided,
however, such prohibition shall not limit the obligations of Special Member, in
its capacity as Independent Director, to vote on such matters required by the
Loan Documents or the LLC Agreement. In order to implement the admission to
Borrower or the SPE Component Entity (as applicable) of Special Member, Special
Member shall execute a counterpart to the LLC Agreement. Prior to its admission
to Borrower or the SPE Component Entity (as applicable) as Special Member,
Special Member shall not be a member of Borrower or the SPE Component Entity (as
applicable), but Special Member may serve as an Independent Director of Borrower
or the SPE Component Entity (as applicable).

(d) The LLC Agreement shall further provide that (i) upon the occurrence of any
event that causes the Member to cease to be a member of Borrower or the SPE
Component Entity (as applicable) to the fullest extent permitted by law, the
personal representative of Member shall, within ninety (90) days after the
occurrence of the event that terminated the continued membership of Member in
Borrower or the SPE Component Entity (as applicable) agree in writing (A) to
continue Borrower or the SPE Component Entity (as applicable) and (B) to the
admission of the personal representative or its nominee or designee, as the case
may be, as a substitute member of Borrower or the SPE Component Entity (as
applicable) effective as of the occurrence of the event that terminated the
continued membership of Member in Borrower or the SPE Component Entity (as
applicable), (ii) any action initiated by or brought against Member or Special
Member under any Creditors Rights Laws shall not cause Member or Special Member
to cease to be a member of Borrower or the SPE Component Entity (as applicable)
and upon the occurrence of such an event, the business of Borrower or the SPE
Component Entity (as applicable) shall continue without dissolution and
(iii) each of Member and Special Member waives any right it might have to agree
in writing to dissolve Borrower or the SPE Component Entity (as applicable) upon
the occurrence of any action initiated by or brought against Member or Special
Member under any Creditors Rights Laws, or the occurrence of an event that
causes Member or Special Member to cease to be a member of Borrower or the SPE
Component Entity (as applicable).

(e) Without limiting the foregoing in this Section 5.1, Borrower (i) has since
the date of its formation been duly formed, validly existing and in good
standing in the state of its incorporation or formation and in all other
jurisdictions where it is qualified to do business, (ii) has paid all taxes
which it owes and is not involved in any dispute with any taxing authority,
(iii) is not now or has ever been, party to any lawsuit, arbitration, summons or
legal proceeding that resulted in a judgment against it that has not been
indefeasibly satisfied in full by proceeds of insurance or otherwise prior to
the date hereof, (iv) has no Liens of any nature against it, except for
Permitted Encumbrances, (v) has no material contingent or actual obligations not
related to the applicable Collateral, (vi) has all times since the date of its
formation been a single purpose, bankruptcy remote entity and, to the extent
applicable, has complied with the separateness covenants set forth in its
respective limited liability company agreement and (vii) has not owned any
property other than the applicable Collateral.

 

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Section 5.2. Independent Director.

(a) The organizational documents of Borrower (to the extent such Borrower is a
corporation or an Acceptable LLC) or the SPE Component Entity, as applicable,
shall provide that at all times there shall be at least two duly appointed
independent directors or managers of such entity (each, an “Independent
Director”) who each shall (I) not have been at the time of each such
individual’s initial appointment, and shall not have been at any time during the
preceding five years, and shall not be at any time while serving as Independent
Director, either (i) a shareholder (or other equity owner) of, or an officer,
director (other than in its capacity as Independent Director), partner, member
or employee of, Borrower or any of its shareholders, partners, members,
subsidiaries or Affiliates, (ii) a customer of, or supplier to, or other Person
who derives any of its purchases or revenues from its activities with, Borrower
or any of its respective shareholders, partners, members, subsidiaries or
Affiliates, (iii) a Person who Controls or is under common Control with any such
shareholder, officer, director, partner, member, employee supplier, customer or
other Person, or (iv) a member of the immediate family of any such shareholder,
officer, director, partner, member, employee, supplier, customer or other Person
(II) shall have, at the time of their appointment, had at least three (3) years
experience in serving as an independent director and (III) be employed by, in
good standing with and engaged by Borrower in connection with, in each case, an
Approved ID Provider.

(b) The organizational documents of Borrower and the SPE Component Entity shall
further provide that (I) the board of directors or managers of Borrower and the
SPE Component Entity and the constituent equity owners of such entities
(constituent equity owners, the “Constituent Members”) shall not take any action
set forth in Section 5.1(a)(xvi) or any other action which, under the terms of
any organizational documents of Borrower or the SPE Component Entity, requires
the vote of the Independent Directors unless, in each case, at the time of such
action there shall be at least two Independent Directors engaged as provided by
the terms hereof and such Independent Directors vote in favor of or otherwise
consent to such action; (II) any resignation, removal or replacement of any
Independent Director shall not be effective without (and Borrower shall not be
permitted to remove or replace any Independent Director without) (1) prior
written notice to Lender and the Rating Agencies (which such prior written
notice must be given on the earlier of five (5) days or three (3) Business Days
prior to the applicable resignation, removal or replacement) and (2) evidence
that the replacement Independent Director satisfies the applicable terms and
conditions hereof and of the applicable organizational documents (which such
evidence must accompany the aforementioned notice); (III) to the fullest extent
permitted by applicable law, including Section 18-1101(c) of the Act and
notwithstanding any duty otherwise existing at law or in equity, the Independent
Directors shall consider only the interests of the Constituent Members and
Borrower and any SPE Component Entity (including Borrower’s and any SPE
Component Entity’s respective creditors) in acting or otherwise voting on the
matters provided for herein and in Borrower’s and SPE Component Entity’s
organizational documents (which such fiduciary duties to the Constituent Members
and Borrower and any SPE Component Entity (including Borrower’s and any SPE
Component Entity’s respective creditors), in each case, shall be deemed to apply
solely to the extent of their respective economic interests in Borrower or SPE
Component Entity (as applicable) exclusive of (x) all other interests
(including, without limitation, all other interests of the Constituent Members),
(y) the interests of other Affiliates of the Constituent Members, Borrower and
SPE Component Entity and

 

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(z) the interests of any group of Affiliates of which the Constituent Members,
Borrower or SPE Component Entity is a part)); (IV) other than as provided in
subsection (III) above, the Independent Directors shall not have any fiduciary
duties to any Constituent Members, any directors of Borrower or SPE Component
Entity or any other Person; (V) the foregoing shall not eliminate the implied
contractual covenant of good faith and fair dealing under applicable law; and
(VI) to the fullest extent permitted by applicable law, including
Section 18-1101(e) of the Act, an Independent Director shall not be liable to
Borrower, SPE Component Entity, any Constituent Member or any other Person for
breach of contract or breach of duties (including fiduciary duties), unless the
Independent Director acted in bad faith or engaged in willful misconduct.

Section 5.3. Change of Name, Identity or Structure. Borrower shall not change
(or permit to be changed) Borrower’s or the SPE Component Entity’s (a) name,
(b) identity (including its trade name or names), (c) principal place of
business set forth on the first page of this Agreement or (d) if not an
individual, Borrower’s or the SPE Component Entity’s corporate, partnership or
other structure or state of formation, without, in each case, notifying Lender
of such change in writing at least thirty (30) days prior to the effective date
of such change and, in the case of a change in Borrower’s or the SPE Component
Entity’s structure or state of formation, without first obtaining the prior
written consent of Lender and, if required by Lender, a Rating Agency
Confirmation with respect thereto, provided, that, (1) the Delano Property may
be referred to as the “Delano, a Morgans hotel” or pursuant to words of similar
import and (2) the Hudson Property may be referred to as the “Hudson, a Morgans
hotel” or pursuant to words of similar import without the prior written consent
of Lender and without a Rating Agency Confirmation. Borrower shall execute and
deliver to Lender, prior to or contemporaneously with the effective date of any
such change, any financing statement or financing statement change required by
Lender to establish or maintain the validity, perfection and priority of the
security interest granted herein. At the request of Lender, Borrower shall
execute a certificate in form reasonably satisfactory to Lender listing the
trade names under which Borrower or the SPE Component Entity intends to own the
Collateral, and representing and warranting that Borrower or the SPE Component
Entity does business under no other trade name with respect to the applicable
Collateral.

Section 5.4. Business and Operations. Borrower will continue to engage in the
businesses now conducted by it as and to the extent the same are necessary for
the ownership of the applicable Collateral. Borrower will qualify to do business
and will remain in good standing under the laws of the jurisdiction as and to
the extent the same are required for the ownership of the applicable Collateral.

ARTICLE 6

NO SALE OR ENCUMBRANCE

Section 6.1. Transfer Definitions. As used herein and in the other Loan
Documents, “Restricted Party” shall mean Borrower, Mortgage Borrower, Guarantor,
any SPE Component Entity (as defined herein and in the Mortgage Loan Agreement),
any Affiliated Manager, any Hudson Intermediate Entity or any shareholder,
partner, member or non-member manager, or any direct or indirect legal or
beneficial owner of Borrower, Mortgage Borrower, Guarantor, any SPE Component
Entity (as defined herein and in the Mortgage Loan Agreement), any Affiliated
Manager, any Hudson Intermediate Entity or any non-member manager; and a “Sale
or Pledge” shall mean a voluntary or involuntary sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, grant of any options with
respect to, or any other transfer or disposition of (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise, and whether or
not for consideration or of record) of a legal or beneficial interest.

 

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Section 6.2. No Sale/Encumbrance.

(a) It shall be an Event of Default hereof if, without the prior written consent
of Lender, a Sale or Pledge of any Individual Property or any part thereof, the
Collateral or any part thereof or any legal or beneficial interest in the
Properties or any part thereof or the Collateral or any part thereof (including,
without limitation, the Loan and/or Loan Documents) occurs, a Sale or Pledge of
an interest in any Restricted Party occurs and/or Mortgage Borrower shall
acquire any real property in addition to the real property owned by Mortgage
Borrower as of the Closing Date (each of the foregoing, collectively, a
“Prohibited Transfer”), other than (i) pursuant to Leases of space in the
Improvements to Tenants in accordance with the provisions of Section 4.14 or the
conversion of SRO Units to hotel rooms in accordance with the terms and
conditions hereof and (ii) as permitted pursuant to the express terms of this
Article 6.

(b) A Prohibited Transfer shall include, but not be limited to, (i) an
installment sales agreement wherein Borrower or Mortgage Borrower agrees to sell
the Property or any part thereof or the Collateral or any part thereof for a
price to be paid in installments; (ii) an agreement by Mortgage Borrower leasing
all or a substantial part of the Property for other than actual occupancy by a
Tenant thereunder or a sale, assignment or other transfer of, or the grant of a
security interest in, Mortgage Borrower’s right, title and interest in and to
any (A) Leases or any Rents or (B) Property Documents; (iii) if a Restricted
Party is a corporation, any merger, consolidation or Sale or Pledge of such
corporation’s stock or the creation or issuance of new stock in one or a series
of transactions; (iv) if a Restricted Party is a limited or general partnership
or joint venture, any merger or consolidation or the change, removal,
resignation or addition of a general partner or the Sale or Pledge of the
partnership interest of any general or limited partner or any profits or
proceeds relating to such partnership interests or the creation or issuance of
new limited partnership interests; (v) if a Restricted Party is a limited
liability company, any merger or consolidation or the change, removal,
resignation or addition of a managing member or non-member manager (or if no
managing member, any member) or the Sale or Pledge of the membership interest of
any member or any profits or proceeds relating to such membership interest;
(vi) if a Restricted Party is a trust or nominee trust, any merger,
consolidation or the Sale or Pledge of the legal or beneficial interest in a
Restricted Party or the creation or issuance of new legal or beneficial
interests; (vii) the removal or the resignation of Manager (including, without
limitation, an Affiliated Manager) or the engagement of a New Manager, in each
case, other than in accordance with Section 4.15; (viii) any action for
partition of the Property (or any portion thereof or interest therein) or any
similar action instituted or prosecuted by Borrower, Mortgage Borrower or by any
other Person, pursuant to any contractual agreement or other instrument or under
applicable law (including, without limitation, common law) and/or any other
action instituted by (or at the behest of) Borrower, Mortgage Borrower or their
respective Affiliates or consented to or acquiesced in by Borrower, Mortgage
Borrower or their respective Affiliates which results in a Property Document
Event or (ix) the issuance or existence of any LTIP Units that (A) in the
aggregate at any time, exceed ten percent (10%) of the ownership interests in
Morgans Group LLC or (B) provide any holder of any LTIP Unit any control rights
with respect to Morgans Group LLC.

 

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Section 6.3. Permitted Equity Transfers.

(a) Notwithstanding the restrictions contained in this Article 6, the following
equity transfers shall be permitted without Lender’s consent: (i) a transfer
(but not a pledge) by devise or descent or by operation of law upon the death of
a Restricted Party or any member, partner or shareholder of a Restricted Party
(other than a transfer of the direct interests in Borrower, Mortgage Borrower,
Mezzanine B Borrower or any Hudson Intermediate Entity), (ii) the (1) transfer
(but not the pledge), in one or a series of transactions, of the stock,
partnership interests or membership interests (as the case may be) in a
Restricted Party (other than the transfer of the direct interests in Borrower,
Mortgage Borrower, Mezzanine B Borrower or any Hudson Intermediate Entity) or
(2) subject to Section 6.2(b)(ix) above, sale, transfer, issuance or pledge of
LTIP Units (other than the transfer or pledge of the direct interests in
Borrower, Mortgage Borrower, Mezzanine B Borrower or any Hudson Intermediate
Entity), (iii) the sale, transfer, pledge or issuance of shares of common stock
or securities convertible into or exchangeable for shares of common stock in any
Restricted Party that is a publicly traded entity, provided such shares of
common stock are listed on the New York Stock Exchange or another nationally
recognized stock exchange or (iv) the pledge of any direct or indirect interests
in Borrower, any SPE Component Entity (as defined herein and in the Mortgage
Loan Agreement), and each Mortgage Borrower in connection with the Loan and the
Mezzanine B Loan and the exercise of any rights or remedies that Lender or
Mezzanine B Lender may have under its respective Mezzanine Loan Documents
(provided, that, the foregoing provisions of clauses (i), (ii), (iii) and
(iv) above shall not be deemed to waive, qualify or otherwise limit Borrower’s
obligation to comply (or to cause the compliance with) the other covenants set
forth herein and in the other Loan Documents (including, without limitation, the
covenants contained herein relating to ERISA matters)); provided, further, that,
with respect to the transfers listed in clauses (i) and/or (ii) above, (A)
except with respect to the sale, transfer, issuance or pledge of LTIP Units,
Lender shall receive not less than thirty (30) days prior written notice of such
transfers; (B) no such sale, transfer, issuance or pledge, as applicable, shall
result in a change in Control of Guarantor or Affiliated Manager (provided that
a change in the board of Guarantor shall not constitute a violation of this
clause (B)); (C) after giving effect to such sale, transfer, issuance or pledge,
as applicable, Guarantor shall (I) own at least a 51% direct or indirect equity
ownership interest in each of Borrower, any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement) and each Mortgage Borrower; (II)
Control Borrower, any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement), and each Mortgage Borrower and (III) control the
day-to-day operation of the Properties; (D) after giving effect to such sale,
transfer, issuance or pledge, as applicable, the Property shall continue to be
managed by Manager or a New Manager approved in accordance with the applicable
terms and conditions hereof;

 

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(E) such sale, transfer, issuance or pledge, as applicable, shall be conditioned
upon continued compliance with the relevant provisions of Article 5 hereof;
(F) in the case of the transfer of the management of the Property to a new
Affiliated Manager in accordance with the applicable terms and conditions
hereof, or if after giving effect to such sale, transfer, issuance or pledge, as
applicable, more than forty-nine percent (49%) in the aggregate of the direct or
indirect interests in Borrower or any SPE Component Entity are owned by any
Person and/or its Affiliates that owned less than forty-nine percent (49%) of
the direct or indirect interests in Borrower or any SPE Component Entity as of
the Closing Date, Borrower shall deliver to Lender a New Non-Consolidation
Opinion addressing such sale, transfer, issuance or pledge; (G) such sale,
transfer, issuance or pledge, as applicable, shall be conditioned upon
Borrower’s ability to, after giving effect to the equity transfer in question
(I) remake the representations contained herein relating to ERISA matters (and,
upon Lender’s request, Borrower shall deliver to Lender an Officer’s Certificate
containing such updated representations effective as of the date of the
consummation of the applicable equity transfer) and (II) continue to comply with
the covenants contained herein relating to ERISA matters; (H) to the extent that
any sale, transfer, issuance or pledge, as applicable, results in the transferee
(either itself or collectively with its affiliates) owning a 20% or greater
equity interest (directly or indirectly) in Borrower or in any SPE Component
Entity, Lender’s receipt of the Satisfactory Search Results shall be a condition
precedent to such transfer; (I) such sale, transfer, issuance or pledge, as
applicable, shall be permitted pursuant to the terms of the Property Documents;
and (J) after giving effect to such sale, transfer, issuance or pledge, as
applicable, the Guarantor Control Condition shall continue to be satisfied. Upon
request from Lender, Borrower shall promptly provide (or cause to be provided
to) Lender a revised version of the Organizational Chart delivered to Lender in
connection with the Loan reflecting any equity transfer consummated in
accordance with this Section 6.3.

(b) Notwithstanding the restrictions contained in this Article 6, so long as no
Event of Default has occurred and shall be continuing, a Private Company
Transaction shall be permitted without Lender’s consent provided that:
(A) Lender shall receive not less than thirty (30) days prior written notice of
such Private Company Transaction; (B) after giving effect to such Private
Company Transaction, Guarantor shall (I) own at least a 51% direct or indirect
equity ownership interest in Borrower, any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), and any Mortgage Borrower; (II)
Control Borrower, any SPE Component Entity (as defined herein and the Mortgage
Loan Agreement), and any Mortgage Borrower and (III) control the day-to-day
operation of the Properties; (C) after giving effect to such Private Company
Transaction, the Property shall continue to be managed by Manager or a New
Manager approved in accordance with the applicable terms and conditions hereof;
(D) such Private Company Transaction shall be conditioned upon continued
compliance with the relevant provisions of Article 5 hereof; (E) in the case of
the transfer of the management of the Property to a new Affiliated Manager in
accordance with the applicable terms and conditions hereof, or if after giving
effect to such Private Company Transaction, more than forty-nine percent
(49%) in the aggregate of the direct or indirect interests in Borrower or any
SPE Component Entity are owned by any Person and/or its Affiliates that owned
less than forty-nine percent (49%) of the direct or indirect interests in
Borrower or any SPE Component Entity as of the Closing Date, Borrower shall
deliver to Lender a New Non-Consolidation Opinion addressing such Private
Company Transaction; (F) such Private Company Transaction shall be conditioned
upon Borrower’s ability to, after giving effect to the equity transfer in
question (I) remake the representations contained herein relating to ERISA
matters (and, upon Lender’s request, Borrower shall deliver to Lender an
Officer’s Certificate containing such updated representations effective as of
the date of the consummation of the applicable equity transfer) and (II)
continue to comply with the covenants contained herein relating to ERISA
matters; (G) to the extent that any

 

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transfer results in the transferee (either itself or collectively with its
affiliates) owning a 20% or greater equity interest (directly or indirectly) in
Borrower or in any SPE Component Entity, Lender’s receipt of the Satisfactory
Search Results shall be a condition precedent to such Private Company
Transaction; (H) such transfers shall be permitted pursuant to the terms of the
Property Documents; (I) after giving effect to such transfers, the Guarantor
Control Condition shall continue to be satisfied, (J) after giving effect to
such Private Company Transaction, a Private Company Replacement Guarantor shall
be either (I) a Private Company Qualified Transferee or (II) be controlled by,
and at least fifty-one percent (51%) directly or indirectly owned by a Private
Company Qualified Transferee, (K) Lender shall have received a Rating Agency
Confirmation with respect to such transfer, (L) a Private Company Replacement
Guarantor shall execute (I) a recourse guaranty in form and substance
substantially similar to the Guaranty and otherwise reasonably acceptable to
Lender (provided that the Private Company Replacement Guarantor shall not be
required to comply with the covenants set forth in Section 28 of the Guaranty in
effect as of the Closing Date, but such Private Company Replacement Guarantor
shall be required to comply with, and such recourse guaranty shall contain, the
covenants set forth on Schedule XVIII hereof) and (II) an environmental
indemnity in form and substance substantially similar to the Environmental
Indemnity and otherwise reasonably acceptable to Lender, (M) after giving effect
to such Private Company Transaction, such Private Company Replacement Guarantor
shall (I) own at least a 20% direct or indirect equity ownership interest in
each of Borrower, Mortgage Borrower and any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), (II) Control Borrower, Mortgage
Borrower and any SPE Component Entity (as defined herein and in the Mortgage
Loan Agreement) and (III) control the day-to-day operation of the Properties and
(N) Borrower shall have delivered to Lender evidence satisfactory to Lender that
Mortgage Borrower and Mezzanine B Borrower has complied with all of the terms
and conditions set forth in the Mortgage Loan Agreement and the Mezzanine B Loan
Agreement with respect to the Private Company Transaction corresponding to the
Private Company Transaction requested pursuant to this Section 6.3(b). Borrower
shall have the right to consult with Lender with regard to a Private Company
Transaction prior to Borrower’s written notice of such Private Company
Transaction as required pursuant to this Section 6.3(b).

