Exhibit 10.9





Exhibit 10.9




Mondrian Hotel




DOCUMENT PREPARED BY AND

UPON RECORDATION, RETURN TO:

Proskauer Rose LLP

1585 Broadway

New York, New York 10036

Attention: David J. Weinberger, Esq.




SPACE ABOVE LINE FOR RECORDER’S USE ONLY




A.P.N. 5555-002-147



MONDRIAN HOLDINGS LLC,




as Borrower




to




FIRST AMERICAN TITLE INSURANCE COMPANY,




as Trustee for the benefit of




WACHOVIA BANK, NATIONAL ASSOCIATION,


as Lender




DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS

AND FIXTURE FILING




Dated: October 6, 2006





			
	Property Location:	 	The Mondrian Hotel

8440 Sunset Boulevard

Los Angeles, California 90069

(Los Angeles County)





THIS DOCUMENT SECURES A NOTE WHICH MAY CONTAIN PROVISIONS FOR ADJUSTMENTS IN THE INTEREST RATE AND
PAYMENT AMOUNTS AND/OR A BALLOON PAYMENT.



THE PERSONAL PROPERTY IN WHICH BENEFICIARY HAS A SECURITY INTEREST INCLUDES GOODS WHICH ARE OR
SHALL BECOME FIXTURES ON THE PREMISES. THIS DEED OF TRUST SHALL CONSTITUTE A “FIXTURE FILING” FOR
THE PURPOSES OF THE UNIFORM COMMERCIAL CODE. THIS FILING IS TO BE RECORDED IN THE REAL ESTATE
RECORDS OF THE APPROPRIATE COUNTY IN WHICH THE PREMISES ARE LOCATED.


 


 









 





THIS DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND FIXTURE FILING (the
“Security Instrument”) is made as of the 6th day of October, 2006, by MONDRIAN HOLDINGS
LLC, having its chief executive office c/o Morgans Group LLC, 475 Tenth Avenue, New York, New York
10018 (hereinafter referred to as “Borrower”), to FIRST AMERICAN TITLE INSURANCE COMPANY, a
corporation organized and existing under the laws of the state of California, having an address at
520 North Central Avenue, Glendale, California 91203 (hereinafter referred to as “Trustee”
for the benefit of WACHOVIA BANK, NATIONAL ASSOCIATION, having an address at Wachovia Bank,
National Association, Commercial Real Estate Services, 8739 Research Drive URP 4, NC 1075,
Charlotte, North Carolina 28262 (hereinafter referred to as “Lender”).



W I T N E S S E T H:




WHEREAS, Lender has authorized a loan (hereinafter referred to as the “Loan”) to
Borrower in the maximum principal sum of ONE HUNDRED TWENTY MILLION FIVE HUNDRED THOUSAND AND
NO/100 DOLLARS ($120,500,000.00) (hereinafter referred to as the “Loan Amount”), which Loan
is evidenced by that certain promissory note, dated the date hereof, in the amount of $60,250,000
(“Note A-1”) and that certain promissory note, dated the date hereof, in the amount of
$60,250,000 (“Note A-2”; and together with any supplements, amendments, modifications or
extensions thereof, hereinafter collectively referred to as the “Note”) made by Borrower,
as maker, to Lender, as payee;



WHEREAS, in consideration of the Loan, Borrower has agreed to make payments in amounts
sufficient to pay and redeem, and provide for the payment and redemption of the principal of,
premium, if any, and interest on the Note when due;



WHEREAS, Borrower desires by this Security Instrument to provide for, among other things, the
issuance of the Note and for the deposit, deed and pledge by Borrower with, and the creation of a
security interest in favor of, Lender, as security for Borrower’s obligations to Lender from time
to time pursuant to the Note and the other Loan Documents;



WHEREAS, Borrower and Lender intend these recitals to be a material part of this Security
Instrument; and



WHEREAS, all things necessary to make this Security Instrument the valid and legally binding
obligation of Borrower in accordance with its terms, for the uses and purposes herein set forth,
have been done and performed.



NOW THEREFORE, in consideration of the foregoing recitals and to secure the payment of the
principal of, prepayment premium (if any) and interest on the Note and all other obligations,
liabilities or sums due or to become due under this Security Instrument, the Payment Guaranty, the
Note or any other Loan Document, including, without limitation, interest on said obligations,
liabilities or sums (said principal, premium, interest and other sums being hereinafter referred to
as the “Debt”), Borrower has executed and delivered this Security Instrument; and Borrower
has irrevocably granted, and by these presents and by the execution and delivery hereof does hereby
irrevocably grant, bargain, sell, alien, demise, release, convey, assign, transfer, deed,
hypothecate, pledge, set over, warrant, mortgage and confirm to Trustee, forever
in trust WITH POWER OF SALE, all right, title and interest of Borrower, whether now owned or
hereafter acquired, in and to all of the following property, rights, interests and estates:



(a) the plot(s), piece(s) or parcel(s) of real property described in Exhibit
A attached hereto and made a part hereof (individually and collectively, hereinafter
referred to as the “Premises”);



 


 









 







(b) (i) all buildings, foundations, structures, fixtures, additions,
enlargements, extensions, modifications, repairs, replacements and improvements of every
kind or nature now or hereafter located on the Premises (hereinafter collectively referred
to as the “Improvements”); and (ii) to the extent permitted by law, the name or
names, if any, as may now or hereafter be used for any of the Improvements, and the
goodwill associated therewith;




(c) all easements, servitudes, rights-of-way, strips and gores of land,
streets, ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, ditches, ditch rights, reservoirs and reservoir rights, air rights and development
rights, lateral support, drainage, gas, oil and mineral rights, tenements, hereditaments
and appurtenances of any nature whatsoever, in any way belonging, relating or pertaining to
the Premises or the Improvements and the reversion and reversions, remainder and
remainders, whether existing or hereafter acquired, and all land lying in the bed of any
street, road or avenue, opened or proposed, in front of or adjoining the Premises to the
center line thereof and any and all sidewalks, drives, curbs, passageways, streets, spaces
and alleys adjacent to or used in connection with the Premises and/or Improvements and all
the estates, rights, titles, interests, property, possession, claim and demand whatsoever,
both in law and in equity, of Borrower of, in and to the Premises and Improvements and
every part and parcel thereof, with the appurtenances thereto;




(d) all machinery, equipment, systems, fittings, apparatus, appliances,
furniture, furnishings, tools, fixtures, Inventory (as hereinafter defined) and articles of
personal property and accessions thereof and renewals, replacements thereof and
substitutions therefor (including, but not limited to, all plumbing, lighting and elevator
fixtures, office furniture, beds, bureaus, chiffonniers, chests, chairs, desks, lamps,
mirrors, bookcases, tables, rugs, carpeting, drapes, draperies, curtains, shades, venetian
blinds, wall coverings, screens, paintings, hangings, pictures, divans, couches, luggage
carts, luggage racks, stools, sofas, chinaware, flatware, linens, pillows, blankets,
glassware, foodcarts, cookware, dry cleaning facilities, dining room wagons, keys or other
entry systems, bars, bar fixtures, liquor and other drink dispensers, icemakers, radios,
television sets, intercom and paging equipment, electric and electronic equipment,
dictating equipment, telephone systems, computerized accounting systems, engineering
equipment, vehicles, medical equipment, potted plants, heating, lighting and plumbing
fixtures, fire prevention and extinguishing apparatus, theft prevention equipment, cooling
and air-conditioning systems, elevators, escalators, fittings, plants, apparatus, stoves,
ranges, refrigerators, laundry machines, tools, machinery, engines, dynamos, motors,
boilers, incinerators, switchboards, conduits, compressors, vacuum cleaning systems, floor
cleaning, waxing and polishing equipment, call systems,






 


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brackets, signs, bulbs, bells, ash and fuel, conveyors, cabinets, lockers, shelving, spotlighting equipment,
dishwashers, garbage disposals, washers and dryers), other customary hotel equipment and
other property of every kind and nature whatsoever owned by Borrower, or in which Borrower
has or shall have an interest, now or hereafter located upon, or in, and used in connection
with the Premises or the Improvements, or appurtenant thereto, and all building equipment,
materials and supplies of any nature whatsoever owned by Borrower, or in which Borrower has
or shall have an interest, now or hereafter located upon, or in, and used in connection
with the Premises or the Improvements or appurtenant thereto, (hereinafter, all of the
foregoing items described in this paragraph (d) are collectively called the
“Equipment”), all of which, and any replacements, modifications, alterations and
additions thereto, to the extent permitted by applicable law, shall be deemed to constitute
fixtures (the “Fixtures”), and are part of the real estate and security for the
payment of the Debt and the performance of Borrower’s obligations. To the extent any
portion of the Equipment is not real property or fixtures under applicable law, it shall be
deemed to be personal property, and this Security Instrument shall constitute a security
agreement creating a security interest therein in favor of Lender under the UCC;




(e) all awards or payments, including interest thereon, which may hereafter
be made with respect to the Premises, the Improvements, the Fixtures, or the Equipment,
whether from the exercise of the right of eminent domain (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of said right), or for a change
of grade, or for any other injury to or decrease in the value of the Premises, the
Improvements or the Equipment or refunds with respect to the payment of property taxes and
assessments, and all other proceeds of the conversion, voluntary or involuntary, of the
Premises, Improvements, Equipment, Fixtures or any other Property or part thereof into cash
or liquidated claims;




(f) all leases, tenancies, franchises, licenses and permits, Property
Agreements and other agreements affecting the use, enjoyment or occupancy of the Premises,
the Improvements, the Fixtures, or the Equipment or any portion thereof now or hereafter
entered into, whether before or after the filing by or against Borrower of any petition for
relief under the Bankruptcy Code and all reciprocal easement agreements, license agreements
and other agreements with Pad Owners (hereinafter collectively referred to as the
“Leases”), together with all receivables, revenues, rentals, credit card receipts,
receipts and all payments received which relate to the rental, lease, franchise and use of
space at the Premises or which relate to the Food and Beverage Lessee/Operators (it being
acknowledged by Lender that the security interest granted hereunder in receivables,
revenues, rentals, credit card receipts, receipts and all payments received which relate to
the Food and Beverage Lessee/Operators shall not attach to interests of third-party joint
venture partners of Borrower which are not Affiliates of Borrower) and rental and use of
guest rooms or meeting rooms or banquet rooms or recreational facilities or bars, beverage
or food sales, vending machines, mini-bars, room service, telephone, video and television
systems, electronic mail, internet connections, guest laundry, bars, the provision or sale
of other goods and services, and all other payments received from guests






 


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or visitors of the
Premises, and other items of revenue, receipts or income as identified in the Uniform System of Accounts (as hereinafter defined), all cash
or security deposits, lease termination payments, advance rentals and payments of similar
nature and guarantees or other security held by, or issued in favor of, Borrower in
connection therewith to the extent of Borrower’s right or interest therein and all
remainders, reversions and other rights and estates appurtenant thereto, and all base,
fixed, percentage or additional rents, and other rents, oil and gas or other mineral
royalties, and bonuses, issues, profits and rebates and refunds or other payments made by
any Governmental Authority from or relating to the Premises, the Improvements, the Fixtures
or the Equipment plus all rents, common area charges and other payments now existing or
hereafter arising, whether paid or accruing before or after the filing by or against
Borrower of any petition for relief under the Bankruptcy Code (the “Rents”) and all
proceeds from the sale or other disposition of the Leases and the right to receive and
apply the Rents to the payment of the Debt;




(g) all proceeds of and any unearned premiums on any insurance policies
covering the Premises, the Improvements, the Fixtures, the Rents or the Equipment,
including, without limitation, the right to receive and apply the proceeds of any
insurance, judgments, or settlements made in lieu thereof, for damage to the Premises, the
Improvements, the Fixtures or the Equipment and all refunds or rebates of Impositions, and
interest paid or payable with respect thereto;




(h) all deposit accounts, securities accounts, funds or other accounts
maintained or deposited with Lender, or its assigns, in connection herewith, including,
without limitation, the Security Deposit Account (to the extent permitted by law), the
Engineering Escrow Account, the Central Account, the Sub-Accounts and the Escrow Accounts
and all monies and investments deposited or to be deposited in such accounts;




(i) all accounts receivable, contract rights, franchises, interests, estate
or other claims, both at law and in equity, now existing or hereafter arising, and relating
to the Premises, the Improvements, the Fixtures or the Equipment, not included in Rents;




(j) all now existing or hereafter arising claims against any Person with
respect to any damage to the Premises, the Improvements, the Fixtures or the Equipment,
including, without limitation, damage arising from any defect in or with respect to the
design or construction of the Improvements, the Fixtures or the Equipment and any damage
resulting therefrom;




(k) all deposits or other security or advance payments, including rental
payments now or hereafter made by or on behalf of Borrower to others, with respect to (i)
insurance policies, (ii) utility services, (iii) cleaning, maintenance, repair or similar
services, (iv) refuse removal or sewer service, (v) parking or similar services or rights
and (vi) rental of Equipment, if any, relating to or otherwise used in the operation of the
Premises, the Improvements, the Fixtures or the Equipment;




(l) all intangible property now or hereafter relating to the Premises, the
Improvements, the Fixtures or the Equipment or its operation, including, without
limitation, software, letter of credit rights, trade names, trademarks (including, without
limitation, any licenses of or agreements to license trade names or trademarks now or
hereafter entered into by Borrower), logos, building names and goodwill;


 


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(m) all now existing or hereafter arising advertising material, guaranties,
warranties, building permits, other permits, licenses, plans and specifications, shop and
working drawings, soil tests, appraisals and other documents, materials and/or personal
property of any kind now or hereafter existing in or relating to the Premises, the
Improvements, the Fixtures, and the Equipment;




(n) all now existing or hereafter arising drawings, designs, plans and
specifications prepared by architects, engineers, interior designers, landscape designers
and any other consultants or professionals for the design, development, construction,
repair and/or improvement of the Property, as amended from time to time;




(o) the right, in the name of and on behalf of Borrower, to appear in and
defend any now existing or hereafter arising action or proceeding brought with respect to
the Premises, the Improvements, the Fixtures or the Equipment and to commence any action or
proceeding to protect the interest of Lender in the Premises, the Improvements, the
Fixtures or the Equipment;




(p) all accounts, chattel paper, deposit accounts, fixtures, general
intangibles, goods, instruments and securities accounts (each as defined in the Uniform
Commercial Code as in effect from time to time in the State of California in which the
Premises is located (the “UCC Collateral”); and




(q) all proceeds, products, substitutions and accessions (including claims
and demands therefor) of each of the foregoing.



AND FURTHER, in consideration of the foregoing recitals and to secure the Debt as aforesaid,
Borrower by these presents and by the execution and delivery hereof does hereby irrevocably grant,
bargain, sell, alien, demise, release, convey, assign, transfer, deed, hypothecate, pledge, set
over, warrant, mortgage and confirm to Lender, forever, all right, title and interest of Borrower,
whether now owned or hereafter acquired, in and to the Equipment, the Fixtures, the UCC Collateral
and all other personal property described above. To the extent any portion of the Equipment is not
real property or fixtures under applicable law, it shall be deemed to be personal property, and
this Security Instrument shall constitute a security agreement creating a security interest therein
in favor of Lender under the UCC.



All of the foregoing items (a) through (p), together with all of the right, title and interest
of Borrower therein, are collectively referred to as the “Property”.



TO HAVE AND TO HOLD the above granted and described Property unto Trustee, in trust, for the
proper use and benefit of Lender, and the successors and assigns of Lender in fee simple, forever.



PROVIDED, ALWAYS, and these presents are upon this express condition, if Borrower shall well
and truly pay and discharge the Debt and perform and observe the terms, covenants
and conditions set forth in the Loan Documents, then these presents and the estate hereby granted
shall cease and be void.


 


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AND Borrower covenants with and warrants to Lender that:



ARTICLE I: DEFINITIONS




Section 1.01. Certain Definitions.



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




(i) the capitalized terms defined in this Section have the meanings
assigned to them in this Section, and include the plural as well as the singular;




(ii) all accounting terms not otherwise defined herein shall be construed in
accordance with GAAP; and




(iii) the words “herein”, “hereof”, and “hereunder” and other words of
similar import refer to this Security Instrument as a whole and not to any particular
Section or other subdivision.



“ACH” shall have the meaning set forth in Section 5.01 hereof.



“ACM” shall have the meaning set forth in Section 16.03 hereof.



“Adjusted Net Cash Flow” shall mean, as of any date of calculation, the Net Operating
Income over the twelve (12)-month period preceding the date of calculation adjusted to reflect (a)
an annual replacement reserve for furniture, fixtures and equipment of 4% of gross revenues during
such preceding twelve (12) month period and (b) scheduled increases in real estate taxes over the
subsequent twelve (12) month period resulting from, among other things, increases in tax rates or
the assessed value of the Property and/or the expiration of any applicable tax abatements. The
Adjusted Net Cash Flow shall be calculated by Borrower and shall be subject to the reasonable
review and approval of Lender.



“Affiliate” of any specified Person shall mean any other Person directly or indirectly
Controlling or Controlled by or under direct or indirect common Control with such specified Person.



“Annual Budget” shall mean an annual budget submitted by Borrower to Lender in
accordance with the terms of Section 2.09 hereof.



“Appraisal” shall mean the appraisal of the Property and all supplemental reports or
updates thereto previously delivered to Lender in connection with the Loan as set forth in the
Receipt and Closing Certificate delivered to Lender by Borrower on the Closing Date.



“Appraiser” shall mean the Person who prepared the Appraisal.






 


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“Approved Annual Budget” shall mean each Annual Budget approved by Lender in
accordance with the terms hereof.



“Approved Manager Standard” shall mean the standard of business operations, practices
and procedures customarily employed by entities having a senior executive with at least five (5)
years’ experience in the management of full service luxury or full service upscale hotel properties
which manage not less than five (5) full service luxury or full service upscale hotel properties
having 2,000 hotel rooms in the aggregate, including, without limitation, certain full service
luxury or full service upscale hotel properties which contain more than 250 hotel rooms.



“Architect” shall have the meaning set forth in Section 3.04(b)(i) hereof.



“Assignment” shall mean the Assignment of Leases and Rents and Security Deposits of
even date herewith relating to the Property given by Borrower to Lender, as the same may be
modified, amended or supplemented from time to time.



“Bank” shall mean the bank, trust company, savings and loan association or savings
bank designated by Lender, in its sole and absolute discretion, in which the Central Account shall
be located.



“Bankruptcy Code” shall mean 11 U.S.C. §101 et seq., as amended from time to time.



“Basic Carrying Costs” shall mean the sum of the following costs associated with the
Property: (a) Impositions and (b) insurance premiums.



“Basic Carrying Costs Escrow Account” shall mean the Escrow Account maintained
pursuant to Section 5.06 hereof.



“Basic Carrying Costs Monthly Installment” shall mean Lender’s estimate of one-twelfth
(1/12th) of the annual amount for Basic Carrying Costs or with respect to insurance premiums
financed in accordance with the terms of this Security Instrument an amount equal to the next
installment of the insurance premiums then due. “Basic Carrying Costs Monthly Installment” shall
also include, if required by Lender, a sum of money which, together with such monthly installments,
will be sufficient to make the payment of each such Basic Carrying Cost at least thirty (30) days
prior to the date initially due. Should such Basic Carrying Costs not be ascertainable at the time
any monthly deposit is required to be made, the Basic Carrying Costs Monthly Installment shall be
determined by Lender in its reasonable discretion on the basis of the aggregate Basic Carrying
Costs for the prior Fiscal Year or month or the prior payment period for such cost. As soon as the
Basic Carrying Costs are fixed for the then current Fiscal Year, month or period, the next ensuing
Basic Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency or surplus in
prior monthly payments. If at any time during the term of the Loan Lender determines that there
will be insufficient funds in the Basic Carrying Costs Escrow Account to make payments when they
become due and payable, Lender shall have the right to adjust the Basic Carrying Costs Monthly
Installment such that there will be sufficient funds to make such payments.






 


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“Basic Carrying Costs Sub-Account” shall mean the Sub-Account of the Central Account
established pursuant to Section 5.02 into which the Basic Carrying Costs Monthly Installments shall
be deposited.



“Borrower” shall mean Borrower named herein and any successor to the obligations of
Borrower.



“Business Day” shall mean any day other than (a) a Saturday or Sunday, or (b) a day on
which banking and savings and loan institutions in the State of New York or the State of North
Carolina are authorized or obligated by law or executive order to be closed, or at any time during
which the Loan is an asset of a Securitization, the cities, states and/or commonwealths used in the
comparable definition of “Business Day” in the Securitization documents.



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



“Cash Expenses” shall mean for any period, the operating expenses for the Property as
set forth in an Approved Annual Budget to the extent that such expenses are actually incurred by
Borrower minus payments into the Basic Carrying Costs Sub-Account, the Debt Service Payment
Sub-Account, the SAOT Sub-Account and the Recurring Replacement Reserve Sub-Account.



“Central Account” shall mean an Eligible Account, maintained at the Bank, in the name
of Lender or its successors or assigns (as secured party).



“Closing Date” shall mean the date of the Note.



“Code” shall mean the Internal Revenue Code of 1986, as amended and as it may be
further amended from time to time, any successor statutes thereto, and applicable U.S. Department
of Treasury regulations promulgated thereunder.



“Condemnation Proceeds” shall mean all of the proceeds in respect of any Taking or
purchase in lieu thereof.



“Contest” shall have the meaning set forth in Section 18.32 hereof.



“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 the property owned by it is bound.



“Control” means, when used with respect to any specific Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the management and
policies of such Person whether through ownership of voting securities, beneficial interests, by
contract or otherwise. The definition is to be construed to apply equally to variations of the
word “Control” including “Controlled,” “Controlling” or “Controlled by.”



“Counterparty” shall have the meaning set forth in Section 5.10 hereof.






 


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“CPI” shall mean “The Consumer Price Index (New Series) (Base Period 1982-84=100) (all
items for all urban consumers)” issued by the Bureau of Labor Statistics of the United States
Department of Labor (the “Bureau”). If the CPI ceases to use the 1982-84 average equaling
100 as the basis of calculation, or if a change is made in the term, components or number of items
contained in said index, or if the index is altered, modified, converted or revised in any other
way, then the index shall be adjusted to the figure that would have been arrived at had the change
in the manner of computing the index in effect at the date of this Security Instrument not been
made. If at any time during the term of this Security Instrument the CPI shall no longer be
published by the Bureau, then any comparable index issued by the Bureau or similar agency of the
United States issuing similar indices shall be used in lieu of the CPI.



“Credit Card Company” shall have the meaning set forth in Section 5.01 hereof.



“Credit Card Payment Direction Letter” shall have the meaning set forth in Section
5.01 hereof.



“Curtailment Reserve Escrow Account” shall mean the Escrow Account maintained pursuant
to Section 5.11 hereof into which sums shall be deposited during an O&M Operative Period.



“Curtailment Reserve Sub-Account” shall mean the Sub-Account of the Central Account
established pursuant to Section 5.02 hereof.



“Debt” shall have the meaning set forth in the Recitals hereto.



“Debt Service” shall mean the amount of interest and principal payments due and
payable in accordance with the Note during an applicable period.



“Debt Service Coverage” shall mean the quotient obtained by dividing Adjusted Net Cash
Flow by the sum of the (a) aggregate payments of interest, principal and all other sums due for
such specified period under the Note (determined as of the date the calculation of Debt Service
Coverage is required or requested hereunder) and (b) aggregate payments of interest, principal and
all other sums due for such specified period pursuant to the terms of subordinate or mezzanine
financing, if any, then affecting or related to the Property or, if Debt Service Coverage is being
calculated in connection with a request for consent to any subordinate or mezzanine financing, then
proposed. In determining Debt Service Coverage, the applicable interest rate for the Loan and for
any floating rate loan referred to in clause (b) above, if any, shall be the LIBOR Margin, with
respect to the Loan, and the applicable margin over the applicable index, with respect to any other
loan referred to in clause (b) above, plus, in each case, 7.0% with respect to the Loan, and the
applicable strike price set forth in any rate cap or similar agreement applicable to any other loan
referred to in clause (b) above with respect to such loan.



“Debt Service Payment Sub-Account” shall mean the Sub-Account of the Central Account
established pursuant to Section 5.02 hereof into which the Required Debt Service Payment shall be
deposited.






 


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“Default” shall mean any Event of Default or event which would constitute an Event of
Default if all requirements in connection therewith for the giving of notice, the lapse of time,
and the happening of any further condition, event or act, had been satisfied.



“Default Rate” shall mean the lesser of (a) the highest rate allowable at law and (b)
five percent (5%) above the interest rate set forth in the Note.



“Default Rate Interest” shall mean, to the extent the Default Rate becomes applicable,
interest in excess of the interest which would have accrued on (a) the Principal Amount and (b) any
accrued but unpaid interest, if the Default Rate was not applicable.



“Development Laws” shall mean all applicable subdivision, zoning, environmental
protection, wetlands protection, or land use laws or ordinances, and any and all applicable rules
and regulations of any Governmental Authority promulgated thereunder or related thereto.



“Disclosure Document” shall mean a prospectus, prospectus supplement, private
placement memorandum, or similar offering memorandum or offering circular, in each case in
preliminary or final form, used to offer securities in connection with a Securitization.



“Dollar” and the sign “$” shall mean lawful money of the United States of America.



“Eligible Account” shall mean a segregated account which is either (a) an account or
accounts maintained with a federal or state chartered depository institution or trust company the
long term unsecured debt obligations of which are rated by each of the Rating Agencies (or, if not
rated by Fitch, Inc. (“Fitch”), otherwise acceptable to Fitch, as confirmed in writing that
such account would not, in and of itself, result in a downgrade, qualification or withdrawal of the
then current ratings assigned to any certificates issued in connection with a Securitization) in
its highest rating category at all times (or, in the case of the Basic Carrying Costs Escrow
Account, the long term unsecured debt obligations of which are rated at least “AA” (or its
equivalent)) by each of the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to
Fitch, as confirmed in writing that such account would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then current ratings assigned to any certificates
issued in connection with a Securitization) or, if the funds in such account are to be held in such
account for less than thirty (30) days, the short term obligations of which are rated by each of
the Rating Agencies (or, if not rated by Fitch, otherwise acceptable to Fitch, as confirmed in
writing that such account would not, in and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any certificates issued in connection with a
Securitization) in its highest rating category at all times or (b) a segregated trust account or
accounts maintained with a federal or state chartered depository institution or trust company
acting in its fiduciary capacity which, in the case of a state chartered depository institution is
subject to regulations substantially similar to 12 C.F.R. § 9.10(b), having in either case a
combined capital and surplus of at least $100,000,000 and subject to supervision or examination by
federal and state authority, or otherwise acceptable (as evidenced by a written confirmation from
each Rating Agency that such account would not, in and of itself, cause a downgrade, qualification
or withdrawal of the then current ratings assigned to any certificates issued in connection with a
Securitization) to each Rating Agency, which may be an account maintained by Lender or its agents.
Eligible Accounts
may bear interest. The title of each Eligible Account shall indicate that the funds held therein
are held in trust for the uses and purposes set forth herein.


 


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“Engineer” shall have the meaning set forth in Section 3.04(b)(i) hereof.



“Engineering Escrow Account” shall mean an Escrow Account established and maintained
pursuant to Section 5.12 hereof relating to payments for any Required Engineering Work.



“Environmental Problem” shall mean any of the following:




(a) the presence of any Hazardous Material on, in, under, or above all or
any portion of the Property;




(b) the release or threatened release of any Hazardous Material from or onto
the Property;




(c) the violation or threatened violation of any Environmental Statute with
respect to the Property; or




(d) the failure to obtain or to abide by the terms or conditions of any
permit or approval required under any Environmental Statute with respect to the Property.



A condition described above shall be an Environmental Problem regardless of whether or not any
Governmental Authority has taken any action in connection with the condition and regardless of
whether that condition was in existence on or before the date hereof.



“Environmental Report” shall mean the environmental audit report for the Property and
any supplements or updates thereto, previously delivered to Lender in connection with the Loan.



“Environmental Statute” shall mean any federal, state or local statute, ordinance,
rule or regulation, any judicial or administrative order (whether or not on consent) or judgment
applicable to Borrower or the Property including, without limitation, any judgment or settlement
based on common law theories, and any provisions or condition of any permit, license or other
authorization binding on Borrower relating to (a) the protection of the environment, the safety and
health of persons (including employees) or the public welfare from actual or potential exposure (or
effects of exposure) to any actual or potential release, discharge, disposal or emission (whether
past or present) of any Hazardous Materials or (b) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of any Hazardous Materials, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), as amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. §9601 et seq., the Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of
1984, 42 U.S.C. §6901 et seq., the Federal Water Pollution Control Act, as amended
by the Clean Water Act of 1977, 33 U.S.C. §1251 et seq., the Toxic Substances
Control Act of 1976, 15 U.S.C. §2601 et seq., the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. §1101 et seq., the Clean Air
Act of 1966, as amended, 42 U.S.C. §7401 et seq., the National Environmental Policy
Act of 1975, 42 U.S.C. §4321, the Rivers and Harbors Act of 1899, 33 U.S.C. §401 et
seq., the Endangered Species Act of 1973, as amended, 16 U.S.C. §1531 et
seq., the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §651 et
seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. §300(f) et
seq., and all rules, regulations and guidance documents promulgated or published
thereunder.


 


11









 





“Equipment” shall have the meaning set forth in granting clause (d) of this Security
Instrument.



“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended
from time to time, and the regulations promulgated thereunder. Section references to ERISA are to
ERISA, as in effect at the date of this Security Instrument and, as of the relevant date, any
subsequent provisions of ERISA, amendatory thereof, supplemental thereto or substituted therefor.



“ERISA Affiliate” shall mean any corporation or trade or business that is a member of
any group of organizations (a) described in Section 414(b) or (c) of the Code of which Borrower or
Guarantor is a member and (b) solely for purposes of potential liability under Section 302(c)(11)
of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and
Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which Borrower or
Guarantor is a member.



“Escrow Account” shall mean each of the Engineering Escrow Account, the Basic Carrying
Costs Escrow Account, the SAOT Escrow Account, the Recurring Replacement Reserve Escrow Account,
the Operation and Maintenance Expense Escrow Account and the Curtailment Reserve Escrow Account,
each of which shall be an Eligible Account or book entry sub-account of an Eligible Account.



“Event of Default” shall have the meaning set forth in Section 13.01 hereof.



“Extraordinary Expense” shall mean (a) a material extraordinary operating expense or
capital expense not set forth in the Approved Annual Budget or allotted for in the Recurring
Replacement Reserve Sub-Account and (b) the excess of Operating Expenses over those set forth in
the Approved Annual Budget for Interest Accrual Periods prior to the Interest Accrual Period in
which such determination is being made resulting from revenues which have increased over those set
forth in the Approved Annual Budget for which, with respect to items set forth in this clause (b)
no Lender approval is required.



“First Interest Accrual Period” shall have the meaning set forth in the Note.



“Fiscal Year” shall mean the twelve (12) month period commencing on January 1 and
ending on December 31 during each year of the term of this Security Instrument, or such other
fiscal year of Borrower as Borrower may select from time to time with the prior written consent of
Lender, which consent shall not be unreasonably withheld.






 


12









 







“Fixtures” shall have the meaning set forth in granting clause (d) of this Security
Instrument.



“Food and Beverage Lessee/Operators” shall have the meaning set forth on Exhibit H
attached hereto and made a part hereof.



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



“General Partner” shall mean, if Borrower or an SPE Pledgor is a partnership, each
general partner of Borrower or SPE Pledgor, as applicable, and, if Borrower or an SPE Pledgor is a
limited liability company, each managing member of Borrower or SPE Pledgor and in each case, if
applicable, each general partner or managing member of such general partner or managing member. In
the event that Borrower, an SPE Pledgor or any General Partner is a single member limited liability
company, the term “General Partner” shall include such single member.



“Governmental Authority” shall mean, with respect to any Person, any federal or State
government or other political subdivision thereof and any entity, including any regulatory or
administrative authority or court, exercising executive, legislative, judicial, regulatory or
administrative or quasi-administrative functions of or pertaining to government, and any
arbitration board or tribunal, in each case having jurisdiction over such applicable Person or such
Person’s property and any stock exchange on which shares of capital stock of such Person are listed
or admitted for trading.



“Guarantor” shall mean Morgans Group LLC, a Delaware limited liability company, and
each SPE Pledgor.



“Hazardous Material” shall mean any flammable, explosive or radioactive materials,
hazardous materials or wastes, hazardous or toxic substances, pollutants or related materials,
asbestos or any material containing asbestos, molds, spores and fungus which may pose a risk to
human health or the environment or any other substance or material as defined in or regulated by
any Environmental Statutes.



“Impositions” shall mean all taxes (including, without limitation, all real estate, ad
valorem, assessments (including, without limitation, all assessments for public improvements or
benefits, whether or not commenced or completed prior to the date hereof and whether or not
commenced or completed within the term of this Security Instrument), ground rents, condominium
common charges, excises, levies, fees (including, without limitation, license, permit, inspection,
authorization and similar fees), and all other governmental charges, in each case whether general
or special, ordinary or extraordinary, or foreseen or unforeseen, of every character in respect of
the Property and/or any Rent (including all interest and penalties thereon), which at any time
prior to, during or in respect of the term hereof may be assessed or imposed on or in respect of or
be a lien upon (a) Borrower (including, without limitation, all franchise, single business or other
taxes imposed on Borrower for the privilege of doing business in the jurisdiction in which the
Property or any other collateral delivered or pledged to Lender in connection with the Loan is
located) or Lender or (b) the Property or any part thereof or any
Rents therefrom or any estate, right, title or interest therein. Impositions shall not include any
taxes imposed on Lender’s income and franchise taxes imposed on Lender by the law or regulation of
any Governmental Authority.


 


13









 





“Improvements” shall have the meaning set forth in granting clause (b) of this
Security Instrument.



“Indemnified Parties” shall have the meaning set forth in Section 12.01 hereof.



“Independent” shall mean, when used with respect to any Person, a Person who (a) is in
fact independent, (b) does not have any direct financial interest or any material indirect
financial interest in Borrower, or in any Affiliate of Borrower or any constituent partner,
shareholder, member or beneficiary of Borrower, (c) is not connected with Borrower or any Affiliate
of Borrower or any constituent partner, shareholder, member or beneficiary of Borrower as an
officer, employee, promoter, underwriter, trustee, partner, director or person performing similar
functions and (d) is not a member of the immediate family of a Person defined in (b) or (c) above.
Whenever it is herein provided that any Independent Person’s opinion or certificate shall be
provided, such opinion or certificate shall state that the Person executing the same has read this
definition and is Independent within the meaning hereof.



“Independent Director” shall have the meaning set forth in Section 2.02(g)(xvi)
hereof.



“Initial Engineering Deposit” shall equal the amount set forth on Exhibit B attached
hereto and made a part hereof.



“Institutional Lender” shall mean any of the following Persons: (a) any bank, savings
and loan association, savings institution, trust company or national banking association, acting
for its own account or in a fiduciary capacity, (b) any charitable foundation, (c) any insurance
company or pension and/or annuity company, (d) any fraternal benefit society, (e) any pension,
retirement or profit sharing trust or fund within the meaning of Title I of ERISA or for which any
bank, trust company, national banking association or investment adviser registered under the
Investment Advisers Act of 1940, as amended, is acting as trustee or agent, (f) any investment
company or business development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small Business Investment Act
of 1958, as amended, (h) any broker or dealer registered under the Securities Exchange Act of 1934,
as amended, or any investment adviser registered under the Investment Adviser Act of 1940, as
amended, (i) any government, any public employees’ pension or retirement system, or any other
government agency supervising the investment of public funds, or (j) any other entity all of the
equity owners of which are Institutional Lenders; provided that each of said Persons shall have net
assets in excess of $1,000,000,000 and a net worth in excess of $500,000,000, be in the business of
making commercial mortgage loans, secured by properties of like type, size and value as the
Property and have a long term credit rating which is not less than “BBB-” (or its equivalent) from
each Rating Agency.



“Insurance Proceeds” shall mean all of the proceeds received under the insurance
policies required to be maintained by Borrower pursuant to Article III hereof.






 


14









 







“Insurance Requirements” shall mean all terms of any insurance policy required by this
Security Instrument, all requirements of the issuer of any such policy, and all regulations and
then current standards applicable to or affecting the Property or any use or condition thereof,
which may, at any time, be recommended by the Board of Fire Underwriters, if any, having
jurisdiction over the Property, or such other Person exercising similar functions.



“Interest Accrual Period” shall have the meaning set forth in the Note.



“Interest Rate” shall have the meaning set forth in the Note.



“Interest Shortfall” shall mean any shortfall in the amount of interest required to be
paid with respect to the Loan Amount on any Payment Date.



“Inventory” shall have the meaning as such term is defined in the Uniform Commercial
Code applicable in the State in which the Property is located, including, without limitation,
provisions in storerooms, refrigerators, pantries and kitchens, beverages in wine cellars and bars,
other merchandise for sale, fuel, mechanical supplies, stationery and other supplies and similar
items, as defined in the Uniform System of Accounts.



“Late Charge” shall have the meaning set forth in Section 13.09 hereof.



“Leases” shall have the meaning set forth in granting clause (f) of this Security
Instrument.



“Legal Requirement” shall mean as to any Person, the certificate of incorporation,
by-laws, certificate of limited partnership, agreement of limited partnership or other organization
or governing documents of such Person, and any law, statute, order, ordinance, judgement, decree,
injunction, treaty, rule or regulation (including, without limitation, Environmental Statutes,
Development Laws and Use Requirements) or determination of an arbitrator or a court or other
Governmental Authority and all covenants, agreements, restrictions and encumbrances contained in
any instruments, in each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.



“Lender” shall mean the Lender named herein and its successors or assigns.



“LIBOR Margin” shall have the meaning set forth in the Note.



“LIBOR Rate” shall have the meaning set forth in the Note.



“Loan” shall have the meaning set forth in the Recitals hereto.



“Loan Amount” shall have the meaning set forth in the Recitals hereto.



“Loan Documents” shall mean this Security Instrument, the Note, the Assignment, and
any and all other agreements, instruments, certificates or documents executed and delivered by
Borrower or any Affiliate of Borrower in connection with the Loan, together with any supplements,
amendments, modifications or extensions thereof.






 


15









 







“Loan Year” shall mean each 365 day period (or 366 day period if the month of February
in a leap year is included) commencing on the first day of the month following the Closing Date
(provided, however, that the first Loan Year shall also include the period from the Closing Date to
the end of the month in which the Closing Date occurs).



“Loss Proceeds” shall mean, collectively, all Insurance Proceeds and all Condemnation
Proceeds.



“Major Contracts” shall mean all Space Leases in excess of 2,000 square feet, and all
Leases, consulting agreements, joint venture agreements or other contracts between Borrower and a
third party operator (including joint ventures in which Borrower has an interest) relating to food
and beverage operations at the Property.



“Major Space Lease” shall mean any Space Lease of a tenant or Affiliate of such tenant
where such tenant or such Affiliate leases, in the aggregate, five percent (5%) or more of the
Total GLA.



“Management Agreement” shall have the meaning set forth in Section 7.02(e) hereof.



“Manager” shall mean Morgans Hotel Group Management LLC, a Delaware limited liability
company or any other Person which manages the Property on behalf of Borrower.



“Manager Certification” shall have the meaning set forth in Section 2.09(d) hereof.



“Manager Control Notice” shall have the meaning set forth in Section 7.02(e) hereof.



“Material Adverse Effect” shall mean any event or condition that has a material
adverse effect on (a) the Property, (b) the business, profits, management, operations or condition
(financial or otherwise) of Borrower, (c) the enforceability, validity, perfection or priority of
the lien of any Loan Document or (d) the ability of Borrower to perform any obligations under any
Loan Document.



“Maturity”, when used with respect to the Note, shall mean the Maturity Date set forth
in the Note or such other date pursuant to the Note on which the final payment of principal, and
premium, if any, on the Note becomes due and payable as therein or herein provided, whether at
Stated Maturity or by declaration of acceleration, or otherwise.