(c) Notwithstanding the restrictions contained in this Article 6, so long as no
Event of Default has occurred and shall be continuing, a Public Company
Transaction shall be permitted without Lender’s consent provided that:
(A) Lender shall receive not less than thirty (30) days prior written notice of
such Public Company Transaction; (B) after giving effect to such Public Company
Transaction, Guarantor shall (I) own at least a 51% direct or indirect equity
ownership interest in each of Borrower, any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), and each Mortgage Borrower; (II)
Control Borrower, any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement) and each Mortgage Borrower and (III) control the
day-to-day operation of the Properties; (C) after giving effect to such Public
Company Transaction, the Property shall continue to be managed by Manager or a
New Manager approved in accordance with the applicable terms and conditions
hereof; (D) such Public Company Transaction shall be conditioned upon continued
compliance with the relevant provisions of Article 5 hereof; (E) in the case of
the transfer of the management of the Property to a new Affiliated Manager in
accordance with the applicable terms and conditions hereof, or if after giving
effect to such Public Company Transaction, more than forty-nine percent (49%) in
the aggregate of the direct or indirect interests in Borrower or any SPE
Component Entity are owned by any Person and/or its Affiliates that owned less
than forty-nine percent (49%) of the direct or indirect interests in Borrower or
any SPE Component Entity as of the Closing Date,

 

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Borrower shall deliver to Lender a New Non-Consolidation Opinion addressing such
Public Company Transaction; (F) such Public Company Transaction shall be
conditioned upon Borrower’s ability to, after giving effect to the equity
transfer in question (I) remake the representations contained herein relating to
ERISA matters (and, upon Lender’s request, Borrower shall deliver to Lender an
Officer’s Certificate containing such updated representations effective as of
the date of the consummation of the applicable equity transfer) and (II)
continue to comply with the covenants contained herein relating to ERISA
matters; (G) to the extent that any transfer results in the transferee (either
itself or collectively with its affiliates) owning a 20% or greater equity
interest (directly or indirectly) in Borrower or in any SPE Component Entity,
Lender’s receipt of the Satisfactory Search Results shall be a condition
precedent to such Public Company Transaction; (H) such transfers shall be
permitted pursuant to the terms of the Property Documents and the Mortgage Loan
Documents; (I) after giving effect to such transfers, the Guarantor Control
Condition shall continue to be satisfied, (J) after giving effect to such Public
Company Transaction, a Public Company Replacement Guarantor shall be either
(I) a Public Company Qualified Transferee or (II) be controlled by, and at least
fifty-one percent (51%) directly or indirectly owned by a Public Company
Qualified Transferee, (K) Lender shall have received a Rating Agency
Confirmation with respect to such transfer; (L) a Public Company Replacement
Guarantor shall execute (I) a recourse guaranty in form and substance
substantially similar to the Guaranty and otherwise reasonably acceptable to
Lender (provided that the Public Company Replacement Guarantor shall not be
required to comply with the covenants set forth in Section 28 of the Guaranty in
effect as of the Closing Date but such Public Company Replacement Guarantor
shall be required to comply with, and such recourse guaranty shall contain, the
covenants set forth on Schedule XIX hereof) and (II) an environmental indemnity
in form and substance substantially similar to the Environmental Indemnity and
otherwise reasonably acceptable to Lender, (M) after giving effect to such
Public Company Transaction, such Public Company Replacement Guarantor shall
(I) own at least a 20% direct or indirect equity ownership interest in each of
Borrower, Mortgage Borrower and any SPE Component Entity (as defined herein and
in the Mortgage Loan Agreement), (II) Control Borrower, Mortgage Borrower and
any SPE Component Entity (as defined herein and in the Mortgage Loan Agreement)
and (III) control the day-to-day operation of the Properties and (N) Borrower
shall have delivered to Lender evidence satisfactory to Lender that Mortgage
Borrower and Mezzanine B Borrower have complied with all of the terms and
conditions set forth in the Mortgage Loan Agreement and Mezzanine B Loan
Agreement with respect to the Public Company Transaction corresponding to the
Public Company Transaction requested pursuant to this Section 6.3(c). Borrower
shall have the right to consult with Lender with regard to a Public Company
Transaction prior to Borrower’s written notice of such Public Company
Transaction as required pursuant to this Section 6.3(c).

Section 6.4. Permitted Property Transfer (Assumption). Notwithstanding the
foregoing provisions of this Article 6, at any time other than the sixty
(60) days prior to and following any Secondary Market Transaction, Lender shall
not unreasonably withhold consent to a one-time transfer of the Properties (or,
to the extent that an Individual Property has been released in accordance with
Section 2.10 hereof, the remaining Individual Property) in their or its
entirety, as applicable, to, and the related assumptions of the Mortgage Loan
by, any Person (a “Property Owner Transferee”) and the related assumptions of
the Loan by a Transferee (as defined below) provided that each of the following
terms and conditions are satisfied:

 

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(a) no Default or Event of Default has occurred;

(b) Borrower shall have (i) delivered written notice to Lender of the terms of
such prospective transfer not less than sixty (60) days before the date on which
such transfer is scheduled to close and, concurrently therewith, all such
information concerning the proposed Transferee as Lender shall reasonably
require and (ii) paid to Lender a non-refundable processing fee in the amount of
$25,000. Unless a Qualified Transferee owns more than fifty-one percent (51%) of
the direct or indirect equity ownership interest in such Transferee and such
Property Owner Transferee and Controls Transferee and Property Owner Transferee
and will control the day-to-day operations of the Properties, Lender shall have
the right to approve or disapprove the proposed transfer based on its then
current underwriting and credit requirements for similar loans secured by
similar properties which loans are sold in the secondary market, such approval
not to be unreasonably withheld. Unless a Qualified Transferee owns more than
fifty-one percent (51%) of the direct or indirect equity ownership interest in
such Transferee and such Property Owner Transferee and Controls Transferee and
such Property Owner Transferee and will control the day-to-day operations of the
Properties, in determining whether to give or withhold its approval of the
proposed transfer, Lender shall consider the experience and track record of
Transferee, Property Owner Transferee and their respective principals in owning
and operating facilities similar to the Properties, the financial strength of
Transferee, Property Owner Transferee and their respective principals, the
general business standing of Transferee, Property Owner Transferee and their
respective principals and Transferee’s, Property Owner Transferee and their
respective principals’ relationships and experience with contractors, vendors,
tenants, lenders and other business entities; provided, however, that,
notwithstanding Lender’s agreement to consider the foregoing factors in
determining whether to give or withhold such approval, such approval shall be
given or withheld based on what Lender determines to be commercially reasonable
and, if given, may be given subject to such conditions as Lender may deem
reasonably appropriate;

(c) Borrower shall have paid to Lender, concurrently with the closing of such
prospective transfer, (i) a non-refundable assumption fee in an amount equal to
one-quarter of one percent (0.25%) of the then outstanding principal balance of
the Loan, (ii) all out-of-pocket costs and expenses, including reasonable
attorneys’ fees, incurred by Lender in connection therewith and (iii) all fees,
costs and expenses of all third parties and the Rating Agencies incurred in
connection therewith;

(d) The Property Owner Transferee will be a Single Purpose Entity with
organizational documents reasonably acceptable to Lender. The sole holder of
100% of the equity interests in the Property Owner Transferee (the “Transferee”)
will be the Borrower and shall be a newly formed, Single Purpose Entity with
organizational documents that are reasonably acceptable to Lender;

(e) Transferee shall have pledged its entire equity interest in the Property
Owner Transferee to Lender pursuant to a pledge agreement in substantially the
same form as the Pledge Agreement and Transferee shall have delivered original
certificates of its entire equity interest in Property Owner Transferee in
substantially the same form of the certificate delivered to Lender on the
Closing Date;

 

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(f) Transferee assumes and agrees to pay the Debt as and when due subject to the
provisions of Article 13 hereof and, prior to or concurrently with the closing
of such transfer, Transferee, Property Owner Transferee and their respective
constituent partners, members, shareholders, Affiliates or sponsors as Lender
may require, shall execute, without any cost or expense to Lender, such
documents and agreements as Lender shall reasonably require to evidence and
effectuate said assumption and a Qualified Transferee Replacement Guarantor
shall execute a recourse guaranty and an environmental indemnity in form and
substance substantially similar to the Guaranty and Environmental Indemnity,
respectively, with such changes to each of the foregoing as may be reasonably
required by Lender, including, without limitation that such Qualified Transferee
Replacement Guarantor shall not be required to comply with the covenants set
forth in Section 26(e) and Section 28 of the Guaranty in effect as of the
Closing Date, but such Qualified Transferee Replacement Guarantor shall be
required to comply with, and such recourse guaranty shall contain, the covenants
set forth on Schedule XX hereof. In addition to the foregoing, such Qualified
Transferee Replacement Guarantor shall be either (I) a Qualified Transferee or
(II) be controlled by, and at least fifty-one percent (51%) directly or
indirectly owned by a Qualified Transferee;

(g) Borrower and Transferee, without any cost to Lender, shall furnish any
information requested by Lender for the preparation of, and shall authorize
Lender to file, new financing statements and financing statement amendments and
other documents to the fullest extent permitted by applicable Legal
Requirements, and shall execute any additional documents reasonably requested by
Lender;

(h) Borrower shall have delivered to Lender, without any cost or expense to
Lender, (i) a new UCC title insurance policy in form and substance reasonably
satisfactory to Lender; and (ii) a mezzanine endorsement to the owner’s title
policy in form and substance reasonably acceptable to Lender, relating to the
change in the identity of the vestee and execution and delivery of the
conveyance documents or a mezzanine endorsement to a new owner’s title policy in
form and substance reasonably acceptable to Lender;

(i) Transferee shall have furnished to Lender all appropriate papers evidencing
Transferee’s and Property Owner Transferee’s organization and good standing, and
the qualification of the signers to execute the assumption of the Debt, which
papers shall include certified copies of all documents relating to the
organization and formation of Transferee, Property Owner Transferee and of the
entities, if any, which are partners or members of Transferee and Property Owner
Transferee. Transferee, Property Owner Transferee and such respective
constituent partners, members or shareholders of Transferee and Property Owner
Transferee (as the case may be), as Lender shall require, shall comply with the
covenants set forth in Article 5 hereof;

(j) Transferee shall have caused Property Owner Transferee to assume the
obligations of Mortgage Borrower under any Management Agreement or provide a new
management agreement with a new manager which meets with the requirements of the
Subordination of Management Agreement and Section 4.15 hereof and shall execute
a Subordination of Management Agreement in substantially the form delivered to
Lender in connection with the closing of the Loan;

 

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(k) Transferee shall furnish to Lender a New Non-Consolidation Opinion and an
additional opinion of counsel satisfactory to Lender and its counsel (A) that
Transferee’s formation documents provide for the matters described in
subparagraph (g) above, (B) that the assumption of the Debt has been duly
authorized, executed and delivered, and that the assumption agreement and the
other Loan Documents are valid, binding and enforceable against Transferee in
accordance with their terms, (C) that Transferee and any entity which is a
controlling stockholder, member or general partner of Transferee, have been duly
organized, and are in existence and good standing and (D) with respect to such
other matters as Lender may reasonably request;

(l) Lender shall have received (A) a Rating Agency Confirmation with respect to
such transfer and (B) evidence that the proposed transfer will not result in a
Property Document Event;

(m) Borrower’s obligations under the contract of sale pursuant to which the
transfer is proposed to occur shall expressly be subject to the satisfaction of
the terms and conditions of this Section 6.4; and

(n) Borrower shall have delivered to Lender evidence satisfactory to Lender that
each of the Mortgage Borrower and Mezzanine B Borrower have complied with all of
the terms and conditions set forth in the applicable Mortgage Loan Agreement and
Mezzanine B Loan Agreement with respect to the assumption corresponding to the
assumption requested pursuant to this Section 6.4.

Section 6.5. Lender’s Rights. Lender reserves the right to condition the consent
to a Prohibited Transfer requested hereunder upon (a) a modification of the
terms hereof and on assumption of this Agreement and the other Loan Documents as
so modified by the proposed Prohibited Transfer, (b) payment of a transfer fee
of 1% of outstanding principal balance of the Loan and all of Lender’s expenses
incurred in connection with such Prohibited Transfer, (c) receipt of a Rating
Agency Confirmation with respect to the Prohibited Transfer, (d) the proposed
transferee’s continued compliance with the covenants set forth in this
Agreement, including, without limitation, the covenants in Article 5,
(e) receipt of a New Non-Consolidation Opinion with respect to the Prohibited
Transfer and/or (f) such other conditions and/or legal opinions as Lender shall
determine in its sole discretion to be in the interest of Lender. All expenses
incurred by Lender shall be payable by Borrower whether or not Lender consents
to the Prohibited Transfer. Lender shall not be required to demonstrate any
actual impairment of its security or any increased risk of default hereunder in
order to declare the Debt immediately due and payable upon a Prohibited Transfer
without Lender’s consent. This provision shall apply to every Prohibited
Transfer, whether or not Lender has consented to any previous Prohibited
Transfer.

 

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Section 6.6. Economic Sanctions, Anti-Money Laundering and Transfers. Borrower
shall (and shall cause its direct and indirect constituent owners and Affiliates
(other than holders of shares of common stock that are listed on the New York
Stock Exchange or another nationally recognized stock exchange or holders of
LTIP Units that are not affiliated with any Borrower Party or its Affiliates)
to) (a) at all times comply with the representations and covenants contained in
Sections 3.29 and 3.30 such that the same remain true, correct and not violated
or breached and (b) not permit a Prohibited Transfer to occur and shall cause
the ownership and Control requirements specified in this Article 6 (including,
without limitation, those stipulated in Section 6.3 hereof) to be complied with
at all times. Borrower hereby represents that, other than in connection with the
Loan, the Loan Documents and any Permitted Encumbrances, as of the date hereof,
there exists no Sale or Pledge of (i) the Property or any part thereof, the
Collateral or any part thereof or any legal or beneficial interest in the
Property or any part thereof or the Collateral or any part thereof or (ii) any
interest in any Restricted Party. Notwithstanding anything to the contrary
contained in this Article 6, in no instance shall a transfer be made to a Person
who has been convicted of, or been indicted for, a felony criminal offense, who
has been adjudicated guilty of fraud, racketeering or moral turpitude in
connection with a governmental investigation and/or who is then subject to a
bankruptcy or insolvency action against it.

ARTICLE 7

INSURANCE; CASUALTY; CONDEMNATION; RESTORATION

Section 7.1. Insurance. Borrower shall cause Mortgage Borrower to (a) maintain
at all times during the term of the Loan the Policies required under the
Mortgage Loan Agreement, and (b) otherwise satisfy all covenants related thereto
as provided in the Mortgage Loan Agreement. Borrower shall cause Lender to be
named as certificate holder and loss payee on all property policies and as an
additional insured on all liability policies, and Lender shall be entitled to
such notice, document delivery and consent rights afforded Mortgage Lender under
the applicable terms and conditions of the Mortgage Loan Agreement relating to
the Policies as may be designated by Lender. Borrower shall not permit the
Policies to be canceled without at least thirty (30) days’ prior notice to
Lender. Borrower shall provide Lender with evidence of all such insurance
required hereunder and with the other related notices required under the
Mortgage Loan Documents, in each case, on or before the date on which Mortgage
Borrower is required to provide the same to Mortgage Lender. If at any time
Lender believes it is not in receipt of written evidence that the Policies are
in full force and effect, Lender shall have the right, after five (5) days
written notice to Borrower (unless there is ten (10) days or less on the
Policies, in which instance no written notice to Borrower is required), to take
such action as Lender deems necessary to protect its interest in the Property,
including, without limitation, the obtaining of such insurance coverage as
Lender in its sole discretion deems appropriate, and all expenses incurred by
Lender in connection with such action or in obtaining such insurance and keeping
it in effect shall be paid by Borrower to Lender upon demand and until paid
shall be secured by the Loan Documents and shall bear interest at the Default
Rate.

Section 7.2. Casualty. If any Individual Property shall be damaged or destroyed,
in whole or in part, by fire or other casualty (a “Casualty”), Borrower shall
(or shall cause Mortgage Borrower to) give prompt notice of such damage to
Lender and shall (or shall cause Mortgage Borrower to) promptly commence and
diligently prosecute the completion of the Restoration of the applicable
Individual Property and otherwise comply with the provisions of Section 7.4 of
the Mortgage Loan Agreement (provided, that, such diligent prosecution of the
completion of the Restoration shall be conditioned upon Mortgage Borrower’s
receipt of any Net Proceeds to the extent that Mortgage Borrower is entitled to
such Net Proceeds pursuant to Section 7.4 of the Mortgage Loan Agreement).
Subject to the rights of Mortgage Lender under the Mortgage Loan Documents,
Lender may, but shall not be obligated to, make proof of loss if not made
promptly by Mortgage Borrower.

 

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Section 7.3. Condemnation. Borrower shall (or shall cause Mortgage Borrower to)
promptly give Lender notice of the actual or threatened commencement of any
proceeding for the Condemnation of any Individual Property (or any portion
thereof) of which Borrower has knowledge and shall (or shall cause Mortgage
Borrower to) deliver to Lender copies of any and all papers served in connection
with such proceedings. Lender may participate in any such proceedings, and
Borrower shall from time to time deliver to Lender all instruments requested by
it to permit such participation. Borrower shall cause Mortgage Borrower to, at
Borrower’s or Mortgage Borrower’s expense, diligently prosecute any such
proceedings, and shall consult with Lender, its attorneys and experts, and
cooperate with them in the carrying on or defense of any such proceedings.
Notwithstanding any taking by any public or quasi-public authority through
Condemnation or otherwise (including but not limited to any transfer made in
lieu of or in anticipation of the exercise of such taking), Borrower shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Note and in this Agreement and the Debt shall not be reduced until any
Net Liquidation Proceeds After Debt Service shall have been actually received
and applied by Lender, after the deduction of expenses of collection, to the
reduction or discharge of the Debt. Lender shall not be limited to the interest
paid on the Award by the condemning authority but shall be entitled to receive
out of the Net Liquidation Proceeds After Debt Service interest at the rate or
rates provided herein or in the Note. If any Individual Property or any portion
thereof is taken by a condemning authority, Borrower shall cause Mortgage
Borrower to promptly commence and diligently prosecute the Restoration of any
Individual Property (or any portion thereof) and otherwise comply with the
provisions of Section 7.4 of the Mortgage Loan Agreement (provided, that, such
diligent prosecution of the completion of the Restoration shall be conditioned
upon Mortgage Borrower’s receipt of any Net Proceeds (as defined in the Mortgage
Loan Agreement) to the extent that Mortgage Borrower is entitled to such Net
Proceeds (as defined in the Mortgage Loan Agreement) pursuant to Section 7.4 of
the Mortgage Loan Agreement). Subject to the rights of Mortgage Lender under the
Mortgage Loan Documents, if the Property is sold, through foreclosure or
otherwise, prior to the receipt by Lender of the Award, Lender shall have the
right, whether or not a deficiency judgment on the Note shall have been sought,
recovered or denied, to receive the Award, or a portion thereof sufficient to
pay the Debt.

Section 7.4. Restoration. Borrower shall (or shall cause Mortgage Borrower to)
deliver to Lender all reports, plans, specifications, documents and other
materials that are delivered to Mortgage Lender under the Mortgage Loan
Agreement in connection with the Restoration of any Individual Property after a
Casualty or Condemnation. Borrower shall cause Mortgage Borrower to comply with
the terms and conditions of the Mortgage Loan Documents relating to Restoration.
Notwithstanding anything to the contrary contained in this Agreement, if at any
time and for any reason the Mortgage Loan Restoration Provisions cease to exist
or are waived or modified in any material respect (in each case, including,
without limitation, due to any waiver, amendment or refinance) (such provisions,
the “Waived Restoration Provisions”), to the extent permitted to do so pursuant
to the Mortgage Loan Documents (if applicable), Borrower shall promptly
(i) notify Lender of the same, (ii) execute any amendments to this Agreement
and/or the Loan Documents implementing the Waived Restoration Provisions as may
be required by Lender (provided such amendments are substantially similar to the
provisions set forth in the Mortgage Loan Agreement relating to the same) and
shall cause Mortgage Borrower to acknowledge and agree to the same and
(iii) remit to Lender (and shall cause Mortgage Borrower to remit to Lender) any
Net Proceeds related to the Waived Restoration Provisions. Lender shall be
entitled to such notice, document delivery and consent rights afforded Mortgage
Lender under the applicable terms and conditions of the Mortgage Loan Documents
relating to Casualty, Condemnation and Restoration.

 

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ARTICLE 8

RESERVE FUNDS

Section 8.1. Reserve Funds.

(a) Borrower shall cause Mortgage Borrower to deposit and maintain each of the
Mortgage Loan Reserve Funds as required under the Mortgage Loan Documents and to
perform and comply with all the terms and provisions relating thereto. If
requested by Lender, Borrower will promptly provide evidence reasonably
acceptable to Lender of compliance with the foregoing.

(b) Notwithstanding anything to the contrary contained in this Agreement, if at
any time and for any reason the Mortgage Loan Reserve Funds are no longer being
maintained and/or are reduced, waived or modified in any material respect (in
each case, including, without limitation, due to any waiver, amendment or
refinance) (such Mortgage Loan Reserve Funds, the “Waived Reserve Funds”),
Borrower shall promptly (i) notify Lender of the same and establish and maintain
with Lender and for the benefit of Lender reserves in replacement and
substitution thereof (the “Substitute Reserves”), which Substitute Reserves
shall be subject to all of the same terms and conditions applicable under the
Mortgage Loan Documents, (ii) execute any amendments to this Agreement and/or
the Loan Documents relating to the Substitute Reserves required by Lender
(provided such amendments are substantially similar to the provisions set forth
in the Mortgage Loan Agreement relating to the same) and shall cause Mortgage
Borrower to acknowledge and agree to the same, and (iii) remit to Lender (and
shall cause Mortgage Borrower to remit to Lender) any Mortgage Loan Reserve
Funds remaining in the Waived Reserve Funds. In the event that the Mortgage
Lender subsequently reinstates all or any Waived Reserve Funds, then the Lender
shall cooperate to transfer such Substitute Reserves to the Mortgage Lender, and
Borrower shall no longer be required to deposit funds into such Substitute
Reserves until such time as any such Waived Reserve Funds subsequently exists.

Section 8.2. The Accounts Generally.

(a) Borrower grants to Lender a first-priority perfected security interest in
each of the Accounts and any and all sums now or hereafter deposited in the
Accounts as additional security for payment of the Debt. Until expended or
applied in accordance herewith, the Accounts and the funds deposited therein
shall constitute additional security for the Debt. The provisions of this
Section 8.2 (together with the other related provisions of the other Loan
Documents) are intended to give Lender and/or Servicer “control” of the Accounts
and the Account Collateral and serve as a “security agreement” and a “control
agreement” with respect to the same, in each case, within the meaning of the
UCC. Borrower acknowledges and agrees that the Accounts are subject to the sole
dominion, control and discretion of Lender, its authorized agents or designees,
subject to the terms hereof, and Borrower shall have no right of withdrawal with
respect to any Account except with the prior written consent of Lender or as
otherwise provided herein. The funds on deposit in the Accounts shall not
constitute trust funds and may be commingled with other monies held by Lender.
Notwithstanding anything to the contrary contained herein, unless otherwise
consented to in writing by Lender, Borrower shall only be permitted to request
(and Lender shall only be required to disburse) Reserve Funds on account of the
liabilities, costs, work and other matters (as applicable) for which said sums
were originally reserved hereunder, in each case, as reasonably determined by
Lender.

 

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(b) Borrower shall not, without obtaining the prior written consent of Lender,
further pledge, assign or grant any security interest in the Accounts or the
sums deposited therein or permit any lien to attach thereto, or any levy to be
made thereon, or any UCC-1 Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto. Borrower hereby authorizes
Lender to file a financing statement or statements under the UCC in connection
with any of the Accounts and the Account Collateral in the form required to
properly perfect Lender’s security interest therein. Borrower agrees that at any
time and from time to time, at the expense of Borrower, Borrower will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be reasonably necessary or desirable, or that Lender may
reasonably request, in order to perfect and protect any security interest
granted or purported to be granted hereby (including, without limitation, any
security interest in and to any Permitted Investments) or to enable Lender to
exercise and enforce its rights and remedies hereunder with respect to any
Account or Account Collateral.

(c) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, upon the occurrence and during the continuance of an Event of
Default, without notice from Lender or Servicer (i) Borrower shall have no
rights in respect of the Accounts, (ii) Lender may liquidate and transfer any
amounts then invested in Permitted Investments pursuant to the applicable terms
hereof to the Accounts or reinvest such amounts in other Permitted Investments
as Lender may reasonably determine is necessary to perfect or protect any
security interest granted or purported to be granted hereby or pursuant to the
other Loan Documents or to enable Lender to exercise and enforce Lender’s rights
and remedies hereunder or under any other Loan Document with respect to any
Account or any Account Collateral, and (iii) Lender shall have all rights and
remedies with respect to the Accounts and the amounts on deposit therein and the
Account Collateral as described in this Agreement and in the Pledge Agreement,
in addition to all of the rights and remedies available to a secured party under
the UCC, and, notwithstanding anything to the contrary contained in this
Agreement or in the Pledge Agreement, may apply the amounts of such Accounts as
Lender determines in its sole discretion including, but not limited to, payment
of the Debt.

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

 

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(e) Borrower shall indemnify Lender and hold Lender harmless from and against
any and all actions, suits, claims, demands, liabilities, losses, damages,
obligations and costs and expenses (including litigation costs and reasonable
attorneys fees and expenses) arising from or in any way connected with the
Accounts, the sums deposited therein or the performance of the obligations for
which the Accounts were established, except to the extent arising from the gross
negligence or willful misconduct of Lender, its agents or employees. Upon
Lender’s request, Borrower shall assign to Lender all rights and claims Borrower
may have against all Persons supplying labor, materials or other services which
are to be paid from or secured by the Accounts; provided, however, that Lender
may not pursue any such right or claim unless an Event of Default has occurred
and remains uncured.

(f) Borrower and Lender (or Servicer on behalf of Lender) shall maintain each
applicable Account as an Eligible Account, except as otherwise expressly agreed
to in writing by Lender. In the event that Lender or Servicer no longer
satisfies the criteria for an Eligible Institution, Borrower shall cooperate
with Lender in transferring the applicable Accounts to an institution that
satisfies such criteria. Borrower hereby grants Lender power of attorney
(irrevocable for so long as the Loan is outstanding) with respect to any such
transfers and the establishment of accounts with a successor institution.

(g) Interest accrued on any Account other than an Interest Bearing Account shall
not be required to be remitted either to Borrower or to any Account and may
instead be retained by Lender. Funds deposited in the Interest Bearing Accounts
shall be invested in Permitted Investments as provided for in Section 8.2(h)
hereof. Interest accrued, if any, on sums on deposit in the Interest Bearing
Accounts shall be remitted to and become part of the applicable Account. All
such interest that so becomes part of the applicable Account shall be disbursed
in accordance with the disbursement procedures contained herein applicable to
such Account; provided, however, that Lender may, at its election, retain any
such interest for its own account during the occurrence and continuance of an
Event of Default.

(h) Sums on deposit in the Interest Bearing Accounts shall, upon Borrower’s
written request, be invested in Permitted Investments selected by Lender or
Servicer provided (i) such investments are then regularly offered by Lender (or
Servicer on behalf of Lender) for accounts of this size, category and type
(Borrower acknowledges that the Servicer or Lender may only offer as an
investment opportunity the right to place funds on deposit in the applicable
Accounts in an interest bearing account (bearing interest at the money market
rate)), (ii) such investments are permitted by applicable federal, State and
local rules, regulations and laws, (iii) the maturity date of the Permitted
Investment is not later than the date on which sums in the Interest Bearing
Accounts are required to be disbursed pursuant to the terms hereof, and (iv) no
Event of Default shall have occurred and be continuing. All income earned from
the aforementioned Permitted Investments shall be property of Borrower and
Borrower hereby irrevocably authorizes and directs Lender (or Servicer on behalf
of Lender) to hold any income earned from the aforementioned Permitted
Investments as part of the applicable Interest Bearing Account. Borrower shall
be responsible for payment of any federal, State or local income or other tax
applicable to income earned from Permitted Investments. No other investments of
the sums on deposit in the Interest Bearing Accounts shall be permitted. Lender
shall not be liable for any loss sustained on the investment of any funds in the
Interest Bearing Accounts.

 

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(i) Borrower acknowledges and agrees that it solely shall be, and shall at all
times remain, liable to Lender or Servicer for all reasonable out-of-pocket
fees, charges, costs and expenses in connection with the Accounts, this
Agreement and the enforcement hereof, including, without limitation, any monthly
or annual fees or charges as may be reasonably assessed by Lender or Servicer in
connection with the administration of the Accounts and the reasonable fees and
expenses of legal counsel to Lender and Servicer as needed to enforce, protect
or preserve the rights and remedies of Lender and/or Servicer under this
Agreement.

Section 8.3. Letters of Credit.

(a) This Section shall apply to any Letters of Credit which are permitted to be
delivered pursuant to the express terms and conditions hereof. Other than in
connection with any Letters of Credit delivered in connection with the closing
of the Loan, Borrower shall give Lender no less than ten (10) days written
notice of Borrower’s election to deliver a Letter of Credit together with a
draft of the proposed Letter of Credit and Borrower shall pay to Lender all of
Lender’s reasonable out-of-pocket costs and expenses in connection therewith. No
party other than Lender shall be entitled to draw on any such Letter of Credit.
In the event that any disbursement of any Reserve Funds relates to a portion
thereof provided through a Letter of Credit, any “disbursement” of said funds as
provided above shall be deemed to refer to (i) Borrower providing Lender a
replacement Letter of Credit in an amount equal to the original Letter of Credit
posted less the amount of the applicable disbursement provided hereunder and
(ii) Lender, after receiving such replacement Letter of Credit, returning such
original Letter of Credit to Borrower; provided, that, no replacement Letter of
Credit shall be required with respect to the final disbursement of the
applicable Reserve Funds such that no further sums are required to be deposited
in the applicable Reserve Funds.

(b) Each Letter of Credit delivered hereunder shall be additional security for
the payment of the Debt. Upon the occurrence and during the continuance of an
Event of Default, Lender shall have the right, at its option, to draw on any
Letter of Credit and to apply all or any part thereof to the payment of the
items for which such Letter of Credit was established or to apply each such
Letter of Credit to payment of the Debt in such order, proportion or priority as
Lender may determine. Any such application to the Debt shall be subject to the
terms and conditions hereof relating to application of sums to the Debt. Lender
shall have the additional rights to draw in full any Letter of Credit: (i) if
Lender has received a notice from the issuing bank that the Letter of Credit
will not be renewed and a substitute Letter of Credit is not provided at least
forty five (45) days prior to the date on which the outstanding Letter of Credit
is scheduled to expire; (ii) if Lender has not received a notice from the
issuing bank that it has renewed the Letter of Credit at least forty five
(45) days prior to the date on which such Letter of Credit is scheduled to
expire and a substitute Letter of Credit is not provided at least forty five
(45) days prior to the date on which the outstanding Letter of Credit is
scheduled to expire; (iii) upon receipt of notice from the issuing bank that the
Letter of Credit will be terminated (except if the termination of such Letter of
Credit is permitted pursuant to the terms and conditions hereof or a substitute
Letter of Credit is provided by no later than forty five (45) days prior to such
termination); (iv) if Lender has received notice that the bank issuing the
Letter of Credit shall cease to be an Approved Bank and Borrower has not
substituted a Letter of Credit from an Approved Bank within fifteen (15) days
after notice; and/or (v) if the bank issuing the Letter of Credit shall fail to
(A) issue a replacement Letter of Credit in the event the original Letter of
Credit has been lost, mutilated, stolen and/or destroyed or (B) consent to the
transfer of the Letter of Credit to any Person designated by Lender. If Lender
draws upon a Letter of Credit pursuant to the terms and conditions of this
Agreement, provided no Event of Default exists, Lender shall apply all or any
part thereof for the purposes for which such Letter of Credit was established.
Notwithstanding anything to the contrary contained in the above, Lender is not
obligated to draw any Letter of Credit upon the happening of an event specified
in (i), (ii), (iii), (iv) or (v) above and shall not be liable for any losses
sustained by Borrower due to the insolvency of the bank issuing the Letter of
Credit if Lender has not drawn the Letter of Credit.

 

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ARTICLE 9

CASH MANAGEMENT

Section 9.1. Mortgage Loan Cash Management; Establishment of Certain Accounts.

(a) Borrower shall cause Mortgage Borrower to comply with the Mortgage Loan Cash
Management Provisions and not, without Lender’s prior consent, amend, restate,
replace and/or otherwise modify the same. If requested by Lender, Borrower will
promptly provide evidence reasonably acceptable to Lender of its compliance with
the foregoing.

(b) Notwithstanding anything to the contrary contained in this Agreement, if at
any time and for any reason the Mortgage Loan Cash Management Accounts are no
longer being maintained and/or the Mortgage Loan Cash Management Provisions
cease to exist or are reduced, waived or modified in any material respect (in
each case, including, without limitation, due to any waiver, amendment or
refinance) (such accounts, the “Waived Cash Management Accounts” and such
provisions, the “Waived Cash Management Provisions”), to the extent permitted to
do so pursuant to the Mortgage Loan Documents (if applicable), Borrower shall
promptly (i) notify Lender of the same and establish and maintain with Lender
and for the benefit of Lender in replacement and substitution thereof,
substitute accounts (the “Substitute Cash Management Accounts”), which
Substitute Cash Management Accounts shall be subject to all of the same terms
and conditions applicable under the Mortgage Loan Documents, (ii) execute any
amendments to this Agreement and/or the Loan Documents implementing the Waived
Cash Management Provisions as may be required by Lender (provided such
amendments are substantially similar to the provisions set forth in the Mortgage
Loan Agreement relating to the same) and shall cause Mortgage Borrower to
acknowledge and agree to the same and (iii) remit to Lender (and shall cause
Mortgage Borrower to remit to Lender) any funds remaining in the Waived Cash
Management Accounts. In the event that the Mortgage Lender subsequently
reinstates all or any Waived Cash Management Accounts, then the Lender shall
cooperate to transfer such Substitute Cash Management Accounts to the Mortgage
Lender, and Borrower shall no longer be required to deposit funds into such
Substitute Cash Management Accounts until such time as any such Waived Cash
Management Accounts subsequently exists.

 

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ARTICLE 10

EVENTS OF DEFAULT; REMEDIES

Section 10.1. Event of Default.

The occurrence of any one or more of the following events shall constitute an
“Event of Default”:

(a) if (A) any monthly Debt Service payment or the payment due on the Maturity
Date is not paid when due, (B) any deposit to any of the Accounts required
hereunder or under the other Loan Documents is not paid when due and such
non-payment pursuant to this clause (B) continues for five (5) Business Days
following notice to Borrower that the same is due and payable or (C) any other
portion of the Debt is not paid when due and such non-payment pursuant to this
clause (C) continues for five (5) Business Days following notice to Borrower
that the same is due and payable;

(b) if any of the Taxes or Other Charges are not paid when the same are due and
payable except to the extent (A) sums sufficient to pay the Taxes or Other
Charges in question had been reserved under the Mortgage Loan Documents prior to
the applicable due date for the Taxes or Other Charges in accordance with the
terms of this Agreement and Mortgage Lender failed to pay the Taxes or Other
Charges in question when required thereunder, (B) Mortgage Lender’s access to
such sums was not restricted or constrained in any manner and (C) no Event of
Default was continuing;

(c) if (A) the Policies are not kept in full force and effect or (B) if evidence
of the same is not delivered to Lender upon request when required pursuant to
the applicable provisions of this Agreement and such failure pursuant to this
clause (B) shall continue for five (5) Business Days following notice to
Borrower of such failure;

(d) if (A) any of the representations or covenants contained in Article 5 are
breached or violated; provided, that, any such breach shall not constitute an
Event of Default (1) if such breach is inadvertent and non-recurring, (2) if
such breach is curable, Borrower shall promptly cure such breach within thirty
(30) days after such breach occurs and (3) upon the written request of Lender,
Borrower shall promptly deliver to Lender a New Non-Consolidation Opinion to the
effect that such breach shall not in any way impair, negate or amend the
opinions rendered in the Non-Consolidation Opinion, which opinion and the
counsel delivering such opinion shall be acceptable to Lender in its sole
discretion or (B) any warranty or covenants contained in Section 4 or 5 of the
Pledge Agreement are breached or violated;

(e) if a Prohibited Transfer shall occur or any representation or covenants
contained in Section 6.6 hereof is breached or violated;

(f) if any of the representations or covenants contained in Section 3.34,
Section 3.35, Section 3.36, Section 3.38, Section 3.39, Section 3.40,
Section 3.41, Section 4.22, Section 4.23, Section 4.24, Section 4.25 or
Section 4.26 hereof or if the Property Document Provisions are breached or
violated and such breach or violation, to the extent that the same is
susceptible of being cured, shall continue for ten (10) Business Days following
notice to Borrower of such failure;

 

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(g) if any representation or warranty made herein, in the Guaranty or in the
Environmental Indemnity or in any other guaranty, or in any certificate, report,
financial statement or other instrument or document furnished to Lender in
connection with the Loan shall have been false or misleading in any respect
sufficient to result in a Material Adverse Effect when made; provided, however,
if such untrue representation or warranty is susceptible of being cured, such
breach shall not constitute an Event of Default if Borrower or Guarantor, as
applicable, shall cure such representation or warranty within thirty (30) days
of receipt of notice from Lender;

(h) if (i) Borrower, Mortgage Borrower, any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), any Affiliated Manager, any Hudson
Intermediate Entity or Guarantor shall commence any case, proceeding or other
action (A) under any Creditors Rights Laws seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent,
or seeking reorganization, liquidation or dissolution, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or Borrower,
Mortgage Borrower, any SPE Component Entity (as defined herein and in the
Mortgage Loan Agreement), any Affiliated Manager, any Hudson Intermediate Entity
or Guarantor, or any managing member or general partner of Borrower, Mortgage
Borrower, any SPE Component Entity (as defined herein and in the Mortgage Loan
Agreement), any Affiliated Manager, any Hudson Intermediate Entity or Guarantor
shall make a general assignment for the benefit of its creditors; (ii) there
shall be commenced against Borrower, Mortgage Borrower, any SPE Component Entity
(as defined herein and in the Mortgage Loan Agreement), any Affiliated Manager,
any Hudson Intermediate Entity or Guarantor or any managing member or general
partner of Borrower, Mortgage Borrower, any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), any Affiliated Manager, any Hudson
Intermediate Entity or Guarantor any case, proceeding or other action of a
nature referred to in clause (i) above (other than any case, action or
proceeding already constituting an Event of Default by operation of the other
provisions of this subsection) which (A) results in the entry of an order for
relief or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; (iii) there shall be
commenced against Borrower, Mortgage Borrower, any SPE Component Entity (as
defined herein and in the Mortgage Loan Agreement), any Affiliated Manager, any
Hudson Intermediate Entity or Guarantor any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets (other than any case,
action or proceeding already constituting an Event of Default by operation of
the other provisions of this subsection) which results in the entry of any order
for any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof;
(iv) Borrower, Mortgage Borrower, any SPE Component Entity (as defined herein
and in the Mortgage Loan Agreement), any Affiliated Manager, any Hudson
Intermediate Entity or Guarantor shall take any action in furtherance of, in
collusion with respect to, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above;
(v) Borrower, Mortgage Borrower, any SPE Component Entity (as defined herein and
in the Mortgage Loan Agreement), any Affiliated Manager, any Hudson Intermediate
Entity or Guarantor shall generally not, or shall be unable to, or shall admit
in writing its inability to, pay its debts as they become due; (vi) any
Restricted Party is substantively consolidated with any other entity in
connection with any proceeding under the Bankruptcy Code or any other Creditors
Rights Laws involving Guarantor or its subsidiaries; or (vii) a Bankruptcy Event
occurs;

 

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(i) if Borrower shall be in default beyond applicable notice and grace periods
under any security agreement covering any part of the Collateral whether it be
superior or junior in lien to the Pledge Agreement;

(j) if the Property becomes subject to any mechanic’s, materialman’s or other
lien other than a lien for any Taxes not then due and payable and the lien shall
remain undischarged of record (by payment, bonding or otherwise) for a period of
thirty (30) days;

(k) if any federal tax lien is filed against Borrower, Mortgage Borrower, any
SPE Component Entity (as defined herein and in the Mortgage Loan Agreement),
Guarantor, any Hudson Intermediate Entity, any Individual Property, or the
Collateral and same is not discharged of record (by payment, bonding or
otherwise) within thirty (30) days after same is filed;

(l) if Borrower shall fail to deliver (or shall fail to cause Mortgage Borrower
to deliver) to Lender, within ten (10) Business Days after request by Lender,
the estoppel certificates required by Section 4.13(a) or (c) hereof;

(m) if any default occurs under any guaranty or indemnity executed in connection
herewith (including, without limitation, the Environmental Indemnity and/or the
Guaranty) and such default continues after the expiration of applicable grace
periods, if any;

(n) if any of the assumptions contained in the Non-Consolidation Opinion, or in
any New Non-Consolidation Opinion (including, without limitation, in any
schedules thereto and/or certificates delivered in connection therewith) are
untrue or shall become untrue in any material respect; provided any such breach
shall not constitute an Event of Default (1) if such breach is inadvertent and
non-recurring, (2) if such breach is curable, Borrower shall promptly cure such
breach within thirty (30) days after such breach occurs and (3) upon the written
request of Lender, Borrower shall promptly deliver to Lender a New
Non-Consolidation Opinion to the effect that such breach shall not in any way
impair, negate or amend the opinions rendered in the Non-Consolidation Opinion,
which opinion and the counsel delivering such opinion shall be acceptable to
Lender in its sole discretion;

(o) if Mortgage Borrower defaults under the Management Agreement beyond the
expiration of applicable notice and grace periods, if any, thereunder and such
default gives Manager the right to terminate the Management Agreement or if the
Management Agreement is canceled, terminated or surrendered, expires pursuant to
its terms or otherwise ceased to be in full force and effect, unless, in each
such case, Borrower causes Mortgage Borrower to, contemporaneously with such
cancellation, termination, surrendered, expiration or cessation, enter into a
Qualified Management Agreement with a Qualified Manager in accordance with the
applicable terms and provisions hereof;

(p) if Borrower fails to cause Mortgage Borrower to appoint a New Manager when
required pursuant to this Agreement and/or fails to comply with any limitations
on instructing the Manager and/or Special Manager, each as required by and in
accordance with, as applicable, the terms and provisions of, this Agreement, the
Subordination of Management Agreement, the Subordination of Special Management
Agreement and the Mortgage Loan Documents;

 

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(q) if any representation and/or covenant herein relating to ERISA matters is
breached;

(r) if (A) Borrower shall fail (beyond any applicable notice or grace period) to
pay (or shall fail to cause Mortgage Borrower to pay) any rent, additional rent
or other charges payable under any Property Document as and when payable
thereunder, (B) Mortgage Borrower defaults under the Property Documents in any
material respect beyond the expiration of applicable notice and grace periods,
if any, thereunder, (C) any of the Property Documents are amended, supplemented,
replaced, restated or otherwise modified without Lender’s prior written consent
or if Borrower or Mortgage Borrower consents to a transfer of any party’s
interest thereunder without Lender’s prior written consent, to the extent that
Lender’s consent is required pursuant to this Agreement, (D) any Property
Document and/or the estate created thereunder is canceled, rejected, terminated,
surrendered or expires pursuant to its terms without Lender’s consent (to the
extent that Lender’s consent is required pursuant to this Agreement), unless in
such case Borrower causes Mortgage Borrower to enter into a replacement thereof
in accordance with the applicable terms and provisions of this Agreement and the
Mortgage Loan Documents or (E) a Property Document Event occurs;

(s) if (A) the Interest Rate Cap Agreement or Replacement Interest Rate Cap
Agreement shall fail to any time to be in full force and effect or (B) Borrower
shall otherwise fail to comply with the terms and conditions of Section 2.8
hereof and such failure pursuant to this clause (B) shall continue for ten
(10) Business Days following notice to Borrower;

(t) if, without Lender’s consent, any liquor license, hotel license, and/or
other material Permit relating to any Individual Property ceases to be in full
force and effect and, in each instance, such failure shall continue for thirty
(30) days following notice to Borrower;

(u) if any of the provisions contained in Section 7(a)(ii), Section 7(a)(iii) or
Section 7(b) of any Subordination of Management Agreement is breached or
violated;

(v) if Mortgage Borrower ceases to operate a hotel on any Individual Property or
terminates such business for any reason whatsoever;

(w) other than pursuant to Section 2.7(b) hereof, if (A) any prepayment of the
Mortgage Loan is made at any time (unless such prepayment of the Mortgage Loan
is made on a pro-rata basis with the Loan and the Mezzanine B Loan) or (B) any
prepayment of the Mezzanine B Loan is made at any time (unless such prepayment
of the Mezzanine B Loan is made on a pro-rata basis with the Loan and the
Mortgage Loan);

(x) if, prior to obtaining a final certificate of occupancy with respect to the
Hudson Property, Borrower shall fail to cause Mortgage Borrower to maintain a
temporary certificate of occupancy with respect to the Hudson Property;

(y) if Mortgage Borrower or Manager fails to make any required contributions
related to employees covered by the CBA Multiemployer Plans after Mortgage
Borrower and/or Manager is notified in writing of a failure to make any required
contributions related to employees covered by the CBA Multiemployer Plans and
Mortgage Borrower and/or Manager fails to cure such deficiency or contest the
same within sixty (60) days of such notice and Lender reasonably determines that
such failure to make such required contribution would result in a Material
Adverse Effect;

 

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(z) if (A) a default has occurred and continues beyond any applicable cure
period under any Operating Lease, (B) any Operating Lease is amended, modified
or terminated in violation of the terms of this Agreement or (C) Borrower fails
to cause Mortgage Borrower to enforce any of the terms and provisions of the
Operating Lease;

(aa) if a Mortgage Loan Event of Default shall occur;

(bb) With respect to any default or breach of any term, covenant or condition of
this Agreement not specified in subsections (a) through (aa) above or not
otherwise specifically specified as an Event of Default in this Agreement, if
the same is not cured (i) within ten (10) days after notice from Lender (in the
case of any default which can be cured by the payment of a sum of money) or
(ii) for thirty (30) days after notice from Lender (in the case of any other
default or breach); provided, that, with respect to any default or breach
specified in subsection (ii), if the same cannot reasonably be cured within such
thirty (30) day period and Borrower shall have commenced to cure the same 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 so long as
it shall require Borrower in the exercise of due diligence to cure the same, it
being agreed that no such extension shall be for a period in excess of ninety
(90) days; or

(cc) if any default shall exist under any of the other Loan Documents beyond any
applicable cure periods contained in such Loan Documents or if any other such
event shall occur or condition shall exist, if the effect of such event or
condition is to accelerate the maturity of any portion of the Debt or to permit
Lender to accelerate the maturity of all or any portion of the Debt.

Section 10.2. Remedies.

(a) Upon the occurrence and during the continuance of an Event of Default (other
than an Event of Default described in Section 10.1(h) above with respect to
Borrower, Mortgage Borrower or any SPE Component Entity (as defined herein and
in the Mortgage Loan Agreement)) and at any time thereafter Lender may, in
addition to any other rights or remedies available to it pursuant to this
Agreement, the Pledge Agreement, the Note and the other Loan Documents or at law
or in equity, take such action, without notice or demand, that Lender deems
advisable to protect and enforce its rights against Borrower and in the
Collateral, including, without limitation, declaring the Debt to be immediately
due and payable, and Lender may enforce or avail itself of any or all rights or
remedies provided in this Agreement, the Pledge Agreement, the Note and the
other Loan Documents and may exercise the rights and remedies of a secured party
under the Uniform Commercial Code against Borrower and the Collateral,
including, without limitation, all rights or remedies available at law or in
equity. Upon any Event of Default described in Section 10.1(h) above with
respect to Borrower, Mortgage Borrower or any SPE Component Entity (as defined
herein and in the Mortgage Loan Agreement), the Debt and all other obligations
of Borrower under this Agreement, the Pledge Agreement, the Note and the other
Loan Documents shall immediately and automatically become due and payable,
without notice or demand, and Borrower hereby expressly waives any such notice
or demand, anything contained herein or in the Pledge Agreement, the Note and
the other Loan Documents to the contrary notwithstanding.