“Maturity Date” shall mean the Maturity Date set forth in the Note, as the same may be
extended from time to time pursuant to the terms of the Note.



“Multiemployer Plan” shall mean a multiemployer plan defined as such in Section 3(37)
of ERISA to which contributions have been, or were required to have been, made by Borrower,
Guarantor or any ERISA Affiliate.



“Net Capital Expenditures” shall mean for any period the amount by which Capital
Expenditures during such period exceed reimbursements for such items during such period from the
Engineering Escrow Account or any other Account established pursuant to the Loan Documents.






 


16









 







“Net Operating Income” shall mean in each Fiscal Year or portion thereof during the
term hereof, Operating Income less Operating Expenses.



“Net Proceeds” shall mean the excess of (a)(i) the purchase price (at foreclosure or
otherwise) actually received by Lender with respect to the Property as a result of the exercise by
Lender of its rights, powers, privileges and other remedies after the occurrence of an Event of
Default, or (ii) in the event that Lender (or Lender’s nominee) is the purchaser at foreclosure by
credit bid, then the amount of such credit bid, in either case, over (b) all costs and expenses,
including, without limitation, all attorneys’ fees and disbursements and any brokerage fees, if
applicable, incurred by Lender in connection with the exercise of such remedies, including the sale
of such Property after a foreclosure against the Property.



“Note” shall have the meaning set forth in the Recitals hereto.



“O&M Operative Period” shall mean the period of time commencing upon the determination
by Lender, which determination shall be made in Lender’s reasonable discretion, that the Debt
Service Coverage (tested quarterly except during the continuance of an O&M Operative Period, in
which event the Debt Service Coverage shall be tested monthly and shall be calculated based upon
information contained in the reports furnished to Lender pursuant to Section 2.09 hereof) is less
than 1.05:1.00 and terminating on the Payment Date next succeeding the date upon which Lender
reasonably determines that the Debt Service Coverage for two (2) consecutive calendar quarters is
1.05:1.00 or greater.



“O&M Program” shall have the meaning set forth in Section 16.03 hereof.



“OFAC List” shall mean the list of specially designated nationals and blocked persons
subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of
Foreign Assets Control and accessible through the internet website www.treas.gov/ofac/t11sdn.pdf.



“Officer’s Certificate” shall mean a certificate delivered to Lender by Borrower which
is signed on behalf of Borrower by an authorized representative of Borrower which states that the
items set forth in such certificate are true, accurate and complete in all respects.



“Operating Expenses” shall mean, in each Fiscal Year or portion thereof during the
term hereof, all expenses directly attributable to the operation, repair and/or maintenance of the
Property including, without limitation, (a) Impositions, (b) insurance premiums, (c) management
fees, whether or not actually paid, equal to the greater of the actual management fees and four
percent (4%) of total revenues of the Property, and (d) costs attributable to the operation, repair
and maintenance of the systems for heating, ventilating and air conditioning the Improvements and
actually paid for by Borrower. Operating Expenses shall not include interest, principal and
premium, if any, or any other amount due under the Note or otherwise in connection with the Debt,
income taxes, extraordinary capital improvement costs, any non-cash charge or expense such as
depreciation or amortization or any item of expense otherwise includable in Operating Expenses
which is paid directly by any tenant except real estate taxes paid directly to any taxing authority
by any tenant.






 


17









 







“Operating Income” shall mean, in each Fiscal Year or portion thereof during the term
hereof, all revenue derived by Borrower arising from the Property including, without limitation,
room revenues, vending machines revenues, beverage revenues, food revenues, Borrower’s pro rata
share of net profits of Food and Beverage Lessee/Operators, and packaging revenues, rental revenues
(whether denominated as basic rent, additional rent, escalation payments, electrical payments or
otherwise) and other fees and charges payable pursuant to Leases or otherwise in connection with
the Property, and business interruption, rent or other similar insurance proceeds. Operating
Income shall not include (a) Insurance Proceeds (other than proceeds of rent, business interruption
or other similar insurance allocable to the applicable period) and Condemnation Proceeds (other
than Condemnation Proceeds arising from a temporary taking or the use and occupancy of all or part
of the applicable Property allocable to the applicable period), or interest accrued on such
Condemnation Proceeds, (b) proceeds of any financing, (c) proceeds of any sale, exchange or
transfer of the Property or any part thereof or interest therein, (d) capital contributions or
loans to Borrower or an Affiliate of Borrower, (e) any item of income otherwise includable in
Operating Income but paid directly by any tenant to a Person other than Borrower except for real
estate taxes paid directly to any taxing authority by any tenant, (f) any other material
extraordinary, non-recurring revenues which for the purposes hereof shall be deemed not to include
room revenues, (g) Rent paid by or on behalf of any lessee under a Space Lease which is the subject
of any proceeding or action relating to its bankruptcy, reorganization or other arrangement
pursuant to the Bankruptcy Code or any similar federal or state law or which has been adjudicated a
bankrupt or insolvent unless such Space Lease has been affirmed by the trustee in such proceeding
or action, (h) Rent paid by or on behalf of any lessee under a Lease the demised premises of which
are not occupied either by such lessee or by a sublessee thereof unless the lessee has a long-term
unsecured debt rating of not less than “A” (or its equivalent) from any Rating Agency; (i) Rent
paid by or on behalf of any lessee under a Lease in whole or partial consideration for the
termination of any Lease, or (j) sales tax rebates from any Governmental Authority.



“Operation and Maintenance Expense Escrow Account” shall mean the Escrow Account
maintained pursuant to Section 5.09 hereof relating to the payment of Operating Expenses (exclusive
of Basic Carrying Costs).



“Operation and Maintenance Expense Sub-Account” shall mean the Sub-Account of the
Central Account established pursuant to Section 5.02 hereof into which sums allocated for the
payment of Cash Expenses, Net Capital Expenditures and approved Extraordinary Expenses shall be
deposited.



“Pad Owners” shall mean any owner of any fee interest in property contiguous to or
surrounded by the Property who has entered into or is subject to a reciprocal easement agreement or
other agreement or agreements with Borrower either (a) in connection with an existing or potential
improvement on such property or (b) relating to or affecting the Property.



“Payment Date” shall have the meaning set forth in the Note.



“Payment Guaranty” shall have the meaning set forth in the Recitals hereto.






 


18









 







“PBGC” shall mean the Pension Benefit Guaranty Corporation established under ERISA, or
any successor thereto.



“Permitted Encumbrances” shall have the meaning set forth in Section 2.05(a) hereof.



“Permitted Liens” shall mean:



(a) the liens created by the Loan Documents;



(b) liens, if any, for Impositions or other charges not yet due and payable and not
delinquent, or that are being contested in accordance with the terms of this Security Instrument;



(c) liens which arise by operation of law (including statutory liens of landlords),
judgment liens and materialmen’s, mechanics’, carriers’, workmen’s and repairmen’s liens and other
similar liens securing obligations that are not overdue for more than thirty (30) days (and if
overdue by more than thirty (30) days, that are being contested in good faith and as to which
appropriate reserves are being maintained) or that have been fully-bonded, paid or with respect to
which enforcement action has been stayed, all in accordance with the terms of this Security
Instrument;



(d) liens, pledges or deposits to secure obligations under workmen’s compensation,
unemployment insurance, social security laws or similar legislation or to secure public or
statutory obligations of Borrower;



(e) purchase money liens, including the lessor’s interest in respect of any property
subject to a capital lease, upon or in property acquired or held by Borrower in the ordinary course
of business to secure the purchase price of such property or to secure indebtedness incurred solely
for the purpose of financing the acquisition of any such property to be subject to such liens, or
liens existing on any such property at the time of acquisition, or extensions, renewals or
replacements of any of the foregoing for the same or lesser amount; provided,
however, that no such lien shall extend to any property other than the property being
acquired, and no such extension, renewal or replacement shall extend to or cover property not
theretofore subject to the lien being extended, renewed or replaced, all subject to the limitations
set forth in Section 2.02(g) of this Security Instrument;



(f) Permitted Encumbrances and such other title and survey exceptions as Lender
approves in writing in Lender’s discretion; and



(g) Space Leases existing as of the date hereof or hereafter entered into in
accordance with the terms hereof.



“Permitted Transferee” shall mean any of the following Persons:



(a) a pension fund, pension trust or pension account that immediately prior to such
transfer owns, directly or indirectly, total gross real estate assets of at least $1,000,000,000;



(b) a pension fund advisor who (i) immediately prior to such transfer, Controls,
directly or indirectly, at least $1,000,000,000 of total gross real estate assets and (ii) is
acting on
behalf of one or more pension funds that, in the aggregate, satisfy the requirements of clause (a)
of this definition;


 


19









 





(c) an insurance company which is subject to supervision by the insurance
commissioner, or a similar official or agency, of a state or territory of the United States
(including the District of Columbia) (i) with a net worth, determined as of a date no more than six
(6) months prior to the date of the transfer of at least $500,000,000 and (ii) which, immediately
prior to such transfer, controls, directly or indirectly, total gross real estate assets of at
least $1,000,000,000;



(d) a corporation organized under the banking laws of the United States or any state
or territory of the United States (including the District of Columbia) (i) with, immediately prior
to such transfer, a combined capital and surplus of at least $500,000,000 and (ii) which,
immediately prior to such transfer, controls, directly or indirectly total gross real estate assets
of at least $1,000,000,000;



(e) any Person who (i) owns or operates at least five (5) full service luxury or
full service upscale properties totaling no less than 1,500 hotel rooms (exclusive of the
Property), (ii) has a net worth, determined as of a date no more than six (6) months prior to the
date of such transfer, of at least $500,000,000 and (iii) immediately prior to such transfer,
Controls, directly or indirectly, total gross real estate assets of at least $1,000,000,000,
provided such Person is reasonably acceptable to Lender based upon, among other things, its credit
history and general reputation; or



(f) any Person in which more than fifty percent (50%) of the ownership interests
are owned directly or indirectly by any of the entities listed in subsections (a) through (e) of
this definition of “Permitted Transferee”, or any combination of more than one such entity, and
which is controlled directly or indirectly by such entity or entities;



in each event with respect to which Lender shall have received information satisfactory to it
confirming that neither the proposed Permitted Transferee nor any Affiliate of the proposed
Permitted Transferee (A) is on the OFAC List or would, if such Person assumes the Loan or obtains
an interest in Borrower, cause Lender to be in violation of Legal Requirements or (B) has been,
within the seven (7) years prior to the proposed Transfer, the subject of any bankruptcy,
reorganization or insolvency proceeding.



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



“Plan” shall mean an employee benefit or other plan established or maintained by
Borrower, Guarantor or any ERISA Affiliate during the five-year period ended prior to the date of
this Security Instrument or to which Borrower, Guarantor or any ERISA Affiliate makes, is obligated
to make or has, within the five year period ended prior to the date of this Security Instrument,
been required to make contributions (whether or not covered by Title IV of ERISA
or Section 302 of ERISA or Section 401(a) or 412 of the Code), other than a Multiemployer Plan.


 


20









 





“Premises” shall have the meaning set forth in granting clause (a) of this Security
Instrument.



“Principal Amount” shall mean the Loan Amount as such amount may be reduced from time
to time pursuant to the terms of this Security Instrument, the Note or the other Loan Documents.



“Principal Payments” shall mean all payments of principal made pursuant to the terms
of the Note.



“Prohibited Person” shall mean any Person and/or any Affiliate thereof identified on
the OFAC List or any other Person or foreign country or agency thereof with whom a U.S. Person may
not conduct business or transactions by prohibition of Federal law or Executive Order of the
President of the United States of America.



“Property” shall have the meaning set forth in the granting clauses of this Security
Instrument.



“Property Agreements” shall mean all agreements, grants of easements and/or
rights-of-way, reciprocal easement agreements, permits, declarations of covenants, conditions and
restrictions, disposition and development agreements, planned unit development agreements, parking
agreements, party wall agreements or other instruments affecting the Property, including, without
limitation any agreements with Pad Owners, but not including any brokerage agreements, management
agreements, service contracts, Space Leases or the Loan Documents.



“Qualified Transferee” shall have the meaning set forth in the form intercreditor
agreement attached as Appendix VI to the U.S. CMBS Legal and Structured Finance Criteria published
by Standard and Poor’s dated May 1, 2003.



“Rate Cap Agreement” shall mean that certain interest rate protection agreement
(together with the confirmation and schedules relating thereto) with a notional amount which shall
not at any time be less than the Principal Amount and a LIBOR Rate strike price equal to seven
percent (7.0%) per annum entered into by Borrower in accordance with the terms hereof or of the
other Loan Documents and any similar interest rate cap or collar agreements subsequently entered
into in replacement or substitution therefor by Borrower with respect to the Loan.



“Rating Agency” shall mean each of Standard & Poor’s Ratings Services, a division of
The McGraw-Hill Company, Inc. (“Standard & Poor’s”), Fitch, Inc., and Moody’s Investors
Service, Inc. (“Moody’s”) and any successor to any of them; provided, however, that at any
time after a Securitization, “Rating Agency” shall mean those of the foregoing rating agencies that
from time to time rate the securities issued in connection with such Securitization.



“Realty” shall have the meaning set forth in Section 2.05(b) hereof.






 


21









 







“Recurring Replacement Expenditures” shall mean Capital Expenditures for furniture,
Fixtures and Equipment to be located at the Property from time to time, as determined in accordance
with GAAP, which are set forth in the Approved Annual Budget.



“Recurring Replacement Reserve Monthly Installment” shall mean the amount per month
set forth on Exhibit B attached hereto and made a part hereof (the “Initial Recurring
Installments”) until the end of the first (1st) Loan Year and an amount per month in each
subsequent Loan Year or portion thereof occurring prior to the Maturity Date equal to four percent
(4%) of the total revenues of the Property during the prior Loan Year (or portion thereof) divided
by twelve (12).



“Recurring Replacement Reserve Escrow Account” shall mean the Escrow Account
maintained pursuant to Section 5.08 hereof relating to the payment of Recurring Replacement
Expenditures.



“Recurring Replacement Reserve Sub-Account” shall mean the Sub-Account of the Central
Account established pursuant to Section 5.02 hereof into which the Recurring Replacement Reserve
Monthly Installment shall be deposited.



“Regulation AB” shall mean Regulation AB under the Securities Act and the Securities
Exchange Act of 1934 (as amended).



“Rent Account” shall mean one or more Eligible Account(s) maintained in a bank
acceptable to Lender in the joint names of Lender and Borrower.



“Rents” shall have the meaning set forth in granting clause (f) of this Security
Instrument.



“Rent Roll” shall have the meaning set forth in Section 2.05(o) hereof.



“Required Debt Service Coverage” shall mean a Debt Service Coverage of not less than
1.2:1.



“Required Debt Service Payment” shall mean, as of any Payment Date, (a) the amount of
interest and principal then due and payable pursuant to the Note, together with any other sums due
thereunder, including, without limitation, any prepayments required to be made or for which notice
has been given under this Security Instrument, Default Rate Interest and premium, if any, paid in
accordance therewith plus (b) pursuant to Section 5.04, reasonable out-of-pocket fees incurred by
Lender in connection with its administration and servicing of the Central Account.



“Required Engineering Work” shall mean the work set forth on Exhibit D attached hereto
and made a part hereof.



“Retention Amount” shall have the meaning set forth in Section 3.04(b)(vii) hereof.



“RevPAR” shall mean the average revenues per available room per day.



“RevPAR Yield Index” shall mean the percentage amount determined by dividing the
RevPAR of the Property by the RevPAR of the Property’s Competitive Set as determined by
Smith Travel Research (“STR”) or if STR is no longer publishing, a successor reasonably
acceptable to Lender.


 


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“Sale” shall have the meaning set forth in Section 9.04 hereof.



“SAOT Deposit” shall mean the amount required to be deposited into the SAOT
Sub-Account pursuant to Section 5.05 hereof which is equal to the SAOT Expenditures for the
calendar month immediately preceding the calendar month in which such deposit is made.



“SAOT Escrow Account” shall mean the Escrow Account maintained pursuant to Section
5.07 hereof.



“SAOT Expenditures” shall mean sales, use or occupancy or other taxes due to any
Governmental Authority imposed on charges for the use of guest rooms at the Property.



“SAOT Sub-Account” shall mean the Sub-Account of the Central Account established
pursuant to Section 5.02 hereof into which the SAOT Deposit shall be deposited.



“Securities Act” shall mean the Securities Act of 1933, as the same shall be amended
from time to time.



“Securitization” shall mean a public or private offering of securities by Lender or
any of its Affiliates or their respective successors and assigns which are collateralized, in whole
or in part, by this Security Instrument.



“Security Deposit Account” shall have the meaning set forth in Section 5.01 hereof.



“Security Instrument” shall mean this Security Instrument as originally executed or as
it may hereafter from time to time be supplemented, amended, modified or extended by one or more
indentures supplemental hereto.



“Servicer” shall have the meaning set forth in Section 5.04 hereof.



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



“Single Purpose Entity” shall mean a corporation, partnership, joint venture, limited
liability company, trust or unincorporated association, which is formed or organized solely for the
purpose of holding, directly, an ownership interest in the Property or, with respect to SPE
Pledgor, holding an ownership interest in a Food and Beverage Lessee/Operator or, with respect to
General Partner, holding an ownership interest in and managing a Person which holds an ownership
interest in the Property, does not engage in any business unrelated to the Property, does not have
any assets other than those related to its interest in the Property or any indebtedness other than
as permitted by this Security Instrument or the other Loan Documents, has its own separate books
and records and has its own accounts, in each case which are separate and apart from the books and
records and accounts of any other Person, holds itself out as being a Person separate and apart
from any other Person and which otherwise satisfies the criteria of the Rating Agency, as in effect
on the Closing Date, for a special-purpose bankruptcy-remote entity.






 


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“Solvent” shall mean, as to any Person, that (a) the sum of the assets of such Person,
at a fair valuation, exceeds its liabilities, including contingent liabilities, (b) such Person has
sufficient capital with which to conduct its business as presently conducted and as proposed to be
conducted and (c) such Person has not incurred debts, and does not intend to incur debts, beyond
its ability to pay such debts as they mature. For purposes of this definition, “debt”
means any liability on a claim, and “claim” means (a) a right to payment, whether or not
such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured, or (b) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured. With respect to any such contingent liabilities, such
liabilities shall be computed in accordance with GAAP at the amount which, in light of all the
facts and circumstances existing at the time, represents the amount which can reasonably be
expected to become an actual or matured liability.



“Space Leases” shall mean any Lease or sublease thereunder (including, without
limitation, any Major Space Lease) or any other agreement providing for the use and occupancy of a
portion of the Property together with any supplements, renewals, amendments, modifications or
extensions thereof.



“SPE Pledgor” shall have the meaning set forth on Exhibit I attached hereto and made a
part hereof.



“Spread Maintenance Premium” shall mean (a) the amount of the prepayment, multiplied
by (b) the LIBOR Margin multiplied by (c) a fraction, the numerator of which is the number of full
and partial months from such prepayment date through the end of the first (1st) Loan Year and the
denominator of which is 12.



“State” shall mean any of the states which are members of the United States of
America.



“Stated Maturity” when used with respect to the Note or any installment of interest
and/or principal payment thereunder, shall mean the date specified in the Note as the fixed date on
which a payment of all or any portion of principal and/or interest is due and payable, as such date
may be extended from time to time pursuant to the terms of the Note.



“Sub-Accounts” shall have the meaning set forth in Section 5.02 hereof.



“Substantial Casualty” shall have the meaning set forth in Section 3.04(a)(iv) hereof.



“Taking” shall mean a condemnation or taking pursuant to the lawful exercise of the
power of eminent domain.


 


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“Third Party Disbursements” shall mean to the extent actually deposited in the Central
Account, (a) that portion of Rents collected by Borrower or Manager, on behalf of Food and Beverage
Lessee/Operators consisting of the sum of (i) operating revenues and sales taxes (to the extent not
otherwise reserved for in the SAOT Sub-Account or SAOT Escrow Account) of such Food and Beverage
Lessee/Operators plus (ii) distributions by such Food and Beverage
Lessee/Operators to its members other than distributions to members who are Affiliates of Borrower,
(b) Rents and/or deposits with respect to gift shop, laundry and parking facilities and movie
rentals, which Borrower is contractually obligated to collect on behalf of third parties that are
not Affiliates of Borrower, SPE Pledgor, Manager or Guarantor which are to be, and actually have
been, paid to such third parties, and (c) gratuities or service charges or other similar receipts
which are to be paid to any employees of Manager and/or the Food and Beverage Lessee/Operators or
Persons occupying similar positions for performing similar duties and which are actually paid to
such Persons.



“Total GLA” shall mean the total gross leasable area of the Property, including all
Space Leases.



“Transfer” shall mean the conveyance, assignment, sale, mortgaging, encumbrance,
pledging, hypothecation, granting of a security interest in, granting of options with respect to,
or other disposition of (directly or indirectly, voluntarily or involuntarily, by operation of law
or otherwise, and whether or not for consideration or of record) all or any portion of any legal or
beneficial interest (a) in all or any portion of the Property; (b) if Borrower is a corporation or,
if Borrower is a partnership and any General Partner is a corporation, in the stock of Borrower or
any General Partner; (c) in Borrower (or any trust of which Borrower is a trustee); or (d) if
Borrower is a limited or general partnership, joint venture, limited liability company, trust,
nominee trust, tenancy in common or other unincorporated form of business association or form of
ownership interest, in any Person having a legal or beneficial ownership in Borrower, excluding any
legal or beneficial interest in any constituent limited partner, if Borrower is a limited
partnership, or in any non-managing member, if Borrower is a limited liability company, unless such
interest would, or together with all other direct or indirect interests in Borrower which were
previously transferred, aggregate 49% or more of the partnership or membership, as applicable,
interest in Borrower or would result in any Person who, as of the Closing Date, did not own,
directly or indirectly, 49% or more of the partnership or membership, as applicable, interest in
Borrower, owning, directly or indirectly, 49% or more of the partnership or membership, as
applicable, interest in Borrower and excluding any legal or beneficial interest in any General
Partner unless such interest would, or together with all other direct or indirect interest in the
General Partner which were previously transferred, aggregate 49% or more of the partnership or
membership, as applicable, interest in the General Partner (or result in a change in control of the
management of the General Partner from the individuals exercising such control immediately prior to
the conveyance or other disposition of such legal or beneficial interest) and shall also include,
without limitation to the foregoing, the following: an installment sales agreement wherein
Borrower agrees to sell the Property or any part thereof or any interest therein for a price to be
paid in installments; an agreement by Borrower leasing all or substantially all of the Property to
one or more Persons pursuant to a single or related transactions, or a sale, assignment or other
transfer of, or the grant of a security interest in, Borrower’s right, title and interest in and to
any Leases or any Rent; any instrument subjecting the Property to a condominium regime or
transferring ownership to a cooperative corporation; and the dissolution or termination of Borrower
or the merger or consolidation of Borrower with any other Person. Notwithstanding the foregoing or
anything to the contrary contained in any other Loan Document, “Transfer” shall not include (a)
transfers of publicly traded stock on a national stock exchange or on the NASDAQ Stock Market in







 


25









 







the normal course of business and not in connection with a tender offer or a sale of Morgans Hotel Group Co. or substantially all of
the assets of such Person or (b) pledges (but not the transfer of any direct or indirect interest
in Borrower in connection with the realization of such pledged interests) of indirect (but not
direct) interests in Borrower to Qualified Transferees in connection with a financing secured by
pledges of direct or indirect interests in all or substantially all of the assets of Morgans Group
LLC, provided that the Net Operating Income at the time of the origination of the financing
constitutes ten percent (10%) or less of the net operating income of the assets with respect to
which the pledged interests which secure such debt relate or (c) any Transfer which does not result
in (i) a change of Control of Borrower (it being acknowledged that any holder of more than forty
percent of the direct or indirect interest in Borrower may have veto rights over major decisions
which are customary in joint venture agreements between two fifty percent owners of a Person and
the same shall not constitute a change of Control) or (ii) a Transfer of more than 49% of any
direct or indirect interest in Borrower.



“Trustee” shall mean the Person or Persons identified in this Security Instrument as
the trustee hereunder and its or their successors and assigns.



“UCC” shall mean the Uniform Commercial Code as in effect on the date hereof in the
State in which the Realty is located; provided, however, that if by reason of mandatory provisions
of law, the perfection or the effect of perfection or non-perfection or priority of the security
interest in any item or portion of the collateral is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State in which the Realty is located (“Other UCC
State”), “UCC” means the Uniform Commercial Code as in effect in such Other UCC State
for purposes of the provisions hereof relating to such perfection or effect of perfection or
non-perfection or priority.



“Uniform System of Accounts” shall mean the Uniform System of Accounts for the Lodging
Industry, 9th Revised Edition, Educational Institute of the American Hotel and Motel Association
and Hotel Association of New York City (1996), as from time to time amended.



“Unscheduled Payments” shall mean (a) all Loss Proceeds that Borrower has elected or
is required to apply to the repayment of the Debt pursuant to this Security Instrument, the Note or
any other Loan Documents, (b) any funds representing a voluntary or involuntary principal
prepayment other than scheduled Principal Payments and (c) any Net Proceeds.



“Use Requirements” shall mean any and all building codes, permits, certificates of
occupancy or compliance, laws, regulations, or ordinances (including, without limitation, health,
pollution, fire protection, medical and day-care facilities, waste product and sewage disposal
regulations), restrictions of record, easements, reciprocal easements, declarations or other
agreements affecting the use of the Property or any part thereof.



“Welfare Plan” shall mean an employee welfare benefit plan as defined in Section 3(1)
of ERISA established or maintained by Borrower, Guarantor or any ERISA Affiliate or that covers any
current or former employee of Borrower, Guarantor or any ERISA Affiliate.



“Work” shall have the meaning set forth in Section 3.04(a)(i) hereof.






 


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ARTICLE II: REPRESENTATIONS, WARRANTIES

AND COVENANTS OF BORROWER




Section 2.01. Payment of Debt. Borrower will pay the Debt at the time and in the
manner provided in the Note and the other Loan Documents, all in lawful money of the United States
of America in immediately available funds.



Section 2.02. Representations, Warranties and Covenants of Borrower. Borrower
represents and warrants to and covenants with Lender:



(a) Organization and Authority. Borrower (i) is a limited liability
company, general partnership, limited partnership or corporation, as the case may be, duly
organized, validly existing and in good standing under the laws of the jurisdiction of its
formation, (ii) has all requisite power and authority and all necessary licenses and permits to own
and operate the Property and to carry on its business as now conducted and as presently proposed to
be conducted and (iii) is duly qualified, authorized to do business and in good standing in the
jurisdiction where the Property is located and in each other jurisdiction where the conduct of its
business or the nature of its activities makes such qualification necessary. If Borrower is a
limited liability company, limited partnership or general partnership, each general partner or
managing member, as applicable, of Borrower which is a corporation is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its incorporation.



(b) Power. Borrower and, if applicable, each General Partner has full power
and authority to execute, deliver and perform, as applicable, the Loan Documents to which it is a
party, to receive the borrowings thereunder, to execute and deliver the Note and to grant to Lender
a first priority, perfected and continuing lien on and security interest in the Property, subject
only to the Permitted Encumbrances.



(c) Authorization of Borrowing. The execution, delivery and performance of
the Loan Documents to which Borrower is a party, the making of the borrowings thereunder, the
execution and delivery of the Note, the grant of the liens on the Property pursuant to the Loan
Documents to which Borrower is a party and the consummation of the Loan are within the powers of
Borrower and have been duly authorized by Borrower and, if applicable, the General Partners, by all
requisite action (and Borrower hereby represents that no approval or action of any member, limited
partner or shareholder, as applicable, of Borrower, which has not been received or taken, is
required to authorize any of the Loan Documents to which Borrower is a party) and will constitute
the legal, valid and binding obligation of Borrower, enforceable against Borrower in accordance
with their terms, except as enforcement may be stayed or limited by bankruptcy, insolvency or
similar laws affecting the enforcement of creditors’ rights generally and by general principles of
equity (whether considered in proceedings at law or in equity) and will not (i) violate any
provision of its partnership agreement or partnership certificate or certificate of incorporation
or by-laws, or operating agreement, certificate of formation or articles of organization, as
applicable, or, to its knowledge, any law, judgment, order, rule or regulation of any court,
arbitration panel or other Governmental Authority, domestic or foreign, or other Person affecting
or binding upon Borrower or the Property, or (ii) violate any provision of any indenture,
agreement, mortgage, deed of trust, contract or other instrument to which Borrower or, if
applicable, any General Partner is a party or by which any of their respective property, assets
or revenues are bound, or be in conflict with, result in an acceleration of any obligation or a
breach of or constitute (with notice or lapse of time or both) a default or require any payment or
prepayment under, any such indenture, agreement, mortgage, deed of trust, contract or other
instrument, or (iii) result in the creation or imposition of any lien, except those in favor of
Lender as provided in the Loan Documents to which it is a party.


 


27









 





(d) Consent. Neither Borrower nor, if applicable, any General Partner, is
required to obtain any consent, approval or authorization from, or to file any declaration or
statement with, any Governmental Authority or other agency in connection with or as a condition to
the execution, delivery or performance of this Security Instrument, the Note or the other Loan
Documents which has not been so obtained or filed.



(e) Interest Rate. To Borrower’s knowledge, the rate of interest paid under
the Note and the method and manner of the calculation thereof do not violate any usury or other law
or applicable Legal Requirement.



(f) Other Agreements. Borrower is not a party to nor is otherwise bound by
any agreements or instruments which, individually or in the aggregate, are reasonably likely to
have a Material Adverse Effect. Neither Borrower nor, if applicable, any General Partner, is in
violation of its organizational documents or other restriction or any agreement or instrument by
which it is bound, or any judgment, decree, writ, injunction, order or award of any arbitrator,
court or Governmental Authority, or any Legal Requirement, in each case, applicable to Borrower or
the Property, except for such violations that would not, individually or in the aggregate, have a
Material Adverse Effect.



(g) Maintenance of Existence. (i) Borrower is familiar with all of the
criteria of the Rating Agency required to qualify as a special-purpose bankruptcy-remote entity and
Borrower, SPE Pledgor and, if applicable, each General Partner at all times since their formation
have been duly formed and existing and shall preserve and keep in full force and effect their
existence as a Single Purpose Entity.




(ii) Borrower, SPE Pledgor and, if applicable, each General Partner, at all
times since their organization have complied, and will continue to comply, with the
provisions of its certificate and agreement of partnership or certificate of incorporation
and by-laws or articles of organization, certificate of formation and operating agreement,
as applicable, and the laws of its jurisdiction of organization relating to partnerships,
corporations or limited liability companies, as applicable.




(iii) Borrower, SPE Pledgor and, if applicable, each General Partner have
done or caused to be done and will do all things necessary to observe organizational
formalities and preserve their existence and Borrower, SPE Pledgor and, if applicable, each
General Partner will not amend, modify or otherwise change the certificate and agreement of
partnership or certificate of incorporation and by-laws or articles of organization,
certificate of formation and operating agreement, as applicable, or other organizational
documents of Borrower, SPE Pledgor and, if applicable, each General Partner except for
immaterial amendments which do not modify the Single Purpose Entity provisions.






 


28









 








(iv) Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times accurately maintained, and will continue to accurately maintain, their respective
financial statements, accounting records and other partnership, company or corporate
documents separate from those of any other Person and Borrower and SPE Pledgor has filed
and will file its own tax returns or, if Borrower, SPE Pledgor and/or, if applicable,
General Partner is part of a consolidated group for purposes of filing tax returns,
Borrower, SPE Pledgor and General Partner, as applicable, have been shown and will be shown
as separate members of such group. Borrower, SPE Pledgor and, if applicable, each General
Partner have not at any time since their formation commingled, and will not commingle,
their respective assets with those of any other Person and each has maintained and will
maintain their assets in such a manner such that it will not be costly or difficult to
segregate, ascertain or identify their individual assets from those of any other Person.
Borrower, SPE Pledgor and, if applicable, each General Partner have not permitted and will
not permit any Affiliate independent access to their bank accounts. Borrower, SPE Pledgor
and, if applicable, each General Partner have at all times since their formation accurately
maintained and utilized, and will continue to accurately maintain and utilize, their own
separate bank accounts, payroll and separate books of account, stationery, invoices and
checks.




(v) Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times paid, and will continue to pay, their own liabilities from their own separate
assets and each has allocated and charged and each shall allocate and charge fairly and
reasonably any overhead which Borrower, SPE Pledgor and, if applicable, any General
Partner, shares with any other Person, including, without limitation, for office space and
services performed by any employee of another Person.




(vi) Borrower, SPE Pledgor and, if applicable, each General Partner, have at
all times identified themselves, and will continue to identify themselves, in all dealings
with the public, under their own names and as separate and distinct entities and shall
correct any known misunderstanding regarding their status as separate and distinct
entities. Borrower, SPE Pledgor and, if applicable, each General Partner, have not at any
time identified themselves, and will not identify themselves, as being a division of any
other Person.




(vii) Borrower, SPE Pledgor and, if applicable, each General Partner, have
been at all times, and will continue to be, adequately capitalized in light of the nature
of their respective businesses.


 


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(viii) Borrower, SPE Pledgor and, if applicable, each General Partner, (A) have
not owned, do not own and will not own any assets or property other than, with respect to
Borrower, the Property and any incidental personal property necessary for the ownership,
management or operation of the Property, with respect to the SPE Pledgor, the ownership of
an interest in a Food and Beverage Lessee/Operator and, with respect to General Partner, if
applicable, its interest in Borrower, (B) have not engaged and will not engage in any
business other than the ownership, management and operation of the Property or with respect
to the SPE Pledgor, the ownership of an interest in a Food and Beverage
Lessee/Operator, or with respect to General Partner, if applicable, its interest in
Borrower, (C) have not incurred and will not incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation), other than (w) the Loan, (x)
unsecured trade and operational debt which (1) is not evidenced by a note, (2) is incurred
in the ordinary course of the operation of the Property, (3) does not, together with any
equipment financing, incurred pursuant to clause (y) hereof, exceed in the aggregate one
percent (1%) of the Loan Amount or, with respect to the SPE Pledgor, $100,000, and (4) is,
unless being contested in accordance with the terms of this Security Instrument, paid prior
to the earlier to occur of the sixtieth (60th) day after the date incurred and the date
when due and (y) equipment financing relating to equipment used in connection with the
operation of the Property which (1) is incurred in the ordinary course of the operation of
the Property, (2) does not, together with any unsecured trade and operational debt incurred
pursuant to clause (x) hereof, exceed one percent (1%) of the Loan Amount or, with respect
to the SPE Pledgor, $100,000, (3) which is secured only by the financed equipment, and (4)
is, unless being contested in accordance with the terms of this Security Instrument, paid
prior to the earlier to occur of the sixtieth (60th) day after the date incurred and the
date when due, (D) have not pledged and will not pledge their assets for the benefit of any
other Person, other than the pledges by the SPE Pledgors and (E) have not made and will not
make any loans or advances to any Person (including any Affiliate).




(ix) None of Borrower, SPE Pledgor nor, if applicable, any General Partner
will change its name or principal place of business unless thirty (30) days prior written
notice thereof is provided to Lender.




(x) None of Borrower, SPE Pledgor nor, if applicable, any General Partner
has, and neither of such Persons will have, any subsidiaries other than with respect to
Borrower, General Partner and, with respect to SPE Pledgor, as disclosed in writing to
Lender.




(xi) Each of Borrower and SPE Pledgor has preserved and maintained and will
preserve and maintain its existence as a Delaware limited liability company and all
material rights, privileges, tradenames, if any, and franchises.




(xii) None of Borrower, SPE Pledgor nor, if applicable, any General Partner,
has merged or consolidated with, and none of them will merge or consolidate with, and none
of them have sold all or substantially all of its respective assets to any Person, and none
of them will sell all or substantially all of its respective assets to any Person, or
liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or
dissolution). None of Borrower, SPE Pledgor nor, if applicable, any General Partner has
acquired nor will acquire any business or assets from, or capital stock or other ownership
interest of, or be a party to any acquisition of, any Person.


 


30









 






(xiii) Borrower, SPE Pledgor and, if applicable, each General Partner, has not
at any time since their formation assumed, guaranteed or held themselves out to be
responsible for, and will not assume, guarantee or hold themselves out to be responsible
for the liabilities or the decisions or actions respecting the daily business affairs of
their
partners, shareholders or members or any predecessor company, corporation or partnership,
each as applicable, any Affiliates, or any other Persons other than (i) in connection with
the Loan and (ii) obligations relating to the Property which have been fully satisfied with
proceeds of the Loan. Neither Borrower nor SPE Pledgor has at any time since its formation
acquired, and will not acquire, obligations or securities of its partners or shareholders,
members or any predecessor company, corporation or partnership, each as applicable, or any
Affiliates. Borrower, SPE Pledgor and, if applicable, each General Partner, have not at
any time since their formation made, and will not make, loans to its partners, members or
shareholders or any predecessor company, corporation or partnership, each as applicable, or
any Affiliates of any of such Persons. Borrower, SPE Pledgor and, if applicable, each
General Partner, have no known contingent liabilities nor do they have any material
financial liabilities under any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which such Person is a party or by which it is otherwise bound
other than under the Loan Documents.




(xiv) None of Borrower, SPE Pledgor nor, if applicable, General Partner, has at
any time since their formation entered into and are not a party to, and, will not enter
into or be a party to, any transaction with its Affiliates, members, partners or
shareholders, as applicable, or any Affiliates thereof except in the ordinary course of
business of Borrower or SPE Pledgor, as applicable, on terms which are substantially
similar to those which Borrower or SPE Pledgor, as applicable, would obtain in a comparable
arm’s length transaction with an unrelated third party.




(xv) If Borrower or SPE Pledgor is a limited partnership or a limited
liability company, the General Partner shall be a corporation or limited liability company
whose sole asset is its ownership interests in Borrower and SPE Pledgor, as applicable, and
the General Partner will at all times comply, and will cause Borrower or SPE Pledgor to
comply, with each of the representations, warranties, and covenants contained in this
Section 2.02(g) as if such representation, warranty or covenant was made directly by such
General Partner.




(xvi) Borrower and SPE Pledgor shall at all times cause there to be at least
two (2) duly appointed members, with respect to Borrower, and at least one (1) duly
appointed member, with respect to SPE Pledgor, of the board of directors or board of
managers or other governing board or body, as applicable (each an “Independent
Director”), of, if Borrower or SPE Pledgor is a corporation, Borrower and SPE Pledgor,
as applicable, and, if Borrower or SPE Pledgor is a limited partnership or limited
liability company, of the General Partner, reasonably satisfactory to Lender who shall not
have been at the time of such individual’s appointment, and may not be or have been at any
time (A) a shareholder of SPE Pledgor, officer, director, attorney, counsel, partner,
member or employee of Borrower or any of the foregoing Persons or Affiliates thereof, (B) a
customer or creditor of, or supplier or service provider to, Borrower or SPE Pledgor or any
of its shareholders, partners, members or their Affiliates, (C) a member of the immediate
family of any Person referred to in (A) or (B) above or (D) a Person Controlling,
Controlled by or under common Control with any Person referred to in (A)
through (C) above. A natural person who otherwise satisfies the foregoing definition
except for being the Independent Director of a Single Purpose Entity Affiliated with
Borrower, SPE Pledgor or General Partner shall not be disqualified from serving as an
Independent Director if such individual is at the time of initial appointment, or at any
time while serving as the Independent Director, an Independent Director of a Single Purpose
Entity Affiliated with Borrower or SPE Pledgor or General Partner if such individual is an
Independent Director provided by a nationally-recognized company that provides professional
independent directors.


 


31









 






(xvii) Borrower, SPE Pledgor and, if applicable, each General Partner, shall not
cause or permit the board of directors or board of managers or other governing board or
body, as applicable, of Borrower, SPE Pledgor or, if applicable, each General Partner, to
take any action which, under the terms of any certificate of incorporation, by-laws,
certificate of formation, operating agreement or articles of organization with respect to
any common stock, requires a vote of the board of directors of Borrower or SPE Pledgor, or,
if applicable, the General Partner, unless at the time of such action there shall be at
least two (2) members, with respect to Borrower, and at least one (1) member, with respect
to SPE Pledgor, who is or are Independent Director(s).




(xviii) Borrower, SPE Pledgor and, if applicable, each General Partner has paid
and shall pay the salaries of their own employees and has maintained and shall maintain a
sufficient number of employees in light of their contemplated business operations.




(xix) Borrower and SPE Pledgor shall, and shall cause their Affiliates to, and
Borrower and SPE Pledgor have and have caused their Affiliates to, conduct their business
so that the assumptions made with respect to Borrower and SPE Pledgor in that certain
opinion letter relating to substantive non-consolidation dated the date hereof (the
“Insolvency Opinion”) delivered in connection with the Loan shall be true and
correct in all respects. Notwithstanding the foregoing, holders of direct or indirect
equity interests in Borrower may deliver to Lender so called “bottom up” guarantees which
do not result in a Material Adverse Effect or result in a change in any obligation of
Borrower or Guarantor to Lender, provided (x) subsequent to a Securitization, Borrower
shall deliver to Lender a letter from each Rating Agency confirming that any rating issued
by the Rating Agency in connection with a Securitization will not, as a result of the
delivery of such guaranty, be downgraded from the then current ratings thereof, qualified
or withdrawn, and (y) Borrower shall deliver to Lender an update of the Insolvency Opinion
addressing the guaranty and confirming the conclusions thereof which shall be in form and
substance satisfactory to Lender.



Notwithstanding anything to the contrary contained in this Section 2.02(g), provided Borrower and
SPE Pledgor are each a Delaware limited liability company which satisfies the single purpose
bankruptcy remote entity requirements of each Rating Agency for a single member limited liability
company, the foregoing provisions of this Section 2.02(g) shall not apply to the General Partner.



(h) No Defaults. No Default or Event of Default has occurred and is
continuing or would occur as a result of the consummation of the transactions contemplated by the
Loan
Documents. Borrower is not in default in the payment or performance of any of its Contractual
Obligations in any respect.


 


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(i) Consents and Approvals. Borrower and, if applicable, each General
Partner, have obtained or made all necessary (i) consents, approvals and authorizations, and
registrations and filings of or with all Governmental Authorities and (ii) consents, approvals,
waivers and notifications of partners, stockholders, members, creditors, lessors and other
nongovernmental Persons, in each case, which are required to be obtained or made by Borrower or, if
applicable, the General Partner, in connection with the execution and delivery of, and the
performance by Borrower of its obligations under, the Loan Documents.



(j) Investment Company Act Status, etc. Borrower is not (i) an “investment
company,” or a company “controlled” by an “investment company,” as such terms are defined in the
Investment Company Act of 1940, as amended, (ii) 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 (iii) subject to any
other federal or state law or regulation which purports to restrict or regulate its ability to
borrow money.



(k) Compliance with Law. Borrower is in compliance in all material respects
with all Legal Requirements to which it or the Property is subject, including, without limitation,
all Environmental Statutes, the Occupational Safety and Health Act of 1970, the Americans with
Disabilities Act and ERISA. No portion of the Property has been or will be purchased, improved,
fixtured, equipped or furnished with proceeds of any illegal activity and, to the best of
Borrower’s knowledge, no illegal activities are being conducted at or from the Property.



(l) Financial Information. All financial data that has been delivered by
Borrower to Lender (i) is true, complete and correct in all material respects, (ii) accurately
represents the financial condition and results of operations of the Persons covered thereby as of
the date on which the same shall have been furnished, and (iii) in the case of audited financial
statements, has been prepared in accordance with GAAP and the Uniform System of Accounts (or such
other accounting basis as is reasonably acceptable to Lender) throughout the periods covered
thereby. As of the date hereof, none of Borrower, SPE Pledgor nor, if applicable, any General
Partner, has any contingent liability, liability for taxes or other unusual or forward commitment
not reflected in such financial statements delivered to Lender. Since the date of the last
financial statements delivered by Borrower to Lender except as otherwise disclosed in such
financial statements or notes thereto, there has been no change in the assets, liabilities or
financial position of Borrower SPE Pledgor nor, if applicable, any General Partner, or in the
results of operations of Borrower which would have a Material Adverse Effect. None of Borrower,
SPE Pledgor nor, if applicable, any General Partner, has incurred any obligation or liability,
contingent or otherwise not reflected in such financial statements which would have a Material
Adverse Effect.



(m) Transaction Brokerage Fees. Borrower has not dealt with any financial
advisors, brokers, underwriters, placement agents, agents or finders in connection with the
transactions contemplated by this Security Instrument. Borrower hereby agrees to indemnify and
hold Lender harmless for, from and against any and all claims, liabilities, costs and expenses of
any kind in any way relating to or arising from (i) a claim by any Person, including without
limitation
the Carlton Group and any of their Affiliates, that such Person acted on behalf of Borrower in
connection with the transactions contemplated herein or (ii) any breach of the foregoing
representation. The provisions of this subsection (m) shall survive the repayment of the Debt.


 


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



(o) Pending Litigation. There are no actions, suits or proceedings pending
or, to the best knowledge of Borrower, threatened against or affecting Borrower or the Property in
any court or before any Governmental Authority which if adversely determined either individually or
collectively has or is reasonably likely to have a Material Adverse Effect.



(p) Solvency; No Bankruptcy. Each of Borrower, SPE Pledgor and, if
applicable, the General Partner, (i) is and has at all times been Solvent and will remain Solvent
immediately upon the consummation of the transactions contemplated by the Loan Documents and (ii)
is free from bankruptcy, reorganization or arrangement proceedings or a general assignment for the
benefit of creditors and is not contemplating the filing of a petition under any state or federal
bankruptcy or insolvency laws or the liquidation of all or a major portion of such Person’s assets
or property and Borrower has no knowledge of any Person contemplating the filing of any such
petition against it or, if applicable, the General Partner. None of the transactions contemplated
hereby will be or have been made with an intent to hinder, delay or defraud any present or future
creditors of Borrower or SPE Pledgor and Borrower has received reasonably equivalent value in
exchange for its obligations under the Loan Documents. Borrower’s assets do not, and immediately
upon consummation of the transaction contemplated in the Loan Documents will not, constitute
unreasonably small capital to carry out its business as presently conducted or as proposed to be
conducted. Borrower does not intend to, nor believes that it will, incur debts and liabilities
beyond its ability to pay such debts as they may mature.



(q) Use of Proceeds. The proceeds of the Loan shall be applied by Borrower
to, inter alia, (i) satisfy certain loans presently encumbering all or a part of
the Property and (ii) pay certain transaction costs incurred by Borrower in connection with the
Loan. No portion of the proceeds of the Loan will be used for family, personal, agricultural or
household use.



(r) Tax Filings. Borrower, SPE Pledgor and, if applicable, each General
Partner, have filed all federal, state and local tax returns required to be filed and have paid or
made adequate provision for the payment of all federal, state and local taxes, charges and
assessments payable by Borrower, SPE Pledgor and, if applicable, the General Partners. Borrower,
SPE Pledgor and, if applicable, the General Partners, believe that their respective tax returns
properly reflect the income and taxes of Borrower, SPE Pledgor and said General Partner, if any,
for the periods covered thereby, subject only to reasonable adjustments required by the Internal
Revenue Service or other applicable tax authority upon audit.






 


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



(t) ERISA. (i) The assets of Borrower and Guarantor are not and will not
become treated as “plan assets”, whether by operation of law or under regulations promulgated under
ERISA. If any Person having a legal or beneficial ownership interest in Borrower is using (or is
deemed under ERISA to be using) “plan assets”, Borrower will qualify as a “real estate operating
company” within the meaning of 29 C.F.R. §2510.3-101(e) at all times that the Loan is outstanding.
Each Plan and Welfare Plan, and, to the knowledge of Borrower, each Multiemployer Plan, is in
compliance in all material respects with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of ERISA, the Code and any other
applicable Legal Requirement, and no event or condition has occurred and is continuing as to which
Borrower would be under an obligation to furnish a report to Lender under clause (ii)(A) of this
Section. Other than an application for a favorable determination letter with respect to a Plan,
there are no pending issues or claims before the Internal Revenue Service, the United States
Department of Labor or any court of competent jurisdiction related to any Plan or Welfare Plan
under which Borrower, Guarantor or any ERISA Affiliate, directly or indirectly (through an
indemnification agreement or otherwise), could be subject to any material risk of liability under
Section 409 or 502(i) of ERISA or Section 4975 of the Code. No Welfare Plan, other than a
Multiemployer Plan, provides or will provide benefits, including, without limitation, death or
medical benefits (whether or not insured) with respect to any current or former employee of
Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement or other termination of
service other than (A) coverage mandated by applicable law, (B) death or disability benefits that
have been fully provided for by fully paid up insurance or (C) severance benefits.




(ii) Borrower will furnish to Lender as soon as possible, and in any event
within ten (10) days after Borrower knows or has reason to believe that any of the events
or conditions specified below with respect to any Plan, Welfare Plan or Multiemployer Plan
has occurred or exists, an Officer’s Certificate setting forth details respecting such
event or condition and the action, if any, that Borrower or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice required to be filed with or
given to the PBGC (or any other relevant Governmental Authority)) by Borrower or an ERISA
Affiliate with respect to such event or condition, if such report or notice is required to
be filed with the PBGC or any other relevant Governmental Authority:




(A) any reportable event, as defined in Section 4043 of ERISA and the
regulations issued thereunder, with respect to a Plan, as to which PBGC has not by
regulation waived the requirement of Section 4043(a) of ERISA that it be notified
within thirty (30) days of the occurrence of such event (provided that a failure to
meet the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA, including, without limitation, the failure to make on or before its due date
a required installment under Section 412(m) of the Code and of Section 302(e) of
ERISA, shall be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code), and any request for a waiver under
Section 412(d) of the Code for any Plan;






 


35









 








(B) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by Borrower or an ERISA Affiliate
to terminate any Plan;




(C) the institution by PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan, or the receipt by Borrower or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by PBGC with respect to such
Multiemployer Plan;




(D) the complete or partial withdrawal from a Multiemployer Plan (or
other employee benefit plan) by Borrower or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by Borrower
or any ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it
intends to terminate or has terminated under Section 4041A of ERISA;




(E) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against Borrower or any ERISA Affiliate to enforce Section 515
of ERISA, which proceeding is not dismissed within thirty (30) days;




(F) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result in the loss of
tax-exempt status of the trust of which such Plan is a part if Borrower or an ERISA
Affiliate fails to timely provide security to the Plan in accordance with the
provisions of said Sections; or




(G) the imposition of a lien or a security interest in connection
with a Plan.




(iii) No liability under Title IV of ERISA has been incurred by Borrower,
Guarantor or any ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to Borrower, Guarantor or any ERISA Affiliate of
incurring any liability under such Title, other than liability for premiums due the
PBGC, which payments have been or will be made when due. To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not
only with respect to the ERISA Plans but also with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which Borrower, Guarantor
or any ERISA Affiliate made, or was required to make, contributions during the past six
years.


 


36









 






(iv) Borrower shall not knowingly engage in or permit any transaction in
connection with which Borrower, Guarantor or any ERISA Affiliate could be reasonably
subject to either a material civil penalty or material tax assessed pursuant to Section
502(i) or 502(l) of ERISA or Section 4975 of the Code; Borrower shall not permit any
Welfare Plan, other than a Multiemployer Plan, to provide benefits, including without
limitation, medical benefits (whether or not insured), with respect to any current or
former employee of Borrower, Guarantor or any ERISA Affiliate beyond his or her retirement
or other termination of service other than (A) coverage mandated by applicable law, (B)
death or disability benefits that have been fully provided for by paid up insurance or
otherwise or (C) severance benefits, permit the assets of Borrower or Guarantor to become
“plan assets”, whether by operation of law or under regulations promulgated under ERISA;
and Borrower and Guarantor shall not adopt, amend (except as may be required by applicable
law) or increase the amount of any benefit or amount payable under, or permit any ERISA
Affiliate to adopt, amend (except as may be required by applicable law) or increase the
amount of any benefit or amount payable under, any employee benefit plan (including,
without limitation, any employee welfare benefit plan that is not a Multiemployer Plan) or
other plan, policy or arrangement, except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in a material
increase in benefits expense to Borrower, Guarantor or any ERISA Affiliate.



(u) Labor Matters. No organized work stoppage or labor strike is pending or
threatened by employees or other laborers at the Property and none of Borrower, SPE Pledgor nor
Manager (i) is involved in or threatened with any material labor dispute, grievance or litigation
relating to labor matters involving any employees and other laborers at the Property, including,
without limitation, violation of any federal, state or local labor, safety or employment laws
(domestic or foreign) and/or charges of unfair labor practices or discrimination complaints; (ii)
has engaged in any unfair labor practices within the meaning of the National Labor Relations Act or
the Railway Labor Act; or (iii) except as otherwise disclosed in writing to Lender, is a party to,
or bound by, any collective bargaining agreement or union contract with respect to employees and
other laborers at the Property and no such agreement or contract is currently being negotiated by
Borrower, SPE Pledgor, Manager or any of their Affiliates.



(v) Borrower’s Legal Status. Borrower’s exact legal name that is indicated
on the signature page hereto, organizational identification number and place of business or, if
more than one, its chief executive office, as well as Borrower’s mailing address, if different,
which were identified by Borrower to Lender and contained in this Security Instrument, are true,
accurate and complete. Borrower (i) will not change its name, its place of business or, if more
than one place of business, its chief executive office, or its mailing address or organizational
identification number if it has one without giving Lender at least thirty (30) days prior written
notice of such change, (ii) if Borrower does not have an organizational identification number and
later obtains one, Borrower shall promptly notify Lender of such organizational identification
number and (iii) Borrower will not change its type of organization, jurisdiction of organization or
other legal structure.


 


37









 





(w) Compliance with Anti-Terrorism, Embargo and Anti-Money Laundering Laws.
(i) None of Borrower, SPE Pledgor, General Partner, any Guarantor, or any Person who owns any
equity interest in or Controls Borrower, SPE Pledgor, General Partner or any Guarantor currently is
identified on the OFAC List or otherwise qualifies as a Prohibited Person, and Borrower and SPE
Pledgor have implemented procedures, approved by Borrower and, if applicable, General Partner, to
ensure that no Person who now or hereafter owns an equity
interest in Borrower, SPE Pledgor or General Partner is a Prohibited Person or Controlled by a
Prohibited Person, (ii) no proceeds of the Loan will be used to fund any operations in, finance any
investments or activities in or make any payments to, Prohibited Persons, and (iii) none of
Borrower, SPE Pledgor, General Partner, or any Guarantor are in violation of any Legal Requirements
relating to anti-money laundering or anti-terrorism, including, without limitation, Legal
Requirements related to transacting business with Prohibited Persons or the requirements of the
Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct
Terrorism Act of 2001, U.S. Public Law 107-56, and the related regulations issued thereunder,
including temporary regulations, all as amended from time to time. No tenant under a Space Lease
at the Property currently is identified on the OFAC List or otherwise qualifies as a Prohibited
Person, and, to the best of Borrower’s knowledge, no tenant at the Property is owned or Controlled
by a Prohibited Person. Borrower has determined that Manager has implemented procedures, approved
by Borrower, to ensure that no tenant under a Space Lease at the Property is a Prohibited Person or
owned or Controlled by a Prohibited Person.



Section 2.03. Further Acts, etc. Borrower will, at the cost of Borrower, and without
expense to Lender, do, execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, mortgages or deeds of trust, as applicable, assignments, notices of assignments,
transfers and assurances as Lender or Trustee shall, from time to time, reasonably require for the
better assuring, conveying, assigning, transferring, and confirming unto Lender and Trustee the
property and rights hereby mortgaged, given, granted, bargained, sold, alienated, enfeoffed,
conveyed, confirmed, pledged, assigned and hypothecated, or which Borrower may be or may hereafter
become bound to convey or assign to Lender and Trustee, or for carrying out or facilitating the
performance of the terms of this Security Instrument or for filing, registering or recording this
Security Instrument and, on demand, will execute and deliver and 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, chattel mortgages or comparable security
instruments to evidence more effectively the lien hereof upon the Property. Borrower hereby
authorizes Lender and Trustee, severally, to file any financing statements, and amendments to
financing statements, in any jurisdictions and with any filing offices as Lender or Trustee,
severally, may determine, in its sole discretion, are necessary or advisable to perfect the
security interest granted to Trustee hereunder. Such financing statements may describe the
collateral in the same manner as described in this document or may contain an indication or
description of collateral that describes such property in any other manner Lender or Trustee so
chooses, including, without limitation, describing such property as “all assets, whether now owned
or hereafter acquired” or “all personal property, whether now owned or hereafter acquire”.
Borrower grants to Lender an irrevocable power of attorney coupled with an interest for the purpose
of protecting, perfecting, preserving and realizing upon the interests granted pursuant to this
Security Instrument and to effect the intent hereof, all as fully and effectually as Borrower might
or could do; and Borrower hereby ratifies all that Lender shall lawfully do or cause to be done by
virtue hereof. Upon receipt of an affidavit of an officer of Lender as to the loss, theft,
destruction or mutilation of the Note or any other Loan Document which is not of public record,
and, in the case of any such mutilation, upon surrender and cancellation of such Note or other
applicable Loan Document, Borrower will issue, in lieu thereof, a replacement Note or other
applicable Loan Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Loan Document in the same principal amount thereof and otherwise of like
tenor.


 


38









 





Section 2.04. Recording of Security Instrument, etc. Borrower forthwith upon the
execution and delivery of this Security Instrument and thereafter, from time to time, will cause
this Security Instrument, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Property 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 protect the lien or security interest hereof
upon, and the interest of Lender in, the Property. Borrower will pay all filing, registration or
recording fees, and all expenses incident to the preparation, execution and acknowledgment of this
Security Instrument, any mortgage or deed of trust, as applicable, supplemental hereto, any
security instrument with respect to the Property and any instrument of further assurance, 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 this Security Instrument, any mortgage or
deed of trust, as applicable, supplemental hereto, any security instrument with respect to the
Property or any instrument of further assurance, except where prohibited by law to do so, in which
event Lender may declare the Debt to be immediately due and payable. Borrower shall hold harmless
and indemnify Lender and Trustee, and their successors and assigns, against any liability incurred
as a result of the imposition of any tax on the making and recording of this Security Instrument.



Section 2.05. Representations, Warranties and Covenants Relating to the Property.
Borrower represents and warrants to and covenants with Lender with respect to the Property as
follows:



(a) Lien Priority. This Security Instrument is a valid and enforceable
first lien on the Property, free and clear of all encumbrances and liens having priority over the
lien of this Security Instrument, except for the items set forth as exceptions to, subordinate
matters in, or otherwise disclosed in the title insurance policy insuring the lien of this Security
Instrument, none of which, individually or in the aggregate, materially interfere with the benefits
of the security intended to be provided by this Security Instrument, materially affect the value or
marketability of the Property, materially impair the use or operation of the Property for the use
currently being made thereof or impair Borrower’s ability to pay its obligations in a timely manner
(such items being the “Permitted Encumbrances”).



(b) Title. Borrower has, subject only to the Permitted Encumbrances, good,
insurable and marketable fee simple title to the Premises, Improvements and Fixtures (the
Improvements and Fixtures, together with the Premises are referred to collectively as the
“Realty”) and good, insurable and marketable title to all easements and rights benefiting
the Realty and has the right, power and authority to mortgage, encumber, give, grant, bargain,
sell, alien, enfeoff, convey, confirm, pledge, assign, and hypothecate the Property. Borrower will
preserve its interest in and title to the Property and will forever warrant and defend the same to
Lender against any and all claims made by, through or under Borrower and will forever warrant and
defend the validity and priority of the lien and security interest created herein against the
claims of all Persons whomsoever claiming by, through or under Borrower. The foregoing warranty of
title shall
survive the foreclosure of this Security Instrument and shall inure to the benefit of and be
enforceable by Lender in the event Lender acquires title to the Property pursuant to any
foreclosure. In addition, there are no outstanding options or rights of first refusal to purchase
the Property or Borrower’s ownership thereof.


 


39









 





(c) Taxes and Impositions. All taxes and other Impositions and governmental
assessments due and payable in respect of, and affecting, the Property have been paid to the extent
due and payable as of the date hereof. Borrower has paid all Impositions which constitute special
governmental assessments in full, except for those assessments which are permitted by applicable
Legal Requirements to be paid in installments, in which case all installments which are due and
payable have been paid in full. There are no pending, or to Borrower’s best knowledge, proposed
special or other assessments for public improvements or otherwise affecting the Property, nor are
there any contemplated improvements to the Property that may result in such special or other
assessments.



(d) Casualty; Flood Zone. The Realty is in good repair and free and clear
of any damage, destruction or casualty (whether or not covered by insurance) that would materially
affect the value of the Realty or the use for which the Realty is currently being used, there
exists no structural or other material defects or damages in or to the Property and Borrower has
not received any written notice from any insurance company or bonding company of any material
defect or inadequacies in the Property, or any part thereof, which would materially and 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. No
portion of the Premises is located in an “area of special flood hazard,” as that term is defined in
the regulations of the Federal Insurance Administration, Department of Housing and Urban
Development, under the National Flood Insurance Act of 1968, as amended (24 CFR § 1909.1), other
than as disclosed in the surveys of the Property delivered to Lender by Borrower in connection with
the origination of the Loan, or Borrower has obtained the flood insurance required by Section
3.01(a)(vi) hereof. The Premises either does not lie in a 100 year flood plain that has been
identified by the Secretary of Housing and Urban Development or any other Governmental Authority
or, if it does, Borrower has obtained the flood insurance required by Section 3.01(a)(vi) hereof.



(e) Completion; Encroachment. All Improvements necessary for the efficient
use and operation of the Premises have been completed and, other than as disclosed in the surveys
of the Property delivered to Lender by Borrower in connection with the origination of the Loan,
none of said Improvements lie outside the boundaries and building restriction lines of the
Premises. Except as set forth in the title insurance policy insuring the lien of this Security
Instrument, no improvements on adjoining properties encroach upon the Premises.



(f) Separate Lot. The Premises are taxed separately without regard to any
other real estate and constitute a legally subdivided lot under all applicable Legal Requirements
(or, if not subdivided, no subdivision or platting of the Premises is required under applicable
Legal Requirements), and for all purposes may be mortgaged, encumbered, conveyed or otherwise dealt
with as an independent parcel. The Property does not benefit from any tax abatement or exemption.






 


40









 







(g) Use. The existence of all Improvements, the present use and operation
thereof and the access of the Premises and the Improvements to all of the utilities and other items
referred to in paragraph (k) below are in compliance in all material respects with all Leases
affecting the Property and all applicable Legal Requirements, including, without limitation,
Environmental Statutes, Development Laws and Use Requirements. Borrower has not received any
notice from any Governmental Authority alleging any uncured violation relating to the Property of
any applicable Legal Requirements.



(h) Licenses and Permits. Borrower currently holds and will continue to
hold all certificates of occupancy, licenses, registrations, permits, consents, franchises and
approvals of any Governmental Authority or any other Person which are material for the lawful
occupancy and operation of the Realty or which are material to the ownership or operation of the
Property or the conduct of Borrower’s business. All such certificates of occupancy, licenses,
registrations, permits, consents, franchises and approvals are current and in full force and
effect.



(i) Intentionally Omitted.



(j) Property Proceedings. There are no actions, suits or proceedings
pending or, to Borrower’s knowledge, threatened in any court or before any Governmental Authority
or arbitration board or tribunal (i) relating to (A) the zoning of the Premises or any part
thereof, (B) any certificates of occupancy, licenses, registrations, permits, consents or approvals
issued with respect to the Property or any part thereof, (C) the condemnation of the Property or
any part thereof, or (D) the condemnation or relocation of any roadways abutting the Premises
required for access or the denial or limitation of access to the Premises or any part thereof from
any point of access to the Premises, (ii) asserting that (A) any such zoning, certificates of
occupancy, licenses, registrations, permits, consents and/or approvals do not permit the operation
of any material portion of the Realty as presently being conducted, (B) any material improvements
located on the Property or any part thereof cannot be located thereon or operated with their
intended use or (C) the operation of the Property or any part thereof is in violation in any
material respect of any Environmental Statutes, Development Laws or other Legal Requirements or
Space Leases or Property Agreements or (iii) which could reasonably be expected to (A) affect the
validity or priority of any Loan Document or (B) have a Material Adverse Effect. Borrower is not
aware of any facts or circumstances which may give rise to any actions, suits or proceedings
described in the preceding sentence.



(k) Utilities. The Premises has all necessary legal access to water, gas
and electrical supply, storm and sanitary sewerage facilities, other required public utilities
(with respect to each of the aforementioned items, by means of either a direct connection to the
source of such utilities or through connections available on publicly dedicated roadways directly
abutting the Premises or through permanent insurable easements benefiting the Premises), fire and
police protection, parking, and means of direct access between the Premises and public highways
over recognized curb cuts (or such access to public highways is through private roadways which may
be used for ingress and egress pursuant to permanent insurable easements).



(l) Mechanics’ Liens. The Property is free and clear of any mechanics’
liens or liens in the nature thereof, and to Borrower’s knowledge no rights are outstanding that
under law could give rise to any such liens, any of which liens are or may be prior to, or equal
with, the lien
of this Security Instrument, except those which are insured against by the title insurance policy
insuring the lien of this Security Instrument.


 


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(m) Intentionally Omitted.



(n) Insurance. The Property is insured in accordance with the requirements
set forth in Article III hereof.



(o) Space Leases.




(i) Borrower has delivered a true, correct and complete schedule of all
Space Leases as of the date hereof, which accurately and completely sets forth in all
material respects, for each such Space Lease, the following (collectively, the “Rent
Roll”): the name and address of the tenant with the name, title and telephone number
of the contact person of such tenant; the lease expiration date, extension and renewal
provisions; the base rent and percentage rent payable; all additional rent and pass-through
obligations; and the security deposit held thereunder and the location of such deposit.




(ii) Each Space Lease constitutes the legal, valid and binding obligation of
Borrower and, to the knowledge of Borrower, is enforceable against the tenant thereof. No
default exists, or with the passing of time or the giving of notice would exist, (A) under
any Major Space Lease or (B) under any other Space Leases which would, in the aggregate,
have a Material Adverse Effect.




(iii) No tenant under any Space Lease has, as of the date hereof, paid Rent
more than thirty (30) days in advance, and the Rents under such Space Leases have not been
waived, released, or otherwise discharged or compromised other than in accordance with the
terms of such Space Lease.




(iv) All work to be performed by Borrower under the Space Leases has been
substantially performed, all contributions to be made by Borrower to the tenants thereunder
have been made except for any held-back amounts, and all other conditions precedent to the
commencement of the term thereunder have been satisfied.




(v) Except as previously disclosed to Lender in writing, there are no
options to terminate any Space Lease.




(vi) Each tenant under a Major Space Lease has entered into occupancy of the
demised premises to the extent required under the terms of its Major Space Lease, and each
such tenant is open and conducting business with the public in the demised premises. To
the best knowledge of Borrower, after due inquiry, each tenant under a Lease other than a
Major Space Lease has entered into occupancy of its demised premises under its Lease to the
extent required under the terms of its Lease and each such tenant is open and conducting
business with the public in the demised premises.




(vii) Borrower has delivered to Lender true, correct and complete copies of
all Space Leases described in the Rent Roll.






 


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(viii) Each Space Lease is in full force and effect and (except as disclosed on
the Rent Roll) has not been assigned, modified, supplemented or amended in any way.




(ix) To Borrower’s best knowledge, no tenant under a Space Lease has filed
any bankruptcy, reorganization or arrangement proceedings or made a general assignment for
the benefit of creditors.




(x) No Space Lease provides any party with the right to obtain a lien or
encumbrance upon the Property superior to the lien of this Security Instrument.



(p) Property Agreements.




(i) Borrower has delivered to Lender true, correct and complete copies of
all Property Agreements.




(ii) No Property Agreement provides any party with the right to obtain a
lien or encumbrance upon the Property superior to the lien of this Security Instrument.




(iii) No default exists or with the passing of time or the giving of notice
or both would exist under any Property Agreement which would, individually or in the
aggregate, have a Material Adverse Effect.




(iv) Borrower has not received or given any written communication which
alleges that a default exists or, with the giving of notice or the lapse of time, or both,
would exist under the provisions of any Property Agreement.




(v) No condition exists whereby Borrower or any future owner of the Property
may be required to purchase any other parcel of land which is subject to any Property
Agreement or which gives any Person a right to purchase, or right of first refusal with
respect to, the Property.




(vi) To the best knowledge of Borrower, no offset or any right of offset
exists respecting continued contributions to be made by any party to any Property Agreement
except as expressly set forth therein. Except as previously disclosed to Lender in writing,
no material exclusions or restrictions on the utilization, leasing or improvement of the
Property (including non-compete agreements) exists in any Property Agreement.




(vii) All “pre-opening” requirements contained in all Property Agreements
(including, but not limited to, all off-site and on-site construction requirements), if
any, have been fulfilled in all material respects, and, to the best of Borrower’s
knowledge, no condition now exists which would permit any party to any such Property
Agreement to refuse to honor its obligations thereunder in accordance with the terms
thereof.




(viii) All work, if any, to be performed by Borrower under each of the Property
Agreements has been substantially performed, all contributions to be made by Borrower to
any party to such Property Agreements have been made, and all other conditions to such
party’s obligations thereunder have been satisfied in all material respects.






 


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(q) Personal Property. Borrower has delivered to Lender a true, correct and
complete schedule of all material personal property, if any, owned by Borrower and located upon the
Property or used in connection with the use or operation of the Realty and Borrower represents that
it has good and marketable title to all such material personal property, free and clear of any
liens, except for Permitted Encumbrances and liens which describe the equipment and other personal
property owned by tenants.



(r) Leasing Brokerage and Management Fees. Except as disclosed pursuant to
the Management Agreements, there are no brokerage fees or commissions payable by Borrower with
respect to the leasing of space at the Property and there are no management fees payable by
Borrower with respect to the management of the Property.



(s) Security Deposits. All security deposits with respect to the Property,
if any, on the date hereof have been transferred to the Security Deposit Account on the date
hereof, and Borrower is in compliance with all Legal Requirements relating to such security
deposits as to which failure to comply could reasonably be expected to, individually or in the
aggregate, have a Material Adverse Effect.



(t) Appraisal. Borrower has no knowledge that any of the facts or
assumptions on which the Appraisal was based are false or incomplete in any material respect and
has no information that would reasonably suggest that the fair market value determined in the
Appraisal does not reflect the actual fair market value of the Property.



(u) Representations Generally. The representations and warranties contained
in this Security Instrument, and the review and inquiry made on behalf of Borrower therefor, have
all been made by Persons having the requisite expertise and knowledge to provide such
representations and warranties. No representation, warranty or statement of fact made by or on
behalf of Borrower in this Security Instrument or in any certificate, document or schedule
furnished to Lender pursuant hereto, contains any untrue statement of a material fact or omits to
state any material fact necessary to make statements contained therein or herein not misleading
(which may be to Borrower’s best knowledge where so provided herein). There are no facts presently
known to Borrower which have not been disclosed to Lender which would, individually or in the
aggregate, have a Material Adverse Effect nor which could reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect.



(v) Liquor License. All licenses, permits, approvals and consents which are
required for the sale and service of alcoholic beverages on the Premises have been obtained from
the applicable Governmental Authorities.



(w) Credit Card Companies. The only Credit Card Companies are Chase Merchant
Services and American Express.



Section 2.06. Removal of Lien. (a) Borrower shall, at its expense, maintain this
Security Instrument as a first lien on the Property and shall keep the Property free and clear of
all liens and encumbrances of any kind and nature other than the Permitted Encumbrances. Borrower
shall, within ten (10) days following the filing thereof, promptly discharge of record, by bond or
otherwise, any such liens and, promptly upon request by Lender, shall deliver to Lender evidence
reasonably satisfactory to Lender of the discharge thereof.


 


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(b) Without limitation to the provisions of Section 2.06(a) hereof, Borrower shall
(i) unless being contested in good faith by appropriate proceedings in accordance with Section
2.06(c) hereof, pay, from time to time when the same shall become due, all claims and demands of
mechanics, materialmen, laborers, and others which, if unpaid, might result in, or permit the
creation of, a lien on the Property or any part thereof, (ii) cause to be removed of record (by
payment or posting of bond or settlement or otherwise) any mechanics’, materialmens’, laborers’ or
other lien on the Property, or any part thereof, or on the revenues, rents, issues, income or
profit arising therefrom, and (iii) in general, do or cause to be done, without expense to Lender,
everything reasonably necessary to preserve in full the lien of this Security Instrument. If
Borrower fails to comply with the requirements of this Section 2.06(b), then, upon five (5)
Business Days’ prior notice to Borrower, Lender may, but shall not be obligated to, pay any such
lien, and Borrower shall, within five (5) Business Days after Lender’s demand therefor, reimburse
Lender for all sums so expended, together with interest thereon at the Default Rate from the date
advanced, all of which shall be deemed part of the Debt. Nothing contained herein shall be deemed
a consent or request of Lender, express or implied, by inference or otherwise, to the performance
of any alteration, repair or other work by any contractor, subcontractor or laborer or the
furnishing of any materials by any materialmen in connection therewith.



(c) Notwithstanding the foregoing, Borrower may contest any lien (other than a lien
relating to non-payment of Impositions, the contest of which shall be governed by Section 4.04
hereof) of the type set forth in subparagraph (b)(ii) of this Section 2.06 provided that, following
prior notice to Lender (i) Borrower is contesting the validity of such lien with due diligence and
in good faith and by appropriate proceedings, without cost or expense to Lender or any of its
agents, employees, officers, or directors, (ii) Borrower shall preclude the collection of, or other
realization upon, any contested amount from the Property or any revenues from or interest in the
Property, (iii) neither the Property nor any part thereof nor interest therein, shall be in any
danger of being sold, forfeited or lost by reason of such contest by Borrower, (iv) such contest by
Borrower shall not affect the ownership, use or occupancy of the Property, (v) such contest by
Borrower shall not subject Lender, Trustee or Borrower to the risk of civil or criminal liability
(other than the civil liability of Borrower for the amount of the lien in question), (vi) such lien
is subordinate to the lien of this Security Instrument, (vii) Borrower has not consented to such
lien, (viii) Borrower has given Lender prompt notice of the filing of such lien and the bonding
thereof by Borrower and, upon request by Lender from time to time, notice of the status of such
contest by Borrower and/or confirmation of the continuing satisfaction of the conditions set forth
in this Section 2.06(c), (ix) Borrower shall promptly pay the obligation secured by such lien upon
a final determination of Borrower’s liability therefor, and (x) Borrower shall deliver to Lender
cash, a bond or other security acceptable to Lender equal to 125% of the contested amount pursuant
to collateral arrangements reasonably satisfactory to Lender.


 


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Section 2.07. Cost of Defending and Upholding this Security Instrument Lien. If any
action or proceeding is commenced to which Lender or Trustee is made a party relating to the Loan
Documents and/or the Property or Lender’s or Trustee’s interest therein or in which it becomes
necessary to defend or uphold the lien of this Security Instrument or any other Loan
Document, Borrower shall, on demand, reimburse Lender and/or Trustee, as applicable, for all
expenses (including, without limitation, reasonable attorneys’ fees and disbursements) incurred by
Lender and/or Trustee, as applicable, in connection therewith, and such sum, together with interest
thereon at the Default Rate from and after such demand until fully paid, shall constitute a part of
the Debt.



Section 2.08. Use of the Property. Borrower will use, or cause to be used, the
Property for such use as is permitted pursuant to applicable Legal Requirements including, without
limitation, under the certificate of occupancy applicable to the Property, and which is required by
the Loan Documents. Borrower shall not suffer or permit the Property or any portion thereof to be
used by the public, any tenant, or any Person not subject to a Lease, in a manner as is reasonably
likely to impair Borrower’s title to the Property, or in such manner as may give rise to a claim or
claims of adverse usage or adverse possession by the public, or of implied dedication of the
Property or any part thereof.



Section 2.09. Financial Reports. (a) Borrower will keep and maintain or will cause
to be kept and maintained on a Fiscal Year basis, in accordance with GAAP, the Uniform System of
Accounts (or such other accounting basis reasonably acceptable to Lender) consistently applied,
proper and accurate books, tax returns, records and accounts reflecting (i) all of the financial
affairs of Borrower, Guarantor and (ii) all items of income and expense in connection with the
operation of the Property or in connection with any services, equipment or furnishings provided in
connection with the operation thereof, whether such income or expense may be realized by Borrower
or by any other Person whatsoever, excepting lessees unrelated to and unaffiliated with Borrower
who have leased from Borrower portions of the Premises for the purpose of occupying the same.
Lender shall have the right from time to time at all times during normal business hours upon
reasonable notice to examine such books, tax returns, records and accounts at the office of
Borrower or other Person maintaining such books, tax returns, records and accounts and to make such
copies or extracts thereof as Lender shall desire. After the occurrence and during the continuance
of an Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower’s, Guarantor’s accounting records with respect to the Property, as Lender shall determine
to be necessary or appropriate in the protection of Lender’s interest.



(b) Borrower will furnish Lender (i) annually, within one hundred twenty (120) days
following the end of each Fiscal Year of Borrower and (ii) on a quarterly basis, within forty-five
(45) days following the end of the first three (3) fiscal quarters of Borrower, with a complete
copy of Borrower’s financial statement consistently applied covering (i) all of the financial
affairs of Borrower and (ii) the operation of the Property for such Fiscal Year or fiscal quarters,
as applicable, and containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s equity. Each annual financial statement shall be audited
by a nationally recognized Independent certified public accountant that is reasonably acceptable to
Lender in accordance with GAAP, the Uniform System of Accounts (or such other accounting basis
reasonably acceptable to Lender). Together with the financial statements required to be furnished
pursuant to this Section 2.09(b), Borrower shall furnish to Lender an Officer’s Certificate
certifying as of the date thereof (1) that the financial statements accurately represent the
results of operations and financial condition of Borrower and the Property all in accordance with
GAAP, the Uniform System of Accounts (or such other accounting basis reasonably
acceptable to Lender) consistently applied, and (2) whether there exists a Default under the Note
or any other Loan Document executed and delivered by Borrower, and if such event or circumstance
exists, the nature thereof, the period of time it has existed and the action then being taken to
remedy such event or circumstance.


 


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(c) During the continuance of an O&M Operative Period and when requested by Lender,
Borrower will furnish Lender monthly, within twenty (20) days following the end of each month, with
a true, complete and correct cash flow statement with respect to the Property in the form attached
hereto as Exhibit C and made a part hereof, showing (i) all cash receipts of any kind whatsoever
and all cash payments and disbursements and (ii) year-to-date summaries of such cash receipts,
payments and disbursements, together with a certification of Manager stating that such cash flow
statement is true, complete and correct and a list of all litigation and proceedings affecting
Borrower or the Property in which the amount involved is $250,000 or more, if not covered by
insurance (or $1,000,000 or more whether or not covered by insurance).



(d) During the continuance of an O&M Operative Period and when requested by Lender,
Borrower will furnish Lender monthly, within twenty (20) days following the end of each month, with
a certification of Manager stating that all sums released from the Operation and Maintenance
Expense Escrow Account to Borrower have been used to pay Operating Expenses or will be used within
thirty (30) days of the date released to Borrower to pay Operating Expenses pursuant to Section
5.09 hereof (any such certification or any certification furnished by a Manager pursuant to clause
(c) above, a “Manager Certification”).



(e) Borrower will furnish Lender annually, within twenty (20) days following the end
of each year and within twenty (20) days following receipt of such request therefor, with a true,
complete and correct rent roll for the Property, including a list of which tenants are in default
under their respective Leases, dated as of the date of Lender’s request, identifying the items set
forth in the Rent Roll and each tenant that, to Borrower’s knowledge, has filed a bankruptcy,
insolvency, or reorganization proceeding since delivery of the last such rent roll, and the
arrearages, if any, for each tenant, if any, and such rent roll shall be accompanied by an
Officer’s Certificate, dated as of the date of the delivery of such rent roll, certifying that such
rent roll is true, correct and complete in all material respects as of its date.