 

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(b) Upon the occurrence and during the continuance of an Event of Default, all
or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower under this Agreement, the Pledge Agreement,
the Note or the other Loan Documents executed and delivered by, or applicable
to, Borrower or at law or in equity may be exercised by Lender at any time and
from time to time, whether or not all or any of the Debt shall be declared due
and payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
this Agreement, the Pledge Agreement, the Note or the other Loan Documents with
respect to the Collateral. Any such actions taken by Lender shall be cumulative
and concurrent and may be pursued independently, singularly, successively,
together or otherwise, at such time and in such order as Lender may determine in
its sole discretion, to the fullest extent permitted by applicable law, without
impairing or otherwise affecting the other rights and remedies of Lender
permitted by applicable law, equity or contract or as set forth herein or in the
Pledge Agreement, the Note or the other Loan Documents. No delay or omission to
exercise any remedy, right or power accruing upon an Event of Default shall
impair any such remedy, right or power or shall be construed as a waiver
thereof, but any such remedy, right or power may be exercised from time to time
and as often as may be deemed expedient. A waiver of one Default or Event of
Default with respect to Borrower shall not be construed to be a waiver of any
subsequent Default or Event of Default by Borrower or to impair any remedy,
right or power consequent thereon.

(c) With respect to Borrower and the Collateral, nothing contained herein or in
any other Loan Document shall be construed as requiring Lender to resort to any
portion of the Collateral for the satisfaction of any of the Debt in preference
or priority to any other portion of the Collateral, and Lender may seek
satisfaction out of all of the Collateral or any part thereof, in its absolute
discretion in respect of the Debt. In addition, Lender shall have the right from
time to time to partially foreclose upon the Collateral in any manner and for
any amounts secured by the Pledge Agreement then due and payable as determined
by Lender in its sole discretion including, without limitation, the following
circumstances: (i) in the event Borrower defaults beyond any applicable grace
period in the payment of one or more scheduled payments of principal and
interest, Lender may foreclose upon the Collateral (or any portion thereof) to
recover such delinquent payments, or (ii) in the event Lender elects to
accelerate less than the entire outstanding principal balance of the Loan,
Lender may foreclose upon the Collateral (or any portion thereof) to recover so
much of the principal balance of the Loan as Lender may accelerate and such
other sums secured by the Pledge Agreement as Lender may elect. Notwithstanding
one or more partial foreclosures, the Collateral shall remain subject to the
Pledge Agreement to secure payment of sums secured by the Pledge Agreement and
not previously recovered.

 

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(d) Lender shall have the right from time to time to sever the Note and the
other Loan Documents into one or more separate notes, security instruments and
other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and
enforcing its rights and remedies provided hereunder. Borrower shall execute and
deliver to Lender from time to time, promptly after the request of Lender, a
severance agreement and such other documents as Lender shall request in order to
effect the severance described in the preceding sentence, all in form and
substance reasonably satisfactory to Lender. Borrower hereby absolutely and
irrevocably appoints Lender as its true and lawful attorney, coupled with an
interest, in its name and stead to make and execute all documents necessary or
desirable to effect the aforesaid severance, Borrower ratifying all that its
said attorney shall do by virtue thereof; provided, however, Lender shall not
make or execute any such documents under such power until three (3) days after
notice has been given to Borrower by Lender of Lender’s intent to exercise its
rights under such power. Borrower shall not be obligated to pay any costs or
expenses incurred in connection with the preparation, execution, recording or
filing of the Severed Loan Documents and the Severed Loan Documents shall not
contain any representations, warranties or covenants not contained in the Loan
Documents and any such representations and warranties contained in the Severed
Loan Documents will be given by Borrower only as of the Closing Date.

(e) Notwithstanding anything to the contrary contained herein or in any other
Loan Document, any amounts recovered from the Collateral (or any portion
thereof) or any other collateral for the Loan and/or paid to or received by
Lender may, after an Event of Default, be applied by Lender toward the Debt in
such order, priority and proportions as Lender in its sole discretion shall
determine.

(f) Lender may, but without any obligation to do so and without notice to or
demand on Borrower and without releasing Borrower from any obligation hereunder
or being deemed to have cured any Event of Default hereunder, make, do or
perform any obligation of Borrower hereunder in such manner and to such extent
as Lender may deem necessary. Lender is authorized to appear in, defend, or
bring any action or proceeding to protect its interest in the Collateral for
such purposes, and the cost and expense thereof (including reasonable attorneys’
fees to the extent permitted by applicable law), with interest as provided in
this Section, shall constitute a portion of the Debt and shall be due and
payable to Lender upon demand. All such costs and expenses incurred by Lender in
remedying such Event of Default or such failed payment or act or in appearing
in, defending, or bringing any action or proceeding shall bear interest at the
Default Rate, for the period after such cost or expense was incurred into the
date of payment to Lender. All such costs and expenses incurred by Lender
together with interest thereon calculated at the Default Rate shall be deemed to
constitute a portion of the Debt and be secured by the liens, claims and
security interests provided to Lender under the Loan Documents and shall be
immediately due and payable upon demand by Lender therefore.

ARTICLE 11

SECONDARY MARKET

Section 11.1. Securitization.

(a) Lender shall have the right (i) to sell or otherwise transfer the Loan (or
any portion thereof and/or interest therein), (ii) to sell participation
interests in the Loan (or any portion thereof and/or interest therein) or
(iii) to securitize the Loan (or any portion thereof and/or interest therein) in
a single asset securitization or a pooled asset securitization (including a
collateralized debt obligation (CDO) securitization). The transactions referred
to in clauses (i), (ii) and (iii) above shall hereinafter be referred to
collectively as “Secondary Market Transactions” and the transactions referred to
in clause (iii) shall hereinafter be referred to as a “Securitization”. Any
certificates, notes or other securities issued in connection with a
Securitization are hereinafter referred to as “Securities”.

 

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(b) If requested by Lender, each of Borrower and Guarantor shall assist Lender
in satisfying the market standards to which Lender customarily adheres or which
may be reasonably required in the marketplace or by the Rating Agencies in
connection with any Secondary Market Transactions, including, without
limitation, to:

(i) provide or cause Mortgage Borrower to provide (A) updated financial and
other information with respect to the Property (or any portion thereof), the
Collateral (or any portion thereof), the business operated at the Property (or
any portion thereof), Borrower, Mortgage Borrower, Mezzanine B Borrower,
Guarantor, SPE Component Entity (as defined herein and in the Mortgage Loan
Agreement), any Hudson Intermediate Entity and Manager, (B) updated budgets
relating to the Property, (C) updated appraisals, market studies, environmental
reviews (Phase I’s and, if appropriate, Phase II’s), property condition reports
and other due diligence investigations of the Property (or any portion thereof)
(the “Updated Information”), together, if customary, with appropriate
verification of the Updated Information through letters of auditors or opinions
of counsel acceptable to Lender and the Rating Agencies and (D) revisions to and
other agreements with respect to the Property Documents in form and substance
acceptable to Lender and the Rating Agencies;

(ii) provide new and/or updated opinions of counsel, which may be relied upon by
Lender, the Rating Agencies and their respective counsel, agents and
representatives, as to substantive non-consolidation, fraudulent conveyance,
matters of Delaware and federal bankruptcy law relating to limited liability
companies, true sale, true lease and any other opinion customary in Secondary
Market Transactions or required by the Rating Agencies with respect to the
Property (or any portion thereof), the Collateral (or any portion thereof), the
Property Documents, Borrower, Mortgage Borrower, Mezzanine B Borrower and
Borrower’s Affiliates, which counsel and opinions shall be satisfactory in form
and substance to the Rating Agencies and reasonably satisfactory in form and
substance to Lender;

(iii) provide updated, as of the closing date of the Secondary Market
Transaction, representations and warranties made in the Loan Documents and such
additional representations and warranties as the Rating Agencies may require;
and

(iv) execute such amendments to the Loan Documents, the Mortgage Loan Documents,
the Mezzanine B Loan Documents, the Property Documents and Borrower’s, Mortgage
Borrower’s, Mezzanine B Borrower’s, any Hudson Intermediate Entity’s or any SPE
Component Entity’s (as defined herein and in the Mortgage Loan Agreement)
organizational documents as may be reasonably requested by Lender or requested
by the Rating Agencies or otherwise to effect any Secondary Market Transaction,
including, without limitation, (A) to amend and/or supplement the Independent
Director provisions provided herein and therein, in each case, in accordance
with the applicable requirements of the Rating Agencies,

 

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(B) further bifurcating the Loan into two or more additional components,
re-allocating the Loan among existing components or existing Notes, reducing the
number of components of the Loan and/or creating additional separate notes
and/or creating additional senior/subordinate note structure(s) (any of the
foregoing, a “Loan Bifurcation”) and (C) to modify all operative dates
(including but not limited to payment dates, interest period start dates and end
dates, etc.) under the Loan Documents, by up to ten (10) days; provided,
however, that Borrower and/or Guarantor shall not be required to so modify or
amend any Loan Document if such modification or amendment would change any
material economic or material non-economic term, including the interest rate or
the stated maturity (except as provided in subclause (C) above), except in
connection with a Loan Bifurcation which may result in varying interest rates
but will have the same initial weighted average coupon of the original Note
(except following an Event of Default or in connection with any application of
Net Liquidation Proceeds After Debt Service).

(c) If, at the time a Disclosure Document is being prepared for a
Securitization, Lender expects that Borrower alone or Borrower and one or more
Affiliates of Borrower collectively, or the Property (or any portion thereof)
alone or the Property (or any portion thereof) and Related Properties
collectively, will be a Significant Obligor, Borrower and Guarantor shall
furnish to Lender, upon request, any information not already in Lender’s
possession required under Item 1112(a) of Regulation AB together with (i) the
selected financial data or, if applicable, net operating income, required under
Item 1112(b)(1) of Regulation AB, if Lender expects that the principal amount of
the Loan together with any Related Loans as of the cut-off date for such
Securitization may, or if the principal amount of the Loan together with any
Related Loans as of the cut-off date for such Securitization and at any time
during which the Loan and any Related Loans are included in a Securitization
does, equal or exceed ten percent (10%) (but less than twenty percent (20%)) of
the aggregate principal amount of all mortgage loans included or expected to be
included, as applicable, in the Securitization, or (ii) the financial statements
required under Item 1112(b)(2) of Regulation AB, if Lender expects that the
principal amount of the Loan together with any Related Loans as of the cut-off
date for such Securitization may, or if the principal amount of the Loan
together with any Related Loans as of the cut-off date for such Securitization
and at any time during which the Loan and any Related Loans are included in a
Securitization does, equal or exceed twenty percent (20%) of the aggregate
principal amount of all mortgage loans included or expected to be included, as
applicable, in the Securitization. Such financial data or financial statements
shall be furnished to Lender (A) within ten (10) Business Days after notice from
Lender in connection with the preparation of Disclosure Documents for the
Securitization, (B) not later than thirty (30) days after the end of each fiscal
quarter of Borrower and (C) not later than seventy-five (75) days after the end
of each fiscal year of Borrower; provided, however, that without limiting the
obligations of Borrower or Guarantor pursuant to any other provision of this
Agreement, Borrower and Guarantor shall not be obligated to furnish financial
data or financial statements pursuant to clauses (B) or (C) of this sentence
with respect to any period for which a filing pursuant to the Exchange Act in
connection with or relating to the Securitization (an “Exchange Act Filing”) is
not required. If requested by Lender, Borrower and Guarantor shall furnish to
Lender financial data and/or financial statements (including any such data or
statements as may be required under Regulation AB) for any tenant of the
Property (or any portion thereof) if, in connection with a Securitization,
Lender expects there to be, with respect to such tenant or group of Affiliated
tenants, a concentration within all of the mortgage loans included or expected
to be included, as applicable, in the Securitization such that such tenant or
group of Affiliated tenants would constitute a Significant Obligor.

 

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(d) All financial data and statements provided by Borrower and Guarantor
hereunder shall be prepared in accordance with the Approved Accounting Method,
and shall meet the requirements of Regulation AB and other applicable legal
requirements. All financial statements referred to in this Section shall be
audited by independent accountants of Borrower acceptable to Lender in
accordance with Regulation AB and all other applicable legal requirements, shall
be accompanied by the manually executed report of the independent accountants
thereon, which report shall meet the requirements of Regulation AB and all other
applicable legal requirements, and shall be further accompanied by a manually
executed written consent of the independent accountants, in form and substance
acceptable to Lender, to the inclusion of such financial statements in any
Disclosure Document and any Exchange Act Filing and to the use of the name of
such independent accountants and the reference to such independent accountants
as “experts” in any Disclosure Document and Exchange Act Filing, all of which
shall be provided at the same time as the related financial statements are
required to be provided. All financial data and statements (audited or
unaudited) provided by Borrower and Guarantor under this Section shall be
accompanied by an Officer’s Certificate, which certification shall state that
such financial statements meet the requirements set forth in the first sentence
of this subsection (d).

(e) If requested by Lender, Borrower and Guarantor shall provide Lender,
promptly upon request, with any other or additional financial statements, or
financial, statistical or operating information, as Lender shall reasonably
determine to be required pursuant to Regulation AB or any amendment,
modification or replacement thereto or other legal requirements in connection
with any Disclosure Document or any Exchange Act Filing or as shall otherwise be
reasonably requested by Lender.

(f) In the event Lender reasonably determines, in connection with a
Securitization, that the financial data and financial statements required in
order to comply with Regulation AB or any amendment, modification or replacement
thereto or other legal requirements are other than as provided herein, then
notwithstanding the provisions of this Section, Lender may request, and Borrower
and Guarantor shall promptly provide, such other financial data and financial
statements as Lender reasonably determines to be necessary or appropriate for
such compliance.

(g) Notwithstanding anything herein to the contrary, Lender shall pay the
reasonable and out-of-pocket fees and expenses of Borrower with respect to
Borrower’s compliance with this Section 11.1; provided, that, Borrower shall be
responsible for the payment of (i) Borrower’s legal fees with respect to
compliance with the terms of this Section 11.1, and (ii) all of Borrower’s costs
and expenses with respect to Borrower’s compliance with Regulation AB or any
amendment, modification or replacement thereto.

Section 11.2. Disclosure.

(a) Each of Borrower and Guarantor (on their own behalf and on behalf of each
other Borrower Party) understands that information provided to Lender by
Borrower, Guarantor, any other Borrower Party and/or their respective agents,
counsel and representatives may be (i) included in (A) the Disclosure Documents
and (B) filings under the Securities Act and/or the Exchange Act and (ii) made
available to Investors, the Rating Agencies and service providers, in each case,
in connection with any Secondary Market Transaction.

 

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(b) Borrower and Guarantor shall indemnify Lender and its officers, directors,
partners, employees, representatives, agents and affiliates against any losses,
claims, damages or liabilities (collectively, the “Liabilities”) to which Lender
and/or its officers, directors, partners, employees, representatives, agents
and/or affiliates may become subject in connection with (x) any Disclosure
Document and/or any Covered Rating Agency Information, in each case, insofar as
such Liabilities arise out of or are based upon any untrue statement of any
material fact in the Provided Information and/or arise out of or are based upon
the omission to state a material fact in the Provided Information required to be
stated therein or necessary in order to make the statements in the applicable
Disclosure Document and/or Covered Rating Agency Information, in light of the
circumstances under which they were made, not misleading and (y) after a
Securitization, any indemnity obligations incurred by Lender or Servicer in
connection with any Rating Agency Confirmation.

(c) Borrower and Guarantor shall provide in connection with each of (i) a
preliminary and a final private placement memorandum, offering memorandum or
offering circular, (ii) a free writing prospectus, (iii) a preliminary and final
prospectus or prospectus supplement or (iv) a term sheet, as applicable, an
agreement (A) certifying that Borrower and Guarantor have examined such
Disclosure Documents specified by Lender and that each such Disclosure Document,
as it relates to Borrower, Mortgage Borrower, Mezzanine B Borrower, Borrower
Affiliates, the Properties, the Collateral, Manager, Guarantor, the Property
Documents, the Operating Leases, the Management Agreements, the Special
Management Agreement, the CBA Multiemployer Plans, the Union Documents, the SRO
Arrangements, the terms of the Loan Documents, the terms of the Mortgage Loan
Documents, the terms of the Mezzanine B Loan Documents, the use of the Loan
proceeds, the Mortgage Loan proceeds and Mezzanine B Loan proceeds and all other
aspects of the Loan, the Mortgage Loan and the Mezzanine B Loan, does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in the light of the
circumstances under which they were made, not misleading, (B) indemnifying
Lender (and for purposes of this Section 11.2, Lender hereunder shall include
its officers and directors), the Affiliate of Lender (“Lender Affiliate”) that
has filed the registration statement relating to the Securitization (the
“Registration Statement”) or is otherwise acting as “depositor” of the
Securitization, each of its directors, each of its officers who have signed the
Registration Statement and each Person that controls the Affiliate within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act
(collectively, the “Lender Group”), and Lender Affiliate, and any other
placement agent or underwriter with respect to the Securitization, each of their
respective directors and each Person who controls Lender Affiliate or any other
placement agent or underwriter within the meaning of Section 15 of the
Securities Act and Section 20 of the Exchange Act (collectively, the
“Underwriter Group”) for any Liabilities to which Lender, the Lender Group or
the Underwriter Group may become subject insofar as the Liabilities arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in such sections or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated in such sections or necessary in order to make the statements in such
sections, in light of the circumstances under which they were made, not
misleading and (C) agreeing to reimburse Lender, the Lender Group and/or the
Underwriter Group for any legal or other expenses reasonably incurred by Lender,
the Lender Group and the Underwriter Group in connection with investigating or
defending the Liabilities; provided, however, that Borrower will be liable in
any such case under clauses (B) or (C) above only to the extent that any such
loss claim, damage or liability arises out of or is based upon any such untrue
statement or omission made therein in reliance upon and in conformity with
information furnished to Lender by or on behalf of Borrower in connection with
the preparation of the Disclosure Document or in connection with the
underwriting or closing of the Loan, including, without limitation, financial
statements of Borrower, operating statements and rent rolls with respect to the
Property. The indemnification provided for in clauses (B) and (C) above shall be
effective whether or not the indemnification agreement described above is
provided. The aforesaid indemnity will be in addition to any liability which
Borrower may otherwise have.

 

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(d) In connection with filings under Exchange Act and/or the Securities Act,
Borrower and Guarantor shall (i) indemnify Lender, the Lender Group and the
Underwriter Group for Liabilities to which Lender, the Lender Group or the
Underwriter Group may become subject insofar as the Liabilities arise out of or
are based upon the omission or alleged omission to state in the Disclosure
Document a material fact required to be stated in the Disclosure Document in
order to make the statements in the Disclosure Document, in light of the
circumstances under which they were made, not misleading and (ii) reimburse
Lender, the Lender Group or the Underwriter Group for any legal or other
expenses reasonably incurred by Lender, the Lender Group or the Underwriter
Group in connection with defending or investigating the Liabilities.

(e) Promptly after receipt by an indemnified party under this Section 11.2 of
notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 11.2, notify the indemnifying party in writing of the commencement
thereof (but the omission to so notify the indemnifying party will not relieve
the indemnifying party from any liability which the indemnifying party may have
to any indemnified party hereunder except to the extent that failure to notify
causes prejudice to the indemnifying party). In the event that any action is
brought against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled, jointly with
any other indemnifying party, to participate therein and, to the extent that it
(or they) may elect by written notice delivered to the indemnified party
promptly after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel satisfactory to such indemnified party.
After notice from the indemnifying party to such indemnified party under this
Section 11.2, such indemnifying party shall pay for any legal or other expenses
subsequently incurred by such indemnifying party in connection with the defense
thereof; provided, however, if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall have
the right to select separate counsel to assert such legal defenses and to
otherwise participate in the defense of such action on behalf of such
indemnified party at the cost of the indemnifying party.

 

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After notice from such Indemnifying Person to such Indemnified Person of its
election to so assume the defense of such claim or action, such Indemnifying
Person shall not be liable to such Indemnified Person for any legal or other
expenses subsequently incurred by such Indemnified Person in connection with the
defense thereof, unless, (1) if the defendants in any such action include both
an Indemnified Person and any of the Indemnifying Persons and an Indemnified
Person shall have reasonably concluded that there are any legal defenses
available to it and/or other Indemnified Persons that are different from or
additional to those available to an Indemnifying Person, the Indemnified Person
or Persons shall have the right to select separate counsel to assert such legal
defenses and to otherwise participate in the defense of such action on behalf of
such Indemnified Person at the expense of the Indemnifying Persons, (2) the
Indemnifying Person shall not have employed counsel reasonably satisfactory to
the Indemnified Person to represent the Indemnified Person within a reasonable
time after notice of commencement of the action (provided that the Indemnified
Person has provided the Indemnifying Person with ten (10) days prior written
notice that it intends to exercise its rights pursuant to this clause (2) and
the Indemnifying Person has not employed counsel reasonably satisfactory to the
Indemnified Person within such 10-day period), or (3) the Indemnifying Person
has authorized in writing the employment of counsel of the Indemnified Person at
the expense of the Indemnifying Person.

Without the prior written consent of the applicable Indemnified Persons, no
Indemnifying Person shall settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder (whether or not any
Indemnified Person is an actual or potential party to such claim, action, suit
or proceeding) unless (i) such Indemnifying Person shall have given the
Indemnified Persons reasonable prior written notice thereof and shall have
obtained an unconditional release of each Indemnified Person from all liability
arising out of such claim, action, suit or proceedings and (ii) such settlement,
compromise or judgment does not include a statement as to, or admission of,
fault, culpability or a failure to act by or on behalf of any Indemnified
Person. As long as an Indemnifying Person has complied with its obligations to
defend and indemnify hereunder, such Indemnifying Person shall not be liable for
any settlement made by any Indemnified Person(s) without the consent of such
Indemnifying Person (which consent shall not be unreasonably withheld or
delayed). Notwithstanding the foregoing sentence, if at any time an Indemnified
Person shall have requested that an Indemnifying Person reimburse the
Indemnified Person for fees and expenses of counsel to which the Indemnified
Person is entitled pursuant to this Agreement, the Indemnifying Person shall be
liable for any settlement, compromise or entry of a judgment in connection with
any proceeding effected without its written consent if (i) such settlement,
compromise or judgment is entered into or entered, as applicable, more than
ninety (90) days after receipt by the Indemnifying Person of such request,
(ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in
accordance with such request prior to the date of such settlement, compromise or
judgment, and (iii) such settlement, compromise or judgment does not include a
statement as to, or an admission of, fault, culpability or failure to act by or
on behalf of any such Indemnifying Person; provided, that the Indemnified Person
has provided the Indemnifying Person with five (5) Business Days prior notice of
its intent to exercise its rights under this sentence.

 

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The Indemnifying Persons agree that if any indemnification or reimbursement
sought pursuant to this Agreement is judicially determined to be unenforceable
for any reason or is insufficient to hold any Indemnified Person harmless (with
respect only to the Liabilities that are the subject of this Agreement), then
the Indemnifying Persons, on the one hand, and such Indemnified Person, on the
other hand, shall contribute to the Liabilities for which such indemnification
or reimbursement is held unavailable or is insufficient: (x) in such proportion
as is appropriate to reflect the relative benefits to the Indemnifying Persons,
on the one hand, and such Indemnified Person, on the other hand, from the
transactions to which such indemnification or reimbursement relates; or (y) if
the allocation provided by clause (x) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (x) but also the relative faults of the Indemnifying
Persons, on the one hand, and all Indemnified Persons, on the other hand, as
well as any other equitable considerations. Notwithstanding the foregoing, no
party found liable for a fraudulent misrepresentation shall be entitled to
contribution from any other party who is not also found liable for such
fraudulent misrepresentation, and the Indemnifying Persons agree that in no
event shall the amount to be contributed by the Indemnified Persons collectively
pursuant to this paragraph exceed the amount of the fees (by underwriting
discount or otherwise) actually received by such Indemnified Persons in
connection with the closing of the Loan or the Securitization.

The Indemnifying Persons agree that the indemnification, contribution and
reimbursement obligations set forth in this Agreement shall apply whether or not
any Indemnified Person is a formal party to any lawsuits, claims or other
proceedings. The Indemnifying Persons further agree that the Indemnified Persons
are intended third party beneficiaries under this Agreement.

(f) The liabilities and obligations of each of Borrower, Guarantor and Lender
under this Section 11.2 shall survive the termination of this Agreement and the
satisfaction and discharge of the Debt. Failure by Borrower, Guarantor and/or
any other Borrower Party to comply with the provisions of Section 11.1 and/or
Section 11.2 within the timeframes specified therein and/or as otherwise
required by Lender shall, at Lender’s option, constitute a breach of the terms
thereof and/or an Event of Default. Borrower (on its own behalf and on behalf of
each Borrower Party) hereby expressly authorizes and appoints Lender its
attorney-in-fact to take any actions required of any Borrower Party under
Sections 11.1, 11.2 and/or 11.6 in the event any Borrower Party fails to do the
same, which power of attorney shall be irrevocable and shall be deemed to be
coupled with an interest. Notwithstanding anything to the contrary contained
herein, (i) except as may otherwise expressly provided to the contrary in this
Article 11, each Borrower Party shall bear its own cost of compliance with this
Article (including, without limitation, the costs of any ongoing financial
reporting or similar provisions contained herein) and (ii) to the extent that
the timeframes for compliance with such ongoing financial reporting and similar
provisions are shorter than the timeframes allowed for comparable reporting
obligations under Section 4.12 hereof (if any), the timeframes under this
Article 11 shall control.

Section 11.3. Reserves/Escrows. In the event that Securities are issued in
connection with the Loan, all funds held by Lender in escrow or pursuant to
reserves in accordance with this Agreement and the other Loan Documents shall be
deposited in “eligible accounts” at “eligible institutions” and, to the extent
applicable, invested in “permitted investments” as then defined and required by
the Rating Agencies.

 

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Section 11.4. Servicer. At the option of Lender, the Loan may be serviced by a
servicer/special servicer/trustee selected by Lender (collectively, the
“Servicer”) and Lender may delegate all or any portion of its responsibilities
under this Agreement and the other Loan Documents to such Servicer pursuant to a
servicing agreement between Lender and such Servicer. Without limitation of any
other provision contained herein, Borrower shall be liable for the costs and
expenses of Lender incurred with respect to any Servicer, including, without
limitation, any initial set up costs and fees and ongoing monthly costs and
fees, in each case, charged by such Servicer.

Section 11.5. Rating Agency Costs. In connection with any Rating Agency
Confirmation or other Rating Agency consent, approval or review required
hereunder as a result of a request by Borrower (other than the initial review of
the Loan by the Rating Agencies in connection with a Securitization), Borrower
shall pay all of the costs and expenses of Lender, Servicer and each Rating
Agency in connection therewith, and, if applicable, shall pay any fees imposed
by any Rating Agency in connection therewith.

Section 11.6. Mezzanine Option. Borrower acknowledges and agrees that Mortgage
Lender shall have the options set forth in Section 11.6 of the Mortgage Loan
Agreement. Borrower shall cooperate with Mortgage Lender and Lender in Mortgage
Lender’s exercise, from time to time, of any and all such options in good faith
and in a timely manner, which cooperate shall include, but not be limited to,
cooperating with respect to all of the actions and items specified and/or
referenced in Section 11.6 of the Mortgage Loan Agreement. Lender shall pay the
reasonable and out-of-pocket fees and expenses of Borrower with respect to
Borrower’s compliance with this Section 11.6; provided, that, Borrower shall be
responsible for the payment of Borrower’s legal fees with respect to compliance
with the terms of this Section 11.6.

Section 11.7. Registered Form. The Servicer, as non-fiduciary agent of Borrower,
shall maintain a record that identifies each owner (including successors and
assignees) of an interest in the Loan, including the name and address of the
owner, and each owner’s rights to principal and stated interest (the “Loan
Register”), and shall record all transfers of an interest in the Loan, including
each assignment, in the Loan Register. Transfers of interests in the Loan
(including assignments) shall be subject to the applicable conditions set forth
in the Loan Documents with respect thereto and Servicer will update the Loan
Register to reflect the transfer. Furthermore, each Lender that sells a
participation shall, acting solely for this purpose as agent of Borrower,
maintain a register on which it enters the name and address of each participant
and the principal amounts and stated interest of each participant’s interest
(the “Participant Register”); provided that no Lender shall have any obligation
to disclose all or any portion of the Participant Register to any Person
(including the identity of any participant or any information relating to a
participant’s interest) except to the extent that such disclosure is necessary
to establish that such obligation is in registered form under
Section 5f.103-1(c) of the U.S. Department of Treasury regulations. The entries
in the Loan Register and Participant Register shall be conclusive. The Borrower,
the Lenders and the Servicer may treat each Person whose name is recorded in the
Loan Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, and the Borrower, the Lenders and the Servicer may
treat each Person whose name is recorded in the Participant Register pursuant to
the terms hereof as the owner of such participation for all purposes of this
Agreement. Failure to make any such recordation, or any error in such
recordation, however, shall not affect Borrower’s obligations in respect of the
Loan. Borrower acknowledges that the Notes are in registered form and may not be
transferred except by register.

 

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Section 11.8. Syndication. Without limiting Lender’s rights under Section 11.1,
the provisions of this Section 11.8 shall only apply in the event that the Loan
is syndicated in accordance with the provisions of this Section 11.8 set forth
below.

(a) Sale of Loan, Co-Lenders, Participations and Servicing.

(i) Lender and any Co-Lender may, at their option, without Borrower’s consent
(but with notice to Borrower), sell with novation all or any part of their
right, title and interest in, and to, and under the Loan (the “Syndication”), to
one or more additional lenders (each a “Co-Lender”). Each additional Co-Lender
shall enter into an assignment and assumption agreement (the “Assignment and
Assumption”) assigning a portion of Lender’s or Co-Lender’s rights and
obligations under the Loan, and pursuant to which the additional Co-Lender
accepts such assignment and assumes the assigned obligations. From and after the
effective date specified in the Assignment and Assumption (i) each Co-Lender
shall be a party hereto and to each Loan Document to the extent of the
applicable percentage or percentages set forth in the Assignment and Assumption
and, except as specified otherwise herein, shall succeed to the rights and
obligations of Lender and the Co-Lenders hereunder and thereunder in respect of
the Loan, and (ii) Lender, as lender and each Co-Lender, as applicable, shall,
to the extent such rights and obligations have been assigned by it pursuant to
such Assignment and Assumption, relinquish its rights and be released from its
obligations hereunder and under the Loan Documents.

(ii) The liabilities of Lender and each of the Co-Lenders shall be several and
not joint, and Lender’s and each Co-Lender’s obligations to Borrower under this
Agreement shall be reduced by the amount of each such Assignment and Assumption.
Neither Lender nor any Co-Lender shall be responsible for the obligations of any
other Co-Lender. Lender and each Co-Lender shall be liable to Borrower only for
their respective proportionate shares of the Loan.

(iii) Borrower agrees that it shall, in connection with any sale of all or any
portion of the Loan, whether in whole or to an additional Co-Lender or
Participant, within ten (10) Business Days after requested by Agent, furnish
Agent with the certificates required under Sections 4.12 and 4.13 hereof and
such other information as reasonably requested by any additional Co-Lender or
Participant in performing its due diligence in connection with its purchase of
an interest in the Loan.

(iv) Citi (or an Affiliate of Citi) shall act as administrative agent for itself
and the Co-Lenders (together with any successor administrative agent, the
“Agent”) pursuant to this Section 11.8. Borrower acknowledges that Citi, as
Agent, shall have the sole and exclusive authority to execute and perform this
Agreement and each Loan Document on behalf of itself, as a Lender and as agent
for itself and the Co-Lenders subject to the terms of the Co-Lending Agreement.
Each Lender acknowledges that Citi, as Agent, shall retain the exclusive right
to grant approvals and give consents with respect to all matters requiring
consent hereunder. Except as otherwise provided herein, Borrower shall have no
obligation to recognize or deal directly with any Co-Lender, and no Co-Lender
shall have any right to deal directly with Borrower with respect to the rights,
benefits and obligations of Borrower under this Agreement, the Loan Documents or
any one or more documents or instruments in respect thereof. Borrower may rely
conclusively on the actions of Citi as Agent to bind Citi and the Co-Lenders,
notwithstanding that the particular action in question may, pursuant to this
Agreement or the Co-Lending Agreement be subject to the consent or direction of
some or all of the Co-Lenders. Citi may resign as Agent of the Co-Lenders, in
its sole discretion, or if required to by the Co-Lenders in accordance with the
term of the Co-Lending Agreement, in each case without the consent of but upon
prior written notice to Borrower. Upon any such resignation, a successor Agent
shall be determined pursuant to the terms of the Co-Lending Agreement. The term
Agent shall mean any successor Agent.

 

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(v) Notwithstanding any provision to the contrary in this Agreement, the Agent
shall not have any duties or responsibilities except those expressly set forth
herein (and in the Co-Lending Agreement) and no covenants, functions,
responsibilities, duties, obligations or liabilities of Agent shall be implied
by or inferred from this Agreement, the Co-Lending Agreement, or any other Loan
Document, or otherwise exist against Agent.

(vi) Except to the extent its obligations hereunder and its interest in the Loan
have been assigned pursuant to one or more Assignments and Assumption, Citi, as
Agent, shall have the same rights and powers under this Agreement as any other
Co-Lender and may exercise the same as though it were not Agent, respectively.
The term “Co-Lender” or “Co-Lenders” shall, unless otherwise expressly
indicated, include Citi in its individual capacity. Citi and the other
Co-Lenders and their respective Affiliates may accept deposits from, lend money
to, act as trustee under indentures of, and generally engage in any kind of
business with, Borrower, or any Affiliate of Borrower and any Person who may do
business with or own securities of Borrower or any Affiliate of Borrower, all as
if they were not serving in such capacities hereunder and without any duty to
account therefor to each other.

(vii) If required by any Co-Lender, Borrower hereby agrees to execute
supplemental notes in the principal amount of such Co-Lender’s pro rata share of
the Loan substantially in the form of the Note, and such supplemental note shall
(i) be payable to order of such Co-Lender, (ii) be dated as of the Closing Date,
and (iii) mature on the Maturity Date. Such supplemental note shall provide that
it evidences a portion of the existing indebtedness hereunder and under the Note
and not any new or additional indebtedness of Borrower. The term “Note” as used
in this Agreement and in all the other Loan Documents shall include all such
supplemental notes.

(viii) Citi, as Agent, shall maintain at its domestic lending office or at such
other location as Citi, as Agent, shall designate in writing to each Co-Lender
and Borrower a copy of each Assignment and Assumption delivered to and accepted
by it and a register for the recordation of the names and addresses of the
Co-Lenders, the amount of each Co-Lender’s proportionate share of the Loan and
the name and address of each Co-Lender’s agent for service of process (the
“Register”). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error, and Borrower, Citi, as Agent, and the
Co-Lenders may treat each person or entity whose name is recorded in the
Register as a Co-Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection and copying by Borrower or any
Co-Lender during normal business hours upon reasonable prior notice to the
Agent. A Co-Lender may change its address and its agent for service of process
upon written notice to Lender, as Agent, which notice shall only be effective
upon actual receipt by Citi, as Agent, which receipt will be acknowledged by
Citi, as Agent, upon request.

 

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(ix) Notwithstanding anything herein to the contrary, any financial institution
or other entity may be sold a participation interest in the Loan by Lender or
any Co-Lender without Borrower’s consent (such financial institution or entity,
a “Participant”). No Participant shall have any rights under this Agreement, the
Note or any of the Loan Documents and the Participant’s rights in respect of
such participation shall be solely against Lender or Co-Lender, as the case may
be, as set forth in the participation agreement executed by and between Lender
or Co-Lender, as the case may be, and such Participant. Borrower may rely
conclusively on the actions of Citi as Agent to bind Lender and any Participant,
notwithstanding that the particular action in question may, pursuant to this
Agreement or any participation agreement be subject to the consent or direction
of some or all of the Participants. No participation shall relieve Lender or
Co-Lender, as the case may be, from its obligations hereunder or under the Note
or the Loan Documents and Lender or Co- Lender, as the case may be, shall remain
solely responsible for the performance of its obligations hereunder.

(x) Notwithstanding any other provision set forth in this Agreement, Lender or
any Co-Lender may at any time create a security interest in all or any portion
of its rights under this Agreement (including, without limitation, amounts owing
to it in favor of any Federal Reserve Bank in accordance with Regulation A of
the Board of Governors of the Federal Reserve System).

(b) Cooperation in Syndication.

(i) Each of Borrower and Guarantor agrees to reasonably assist Lender in
completing a Syndication satisfactory to Lender. Such assistance shall include
(i) direct contact between senior management and advisors of Borrower and
Guarantor and the proposed Co-Lenders, (ii) assistance in the preparation of a
confidential information memorandum and other marketing materials to be used in
connection with the Syndication, (iii) the hosting, with Lender, of one or more
meetings of prospective Co-Lenders or with the Rating Agencies, (iv) the
delivery of appraisals satisfactory to Lender if required, and (v) working with
Lender to procure a rating for the Loan by the Rating Agencies.

 

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(ii) Lender shall manage all aspects of the Syndication of the Loan, including
decisions as to the selection of institutions to be approached and when they
will be approached, when their commitments will be accepted, which institutions
will participate, the allocations of the commitments among the Co-Lenders and
the amount and distribution of fees among the Co-Lenders. To assist Lender in
its Syndication efforts, each of Borrower and Guarantor agrees promptly to
prepare and provide to Lender all information with respect to Borrower, Mortgage
Borrower, Mezzanine B Borrower, Manager, Guarantor, any SPE Component Entity (as
defined herein and in the Mortgage Loan Agreement) (if any), any Hudson
Intermediate Entity, the Property (or any portion thereof), and the Collateral
(or any portion thereof) contemplated hereby, including all financial
information and projections (the “Projections”), as Lender may reasonably
request in connection with the Syndication of the Loan. Each of Borrower and
Guarantor hereby represents and covenants that (i) all information other than
the Projections (the “Information”) that has been or will be made available to
Lender by Borrower, Guarantor or any of their representatives is or will be,
when furnished, complete and correct in all material respects and does not or
will not, when furnished, contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not materially misleading in light of the circumstances under
which such statements are made and (ii) the Projections that have been or will
be made available to Lender by Borrower, Guarantor or any of their
representatives have been or will be prepared in good faith based upon
reasonable assumptions. Each of Borrower and Guarantor understands that in
arranging and syndicating the Loan, Lender, the Co-Lenders and, if applicable,
the Rating Agencies, may use and rely on the Information and Projections without
independent verification thereof.

(iii) If required in connection with the Syndication, each of Borrower and
Guarantor hereby agrees to:

(A) amend the Loan Documents to give Lender the right, at Borrower’s sole cost
and expense, to have the Property reappraised on an annual basis;

(B) deliver updated financial and operating statements and other information
reasonably required by Lender to facilitate the Syndication;

(C) deliver reliance letters reasonably satisfactory to Lender with respect to
the environmental assessments and reports delivered to Lender prior to the
Closing Date, which will run to Lender, any Co-Lender and their respective
successors and assigns;

(D) execute modifications to the Loan Documents required by the Co- Lenders,
provided that such modification will not (except as set forth in clause
(E) below), change any material or economic terms of the Loan Documents, or
otherwise materially increase the obligations or materially decrease the rights
of Borrower and Guarantor pursuant to the Loan Documents; and

(E) if Lender elects, in its sole discretion, prior to or upon a Syndication, to
split the Loan into two or more parts, or the Note into multiple component notes
or tranches which may have different interest rates, principal amounts, payment
priorities and maturities, Borrower and Guarantor agrees to cooperate with
Lender in connection with the foregoing and to execute the required
modifications and amendments to the Note, this Agreement and the Loan Documents
and to provide opinions necessary to effectuate the same. Such Notes or
components may be assigned different interest rates, so long as the initial
weighted average of such interest rates does not exceed the applicable Interest
Rate (except following an Event of Default or any principal payments received on
the Loan).

 

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Borrower shall be responsible for payments of its legal fees incurred in
connection with compliance with the requests made under this Section.

(c) Limitation of Liability. No claim may be made by Borrower, or any other
Person against Agent, Lender or any Co-Lenders or the Affiliates, directors,
officers, employees, attorneys or agent of any of such Persons for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement or any act, omission or event
occurring in connection therewith; and Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.

(d) No Joint Venture. Notwithstanding anything to the contrary herein contained,
neither Agent, Lender nor any Co-Lender by entering into this Agreement or by
taking any action pursuant hereto, will be deemed a partner or joint venturer
with Borrower.

(e) Voting Rights of Co-Lenders. Borrower acknowledges that the Co-Lending
Agreement may contain provisions which require that amendments, waivers,
extensions, modifications, and other decisions with respect to the Loan
Documents shall require the approval of all or a number of the Co-Lenders
holding in the aggregate a specified percentage of the Loan or any one or more
Co-Lenders that are specifically affected by such amendment, waiver, extension,
modification or other decision.

(f) Notwithstanding anything herein to the contrary, Lender shall pay the
reasonable and out-of-pocket fees and expenses of Borrower with respect to
Borrower’s compliance with this Section 11.8; provided, that, Borrower shall be
responsible for the payment of Borrower’s legal fees with respect to compliance
with the terms of this Section 11.8.

Section 11.9. Intentionally Omitted.

Section 11.10. Intercreditor Agreement.

(a) Lender, Mortgage Lender and Mezzanine B Lender are or will be parties to a
certain Intercreditor Agreement (the “Intercreditor Agreement”) memorializing
their relative rights and obligations with respect to the Loan, the Mortgage
Loan, the Mezzanine B Loan, Borrower, Mortgage Borrower, Mezzanine B Borrower,
the Collateral and the Properties. Borrower hereby acknowledges and agrees that
(i) such Intercreditor Agreement is intended solely for the benefit of Lender,
Mortgage Lender and Mezzanine B Lender and (ii) Borrower, Mortgage Borrower and
Mezzanine B Borrower are not intended third-party beneficiaries of any of the
provisions therein and shall not be entitled to rely on the provisions contained
therein. Lender, Mortgage Lender and Mezzanine B Lender shall have no obligation
to disclose to Borrower the contents of the Intercreditor Agreement. Borrower’s
obligations hereunder are independent of such Intercreditor Agreement and remain
unmodified by the terms and provisions thereof.

 

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(b) If all or part of any payment made by Mezzanine B Borrower pursuant to the
Mezzanine B Loan Documents pursuant to the Mezzanine B Loan Agreement is paid or
released to Lender pursuant to the Intercreditor Agreement, Lender shall apply
such amounts to the repayment of the Debt as a prepayment pursuant to the
applicable provision of Section 2.7 hereof.

ARTICLE 12

INDEMNIFICATIONS

Section 12.1. General Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses imposed upon or incurred by or
asserted against any Indemnified Parties and directly or indirectly arising out
of or in any way relating to any one or more of the following: (a) any accident,
injury to or death of persons or loss of or damage to property occurring in, on
or about the Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (b) any use,
nonuse or condition in, on or about the Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas, streets
or ways; (c) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property or any part thereof;
(d) any failure of the Property (or any portion thereof) or the Collateral (or
any portion thereof) to be in compliance with any applicable Legal Requirements;
(e) any and all claims and demands whatsoever which may be asserted against
Lender by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements contained in any
Lease, management agreement or any Property Document; (f) the payment of any
commission, charge or brokerage fee to anyone (other than a broker or other
agent retained by Lender) which may be payable in connection with the funding of
the Loan evidenced by the Note and secured by the Pledge Agreement; and/or
(g) the holding or investing of the funds on deposit in the Accounts or the
performance of any work or the disbursement of funds in each case in connection
with the Accounts. Any amounts payable to Lender by reason of the application of
this Section 12.1 shall become immediately due and payable and shall bear
interest at the Default Rate from the date loss or damage is sustained by Lender
until paid.

Section 12.2. Mortgage and Intangible Tax Indemnification. Borrower shall, at
its sole cost and expense, protect, defend, indemnify, release and hold harmless
the Indemnified Parties from and against any and all Losses imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and/or
recording of the Security Instrument, any of the other Mortgage Loan Documents,
the Note and/or any of the other Loan Documents.

Section 12.3. ERISA Indemnification. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses (including, without limitation,
reasonable attorneys’ fees and costs incurred in the investigation, defense, and
settlement of Losses incurred in correcting any prohibited transaction or in the
sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Lender’s sole
discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 3.7 or 4.19 of this Agreement.

 

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Section 12.4. Duty to Defend, Legal Fees and Other Fees and Expenses. Upon
written request by any Indemnified Party, Borrower shall defend such Indemnified
Party (if requested by any Indemnified Party, in the name of the Indemnified
Party) by attorneys and other professionals approved by the Indemnified Parties.
Notwithstanding the foregoing, any Indemnified Parties may, in their sole
discretion, engage their own attorneys and other professionals to defend or
assist them, and, at the option of Indemnified Parties, their attorneys shall
control the resolution of any claim or proceeding. Upon demand, Borrower shall
pay or, in the sole discretion of the Indemnified Parties, reimburse, the
Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys, engineers, environmental consultants, laboratories and other
professionals in connection therewith.

Section 12.5. Survival. The obligations and liabilities of Borrower under this
Article 12 shall fully survive indefinitely notwithstanding any termination,
satisfaction, assignment, entry of a judgment of foreclosure, exercise of any
power of sale, or delivery of an assignment in lieu of foreclosure of the Pledge
Agreement.

Section 12.6. Environmental Indemnity. Simultaneously herewith, Borrower and
Guarantor have executed and delivered the Environmental Indemnity to Lender,
which Environmental Indemnity is not secured by the Pledge Agreement.

ARTICLE 13

EXCULPATION

Section 13.1. Exculpation.