(f) Borrower shall furnish to Lender, within thirty (30) days after Lender’s
request therefor, with such further detailed information with respect to the operation of the
Property and the financial affairs of Borrower as may be reasonably requested by Lender.



(g) Borrower shall cause Manager to furnish to Lender, within one hundred twenty
(120) days following the end of each Fiscal Year of Borrower and upon request of Lender, a schedule
of tenant security deposits showing any activity in the Security Deposit Account for such month,
together with a certification of Manager as to the balance in such Security Deposit Account and
that such tenant security deposits are being held in accordance with all Legal Requirements.



(h) Borrower will furnish Lender annually, within one hundred twenty (120) days
after the end of each Fiscal Year, with a report setting forth (i) the Net Operating Income for
such Fiscal Year, (ii) the average occupancy rate of the Property during such Fiscal Year,
(iii) the
Capital Expenditures incurred at the Property during such Fiscal Year and the aggregate Recurring
Replacement Expenditures made in connection therewith, and (iv) the balance contained in each of
the Escrow Accounts as of the end of such Fiscal Year (which balance Lender shall provide upon
Borrower’s written request therefor).


 


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(i) Borrower shall cause Manager to keep and maintain on a Fiscal Year basis, in
accordance with GAAP and the Uniform System of Accounts (or such other accounting basis reasonably
acceptable to Lender) consistently applied, proper and accurate books, records and accounts on an
accrual basis reflecting (i) all of the financial results of operation and financial conditions of
Manager and (ii) all items of income and expense in connection with the operation of the Property
or in connection with any services, equipment or furnishings provided in connection with the
operation thereof, whether such income or expense may be realized by Manager or by any other Person
whatsoever. Lender shall have the right from time to time at all times during normal business
hours upon reasonable notice to examine such books, records and accounts at the office of Manager
or other Person maintaining such books, records and accounts and to make such copies or extracts
thereof as Lender shall desire. After the occurrence and during the continuance of an Event of
Default, Borrower shall pay any costs and expenses incurred by Lender to examine Manager’s
accounting records with respect to the Property, as Lender shall determine to be necessary or
appropriate in the protection of Lender’s interest.



(j) Borrower will furnish Lender monthly, within thirty (30) days following the end
of each month, an occupancy summary for the Property setting forth the occupancy rates, average
daily room rates, RevPAR Yield Index, RevPAR and room revenues for each month of the current
calendar year, as well as year-to-date averages, and such other information as may customarily be
reflected thereon or reasonably requested by Lender, together with all STR Reports received by
Borrower during the preceding month.



(k) Borrower shall and shall cause Guarantor to furnish to Lender annually, within
thirty (30) days of filing its respective tax return, a copy of such tax return and within one
hundred twenty (120) days after the end of each Fiscal Year or in lieu thereof deliver annual
financial statements of Guarantor prepared in accordance with GAAP which are audited by a
nationally recognized Independent certified public accountant that is reasonably acceptable to
Lender.



(l) Borrower shall submit to Lender for Lender’s written approval an Annual Budget
not later than fifteen (15) days prior to the commencement of each Fiscal Year, in form reasonably
satisfactory to Lender setting forth in reasonable detail budgeted monthly operating income and
monthly operating capital and other expenses for the Property. Each Annual Budget shall contain,
among other things, management fees, third party service fees, and other expenses as Borrower may
reasonably determine. Lender shall have the right to approve such Annual Budget which approval
shall not be unreasonably withheld, and in the event that Lender objects to the proposed Annual
Budget submitted by Borrower, Lender shall advise Borrower of such objections within fifteen (15)
days after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall, within ten (10) days after receipt of notice of any such
objections, revise such Annual Budget and resubmit the same to Lender. Lender shall advise






 


48









 







Borrower of any objections to such revised Annual Budget within ten (10) days after receipt thereof (and deliver to Borrower a reasonably detailed description of such
objections) and Borrower shall revise the same in accordance with the process described herein
until Lender approves an Annual Budget, provided, however, that if Lender shall not advise Borrower
of its objections to any proposed Annual Budget within the applicable time period set forth in this
Section, then such proposed Annual Budget shall be deemed approved by Lender. Until such time that
Lender approves a proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual increases in Basic
Carrying Costs and utilities expenses and to delete any non-recurring expenses. In the event that
Borrower must incur an Extraordinary Expense of the type described in clause (a) of the definition
of Extraordinary Expense, then Borrower shall promptly deliver to Lender a reasonably detailed
explanation of such proposed Extraordinary Expense for Lender’s approval, which approval may be
granted or denied in Lender’s sole and absolute discretion.



(m) In the event that Borrower fails to deliver any of the financial statements,
reports or other information required to be delivered to Lender pursuant to this Section 2.09 on or
prior to their due dates, if any such failure shall continue for ten (10) days following notice
thereof from Lender, Borrower shall pay to Lender on each Payment Date for each month or portion
thereof that any such financial statements, reports or other information remains undelivered, an
administrative fee in the amount of Two Thousand Five Hundred Dollars ($2,500) in the aggregate for
all failures occurring in any applicable month. Borrower agrees that such administrative fee (i)
is a fair and reasonable fee necessary to compensate Lender for its additional administrative costs
and increased costs relating to Borrower’s failure to deliver the aforementioned statements,
reports or other items as and when required hereunder and (ii) is not a penalty.



Section 2.10. Litigation. Borrower will give prompt written notice to Lender of any
litigation or governmental proceedings pending or threatened (in writing) against Borrower which
are reasonably likely to have a Material Adverse Effect.



Section 2.11. Updates of Representations. Borrower shall deliver to Lender within
ten (10) days of the request of Lender an Officer’s Certificate updating all of the representations
and warranties contained in this Security Instrument and the other Loan Documents and certifying
that all of the representations and warranties contained in this Security Instrument and the other
Loan Documents, as updated pursuant to such Officer’s Certificate, are true, accurate and complete
as of the date of such Officer’s Certificate. Notwithstanding the foregoing, provided that no
Event of Default has occurred and is continuing, Borrower shall not be required to deliver the
foregoing Officer’s Certificate more than three (3) times during the term of the Loan. For the
avoidance of doubt, Lender acknowledges and agrees that it shall not be the basis of a Default or
Event of Default hereunder if any representation that was true when made ceases to continue to be
true thereafter (unless and only to the extent that the same constitutes a breach of a covenant
hereunder or an “Event of Default” as expressly defined in Section 13.01 hereof).


 


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Section 2.12. Major Contracts. Borrower shall not enter into any new Major Contracts
or amend any existing Major Contracts without, in each instance, first obtaining Lender’s prior
consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing,
Lender hereby approves Jeffrey Chodorow or any entity Controlled by Jeffrey Chodorow as a
restaurant and bar operator for the bars and restaurants situated at the Premises, but reserves the
right to approve any economic terms of any new Major Contracts with Jeffrey Chodorow or any entity
Controlled by Jeffrey Chodorow unless such new Major Contracts are on terms which are substantially
the same or more favorable to the Property than the terms of the applicable Major Contracts in
effect prior to the amendment or renewal thereof, in which case such new Major Contracts shall be
deemed approved by Lender.



ARTICLE III: INSURANCE AND CASUALTY RESTORATION




Section 3.01. Insurance Coverage. Borrower shall, at its expense, maintain the
following insurance coverages with respect to the Property during the term of this Security
Instrument:




(a) (i) Insurance against loss or damage by fire, casualty and other hazards
included in an “all-risk” coverage endorsement or its equivalent (which, in the case of
insurance during the time of any construction work (“Construction”) shall be in
“builder’s risk completed value non-reporting form” together with rents, earnings and extra
expense insurance covering loss due to delay in completion of the Improvements), with such
endorsements as Lender may from time to time reasonably require and which are customarily
required by Institutional Lenders of similar properties similarly situated, including,
without limitation, if the Property constitutes a legal non-conforming use, an ordinance of
law coverage endorsement which contains “Demolition Cost”, “Loss Due to Operation of Law”
and “Increased Cost of Construction” coverages, covering the Property in an amount not less
than the greater of (A) 100% of the insurable replacement value of the Property (exclusive
of the Premises and footings and foundations) and (B) such other amount as is necessary to
prevent any reduction in such policy by reason of and to prevent Borrower, Lender or any
other insured thereunder from being deemed to be a co-insurer. Not less frequently than
once every three (3) years, Borrower, at its option, shall either (A) have the Appraisal
updated or obtain a new appraisal of the Property, (B) have a valuation of the Property
made by or for its insurance carrier conducted by an appraiser experienced in valuing
properties of similar type to that of the Property which are in the geographical area in
which the Property is located or (C) provide such other evidence as will, in Lender’s sole
judgment, enable Lender to determine whether there shall have been an increase in the
insurable value of the Property and Borrower shall deliver such updated Appraisal, new
appraisal, insurance valuation or other evidence acceptable to Lender, as the case may be,
and, if such updated Appraisal, new appraisal, insurance valuation, or other evidence
acceptable to Lender reflects an increase in the insurable value of the Property, the
amount of insurance required hereunder shall be increased accordingly and Borrower shall
deliver evidence satisfactory to Lender that such policy has been so increased.




(ii) Commercial general liability insurance against claims for personal and
bodily injury and/or death to one or more persons or property damage, occurring on, in or
about the Property (including the adjoining streets, sidewalks and passageways therein) in
such amounts as Lender may from time to time reasonably require (but in no event shall
Lender’s requirements be increased more frequently than once during each twelve (12)
month period) and which are customarily required by Institutional Lenders for similar
properties similarly situated, but not less than $1,000,000 per occurrence and $2,000,000
general aggregate on a per location basis and, in addition thereto, not less than
$75,000,000 excess and/or umbrella liability insurance shall be maintained for any and all
claims.


 


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(iii) Business interruption, rent loss or other similar insurance with an
unlimited indemnity period (A) with loss payable to Lender, (B) covering all risks required
to be covered by the insurance provided for in Section 3.01(a)(i) hereof and (C) in an
amount not less than 100% of the projected total revenues derived from the Property for the
succeeding twenty-four (24) month period based on an occupancy rate taking into account
historical and projected occupancy. The amount of such insurance shall be determined upon
the execution of this Security Instrument, and not more frequently than once each calendar
year thereafter based on Borrower’s reasonable estimate of projected fixed or base rent
plus percentage rent, from the Property for the next succeeding twenty-four (24) months.
In the event the Property shall be damaged or destroyed, Borrower shall and hereby does
assign to Lender all payment of claims under the policies of such insurance, and all
amounts payable thereunder, and all net amounts, shall be collected by Lender under such
policies and shall be applied in accordance with this Security Instrument; provided,
however, that nothing herein contained shall be deemed to relieve Borrower of its
obligations to timely pay all amounts due under the Loan Documents.




(iv) War risk insurance when such insurance is obtainable from the United
States of America or any agency or instrumentality thereof at reasonable rates (for the
maximum amount of insurance obtainable) and if requested by Lender, and such insurance is
then customarily required by Institutional Lenders of similar properties similarly
situated. As of the Closing Date, no insurance of the type set forth in this Section
3.01(a)(iv) is required.




(v) Insurance against loss or damages from (A) leakage of sprinkler systems
and (B) explosion of steam boilers, air conditioning equipment, pressure vessels or similar
apparatus now or hereafter installed at the Property, in such amounts as Lender may from
time to time reasonably require and which are then customarily required by Institutional
Lenders of similar properties similarly situated.




(vi) Flood insurance in an amount equal to the full insurable value of the
Property or the maximum amount available, whichever is less, if the Improvements are
located in an area designated by the Secretary of Housing and Urban Development as being
“an area of special flood hazard” under the National Flood Insurance Program (i.e.,
having a one percent or greater chance of flooding), and if flood insurance is available
under the National Flood Insurance Act.




(vii) Worker’s compensation insurance or other similar insurance which may be
required by Governmental Authorities or Legal Requirements.




(viii) Intentionally omitted.






 


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(ix) Insurance against damage resulting from acts of terrorism, or an
insurance policy without an exclusion for damages resulting from terrorism, on terms
consistent with the commercial property insurance policy required under subsections (i),
(ii) and (iii) above; provided, however, Borrower shall not be required to carry more than
the amount of insurance required pursuant to this Section 3.01(a)(ix) as is available for
an annual premium of 200% of the total annual premium of the insurance required pursuant to
this Section 3.01(a)(ix) during the previous policy year.




(x) At all times during Construction, contractor’s liability insurance to a
limit acceptable to Lender in its reasonable discretion based upon, among other things,
then current market standards and the scope of work, covering each contractor’s
construction operation at the Premises (which insurance may be provided by the contractor).




(xi) Such other insurance as may from time to time be required by Lender and
which is then customarily required by Institutional Lenders for similar properties
similarly situated, against other insurable hazards, including, but not limited to,
malicious mischief, vandalism, loss resulting from mold, spores or fungus on or about the
Premises, (which Lender acknowledges, as of the Closing Date is not required hereunder),
sinkhole and mine subsidence, windstorm and/or earthquake, due regard to be given to the
size and type of the Premises, Improvements, Fixtures and Equipment and their location,
construction and use.




(xii) If Borrower, any of its Affiliates or Manager holds a liquor license
for the Premises, liquor liability insurance in the amount of no less than $10,000,000.




(xiii) Automobile liability insurance covering owned, hired and not owned
vehicles in an amount of not less than $1,000,000 per accident.



(b) Borrower shall cause any Manager of the Property to maintain fidelity insurance
in an amount equal to or greater than $10,000,000.



Section 3.02. Policy Terms. (a) All insurance required by this Article III shall be
in the form (other than with respect to Sections 3.01(a)(vi) and (vii) above when insurance in
those two sub-sections is placed with a governmental agency or instrumentality on such agency’s
forms) and amount and with deductibles as, from time to time, shall be reasonably acceptable to
Lender, under valid and enforceable policies issued by financially responsible insurers authorized
to do business in the State where the Property is located, which shall have a claims paying ability
rating and/or financial strength rating, as applicable, of not less than “A-” (or its equivalent),
or such lower claims paying ability rating and/or financial strength rating, as applicable, as
Lender shall, in its reasonable discretion (taking into account then current Rating Agency
guidelines), consent to, from a Rating Agency (one of which after a Securitization in which
Standard & Poor’s rates any securities issued in connection with such Securitization, shall be
Standard & Poor’s). Originals or certified copies of all insurance policies shall be delivered to
and held by Lender. All such policies (except policies for worker’s compensation) shall name
Lender, its successors and/or assigns as an additional named insured, with respect to the insurance
required pursuant to Section 3.01(a)(iii) above, shall provide for loss payable to Lender, its
successors and/or assigns and shall contain (or have






 


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attached): (i) standard “non-contributory
mortgagee” endorsement or its equivalent relating, inter alia, to recovery by Lender
notwithstanding the negligent or willful acts or omissions of Borrower; (ii) a waiver of
subrogation endorsement as to Lender; (iii) an endorsement indicating that neither Lender nor
Borrower shall be or be deemed to be a co-insurer with respect to any casualty risk insured by such
policies and shall provide for a deductible per loss of an amount not more than the lesser of (x)
that which is customarily maintained by owners of similar properties similarly situated and (y)
$250,000 or, with respect to the deductible under any insurance against losses resulting from
windstorms, 5% of the values at risk or, with respect to the deductible under any insurance against
losses resulting from earthquake, 5% of the values at risk, and (iv) a provision that such policies
shall not be canceled, terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty (30) days’ prior
written notice to Lender in each instance. Not less than thirty (30) days prior to the expiration
dates of the insurance policies obtained pursuant to this Security Instrument, originals or
certified copies of renewals of such policies (or certificates evidencing such renewals) bearing
notations evidencing the payment of premiums or accompanied by other reasonable evidence of such
payment (which premiums shall not be paid by Borrower through or by any financing arrangement which
would entitle an insurer to terminate a policy; provided, however, premiums for the insurance
required pursuant to Section 3.01(a)(i) may be paid quarterly in advance or as otherwise reasonably
acceptable to Lender, it being acknowledged that paying the premium for such policies by financing
the same, paying twenty percent (20%) of the total annual premium (inclusive of finance charges) at
the time of the applicable policy renewal and paying the remaining eighty percent (80%) of the
total annual premium (inclusive of finance charges) in nine (9) equal monthly installments is
acceptable to Lender) shall be delivered by Borrower to Lender. Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event of loss, with any insurance
required under this Article III.



(b) If Borrower fails to maintain and deliver to Lender the original policies or
certificates of insurance required by this Security Instrument, or if there are insufficient funds
in the Basic Carrying Costs Escrow Account to pay the premiums for same, Lender may, at its option,
procure such insurance, and Borrower shall pay, or as the case may be, reimburse Lender for, all
premiums thereon promptly, upon demand by Lender, with interest thereon at the Default Rate from
the date paid by Lender to the date of repayment and such sum shall constitute a part of the Debt.



(c) Borrower shall notify Lender of the renewal premium of each insurance policy and
Lender shall be entitled to pay such amount on behalf of Borrower from the Basic Carrying Costs
Escrow Account in accordance with the financing schedule of the payments for such premiums, if any,
or, if an Event of Default has occurred and is continuing, in full or such other manner as Lender
may elect. With respect to insurance policies which require periodic payments (i.e., monthly or
quarterly) of premiums, Lender shall be entitled to pay such amounts ten (10) days (or such lesser
number of days as Lender shall determine) prior to the respective due dates of such installments.


 


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(d) The insurance required by this Security Instrument may, at the option of
Borrower, be effected by blanket and/or umbrella policies issued to Borrower covering the Property
provided that, in each case, the policies otherwise comply with the provisions of this
Security Instrument and allocate to the Property, from time to time (but in no event less than once
a year), the coverage specified by this Security Instrument, without possibility of reduction or
coinsurance by reason of damage to any other property (real or personal) named therein. If the
insurance required by this Security Instrument shall be effected by any such blanket or umbrella
policies, Borrower shall furnish to Lender (i) original policies or certified copies thereof, or an
original certificate of insurance together with reasonable access to the original of such policy to
review such policy’s coverage of the Property, with schedules attached thereto showing the amount
of the insurance provided under such policies applicable to the Property and (ii) an Officer’s
Certificate setting forth (A) the number of properties covered by such policy, (B) the location by
city (if available, otherwise, county) and state of the properties, (C) the average square footage
of the properties, (D) a brief description of the typical construction type included in the blanket
policy and (E) such other information as Lender may reasonably request.



Section 3.03. Assignment of Policies. (a) Borrower hereby assigns to Lender the
proceeds of all insurance (other than worker’s compensation and liability insurance) obtained
pursuant to this Security Instrument, all of which proceeds shall be payable to Lender as
collateral and further security for the payment of the Debt and the performance of Borrower’s
obligations hereunder and under the other Loan Documents, and Borrower hereby authorizes and
directs the issuer of any such insurance to make payment of such proceeds directly to Lender.
Except as otherwise expressly provided in Section 3.04 or elsewhere in this Article III, Lender
shall have the option, in its discretion, and without regard to the adequacy of its security, to
apply all or any part of the proceeds it may receive pursuant to this Article in such manner as
Lender may elect to any one or more of the following: (i) the payment of the Debt, whether or not
then due, in accordance with the provisions of the Note, (ii) the repair or restoration of the
Property, (iii) the cure of any Default or (iv) the reimbursement of the costs and expenses of
Lender incurred pursuant to the terms hereof in connection with the recovery of the Insurance
Proceeds. Subject to Section 15.03(a), nothing herein contained shall be deemed to excuse Borrower
from repairing or maintaining the Property as provided in this Security Instrument or restoring all
damage or destruction to the Property, regardless of the sufficiency of the Insurance Proceeds, and
the application or release by Lender of any Insurance Proceeds shall not cure or waive any Default
or notice of Default.



(b) In the event of the foreclosure of this Security Instrument or any other
transfer of title or assignment of all or any part of the Property in extinguishment, in whole or
in part, of the Debt, all right, title and interest of Borrower in and to all policies of insurance
required by this Security Instrument shall inure to the benefit of the successor in interest to
Borrower or the purchaser of the Property (it being acknowledged that the policy required pursuant
to Section 3.01(a)(ii) hereof shall not be required to be assigned to Lender). If, prior to the
receipt by Lender of any proceeds, the Property or any portion thereof shall have been sold on
foreclosure of this Security Instrument or by deed in lieu thereof or otherwise, or any claim under
such insurance policy arising during the term of this Security Instrument is not paid until after
the extinguishment of the Debt, and Lender shall not have received the entire amount of the Debt
outstanding at the time of such extinguishment, whether or not a deficiency judgment on this
Security Instrument shall have been sought or recovered or denied, then, the proceeds of any such
insurance to the extent of the amount of the Debt not so received, shall






 


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be paid to and be the
property of Lender, together with interest thereon at the Default Rate, and the reasonable attorney’s fees, costs and disbursements incurred by Lender in connection with the collection of
the proceeds which shall be paid to Lender and Borrower hereby assigns, transfers and sets over to
Lender all of Borrower’s right, title and interest in and to such proceeds. Notwithstanding any
provisions of this Security Instrument to the contrary, Lender shall not be deemed to be a trustee
or other fiduciary with respect to its receipt of any such proceeds, which may be commingled with
any other monies of Lender; provided, however, that Lender shall use such proceeds for the purposes
and in the manner permitted by this Security Instrument. Any proceeds deposited with Lender shall
be held by Lender in an interest-bearing account, but Lender makes no representation or warranty as
to the rate or amount of interest, if any, which may accrue on such deposit and shall have no
liability in connection therewith. Interest accrued, if any, on the proceeds shall be deemed to
constitute a part of the proceeds for purposes of this Security Instrument. The provisions of this
Section 3.03(b) shall survive the termination of this Security Instrument by foreclosure, deed in
lieu thereof or otherwise as a consequence of the exercise of the rights and remedies of Lender
hereunder after a Default.



Section 3.04. Casualty Restoration. (a) (i) In the event of any damage to or
destruction of the Property, Borrower shall give prompt written notice to Lender (which notice
shall set forth Borrower’s good faith estimate of the cost of repairing or restoring such damage or
destruction, or if Borrower cannot reasonably estimate the anticipated cost of restoration,
Borrower shall nonetheless give Lender prompt notice of the occurrence of such damage or
destruction, and will diligently proceed to obtain estimates to enable Borrower to quantify the
anticipated cost and time required for such restoration, whereupon Borrower shall promptly notify
Lender of such good faith estimate) and, provided that restoration does not violate any Legal
Requirements, Borrower shall promptly commence and diligently prosecute to completion the repair,
restoration or rebuilding of the Property so damaged or destroyed to a condition such that the
Property shall be at least equal in value to that immediately prior to the damage to the extent
practicable, in full compliance with all Legal Requirements and the provisions of all Leases, and
in accordance with Section 3.04(b) below. Such repair, restoration or rebuilding of the Property
including, without limitation, preparation of plans and specifications in connection therewith, and
also including the repair and replacement of furniture, fixtures and equipment, are sometimes
hereinafter collectively referred to as the “Work”.



(ii) Borrower shall not adjust, compromise or settle any claim for Insurance
Proceeds without the prior written consent of Lender, which shall not be unreasonably withheld or
delayed and Lender shall have the right, at Borrower’s sole cost and expense, to participate in any
settlement or adjustment of Insurance Proceeds; provided, however, that, except during the
continuance of an Event of Default, Lender’s consent shall not be required with respect to the
adjustment, compromising or settlement of any claim for Insurance Proceeds in an amount less than
$250,000.



(iii) Subject to Section 3.04(a)(iv), Lender shall apply any Insurance Proceeds which
it may receive towards the Work in accordance with Section 3.04(b) and the other applicable
sections of this Article III.


 


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(iv) If (A) an Event of Default shall have occurred and be continuing, (B) Lender is
not reasonably satisfied that the Debt Service Coverage, after substantial completion of
the Work, will be at least equal to the Required Debt Service Coverage, (C) more than thirty
percent (30%) of the reasonably estimated fair market value of the Property is damaged or
destroyed, (D) Lender is not reasonably satisfied that the Work can be completed six (6) months
prior to Maturity or (E) Lender is not reasonably satisfied that the Work can be completed within
twelve (12) months of the damage to or destruction of the Property (each, a “Substantial
Casualty”), Lender shall have the option, in its sole discretion to apply any Insurance
Proceeds it may receive pursuant to this Security Instrument (less any cost to Lender of recovering
and paying out such proceeds incurred pursuant to the terms hereof and not otherwise reimbursed to
Lender, including, without limitation, reasonable attorneys’ fees and expenses) to the payment of
the Debt, without any prepayment fee or charge of any kind, or to allow such proceeds to be used
for the Work pursuant to the terms and subject to the conditions of Section 3.04(b) hereof and the
other applicable sections of this Article III.



(v) In the event that Lender elects or is obligated hereunder to allow Insurance
Proceeds to be used for the Work, any excess proceeds remaining after completion of such Work shall
be applied to the payment of the Debt without any prepayment fee or charge of any kind.



(b) If any Condemnation Proceeds in accordance with Section 6.01(a), or any
Insurance Proceeds in accordance with Section 3.04(a), are to be applied to the repair, restoration
or rebuilding of the Property, then such Condemnation Proceeds or Insurance Proceeds shall be
deposited into a segregated interest-bearing bank account at the Bank, which shall be an Eligible
Account, held by Lender and shall be paid out from time to time to Borrower as the Work progresses
(less any cost to Lender of recovering and paying out such proceeds, including, without limitation,
reasonable attorneys’ fees and costs allocable to inspecting the Work and the plans and
specifications therefor) subject to Section 5.13 hereof and to all of the following conditions:




(i) An Independent architect or engineer selected by Borrower and
reasonably acceptable to Lender (an “Architect” or “Engineer”) or a Person
otherwise reasonably acceptable to Lender, shall have delivered to Lender a certificate
estimating the cost of completing the Work, and, if the amount set forth therein is more
than the sum of the amount of Insurance Proceeds then being held by Lender in connection
with a casualty and amounts agreed to be paid as part of a final settlement under the
insurance policy upon or before completion of the Work, Borrower shall have delivered to
Lender (A) cash collateral in an amount equal to such excess, (B) an unconditional,
irrevocable, clean sight draft letter of credit, in form, substance and issued by a bank
reasonably acceptable to Lender, in the amount of such excess and draws on such letter of
credit shall be made by Lender to make payments pursuant to this Article III following
exhaustion of the Insurance Proceeds or Condemnation Proceeds, as applicable, therefor or
(C) a completion bond in form, substance and issued by a surety company reasonably
acceptable to Lender.




(ii) If the cost of the Work is reasonably estimated by an Architect or
Engineer in a certification reasonably acceptable to Lender to be equal to or exceed five
percent (5%) of the Loan Amount, such Work shall be performed under the supervision of an
Architect or Engineer, it being understood that the plans and specifications with
respect thereto shall provide for Work so that, upon completion thereof, the Property shall
be at least equal in replacement value and general utility to the Property prior to the
damage or destruction.


 


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(iii) Each request for payment shall be made on not less than ten (10) days’
prior notice to Lender and shall be accompanied by a certificate of an Architect or
Engineer, or, if the Work is not required to be supervised by an Architect or Engineer, by
an Officer’s Certificate stating (A) that payment is for Work completed in material
compliance with the plans and specifications, if required under clause (ii) above, (B) that
the sum requested is required to reimburse Borrower for payments by Borrower to date, or is
due to the contractors, subcontractors, materialmen, laborers, engineers, architects or
other Persons rendering services or materials for the Work (giving a brief description of
such services and materials), and that when added to all sums previously paid out by Lender
does not exceed the value of the Work done to the date of such certificate, (C) if the sum
requested is to cover payment relating to repair and restoration of personal property
required or relating to the Property, that title to the personal property items covered by
the request for payment is vested in Borrower (unless Borrower is lessee of such personal
property), and (D) that the Insurance Proceeds and/or letters of credit, completion and
similar bonds, each of which is satisfactory to Lender in its reasonable discretion, and
other amounts deposited by Borrower held by Lender after such payment is more than the
estimated remaining cost to complete such Work; provided, however, that if such certificate
is given by an Architect or Engineer, such Architect or Engineer shall certify as to clause
(A) above, and such Officer’s Certificate shall certify as to the remaining clauses above,
and provided, further, that Lender shall not be obligated to disburse such funds if Lender
determines, in Lender’s reasonable discretion, that Borrower shall not be in compliance
with this Section 3.04(b). Additionally, each request for payment shall contain a
statement signed by Borrower stating that the requested payment is for Work completed to
date.




(iv) Each request for payment shall be accompanied by waivers of lien, in
customary form and substance, covering that part of the Work for which payment or
reimbursement is being requested and, if required by Lender, a search prepared by a title
company or licensed abstractor, or by other evidence reasonably satisfactory to Lender that
there has not been filed with respect to the Property any mechanic’s or other lien or
instrument for retention of title relating to any part of the Work not discharged of
record. Additionally, as to any personal property covered by the request for payment,
Lender shall be furnished with evidence of Borrower having incurred a payment obligation
therefor and such further evidence reasonably satisfactory to assure Lender that UCC
filings therefor provide a valid first lien on the personal property.




(v) Lender shall have the right to inspect the Work at all reasonable times
upon reasonable prior notice and may condition any disbursement of Insurance Proceeds upon
satisfactory compliance by Borrower with the provisions hereof. Neither the approval by
Lender of any required plans and specifications for the Work nor the inspection by Lender
of the Work shall make Lender responsible for the preparation of
such plans and specifications, or the compliance of such plans and specifications of the
Work, with any applicable law, regulation, ordinance, covenant or agreement.


 


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(vi) Insurance Proceeds shall not be disbursed more frequently than once
every thirty (30) days.




(vii) Until such time as the Work has been substantially completed, Lender
shall not be obligated to disburse up to ten percent (10%) of the cost of the Work (the
“Retention Amount”) to Borrower. Upon substantial completion of the Work, Borrower
shall send notice thereof to Lender and, subject to the conditions of Section
3.04(b)(i)-(iv), Lender shall disburse one-half of the Retention Amount to Borrower;
provided, however, that the remaining one-half of the Retention Amount shall be disbursed
to Borrower when Lender shall have received copies of any and all certificates of occupancy
or other certificates, licenses and permits required for the ownership, occupancy and
operation of the Property in accordance with all Legal Requirements. Borrower hereby
covenants to diligently seek to obtain any such certificates, licenses and permits.




(viii) Upon failure on the part of Borrower promptly after a casualty or Taking
to commence the Work or to proceed diligently and continuously to completion of the Work,
which failure shall continue after notice for thirty (30) days, Lender may apply any
Insurance Proceeds or Condemnation Proceeds it then or thereafter holds to the payment of
the Debt in accordance with the provisions of the Note; provided, however, that Lender
shall be entitled to apply at any time all or any portion of the Insurance Proceeds or
Condemnation Proceeds it then holds to the extent necessary to cure any Event of Default.



(c) If Borrower (i) within one hundred twenty (120) days after the occurrence of any
damage to the Property or any portion thereof shall fail to submit to Lender for approval plans and
specifications for the Work (approved by the Architect and by all Governmental Authorities whose
approval is required), (ii) after any such plans and specifications are approved by all
Governmental Authorities, the Architect and Lender, shall fail to promptly commence such Work after
a casualty or Taking or (iii) shall fail to diligently prosecute such Work to completion, then, in
addition to all other rights available hereunder, at law or in equity, Lender, or any receiver of
the Property or any portion thereof, upon five (5) days’ prior notice to Borrower (except in the
event of emergency in which case no notice shall be required), may (but shall have no obligation
to) perform or cause to be performed such Work, and may take such other steps as it reasonably
deems advisable. Borrower hereby waives, for Borrower, any claim, other than for gross negligence
or willful misconduct, against Lender and any receiver arising out of any act or omission of Lender
or such receiver pursuant hereto, and Lender may apply all or any portion of the Insurance Proceeds
(without the need to fulfill any other requirements of this Section 3.04) to reimburse Lender and
such receiver, for all costs not reimbursed to Lender or such receiver upon demand together with
interest thereon at the Default Rate from the date such amounts are advanced until the same are
paid to Lender or the receiver.


 


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(d) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled
with an interest, to collect and receive any Insurance Proceeds paid with respect to any portion of
the
Property or the insurance policies required to be maintained hereunder, and to endorse any checks,
drafts or other instruments representing any Insurance Proceeds whether payable by reason of loss
thereunder or otherwise.



Section 3.05. Compliance with Insurance Requirements. Borrower promptly shall comply
with, and shall cause the Property to comply with, all Insurance Requirements, even if such
compliance requires structural changes or improvements or would result in interference with the use
or enjoyment of the Property or any portion thereof provided Borrower shall have a right to contest
in good faith and with diligence such Insurance Requirements provided (a) no Event of Default shall
exist during such contest and such contest shall not subject the Property or any portion thereof to
any lien or affect the priority of the lien of this Security Instrument, (b) failure to comply with
such Insurance Requirements will not subject Lender, Trustee or any of their agents, employees,
officers or directors to any civil or criminal liability, (c) such contest will not cause any
reduction in insurance coverage, (d) such contest shall not affect the ownership, use or occupancy
of the Property, (e) the Property or any part thereof or any interest therein shall not be in any
danger of being sold, forfeited or lost by reason of such contest by Borrower, (f) Borrower has
given Lender prompt notice of such contest and, upon request by Lender from time to time, notice of
the status of such contest by Borrower and/or information of the continuing satisfaction of the
conditions set forth in clauses (a) through (e) of this Section 3.05, (g) upon a final
determination of such contest, Borrower shall promptly comply with the requirements thereof, and
(h) prior to and during such contest, Borrower shall furnish to Lender security satisfactory to
Lender, in its reasonable discretion, against loss or injury by reason of such contest or the
non-compliance with such Insurance Requirement (and if such security is cash, Lender shall deposit
the same in an interest-bearing account and interest accrued thereon, if any, shall be deemed to
constitute a part of such security for purposes of this Security Instrument, but Lender (i) makes
no representation or warranty as to the rate or amount of interest, if any, which may accrue
thereon and shall have no liability in connection therewith and (ii) shall not be deemed to be a
trustee or fiduciary with respect to its receipt of any such security and any such security may be
commingled with other monies of Lender). If Borrower shall use the Property or any portion thereof
in any manner which could permit the insurer to cancel any insurance required to be provided
hereunder, Borrower immediately shall obtain a substitute policy which shall satisfy the
requirements of this Security Instrument and which shall be effective on or prior to the date on
which any such other insurance policy shall be canceled. Borrower shall not by any action or
omission invalidate any insurance policy required to be carried hereunder unless such policy is
replaced as aforesaid, or materially increase the premiums on any such policy above the normal
premium charged for such policy. Borrower shall cooperate with Lender in obtaining for Lender the
benefits of any Insurance Proceeds lawfully or equitably payable to Lender in connection with the
transaction contemplated hereby.


 


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Section 3.06. Event of Default During Restoration. Notwithstanding anything to the
contrary contained in this Security Instrument including, without limitation, the provisions of
this Article III, if, at the time of any casualty affecting the Property or any part thereof, or at
any time during any Work, or at any time that Lender is holding or is entitled to receive any
Insurance Proceeds pursuant to this Security Instrument, a Default exists and is continuing
(whether or not it constitutes an Event of Default), Lender shall then have no obligation to make
such proceeds available for Work and Lender shall have the right and option, to be exercised in its
sole and
absolute discretion and election, with respect to the Insurance Proceeds, either to retain and
apply such proceeds in reimbursement for the actual costs, fees and expenses incurred by Lender in
accordance with the terms hereof in connection with the adjustment of the loss and any balance
toward payment of the Debt in such priority and proportions as Lender, in its sole discretion,
shall deem proper, or towards the Work, upon such terms and conditions as Lender shall determine,
or to cure an Event of Default, or to any one or more of the foregoing as Lender, in its sole and
absolute discretion, may determine. If Lender shall receive and retain such Insurance Proceeds,
the lien of this Security Instrument shall be reduced only by the amount thereof received, after
reimbursement to Lender of expenses of collection, and actually applied by Lender in reduction of
the principal sum payable under the Note in accordance with the Note.



Section 3.07. Application of Proceeds to Debt Reduction. (a) No damage to the
Property, or any part thereof, by fire or other casualty whatsoever, whether such damage be partial
or total, shall relieve Borrower from its liability to pay in full the Debt and to perform its
obligations under this Security Instrument and the other Loan Documents.



(b) If any Insurance Proceeds are applied to reduce the Debt, Lender shall apply the
same in accordance with the provisions of the Note.



ARTICLE IV: IMPOSITIONS




Section 4.01. Payment of Impositions, Utilities and Taxes, etc. (a) Borrower shall
pay or cause to be paid all Impositions and remit or cause to be remitted all SAOT Expenditures at
least five (5) days prior to the date upon which any fine, penalty, interest or cost for nonpayment
is imposed, and furnish to Lender, upon request, receipted bills of the appropriate taxing
authority or other documentation reasonably satisfactory to Lender evidencing the payment thereof.
If Borrower shall fail to pay any Imposition or remit any SAOT Expenditures in accordance with this
Section and is not contesting or causing a contesting of such Imposition in accordance with Section
4.04 hereof, or if there are insufficient funds in the Basic Carrying Costs Escrow Account to pay
any Imposition, Lender shall have the right, but shall not be obligated, to pay that Imposition or
remit that SAOT Expenditure, as applicable, and Borrower shall repay to Lender, on demand, any
amount paid by Lender, with interest thereon at the Default Rate from the date of the advance
thereof to the date of repayment, and such amount shall constitute a portion of the Debt secured by
this Security Instrument.



(b) Borrower shall, prior to the date upon which any fine, penalty, interest or cost
for the nonpayment is imposed, pay or cause to be paid all charges for electricity, power, gas,
water and other services and utilities in connection with the Property, and shall, upon request,
deliver to Lender receipts or other documentation reasonably satisfactory to Lender evidencing
payment thereof. If Borrower shall fail to pay any amount required to be paid by Borrower pursuant
to this Section 4.01 and is not contesting such charges in accordance with Section 4.04 hereof,
Lender shall have the right, but shall not be obligated, to pay that amount, and Borrower will
repay to Lender, on demand, any amount paid by Lender with interest thereon at the Default Rate
from the date of the advance thereof to the date of repayment, and such amount shall constitute a
portion of the Debt secured by this Security Instrument.




 


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(c) Borrower shall pay all taxes, charges, filing, registration and recording fees,
excises and levies imposed upon Lender by reason of or in connection with its ownership of any Loan
Document or any other instrument related thereto, or resulting from the execution, delivery and
recording of, or the lien created by, or the obligation evidenced by, any of them, other than
income, franchise and other similar taxes imposed on Lender and shall pay all corporate stamp
taxes, if any, and other taxes, required to be paid on the Loan Documents other than taxes imposed
on Lender’s income and franchise taxes imposed on Lender by the law or regulations of any
Governmental Authority. If Borrower shall fail to make any such payment within ten (10) days after
written notice thereof from Lender, Lender shall have the right, but shall not be obligated, to pay
the amount due, and Borrower shall reimburse Lender therefor, on demand, with interest thereon at
the Default Rate from the date of the advance thereof to the date of repayment, and such amount
shall constitute a portion of the Debt secured by this Security Instrument.



Section 4.02. Deduction from Value. In the event of the passage after the date of
this Security Instrument of any Legal Requirement deducting from the value of the Property for the
purpose of taxation, any lien thereon or changing in any way the Legal Requirements now in force
for the taxation of this Security Instrument and/or the Debt for federal, state or local purposes,
or the manner of the operation of any such taxes so as to adversely affect the interest of Lender,
or imposing any tax or other charge on any Loan Document, then Borrower will pay such tax, with
interest and penalties thereon, if any, within the statutory period. In the event the payment of
such tax or interest and penalties by Borrower would be unlawful, or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then in any such event, Lender shall
have the option, by written notice of not less than thirty (30) days, to declare the Debt
immediately due and payable, with no prepayment fee or charge of any kind.