(a) Subject to the qualifications below, Lender shall not enforce the liability
and obligation of Borrower to perform and observe the obligations contained in
the Note, this Agreement, the Pledge Agreement or the other Loan Documents by
any action or proceeding wherein a money judgment or any deficiency judgment or
other judgment establishing personal liability shall be sought against Borrower
or any principal, director, officer, employee, beneficiary, shareholder,
partner, member, trustee, agent, or Affiliate of Borrower or any legal
representatives, successors or assigns of any of the foregoing (collectively,
the “Exculpated Parties”), except that Lender may bring a foreclosure action, an
action for specific performance or any other appropriate action or proceeding to
enable Lender to enforce and realize upon its interest under the Note, this
Agreement, the Pledge Agreement and the other Loan Documents, or in the
Collateral (or any portion thereof), or any other collateral given to Lender
pursuant to the Loan Documents; provided, however, that, except as specifically
provided herein, any judgment in any such action or proceeding shall be
enforceable against Borrower only to the extent of Borrower’s interest in the
Collateral and in any other collateral given to Lender, and Lender, by accepting
the Note, this Agreement, the Pledge Agreement and the other Loan Documents,
shall not sue for, seek or demand any deficiency judgment against Borrower or
any of the Exculpated Parties in any such action or proceeding under or by
reason of or

 

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under or in connection with the Note, this Agreement, the Pledge Agreement or
the other Loan Documents. The provisions of this Section shall not, however,
(1) constitute a waiver, release or impairment of any obligation evidenced or
secured by any of the Loan Documents; (2) impair the right of Lender to name
Borrower as a party defendant in any action or suit for foreclosure and sale
under the Pledge Agreement; (3) affect the validity or enforceability of any
indemnity, guaranty or similar instrument (including, without limitation,
indemnities set forth in Article 12 hereof, Section 11.2 hereof, in the Guaranty
and the Environmental Indemnity) made in connection with the Loan or any of the
rights and remedies of Lender thereunder (including, without limitation,
Lender’s right to enforce said rights and remedies against Borrower and/or
Guarantor (as applicable) personally and without the effect of the exculpatory
provisions of this Article 13); (4) impair the rights of Lender to (A) obtain
the appointment of a receiver and/or (B) enforce its rights and remedies
provided in Articles 8 and 9 hereof; (5) impair the enforcement of the Pledge
Agreement; (6) impair the right of Lender to enforce Section 4.12(e) of this
Agreement; (7) constitute a prohibition against Lender to seek a deficiency
judgment against Borrower in order to fully realize the security granted by the
Pledge Agreement or to commence any other appropriate action or proceeding in
order for Lender to exercise its remedies against the Property (or any portion
thereof) or the Collateral (or any portion thereof); or (8) constitute a waiver
of the right of Lender to enforce the liability and obligation of Borrower, by
money judgment or otherwise, to the extent of any Loss incurred by Lender
(including attorneys’ fees and costs reasonably incurred) arising out of or in
connection with the following:

(i) fraud or intentional misrepresentation by any Borrower Party in connection
with the Loan;

(ii) the gross negligence or willful misconduct of any Borrower Party;

(iii) any litigation or other legal proceeding related to the Debt filed by any
Borrower Party or any other action of any Borrower Party that delays, opposes,
impedes, obstructs, hinders, enjoins or otherwise interferes with or frustrates
the efforts of Lender to exercise any rights and remedies available to Lender as
provided herein and in the other Loan Documents; provided, however, that
Borrower shall have no liability under this clause (iii) in the event that such
Borrower Party asserts any defense or otherwise exercises any of its rights in
good faith, including, without limitation, by means of, or in connection with,
the filing, pursuit or maintenance by such Borrower Party of any litigation,
proceeding, action or claim in good faith;

(iv) (A) waste to the Property caused by the intentional acts or intentional
omissions of any Borrower Party and/or (B) the removal or disposal of any
portion of the Property by any Borrower Party or its Affiliates after an Event
of Default;

(v) the misapplication, misappropriation or conversion by any Borrower Party of
(A) any insurance proceeds paid by reason of any loss, damage or destruction to
the Property (or any portion thereof), (B) any Awards or other amounts received
in connection with the Condemnation of all or a portion of the Property, (C) any
Rents, if any, (D) any Tenant security deposits or Rents collected in advance,
if any, (E) any other monetary collateral for the Loan (including, without
limitation, any Reserve Funds and/or any portion thereof disbursed to (or at the
direction of) Borrower), or (F) any Net Liquidation Proceeds After Debt Service
or any distributions or other payments made in respect of any part of the
Properties (or any portion thereof) or the Collateral (or any portion thereof);

 

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(vi) failure to pay Taxes, charges for labor or materials or other charges that
can create liens on any portion of the Property in accordance with the terms and
provisions hereof (except (1) to the extent that Mortgage Borrower does not have
sufficient revenue from the Properties to make such payment, (2) to the extent
that sums sufficient to pay such amounts have been deposited in escrow with
Mortgage Lender pursuant to the terms of Sections 8.1, 8.2, 8.3, 8.6 or 8.8 of
the Mortgage Loan Agreement, as applicable and Mortgage Lender has not made such
sums available to Mortgage Borrower or (3) to the extent that Mortgage Borrower
is contesting (or causing Mortgage Borrower to contest) such charges in
accordance with the terms and conditions of Section 4.5 hereof (with respect to
Taxes) and in accordance with the terms and conditions of Section 4.16 hereof
(with respect to Work Charges and/or other trade payables));

(vii) failure to pay Insurance Premiums, to maintain the Policies in full force
and effect and/or to provide Lender evidence of the same, in each case, as
expressly provided herein (except (1) to the extent that Mortgage Borrower does
not have sufficient revenue from the Properties to make such payment or (2) to
the extent that sums sufficient to pay such amounts have been deposited in
escrow with Mortgage Lender pursuant to the terms of Section 8.6 of the Mortgage
Loan Agreement and Mortgage Lender has not made such sums available to Mortgage
Borrower);

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

(ix) any tax on the making of the Note or any of the other Loan Documents or any
transfer or similar taxes upon the making of the same, but excluding any income,
franchise or other similar taxes;

(x) any violation or breach of any applicable law mandating the forfeiture or
seizure of the Property (or any portion thereof and/or interest therein);

(xi) any material violation or breach by Mortgage Borrower with respect to any
representation, warranty or covenant contained in Article 5 of the Mortgage Loan
Agreement (except with respect to Mortgage Borrower or any SPE Component Entity
(as defined in the Mortgage Loan Agreement) remaining solvent, maintaining
adequate capital or complying with Section 5.1(a)(vii) of the Mortgage Loan
Agreement with respect to trade payables or Permitted Equipment Leases (as
defined in the Mortgage Loan Agreement) solely (1) to the extent that Mortgage
Borrower does not have sufficient revenue from the Properties to make such
payment or (2) to the extent that sums sufficient to pay such amounts have been
deposited in an escrow for the payment of such amounts with Mortgage Lender
pursuant to the terms of Article VIII of the Mortgage Loan Agreement and
Mortgage Lender has not made such sums available to Mortgage Borrower);

 

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(xii) (A) the failure of Mortgage Borrower to make any True Up Payment (as
defined in the Mortgage Loan Agreement) (except to the extent that Mortgage
Borrower does not have sufficient revenue from the Properties to make such
payment) or (B) the failure of Borrower to make any True Up Payment (except to
the extent that Borrower does not have sufficient revenue from the Collateral to
make such payment), as applicable;

(xiii) the failure to purchase or replace (as applicable) any Interest Rate Cap
Agreement or Replacement Interest Rate Cap Agreement (as applicable), in each
case, as and when required by the terms hereof;

(xiv) any material violation or breach with respect to any representation,
warranty or covenant contained in Article 5 (except with respect to Borrower or
any SPE Component Entity remaining solvent or maintaining adequate capital
solely to the extent that Borrower does not have sufficient revenue from the
Properties to make such payments);

(xv) any violation or breach of Section 11.6 or 11.8 hereof;

(xvi) any Property Document Event shall occur;

(xvii) intentionally omitted;

(xviii) any violation or breach of Section 7(a)(ii), Section 7(a)(iii) or
Section 7(b) of any Subordination of Management Agreement;

(xix) the failure of Borrower or Manager to make required contributions to the
CBA Multiemployer Plan (whether or not such failure results in an Event of
Default hereunder); and/or

(xx) the failure of Mortgage Borrower, Borrower or Manager to cooperate with
Lender and/or its assignees or designees in transitioning to Lender and/or its
assignees or designees any liquor licenses with respect to any Individual
Property.

(b) Notwithstanding anything to the contrary in this Agreement, the Note or any
of the Loan Documents, (A) Lender shall not be deemed to have waived any right
which Lender may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt or to require that all collateral shall continue to secure all of the Debt
owing to Lender in accordance with the Loan Documents, and (B) the Debt shall be
fully recourse to Borrower in the event that: (i) Borrower fails or fails to
cause Mortgage Borrower to comply with any Mortgage Loan Cash Management
Provisions or the Waived Cash Management Provisions, as applicable, and does not
cure such failure within ten (10) days after written notice thereof,
(ii) Borrower fails to cause Mortgage Borrower to appoint a new property manager
when required to do so pursuant to this Agreement or fails to cause Mortgage
Borrower to comply with any limitations on instructing the property manager,
each as required by and in accordance with, as applicable, the terms and
provisions of, this Agreement and the other Loan Documents; (iii) any
representation, warranty or covenant contained in Article 5 hereof is violated
or breached which results in the substantive consolidation of Borrower, Mortgage
Borrower or any SPE Component Entity (as defined herein and in the Mortgage Loan
Agreement) with any other Person that is a debtor in any proceeding under the
Bankruptcy Code or any other Creditors Rights Laws; (iv) a Prohibited Transfer
occurs, (v) a Bankruptcy Event occurs; (vi) Section 11.1 hereof is violated or
breached; or (vii) the Ground Lease is terminated or cancelled or the Renewal
Deadline occurs and Lender has not received evidence acceptable to Lender of the
renewal of the Ground Lease in accordance with its terms.

 

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ARTICLE 14

NOTICES

Section 14.1. Notices. All notices or other written communications hereunder
shall be deemed to have been properly given (a) upon delivery, if delivered in
person or by facsimile transmission with receipt acknowledged by the recipient
thereof and confirmed by telephone by sender, (b) one (1) Business Day after
having been deposited for overnight delivery with any reputable overnight
courier service, or (c) three (3) Business Days after having been deposited in
any post office or mail depository regularly maintained by the U.S. Postal
Service and sent by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:

 

If to Borrower:   

c/o Morgans Hotel Group

475 Tenth Avenue

New York, New York 10018

Attention : General Counsel

Facsimile No.: (212) 277-4172

With a copy to:   

Ropes & Gray LLP

Prudential Tower, 800 Boylston Street

Boston, Massachusetts 02199-3600

Attention : Walter R. McCabe III, Esq.

Facsimile No.: (617) 235-0230

And a copy to:   

McDermott Will & Emery LLP

340 Madison Avenue

New York, New York 10173

Attention: Keith M. Pattiz, Esq.

Facsimile No.: (646) 390-1338

If to Lender:   

Citigroup Global Markets Realty Corp.

388 Greenwich Street

19th Floor

New York, New York 10013

Attention : Ana Rosu Marmann

Facsimile No.: (646) 328-2938

And to:   

Bank of America, N.A.

Real Estate Structured Finance—Servicing

900 West Trade Street

Suite 650

NC1-026-06-01

Charlotte, North Carolina 28255

Attention: Servicing Manager

Facsimile No.: (704) 317-4501

 

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With a copy to:   

Dechert LLP

Cira Centre

2929 Arch Street

Philadelphia, Pennsylvania 19104-2808

Attention: David W. Forti, Esq.

Facsimile No.: (215) 655-2647

or addressed as such party may from time to time designate by written notice to
the other parties.

Either party by notice to the other may designate additional or different
addresses for subsequent notices or communications.

ARTICLE 15

FURTHER ASSURANCES

Section 15.1. Replacement Documents. Upon receipt of an affidavit of an officer
of Lender as to the loss, theft, destruction or mutilation of the Note, this
Agreement or any of the other Loan Documents which is not of public record, and,
in the case of any such mutilation, upon surrender and cancellation of the Note,
this Agreement or such other Loan Document, Borrower will issue, in lieu
thereof, a replacement thereof, dated the date of the Note, this Agreement or
such other Loan Document, as applicable, in the same principal amount thereof
and otherwise of like tenor.

Section 15.2. Execution of Pledge Agreement. Borrower forthwith upon the
execution and delivery of the Pledge Agreement and thereafter, from time to
time, will cause the Pledge Agreement and any of the other Loan Documents
creating a lien or security interest or evidencing the lien hereof upon the
Collateral and each instrument of further assurance to be filed, registered or
recorded in such manner and in such places as may be required by any present or
future law in order to publish notice of and fully to protect and perfect the
lien or security interest hereof upon, and the interest of Lender in, the
Collateral. Borrower will pay all taxes, filing, registration or recording fees,
and all expenses incident to the preparation, execution, acknowledgment and/or
recording of the Note, the Pledge Agreement, this Agreement, the other Loan
Documents, any note or instrument supplemental hereto, any security instrument
with respect to the Collateral and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising out
of or in connection with the execution and delivery of the Pledge Agreement or
any instrument supplemental hereto, any security instrument with respect to the
Collateral or any instrument of further assurance, and any modification or
amendment of the foregoing documents, except where prohibited by applicable law
so to do. Borrower represents that it has paid all of the foregoing taxes, fees,
expenses, duties, imposts, assessments and charges as applicable due and payable
as of the date hereof.

 

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Section 15.3. Further Acts, etc. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
further acts, deeds, conveyances, pledges assignments, notices of assignments,
transfers and assurances as Lender shall, from time to time, reasonably require,
for the better assuring, conveying, assigning, transferring, and confirming unto
Lender the property and rights hereby granted, bargained, sold, conveyed,
confirmed, pledged, assigned, warranted and transferred or intended now or
hereafter so to be, or which Borrower may be or may hereafter become bound to
convey or assign to Lender, or for carrying out the intention or facilitating
the performance of the terms of this Agreement and the Pledge Agreement or for
filing the financing statements, or for complying with all Legal Requirements.
Borrower, on demand, will execute and deliver, and in the event it shall fail to
so execute and deliver, hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements to evidence more effectively the
security interest of Lender in the Collateral. Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
exercising and perfecting any and all rights and remedies available to Lender at
law and in equity, including without limitation, such rights and remedies
available to Lender pursuant to this Section 15.3.

Section 15.4. Changes in Tax, Debt, Credit and Documentary Stamp Laws.

(a) If any law is enacted or adopted or amended after the date of this Agreement
which deducts the Debt from the value of the Collateral for the purpose of
taxation and which imposes a tax, either directly or indirectly, on the Debt or
Lender’s interest in the Collateral, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it that
the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury then Lender shall have
the option by written notice of not less than one hundred twenty (120) days to
declare the Debt immediately due and payable.

(b) Borrower will not claim or demand or be entitled to any credit or credits on
account of the Debt for any part of the Taxes or Other Charges assessed against
the Property (or any part thereof) or the Collateral (or any part thereof), and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, the Collateral, or any respective part thereof, for real estate tax
purposes by reason of the Security Instrument, the Pledge Agreement or the Debt.
If such claim, credit or deduction shall be required by applicable law, Lender
shall have the option, by written notice of not less than one hundred twenty
(120) days, to declare the Debt immediately due and payable.

(c) If at any time the United States of America, any State thereof or any
subdivision of any such State shall require revenue or other stamps to be
affixed to the Note, the Pledge Agreement, or any of the other Loan Documents or
impose any other tax or charge on the same, Borrower will pay for the same, with
interest and penalties thereon, if any.

 

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ARTICLE 16

WAIVERS

Section 16.1. Remedies Cumulative; Waivers.

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

Section 16.2. Modification, Waiver in Writing.

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

Section 16.3. Delay Not a Waiver.

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

Section 16.4. Waiver of Trial by Jury.

BORROWER AND LENDER, BY ACCEPTANCE OF THIS AGREEMENT, HEREBY WAIVE, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE,
RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE APPLICATION FOR THE LOAN, THIS
AGREEMENT, THE NOTE, THE PLEDGE AGREEMENT OR THE OTHER LOAN DOCUMENTS OR ANY
ACTS OR OMISSIONS OF LENDER OR BORROWER.

 

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Section 16.5. Waiver of Notice.

Borrower shall not be entitled to any notices of any nature whatsoever from
Lender except (a) with respect to matters for which this Agreement specifically
and expressly provides for the giving of notice by Lender to Borrower and
(b) with respect to matters for which Lender is required by applicable law to
give notice, and Borrower hereby expressly waives the right to receive any
notice from Lender with respect to any matter for which this Agreement does not
specifically and expressly provide for the giving of notice by Lender to
Borrower.

Section 16.6. Remedies of Borrower.

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

Section 16.7. Marshalling and Other Matters.

Borrower hereby waives, to the extent permitted by applicable Legal
Requirements, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of
marshalling in the event of any sale under the Pledge Agreement or the
Collateral or any part thereof or any interest therein. Further, Borrower hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of the Collateral on behalf of Borrower, and on behalf of
each and every person acquiring any interest in or title to the Collateral
subsequent to the date of the Pledge Agreement and on behalf of all persons to
the extent permitted by applicable Legal Requirements.

Section 16.8. Waiver of Statute of Limitations.

To the extent permitted by applicable Legal Requirements, Borrower hereby
expressly waives and releases to the fullest extent permitted by applicable
Legal Requirements, the pleading of any statute of limitations as a defense to
payment of the Debt or performance of its obligations hereunder, under the Note,
the Pledge Agreement or other Loan Documents.

Section 16.9. Waiver of Counterclaim. Borrower hereby waives the right to assert
a counterclaim, other than a compulsory counterclaim, in any action or
proceeding brought against it by Lender or its agents.

 

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Section 16.10. Sole Discretion of Lender. Wherever pursuant to this Agreement
(a) Lender exercises any right given to it to approve or disapprove, (b) any
arrangement or term is to be satisfactory to Lender, or (c) any other decision
or determination is to be made by Lender, the decision to approve or disapprove
all decisions that arrangements or terms are satisfactory or not satisfactory,
and all other decisions and determinations made by Lender, shall be in the sole
discretion of Lender, except as may be otherwise expressly and specifically
provided herein.

ARTICLE 17

MISCELLANEOUS

Section 17.1. Survival. This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall survive the making by Lender of the Loan and the execution
and delivery to Lender of the Note, and shall continue in full force and effect
so long as all or any of the Debt is outstanding and unpaid unless a longer
period is expressly set forth in this Agreement, the Pledge Agreement, the Note
or the other Loan Documents. Whenever in this Agreement any of the parties
hereto is referred to, such reference shall be deemed to include the legal
representatives, successors and assigns of such party. All covenants, promises
and agreements in this Agreement, by or on behalf of Borrower, shall inure to
the benefit of the legal representatives, successors and assigns of Lender.

Section 17.2. Governing Law. THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW
YORK, THE LOAN WAS MADE BY LENDER AND ACCEPTED BY BORROWER IN THE STATE OF NEW
YORK, AND THE PROCEEDS OF THE LOAN DELIVERED PURSUANT HERETO WERE DISBURSED FROM
THE STATE OF NEW YORK, WHICH STATE THE PARTIES AGREE HAS A SUBSTANTIAL
RELATIONSHIP TO THE PARTIES AND TO THE UNDERLYING TRANSACTION EMBODIED HEREBY,
AND IN ALL RESPECTS, INCLUDING, WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT,
THE NOTE AND THE OTHER LOAN DOCUMENTS AND THE OBLIGATIONS ARISING HEREUNDER AND
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE
(WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS) AND ANY APPLICABLE LAW OF
THE UNITED STATES OF AMERICA, EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE
CREATION, PERFECTION, AND ENFORCEMENT OF THE LIENS AND SECURITY INTERESTS
CREATED PURSUANT HERETO AND PURSUANT TO THE OTHER LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE, IT BEING UNDERSTOOD
THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE
STATE OF NEW YORK SHALL GOVERN THE CONSTRUCTION, VALIDITY AND ENFORCEABILITY OF
ALL LOAN DOCUMENTS AND ALL OF THE OBLIGATIONS ARISING HEREUNDER OR THEREUNDER.
TO THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND
IRREVOCABLY WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION
GOVERNS THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS, AND THIS
AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

 

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ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS WILL, AT LENDER’S
OPTION, BE INSTITUTED IN (OR, IF PREVIOUSLY INSTITUTED, MOVED TO) ANY FEDERAL OR
STATE COURT DESIGNATED BY LENDER IN THE CITY OF NEW YORK, COUNTY OF NEW YORK.
BORROWER HEREBY (I) WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING AND (II) IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF ANY
SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER AND LENDER HEREBY
ACKNOWLEDGE AND AGREE THAT THE FOREGOING AGREEMENT, WAIVER AND SUBMISSION ARE
MADE PURSUANT TO SECTION 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW.

BORROWER DOES HEREBY DESIGNATE AND APPOINT:

CT CORPORATION SYSTEM

111 EIGHTH AVENUE

NEW YORK, NEW YORK 10011

AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY
AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN
ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF
PROCESS UPON SAID AGENT AT SAID ADDRESS AND NOTICE OF SAID SERVICE MAILED OR
DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY
RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. BORROWER (I) SHALL GIVE PROMPT NOTICE TO
LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY
TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN
OFFICE IN NEW YORK, NEW YORK (WHICH SUBSTITUTE AGENT AND OFFICE SHALL BE
DESIGNATED AS THE PERSON AND ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.

 

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Section 17.3. Headings. The Article and/or Section headings in this Agreement
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

Section 17.4. Severability. Wherever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable Legal Requirements, but if any provision of this Agreement shall be
prohibited by or invalid under applicable Legal Requirements, such provision
shall be ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.

Section 17.5. Preferences. Lender shall have the continuing and exclusive right
to apply or reverse and reapply any and all payments by Borrower to any portion
of the obligations of Borrower hereunder. To the extent Borrower makes a payment
or payments to Lender, which payment or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
or required to be repaid to a trustee, receiver or any other party under any
Creditors Rights Laws, state or federal law, common law or equitable cause,
then, to the extent of such payment or proceeds received, the obligations
hereunder or part thereof intended to be satisfied shall be revived and continue
in full force and effect, as if such payment or proceeds had not been received
by Lender.