Section 4.03. No Joint Assessment. Borrower shall not consent to or initiate the
joint assessment of the Premises or the Improvements (a) with any other real property constituting
a separate tax lot and Borrower represents and covenants that the Premises and the Improvements are
and shall remain a separate tax lot or lots separate from other real property that is not part of
the Premises or (b) with any portion of the Property which may be deemed to constitute personal
property, or any other procedure whereby the lien of any taxes which may be levied against such
personal property shall be assessed or levied or charged to the Property as a single lien.



Section 4.04. Right to Contest. Borrower shall have the right, after prior notice to
Lender, at its sole expense, to contest by appropriate legal proceedings diligently conducted in
good faith, without cost or expense to Lender or any of its agents, employees, officers or
directors, the validity, amount or application of any Imposition or any charge described in Section
4.01(b), provided that (a) no Event of Default shall exist during such proceedings and such contest
shall not (unless Borrower shall comply with clause (d) of this Section 4.04) subject the Property
or any portion thereof to any lien or affect the priority of the lien of this Security Instrument,
(b) failure to pay such Imposition or charge will not subject Lender, Trustee or any of their
agents, employees, officers or directors to any civil or criminal liability, (c) the contest
suspends enforcement of the Imposition or charge (unless Borrower first pays the Imposition or
charge), (d) prior to and during such contest, Borrower shall furnish to Lender security
satisfactory to Lender, in its






 


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reasonable discretion, against loss or injury by reason of such contest or the non-payment of such Imposition or charge (and if such security is cash, Lender may
deposit the same in an interest-bearing account and interest accrued thereon, if any, shall be
deemed to constitute a part of such security for purposes of this Security Instrument, but Lender
(i) makes no representation or warranty as to the rate or amount of interest, if any, which may
accrue thereon and shall have no liability in connection therewith other than with respect to
Lender’s gross negligence or willful misconduct and (ii) shall not be deemed to be a trustee or
fiduciary with respect to its receipt of any such security and any such security may be commingled
with other monies of Lender), (e) such contest shall not affect the ownership, use or occupancy of
the Property, (f) the Property or any part thereof or any interest therein shall not be in any
danger of being sold, forfeited or lost by reason of such contest by Borrower, (g) Borrower has
given Lender notice of the commencement of such contest and upon request by Lender, from time to
time, notice of the status of such contest by Borrower and/or confirmation of the continuing
satisfaction of clauses (a) through (f) of this Section 4.04, and (h) upon a final determination of
such contest, Borrower shall promptly comply with the requirements thereof. Upon completion of any
contest, Borrower shall immediately pay the amount due, if any, and deliver to Lender proof of the
completion of the contest and payment of the amount due, if any, following which Lender shall
return the security, if any, deposited with Lender pursuant to clause (d) of this Section 4.04.
Borrower shall not pay any Imposition in installments unless permitted by applicable Legal
Requirements or the applicable Governmental Authority, and shall, upon the request of Lender,
deliver copies of all notices and bills relating to any Imposition or other charge covered by this
Article IV to Lender.



Section 4.05. No Credits on Account of the Debt. Borrower will not claim or demand
or be entitled to any credit or credits on account of the Debt for any part of the Impositions
assessed against the Property or any part thereof and no deduction shall otherwise be made or
claimed from the taxable value of the Property, or any part thereof, by reason of this Security
Instrument or the Debt. In the event such claim, credit or deduction shall be required by Legal
Requirements, Lender shall have the option, by written notice of not less than thirty (30) days, to
declare the Debt immediately due and payable, and Borrower hereby agrees to pay such amounts not
later than thirty (30) days after such notice.



Section 4.06. Documentary Stamps. If, at any time, the United States of America, any
State or Commonwealth thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note, this Security Instrument or any other Loan Document, or impose
any other tax or charges on the same, Borrower will pay the same, with interest and penalties
thereon, if any.


 


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ARTICLE V: CENTRAL CASH MANAGEMENT




Section 5.01. Cash Flow. Borrower hereby acknowledges and agrees that (a) the Rents
(which for the purposes of this Section 5.01 shall not include security deposits from tenants under
Leases held by Borrower and not applied towards Rent) derived from the Property, (b) Loss Proceeds
and (c) all proceeds of the Rate Cap Agreement shall be utilized to fund the Sub-Accounts.
Borrower shall cause Manager to collect all security deposits from tenants under valid Leases,
which shall be held by Manager, as agent for Borrower, in accordance with applicable law and in a
segregated demand deposit bank account at such commercial or savings bank or
banks as may be reasonably satisfactory to Lender (the “Security Deposit Account”).
Borrower shall notify Lender of any security deposits held as letters of credit and, upon Lender’s
request, such letters of credit shall be promptly delivered to Lender. Borrower shall have no
right to withdraw funds from the Security Deposit Account; provided that, as long as no
Event of Default has occurred and is continuing, Borrower may withdraw funds from the Security
Deposit Account to refund or apply security deposits as required by the Leases or by applicable
Legal Requirements. After the occurrence and during the continuance of an Event of Default, all
withdrawals from the Security Deposit Account must be approved by Lender. All rental payments made
by tenants and other payments constituting Rent, other than direct payments by credit cards which
shall be paid directly into the Rent Account, shall be delivered to Manager. Manager shall collect
all of such Rent and shall deposit such funds, within one (1) Business Day after receipt thereof in
the Rent Account, the name and address of the bank in which such account is located and the account
number of which to be identified in writing by Manager to Lender. Borrower shall cause Manager to
give to the bank in which the Rent Account is located an irrevocable written instruction, in form
and substance reasonably acceptable to Lender, that all funds deposited in such account shall be
automatically transferred through automated clearing house funds (“ACH”) or by Federal wire
to the Central Account prior to 5:00 p.m. (New York City time) on a daily basis. On the Closing
Date, Borrower shall deliver to Lender a copy of the irrevocable notice which Borrower delivered to
the bank in which the Rent Account is located pursuant to the provisions of this Section 5.01, the
receipt of which is acknowledged in writing by such bank. Additionally, Borrower shall, or shall
cause Manager to send to each respective credit card company or credit card clearing bank with
which Borrower or Manager has entered into merchant’s agreements (each, a “Credit Card
Company”) a direction letter in the form of Exhibit G annexed hereto and made a part hereof
(the “Credit Card Payment Direction Letter”) directing such Credit Card Company to make all
payments due in connection with goods or services furnished at or in connection with the Property
by Federal wire or through ACH directly to the Rent Account. Without the prior written consent of
Lender, neither Borrower nor Manager shall (i) terminate, amend, revoke or modify any Credit Card
Payment Direction Letter in any manner or (ii) direct or cause any Credit Card Company to pay any
amount in any manner other than as specifically provided in the related Credit Card Payment
Direction Letter. Lender may elect to change the financial institution in which the Central
Account shall be maintained; however, Lender shall give Borrower and the bank in which the
Rent Account is located not fewer than five (5) Business Days’ prior notice of such change.
Neither Borrower nor Manager shall change such bank or the Rent Account without the prior written
consent of Lender. All fees and charges of the bank(s) in which the Rent Account and the Central
Account are located shall be paid by Borrower.


 


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Section 5.02. Establishment of Accounts. Lender has established the Escrow Accounts
and the Central Account in the name of Lender as secured party and Borrower has established the
Rent Account in the joint names of Lender, as secured party, and Borrower. The Rent Account, the
Central Account and the Escrow Accounts shall be under the sole dominion and control of Lender and
funds held therein shall not constitute trust funds. Borrower hereby irrevocably directs and
authorizes Lender to withdraw funds from the Rent Account, the Central Account and the Escrow
Accounts, all in accordance with the terms and conditions of this Security Instrument. Borrower
shall have no right of withdrawal in respect of the Rent Account, the Central Account or the Escrow
Accounts. Each transfer of funds to be made hereunder shall
be made only to the extent that funds are on deposit in the Rent Account or the Central Account or
the affected Sub-Account or Escrow Account, and Lender shall have no responsibility to make
additional funds available in the event that funds on deposit are insufficient. The Central
Account shall contain the Basic Carrying Costs Sub-Account, the Debt Service Payment Sub-Account,
the Recurring Replacement Reserve Sub-Account, the SAOT Sub-Account, the Operation and Maintenance
Expense Sub-Account and the Curtailment Reserve Sub-Account, each of which accounts shall be
Eligible Accounts or book-entry sub-accounts of an Eligible Account (each a “Sub-Account”
and collectively, the “Sub-Accounts”) to which certain funds shall be allocated and from
which disbursements shall be made pursuant to the terms of this Security Instrument. Sums held in
the Escrow Accounts may be commingled with other monies held by Lender.




Section 5.03. Intentionally Omitted.



Section 5.04. Servicing Fees. At the option of Lender, the Loan may be serviced by a
servicer (the “Servicer”) selected by Lender and Lender may delegate all or any portion of
its responsibilities under this Security Instrument to the Servicer. Provided that no Default has
occurred and is continuing, Borrower shall have no obligation to reimburse Lender for servicing
fees incurred in connection with the ordinary, routine servicing of the Loan; provided, however,
that Borrower shall reimburse Lender for (a) any and all out of pocket costs and expenses incurred
after the occurrence and during the continuance of an Event of Default or as a result of an Event
of Default (but not including special servicing fees unless Lender forecloses on the lien of this
Security Instrument or exercises any power of sale granted hereunder) and (b) as otherwise provided
for in this Security Instrument.



Section 5.05. Monthly Funding of Sub-Accounts and Escrow Accounts. (a) On or before
each Payment Date during the term of the Loan, commencing on the first (1st) Payment Date occurring
after the month in which the Loan is initially funded, Borrower shall pay or cause to be paid to
the Central Account (including from the Rent Account) all sums required to be deposited in the
Sub-Accounts pursuant to this Section 5.05(a) and all funds transferred or deposited into the
Central Account shall be allocated among the Sub-Accounts as follows and in the following priority:




(i) first, to the SAOT Sub-Account until an amount equal to the SAOT
Deposit for the Payment Date occurring for such Interest Accrual Period has been allocated
to the SAOT Sub-Account;




(ii) second, to the Basic Carrying Costs Sub-Account, until an amount equal
to the Basic Carrying Costs Monthly Installment for such Interest Accrual Period has been
allocated to the Basic Carrying Costs Sub-Account;




(iii) third, to the Debt Service Payment Sub-Account, until an amount equal
to the Required Debt Service Payment for the Payment Date occurring for such Interest
Accrual Period has been allocated to the Debt Service Payment Sub-Account, it being
acknowledged that any sums deposited into the Central Account for such Interest Accrual
Period by Borrower which are allocated to the Debt Service Payment Sub-Account for
such Interest Accrual Period shall be credited towards sums required to be deposited
therein by Borrower;


 


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(iv) fourth, to the Operation and Maintenance Expense Sub-Account in an
amount equal to the Cash Expenses, other than management fees in excess of four percent
(4%) of total revenues of the Property, for such Interest Accrual Period pursuant to the
related Approved Annual Budget;




(v) fifth, to the Operation and Maintenance Expense Sub-Account in an amount
equal to the amount, if any, of the Net Capital Expenditures for such Interest Accrual
Period pursuant to the related Approved Annual Budget;




(vi) sixth, to the Operation and Maintenance Expense Sub-Account until an
amount equal to the amount, if any, of the Extraordinary Expenses approved by Lender for
such Interest Accrual Period;




(vii) seventh, to the Recurring Replacement Reserve Sub-Account, until an
amount equal to the Recurring Replacement Reserve Monthly Installment for such Interest
Accrual Period has been allocated to the Recurring Replacement Reserve Sub-Account; and




(viii) eighth, but only during an O&M Operative Period, the balance, if any, to
the Curtailment Reserve Sub-Account.



Provided that no Event of Default has occurred and is continuing, Lender agrees that in each
Interest Accrual Period any amounts deposited into or remaining in the Central Account after the
Sub-Accounts have been funded as set forth in this Section 5.05(a) with respect to such Interest
Accrual Period and any periods prior thereto, shall be disbursed by Lender to Borrower on the
Payment Date applicable to such Interest Accrual Period. In addition, Lender shall pay and apply
all funds on deposit in the Sub-Accounts from time to time in accordance with Sections 5.06 through
5.11, as applicable. The balance of the funds distributed to Borrower after payment of all
Operating Expenses by or on behalf of Borrower may be retained by Borrower. After the occurrence,
and during the continuance, of an Event of Default, no such excess funds held in the Central
Account shall be distributed to, or withdrawn by, Borrower, and Lender shall have the right to
apply all or any portion of the funds held in the Central Account or any Sub-Account or any Escrow
Account (excluding the SAOT Sub-Account) to the Debt in Lender’s sole discretion.



(b) On each Payment Date, or with respect to sums in the Operation and Maintenance
Sub-Account and SAOT Sub-Account, on Wednesday of each week unless such day is not a Business Day,
in which case on the first Business Day thereafter, (i) sums held in the Basic Carrying Costs
Sub-Account shall be transferred to the Basic Carrying Costs Escrow Account, (ii) sums held in the
Debt Service Payment Sub-Account, together with any amounts deposited into the Central Account that
are either (x) Loss Proceeds that Lender has elected to apply to reduce the Debt in accordance with
the terms of Article III hereof or (y) excess Loss Proceeds remaining after the completion of any
restoration required hereunder, shall be transferred to Lender to be applied towards the Required
Debt Service Payment, (iii) sums held in the SAOT
Sub-Account shall be transferred to the SAOT Escrow Account, (iv) sums held in the Recurring
Replacement Reserve Sub-Account shall be transferred to the Recurring Replacement Escrow Account,
(v) sums held in the Operation and Maintenance Expense Sub-Account shall be transferred to the
Operation and Maintenance Expense Escrow Account and (vi) sums held in the Curtailment Reserve
Sub-Account shall be transferred to the Curtailment Reserve Escrow Account.


 


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Section 5.06. Payment of Basic Carrying Costs. Borrower hereby agrees to pay all
Basic Carrying Costs (without regard to the amount of money in the Basic Carrying Costs Sub-Account
or the Basic Carrying Costs Escrow Account). At least ten (10) Business Days prior to the due date
of any Basic Carrying Costs, and not more frequently than once each month, Borrower may notify
Lender in writing and request that Lender pay such Basic Carrying Costs on behalf of Borrower on or
prior to the due date thereof, and, provided that no Event of Default has occurred and that there
are sufficient funds available in the Basic Carrying Costs Escrow Account, Lender shall make such
payments out of the Basic Carrying Costs Escrow Account before same shall be delinquent. Together
with each such request, Borrower shall furnish Lender with bills and all other documents necessary,
as reasonably determined by Lender, for the payment of the Basic Carrying Costs which are the
subject of such request. Borrower’s obligation to pay (or cause Lender to pay) Basic Carrying Costs
pursuant to this Security Instrument shall include, to the extent permitted by applicable law,
Impositions resulting from future changes in law which impose upon Lender an obligation to pay any
property taxes or other Impositions or which otherwise adversely affect Lender’s interests.
Notwithstanding the foregoing, in the event that Lender receives a tax bill directly from a
Governmental Authority relating to any Impositions, Lender shall pay all sums due thereunder prior
to the date such Impositions would accrue late charges or interest thereon or within ten (10)
Business Days of the receipt of such tax bill, whichever is later. In making any payment of
Impositions, Lender may rely on any bill, statement or estimate obtained from the applicable
Governmental Authority without inquiry into the accuracy of such bill, statement or estimate or
into the validity of any Imposition or claim with respect thereto.



Provided that no Event of Default shall have occurred and be continuing, all funds deposited
into the Basic Carrying Costs Escrow Account shall be held by Lender pursuant to the provisions of
this Security Instrument and shall be applied in payment of Basic Carrying Costs in accordance with
the terms hereof. Should an Event of Default occur and be continuing, the sums on deposit in the
Basic Carrying Costs Sub-Account and the Basic Carrying Costs Escrow Account may be applied by
Lender in payment of any Basic Carrying Costs or may be applied to the payment of the Debt or any
other charges affecting all or any portion of the Property as Lender in its sole discretion may
determine; provided, however, that no such application shall be deemed to have been
made by operation of law or otherwise until actually made by Lender as herein provided.


 


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Section 5.07. SAOT Escrow Account. Borrower agrees to pay all SAOT Expenditures
(without regard to the amount of money then available in the SAOT Sub-Account or the SAOT Escrow
Account). Lender will, at Lender’s option, either, (a) apply funds in the SAOT Escrow Account to
payments of SAOT Expenditures required to be made by Borrower to the appropriate Governmental
Authorities, provided that Borrower has promptly supplied Lender with notices of
all SAOT Expenditures due or has certified to Lender that such funds are required to make payments
of SAOT Expenditures required to be made by Borrower, (b) reimburse Borrower for such amounts upon
presentation of evidence of payment by Borrower of such SAOT Expenditures or (c) release to
Borrower funds in the SAOT Escrow Account for payment of SAOT Expenditures required to be made by
Borrower to the appropriate Governmental Authorities, provided that Borrower has promptly supplied
Lender with notices of all SAOT Expenditures due or has certified to Lender that such funds will be
used to make payments of SAOT Expenditures required to be made by Borrower.



Provided that no Event of Default shall have occurred and be continuing, all funds deposited
into the SAOT Escrow Account shall be held by Lender pursuant to the provisions of this Security
Instrument and shall be disbursed to Borrower for payment of SAOT Expenditures. Should an Event of
Default occur, the sums on deposit in the SAOT Sub-Account and the SAOT Escrow Account may be
applied by Lender in payment of any SAOT Expenditures.



Section 5.08. Recurring Replacement Reserve Escrow Account. Borrower hereby agrees
to pay all Recurring Replacement Expenditures with respect to the Property (without regard to the
amount of money then available in the Recurring Replacement Reserve Sub-Account or the Recurring
Replacement Reserve Escrow Account). Provided that Lender has received written notice from
Borrower and not more frequently than once each month, and further provided that no Event of
Default has occurred and is continuing, that there are sufficient funds available in the Recurring
Replacement Reserve Escrow Account and Borrower shall have theretofore furnished Lender with lien
waivers, copies of bills, invoices and other reasonable documentation as may be required by Lender
to establish that the Recurring Replacement Expenditures which are the subject of such request
represent amounts due for completed or partially completed capital work and improvements performed
at the Property, Lender shall make such payments out of the Recurring Replacement Reserve Escrow
Account or shall reimburse Borrower out of the Recurring Replacement Reserve Escrow Account if
Borrower delivers to Lender evidence satisfactory to Lender evidencing prior payment for the
Recurring Replacement Expenditures which are the subject of the draw request or an Officer’s
Certificate certifying that the funds will be used to pay for the Recurring Replacement
Expenditures which are the subject of the draw request together with evidence reasonably
satisfactory to Lender evidencing payment in full for all Recurring Replacement Expenditures which
were the subject of prior draw requests with respect to which Borrower did not deliver such proof.



Provided that no Event of Default shall have occurred and be continuing, all funds deposited
into the Recurring Replacement Reserve Escrow Account shall be held by Lender pursuant to the
provisions of this Security Instrument and shall be applied in payment of Recurring Replacement
Expenditures. Should an Event of Default occur and be continuing, the sums on deposit in the
Recurring Replacement Reserve Sub-Account and the Recurring Replacement Reserve Escrow Account may
be applied by Lender in payment of any Recurring Replacement Expenditures or may be applied to the
payment of the Debt or any other charges affecting all or any portion of the Property, as Lender in
its sole discretion may determine; provided, however, that no such application
shall be deemed to have been made by operation of law or otherwise until actually made by Lender as
herein provided.


 


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Section 5.09. Operation and Maintenance Expense Escrow Account. Borrower hereby
agrees to pay all Operating Expenses with respect to the Property (without regard to the amount of
money then available in the Operation and Maintenance Expense Sub-Account or the Operation and
Maintenance Expense Escrow Account). All funds allocated to the Operation and Maintenance Expense
Escrow Account shall be held by Lender pursuant to the provisions of this Security Instrument.
Provided no O&M Operative Period has occurred and is continuing, either (a) Lender shall disburse
to Borrower from the Operation and Maintenance Expense Escrow Account on each Payment Date an
amount equal to (i) the Operating Expenses set forth in the Approved Annual Budget for such month
provided for in the Approved Annual Budget plus (ii) the Third Party Disbursements which have been
substantiated in a manner reasonably acceptable to Lender and (iii) any Extraordinary Expenses for
which sums have been deposited into the Operation and Maintenance Expense Escrow Account pursuant
to Section 5.05 hereof ((i), (ii) and (iii) are hereinafter referred to as an “Operating
Expense Disbursement”) or (b) if requested by Borrower and if sufficient funds have been
collected in the Central Account to make the payments required under clauses (i) — (iv) of Section
5.05(a) hereof on the next succeeding Payment Date, Borrower shall be entitled to request
disbursements from the Operation and Maintenance Expense Escrow Account on a weekly basis, for
payment of the Operating Expense Disbursement incurred or to be incurred during the then-current
Interest Accrual Period or during any prior Interest Accrual Period. During the continuance of an
O&M Operative Period, Lender shall disburse funds held in the Operation and Maintenance Expense
Escrow Account to Borrower on a weekly basis, within ten (10) days after delivery by Borrower to
Lender of a request therefor, in increments of at least $1,000, provided (a) such disbursement is
for the Operating Expense Disbursement; and (b) such disbursement is accompanied by (i) an
Officer’s Certificate provided monthly certifying (A) that such funds will be used to pay Operating
Expenses set forth in the Approved Annual Budget and a description thereof, (B) that all
outstanding trade payables (other than those to be paid from the requested disbursement or those
permitted pursuant to Section 2.02(g)(viii)(C) hereof) have been paid in full, (C) that the same
has not been the subject of a previous disbursement, and (D) that all previous disbursements have
been or will be used to pay the previously identified Operating Expenses set forth in the Approved
Annual Budget, and (B) reasonably detailed documentation satisfactory to Lender as to the amount,
necessity and purpose therefor. Should an Event of Default occur and be continuing, the sums on
deposit in the Operation and Maintenance Expense Sub-Account or the Operation and Maintenance
Expense Escrow Account may be applied by Lender in payment of any Operating Expenses for the
Property or may be applied to the payment of the Debt or any other charges affecting all or any
portion of the Property as Lender, in its sole discretion, may determine; provided,
however, that no such application shall be deemed to have been made by operation of law or
otherwise until actually made by Lender as herein provided. During any O&M Operative Period, the
management fee payable to Manager shall be limited to 4% per annum of the total revenues of the
Property and shall not include the 2.5% Allocable Chain Expense (as defined in the Management
Agreement). Failure to pay such 2.5% Allocable Chain Expense shall not be a default under the
Management Agreement.


 


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Section 5.10. Rate Cap Agreement. Borrower shall at all times during the term of the
Loan maintain the Rate Cap Agreement at all times during the term of the Loan which shall be in
form and substance and issued by a bank reasonably acceptable to Lender, and shall pay all fees,
charges and expenses incurred in connection therewith. Borrower shall comply with all of its
obligations under the terms of the Rate Cap Agreement. All amounts paid by the issuer of the Rate
Cap Agreement (the “Counterparty”) to Borrower or Lender shall be deposited immediately
into the Central Account. Borrower shall take all actions reasonably requested by Lender to
enforce Lender’s rights under the Rate Cap Agreement in the event of a default by the
Counterparty. In the event that (a) the long-term unsecured debt obligations of the Counterparty
are downgraded by the Rating Agency below “A+” or its equivalent or (b) the Counterparty shall
default in any of its obligations under the Rate Cap Agreement, Borrower shall, at the request of
Lender, promptly but in all events within thirty (30) days, replace the Rate Cap Agreement with an
agreement having identical payment terms and maturity as the Rate Cap Agreement and which is
otherwise in form and substance substantially similar to the Rate Cap Agreement and otherwise
acceptable to Lender with a cap provider, the long-term unsecured debt of which is rated at least
“AA-” (or its equivalent) by each Rating Agency, or which will allow each Rating Agency to reaffirm
their then current ratings of all rated certificates issued in connection with the Securitization.
In the event that Borrower fails to maintain the Rate Cap Agreement as provided in this Section
5.10, Lender may purchase the Rate Cap Agreement and the cost incurred by Lender in connection
therewith shall be paid by Borrower to Lender with interest thereon at the Default Rate from the
date such cost is incurred until such cost is paid by Borrower to Lender.



Section 5.11. Curtailment Reserve Escrow Account. Funds deposited into the
Curtailment Reserve Escrow Account shall be held by Lender in the Curtailment Reserve Escrow
Account as additional security for the Loan until the Loan has been paid in full; provided, that
whenever, from time to time, the Debt Service Coverage exceeds 1.10:1.0 for two (2) consecutive
calendar quarters, Lender shall, promptly upon written request from Borrower, release all sums
contained in the Curtailment Reserve Escrow Account to Borrower. In the event the Debt Service
Coverage is 1.05:1.0 or lower for one or more calendar quarters, Lender may, in its sole
discretion, apply any sums in the Curtailment Reserve Escrow Account to the Debt, without any
prepayment fee or charge of any kind. Should an Event of Default occur and be continuing, the sums
on deposit in the Curtailment Reserve Sub-Account and the Curtailment Reserve Escrow Account may be
applied by Lender to the payment of the Debt or other charges affecting all or any portion of the
Property, as Lender, in its sole discretion, may determine; provided, however, that no such
application shall be deemed to have been made by operation of law or otherwise until actually made
by Lender as herein provided.



Section 5.12. Performance of Engineering Work. (a) Lender shall reimburse Borrower
for Required Engineering Work with respect to which Borrower wishes to withdraw sums from the
Engineering Escrow Account, not more frequently than once each month, provided that no Event of
Default has occurred, that there are sufficient funds available in the Engineering Escrow Account
to make such reimbursement and Borrower shall have theretofore furnished Lender with lien waivers,
copies of bills, invoices and other reasonable documentation as may be required by Lender to
establish that the Required Engineering Work which is the subject of such request represent amounts
due for completed or partially completed capital work and improvements performed at the Property,
in which case Lender shall make such payments out of the Engineering Escrow Account. In order to
request such a reimbursement for Required Engineering Work, Borrower shall submit to Lender for
Lender’s written approval a reimbursement request for such Required Engineering Work not later than
fifteen (15) days prior to the date for which such reimbursement is requested, in form reasonably
satisfactory to Lender
setting forth in reasonable detail the basis for Borrower’s request and a detailed description of
the completed or partially completed capital work and improvements performed at the Property.
Lender shall have the right to approve such request, which approval shall not be unreasonably
withheld, and in the event that Lender objects to the proposed request submitted by Borrower,
Lender shall advise Borrower of such objections within fifteen (15) days after receipt thereof (and
deliver to Borrower a reasonably detailed description of such objections) and Borrower may, within
ten (10) days after receipt of notice of any such objections revise such request and resubmit the
same to Lender whereupon Lender agrees to review such new submission.


 


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(b) Should an Event of Default occur and be continuing, the sums on deposit in the
Engineering Escrow Account may be applied by Lender in payment of any Required Engineering Work or
may be applied to the payment of the Debt or any other charges affecting all or any portion of the
Property, as Lender in its sole discretion may determine; provided, however, that
no such application shall be deemed to have been made by operation of law or otherwise until
actually made by Lender as herein provided



Section 5.13. Loss Proceeds. In the event of a casualty to the Property, unless
Lender elects, or is required pursuant to Article III hereof to make all of the Insurance Proceeds
available to Borrower for restoration, Lender and Borrower shall cause all such Insurance Proceeds
to be paid by the insurer directly to the Central Account, whereupon Lender shall, after deducting
Lender’s costs of recovering and paying out such Insurance Proceeds, including without limitation,
reasonable attorneys’ fees, apply the same to reduce the Debt in accordance with the terms of the
Note; provided, however, that if Lender elects, or is deemed to have elected, to
make the Insurance Proceeds available for restoration, all Insurance Proceeds in respect of rent
loss, business interruption or similar coverage shall be maintained in the Central Account, to be
applied by Lender in the same manner as Rent received with respect to the operation of the
Property; provided, further, however, that in the event that the Insurance
Proceeds with respect to such rent loss, business interruption or similar insurance policy are paid
in a lump sum in advance, Lender shall hold such Insurance Proceeds in a segregated
interest-bearing escrow account, which shall be an Eligible Account, shall estimate, in Lender’s
reasonable discretion, the number of months required for Borrower to restore the damage caused by
the casualty, shall divide the aggregate rent loss, business interruption or similar Insurance
Proceeds by such number of months, and shall disburse from such bank account into the Central
Account each month during the performance of such restoration such monthly installment of said
Insurance Proceeds. In the event that Insurance Proceeds are to be applied toward restoration,
Lender shall hold such funds in a segregated bank account at the Bank, which shall be an Eligible
Account, and shall disburse same in accordance with the provisions of Section 3.04 hereof. Unless
Lender elects, or is required pursuant to Section 6.01 hereof to make all of the Condemnation
Proceeds available to Borrower for restoration, Lender and Borrower shall cause all such
Condemnation Proceeds to be paid to the Central Account, whereupon Lender shall, after deducting
Lender’s costs of recovering and paying out such Condemnation Proceeds, including without
limitation, reasonable attorneys’ fees, apply same to reduce the Debt in accordance with the terms
of the Note; provided, however, that any Condemnation Proceeds received in
connection with a temporary Taking shall be maintained in the Central Account, to be applied by
Lender in the same manner as Rent received with respect to the operation of the Property;
provided, further, however, that in the event that the Condemnation






 


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Proceeds of any such temporary Taking are paid in a lump sum in advance, Lender shall hold such Condemnation
Proceeds in a segregated interest-bearing bank account, which shall be an Eligible Account, shall
estimate, in Lender’s reasonable discretion, the number of months that the Property shall be
affected by such temporary Taking, shall divide the aggregate Condemnation Proceeds in connection
with such temporary Taking by such number of months, and shall disburse from such bank account into
the Central Account each month during the pendency of such temporary Taking such monthly
installment of said Condemnation Proceeds. In the event that Condemnation Proceeds are to be
applied toward restoration, Lender shall hold such funds in a segregated bank account at the Bank,
which shall be an Eligible Account, and shall disburse same in accordance with the provisions of
Section 3.04 hereof. If any Loss Proceeds are received by Borrower, such Loss Proceeds shall be
received in trust for Lender, shall be segregated from other funds of Borrower, and shall be
forthwith paid into the Central Account, or paid to Lender to hold in a segregated bank account at
the Bank, in each case to be applied or disbursed in accordance with the foregoing. Any Loss
Proceeds made available to Borrower for restoration in accordance herewith, to the extent not used
by Borrower in connection with, or to the extent they exceed the cost of, such restoration, shall
be deposited into the Central Account, whereupon Lender shall apply the same to reduce the Debt in
accordance with the terms of the Note.



ARTICLE VI: CONDEMNATION




Section 6.01. Condemnation. (a) Borrower shall notify Lender promptly of the
commencement or threat of any Taking of the Property or any portion thereof. Lender is hereby
irrevocably appointed as Borrower’s attorney-in-fact, coupled with an interest, with exclusive
power to collect, receive and retain the proceeds of any such Taking as to which Borrower is or may
be entitled and to make any compromise or settlement in connection with such proceedings (subject
to Borrower’s reasonable approval, except after the occurrence and during the continuance of an
Event of Default, in which event Borrower’s approval shall not be required), subject to the
provisions of this Security Instrument; provided, however, that Borrower may
participate in any such proceedings (without regard to the extent of the Taking) and Borrower shall
be authorized and entitled to compromise or settle any such proceeding with respect to Condemnation
Proceeds in an amount less than five percent (5%) of the Loan Amount. Borrower shall execute and
deliver to Lender any and all instruments reasonably required in connection with any such
proceeding promptly after request therefor by Lender. Except as set forth above, Borrower shall
not adjust, compromise, settle or enter into any agreement with respect to such proceedings without
the prior consent of Lender. All Condemnation Proceeds are hereby assigned to and shall be paid to
Lender to be applied in accordance with the terms hereof. With respect to Condemnation Proceeds in
an amount in excess of five percent (5%) of the Loan Amount, Borrower hereby authorizes Lender to
compromise, settle, collect and receive such Condemnation Proceeds, and to give proper receipts and
acquittance therefor. Subject to the provisions of this Article VI, Lender may apply such
Condemnation Proceeds (less any cost to Lender of recovering and paying out such proceeds,
including, without limitation, reasonable attorneys’ fees and disbursements and costs allocable to
inspecting any repair, restoration or rebuilding work and the plans and specifications therefor)
toward the payment of the Debt or to allow such proceeds to be used for the Work.






 


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(b) “Substantial Taking” shall mean (i) a Taking of such portion of the
Property that would, in Lender’s reasonable discretion, leave remaining a balance of the Property
which would not under then current economic conditions, applicable Development Laws and other
applicable Legal Requirements, permit the restoration of the Property so as to constitute a
complete, rentable facility of the same type as existed prior to the Taking, having adequate
ingress and egress to the Property, capable of producing a projected Net Operating Income (as
reasonably determined by Lender) yielding a projected Debt Service Coverage therefrom for the next
two (2) years of not less than the Required Debt Service Coverage or (ii) a Taking which Lender is
not reasonably satisfied could be repaired within twelve (12) months and at least six (6) months
prior to the Maturity Date or (iii) a Taking of fifteen percent (15%) or more of the Premises.



(c) In the case of a Substantial Taking, Condemnation Proceeds shall be payable to
Lender in reduction of the Debt but without any prepayment fee or charge of any kind and, if
Borrower elects to apply any Condemnation Proceeds it may receive pursuant to this Security
Instrument to the payment of the Debt, Borrower may prepay the balance of the Debt without any
prepayment fee or charge of any kind.



(d) In the event of a Taking which is less than a Substantial Taking, Borrower at
its sole cost and expense (whether or not the award shall have been received or shall be sufficient
for restoration) shall proceed diligently to restore, or cause the restoration of, the remaining
Improvements not so taken, to maintain a complete, rentable, self-contained fully operational
facility of the same sort as existed prior to the Taking in as good a condition as is reasonably
possible. In the event of such a Taking, Lender shall receive the Condemnation Proceeds and shall
pay over the same:




(i) first, provided no Event of Default shall have occurred and be
continuing, to Borrower to the extent of any portion of the award as may be necessary to
pay the reasonable cost of restoration of the Improvements remaining, and




(ii) second, to Lender, in reduction of the Debt without any prepayment
premium or charge of any kind.



If one or more Takings in the aggregate create a Substantial Taking, then, in such event, the
sections of this Article VI above applicable to Substantial Takings shall apply.



(e) In the event Lender is obligated to or elects to make Condemnation Proceeds
available for the restoration or rebuilding of the Property, such proceeds shall be disbursed in
the manner and subject to the conditions set forth in Section 3.04(b) hereof. If, in accordance
with this Article VI, any Condemnation Proceeds are used to reduce the Debt, they shall be applied
in accordance with the provisions of the Note and, with no prepayment fee or charge of any kind.
Borrower shall promptly upon request by Lender execute and deliver all instruments requested by
Lender for the purpose of confirming the assignment of the Condemnation Proceeds to Lender.
Application of all or any part of the Condemnation Proceeds to the Debt shall be made in accordance
with the provisions of Sections 3.06 and 3.07 hereof. No application of the Condemnation Proceeds
to the reduction of the Debt shall have the effect of releasing the lien of this Security
Instrument until the remainder of the Debt has been paid in full. In the case of any Taking,
Lender, to






 


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the extent that Lender has not been reimbursed by Borrower, shall be entitled, as a first priority out of any Condemnation Proceeds, to reimbursement for all costs, fees and
expenses reasonably incurred in the determination and collection of any Condemnation Proceeds. All
Condemnation Proceeds deposited with Lender pursuant to this Section, until expended or applied as
provided herein, shall be held in accordance with Section 3.04(b) hereof and shall constitute
additional security for the payment of the Debt and the payment and performance of Borrower’s
obligations, but Lender shall not be deemed a trustee or other fiduciary with respect to its
receipt of such Condemnation Proceeds or any part thereof. All awards so deposited with Lender
shall be held by Lender in an Eligible Account, but Lender makes no representation or warranty as
to the rate or amount of interest, if any, which may accrue on any such deposit and shall have no
liability in connection therewith other than with respect to Lender’s gross negligence or willful
misconduct. For purposes hereof, any reference to the award shall be deemed to include interest,
if any, which has accrued thereon.



ARTICLE VII: LEASES AND RENTS




Section 7.01. Assignment. (a) Borrower does hereby bargain, sell, assign and set
over unto Lender, all of Borrower’s interest in the Leases and Rents. The assignment of Leases and
Rents in this Section 7.01 is an absolute, unconditional and present assignment from Borrower to
Lender and not an assignment for security and the existence or exercise of Borrower’s revocable
license to collect Rent shall not operate to subordinate this assignment to any subsequent
assignment. The exercise by Lender of any of its rights or remedies pursuant to this Section 7.01
shall not be deemed to make Lender a mortgagee-in-possession. In addition to the provisions of
this Article VII, Borrower shall comply with all terms, provisions and conditions of the
Assignment.



(b) So long as there shall exist and be continuing no Event of Default, Borrower
shall have a revocable license to take all actions with respect to all Leases and Rents, present
and future, including the right to collect and use the Rents, subject to the terms of this Security
Instrument and the Assignment.



(c) In a separate instrument Borrower shall, as requested from time to time by
Lender, assign to Lender or its nominee by specific or general assignment, any and all Leases, such
assignments to be in form and content reasonably acceptable to Lender, but subject to the
provisions of Section 7.01(b) hereof. Borrower agrees to deliver to Lender, within thirty (30)
days after Lender’s request, a true and complete copy of every Lease and, within ten (10) Business
Days after Lender’s request, a complete list of the Leases, certified by Borrower to be true,
accurate and complete and stating the demised premises, the names of the lessees, the Rent payable
under the Leases, the date to which such Rents have been paid, the material terms of the Leases,
including, without limitation, the dates of occupancy, the dates of expiration, any Rent
concessions, work obligations or other inducements granted to the lessees thereunder, and any
renewal options.



(d) The rights of Lender contained in this Article VII, the Assignment or any other
assignment of any Lease shall not result in any obligation or liability of Lender to Borrower or
any lessee under a Lease or any party claiming through any such lessee.






 


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(e) At any time after and during the continuance of an Event of Default, the license
granted hereinabove may be revoked by Lender, and Lender or a receiver appointed in accordance with
this Security Instrument may enter upon the Property, and collect, retain and apply the Rents
toward payment of the Debt in such priority and proportions as Lender in its sole discretion shall
deem proper.



(f) In addition to the rights which Lender may have herein, upon the occurrence and
during the continuance of any Event of Default, Lender, at its option, may require Borrower to pay
monthly in advance to Lender, or any receiver appointed to collect the Rents, the fair and
reasonable rental value for the use and occupation of such part of the Property as may be used and
occupied by Borrower and may require Borrower to vacate and surrender possession of the Property to
Lender or to such receiver and, in default thereof, Borrower may be evicted by summary proceedings
or otherwise.



Section 7.02. Management of Property. (a) Borrower shall manage the Property or
cause the Property to be managed in a manner which is consistent with the Approved Manager
Standard. All Space Leases shall provide for rental rates comparable to then existing local market
rates and terms and conditions which constitute good and prudent business practice and are
consistent with prevailing market terms and conditions, and shall be arms-length transactions. All
Leases shall provide that they are subordinate to this Security Instrument and that the lessees
thereunder attorn to Lender. Borrower shall deliver copies of all Leases, amendments,
modifications and renewals thereof to Lender. All proposed Leases for the Property shall be subject
to the prior written approval of Lender (which approval shall not be unreasonably withheld or
delayed), provided, however that Borrower may enter into new leases with unrelated third parties
without obtaining the prior consent of Lender provided that: (i) the proposed tenant is unrelated
to a tenant under an existing Lease; (ii) the proposed leases conform with the requirements of this
Section 7.02; (iii) the space to be leased pursuant to such proposed lease does not exceed 5,000
square feet; and (iv) the term of the proposed lease inclusive of all extensions and renewals, does
not exceed five (5) years.