Section 17.6. Expenses. Borrower covenants and agrees to pay its own costs and
expenses and pay, or, if Borrower fails to pay, to reimburse, Lender, upon
receipt of written notice from Lender, for Lender’s reasonable costs and
expenses (including reasonable, actual attorneys’ fees and disbursements) in
each case, incurred by Lender in accordance with this Agreement in connection
with (i) the preparation, negotiation, execution and delivery of this Agreement,
the Pledge Agreement, the Note and the other Loan Documents and the consummation
of the transactions contemplated hereby and thereby and all the costs of
furnishing all opinions by counsel for Borrower (including without limitation
any opinions requested by Lender as to any legal matters arising under this
Agreement, the Pledge Agreement, the Note and the other Loan Documents with
respect to the Collateral); (ii) Borrower’s ongoing performance of and
compliance with Borrower’s respective agreements and covenants contained in this
Agreement, the Pledge Agreement, the Note and the other Loan Documents on its
part to be performed or complied with after the Closing Date, including, without
limitation, confirming compliance with environmental and insurance requirements
(provided that Borrower’s costs and expenses in connection with compliance with
Sections 11.1, 11.6, 11.7, 11.8 and 11.9 are subject to the express terms and
conditions of such Sections); (iii) Lender’s ongoing performance and compliance
with all agreements and conditions contained in this Agreement, the Pledge
Agreement, the Note and the other Loan Documents on its part to be performed or
complied with after the Closing Date (including, without limitation, those
contained in Articles 8 and 9 hereof); (iv) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or
other modifications to this Agreement, the Pledge Agreement, the Note and the
other Loan Documents and any other documents or matters requested by Lender;
(v) securing Borrower’s compliance with any requests made pursuant to the
provisions of this Agreement; (vi) the filing and recording fees and expenses,
title insurance and reasonable fees and expenses of counsel for providing to
Lender all required legal opinions, and other similar expenses incurred in
creating and perfecting the lien in favor of Lender pursuant to this Agreement,
the Pledge Agreement, the Note and the

 

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other Loan Documents; (vii) enforcing or preserving any rights, in response to
third party claims or the prosecuting or defending of any action or proceeding
or other litigation, in each case against, under or affecting Borrower, this
Agreement, the Pledge Agreement, the Note, the other Loan Documents, the
Collateral, or any other security given for the Loan; (viii) servicing the Loan
(including, without limitation, enforcing any obligations of or collecting any
payments due from Borrower under this Agreement, the Pledge Agreement, the Note
and the other Loan Documents or with respect to the Collateral) or in connection
with any refinancing or restructuring of the credit arrangements provided under
this Agreement in the nature of a “work-out” or of any insolvency or bankruptcy
proceedings; and (ix) the preparation, negotiation, execution, delivery, review,
filing, recording or administration of any documentation associated with the
exercise of any of Borrower’s rights hereunder and/or under the other Loan
Documents regardless of whether or not any such right is consummated (including,
without limitation, Borrower’s rights hereunder to defease the Loan and to
permit or undertake transfers (including under Sections 6.3 and 6.4 hereof), in
each case, in accordance with the applicable terms and conditions hereof);
provided, however, that, with respect to each of subsections (i) though
(ix) above, (A) none of the foregoing subsections shall be deemed to be mutually
exclusive or limit any other subsection, (B) the same shall be deemed to
(I) include, without limitation and in each case, any related special servicing
fees, liquidation fees, modification fees, work-out fees, appraisal costs,
special servicer inspection costs, operating advisor consulting fees and other
similar costs or expenses payable to any Servicer, trustee, operating advisor
and/or special servicer of the Loan (or any portion thereof and/or interest
therein) and (II) exclude any requirement that Borrower directly pay the base
monthly servicing fees due to any master servicer on account of the day to day,
routine servicing of the Loan (provided, further, that the foregoing subsection
(II) shall not be deemed to otherwise limit any fees, costs, expenses or other
sums required to be paid to Lender under this Section, the other terms and
conditions hereof and/or of the other Loan Documents) and (C) Borrower shall not
be liable for the payment of any such costs and expenses to the extent the same
arise by reason of the gross negligence, illegal acts, fraud or willful
misconduct of Lender.

Section 17.7. Cost of Enforcement. In the event (a) that the Pledge Agreement is
foreclosed in whole or in part, (b) of the bankruptcy, insolvency,
rehabilitation or other similar proceeding in respect of Borrower, Mortgage
Borrower or any of their constituent Persons or an assignment by Borrower,
Mortgage Borrower or any of their constituent Persons for the benefit of its
creditors, or (c) Lender exercises any of its other remedies under this
Agreement, the Pledge Agreement, the Note and the other Loan Documents, Borrower
shall be chargeable with and agrees to pay all costs of collection and defense,
including attorneys’ fees and costs, incurred by Lender or Borrower in
connection therewith and in connection with any appellate proceeding or post
judgment action involved therein, together with all required service or use
taxes.

Section 17.8. Schedules Incorporated. The Schedules annexed hereto are hereby
incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.

 

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Section 17.9. Offsets, Counterclaims and Defenses. Any assignee of Lender’s
interest in and to this Agreement, the Pledge Agreement, the Note and the other
Loan Documents shall take the same free and clear of all offsets, counterclaims
or defenses which are unrelated to such documents which Borrower may otherwise
have against any assignor of such documents, and no such unrelated counterclaim
or defense shall be interposed or asserted by Borrower in any action or
proceeding brought by any such assignee upon such documents and any such right
to interpose or assert any such unrelated offset, counterclaim or defense in any
such action or proceeding is hereby expressly waived by Borrower.

Section 17.10. No Joint Venture or Partnership; No Third Party Beneficiaries.

(a) Borrower and Lender intend that the relationships created under this
Agreement, the Pledge Agreement, the Note and the other Loan Documents be solely
that of borrower and lender. Nothing herein or therein is intended to create a
joint venture, partnership, tenancy-in-common, or joint tenancy relationship
between Borrower and Lender nor to grant Lender any interest in the Collateral
other than that of pledgee, beneficiary or lender.

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

(c) The general partners, members, principals and (if Borrower is a trust)
beneficial owners of Borrower are experienced in the ownership and operation of
properties similar to the Property, and Borrower and Lender are relying solely
upon such expertise and business plan in connection with the ownership and
operation of the Collateral and the Property. Borrower is not relying on
Lender’s expertise, business acumen or advice in connection with the Collateral
and/or the Property.

(d) Notwithstanding anything to the contrary contained herein, Lender is not
undertaking the performance of (i) any obligations related to the Property (or
any portion thereof) (including, without limitation, under the Leases) or the
Collateral (or any portion thereof); or (ii) any obligations with respect to any
agreements, contracts, certificates, instruments, franchises, permits,
trademarks, licenses and other documents to which any Borrower Party, the
Collateral (or any portion thereof) and/or the Property (or any portion thereof)
is subject.

(e) By accepting or approving anything required to be observed, performed or
fulfilled or to be given to Lender pursuant to this Agreement, the Pledge
Agreement, the Note or the other Loan Documents, including, without limitation,
any officer’s certificate, balance sheet, statement of profit and loss or other
financial statement, survey, appraisal, or insurance policy, Lender shall not be
deemed to have warranted, consented to, or affirmed the sufficiency, the
legality or effectiveness of same, and such acceptance or approval thereof shall
not constitute any warranty or affirmation with respect thereto by Lender.

 

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(f) Borrower recognizes and acknowledges that in accepting this Agreement, the
Note, the Pledge Agreement and the other Loan Documents, Lender is expressly and
primarily relying on the truth and accuracy of the representations and
warranties set forth in Article 3 of this Agreement without any obligation to
investigate the Property or the Collateral and notwithstanding any investigation
of the Property or the Collateral by Lender; that such reliance existed on the
part of Lender prior to the date hereof, that the warranties and representations
are a material inducement to Lender in making the Loan; and that Lender would
not be willing to make the Loan and accept the this Agreement, the Note, the
Pledge Agreement and the other Loan Documents in the absence of the warranties
and representations as set forth in Article 3 of this Agreement.

Section 17.11. Publicity. All news releases, publicity or advertising by
Borrower or its Affiliates through any media intended to reach the general
public which refers to this Agreement, the Note, the Pledge Agreement or the
other Loan Documents or the financing evidenced by this Agreement, the Note, the
Pledge Agreement or the other Loan Documents, to Lender or any of its Affiliates
shall be subject to the prior written approval of Lender, not to be unreasonably
withheld.

Section 17.12. Limitation of Liability. No claim may be made by Borrower, or any
other Person against Lender or its Affiliates, directors, officers, employees,
attorneys or agents of any of such Persons for any special, indirect,
consequential or punitive damages in respect of any claim for breach of contract
or any other theory of liability arising out of or related to the transactions
contemplated by this Agreement or any act, omission or event occurring in
connection therewith; and Borrower hereby waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.

Section 17.13. Conflict; Construction of Documents; Reliance. In the event of
any conflict between the provisions of this Agreement and the Pledge Agreement,
the Note or any of the other Loan Documents, the provisions of this Agreement
shall control. The parties hereto acknowledge that they were represented by
competent counsel in connection with the negotiation, drafting and execution of
this Agreement, the Note, the Pledge Agreement and the other Loan Documents and
this Agreement, the Note, the Pledge Agreement and the other Loan Documents
shall not be subject to the principle of construing their meaning against the
party which drafted same. Borrower acknowledges that, with respect to the Loan,
Borrower shall rely solely on its own judgment and advisors in entering into the
Loan without relying in any manner on any statements, representations or
recommendations of Lender or any parent, subsidiary or Affiliate of Lender.
Lender shall not be subject to any limitation whatsoever in the exercise of any
rights or remedies available to it under this Agreement, the Note, the Pledge
Agreement and the other Loan Documents or any other agreements or instruments
which govern the Loan by virtue of the ownership by it or any parent, subsidiary
or Affiliate of Lender of any equity interest any of them may acquire in
Borrower, and Borrower hereby irrevocably waives the right to raise any defense
or take any action on the basis of the foregoing with respect to Lender’s
exercise of any such rights or remedies. Borrower acknowledges that Lender
engages in the business of real estate financings and other real estate
transactions and investments which may be viewed as adverse-to or competitive
with the business of Borrower or its Affiliates.

 

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Section 17.14. Entire Agreement. This Agreement, the Note, the Pledge Agreement
and the other Loan Documents contain the entire agreement of the parties hereto
and thereto in respect of the transactions contemplated hereby and thereby, and
all prior agreements among or between such parties, whether oral or written
between Borrower and Lender are superseded by the terms of this Agreement, the
Note, the Pledge Agreement and the other Loan Documents.

Section 17.15. Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and
several. This Agreement shall be binding upon and inure to the benefit of
Borrower and Lender and their respective successors and assigns forever.

Section 17.16. Duplicate Originals; Counterparts. This Agreement may be executed
in any number of duplicate originals and each duplicate original shall be deemed
to be an original. The failure of any party hereto to execute this Agreement, or
any counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.

Section 17.17. Brokers. Borrower agrees (i) to pay any and all fees imposed or
charged by all brokers, mortgage bankers and advisors (each a “Broker”) hired or
contracted by any Borrower Party or their Affiliates in connection with the
transactions contemplated by this Agreement and (ii) to indemnify and hold
Lender harmless from and against any and all claims, demands and liabilities for
brokerage commissions, assignment fees, finder’s fees or other compensation
whatsoever arising from this Agreement or the making of the Loan which may be
asserted against Lender by any Person. The foregoing indemnity shall survive the
termination of this Agreement and the payment of the Debt. Borrower hereby
represents and warrants that the only Broker engaged by any Borrower Party in
connection with the transactions contemplated by this Agreement respect hereto
is Jones Lang LaSalle Americas. Lender hereby agrees to pay any and all fees
imposed or charged by any Broker hired solely by Lender. Borrower acknowledges
and agrees that (a) any Broker is not an agent of Lender and has no power or
authority to bind Lender, (b) Lender is not responsible for any recommendations
or advice given to any Borrower Party by any Broker, (c) Lender and the Borrower
Parties have dealt at arms-length with each other in connection with the Loan,
(d) no fiduciary or other special relationship exists or shall be deemed or
construed to exist among Lender and the Borrower Parties and (e) none of the
Borrower Parties shall be entitled to rely on any assurances or waivers given,
or statements made or actions taken, by any Broker which purport to bind Lender
or modify or otherwise affect this Agreement or the Loan, unless Lender has, in
its sole discretion, agreed in writing with any such Borrower Party to such
assurances, waivers, statements, actions or modifications. Borrower acknowledges
and agrees that Lender may, in its sole discretion, pay fees or compensation to
any Broker in connection with or arising out of the closing and funding of the
Loan. Such fees and compensation, if any, (i) shall be in addition to any fees
which may be paid by any Borrower Party to such Broker and (ii) create a
potential conflict of interest for Broker in its relationship with the Borrower
Parties. Such fees and compensation, if applicable, may include a direct,
one-time payment, servicing fees and/or incentive payments based on volume and
size of financings involving Lender and such Broker.

 

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Section 17.18. Set-Off. In addition to any rights and remedies of Lender
provided by this Agreement and by law, Lender shall have the right in its sole
discretion, without prior notice to Borrower, any such notice being expressly
waived by Borrower to the extent permitted by applicable law, upon any amount
becoming due and payable by Borrower hereunder (whether at the stated maturity,
by acceleration or otherwise), to set-off and appropriate and apply against such
amount any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims, in any
currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by Lender or any Affiliate
thereof to or for the credit or the account of Borrower; provided however,
Lender may only exercise such right during the continuance of an Event of
Default. Lender agrees promptly to notify Borrower after any such set-off and
application made by Lender; provided that the failure to give such notice shall
not affect the validity of such set-off and application.

Section 17.19. Waiver of Rights, Defenses and Claims. Borrower hereby
unconditionally and irrevocably waives all rights, defenses and claims that
Borrower may have based on the fact that certain terms and provisions of the
Mortgage Loan Agreement, including without limitation certain definitions set
forth in Section 1.1 of the Mortgage Loan Agreement, are incorporated into this
Agreement by reference.

Section 17.20. Additional Provisions. Notwithstanding anything to the contrary
contained herein, Borrower hereby agrees as follows:

(a) Borrower shall cause Mortgage Borrower to: (i) pay all principal, interest
and other sums required to be paid by Mortgage Borrower under and pursuant to
the provisions of the Mortgage Loan Documents; (ii) diligently perform and
observe all of the terms, covenants and conditions of the Mortgage Loan
Documents on the part of Mortgage Borrower to be performed and observed; and
(iii) promptly deliver to Lender a true and complete copy of any notice by
Mortgage Lender to Mortgage Borrower or Guarantor of any default by Mortgage
Borrower under the Mortgage Loan Documents.

(b) Borrower agrees to notify Lender promptly upon receipt of written notice of
the occurrence of any default under the Mortgage Loan Documents. If any default
occurs under the Mortgage Loan Documents, Borrower agrees that Lender shall have
the immediate right, without prior notice to Borrower, but shall be under no
obligation to (A) pay all or any part of the Mortgage Loan and any other sums
that are then due and payable, and perform any act or take any action on behalf
of Borrower and/or Mortgage Borrower as may be appropriate, to cause all of the
terms, covenants and conditions of the Mortgage Loan Documents on the part of
Mortgage Borrower to be performed or observed thereunder to be promptly
performed or observed, and (B) pay any other amounts and take any other action
as Lender, in its sole and absolute discretion, shall deem advisable to protect
or preserve the rights and interests of Lender in the Loan and/or the
Collateral, except, in each case, to the extent Borrower or Mortgage Borrower is
diligently pursuing remedies to cure such default in Lender’s reasonable
discretion. Borrower shall not impede, interfere with, hinder or delay, and
shall not permit Mortgage Borrower to impede, interfere with, hinder or delay,
any effort or action on the part of Lender to cure any default or asserted
default under the Mortgage Loan, or to otherwise protect or preserve Lender’s
interests in the Loan and the Collateral following a default or asserted default
under the Mortgage Loan. In the event that Lender makes any payment in respect
of the Mortgage Loan, Lender shall be subrogated to all of the rights of
Mortgage Lender under the Mortgage Loan Documents against the Properties (or any
portion thereof) and Mortgage Borrower in addition to all other rights Lender
may have under the Loan Documents or applicable law.

 

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(c) Borrower hereby grants to Lender and its designees the right to enter upon
the Properties (or any portion thereof) (subject to the rights of Tenants) at
any time following the occurrence and during the continuance of any default
under the Mortgage Loan Documents, for the purpose of taking any such action or
to appear in, defend or bring any action or proceeding to protect Lender’s
interest in the Collateral or to cure any such default. Lender may take such
action as Lender deems reasonably necessary or desirable to carry out the
intents and purposes of this Section (including communicating with Mortgage
Lender with respect to any Mortgage Loan defaults), without consent from
Borrower or Mortgage Borrower, but with prior reasonable notice. Lender shall
have no obligation to complete any cure or attempted cure undertaken or
commenced by Lender. All sums so paid and the costs and expenses incurred by
Lender in exercising rights under this Section (including, without limitation,
reasonable attorneys’ and other professional fees), with interest at the Default
Rate, for the period from the date of demand by Lender to Borrower for such
payments to the date of payment to Lender, shall constitute a portion of the
Debt, shall be secured by the Pledge Agreement and shall be due and payable to
Lender within five (5) Business Days following demand therefor.

(d) If Lender shall receive a copy of any notice of default under the Mortgage
Loan Documents sent by Mortgage Lender, such notice shall constitute full
protection to Lender for any action taken or omitted to be taken by Lender, in
good faith, in reliance thereon, except to the extent such action or omission is
deemed to be fraudulent or willful misconduct. As a material inducement to
Lender’s making the Loan, Borrower hereby absolutely and unconditionally
releases and waives all claims against Lender arising out of Lender’s exercise
of its rights and remedies provided in this Section, except for Lender’s gross
negligence or willful misconduct.

(e) Lender shall have the right at any time to acquire all or any portion of the
Mortgage Loan or any interest in any holder of, or participant in, the Mortgage
Loan without notice or consent of Borrower or any other Borrower Party, in which
event Lender shall have and may exercise all rights of Mortgage Lender
thereunder (to the extent of its interest), including the right (i) to declare
that the Mortgage Loan is in default in accordance with the terms of the
Mortgage Loan Agreement and (ii) to accelerate the Mortgage Loan indebtedness,
in accordance with the terms of the Mortgage Loan Agreement and (iii) to pursue
all remedies against any obligor under the Mortgage Loan Documents. In addition,
Borrower hereby expressly agrees that any claims, counterclaims, defenses,
offsets, deductions or reductions of any kind which Mortgage Borrower or any
other Person may have against Mortgage Lender relating to or arising out of the
Mortgage Loan shall be the personal obligation of Mortgage Lender, and in no
event shall Mortgage Borrower be entitled to bring, pursue or raise any such
claims, counterclaims, defenses, offsets, deductions or reductions against
Lender or any Affiliate of Lender or any other Person as the successor holder of
the Mortgage Loan or any interest therein for any causes on or prior to the date
such Lender or Person acquires such interest in the Mortgage Loan, provided that
Mortgage Borrower may seek specific performance of its contractual rights under
the Mortgage Loan Documents.

 

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(f) Lender shall have the right to routinely consult with and advise Borrower’s
management regarding the significant business activities and business and
financial developments of Borrower. Lender shall have the right to cause
consultation meetings to occur on a regular basis (no less frequently than
quarterly) with Lender having the right to call special meetings at any
reasonable times and upon reasonable advance notice.

(g) Borrower shall not cause or permit Mortgage Borrower to, without the prior
written consent of Lender, (i) refinance the Mortgage Loan, (ii) modify or amend
the Mortgage Loan Documents, (iii) effect a deed-in-lieu of the Mortgage Loan or
(iv) purchase the Mortgage Loan (or an interest therein)

(h) If at any time all or part of any payment made by Borrower under or with
respect to this Agreement or the other Loan Documents violated the terms of the
Mortgage Loan Documents and must be paid or released to Mortgage Lender pursuant
to the Intercreditor Agreement, then the obligations of Borrower hereunder and
the other Loan Documents shall, to the extent of such payment, be deemed to have
continued in existence and been reinstated, notwithstanding such previous
payment to Lender by Borrower, all as though such previous payment had never
been made, provided that the amount turned over to Mortgage Lender pursuant to
the Intercreditor Agreement is applied to amounts due under the Mortgage Loan.

[NO FURTHER TEXT ON THIS PAGE]

 

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

 

BORROWER:

HUDSON DELANO SENIOR MEZZ LLC,

a Delaware limited liability company

 

By: Hudson Delano Junior Mezz LLC,

a Delaware limited liability company,

its Managing Member

   

By: Morgans Group LLC,

a Delaware limited liability company,

its Managing Member

     

By: Morgans Hotel Group Co.,

a Delaware corporation,

its Managing Member

        By:   /s/ Richard Szymanski           Name: Richard Szymanski          
Title: Chief Financial Officer

[SIGNATURES CONTINUED ON NEXT PAGE]

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LENDER:

CITIGROUP GLOBAL MARKETS REALTY CORP.,

a New York corporation

By:   /s/ Ana Rosu Marmann   Name: Ana Rosu Marmann   Title: Vice President

[SIGNATURES CONTINUED ON NEXT PAGE]

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LENDER: BANK OF AMERICA, N.A., a national banking association By:   /s/ Steven
Wasser   Name: Steven Wasser   Title: Managing Director

[NO FURTHER TEXT ON THIS PAGE]

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SCHEDULE I

MORTGAGE BORROWER

Beach Hotel Associates LLC

Henry Hudson Holdings LLC

58th Street Bar Company LLC

Hudson Leaseco LLC

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SCHEDULE II

CONDOMINIUM DOCUMENTS

With respect to the Hudson Property:

 

  •   Amended and Restated Declaration Pursuant to Article 9-B of the Real
Property Law of the State of New York, by and among Henry Hudson Holdings LLC,
Irving Schatz, Adrienne Wechsler and Cheryl Hirsch, dated as of February 12,
1999

 

  •   Amendment to Amended and Restated Declaration, dated as of September 30,
1999

 

  •   By-Laws of 353 West 57th Street Condominium

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SCHEDULE III

ORGANIZATIONAL CHART

(attached hereto)

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LOGO [g658368dsp_498.jpg]

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SCHEDULE IV

DESCRIPTION OF REA’S

With respect to the Delano Property:

None.

With respect to the Hudson Property:

None.