(b) Borrower (i) shall observe and perform all of its material obligations under the
Leases pursuant to applicable Legal Requirements and shall not do or permit to be done anything to
impair the value of the Leases as security for the Debt; (ii) shall promptly send copies to Lender
of all notices of default which Borrower shall receive under the Leases; (iii) shall, consistent
with the Approved Manager Standard, enforce all of the material terms, covenants and conditions
contained in the Leases to be observed or performed; (iv) shall not collect any of the Rents under
the Leases more than one (1) month in advance (except that Borrower may collect in advance such
security deposits as are permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (v) shall not execute any other assignment of lessor’s
interest in the Leases or the Rents except as otherwise expressly permitted pursuant to this
Security Instrument; (vi) shall not cancel or terminate any of the Leases or accept a surrender
thereof in any manner inconsistent with the Approved Manager Standard; (vii) shall not convey,
transfer or suffer or permit a conveyance or transfer of all or any part of the Premises or the
Improvements or of any interest therein so as to effect a merger of the estates and rights of, or a
termination or diminution of the obligations of, lessees thereunder; (viii) shall not alter, modify
or change the






 


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terms of any guaranty of any Major Space Lease or cancel or terminate any such guaranty; (ix) shall, in accordance with the Approved Manager Standard, make all reasonable
efforts to seek lessees for space as it becomes vacant and enter into Leases in accordance with the
terms hereof; (x) shall not cancel or terminate or materially modify, alter or amend any Major
Space Lease or Property Agreement without Lender’s consent, which consent will not be unreasonably
withheld or delayed; (xi) shall notify Lender promptly if any Pad Owner shall cease business
operations or of the occurrence of any event of which it becomes aware affecting a Pad Owner or its
property which could reasonably be expected to have any material effect on the Property; and (xii)
shall, without limitation to any other provision hereof, execute and deliver at the request of
Lender all such further assurances, confirmations and assignments in connection with the Property
as are required herein and as Lender shall from time to time reasonably require.



(c) All security deposits of lessees, whether held in cash or any other form, shall
be treated by Borrower as trust funds, shall not be commingled with any other funds of Borrower
and, if cash, shall be deposited by Borrower in the Security Deposit Account. Any bond or other
instrument which Borrower is permitted to hold in lieu of cash security deposits under applicable
Legal Requirements shall be maintained in full force and effect unless replaced by cash deposits as
hereinabove described, shall be issued by a Person reasonably satisfactory to Lender, shall, if
permitted pursuant to Legal Requirements, at Lender’s option, name Lender as payee or mortgagee
thereunder or be fully assignable to Lender and shall, in all respects, comply with applicable
Legal Requirements and otherwise be reasonably satisfactory to Lender. Borrower shall, upon
request, provide Lender with evidence reasonably satisfactory to Lender of Borrower’s compliance
with the foregoing. Following the occurrence and during the continuance of any Event of Default,
Borrower shall, upon Lender’s request, if permitted by applicable Legal Requirements, turn over the
security deposits (and any interest thereon) to Lender to be held by Lender in accordance with the
terms of the Leases and all Legal Requirements.



(d) If requested by Lender, Borrower shall furnish, or shall cause the applicable
lessee to furnish, to Lender financial data and/or financial statements in accordance with
Regulation AB for any lessee of the Property if, in connection with a Securitization, Lender
expects there to be, with respect to such lessee or any group of affiliated lessees, a
concentration within all of the mortgage loans included or expected to be included, as applicable,
in such Securitization such that such lessee or group of affiliated lessees would constitute a
Significant Obligor; provided, however, that in the event the related Space Lease does not require
the related lessee to provide the foregoing information, Borrower shall use commercially reasonable
efforts to cause the applicable lessee to furnish such information.


 


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(e) Borrower covenants and agrees with Lender that (i) the Property will be managed
at all times by Manager pursuant to the management agreements approved by Lender, which approval
Lender shall not unreasonably withhold or delay (each, a “Management Agreement”), (ii)
after Borrower has knowledge of a fifty percent (50%) or more change in Control of the ownership of
Manager, Borrower will promptly give Lender notice thereof (a “Manager Control Notice”) and
(iii) the Management Agreement may be terminated by Lender at any time for cause (including, but
not limited to, Manager’s gross negligence, misappropriation of funds, willful misconduct or fraud)
or at any time following (A) the occurrence and during the
continuance of an Event of Default, or (B) the receipt of a Manager Control Notice and a substitute
managing agent shall be appointed by Borrower, subject to Lender’s prior written approval, which
approval Lender shall not unreasonably withhold or delay, but which may be conditioned on, inter
alia, a letter from each Rating Agency confirming that any rating issued by the Rating Agency in
connection with a Securitization will not, as a result of the proposed change of Manager, be
downgraded from the then current ratings thereof, qualified or withdrawn. Borrower may from time
to time appoint a successor manager to manage the Property with Lender’s prior written consent
which consent shall not be unreasonably withheld or delayed, provided that any such successor
manager shall be a reputable management company which meets the Approved Manager Standard and each
Rating Agency shall have confirmed in writing that any rating issued by the Rating Agency in
connection with a Securitization will not, as a result of the proposed change of Manager, be
downgraded from the then current ratings thereof, qualified or withdrawn. Borrower further
covenants and agrees that Borrower shall require Manager (or any successor managers) to maintain at
all times during the term of the Loan worker’s compensation insurance as required by Governmental
Authorities.



(f) There are no franchise agreements relating to the Property and Borrower shall
not enter into any franchise agreements relating to the Property.



(g) Borrower covenants that it shall not, nor permit Manager, to sell or deliver
rooms or suites and accept payment therefor for more than thirty (30) days in advance of delivery
except in the ordinary course of Borrower’s business and in accordance with the Approved Manager
Standard.



(h) Borrower shall fund and operate, or shall cause Manager to fund and operate, the
Property in a manner consistent with a hotel of the same type and category as the Property.



(i) Borrower shall maintain or cause Manager to maintain Inventory in kind and
amount sufficient to meet hotel industry standards for hotels comparable to the hotel located at
the Premises and at levels sufficient for the operation of the hotel located at the Premises at
historic occupancy levels.



(j) Borrower shall deliver to Lender all notices of default or termination received
by Borrower or Manager with respect to any licenses and permits, contracts, Property Agreements,
Leases or insurance policies within three (3) Business Days of receipt of the same.



(k) If Borrower or SPE Pledgor is a party to a Food and Beverage Lease/Operating
Agreement, Borrower and/or SPE Pledgor, as applicable, shall (i) diligently perform and observe all
of the terms, covenants and conditions of the Food and Beverage Leases/Operating Agreements on the
part of Borrower and the SPE Pledgor to be performed and observed, (ii) promptly notify Lender of
any material default under any Food and Beverage Lease/Operating Agreement of which it is aware and
(iii) diligently enforce all of the material obligations of the Food and Beverage Lessees/Operators
under the Food and Beverage Leases/Operating Agreements. If Borrower or SPE Pledgor shall default
in the performance or observance of any material term, covenant or condition of any Food and
Beverage Leases/Operating Agreements on the part of such Borrower or SPE Pledgor to be performed or
observed beyond any applicable grace or cure period, then, without limiting Lender’s other rights
or remedies under this Security
Instrument or any other Loan Documents, and without waiving or releasing Borrower from any of its
obligations hereunder or Borrower or the SPE Pledgor under the Food and Beverage Leases/Operating
Agreements, Lender shall have the right, but shall be under no obligation, to pay any sums and to
perform any act as may be reasonably appropriate to cause all the terms, covenants and conditions
of the Food and Beverage Leases/Operating Agreements on the part of Borrower or SPE Pledgor to be
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(l) Neither Borrower nor SPE Pledgor shall, and neither Borrower nor SPE Pledgor
shall permit any other Person to (i) materially modify, or to renew or terminate or extend, any
Food and Beverage Lease/Operating Agreement, transfer its interest in any Food and Beverage
Lease/Operating Agreement or consent to the assignment of any Food and Beverage Lease/Operating
Agreement, (ii) waive or release any of its rights under any Food and Beverage Lease/Operating
Agreement or (iii) consent to any increase in its obligations under any Food and Beverage
Lease/Operating Agreement, in each case without the express consent of Lender, which consent shall
not be unreasonably withheld. Any action taken in violation of the foregoing without the prior
express consent of Lender shall be void and of no force and effect.



(m) None of Borrower, SPE Pledgor nor any Affiliate of any Borrower or SPE Pledgor
shall direct, solicit or otherwise collude to cause any Food and Beverage SPE Pledgor Distributions
(as defined in the Pledge Agreement of even date herewith given by SPE Pledgor to Lender in
connection with the origination of the Loan) to be applied, disbursed or remitted in any manner
inconsistent with the terms and provisions of the Loan Documents and/or the payment instructions
provided by Lender to each Food and Beverage Lessee/Operator. None of Borrower, SPE Pledgor nor
any Affiliate of Borrower or SPE Pledgor shall interfere with the application, disbursement or
remittance of Food and Beverage SPE Pledgor Distributions as required under the terms and
provisions of the Loan Documents and/or the payment instructions provided by Lender to each Food
and Beverage Lessee/Operator. Borrower and each SPE Pledgor shall take all commercially reasonable
steps necessary to cause all revenues of the Food and Beverage Lessees/Operators to continue to be
collected by Borrower. None of Borrower, SPE Pledgor nor Affiliate of Borrower or SPE Pledgor
shall revoke or attempt to revoke the payment instructions provided by Lender to each Food &
Beverage Lessee/Operator.



ARTICLE VIII: MAINTENANCE AND REPAIR




Section 8.01. Maintenance and Repair of the Property; Alterations; Replacement of
Equipment. Borrower hereby covenants and agrees:



(a) Borrower shall not (i) desert or abandon the Property, (ii) change the use of
the Property or cause or permit the use or occupancy of any part of the Property to be discontinued
if such discontinuance or use change would violate any zoning or other law, ordinance or
regulation; (iii) consent to or seek any lowering of the zoning classification, or greater zoning
restriction affecting the Property; or (iv) without Lender’s consent, which may be granted or
withheld in Lender’s sole and absolute discretion and may be subject to such conditions as Lender
shall, in its sole and absolute discretion, impose, take any steps whatsoever to convert the
Property, or any portion thereof, to a condominium or cooperative form of ownership.






 


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(b) Borrower shall, at its expense, (i) take good care of the Property including
grounds generally, and utility systems and sidewalks, roads, alleys, and curbs therein, and shall
keep the same in good, safe and insurable condition and in compliance with all applicable Legal
Requirements, (ii) promptly make all repairs to the Property, above grade and below grade, interior
and exterior, structural and nonstructural, ordinary and extraordinary, unforeseen and foreseen,
and maintain the Property in a manner appropriate for the facility and (iii) not commit or suffer
to be committed any waste of the Property or do or suffer to be done anything which will increase
the risk of fire or other hazard to the Property or impair the value thereof. Borrower shall keep
the sidewalks, vaults, gutters and curbs comprising, or adjacent to, the Property, clean and free
from dirt, snow, ice, rubbish and obstructions (unless such obstructions are as a result of repairs
made in accordance with the terms hereof or if necessary to preserve safety or if required by Legal
Requirements). All repairs made by Borrower shall be made with first-class materials, in a good
and workmanlike manner, shall be equal or better in quality and class to the original work and
shall comply with all applicable Legal Requirements and Insurance Requirements. To the extent any
of the above obligations are obligations of tenants under Space Leases or Pad Owners or other
Persons under Property Agreements, Borrower may fulfill its obligations hereunder by causing such
tenants, Pad Owners or other Persons, as the case may be, to perform their obligations thereunder.
As used herein, the terms “repair” and “repairs” shall be deemed to include all necessary
replacements.



(c) Borrower shall not demolish, remove, construct, or, except as otherwise
expressly provided herein, restore, or alter the Property or any portion thereof nor consent to or
permit any such demolition, removal, construction, restoration, addition or alteration, in each
case in a manner which would diminish the value of the Property without Lender’s prior written
consent in each instance, which consent shall not be unreasonably withheld or delayed.



(d) Borrower represents and warrants to Lender that (i) there are no fixtures,
machinery, apparatus, tools, equipment or articles of personal property attached or appurtenant to,
or located on, or used in connection with the management, operation or maintenance of the Property,
except for the Equipment and equipment leased by Borrower for the management, operation or
maintenance of the Property in accordance with the Loan Documents; (ii) the Equipment and the
leased equipment constitute all of the fixtures, machinery, apparatus, tools, equipment and
articles of personal property necessary to the proper operation and maintenance of the Property;
and (iii) all of the Equipment is free and clear of all liens, except for the lien of this Security
Instrument, the lien, if any, of equipment financing permitted pursuant to Section 2.02(g)(viii)
hereof and the Permitted Encumbrances. All right, title and interest of Borrower in and to all
extensions, improvements, betterments, renewals and appurtenances to the Property hereafter
acquired by, or released to, Borrower or constructed, assembled or placed by Borrower in the
Property, and all changes and substitutions of the security constituted thereby, shall be and, in
each such case, without any further mortgage, encumbrance, conveyance, assignment or other act by
Lender or Borrower, shall become subject to the lien and security interest of this Security
Instrument as fully and completely, and with the same effect, as though now owned by Borrower and
specifically described in this Security Instrument, but at any and all times Borrower shall execute
and deliver to Lender any documents Lender may reasonably deem necessary or appropriate for the
purpose of specifically subjecting the same to the lien and security interest of this Security
Instrument.






 


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(e) Notwithstanding the provisions of this Security Instrument to the contrary,
Borrower shall have the right, at any time and from time to time, to remove and dispose of
Equipment which may have become obsolete or unfit for use or which is no longer useful in the
management, operation or maintenance of the Property. Borrower shall promptly replace any such
Equipment so disposed of or removed with other Equipment of equal value and utility, free of any
security interest or superior title, liens or claims other than Permitted Encumbrances, Permitted
Liens or equipment financing permitted pursuant to Section 2.02(g)(viii) hereof; except that, if by
reason of technological or other developments, replacement of the Equipment so removed or disposed
of is not necessary or desirable for the proper management, operation or maintenance of the
Property, Borrower shall not be required to replace the same. All such replacements or additional
equipment shall be deemed to constitute “Equipment” and shall be covered by the security interest
herein granted.



ARTICLE IX: TRANSFER OR ENCUMBRANCE OF THE PROPERTY




Section 9.01. Other Encumbrances. Other than with respect to Permitted Liens and
Permitted Encumbrances, Borrower shall not further encumber or permit the further encumbrance in
any manner (whether by grant of a pledge, security interest or otherwise) of the Property or any
part thereof or interest therein, including, without limitation, of the Rents therefrom. In
addition, Borrower shall not further encumber and shall not permit the further encumbrance in any
manner (whether by grant of a pledge, security interest or otherwise) of Borrower or any direct or
indirect interest in Borrower except as expressly permitted pursuant to this Security Instrument.



Section 9.02. No Transfer. Borrower acknowledges that Lender has examined and relied
on the expertise of Borrower and, if applicable, each General Partner, in owning and operating
properties such as the Property in agreeing to make the Loan and will continue to rely on
Borrower’s ownership of the Property as a means of maintaining the value of the Property as
security for repayment of the Debt and Borrower acknowledges that Lender has a valid interest in
maintaining the value of the Property. Borrower shall not Transfer, nor permit any Transfer,
without the prior written consent of Lender, which consent Lender may withhold in its sole and
absolute discretion. Lender shall not be required to demonstrate any actual impairment of its
security or any increased risk of default hereunder in order to declare the Debt immediately due
and payable upon a Transfer without Lender’s consent. This provision shall apply to every Transfer
regardless of whether voluntary or not, or whether or not Lender has consented to any previous
Transfer.



Section 9.03. Due on Sale. Lender may declare the Debt immediately due and payable
upon any Transfer or further encumbrance without Lender’s consent unless otherwise specifically
permitted hereunder without regard to whether any impairment of its security or any increased risk
of default hereunder can be demonstrated. This provision shall apply to every Transfer or further
encumbrance of the Property or any part thereof or interest in the Property or in Borrower
regardless of whether voluntary or not, or whether or not Lender has consented to any previous
Transfer or further encumbrance of the Property or interest in Borrower unless otherwise
specifically permitted hereunder.






 


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Section 9.04. Permitted Transfer. Notwithstanding the foregoing provisions of this
Article IX, a conveyance of the Property in its entirety or a Transfer (hereinafter,
“Sale”) shall be permitted hereunder from time to time provided that each of the following
terms and conditions are satisfied:



(a) no Event of Default is then continuing hereunder or under any of the other Loan
Documents;



(b) If the proposed Sale is to occur at any time after a Securitization, each Rating
Agency shall have delivered written confirmation that any rating issued by such Rating Agency in
connection with the Securitization will not, as a result of the proposed Sale, be downgraded from
the then current ratings thereof, qualified or withdrawn; provided, however, that no request for
consent to the Sale will be entertained by Lender if the proposed Sale is to occur within sixty
(60) days of any contemplated sale of the Loan by Lender, whether in connection with a
Securitization or otherwise;



(c) Borrower gives Lender written notice of the terms of the proposed Sale not less
than sixty (60) days before the date on which such Sale is scheduled to close and, concurrently
therewith, gives Lender (i) all such information concerning the proposed transferee of the Property
(hereinafter, “Buyer”) as Lender would require in evaluating an initial extension of credit
to a borrower and Lender determines, in its reasonable discretion that the Buyer is acceptable to
Lender in all material respects (it being acknowledged that any Permitted Transferee shall be
deemed acceptable to Lender provided that not more than 75% in the aggregate of the direct or
indirect interests in Borrower (but without including more than once one or more transfers of the
same interest) has been transferred subsequent to the Closing Date in one or more transactions and
Borrower continues to be Controlled by the same Persons which Controlled Borrower prior to such
transfer (it being acknowledged that (x) any holder of more than forty percent of the direct or
indirect interest in Borrower may have veto rights over major decisions which are customary in
joint venture agreements between two fifty percent owners of a Person and the same shall not
constitute a change in Control) and (y) it further being acknowledged that any Transfer of a direct
or indirect interest in Morgans Group LLC otherwise requiring approval hereunder shall not be
subject to the approval of Lender if Morgans Group LLC continues to own and manage hotel rooms
located in full service luxury or full service upscale properties numbering not less than eighty
percent (80%) of the number of hotel rooms which it owns and eighty percent (80%) of the number of
hotel rooms it manages as of the Closing Date (and such numbers shall be calculated on a pro rata
basis, so that, for example, if Morgans Group LLC has a fifty percent (50%) interest in a Person
that owns two hundred (200) hotel rooms, Morgans Group LLC shall be deemed to own one hundred (100)
hotel rooms) and the conditions set forth in clauses (A) and (B) of the definition of Permitted
Transferee are met) and (ii) a non-refundable application fee equal to $15,000;



(d) Borrower pays Lender, concurrently with the closing of any conveyance of the
Property in its entirety or a direct or indirect interest in Borrower of 75% or more (in the
aggregate whether in one or a series of transactions but without including more than once one or
more transfers of the same interest) of the direct or indirect interest in Borrower, a
non-refundable assumption fee in an amount equal to one percent (1%) of the then outstanding
Loan Amount (which fee shall be waived in the event of a Transfer of the type set forth in clause
(y) of Section 9.04(c)(i)) together with all out-of-pocket costs and expenses, including, without
limitation, reasonable attorneys’ fees, incurred by Lender in connection with the Sale;


 


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(e) In the event the applicable Transfer will result in Borrower no longer owning
the Property, Buyer assumes all of the obligations under the Loan Documents and, prior to or
concurrently with the closing of such Sale, Buyer executes, without any cost or expense to Lender,
such documents and agreements as Lender shall reasonably require to evidence and effectuate said
assumption and delivers such legal opinions as Lender may reasonably require;



(f) In the event the applicable Transfer will result in Borrower no longer owning
the Property, Borrower and Buyer execute, without any cost or expense to Lender, new financing
statements or financing statement amendments and any additional documents reasonably requested by
Lender;



(g) In the event the applicable Transfer will result in Borrower no longer owning
the Property, Borrower delivers to Lender, without any cost or expense to Lender, such endorsements
to Lender’s title insurance policy, hazard insurance policy endorsements or certificates and other
similar materials as Lender may reasonably deem necessary at the time of the Sale, all in form and
substance reasonably satisfactory to Lender, including, without limitation, an endorsement or
endorsements to Lender’s title insurance policy insuring the lien of this Security Instrument,
extending the effective date of such policy to the date of execution and delivery (or, if later, of
recording) of the assumption agreement referenced above in subparagraph (e) of this Section, with
no additional exceptions added to such policy, and insuring that fee simple title to the Property
is vested in Buyer;



(h) In the event the applicable Transfer will result in Borrower no longer owning
the Property, Borrower executes and delivers to Lender, without any cost or expense to Lender, a
release of Lender, its officers, directors, employees and agents, from all claims and liability
relating to the transactions evidenced by the Loan Documents, through and including the date of the
closing of the Sale, which agreement shall be in form and substance satisfactory to Lender and
shall be binding upon Buyer;



(i) In the event the applicable Transfer will result in Borrower no longer owning
the Property, subject to the provisions of Section 18.32 hereof, such Sale does not relieve
Borrower of any personal liability under the Note or any of the other Loan Documents for any acts
or events occurring or obligations arising prior to or simultaneously with the closing of such
Sale, and Borrower executes, without any cost or expense to Lender, such documents and agreements
as Lender shall reasonably require to evidence and effectuate the ratification of said personal
liability;



(j) In the event the applicable Transfer will result in Borrower no longer owning
the Property, such Sale does not relieve any Guarantor of its obligations under any guaranty or
indemnity agreement executed in connection with the Loan and each such Guarantor executes, without
any cost or expense to Lender, such documents and agreements as Lender shall reasonably require to
evidence and effectuate the ratification of each such guaranty agreement, provided that if Buyer or
a party associated with Buyer approved by Lender in its reasonable
discretion assumes the obligations of the current Guarantor under its guaranty and Buyer or such
party associated with Buyer, as applicable, executes, without any cost or expense to Lender, a new
guaranty in similar form and substance to the existing guaranty and otherwise satisfactory to
Lender, then Lender shall release the current Guarantor from all obligations arising under its
guaranty after the closing of such Sale; and


 


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(k) In the event the applicable Transfer will result in Borrower no longer owning
the Property, Buyer is a Single Purpose Entity and Lender receives a non-consolidation opinion
relating to Buyer from Buyer’s counsel, which opinion is in form and substance reasonably
acceptable to Lender.



ARTICLE X: CERTIFICATES




Section 10.01. Estoppel Certificates. (a) After request by Lender, Borrower, within
fifteen (15) days following Lender’s request and at Borrower’s expense, will furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the amount of the original principal
amount of the Note, and the unpaid principal amount of the Note, (ii) the rate of interest of the
Note, (iii) the date payments of interest and/or principal were last paid, (iv) whether to its
knowledge there exists any offsets or defenses to the payment of the Debt, and if any are alleged,
the nature thereof, (v) that the Note and this Security Instrument have not been modified or if
modified, giving particulars of such modification and (vi) that there has occurred and is then
continuing no Default or if such Default exists, the nature thereof, the period of time it has
existed, and the action being taken to remedy such Default.



(b) Within thirty (30) days after written request by Borrower, Lender shall furnish
to Borrower a written statement confirming (i) the outstanding amount of the Debt, (ii) the rate of
interest set forth in the Note, (iii) the maturity date of the Note and (iv) the date to which
interest and/or principal has been paid.



(c) Borrower shall use all reasonable efforts to obtain estoppel certificates from
tenants in form and substance reasonably acceptable to Lender, but, provided no Event of Default
has occurred and is continuing, in no event shall Borrower be required to deliver estoppel
certificates more than twice during any Loan Year.



ARTICLE XI: NOTICES




Section 11.01. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing and delivered personally or sent to the party to whom the notice,
demand or request is being made by overnight delivery by Federal Express or other nationally
recognized overnight delivery service, as follows and shall be deemed given when delivered
personally or one (1) Business Day after being deposited with Federal Express or such other
nationally recognized delivery service:



	 	 	 
	If to Lender:

	 	Wachovia Bank, National Association
	 

	 	Commercial Real Estate Services
	 

	 	8739 Research Drive URP 4
	 

	 	NC 1075
	 

	 	Charlotte, North Carolina 28262
	 

	 	Loan Number: 509850400
	 

	 	Attention: Portfolio Management
	 

	 	Fax No.: (704) 715-0036






 


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	with a copy to:

	 	Proskauer Rose LLP
	 

	 	1585 Broadway
	 

	 	New York, New York 10036
	 

	 	Attn: David J. Weinberger, Esq.
	 

	 	Facsimile No.: (212) 969-2900
	 
	 	 
	If to Borrower:

	 	To Borrower, at the address first written above, to the
attention of Chief Financial Officer, Facsimile No. (212)
277-4268,
	 
	 	 
	with a copy to:

	 	To Borrower, at the address first written above, to the
attention of General Counsel, Facsimile No. (212)
277-4268,
	 
	 	 
	If to Trustee:

	 	To Trustee at the address first written above,






or such other address as either Borrower, Trustee or Lender shall hereafter specify by not less
than ten (10) days prior written notice as provided herein; provided, however, that notwithstanding
any provision of this Article to the contrary, such notice of change of address shall be deemed
given only upon actual receipt thereof. Rejection or other refusal to accept or the inability to
deliver because of changed addresses of which no notice was given as herein required shall be
deemed to be receipt of the notice, demand, statement, request or consent.



ARTICLE XII: INDEMNIFICATION




Section 12.01. Indemnification Covering Property. In addition, and without
limitation, to any other provision of this Security Instrument or any other Loan Document, Borrower
shall protect, indemnify and save harmless Lender, Trustee and their successors and assigns, and
each of their agents, employees, officers, directors, stockholders, partners and members
(collectively, “Indemnified Parties”) for, from and against any claims, demands, penalties,
fines, liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, whether incurred or imposed within or outside the judicial
process, including, without limitation, reasonable attorneys’ fees and disbursements imposed upon
or incurred by or asserted against any of the Indemnified Parties by reason of (a) ownership of
this Security Instrument, the Assignment, the Property or any part thereof or any interest therein
or receipt of any Rents; (b) any accident, injury to or death of any person or loss of or damage to
property occurring in, on or about the Property or any part thereof or on the adjoining sidewalks,
curbs, parking areas, streets or ways; (c) any use, nonuse or condition in, on or about, or
possession, alteration, repair, operation, maintenance or management of, the Property or any part
thereof or on the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure on
the part of Borrower to perform or comply with any of the terms of this Security Instrument or the
Assignment; (e) performance of any labor or services or the furnishing of any






 


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materials or other
property in respect of the Property or any part thereof; (f) any claim by brokers, finders or
similar Persons claiming to be entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof; (g) any Imposition including, without limitation, any
Imposition attributable to the execution, delivery, filing, or recording of any Loan Document,
Lease or memorandum thereof; (h) any lien or claim arising on or against the Property or any part
thereof under any Legal Requirement or any liability asserted against any of the Indemnified
Parties with respect thereto; (i) any claim arising out of or in any way relating to any tax or
other imposition on the making and/or recording of this Security Instrument, the Note or any of the
other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g), 2.02(k), 2.02(t) or 2.02(w)
hereof, (k) the failure of any Person to file timely with the Internal Revenue Service an accurate
Form 1099-B, Statement for Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with the Loan, or to supply a copy thereof in a
timely fashion to the recipient of the proceeds of the Loan; (l) the claims of any lessee or any
Person acting through or under any lessee or otherwise arising under or as a consequence of any
Lease or (m) the failure to pay any insurance premiums. Notwithstanding the foregoing provisions
of this Section 12.01 to the contrary, Borrower shall have no obligation to indemnify the
Indemnified Parties pursuant to this Section 12.01 for liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses relative to the foregoing which result from
Lender’s, and its successors’ or assigns’, willful misconduct or gross negligence. Any amounts
payable to Lender by reason of the application of this Section 12.01 shall constitute a part of the
Debt secured by this Security Instrument and the other Loan Documents and shall become immediately
due and payable and shall bear interest at the Default Rate from the date the liability,
obligation, claim, cost or expense is sustained by Lender, as applicable, until paid. The
provisions of this Section 12.01 shall survive the termination of this Security Instrument whether
by repayment of the Debt, foreclosure or delivery of a deed in lieu thereof, assignment or
otherwise. In case any action, suit or proceeding is brought against any of the Indemnified
Parties by reason of any occurrence of the type set forth in (a) through (m) above, Borrower shall,
at Borrower’s expense, resist and defend such action, suit or proceeding or will cause the same to
be resisted and defended by counsel at Borrower’s expense for the insurer of the liability or by
counsel designated by Borrower (unless reasonably disapproved by Lender promptly after Lender has
been notified of such counsel); provided, however, that nothing herein shall
compromise the right of Lender (or any other Indemnified Party) to appoint its own counsel at
Borrower’s expense for its defense with respect to any action which, in the reasonable opinion of
Lender or such other Indemnified Party, as applicable, presents a conflict or potential conflict
between Lender or such other Indemnified Party that would make such separate representation
advisable. Any Indemnified Party will give Borrower prompt notice after such Indemnified Party
obtains actual knowledge of any potential claim by such Indemnified Party for indemnification
hereunder. The Indemnified Parties shall not settle or compromise any action, proceeding or claim
as to which it is indemnified hereunder without notice to Borrower. Notwithstanding the foregoing,
so long as no Default has occurred and is continuing and Borrower is resisting and defending such
action, suit or proceeding as provided above in a prudent and commercially reasonable manner, in
order to obtain the benefit of this Section 12.01 with respect to such action, suit or proceeding,
Lender and the Indemnified Parties agree that they shall not settle such action, suit or proceeding
without obtaining Borrower’s consent which Borrower agrees not to unreasonably withhold, condition
or delay; provided, however, (x) if Borrower is not diligently defending such
action, suit or proceeding in a prudent and commercially reasonable manner as provided above and
Lender has provided Borrower with
thirty (30) days’ prior written notice, or shorter period if mandated by the requirements of the
applicable law, and Borrower has failed to correct such failure, or (y) failure to settle could, in
Lender’s reasonable judgment, expose Lender to criminal liability, Lender may settle such action,
suit or proceeding without the consent of but upon notice to Borrower and be entitled to the
benefits of this Section 12.01 with respect to the settlement of such action, suit or proceeding.


 


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ARTICLE XIII: DEFAULTS




Section 13.01. Events of Default. The Debt shall become immediately due at the
option of Lender upon any one or more of the following events (“Event of Default”):



(a) if the final payment or prepayment premium, if any, due under the Note or
hereunder shall not be paid on Maturity;



(b) if any monthly payment of interest and/or principal due under the Note (other
than the sums described in (a) above) shall not be fully paid on the date upon which the same is
due and payable thereunder; provided, that the failure of any such amount to be paid when due shall
not be an Event of Default if adequate funds were on deposit in the relevant Sub-Account (or would
have been on deposit therein if Lender had timely allocated such funds thereto from the Central
Account and/or the Rent Account in accordance with the provisions of Article V hereof);



(c) if payment of any sum (other than the sums described in (a) above or (b) above)
required to be paid pursuant to the Note, this Security Instrument or any other Loan Document shall
not be paid within five (5) days after Lender delivers written notice to Borrower that same is due
and payable thereunder or hereunder; provided, that the failure of any such amount to be paid when
due shall not be an Event of Default if adequate funds were on deposit in the relevant Sub-Account
(or would have been on deposit therein if Lender had timely allocated such funds thereto from the
Central Account and/or the Rent Account in accordance with the provisions of Article V hereof) and,
if required, Borrower timely instructed Lender as to the application of such funds;



(d) if Borrower, Guarantor or, if Borrower or Guarantor is a partnership, any
general partner of Borrower or Guarantor, or, if Borrower or Guarantor is a limited liability
company, any member of Borrower or managing member of Guarantor, shall institute or cause to be
instituted any proceeding for the termination or dissolution of Borrower, Guarantor or any such
general partner or member;



(e) if the insurance policies required hereunder are not kept in full force and
effect, or if the insurance policies are not assigned and delivered to Lender as herein provided;



(f) if Borrower or Guarantor attempts to assign its rights under this Security
Instrument or any other Loan Document or any interest herein or therein, or if any Transfer occurs
other than in accordance with the provisions hereof;



(g) if any representation or warranty of Borrower or Guarantor made herein or in any
other Loan Document or in any certificate, report, financial statement or other instrument or
agreement furnished to Lender shall prove false or misleading in any material respect as of the
date made or furnished;


 


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(h) if Borrower, Guarantor or any general partner of Borrower, or Guarantor shall
make an assignment for the benefit of creditors or shall admit in writing its inability to pay its
debts generally as they become due;



(i) if a receiver, liquidator or trustee of Borrower, Guarantor or any general
partner of Borrower, or Guarantor shall be appointed or if Borrower, Guarantor or their respective
general partners shall be adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in, by Borrower, Guarantor or their
respective general partners or if any proceeding for the dissolution or liquidation of Borrower,
Guarantor or their respective general partners shall be instituted; however, if such appointment,
adjudication, petition or proceeding was involuntary and not consented to by Borrower, Guarantor or
their respective general partners, as applicable, upon the same not being discharged, stayed or
dismissed within ninety (90) days or if Borrower, Guarantor or their respective general partners
shall generally not be paying its debts as they become due;



(j) if Borrower shall be in default beyond any notice or grace period, if any,
under any other mortgage or deed of trust or security agreement covering any part of the Property
without regard to its priority relative to this Security Instrument; provided, however, this
provision shall not be deemed a waiver of the provisions of Article IX prohibiting further
encumbrances affecting the Property or any other provision of this Security Instrument;



(k) if the Property becomes subject to any lien which is superior to the lien of
this Security Instrument, other than Permitted Encumbrances;



(l) if Borrower or SPE Pledgor discontinues operations with respect to a material
portion of the Property for reasons other than repair or restoration arising from a casualty or
condemnation for ten (10) days or more;



(m) except as permitted in this Security Instrument, any material alteration,
demolition or removal of any of the Improvements without the prior consent of Lender;



(n) if Borrower or SPE Pledgor consummates a transaction which would cause this
Security Instrument or Lender’s rights under this Security Instrument, the Note or any other Loan
Document to constitute a non-exempt prohibited transaction under ERISA or result in a violation of
a state statute regulating government plans subjecting Lender to liability for a violation of ERISA
or a similar state statute; or


 


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(o) if a default shall occur under any of the other terms, covenants or conditions
of the Note, this Security Instrument or any other Loan Document, other than as set forth in (a)
through (n) above, for 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 for thirty (30) days after notice from Lender in the
case of any other default or an additional ninety (90) days if Borrower is diligently and
continuously effectuating a cure of a curable non-monetary default, other than as set forth in (a)
through (n) above. Notwithstanding the foregoing, Borrower’s failure to promptly commence the Work
subsequent to a casualty or Taking shall not be a default hereunder if (i) a Substantial Casualty
or Substantial Taking has occurred, (ii) Lender has not made available Loss Proceeds to Borrower
for the Work for any reason other than because a Default exists and (iii) Borrower has given
written notice to Lender that it shall repay the Loan within six (6) months of Lender applying Loss
Proceeds from the Property towards the repayment of the Debt and Borrower diligently seeks
construction financing for the Work during such period and delivers to Lender evidence thereof.



Section 13.02. Remedies. (a) Upon the occurrence and during the continuance of any
Event of Default, Lender may, in addition to any other rights or remedies available to it hereunder
or under any other Loan Document, at law or in equity, take such action, without notice or demand,
as it reasonably deems advisable to protect and enforce its rights against Borrower and in and to
the Property including, but not limited to, the following actions, each of which may be pursued
singly, concurrently or otherwise, at such time and in such order as Lender may determine, in its
sole discretion, without impairing or otherwise affecting any other rights and remedies of Lender
hereunder, at law or in equity: (i) declare all or any portion of the unpaid Debt to be
immediately due and payable; provided, however, that upon the occurrence of any of the events
specified in Section 13.01(i), the entire Debt will be immediately due and payable without notice
or demand or any other declaration of the amounts due and payable; or (ii) bring, or instruct
Trustee to bring, an action to foreclose this Security Instrument and without applying for a
receiver for the Rents, but subject to the rights of the tenants under the Leases, enter into or
upon the Property or any part thereof, either personally or by its agents, nominees or attorneys,
and dispossess Borrower and its agents and servants therefrom, and thereupon Lender may (A) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal with all and every
part of the Property and conduct the business thereat, (B) make alterations, additions, renewals,
replacements and improvements to or on the Property or any part thereof, (C) exercise all rights
and powers of Borrower with respect to the Property or any part thereof, whether in the name of
Borrower or otherwise, including, without limitation, the right to make, cancel, enforce or modify
Leases, obtain and evict tenants, and demand, sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Property and every part thereof, and (D) apply the
receipts from the Property or any part thereof to the payment of the Debt, after deducting
therefrom all expenses (including, without limitation, reasonable attorneys’ fees and
disbursements) reasonably incurred in connection with the aforesaid operations and all amounts
necessary to pay the Impositions, insurance and other charges in connection with the Property or
any part thereof, as well as just and reasonable compensation for the services of Lender’s third
party agents; or (iii) have an appraisal or other valuation of the Property or any part thereof
performed by an Appraiser (and Borrower covenants and agrees it shall cooperate in causing any such
valuation or appraisal to be performed) and any cost or expense incurred by Lender in connection
therewith shall constitute a portion of the Debt and be secured by this Security Instrument and
shall be immediately due and payable to Lender with interest, at the Default Rate, until the date
of receipt by Lender; or (iv) sell, or instruct Trustee to sell, the Property or institute, or
instruct Trustee to institute, proceedings for the complete foreclosure of this Security
Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or
in equity, for the enforcement of this Security Instrument in which case the Property or any part
thereof may






 


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be sold for cash or credit in one or more parcels; or (v) with or without entry, and to the extent permitted and pursuant to the procedures provided by
applicable Legal Requirements, institute proceedings for the partial foreclosure of this Security
Instrument, or take such other action as may be allowed pursuant to Legal Requirements, at law or
in equity, for the enforcement of this Security Instrument for the portion of the Debt then due and
payable, subject to the lien of this Security Instrument continuing unimpaired and without loss of
priority so as to secure the balance of the Debt not then due; or (vi) sell, or instruct Trustee to
sell, the Property or any part thereof and any or all estate, claim, demand, right, title and
interest of Borrower therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, in whole or in parcels, in any order or manner, at such time and
place, upon such terms and after such notice thereof as may be required or permitted by law, at the
discretion of Lender, and in the event of a sale, by foreclosure or otherwise, of less than all of
the Property, this Security Instrument shall continue as a lien on the remaining portion of the
Property; or (vii) institute an action, suit or proceeding in equity for the specific performance
of any covenant, condition or agreement contained in the Loan Documents, or any of them; or (viii)
recover judgment on the Note or any guaranty either before, during or after (or in lieu of) any
proceedings for the enforcement of this Security Instrument; or (ix) apply, or direct Trustee to
apply, ex parte, for the appointment of a custodian, trustee, receiver, keeper, liquidator or
conservator of the Property or any part thereof, irrespective of the adequacy of the security for
the Debt and without regard to the solvency of Borrower or of any Person liable for the payment of
the Debt, to which appointment Borrower does hereby consent and such receiver or other official
shall have all rights and powers permitted by applicable law and such other rights and powers as
the court making such appointment may confer, but the appointment of such receiver or other
official shall not impair or in any manner prejudice the rights of Lender to receive the Rent with
respect to any of the Property pursuant to this Security Instrument or the Assignment; or (x)
require, at Lender’s option, Borrower to pay monthly in advance to Lender, or any receiver
appointed to collect the Rents, the fair and reasonable rental value for the use and occupation of
any portion of the Property occupied by Borrower and may require Borrower to vacate and surrender
possession to Lender of the Property or to such receiver and Borrower may be evicted by summary
proceedings or otherwise; or (xi) without notice to Borrower (A) apply all or any portion of the
cash collateral in any Sub-Account and Escrow Account, including any interest and/or earnings
therein, to carry out the obligations of Borrower under this Security Instrument and the other Loan
Documents, to protect and preserve the Property and for any other purpose permitted under this
Security Instrument and the other Loan Documents and/or (B) have all or any portion of such cash
collateral immediately paid to Lender to be applied against the Debt in the order and priority set
forth in the Note; or (xii) pursue any or all such other rights or remedies as Lender and Trustee
may have under applicable law or in equity; provided, however, that the provisions of this Section
13.02(a) shall not be construed to extend or modify any of the notice requirements or grace periods
provided for hereunder or under any of the other Loan Documents. Borrower hereby waives, to the
fullest extent permitted by Legal Requirements, any defense Borrower might otherwise raise or have
by the failure to make any tenants parties defendant to a foreclosure proceeding and to foreclose
their rights in any proceeding instituted by Lender or Trustee.


 


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(b) To the extent not prohibited by law, any time after and during the continuance
of an Event of Default, Trustee, at the request of Lender, shall have the power to sell the
Property or any part thereof at public auction, in such manner, at such time and place, upon such
terms
and conditions, and upon such public notice as Lender may deem best for the interest of Lender, or
as may be required or permitted by applicable law, consisting of advertisement in a newspaper of
general circulation in the jurisdiction and for such period as applicable law may require and at
such other times and by such other methods, if any, as may be required by law to convey the
Property in fee simple by Trustee’s deed with special warranty of title to and at the cost of the
purchaser, who shall not be liable to see to the application of the purchase money. The proceeds
or avails of any sale made under or by virtue of this Section 13.02, together with any other sums
which then may be held by Lender under this Security Instrument, whether under the provisions of
this Section 13.02 or otherwise, shall be applied as follows:




First: To the payment of the third-party costs and expenses reasonably incurred in
connection with any such sale and to advances, fees and expenses, including, without
limitation, reasonable fees and expenses of Lender’s and Trustee’s legal counsel as
applicable, and of any judicial proceedings wherein the same may be made, and of all
expenses, liabilities and advances reasonably made or incurred by Lender or Trustee under
this Security Instrument, together with interest as provided herein on all such advances
made by Lender, and all Impositions, except any Impositions or other charges subject to
which the Property shall have been sold;




Second: To the payment of the whole amount then due, owing and unpaid under the Note for
principal and interest thereon, with interest on such unpaid principal at the Default Rate
from the date of the occurrence of the earliest Event of Default that formed a basis for
such sale until the same is paid;




Third: To the payment of any other portion of the Debt required to be paid by Borrower
pursuant to any provision of this Security Instrument, the Note, or any of the other Loan
Documents; and




Fourth: The surplus, if any, to Borrower unless otherwise required by Legal Requirements.



Lender and any receiver or custodian of the Property or any part thereof shall be liable to account
for only those rents, issues, proceeds and profits actually received by it.



(c) Lender or Trustee, as applicable, may adjourn from time to time any sale by it
to be made under or by virtue of this Security Instrument by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and, except as otherwise provided by
any applicable provision of Legal Requirements, Lender or Trustee, as applicable, without further
notice or publication, may make such sale at the time and place to which the same shall be so
adjourned.


 


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(d) Upon the completion of any sale or sales made by Lender or Trustee under or by
virtue of this Section 13.02, Lender or Trustee, as applicable, or any officer of any court
empowered to do so, shall execute and deliver to the accepted purchaser or purchasers a good and
sufficient instrument, or good and sufficient instruments, granting, conveying, assigning and
transferring all estate, right, title and interest in and to the property and rights sold. Lender
is hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an
interest), in its name and stead, to make all necessary conveyances, assignments, transfers and
deliveries of the property and rights so sold and for that purpose Lender may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may substitute one or more
Persons with like power, Borrower hereby ratifying and confirming all that its said
attorney-in-fact or such substitute or substitutes shall lawfully do by virtue hereof.
Nevertheless, Borrower, if so requested by Lender, shall ratify and confirm any such sale or sales
by executing and delivering to Lender, or to such purchaser or purchasers all such instruments as
may be advisable, in the sole judgement of Lender, for such purpose, and as may be designated in
such request. Any such sale or sales made under or by virtue of this Section 13.02, whether made
under the power of sale herein granted or under or by virtue of judicial proceedings or a judgment
or decree of foreclosure and sale, shall operate to divest all the estate, right, title, interest,
claim and demand whatsoever, whether at law or in equity, of Borrower in and to the property and
rights so sold, and shall, to the fullest extent permitted under Legal Requirements, be a perpetual
bar, both at law and in equity against Borrower and against any and all Persons claiming or who may
claim the same, or any part thereof, from, through or under Borrower.



(e) In the event of any sale made under or by virtue of this Section 13.02 (whether
made under the power of sale herein granted or under or by virtue of judicial proceedings or a
judgment or decree of foreclosure and sale), the entire Debt immediately thereupon shall, anything
in the Loan Documents to the contrary notwithstanding, become due and payable.



(f) Upon any sale made under or by virtue of this Section 13.02 (whether made under
the power of sale herein granted or under or by virtue of judicial proceedings or a judgment or
decree of foreclosure and sale), Lender may bid for and acquire the Property or any part thereof
and in lieu of paying cash therefor may make settlement for the purchase price by crediting upon
the Debt the net sales price after deducting therefrom the expenses of the sale and the costs of
the action.



(g) No recovery of any judgment by Lender and no levy of an execution under any
judgment upon the Property or any part thereof or upon any other property of Borrower shall release
the lien of this Security Instrument upon the Property or any part thereof, or any liens, rights,
powers or remedies of Lender hereunder, but such liens, rights, powers and remedies of Lender shall
continue unimpaired until all amounts due under the Note, this Security Instrument and the other
Loan Documents are paid in full.



(h) Upon the exercise by Lender of any power, right, privilege, or remedy pursuant
to this Security Instrument which requires any consent, approval, registration, qualification, or
authorization of any Governmental Authority, Borrower agrees to execute and deliver, or will cause
the execution and delivery of, all applications, certificates, instruments, assignments and other
documents and papers that Lender or any purchaser of the Property may be required to obtain for
such governmental consent, approval, registration, qualification, or authorization and Lender is
hereby irrevocably appointed the true and lawful attorney-in-fact of Borrower (coupled with an
interest), in its name and stead, to execute all such applications, certificates, instruments,
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Section 13.03. Payment of Debt After Default. If, following the occurrence of any
Event of Default, Borrower shall tender payment of an amount sufficient to satisfy the Debt in
whole or
in part at any time prior to a foreclosure sale of the Property, and if at the time of such tender
prepayment of the principal balance of the Note is not permitted by the Note or this Security
Instrument, Borrower shall, in addition to the entire Debt, also pay to Lender a sum equal to
interest which would have accrued on the principal balance of the Note at an interest rate equal to
the LIBOR Margin for the Note plus the greater of (x) the then current LIBOR Rate and (y) the then
current average yield for “This Week” as published by the Federal Reserve Board during the most
recent full week preceding the date on which Borrower tenders such payment in Federal Reserve
Statistical Release H.15 (519) for instruments having a ten (10) year maturity, from the date of
such tender to the earlier of (a) the Maturity Date or (b) the first day of the period during which
prepayment of the principal balance of the Note would have been permitted together with a
prepayment consideration equal to the prepayment consideration which would have been payable as of
the first day of the period during which prepayment would have been permitted. If at the time of
such tender, prepayment of the principal balance of the Note is permitted, such tender by Borrower
shall be deemed to be a voluntary prepayment of the principal balance of the Note and Borrower
shall, in addition to the entire Debt, also pay to Lender the applicable prepayment consideration
specified in the Note and this Security Instrument.



Section 13.04. Possession of the Property. Upon the occurrence and during the
continuance of any Event of Default and the acceleration of the Debt or any portion thereof,
Borrower, if an occupant of the Property or any part thereof, upon demand of Lender, shall
immediately surrender possession of the Property (or the portion thereof so occupied) to Lender,
and if Borrower is permitted to remain in possession, the possession shall be as a month-to-month
tenant of Lender and, on demand, Borrower shall pay to Lender monthly, in advance, a reasonable
rental for the space so occupied and in default thereof Borrower may be dispossessed. The
covenants herein contained may be enforced by a receiver of the Property or any part thereof.
Nothing in this Section 13.04 shall be deemed to be a waiver of the provisions of this Security
Instrument making the Transfer of the Property or any part thereof without Lender’s prior written
consent an Event of Default.



Section 13.05. Interest After Default. If any amount due under the Note, this
Security Instrument or any of the other Loan Documents is not paid within any applicable notice and
grace period after same is due, whether such date is the stated due date, any accelerated due date
or any other date or at any other time specified under any of the terms hereof or thereof, then, in
such event, Borrower shall pay interest on the amount not so paid from and after the date on which
such amount first becomes due at the Default Rate; and such interest shall be due and payable at
such rate until the earlier of the cure of all Events of Default or the payment of the entire
amount due to Lender, whether or not any action shall have been taken or proceeding commenced to
recover the same or to foreclose this Security Instrument. All unpaid and accrued interest shall
be secured by this Security Instrument as part of the Debt. Nothing in this Section 13.05 or in
any other provision of this Security Instrument shall constitute an extension of the time for
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Section 13.06. Borrower’s Actions After Default. Upon the occurrence and during the
continuance of any Event of Default and immediately upon the commencement of any action, suit or
other legal proceedings by Lender to obtain judgment for the Debt, or of any other nature
in aid of the enforcement of the Loan Documents, Borrower will (a) after receipt of notice of the
institution of any such action, waive the issuance and service of process and enter its voluntary
appearance in such action, suit or proceeding, and (b) if required by Lender, consent to the
appointment of a receiver or receivers of the Property or any part thereof and of all the earnings,
revenues, rents, issues, profits and income thereof.



Section 13.07. Control by Lender After Default. Notwithstanding the appointment of
any custodian, receiver, liquidator or trustee of Borrower, or of any of its property, or of the
Property or any part thereof, to the extent permitted by Legal Requirements, Lender shall be
entitled to obtain possession and control of all property now and hereafter covered by this
Security Instrument and the Assignment in accordance with the terms hereof.



Section 13.08. Right to Cure Defaults. (a) Upon the occurrence and during the
continuance of any Event of Default, Lender or its agents may, but without any obligation to do so
and without notice to or demand on Borrower and without releasing Borrower from any obligation
hereunder, make or do the same in such manner and to such extent as Lender may deem necessary to
protect the security hereof. Lender and its agents are authorized to enter upon the Property or
any part thereof for such purposes, or appear in, defend, or bring any action or proceedings to
protect Lender’s interest in the Property or any part thereof or to foreclose this Security
Instrument or collect the Debt, and the cost and expense thereof (including reasonable attorneys’
fees to the extent permitted by law), with interest as provided in this Section 13.08, shall
constitute a portion of the Debt and shall be immediately due and payable to Lender upon demand.
All such costs and expenses incurred by Lender or its agents in remedying such Event of Default or
in appearing in, defending, or bringing any such action or proceeding shall bear interest at the
Default Rate, for the period from the date so demanded to the date of payment to Lender. All such
costs and expenses incurred by Lender or its agents together with interest thereon calculated at
the above rate shall be deemed to constitute a portion of the Debt and be secured by this Security
Instrument.



(b) If Lender makes any payment or advance that Lender is authorized by this
Security Instrument to make in the place and stead of Borrower (i) relating to the Impositions or
tax liens asserted against the Property, Lender may do so according to any bill, statement or
estimate procured from the appropriate public office without inquiry into the accuracy of the bill,
statement or estimate or into the validity of any of the Impositions or the tax liens or claims
thereof; (ii) relating to any apparent or threatened adverse title, lien, claim of lien,
encumbrance, claim or charge, Lender will be the sole judge of the legality or validity of same; or
(iii) relating to any other purpose authorized by this Security Instrument but not enumerated in
this Section 13.08, Lender may do so whenever, in its judgment and discretion, the payment or
advance seems necessary or desirable to protect the Property and the full security interest
intended to be created by this Security Instrument. In connection with any payment or advance made
pursuant to this Section 13.08, Lender has the option and is authorized, but in no event shall be
obligated, to obtain a continuation report of title prepared by a title insurance company. The
payments and the advances made by Lender pursuant to this Section 13.08 and the cost and expenses
of said title report will be due and payable by Borrower on demand, together with interest at the
Default Rate, and will be secured by this Security Instrument.






 


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Section 13.09. Late Payment Charge. If any portion of the Debt is not paid in full
on or before the day on which it is due and payable hereunder (other than the principal portion of
the Debt due on the Maturity Date), Borrower shall pay to Lender an amount equal to five percent
(5%) of such unpaid portion of the Debt (“Late Charge”) to defray the expense incurred by
Lender in handling and processing such delinquent payment, and such amount shall constitute a part
of the Debt.



Section 13.10. Recovery of Sums Required to Be Paid. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a part of the Debt as
the same become due and payable hereunder (after the expiration of any grace period or the giving
of any notice herein provided, if any), without regard to whether or not the balance of the Debt
shall be due, and without prejudice to the right of Lender thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by Borrower existing at the time such
earlier action was commenced.



Section 13.11. Marshalling and Other Matters. Borrower hereby waives, to the fullest
extent permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement, redemption (both equitable and statutory) and homestead laws now or hereafter in
force and all rights of marshalling in the event of any sale hereunder of the Property 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 this Security Instrument on behalf
of Borrower, whether equitable or statutory and on behalf of each and every Person acquiring any
interest in or title to the Property or any part thereof subsequent to the date of this Security
Instrument and on behalf of all Persons to the fullest extent permitted by applicable law.



Section 13.12. Tax Reduction Proceedings. Upon the occurrence and during the
continuance of an Event of Default, Borrower shall be deemed to have appointed Lender as its
attorney-in-fact to seek a reduction or reductions in the assessed valuation of the Property for
real property tax purposes or for any other purpose and to prosecute any action or proceeding in
connection therewith. This power, being coupled with an interest, shall be irrevocable for so long
as any part of the Debt remains unpaid and any Event of Default shall be continuing.




Section 13.13. General Provisions Regarding Remedies.



(a) Right to Terminate Proceedings. Lender or Trustee may terminate or
rescind any proceeding or other action brought in connection with its exercise of the remedies
provided in Section 13.02 at any time before the conclusion thereof, as determined in Lender’s sole
discretion and without prejudice to Lender or Trustee.



(b) No Waiver or Release. The failure of Lender or Trustee to exercise any
right, remedy or option provided in the Loan Documents shall not be deemed a waiver of such right,
remedy or option or of any covenant or obligation contained in the Loan Documents. No acceptance
by Lender of any payment upon the occurrence and during the continuance of an Event of Default and
no payment by Lender of any payment or obligation for which Borrower is liable hereunder shall be
deemed to waive or cure any Event of Default. No sale of all or any portion of the Property, no
forbearance on the part of Lender, and no extension of time for the payment of the whole or any
portion of the Debt or any other indulgence given by Lender to
Borrower or any other Person, shall operate to release or in any manner affect the interest of
Lender in the Property or the liability of Borrower to pay the Debt. No waiver by Lender shall be
effective unless it is in writing and then only to the extent specifically stated.


 


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(c) No Impairment; No Releases. The interests and rights of Lender under
the Loan Documents shall not be impaired by any indulgence, including (i) any renewal, extension or
modification which Lender may grant with respect to any of the Debt; (ii) any surrender,
compromise, release, renewal, extension, exchange or substitution which Lender may grant with
respect to the Property or any portion thereof; or (iii) any release or indulgence granted to any
maker, endorser, guarantor or surety of any of the Debt.



ARTICLE XIV: COMPLIANCE WITH REQUIREMENTS




Section 14.01. Compliance with Legal Requirements. (a) Borrower shall promptly
comply with all present and future Legal Requirements, foreseen and unforeseen, ordinary and
extraordinary, whether requiring structural or nonstructural repairs or alterations including,
without limitation, all zoning, subdivision, building, safety and environmental protection, land
use and development Legal Requirements, all Legal Requirements which may be applicable to the curbs
adjoining the Property or to the use or manner of use thereof, and all rent control, rent
stabilization and all other similar Legal Requirements relating to rents charged and/or collected
in connection with the Leases. Borrower represents and warrants that the Property is in compliance
in all respects with all Legal Requirements as of the date hereof, no notes or notices of
violations of any Legal Requirements have been entered or received by Borrower and to its best
knowledge there is no basis for the entering of such notes or notices.



(b) Borrower shall have the right to contest by appropriate legal proceedings
diligently conducted in good faith, without cost or expense to Lender or Trustee, the validity or
application of any Legal Requirement and to suspend compliance therewith if permitted under
applicable Legal Requirements, provided (i) failure to comply therewith may not subject Lender or
Trustee to any civil or criminal liability, (ii) prior to and during such contest, Borrower shall
furnish to Lender security reasonably satisfactory to Lender, in its discretion, against loss or
injury by reason of such contest or non-compliance with such Legal Requirement, (iii) no Event of
Default shall exist during such proceedings and such contest shall not otherwise violate any of the
provisions of any of the Loan Documents, (iv) such contest shall not (unless Borrower shall comply
with the provisions of clause (ii) of this Section 14.01(b)) subject the Property to any lien or
encumbrance the enforcement of which is not suspended or otherwise affect the priority of the lien
of this Security Instrument; (v) such contest shall not affect the ownership, use or occupancy of
the Property; (vi) the Property or any part thereof or any interest therein shall not be in any
danger of being sold, forfeited or lost by reason of such contest by Borrower; (vii) Borrower shall
give Lender prompt notice of the commencement of such proceedings and, upon request by Lender,
notice of the status of such proceedings and/or confirmation of the continuing satisfaction of the
conditions set forth in clauses (i) — (vi) of this Section 14.01(b); and (viii) upon a final
determination of such proceeding, Borrower shall take all steps necessary to comply with any
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(c) Borrower shall at all times comply with all applicable Legal Requirements with
respect to the construction, use and maintenance of any vaults adjacent to the Property. If by
reason of the failure to pay taxes, assessments, charges, permit fees, franchise taxes or levies of
any kind or nature, the continued use of the vaults adjacent to Property or any part thereof is
discontinued, Borrower nevertheless shall, with respect to any vaults which may be necessary for
the continued use of the Property, take such steps (including the making of any payment) to ensure
the continued use of vaults or replacements.



Section 14.02. Compliance with Recorded Documents; No Future Grants. Borrower shall
promptly perform and observe or cause to be performed and observed, all of the terms, covenants and
conditions of all Property Agreements and all things necessary to preserve intact and unimpaired
any and all appurtenances or other interests or rights affecting the Property.



ARTICLE XV: PREPAYMENT




Section 15.01. Prepayment. (a) Except as set forth in Section 15.01(b) hereof, no
prepayment of the Debt may be made in whole or in part.



(b) Borrower may voluntarily prepay the Loan, in whole or in part, on any Business
Day, in accordance with the following provisions:




(i) Lender shall have received from Borrower not less than thirty (30)
days, nor more than ninety (90) days, prior written notice specifying the date proposed for
such prepayment and the amount which is to be prepaid (which notice shall be revocable by
Borrower up to three (3) times during the term of the Loan by giving Lender not less than
one (1) Business Day prior written notice of such revocation, provided that Borrower shall
remain obligated to pay Lender’s costs and expenses including, without limitation, breakage
costs incurred by Lender in connection with such revocation).




(ii) Borrower shall also pay to Lender all interest due through and
including the last day of the Interest Accrual Period in which such prepayment is being
made, together with any and all other amounts due and owing pursuant to the terms of the
Note, this Security Instrument or the other Loan Documents, provided that the amount
prepaid shall be deposited in an interest-bearing account until the Final Payment Date, and
all interest accruing thereon through the date immediately preceding the Final Payment Date
shall be remitted to Borrower, provided that Borrower acknowledges that Lender makes no
representation or warranty as to the rate of return. For the sake of clarity, if Borrower
shall have paid interest on the Payment Date in the month in which the repayment occurs
through the then current Interest Accrual Period and repays the Debt in full on or before
the Final Payment Date, no additional interest shall be due or payable by Borrower with
respect to the period subsequent to the Payment Date.




(iii) Any partial prepayment shall be in a minimum amount of not less than
$25,000 and shall be in whole multiples of $1,000 in excess thereof.




(iv) Intentionally omitted.




(v) Intentionally omitted.






 


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(vi) In the event that the Loan is prepaid in whole or in part prior to the
first (1st) anniversary of the date hereof, Borrower shall pay to Lender, together with
such prepayment and all other amounts due in connection therewith, a non-refundable amount
which shall be deemed earned by Lender upon the funding of the Loan and shall not count to
or be credited to payment of the Principal Amount, any interest thereon or any other
amounts payable under the Note, the Security Instrument or any of the Loan Documents, equal
to the Spread Maintenance Premium. Thereafter, all prepayments of the Loan shall be
without any prepayment fee or charge of any kind.



ARTICLE XVI: ENVIRONMENTAL COMPLIANCE




Section 16.01. Covenants, Representations and Warranties. (a) Borrower has not, at
any time, and, to Borrower’s best knowledge after due inquiry and investigation, except as set
forth in the Environmental Report, no other Person has at any time, handled, buried, stored,
retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or pumped, poured, emitted, emptied, discharged, injected, dumped,
transferred or otherwise disposed of or dealt with Hazardous Materials on, to or from the Premises
or any other real property owned and/or occupied by Borrower, and Borrower does not intend to and
shall not use the Property or any part thereof or any such other real property for the purpose of
handling, burying, storing, retaining, refining, transporting, processing, manufacturing,
generating, producing, spilling, seeping, leaking, escaping, leaching, pumping, pouring, emitting,
emptying, discharging, injecting, dumping, transferring or otherwise disposing of or dealing with
Hazardous Materials, except for use and storage for use of heating oil, cleaning fluids, pesticides
and other substances customarily used in the operation of properties that are being used for the
same purposes as the Property is presently being used, provided such use and/or storage for use is
in compliance with the requirements hereof and the other Loan Documents and does not give rise to
liability under applicable Legal Requirements or Environmental Statutes or be the basis for a lien
against the Property or any part thereof. In addition, without limitation to the foregoing
provisions, Borrower represents and warrants that, to the best of its knowledge, after due inquiry
and investigation, except as previously disclosed in writing to Lender, there is no asbestos in,
on, over, or under all or any portion of the fire-proofing or any other portion of the Property.



(b) Borrower, after due inquiry and investigation, knows of no seepage, leak,
escape, leach, discharge, injection, release, emission, spill, pumping, pouring, emptying or
dumping of Hazardous Materials into waters on, under or adjacent to the Property or any part
thereof or any other real property owned and/or occupied by Borrower, or onto lands from which such
Hazardous Materials might seep, flow or drain into such waters, except as disclosed in the
Environmental Report.



(c) Borrower shall not permit any Hazardous Materials to be handled, buried, stored,
retained, refined, transported, processed, manufactured, generated, produced, spilled, allowed to
seep, leak, escape or leach, or to be pumped, poured, emitted, emptied, discharged, injected,
dumped, transferred or otherwise disposed of or dealt with on, under, to or from the Property or
any portion thereof at any time, except for use and storage for use of heating oil, ordinary
cleaning fluids, pesticides and other substances customarily used in the operation of properties
that are being used for the same purposes as the Property is presently being used, provided such
use and/or storage for use is in compliance with the requirements hereof and the other Loan
Documents and does not give rise to liability under applicable Legal Requirements or be the basis
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(d) Borrower represents and warrants that no actions, suits, or proceedings have
been commenced, or are pending, or to the best knowledge of Borrower, are threatened with respect
to any Legal Requirement governing the use, manufacture, storage, treatment, transportation, or
processing of Hazardous Materials with respect to the Property or any part thereof. Borrower has
received no notice of, and, except as disclosed in the Environmental Report, after due inquiry, has
no knowledge of any fact, condition, occurrence or circumstance which with notice or passage of
time or both would give rise to a claim under or pursuant to any Environmental Statute pertaining
to Hazardous Materials on, in, under or originating from the Property or any part thereof or any
other real property owned or occupied by Borrower or arising out of the conduct of Borrower,
including, without limitation, pursuant to any Environmental Statute.



(e) Borrower has not waived any Person’s liability with regard to Hazardous
Materials in, on, under or around the Property, nor has Borrower retained or assumed, contractually
or by operation of law, any other Person’s liability relative to Hazardous Materials or any claim,
action or proceeding relating thereto.



(f) In the event that there shall be filed a lien against the Property or any part
thereof pursuant to any Environmental Statute pertaining to Hazardous Materials, Borrower shall,
within sixty (60) days or, in the event that the applicable Governmental Authority has commenced
steps to cause the Premises or any part thereof to be sold pursuant to the lien, within fifteen
(15) days, from the date that Borrower receives notice of such lien, either (i) pay the claim and
remove the lien from the Property, or (ii) furnish (A) a bond satisfactory to Lender in the amount
of the claim out of which the lien arises, (B) a cash deposit in the amount of the claim out of
which the lien arises, or (C) other security reasonably satisfactory to Lender in an amount
sufficient to discharge the claim out of which the lien arises.



(g) Borrower represents and warrants that (i) except as disclosed in the
Environmental Report, Borrower has no knowledge of any violation of any Environmental Statute or
any Environmental Problem in connection with the Property, nor has Borrower been requested or
required by any Governmental Authority to perform any remedial activity or other responsive action
in connection with any Environmental Problem and (ii) neither the Property nor any other property
owned by Borrower is included or, to Borrower’s best knowledge, after due inquiry and
investigation, proposed for inclusion on the National Priorities List issued pursuant to CERCLA by
the United States Environmental Protection Agency (the “EPA”) or on the inventory of other
potential “Problem” sites issued by the EPA or has been identified by the EPA as a potential CERCLA
site or included or, to Borrower’s knowledge, after due inquiry and investigation, proposed for
inclusion on any list or inventory issued pursuant to any other Environmental Statute, if any, or
issued by any other Governmental Authority. Borrower covenants that Borrower will comply with all
Environmental Statutes affecting or imposed upon Borrower or the Property.






 


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(h) Borrower covenants that it shall promptly notify Lender of the presence and/or
release of any Hazardous Materials and of any request for information or any inspection of the
Property or any part thereof by any Governmental Authority with respect to any Hazardous Materials
and provide Lender with copies of such request and any response to any such request or inspection.
Borrower covenants that it shall, in compliance with applicable Legal Requirements, conduct and
complete all investigations, studies, sampling and testing (and promptly shall provide Lender with
copies of any such studies and the results of any such test) and all remedial, removal and other
actions necessary to clean up and remove all Hazardous Materials in, on, over, under, from or
affecting the Property or any part thereof in accordance with all such Legal Requirements
applicable to the Property or any part thereof to the satisfaction of Lender.



(i) Following the occurrence and during the continuance of an Event of Default
hereunder, and without regard to whether Lender shall have taken possession of the Property or a
receiver has been requested or appointed or any other right or remedy of Lender has or may be
exercised hereunder or under any other Loan Document, Lender shall have the right (but no
obligation) to conduct such investigations, studies, sampling and/or testing of the Property or any
part thereof as Lender may, in its discretion, determine to conduct, relative to Hazardous
Materials. All costs and expenses incurred in connection therewith including, without limitation,
consultants’ fees and disbursements and laboratory fees, shall constitute a part of the Debt and
shall, upon demand by Lender, be immediately due and payable and shall bear interest at the Default
Rate from the date so demanded by Lender until reimbursed. Borrower shall, at its sole cost and
expense, fully and expeditiously cooperate in all such investigations, studies, samplings and/or
testings including, without limitation, providing all relevant information and making knowledgeable
people available for interviews.



(j) Borrower represents and warrants that all paint and painted surfaces existing
within the interior or on the exterior of the Improvements are not flaking, peeling, cracking,
blistering, or chipping in a manner which could reasonably be expected to have a Material Adverse
Effect, and do not contain lead or are maintained in a condition that prevents exposure of young
children to lead-based paint, as of the date hereof, and that the current inspections, operation,
and maintenance program at the Property with respect to lead-based paint sufficient to ensure that
all painted surfaces within the Property shall be maintained in a condition that prevents exposure
of tenants to lead-based paint. To Borrower’s knowledge, there have been no claims for adverse
health effects from exposure on the Property to lead-based paint or requests for the investigation,
assessment or removal of lead-based paint at the Property.



(k) Borrower represents and warrants that except in accordance with all applicable
Environmental Statutes and as disclosed in the Environmental Report, (i) no underground treatment
or storage tanks or pumps or water, gas, or oil wells are or have been located about the Property,
(ii) no PCBs or transformers, capacitors, ballasts or other equipment that contain dielectric fluid
containing PCBs are located about the Property, (iii) no insulating material containing urea
formaldehyde is located about the Property and (iv) no asbestos-containing material is located
about the Property, in a manner which could reasonably be expected to have a Material Adverse
Effect.






 


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Section 16.02. Environmental Indemnification. Borrower shall defend, indemnify and
hold harmless the Indemnified Parties for, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or nature, known or unknown,
contingent or otherwise, whether incurred or imposed within or outside the judicial process,
including, without limitation, reasonable attorneys’ and consultants’ fees and disbursements and
investigations and laboratory fees arising out of, or in any way related to any Environmental
Problem, including without limitation:



(a) the presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threat of release of any Hazardous Materials in, on, over, under, from or affecting the
Property or any part thereof whether or not disclosed by the Environmental Report;



(b) any personal injury (including wrongful death, disease or other health condition
related to or caused by, in whole or in part, any Hazardous Materials) or property damage (real or
personal) arising out of or related to any Hazardous Materials in, on, over, under, from or
affecting the Property or any part thereof whether or not disclosed by the Environmental Report;



(c) any action, suit or proceeding brought or threatened, settlement reached, or
order of any Governmental Authority relating to such Hazardous Material whether or not disclosed by
the Environmental Report; and/or



(d) any violation of the provisions, covenants, representations or warranties of
Section 16.01 hereof or of any Legal Requirement which is based on or in any way related to any
Hazardous Materials in, on, over, under, from or affecting the Property or any part thereof
including, without limitation, the cost of any work performed and materials furnished in order to
comply therewith whether or not disclosed by the Environmental Report.



Notwithstanding the foregoing provisions of this Section 16.02 to the contrary, Borrower shall
have no obligation to indemnify Lender for liabilities, claims, damages, penalties, causes of
action, costs and expenses relative to the foregoing which result directly from Lender’s willful
misconduct or gross negligence. Any amounts payable to Lender by reason of the application of this
Section 16.02 shall be secured by this Security Instrument and shall, upon demand by Lender, become
immediately due and payable and shall bear interest at the Default Rate from the date so demanded
by Lender until paid.



This indemnification shall survive the termination of this Security Instrument whether by
repayment of the Debt, foreclosure or deed in lieu thereof, assignment, or otherwise. The
indemnity provided for in this Section 16.02 shall not be included in any exculpation of Borrower
or its principals from personal liability provided for in this Security Instrument or in any of the
other Loan Documents. Nothing in this Section 16.02 shall be deemed to deprive Lender of any
rights or remedies otherwise available to Lender, including, without limitation, those rights and
remedies provided elsewhere in this Security Instrument or the other Loan Documents.


 


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Section 16.03. Development and Implementation of Operations and Maintenance Program.
Borrower hereby covenants to prepare or cause to be prepared an operations and maintenance program
(the “O&M Program”) for the Premises which addresses any requirements
of the Environmental Report and which includes (a) if recommended in the Environmental Report, a
plan for the encapsulation, removal or other action with respect to asbestos containing material
(“ACM”)at the Premises; and (b) compliance with such other recommendations contained in the
Environmental Report. The O&M Program shall be subject to Lender’s reasonable approval and within
ninety (90) days of the date hereof Borrower shall provide Lender with evidence reasonably
satisfactory to Lender that the O&M Program has been established and is in operation. Borrower
hereby covenants and agrees that, during the term of the Loan, including any extension or renewal
thereof, Borrower shall comply in all material respects with the terms and conditions of the O&M
Program.



ARTICLE XVII: ASSIGNMENTS




Section 17.01. Participations and Assignments. Lender shall, at no cost to Borrower,
have the right to assign this Security Instrument and/or any of the Loan Documents, and to
transfer, assign or sell participations and subparticipations (including blind or undisclosed
participations and subparticipations) in the Loan Documents and the obligations hereunder to any
Person; provided, however, that no such participation shall increase, decrease or otherwise affect
either Borrower’s or Lender’s rights or obligations under this Security Instrument or the other
Loan Documents.



ARTICLE XVIII: MISCELLANEOUS




Section 18.01. Right of Entry. Lender and its agents shall have the right to enter
and inspect the Property or any part thereof at all reasonable times, and, except in the event of
an emergency, upon reasonable notice and to inspect Borrower’s books and records and to make
abstracts and reproductions thereof.



Section 18.02. Cumulative Rights. The rights of Lender under this Security
Instrument shall be separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Lender shall be construed as an election to proceed under any
one provision herein to the exclusion of any other provision. Lender shall not be limited
exclusively to the rights and remedies herein stated but shall be entitled, subject to the terms of
this Security Instrument, to every right and remedy now or hereafter afforded by law.



Section 18.03. Liability. If Borrower consists of more than one Person, the
obligations and liabilities of each such Person hereunder shall be joint and several.



Section 18.04. Exhibits Incorporated. The information set forth on the cover hereof,
and the Exhibits annexed hereto, are hereby incorporated herein as a part of this Security
Instrument with the same effect as if set forth in the body hereof.



Section 18.05. Severable Provisions. If any term, covenant or condition of the Loan
Documents including, without limitation, the Note or this Security Instrument, is held to be
invalid, illegal or unenforceable in any respect, such Loan Document shall be construed without
such provision.






 


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Section 18.06. Duplicate Originals. This Security Instrument may be executed in any
number of duplicate originals and each such duplicate original shall be deemed to constitute but
one and the same instrument.



Section 18.07. No Oral Change. The terms of this Security Instrument, together with
the terms of the Note and the other Loan Documents, constitute the entire understanding and
agreement of the parties hereto and supersede all prior agreements, understandings and negotiations
between Borrower and Lender with respect to the Loan. This Security Instrument, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or terminated orally or
by any act on the part of Borrower or Lender, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.



Section 18.08. Waiver of Counterclaim, Etc. 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, AND WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING BROUGHT BY
EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT
HEREUNDER OR WHICH MAY BE ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS SECURITY INSTRUMENT OR THE DEBT.



Section 18.09. Headings; Construction of Documents; etc. The table of contents,
headings and captions of various paragraphs of this Security Instrument are for convenience of
reference only and are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof. Borrower acknowledges that it was represented by competent counsel in
connection with the negotiation and drafting of this Security Instrument and the other Loan
Documents and that neither this Security Instrument nor the other Loan Documents shall be subject
to the principle of construing the meaning against the Person who drafted same.



Section 18.10. Sole Discretion of Lender. Whenever Lender exercises any right given
to it to approve or disapprove, or any arrangement or term is to be satisfactory to Lender, the
decision of Lender to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Lender and shall be final and
conclusive, except as may be otherwise specifically provided herein.



Section 18.11. Waiver of Notice. Borrower shall not be entitled to any notices of
any nature whatsoever from Lender except with respect to matters for which this Security Instrument
specifically and expressly provides for the giving of notice by Lender to Borrower and except with
respect to matters for which Borrower is not, pursuant to applicable Legal Requirements, permitted
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Section 18.12. Covenants Run with the Land. All of the grants, covenants, terms,
provisions and conditions herein shall run with the Premises, shall be binding upon Borrower and
shall inure to the benefit of Lender, subsequent holders of this Security Instrument and their
successors and assigns. Without limitation to any provision hereof, the term “Borrower” shall
include and refer to the borrower named herein, any subsequent owner of the Property, and its
respective heirs, executors, legal representatives, successors and assigns. The representations,
warranties and agreements contained in this Security Instrument and the other Loan Documents are
intended solely for the benefit of the parties hereto, shall confer no rights hereunder, whether
legal or equitable, in any other Person and no other Person shall be entitled to rely thereon.



Section 18.13. Applicable Law. THIS SECURITY INSTRUMENT AND THE OBLIGATIONS ARISING
HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE
UNITED STATES OF AMERICA.



Section 18.14. Security Agreement. (a) (i) This Security Instrument is both a real
property mortgage, deed to secure debt or deed of trust, as applicable, and a “security agreement”
within the meaning of the UCC. The Property includes both real and personal property and all other
rights and interests, whether tangible or intangible in nature, of Borrower in the Property. This
Security Instrument is filed as a fixture filing and covers goods which are or are to become
fixtures on the Property. Borrower by executing and delivering this Security Instrument has
granted to Lender, as security for the Debt, a security interest in the Property to the full
extent that the Property may be subject to the UCC (said portion of the Property so subject to the
UCC being called in this Section 18.14 the “Collateral”). If an Event of Default shall occur, and
shall be continuing, Lender, in addition to any other rights and remedies which it may have, shall
have and may exercise immediately and without demand, any and all rights and remedies granted to a
secured party upon default under the UCC, including, without limiting the generality of the
foregoing, the right to take possession of the Collateral or any part thereof, and to take such
other measures as Lender may deem necessary for the care, protection and preservation of the
Collateral. Upon request or demand of Lender following and during the continuance of an Event of
Default, Borrower shall, at its expense, assemble the Collateral and make it available to Lender at
a convenient place acceptable to Lender. Borrower shall pay to Lender on demand any and all
expenses, including reasonable legal expenses and attorneys’ fees, incurred or paid by Lender in
protecting its interest in the Collateral and in enforcing its rights hereunder with respect to the
Collateral. Any disposition pursuant to the UCC of so much of the Collateral as may constitute
personal property shall be considered commercially reasonable if made pursuant to a public sale
which is advertised at least twice in a newspaper in which sheriff’s sales are advertised in the
county where the Premises is located. Any notice of sale, disposition or other intended action by
Lender with respect to the Collateral given to Borrower in accordance with the provisions hereof at
least ten (10) days prior to such action, shall constitute reasonable notice to Borrower. The
proceeds of any disposition of the Collateral, or any part thereof, may be applied by Lender to the
payment of the Debt in such priority and proportions as Lender in its discretion shall deem
proper. It is not necessary that the Collateral be present at any disposition thereof. Lender
shall have no obligation to clean-up or otherwise prepare the Collateral for disposition.


 


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(ii) The mention in a financing statement filed in the records normally
pertaining to personal property of any portion of the Property shall not derogate from or
impair in any manner the intention of this Security Instrument. Lender hereby declares
that all items of Collateral are part of the real property encumbered hereby to the fullest
extent permitted by law, regardless of whether any such item is physically attached to the
Improvements or whether serial numbers are used for the better identification of certain
items. Specifically, the mention in any such financing statement of any items included in
the Property shall not be construed to alter, impair or impugn any rights of Lender as
determined by this Security Instrument or the priority of Lender’s lien upon and security
interest in the Property in the event that notice of Lender’s priority of interest as to
any portion of the Property is required to be filed in accordance with the UCC to be
effective against or take priority over the interest of any particular class of persons,
including the federal government or any subdivision or instrumentality thereof. No portion
of the Collateral constitutes or is the proceeds of “Farm Products”, as defined in the UCC.




(iii) If Borrower is at any time a beneficiary under a letter of credit now
or hereafter issued in favor of Borrower, Borrower shall promptly notify Lender thereof
and, at the request and option of Lender, Borrower shall, pursuant to an agreement in form
and substance reasonably satisfactory to Lender, either (A) arrange for the issuer and any
confirmer of such letter of credit to consent to an assignment to Lender of the proceeds of
any drawing under the letter of credit or (B) arrange for Lender to become the transferee
beneficiary of the letter of credit, with Lender agreeing, in each case, that the proceeds
of any drawing under the letter to credit are to be applied as provided in this Security
Instrument.




(iv) Borrower and Lender acknowledge that for the purposes of Article 9 of
the UCC, the law of the State of California shall be the law of the jurisdiction of the
bank in which the Central Account is located.




(v) Lender may comply with any applicable Legal Requirements in connection
with the disposition of the Collateral, and Lender’s compliance therewith will not be
considered to adversely affect the commercial reasonableness of any sale of the Collateral.




(vi) Lender may sell the Collateral without giving any warranties as to the
Collateral. Lender may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like. This procedure will not be considered to adversely affect the
commercial reasonableness of any sale of the Collateral.