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SCHEDULE V

ALLOCATED LOAN AMOUNTS

 

  •   Delano Property: $37,777,777.78

 

  •   Hudson Property: $62,222,222.22

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SCHEDULE VI

MANAGER

With respect to the Delano Property:

Morgans Hotel Group Management LLC

With respect to the Hudson Property:

Morgans Hotel Group Management LLC

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SCHEDULE VII

INTENTIONALLY OMITTED

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SCHEDULE VIII

OPERATING LEASE/OPERATING LESSEE

With respect to the Hudson Property:

 

  •   Lease between Henry Hudson Holdings LLC, as operating lessor, and Hudson
Leaseco LLC, as operating lessee, dated as of August 28, 2000

 

  •   Lease between Henry Hudson Holdings LLC, as operating lessor, and 58th
Street Bar Company LLC, as operating lessee, dated as of August 12, 2011

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

SCHEDULE IX

LIQUOR LICENSES

With respect to the Delano Property:

 

  •   4COP Retail Beverage License, Beach Hotel Associates LLC, BEV2332055,
Active 03/31/2014

 

  •   4COP Retail Beverage License, Beach Hotel Associates LLC & LGD Management
LLC, BEV2300022, Active 03/31/2014

With respect to the Hudson Property:

 

  •   Hotel Liquor License, Hudson Leaseco LLC, Effective Date 02/01/2013,
Expiration Date 01/31/2015, Serial #: 1110624, Certificate #: 810169

 

  •   On-Premises, Liquor License, 58th Street Bar Company, Effective Date
03/08/2013, Expiration Date 05/31/2014, Serial #: 1126521, Certificate #: 81017

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

SCHEDULE X

INTENTIONALLY OMITTED

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SCHEDULE XI

INTENTIONALLY OMITTED

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

SCHEDULE XII

INTENTIONALLY OMITTED

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SCHEDULE XIII

BORROWER’S ORGANIZATIONAL IDENTIFICATION NUMBER/TAX IDENTIFICATION NUMBER

 

     Organizational ID #      Tax ID #  

Hudson Delano Senior Mezz LLC

     4218604         20-5632088   

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SCHEDULE XIV

CONDOMINIUM UNITS

With respect to the Hudson Property:

 

  •   Unit 1, Lot 1701

 

  •   Unit 2, Lot 1702

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SCHEDULE XV

BOARD

With respect to the Hudson Property:

 

  •   Josh Fluhr – Voting Member of the Board appointed by Borrower

 

  •   Michael Walsh – Voting Member of the Board appointed by Borrower

 

  •   Alex Hirsch – Non-Voting Member of the Board

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SCHEDULE XVI

SRO UNITS

With respect to the Hudson Property:

 

NAME

   ROOM #    TYPE

[Omitted]

   1169    2

[Omitted]

   1443/1445    2

[Omitted]

   1516    1

[Omitted]

   1546    1

[Omitted]

   1632    1

[Omitted]

   1722    1

[Omitted]

   1753    1

[Omitted]

   1756    1

[Omitted]

   1812    1

[Omitted]

   1839    2

[Omitted]

   1846    2

[Omitted]

   1855/1856    3

[Omitted]

   1916    2

[Omitted]

   2017    2

[Omitted]

   2022    1

[Omitted]

   2023/2025    2

[Omitted]

   2027    2

[Omitted]

   2031    2

[Omitted]

   2039    2

[Omitted]

   2040    2

[Omitted]

   2045    1

[Omitted]

   2046    1

[Omitted]

   2102    2

[Omitted]

   2103/2105    2

[Omitted]

   2106    2

[Omitted]

   2107    2

[Omitted]

   2112\2010    2

[Omitted]

   2114    2

[Omitted]

   2115    1

[Omitted]

   2117    2

[Omitted]

   2127    2

[Omitted]

   2129    2

[Omitted]

   2134    2

[Omitted]

   2135    1

[Omitted]

   2138    1

[Omitted]

   2139    1

[Omitted]

   2140    1

[Omitted]

   2145    3

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

[Omitted]

   2146    2

[Omitted]

   2150/2153/2153    5

[Omitted]

   2155    2

[Omitted]

   2157    1

[Omitted]

   2204    2

[Omitted]

   2206    2

[Omitted]

   2205/207    3

[Omitted]

   2211    1

[Omitted]

   2210/2212    2

[Omitted]

   2214    2

[Omitted]

   2227    2

[Omitted]

   2229    2

[Omitted]

   2231    2

[Omitted]

   2232    2

[Omitted]

   2235    2

[Omitted]

   2236    1

[Omitted]

   2239    2

[Omitted]

   2240    2

[Omitted]

   2244    2

[Omitted]

   2245    2

[Omitted]

   2250/2252    2

[Omitted]

   2253    2

[Omitted]

   2255    2

[Omitted]

   2257    1   

 

  

 

Total Occupied

   62    111 Units

Vacant Rooms

     

Single

   2025    1

Double/Corp Room

   2035    2

Single

   2050    2

Triple

   2133    3

Double

   2205    2   

 

  

 

Total Vacant

   5    10 Units   

 

  

Total SRO Units

      121

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SCHEDULE XVII

OCCUPIED SRO UNITS

With respect to the Hudson Property:

 

NAME

   ROOM #    TYPE

[Omitted]

   1169    2

[Omitted]

   1443/1445    2

[Omitted]

   1516    1

[Omitted]

   1546    1

[Omitted]

   1632    1

[Omitted]

   1722    1

[Omitted]

   1753    1

[Omitted]

   1756    1

[Omitted]

   1812    1

[Omitted]

   1839    2

[Omitted]

   1846    2

[Omitted]

   1855/1856    3

[Omitted]

   1916    2

[Omitted]

   2017    2

[Omitted]

   2022    1

[Omitted]

   2023/2025    2

[Omitted]

   2027    2

[Omitted]

   2031    2

[Omitted]

   2039    2

[Omitted]

   2040    2

[Omitted]

   2045    1

[Omitted]

   2046    1

[Omitted]

   2102    2

[Omitted]

   2103/2105    2

[Omitted]

   2106    2

[Omitted]

   2107    2

[Omitted]

   2112\2010    2

[Omitted]

   2114    2

[Omitted]

   2115    1

[Omitted]

   2117    2

[Omitted]

   2127    2

[Omitted]

   2129    2

[Omitted]

   2134    2

[Omitted]

   2135    1

[Omitted]

   2138    1

[Omitted]

   2139    1

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

[Omitted]

   2140    1

[Omitted]

   2145    3

[Omitted]

   2146    2

[Omitted]

   2150/2153/2153    5

[Omitted]

   2155    2

[Omitted]

   2157    1

[Omitted]

   2204    2

[Omitted]

   2206    2

[Omitted]

   2205/207    3

[Omitted]

   2211    1

[Omitted]

   2210/2212    2

[Omitted]

   2214    2

[Omitted]

   2227    2

[Omitted]

   2229    2

[Omitted]

   2231    2

[Omitted]

   2232    2

[Omitted]

   2235    2

[Omitted]

   2236    1

[Omitted]

   2239    2

[Omitted]

   2240    2

[Omitted]

   2244    2

[Omitted]

   2245    2

[Omitted]

   2250/2252    2

[Omitted]

   2253    2

[Omitted]

   2255    2

[Omitted]

   2257    1   

 

  

 

Total Occupied

   62    111 Units

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

SCHEDULE XVIII

PRIVATE COMPANY TRANSFER – ADDITIONAL RECOURSE GUARANTY COVENANTS

“Guarantor shall, at all times while the Debt remains unsatisfied, maintain
(i) net worth of not less than $100,000,000 (exclusive of the Properties), as
determined by Lender, (ii) net worth of not less than $270,000,000 (inclusive of
the Properties), as determined by Lender and (iii) Unencumbered Liquid Assets
(defined below) of not less than $10,000,000. In the event that Guarantor fails
to comply with the foregoing net worth and Unencumbered Liquid Assets
requirements, it shall be an Event of Default under this Guaranty and under the
Loan Documents.

Guarantor acknowledges, covenants and agrees that in no instance shall Guarantor
be permitted to dividend, distribute or contribute any funds received by
Guarantor unless at all times while the Debt remains unsatisfied, Guarantor
shall maintain (i) net worth of not less than $200,000,000 (exclusive of the
Properties), as determined by Lender, (ii) net worth of not less than
$370,000,000 (inclusive of the Properties), as determined by Lender and
(iii) Unencumbered Liquid Assets (defined below) of not less than $10,000,000.

During the term hereunder, Guarantor will furnish or cause to be furnished to
Lender within forty (40) days after the end of the first, second and third
calendar quarters and within ninety (90) days after the end of the fourth
calendar quarter, an Officer’s Certificate certifying as to Guarantor’s
compliance with the foregoing net worth requirements and Unencumbered Liquid
Assets requirements, together with all financial information reasonably
requested by Lender with respect to such calculations, including, but not
limited to, supporting valuation assumptions and appraisals.

For purposes hereof, “Cash and Cash Equivalents” shall mean: (1) United States
dollars and (2) any of the following which may be liquidated without
restrictions within five (5) Business Days or less: (A) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six
(6) months from the date of acquisition; (B) certificates of deposit and
Eurodollar time deposits with maturities of six (6) months or less from the date
of acquisition, bankers’ acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic commercial bank
having capital and surplus in excess of $500 million and an S&P Certificate of
Deposit Rating (short term) of A-1 or better or the equivalent by Moody’s;
(C) repurchase obligations with a term of not more than seven (7) days for
underlying securities of the types described in clauses (2)(A) and (B) above
entered into with any financial institution meeting the qualifications specified
in clause (2) (B) above; (D) commercial paper having the highest rating
obtainable from Moody’s or S&P, and in each case maturing within six months
after the date of acquisition; and (E) money market funds substantially all the
assets of which are comprised of securities and other obligations of the types
described in clauses (1) and (2)(A) through (D) above.

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

For the purposes hereof, “Unencumbered Liquid Assets” shall be determined by
Lender in its reasonable discretion, at any time and from time to time, and
shall mean the “liquid assets” of Guarantor, free and clear of all liens and
shall include only the following assets of Guarantor as set forth on Guarantor’s
balance sheet: (x) all Cash and Cash Equivalents, and (y) the following, to the
extent acquired for investment or with a view to achieving trading profits (and
which may be liquidated without restrictions within five (5) Business Days or
less): marketable securities owned of record and beneficially by Guarantor and
which are freely tradeable, without any restriction on the New York Stock
Exchange, the American Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.”

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

SCHEDULE XIX

PUBLIC COMPANY TRANSFER – ADDITIONAL RECOURSE GUARANTY COVENANTS

“Guarantor shall, at all times while the Debt remains unsatisfied, maintain
(i) net worth of not less than $100,000,000 (exclusive of the Properties), as
determined by Lender, (ii) net worth of not less than $270,000,000 (inclusive of
the Properties) and (iii) Unencumbered Liquid Assets (defined below) of not less
than $10,000,000, provided, that, Guarantor shall not be required to maintain
such net worth and such Unencumbered Liquid Assets requirements if at the time
of the closing of the Public Company Transaction in accordance with the terms
and conditions of the Loan Documents, (A) Guarantor is an entity whose
securities are listed and traded on the New York Stock Exchange, the American
Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the London Stock Exchange, the
Euronext, the Toronto Stock Exchange or the Frankfurt Stock Exchange,
(B) Guarantor has net worth of not less than $750,000,000 (exclusive of the
Properties), as determined by Lender and (C) Guarantor has Unencumbered Liquid
Assets (defined below) of not less than $10,000,000. In the event that Guarantor
is required to maintain a net worth and Unencumbered Liquid Assets as described
above and Guarantor fails to comply with the net worth and Unencumbered Liquid
Assets requirements as described above, as applicable, it shall be an Event of
Default under this Guaranty and under the Loan Documents.

Guarantor acknowledges, covenants and agrees that in no instance shall Guarantor
be permitted to dividend, distribute or contribute any funds received by
Guarantor unless at all times while the Debt remains unsatisfied, Guarantor
shall maintain (i) net worth of not less than $200,000,000 (exclusive of the
Properties), as determined by Lender, (ii) net worth of not less than
$370,000,000 (inclusive of the Properties), as determined by Lender and
(iii) Unencumbered Liquid Assets (defined below) of not less than $10,000,000.

During the term hereunder, to the extent that Guarantor is required to maintain
a net worth and Unencumbered Liquid Assets as described above, Guarantor will
furnish or cause to be furnished to Lender within forty (40) days after the end
of the first, second and third calendar quarters and within ninety (90) days
after the end of the fourth calendar quarter, an Officer’s Certificate
certifying as to Guarantor’s compliance with the foregoing net worth
requirements and Unencumbered Liquid Assets requirements (as applicable),
together with all financial information reasonably requested by Lender with
respect to such calculations, including, but not limited to, supporting
valuation assumptions and appraisals.

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

For purposes hereof, “Cash and Cash Equivalents” shall mean: (1) United States
dollars and (2) any of the following which may be liquidated without
restrictions within five (5) Business Days or less: (A) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six
(6) months from the date of acquisition; (B) certificates of deposit and
Eurodollar time deposits with maturities of six (6) months or less from the date
of acquisition, bankers’ acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic commercial bank
having capital and surplus in excess of $500 million and an S&P Certificate of
Deposit Rating (short term) of A-1 or better or the equivalent by Moody’s;
(C) repurchase obligations with a term of not more than seven (7) days for
underlying securities of the types described in clauses (2)(A) and (B) above
entered into with any financial institution meeting the qualifications specified
in clause (2) (B) above; (D) commercial paper having the highest rating
obtainable from Moody’s or S&P, and in each case maturing within six months
after the date of acquisition; and (E) money market funds substantially all the
assets of which are comprised of securities and other obligations of the types
described in clauses (1) and (2)(A) through (D) above.

For the purposes hereof, “Unencumbered Liquid Assets” shall be determined by
Lender in its reasonable discretion, at any time and from time to time, and
shall mean the “liquid assets” of Guarantor, free and clear of all liens and
shall include only the following assets of Guarantor as set forth on Guarantor’s
balance sheet: (x) all Cash and Cash Equivalents, and (y) the following, to the
extent acquired for investment or with a view to achieving trading profits (and
which may be liquidated without restrictions within five (5) Business Days or
less): marketable securities owned of record and beneficially by Guarantor and
which are freely tradeable, without any restriction on the New York Stock
Exchange, the American Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.”

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

SCHEDULE XX

ASSUMPTION – ADDITIONAL RECOURSE GUARANTY COVENANTS

“Guarantor shall, at all times while the Debt remains unsatisfied, maintain
(i) net worth of not less than $250,000,000 (exclusive of the Properties), as
determined by Lender and (ii) Unencumbered Liquid Assets (defined below) of not
less than $10,000,000. In the event that Guarantor fails to comply with the
foregoing net worth and Unencumbered Liquid Assets requirements, as applicable,
it shall be an Event of Default under this Guaranty and under the Loan
Documents. During the term hereunder, Guarantor will furnish or cause to be
furnished to Lender within forty (40) days after the end of the first, second
and third calendar quarters and within ninety (90) days after the end of the
fourth calendar quarter, an Officer’s Certificate certifying as to Guarantor’s
compliance with the foregoing net worth and Unencumbered Liquid Assets
requirements, together with all financial information reasonably requested by
Lender with respect to such calculations, including, but not limited to,
supporting valuation assumptions and appraisals.

For purposes hereof, “Cash and Cash Equivalents” shall mean: (1) United States
dollars and (2) any of the following which may be liquidated without
restrictions within five (5) Business Days or less: (A) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six
(6) months from the date of acquisition; (B) certificates of deposit and
Eurodollar time deposits with maturities of six (6) months or less from the date
of acquisition, bankers’ acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic commercial bank
having capital and surplus in excess of $500 million and an S&P Certificate of
Deposit Rating (short term) of A-1 or better or the equivalent by Moody’s;
(C) repurchase obligations with a term of not more than seven (7) days for
underlying securities of the types described in clauses (2)(A) and (B) above
entered into with any financial institution meeting the qualifications specified
in clause (2) (B) above; (D) commercial paper having the highest rating
obtainable from Moody’s or S&P, and in each case maturing within six months
after the date of acquisition; and (E) money market funds substantially all the
assets of which are comprised of securities and other obligations of the types
described in clauses (1) and (2)(A) through (D) above.

For the purposes hereof, “Unencumbered Liquid Assets” shall be determined by
Lender in its reasonable discretion, at any time and from time to time, and
shall mean the “liquid assets” of Guarantor, free and clear of all liens and
shall include only the following assets of Guarantor as set forth on Guarantor’s
balance sheet: (x) all Cash and Cash Equivalents, and (y) the following, to the
extent acquired for investment or with a view to achieving trading profits (and
which may be liquidated without restrictions within five (5) Business Days or
less): marketable securities owned of record and beneficially by Guarantor and
which are freely tradeable, without any restriction on the New York Stock
Exchange, the American Stock Exchange, NASDAQ, the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.”

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

SCHEDULE XXI

GUARANTOR LITIGATION REPRESENTATION EXCEPTIONS

 

  •   OTK Associates, LLC, directly on its own behalf and derivatively on behalf
of Morgans Hotel Group Co. v. Robert Friedman, et al., in the Court of Chancery
of the State of Delaware, C.A. No. 8447-VCL.

 

  •   Yucaipa American Alliance Fund II L.P., et al. v. Morgans Hotel Group Co.
and Morgans Group LLC, in the Supreme Court of the State of New York, County of
New York, Index No. 652294/2013

 

  •   Starck Arbitration: Mr. Philippe Starck has initiated arbitration
proceedings in the London Court of International Arbitration regarding an
exclusive service agreement that he entered into with Residual Hotel Interest
LLC (formerly known as Morgans Hotel Group LLC) in February 1998 regarding the
design of certain hotels now owned by us. We are not a party to these
proceedings at this time. To our knowledge, they have not continued to pursue
this arbitration.

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

SCHEDULE XXII

COLLECTIVE BARGAINING AGREEMENT

 

  •   Agreement dated July 11, 2012 by and between the New York Hotel & Motel
Trades Council, AFL-CIO and Hudson Hotel

 

  •   Agreement dated February, 2011 by and between the New York Hotel & Motel
Trades Council, AFL-CIO and Morgans Hotel Group

 

  •   Voluntary Settlement Agreement dated November 11, 2010 by and between the
New York Hotel & Motel Trades Council, AFL-CIO and the Hudson Hotel

 

  •   Agreement dated October, 2010 by and between the New York Hotel & Motel
Trades Council, AFL-CIO and Hudson Hotel

 

  •   Agreement dated September 2010 by and between the Morgans Hotel Group
Management, LLC, d/b/a Hudson Hotel on its own behalf and on behalf of the
Hudson Hotel and the New York Hotel & Motel Trades Council, AFL-CIO

 

  •   Settlement Agreement dated February 9, 2010 by and between the New York
Hotel & Motel Trades Council, AFL-CIO and the Hudson Hotel

 

  •   Agreement dated September 2010 by and between Hudson Hotel and the New
York Hotel & Motel Trades Council, AFL-CIO

 

  •   Agreement dated January 2008 by and between the New York Hotel & Motel
Trades Council, AFL-CIO and the Hudson Hotel

 

  •   Agreement dated April 25, 2008 be and between the Hudson Hotel and the New
York Hotel & Motel Trades Council, AFL-CIO

 

  •   Letter Agreement dated May 28, 2004 between International Union of
Operating Engineers Local Union No. 94, 94A, 94B

 

  •   Amendment to Industry-Wide Collective Bargaining Agreement between Hotel
Association of New York City, Inc. and New York Hotel & Motel Trades council,
AFL-CIO, effective January 1, 2014

 

  •   Collective Bargaining Agreement between Hotel Association of New York
City, Inc. and New York Hotel & Motel Trades Council, AFL-CIO, July 1,
2012-June 30, 2019

 

  •   Agreement dated July 11, 2012 by and between the New York Hotel & Motel
Trades Council, AFL-CIO and Morgans Hotel Group

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

SCHEDULE XXIII

EXTENSION – ADDITIONAL RECOURSE GUARANTY COVENANTS

“At all times while the TLG Promissory Notes (defined below) and/or the
Convertible Notes (defined below) remain outstanding, Guarantor shall maintain
Unencumbered Liquid Assets (defined below) of not less than an aggregate amount
sufficient to pay the outstanding principal amount of each of the TLG Promissory
Notes and to pay the outstanding principal amount of each of the Convertible
Notes in full. In the event that Guarantor fails to comply with the foregoing
Unencumbered Liquid Assets requirements it shall be an Event of Default under
this Guaranty and under the Loan Documents. During the term hereunder, Guarantor
will furnish or cause to be furnished to Lender within forty (40) days after the
end of the first, second and third calendar quarters and within ninety (90) days
after the end of the fourth calendar quarter, an Officer’s Certificate
certifying as to Guarantor’s compliance with the foregoing Unencumbered Liquid
Assets requirements, together with all financial information reasonably
requested by Lender with respect to such calculations.

For purposes hereof, “Cash and Cash Equivalents” shall mean: (1) United States
dollars and (2) any of the following which may be liquidated without
restrictions within five (5) Business Days or less: (A) securities issued or
directly and fully guaranteed or insured by the United States government or any
agency or instrumentality thereof having maturities of not more than six
(6) months from the date of acquisition; (B) certificates of deposit and
Eurodollar time deposits with maturities of six (6) months or less from the date
of acquisition, bankers’ acceptances with maturities not exceeding six months
and overnight bank deposits, in each case, with any domestic commercial bank
having capital and surplus in excess of $500 million and an S&P Certificate of
Deposit Rating (short term) of A-1 or better or the equivalent by Moody’s;
(C) repurchase obligations with a term of not more than seven (7) days for
underlying securities of the types described in clauses (2)(A) and (B) above
entered into with any financial institution meeting the qualifications specified
in clause (2) (B) above; (D) commercial paper having the highest rating
obtainable from Moody’s or S&P, and in each case maturing within six months
after the date of acquisition; and (E) money market funds substantially all the
assets of which are comprised of securities and other obligations of the types
described in clauses (1) and (2)(A) through (D) above.

For purposes hereof, “Convertible Notes” shall mean the 2.375% Senior
Subordinated Convertible Notes Due 2014 of Guarantor issued on October 17, 2007,
as such convertible notes may be amended, supplemented or otherwise modified,
and any notes, securities or other obligations of Guarantor, any Borrower Party
or any of their affiliates that refinance, supplement or replace such
convertible notes.

For purposes hereof, “TLG Promissory Notes” shall mean those certain promissory
notes issued in November 2011 by TLG Acquisition LLC to Andrew Sasson and Andy
Masi , as such promissory notes may be amended, supplemented or otherwise
modified, and any notes, securities or other obligations of Guarantor, any
Borrower Party or any of their affiliates that refinance, supplement or replace
such promissory notes.

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

For the purposes hereof, “Unencumbered Liquid Assets” shall be determined by
Lender in its reasonable discretion, at any time and from time to time, and
shall mean the “liquid assets” of Guarantor, free and clear of all liens and
shall include only the following assets of Guarantor as set forth on Guarantor’s
balance sheet: (x) all Cash and Cash Equivalents, and (y) the following, to the
extent acquired for investment or with a view to achieving trading profits (and
which may be liquidated without restrictions within five (5) Business Days or
less): marketable securities owned of record and beneficially by Guarantor and
which are freely tradeable, without any restriction on the New York Stock
Exchange, the American Stock Exchange, NASDAQ the Tokyo Stock Exchange, the
London Stock Exchange, the Euronext, the Toronto Stock Exchange or the Frankfurt
Stock Exchange.”

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

SCHEDULE XXIV

ERISA REPRESENTATION EXCEPTION

 

  •   Borrower is obligated to contribute to The New York Hotel Trades Council
and Hotel Association of New York City, Inc., Pension Fund.

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

SCHEDULE XXV

STATUS OF PROPERTY REPRESENTATION EXCEPTIONS

With respect to the Delano Property:

 

  •   As to Section 3.12(c): Certain waste disposal services are handled by the
private company, Waste Services of Florida, Inc. (WSI).

 

  •   As to Section 3.12(m):

 

  •   A project to replace the boilers is in progress. $75,000 has been paid
thus far as a deposit on the project which is expected to cost $150,000.

 

  •   Work on new flooring for the solarium has commenced. $12,500 has been paid
thus far and $12,500 will be due upon completion.

With respect to the Hudson Property:

 

  •   As to Section 3.12(h), UCC filed with the NY SOS by De Lage Landen
Financial Services, Inc., filed 4/26/12 (with respect to six (6) Canon copiers
and seven (7) Canon fax machines)

 

  •   As to Section 3.12(b), the following are violations at the Hudson Property
filed by the New York City Department of Buildings:

 

  •   Violation No. 040303CMTF01RNS filed on April 3, 2003

 

  •   Violation No. 073113E9028/478987 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478988 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478989 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478990 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478991 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478992 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478993 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478994 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478995 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478996 filed on July 31, 2013

 

  •   Violation No. 073113E9028/478997 filed on July 31, 2013

 

  •   Violation No. 060313BENCH00248 filed on June 3, 2013

 

  •   Violation No. 110211AEUHAZ100055 filed on November 2, 2011

 

  •   Violation No. 081011CMTFKP01 filed on August 10, 2011