(vii) If Lender sells any of the Collateral upon credit, Borrower will be
credited only with payments actually made by the purchaser, received by Lender and applied
to the indebtedness of Borrower. In the event the purchaser of the Collateral fails to
fully pay for the Collateral, Lender may resell the Collateral and Borrower will be
credited with the proceeds of such sale.



(b) Borrower hereby irrevocably appoints Lender as its attorney-in-fact, coupled
with an interest, to file with the appropriate public office on its behalf any financing or other
statements signed only by Lender, as secured party, or, to the extent permitted under the UCC,
unsigned, in connection with the Collateral covered by this Security Instrument.






 


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Section 18.15. Actions and Proceedings. Lender has the right to appear in and defend
any action or proceeding brought with respect to the Property in its own name or, if required by
Legal Requirements or, if in Lender’s reasonable judgment, it is necessary, in the name and on
behalf of Borrower, which Lender believes will adversely affect the Property or this Security
Instrument and to bring any action or proceedings, in its name or in the name and on behalf of
Borrower, which Lender, in its discretion, decides should be brought to protect its interest in the
Property.



Section 18.16. Usury Laws. This Security Instrument and the Note are subject to the
express condition, and it is the expressed intent of the parties, that at no time shall Borrower be
obligated or required to pay interest on the principal balance due under the Note at a rate which
could subject the holder of the Note to either civil or criminal liability as a result of being in
excess of the maximum interest rate which Borrower is permitted by law to contract or agree to
pay. If by the terms of this Security Instrument or the Note, Borrower is at any time required or
obligated to pay interest on the principal balance due under the Note at a rate in excess of such
maximum rate, such rate of interest shall be deemed to be immediately reduced to such maximum rate
and the interest payable shall be computed at such maximum rate and all prior interest payments in
excess of such maximum rate shall be applied and shall be deemed to have been payments in reduction
of the principal balance of the Note. No application to the principal balance of the Note pursuant
to this Section 18.16 shall give rise to any requirement to pay any prepayment fee or charge of any
kind due hereunder, if any.



Section 18.17. Remedies of Borrower. In the event that a claim or adjudication is
made that Lender has acted unreasonably or unreasonably delayed acting in any case where by law or
under the Note, this Security Instrument or the Loan Documents, it has an obligation to act
reasonably or promptly, Lender shall not be liable for any monetary damages, and Borrower’s
remedies shall be limited to injunctive relief or declaratory judgment.



Section 18.18. Offsets, Counterclaims and Defenses. Any assignee of this Security
Instrument, the Assignment and the Note shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to the Note, the Assignment or this Security
Instrument which Borrower may otherwise have against any assignor of this Security Instrument, the
Assignment and the Note 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 this Security
Instrument, the Assignment or the Note 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 18.19. No Merger. If Borrower’s and Lender’s estates become the same
including, without limitation, upon the delivery of a deed by Borrower in lieu of a foreclosure
sale, or upon a purchase of the Property by Lender in a foreclosure sale, this Security Instrument
and the lien created hereby shall not be destroyed or terminated by the application of the doctrine
of merger and in such event Lender shall continue to have and enjoy all of the rights and
privileges of Lender as to the separate estates; and, as a consequence thereof, upon the
foreclosure of the lien created by this Security Instrument, any Leases or subleases then existing
and created by Borrower shall not be destroyed or terminated by application of the law of merger
or as a result of such foreclosure unless Lender or any purchaser at any such foreclosure sale
shall so elect. No act by or on behalf of Lender or any such purchaser shall constitute a
termination of any Lease or sublease unless Lender or such purchaser shall give written notice
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Section 18.20. Restoration of Rights. In case Lender shall have proceeded to enforce
any right under this Security Instrument by foreclosure sale, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall have been determined
adversely, then, in every such case, Borrower and Lender shall be restored to their former
positions and rights hereunder with respect to the Property subject to the lien hereof.



Section 18.21. Waiver of Statute of Limitations. The pleadings of any statute of
limitations as a defense to any and all obligations secured by this Security Instrument are hereby
waived to the full extent permitted by Legal Requirements.



Section 18.22. Advances. This Security Instrument shall cover any and all advances
made pursuant to the Loan Documents, rearrangements and renewals of the Debt and all extensions in
the time of payment thereof, even though such advances, extensions or renewals be evidenced by new
promissory notes or other instruments hereafter executed and irrespective of whether filed or
recorded. Likewise, the execution of this Security Instrument shall not impair or affect any other
security which may be given to secure the payment of the Debt, and all such additional security
shall be considered as cumulative. The taking of additional security, execution of partial
releases of the security, or any extension of time of payment of the Debt shall not diminish the
force, effect or lien of this Security Instrument and shall not affect or impair the liability of
Borrower and shall not affect or impair the liability of any maker, surety, or endorser for the
payment of the Debt.



Section 18.23. Application of Default Rate Not a Waiver. Application of the Default
Rate shall not be deemed to constitute a waiver of any Default or Event of Default or any rights or
remedies of Lender under this Security Instrument, any other Loan Document or applicable Legal
Requirements, or a consent to any extension of time for the payment or performance of any
obligation with respect to which the Default Rate may be invoked.



Section 18.24. Intervening Lien. To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Security Instrument shall be superior to the rights of
the holder of any intervening lien.



Section 18.25. No Joint Venture or Partnership. Borrower and Lender intend that the
relationship created hereunder be solely that of mortgagor and mortgagee or grantor and beneficiary
or borrower and lender, as the case may be. Nothing herein is intended to create a joint venture,
partnership, tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor to
grant Lender any interest in the Property other than that of mortgagee, beneficiary or lender.



Section 18.26. Time of the Essence. Time shall be of the essence in the performance
of all obligations of Borrower hereunder.






 


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Section 18.27. Borrower’s Obligations Absolute. Borrower acknowledges that Lender
and/or certain Affiliates of Lender are engaged in the business of financing, owning, operating,
leasing, managing, and brokering real estate and in other business ventures which may be viewed as
adverse to or competitive with the business, prospect, profits, operations or condition (financial
or otherwise) of Borrower. Except as set forth to the contrary in the Loan Documents, all sums
payable by Borrower hereunder shall be paid without notice or demand, counterclaim, set-off,
deduction or defense and without abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Borrower hereunder shall in no way be released, discharged, or
otherwise affected (except as expressly provided herein) by reason of: (a) any damage to or
destruction of or any Taking of the Property or any portion thereof; (b) any restriction or
prevention of or interference with any use of the Property or any portion thereof; (c) any title
defect or encumbrance or any eviction from the Premises or any portion thereof by title paramount
or otherwise; (d) any bankruptcy proceeding relating to Borrower, any General Partner, or any
guarantor or indemnitor, or any action taken with respect to this Security Instrument or any other
Loan Document by any trustee or receiver of Borrower or any such General Partner, guarantor or
indemnitor, or by any court, in any such proceeding; (e) any claim which Borrower has or might have
against Lender; (f) any default or failure on the part of Lender to perform or comply with any of
the terms hereof or of any other agreement with Borrower; or (g) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Borrower shall have notice or
knowledge of any of the foregoing.



Section 18.28. Publicity. All promotional news releases, publicity or advertising
by Manager, Borrower or their respective Affiliates through any media intended to reach the general
public shall not refer to the Loan Documents or the financing evidenced by the Loan Documents, or
to Lender or to any of its Affiliates without the prior written approval of Lender or such
Affiliate, as applicable, in each instance, such approval not to be unreasonably withheld or
delayed. Notwithstanding anything herein to the contrary, Borrower shall be authorized to provide
information relating to the Loan Documents or the financing evidenced by the Loan Documents, or to
Lender or to any of its Affiliates, to rating agencies, underwriters, potential securities
investors, auditors, regulatory authorities and to any Persons which may be entitled to such
information by operation of law and without limiting the foregoing to issue press releases and make
Form 8-K and other securities filings containing the above-described information as it or its
counsel reasonably deems required by law. Lender shall be authorized to provide information
relating to the Property, the Loan and matters relating thereto to rating agencies, underwriters,
potential securities investors, auditors, regulatory authorities and to any Persons which may be
entitled to such information by operation of law and may use basic transaction information
(including, without limitation, the name of Borrower, the name and address of the Property and the
Loan Amount) in press releases or other marketing materials.



Section 18.29. Securitization Opinions. In the event the Loan is included as an
asset of a Securitization by Lender or any of its Affiliates, Borrower shall, within fifteen (15)
Business Days after Lender’s written request therefor, at Lender’s sole cost and expense, deliver
opinions in form and substance and delivered by counsel reasonably acceptable to Lender and the
Rating Agency, as may be reasonably required by Lender and/or the Rating Agency in connection with
such securitization. Borrower’s failure to deliver the opinions required hereby within such
fifteen (15) Business Day period shall constitute an “Event of Default” hereunder.
Notwithstanding the foregoing, in no event shall Borrower be required to deliver a “10b-5 opinion”
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Section 18.30. Cooperation with Rating Agencies. Borrower covenants and agrees that
in the event the Loan is to be included as an asset of a Securitization, Borrower shall (a) gather
any information reasonably required by each Rating Agency in connection with such a Securitization,
(b) at Lender’s request, meet with representatives of each Rating Agency to discuss the business
and operations of the Property, (c) cooperate with the reasonable requests of each Rating Agency
and Lender, at Borrower’s sole cost and expense with respect to the first such request made by
Lender following the Closing Date and at Lender’s expense for any additional requests thereafter,
in connection with all of the foregoing as well as in connection with all other matters and the
preparation of any offering documents with respect thereto, including, without limitation, entering
into any amendments or modifications to this Security Instrument or to any other Loan Document
which may be requested by Lender to conform to Rating Agency or market standards for a
Securitization; provided, that no such modification shall modify (i) the interest rate payable
under the Note, (ii) the stated maturity of the Note or (iii) the principal amount of or the
amortization of principal under the Note, (d) Section 18.32 hereof, (e) any other material economic
term of the Loan or (f) any provision, the effect of which would increase Borrower’s obligations or
decrease Borrower’s rights under the Loan Documents to more than a de minimis extent. Borrower
acknowledges that the information provided by Borrower to Lender may be incorporated into the
offering documents for a Securitization and to the fullest extent permitted, Borrower irrevocably
waives all rights, if any, to prohibit such disclosures including, without limitation, any right of
privacy. Lender and each Rating Agency shall be entitled to rely on the information supplied by,
or on behalf of, Borrower and Borrower indemnifies and holds harmless the Indemnified Parties,
their Affiliates and each Person who controls such Persons within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as same may be amended from
time to time, for, from and against any claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, known or unknown, contingent
or otherwise, whether incurred or imposed within or outside the judicial process, including,
without limitation, reasonable attorneys’ fees and disbursements that arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact contained in such
information 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 information or necessary in order to make the
statements in such information, or in light of the circumstances under which they were made, not
misleading.



Section 18.31. Securitization Financials. Borrower covenants and agrees that, upon
Lender’s written request therefor in connection with a Securitization, Borrower shall, at Lender’s
sole cost and expense, promptly deliver (a) audited financial statements and related documentation
prepared by an Independent certified public accountant that satisfy securities laws and
requirements for use in a public registration statement (which may include up to three (3) years of
historical audited financial statements) and (b) if, at the time one or more Disclosure Documents
are being prepared in connection with a Securitization, Lender expects that Borrower alone or
Borrower and one or more of its Affiliates collectively, or the Property alone or the Property and
any other parcel(s) of real property, together with improvements thereon and personal property
related thereto, that is “related”, within the meaning of the definition of






 


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Significant Obligor, to the Property (a “Related Property”) collectively, will be a
Significant Obligor, Borrower shall furnish to Lender upon request (i) the selected financial data
or, if applicable, net operating income, required under Item 1112(b)(1) of Regulation AB and
meeting the requirements thereof, if Lender expects that the principal amount of the Loan, together
with any loans made to an Affiliate of Borrower or secured by a Related Property that is included
in a Securitization with the Loan (a “Related Loan”), 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 and meeting the requirements thereof, 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 within
ten (10) Business Days after notice from Lender in connection with the preparation of Disclosure
Documents for the Securitization and, with respect to the data or financial statements required
pursuant to clause (b) hereof, (A) not later than thirty (30) days after the end of each fiscal
quarter of Borrower and (B) not later than seventy-five (75) days after the end of each Fiscal
Year; provided, however, that Borrower shall not be obligated to furnish financial data or
financial statements pursuant to clauses (A) or (B) of this sentence with respect to any period for
which a filing pursuant to the Securities Exchange Act of 1934 in connection with or relating to
the Securitization is not required.



Section 18.32. Exculpation. Notwithstanding anything herein or in any other Loan
Document to the contrary, except as otherwise set forth in this Section 18.32 to the contrary,
Lender shall not enforce the liability and obligation of Borrower and (a) if Borrower is a
partnership, its constituent partners or any of their respective partners, (b) if Borrower is a
trust, its beneficiaries or any of their respective Partners (as hereinafter defined), (c) if
Borrower is a corporation, any of its shareholders, directors, principals, officers or employees,
or (d) if Borrower is a limited liability company, any of its members and their respective legal,
equitable and beneficial owner (the Persons described in the foregoing clauses (a) — (d), as the
case may be, together with any direct or indirect beneficial or legal owners of such Persons, are
hereinafter referred to as the “Partners”) to perform and observe the obligations contained
in this Security Instrument or any of the other Loan Documents by any action or proceeding wherein
a money judgment shall be sought against Borrower or the Partners, except that Lender may bring a
foreclosure action, action for specific performance, or other appropriate action or proceeding
(including, without limitation, an action to obtain a deficiency judgment) solely for the purpose
of enabling Lender to realize upon (i) Borrower’s interest in the Property and (ii) any other
collateral given to Lender under the Loan Documents (the “Default Collateral”);
provided, however, that any judgment in any such action or proceeding shall be
enforceable against Borrower and the Partners only to the extent of any such Default Collateral.
The provisions of this Section shall not, however,






 


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(a) impair the validity of the Debt evidenced by
the Note or in any way affect or impair the lien of this Security Instrument or any of the other Loan Documents or
the right of Lender to foreclose this Security Instrument following the occurrence and during the
continuance of an Event of Default; (b) impair the right of Lender to name Borrower as a party
defendant in any action or suit for judicial foreclosure and sale under this Security Instrument;
(c) affect the validity or enforceability of the Note, this Security Instrument, or any of the
other Loan Documents, or impair the right of Lender to seek a personal judgment against Guarantor;
(d) impair the right of Lender to obtain the appointment of a receiver; (e) impair the enforcement
of the Assignment; (f) impair the right of Lender to bring suit for monetary judgment with respect
to damages incurred by Lender resulting from fraud or intentional misrepresentation by Borrower, or
any other Person in connection with this Security Instrument, the Note or the other Loan Documents,
and the foregoing provisions shall not modify, diminish or discharge the liability of Borrower or
the Partners with respect to same; (g) impair the right of Lender to bring suit for a monetary
judgment with respect to Borrower’s misappropriation of tenant security deposits or Rent, and the
foregoing provisions shall not modify, diminish or discharge the liability of Borrower or the
Partners with respect to same; (h) impair the right of Lender to obtain Loss Proceeds due to Lender
pursuant to this Security Instrument; (i) impair the right of Lender to enforce the provisions of
Sections 2.02(g), 16.01 or 16.02, inclusive of this Security Instrument, even after repayment in
full by Borrower of the Debt or to bring suit for a monetary judgment against Borrower or the
Partners with respect to any obligation set forth in said Sections; (j) prevent or in any way
hinder Lender from exercising, or constitute a defense, or counterclaim, or other basis for relief
in respect of the exercise of, any other remedy against any or all of the collateral securing the
Note as provided in the Loan Documents; (k) impair the right of Lender to bring suit for a monetary
judgment with respect to damages incurred by Lender resulting from any misapplication or conversion
of Loss Proceeds, and the foregoing provisions shall not modify, diminish or discharge the
liability of Borrower or the Partners with respect to same; (l) impair the right of Lender to sue
for, seek or demand a deficiency judgment against Borrower solely for the purpose of foreclosing
the Property or any part thereof, or realizing upon the Default Collateral; provided,
however, that any such deficiency judgment referred to in this clause (l) shall be
enforceable against Borrower and the Partners only to the extent of any of the Default Collateral;
(m) impair the ability of Lender to bring suit for a monetary judgment with respect to damages
incurred by Lender resulting from arson or waste to or of the Property or damage to the Property
committed by Borrower or its Affiliates; (n) impair the right of Lender to bring a suit for a
monetary judgment in the event of the exercise of any right or remedy under any federal, state or
local forfeiture laws resulting in the loss of the lien of this Security Instrument, or the
priority thereof, against the Property; (o) be deemed a waiver of any right which Lender may have
under Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a
claim for the full amount of the Debt or to require that all collateral shall continue to secure
all of the Debt; (p) impair the right of Lender to bring suit for monetary judgment with respect to
damages incurred by Lender resulting from any losses resulting from any claims, actions or
proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that the relationship of
Borrower and Lender is that of joint venturers, partners, tenants in common, joint tenants or any
relationship other than that of debtor and creditor; (q) impair the right of Lender to bring suit
for a monetary judgment for damages incurred by Lender in the event of a Transfer in violation of
the provisions of Article IX hereof, including, without limitation, the failure to obtain Lender’s
consent to a Transfer as, when and to the extent required thereunder;






 


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(r) impair the right of
Lender to bring suit for a monetary judgment in the event that Borrower moves its principal place of business or its books and records relating to the Property
which are governed by the UCC, or changes its name, its jurisdiction of organization, type of
organization or other legal structure or, if it has one, organizational identification number,
without first giving Lender thirty (30) days prior written notice or (s) impair the right of Lender
to bring suit for a monetary judgment in the event that Borrower changes its name of otherwise does
anything which would make the information set forth in any UCC Financing Statements relating to the
Property materially misleading without giving Lender thirty (30) days prior written notice
thereof. The provisions of this Section 18.32 shall be inapplicable to Borrower if (a) any
proceeding, action, petition or filing under the Bankruptcy Code, or any similar state or federal
law now or hereafter in effect relating to bankruptcy, reorganization or insolvency, or the
arrangement or adjustment of debts, shall be filed by, consented to or acquiesced in by or with
respect to Borrower, or if Borrower shall institute any proceeding for its dissolution or
liquidation, or shall make an assignment for the benefit of creditors or (b) Lender obtains a
judgment that Borrower or any Affiliate of Borrower has, other than in good faith, contested or in
any material way interfered with, directly or indirectly (collectively, a “Contest”), any
foreclosure action, UCC sale or other material remedy exercised by Lender upon the occurrence of
any Event of Default whether by making any motion, bringing any counterclaim, claiming any defense,
seeking any injunction or other restraint, commencing any action, or otherwise, in which event
Lender shall have recourse against all of the assets of Borrower including, without limitation, any
right, title and interest of Borrower in and to the Property and any partnership interests in
Borrower (but excluding the other assets of such Partners to the extent Lender would not have had
recourse thereto other than in accordance with the provisions of this Section 18.32).



Section 18.33. Component Notes. Lender, at its sole cost and expense, without in any
way limiting Lender’s other rights hereunder, in its sole and absolute discretion, shall have the
right at any time to require Borrower to execute and deliver “component” notes (including senior
and junior notes), in substitution for one (1) or both of Note A-1 and/or Note A-2, which notes may
be paid in such order of priority as may be designated by Lender, provided that (a) the aggregate
principal amount of such “component” notes shall equal the outstanding principal balance of the
Loan immediately prior to the creation of such “component” notes, (b) the weighted average interest
rate of all such “component” notes shall on the date created equal the interest rate which was
applicable to the Loan immediately prior to the creation of such “component” notes, (c) the debt
service payments on all such “component” notes shall on the date created equal the debt service
payment which was due under the Loan immediately prior to the creation of such component notes and
(d) the other terms and provisions of each of the “component” notes shall be identical in substance
and substantially similar in form to the Loan Documents. Borrower shall cooperate with all
reasonable requests of Lender in order to establish the “component” notes and shall execute and
deliver such documents as shall reasonably be required by Lender in connection therewith, all in
form and substance reasonably satisfactory to Lender, including, without limitation, the severance
of security documents if requested. It shall be an Event of Default if Borrower fails to comply
with any of the terms, covenants or conditions of this Section 18.33 after the expiration of
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Section 18.34. Mezzanine Loan Option. Lender shall have the right at any time to
divide the Loan into two or more parts (the “Mezzanine Option”): a “mortgage loan” and one
or more
“mezzanine loans.” The principal amount of the mortgage loan plus the principal amount of the
mezzanine loan(s) shall equal the outstanding principal balance of the Loan immediately prior to
the creation of the mortgage loan and the mezzanine loan(s). In effectuating the foregoing, Lender
will make one or more loans to one or more entities that will be the direct or indirect equity
owner(s) of Borrower as described in Section 18.34(b) (collectively, the “Mezzanine
Borrower”). The Mezzanine Borrower will contribute the amount of the mezzanine loan(s) to
Borrower (in its capacity as borrower under the mortgage loan, “mortgage borrower”) and the
mortgage borrower will apply the contribution to pay down the Loan to the mortgage loan amount.
The mortgage loan and the mezzanine loan(s) will be on the same terms and subject to the same
conditions set forth in the Loan Documents except as follows. The mezzanine loan(s) shall be made
pursuant to Lender’s standard mezzanine loan documents.



(a) Lender shall have the right to establish different interest rates and debt
service payments for the mortgage loan and the mezzanine loan(s) and to require the payment of the
mortgage loan and the mezzanine loan(s) in such order of priority as may be designated by Lender;
provided, that (i) the total loan amounts for the mortgage loan and the mezzanine loan(s) shall
equal the amount of the Loan immediately prior to the creation of the mortgage loan and the
mezzanine loan(s), (ii) the weighted average interest rate of the mortgage loan and the mezzanine
loan(s) shall on the date created equal the interest rate which was applicable to the Loan
immediately prior to creation of the mortgage loan and mezzanine loan(s) and (iii) the debt service
payments on the mortgage loan note and the mezzanine loan note(s) shall on the date created equal
the debt service payment which was due under the Loan immediately prior to creation of a mortgage
loan and a mezzanine loan(s).



(b) The Mezzanine Borrower shall be a special purpose, bankruptcy remote entity
pursuant to applicable Rating Agency criteria and shall own directly or indirectly one hundred
percent (100%) of the mortgage borrower. The security for the mezzanine loan(s) shall be a pledge
of one hundred percent (100%) of the direct and indirect ownership interests in the mortgage
borrower.



(c) Borrower shall cooperate with all reasonable requests of Lender in order to
convert the Loan into a mortgage loan and one or more mezzanine loans and shall execute and deliver
such documents as shall reasonably be required by Lender in connection therewith, including,
without limitation, the delivery of non-consolidation, enforceability, authorization and execution
opinions and an “Eagle 9” or “UCC plus” (or equivalent) UCC insurance policy and the modification
of organizational documents and loan documents and the transfer of the membership interest in
Borrower to the Mezzanine Borrower.



It shall be an Event of Default if Borrower fails to comply with any of the terms, covenants
or conditions of this Section 18.34 after expiration of ten (10) Business Days notice thereof.



Section 18.35. Trustee’s Fees. Borrower shall pay all costs, fees and expenses
incurred by Trustee and Trustee’s agents and counsel in connection with the performance by Trustee
of Trustee’s duties hereunder, and all such costs, fees and expenses shall be secured by this
Security Instrument.






 


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Section 18.36. Concerning the Trustee. Trustee shall be under no duty to take any
action hereunder except as expressly required hereunder or by law, or to perform any act which
would involve Trustee in any expense or liability or to institute or defend any suit in respect
hereof, unless properly indemnified to Trustee’s reasonable satisfaction. Trustee, by acceptance
of this Security Instrument, covenants to perform and fulfill the trusts herein created, being
liable, however, only for gross negligence or willful misconduct, and hereby waives any statutory
fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by
Trustee in accordance with the terms hereof. Trustee may resign at any time by written instrument
to that effect delivered to Lender. Lender may remove Trustee at any time or from time to time and
select a successor trustee. In the event of the death, removal, resignation, refusal to act, or
inability to act of Trustee, or in its sole discretion for any reason whatsoever Lender may,
without notice and without specifying any reasons therefor and without applying to any court,
select and appoint a successor trustee, by an instrument recorded wherever this Security Instrument
is recorded, and all powers, rights, duties and authority of Trustee, as aforesaid, shall thereupon
become vested in such successor. Such substitute trustee shall not be required to give bond for
the faithful performance of the duties of Trustee hereunder unless required by Lender. The
procedure provided for in this Section 18.36 for substitution of Trustee shall be in addition to
and not in exclusion of any other provisions for substitution, by law or otherwise.



Section 18.37. Assignment Upon Repayment. At Borrower’s request, upon (a) Borrower’s
prepayment or repayment of the Debt in full, whether by prepayment or otherwise and (b) payment by
Borrower of Lender’s reasonable counsel fees and disbursements and other reasonable costs, if any,
and provided Borrower (i) refinances the Loan through any institution other than Lender, or
(ii) sells any of the Premises, and an institution other than Lender is involved in the financing
of such sale, Lender shall deliver to Borrower or Borrower’s designee (x) an assignment of the
Note, this Security Instrument and the other Loan Documents, without recourse, representation or
warranty, together with the Note (or an affidavit of lost note) duly endorsed by Lender to
Borrower’s designee, or (y) a satisfaction and release of lien in respect hereof, in recordable
form, as well as all appropriate UCC termination statements and the release and termination of all
other security for the Loan. Borrower shall pay all of Lender’s reasonable out-of-pocket costs and
expenses incurred in connection with the foregoing.



Section 18.38. Primary Servicer. Notwithstanding anything to the contrary contained
herein or in any other Loan Document, in the event that Note A-1 and Note A-2 are held by different
Persons, Borrower shall be required to deal with only one Person acting on behalf of all Persons
comprising Lender (the “Primary Servicer”), with respect to any consents, approvals or
notices required or permitted from, or to, Lender pursuant to the Loan Documents (it being
understood that the Primary Servicer may need to consult with other Persons that hold a portion of
Lender’s rights and obligations under the Loan or with the Rating Agencies in connection with any
such consent, approval or notice and that a so-called “special servicer” may act as such Primary
Servicer). Lender may replace such Primary Servicer with another Primary Servicer at any time in
Lender’s sole discretion. As of the date hereof, Wachovia Bank, National Association is hereby
designated as the Primary Servicer and unless and until Borrower is notified by Wachovia Bank,
National Association of a new Primary Servicer, Borrower shall be permitted to rely conclusively
and irrevocably on such designation.






 


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Section 18.39. Certain Matters Relating to Property Located in the State of
California. With respect to the Property which is located in the State of California,
notwithstanding anything contained herein:



(a) Power of Sale. Lender may deliver to Trustee a written declaration of
an Event of Default and demand for sale which requests that Trustee record and serve a written
notice of default and of election to cause the Property to be sold, and cause any or all of the
Property to be sold under the power of sale granted by this Security Instrument in the manner
hereinbelow specified in this Section 18.39.




(i) Declaration of Default; Acceptance. Lender shall (1) deliver
to Trustee a written declaration of an Event of Default which recites facts which
demonstrate Borrower’s default, and a demand that Trustee sell the Property, and (2)
deposit the Note and this Security Instrument, if required by law, with Trustee. Trustee
shall accept Lender’s declaration of an Event of Default as true and as demonstrative of
Borrower’s default, and shall record and serve a written notice of default and of election
to cause the Property to be sold in the manner required by applicable law.




(ii) Rescission of Notice of Default. Lender may rescind any notice
of default at any time before Trustee’s sale by executing a notice of rescission and
recording it. The recordation of the notice will constitute a cancellation of any prior
declaration of an Event of Default and demand for sale and of any acceleration of maturity
of the Debt affected by any prior declaration or notice of an Event of Default. The
exercise by Lender of the right of rescission will not constitute a waiver of any default
then existing or subsequently occurring, or impair the right of Lender to execute other
declarations of default and demand for sale, or notices of default and of election to cause
the Property to be sold, nor otherwise affect the Note or this Security Instrument, or any
of the rights, obligations or remedies of Lender or Trustee hereunder or under applicable
law.




(iii) Date of Trustee’s Sale. If, after the expiration of any period
of time provided by applicable law, Borrower’s Event of Default has not been cured and
Borrower’s Debt has not been reinstated in the manner required by applicable law, Trustee
shall establish a date for the sale of the Property and record and serve a notice of sale
in the manner required by applicable law.




(iv) Trustee’s Sale. If, on or before the date scheduled for the
sale of the Property, Borrower’s Event of Default has not been cured and the Debt has not
been reinstated, Trustee, without demand on Borrower, shall sell the Property at the time
and place fixed by Trustee in the notice of sale, either as a whole or in separate parcels,
and in such order as Trustee may determine, at public auction, and to any Person, including
Borrower, Lender or Trustee. The Property shall be sold to the highest bidder for cash
payable at the time of sale. Notwithstanding the foregoing, instead of paying cash for the
Property, Lender may credit the amount of its auction sale bid by the amount of the Debt,
or any fraction thereof, including, without limitation, Trustee’s cost and expenses from
the sale of the Property. Lender will be entitled to bid, at any trustee’s or foreclosure
sale of the Property, the amount of the Environmental Damages (as hereinafter defined), any
costs incurred by Lender with respect to any Environmental Problem and interest in
addition to the amount of other Debt as a credit bid, the equivalent of cash. Furthermore,
if a bid has been made by Lender in the amount of the Debt, other than Debt for
Environmental Damages and any costs incurred by Lender with respect to any Environmental
Problem incurred by Lender, any Debt comprised of the Environmental Damages and any costs
incurred by Lender with respect to any Environmental Problem shall not be discharged by
virtue of the full credit bid and shall remain an obligation of Borrower to be satisfied
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(v) Delivery of Deed. Trustee shall deliver to the purchaser of the
Property a deed which conveys title to the Property without any covenant or warranty,
express or implied. The recitals in the deed of any matters or facts shall be conclusive
proof of their truthfulness.




(vi) Postponement of Trustee’s Sale. Trustee may postpone the sale
of all or any portion of the Property in accordance with California Civil Code §2924g, by
public announcement at the time and place of sale, and from time to time thereafter Trustee
may postpone such sale by public announcement at the time fixed by the preceding
postponement or as otherwise allowed by said statute.




(vii) Application of Sale Proceeds. The proceeds of Trustee’s public
auction of the Property shall be applied in the following manner: (1) payment of the
portion of the Debt attributable to the costs and expenses of the sale; (2) repayment of
the portion of the Debt attributable to any sums expended or advanced by Lender (other than
the Environmental Damages and costs incurred by Lender with respect to any Environmental
Problem) under the terms of this Security Instrument, plus interest at the Default Rate;
(3) payment of all other Debt and all other obligations of Borrower secured by this
Security Instrument, in any order that Lender chooses; (4) repayment of the portion of the
Debt attributable to the Environmental Damages and costs incurred by Lender with respect to
any Environmental Problem under the terms of this Security Instrument, plus interest at the
Default Rate; and (5) the remainder, if any, to satisfy the outstanding balance of
obligations secured by any junior encumbrances in the order of their priority, then to
Borrower or Borrower’s successor in interest.




(viii) Proof of Compliance with the Law. If there is a sale of the
Property, or any part of it, and the execution of a deed for it, the recital of default and
of recording notice of breach and election of sale, and of the elapsing of the required
time between the recording and the following notice, and of the sale should be made, will
be conclusive proof of the default, recording, election, elapsing of time, and the due
giving of notice, and that the sale was regularly and validly made on proper demand by
Lender. Any deed with these recitals will be effectual and conclusive against Borrower,
its successors, and assigns, and all other Persons. The receipt for the purchase money
recited or in any deed executed to the purchaser will be sufficient discharge to the
purchaser from all obligations to see to the proper application of the purchase money.


 


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(b) Acceptance by Trustee. Trustee accepts this trust when this Security
Instrument, duly executed and acknowledged, is made a public record as provided by law. Trustee is
not
obligated to notify any party hereto of pending sale under any other deed of trust or of any action
or proceeding in which Borrower, Lender or Trustee shall be a party unless brought by Trustee.



(c) Rights and Duties. It shall be no part of the duty of Trustee to see to
any recording, filing or registration of this Security Instrument or any other instrument in
addition or supplemental hereto, or to give any notice thereof, or to see to the payment of or be
under any duty in respect of any tax or assessment or other governmental charge which may be levied
or assessed on the Property, or any part thereof, or against Trustee, or to see to the performance
or observance by Borrower of any of the covenants and agreements contained herein. Trustee shall
not be responsible for the execution, acknowledgement or validity of this Security Instrument or of
any instrument in addition or supplemental hereto or for the sufficiency of the security purported
to be created hereby, and makes no representation in respect thereof or in respect of the rights of
Lender. Trustee shall have the right to advice of counsel upon any matters arising hereunder and
shall be fully protected in relying as to legal matters on the advice of counsel. Trustee shall
not incur any personal liability hereunder except for its own gross negligence or willful
misconduct and Trustee shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by Trustee hereunder and
believed by Trustee in good faith to be genuine.



(d) Subrogation to Existing Liens; Vendor’s Lien. To the extent that
proceeds of the Note are used to pay Debt secured by any outstanding lien, security interest,
charge or prior encumbrance against the Property, such proceeds have been advanced by Lender at
Trustee’s request, and Lender shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security interests, charges or
encumbrances, however remote, irrespective of whether said liens, security interests, charges or
encumbrances are released, and all of the same are recognized as valid and subsisting and are
renewed and continued and merged herein to secure the Debt, but the terms and provisions of this
Security Instrument shall govern and control the manner and terms of enforcement of the liens,
security interests, charges and encumbrances to which Lender is subrogated hereunder. It is
expressly understood that, in consideration of the payment of such indebtedness by Lender, Borrower
hereby waives and releases all demands and causes of action for offsets and payments in connection
with the said indebtedness. If all or any portion of the proceeds of the loan evidenced by the
Note or of any other secured indebtedness has been advanced for the purpose of paying the purchase
price for all or a part of the Property, no vendor’s lien is waived; and Lender shall have, and is
hereby granted, a vendor’s lien on the Property as cumulative additional security for the secured
indebtedness. Lender may foreclose under this Security Instrument or under the vendor’s lien
without waiving the other or may foreclose under both.



(e) Substitute Trustee. Trustee may resign by an instrument in writing
addressed to Lender, or Trustee may be removed at any time with or without cause by an instrument
in writing executed by Lender. In case of the death, resignation, removal or disqualification of
Trustee, or if for any reason Lender shall deem it desirable to appoint a substitute or successor
trustee to act instead of the herein named trustee or any substitute or successor trustee, then
Lender shall have the right and is hereby authorized and empowered to appoint a successor trustee,
or a substitute trustee, without other formality than appointment and designation in writing






 


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executed by Lender, and the authority hereby conferred shall extend to the appointment
of other successor and substitute trustees successively until the Debt secured hereby has been paid
in full, or until the Property is fully and finally sold hereunder. In the event that the Debt is
owned by more than one person or entity, the holder or holders of not less than a majority in
amount of such indebtedness shall have the right and authority to make the appointment of a
successor or substitute trustee as provided for in the preceding sentence or to remove Trustee as
provided in the first sentence of this Section 18.39(e). Such appointment and designation by
Lender, or by the holder or holders of not less than a majority of the Debt secured hereby, shall
be full evidence of the right and authority to make the same and of all facts therein recited. If
Lender is a corporation or association or trust and such appointment is executed in its behalf by
an officer or trustee of such corporation or association or trust, such appointment shall be
conclusively presumed to be executed with authority and shall be valid and sufficient without proof
of any action by the board of directors or any superior officer of the corporation or association
or trust. Upon the making of any such appointment and designation, all of the estate and title of
Trustee in the Property shall vest in the named successor or substitute trustee, and it shall
thereupon succeed to and shall hold, possess and execute, all of the rights, powers, privileges,
immunities and duties herein conferred upon Trustee; but, nevertheless, upon the written request of
Lender or of the successor or substitute trustee, the trustee ceasing to act shall execute and
deliver an instrument transferring to such successor or substitute trustee all of the estate and
title in the Property of the trustee so ceasing to act, together with all the rights, powers,
privileges, immunities and duties herein conferred upon the Trustee, and shall duly assign,
transfer and deliver any of the properties and moneys held by said trustee hereunder to said
successor or substitute trustee. All references herein to “Trustee” shall be deemed to refer to
Trustee (including any successor or substitute appointed and designated as herein provided) from
time to time acting hereunder.



(f) No Liability of Trustee. TRUSTEE SHALL NOT BE LIABLE FOR ANY ERROR OF
JUDGMENT OR ACT DONE BY TRUSTEE IN GOOD FAITH, OR BE OTHERWISE RESPONSIBLE OR ACCOUNTABLE UNDER ANY
CIRCUMSTANCES WHATSOEVER (INCLUDING TRUSTEE’S NEGLIGENCE), EXCEPT FOR TRUSTEE’S GROSS NEGLIGENCE OR
MISCONDUCT. Trustee shall have the right to rely on any instrument, document or signature
authorizing or supporting any action taken or proposed to be taken by it hereunder, believed by it
in good faith to be genuine. All moneys received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but need not be
segregated in any manner from any other moneys (except to the extent required by law), and Trustee
shall be under no liability for interest on any moneys received by it hereunder. Trustee hereby
ratifies and confirms any and all acts which the herein-named Trustee or its successor or
successors, substitute or substitutes, in this trust, shall do lawfully by virtue hereof.




(g) Judgment on Environmental Provision.




(i) Judgment Sought. Pursuant to California Code of Civil
Procedure §736, Lender may bring an action (as such term is defined in California Code of
Civil Procedure §22) for breach of contract against Borrower for breach of any provision
contained in Article XVI hereof (the “Environmental Provision”), for the recovery
of the Environmental Damages listed in Section (ii) hereof, and for the enforcement of the
Environmental Provision, whether the Environmental Provision is or was contained in or
secured by this Security Instrument and whether or not this Security Instrument has been
discharged, reconveyed or foreclosed upon. Notwithstanding the foregoing, no injunction
for the enforcement of an Environmental Provision may be issued after (x) satisfaction of
the Debt or (y) transfer of Borrower’s right, title and interest in and to the “Real
Property Security” (as such term is defined in California Code of Civil Procedure
§736(f)(4)) in a bona fide transaction to an unaffiliated third party for fair value.


 


116









 






(ii) Damages. The damages that Lender may recover pursuant to
Section (i) above shall be limited to reimbursement or indemnification of the following
(collectively, the “Environmental Damages”): (w) if not pursuant to an order of any
Governmental Authority relating to the cleanup, remediation, or other response action
required by any applicable rule promulgated by a Governmental Authority, those costs
relating to a reasonable and good faith cleanup, remediation, or other response action
concerning a Release (such term shall have the meaning ascribed to it under California
Civil Code §2929.5 and under California Civil Code of Procedure §726.5 and §736) or
threatened release of Hazardous Materials which is anticipated by the Environmental
Provision; (x) if pursuant to an order of any Governmental Authority which is anticipated
by the Environmental Provision, all amounts reasonably advanced in good faith by Lender in
connection therewith, provided that Lender negotiated, or attempted to negotiate, in good
faith to minimize the amounts it was required to advance under the order; (y)
indemnification against all liabilities of Lender to any third party relating to the breach
and not arising from acts, omissions or other conduct which occur after Borrower is no
longer an owner or operator of the “Real Property Security” and provided Lender is not
responsible for the environmentally impaired condition of the Real Property Security, in
accordance with the standards set forth in California Code of Civil Procedure §726.5(d)
(for the purposes of this Section (ii), the term “owner or operator” means those persons
described in §101(20)(A) of CERCLA); and (z) attorneys’ fees and costs incurred by Lender
relating to the breach. Notwithstanding the foregoing, the Environmental Damages
recoverable by Lender shall not include (w) any part of the principal amount or accrued
interest of the Debt, except for any amounts advanced by Lender to cure or mitigate the
breach of any Environmental Provision that is added to the principal amount, and
contractual interest thereon, or (x) amounts which relate to a Release which was knowingly
permitted, caused or contributed to by Lender or any affiliate or agent of Lender.



(h) Waiver of Lien. Pursuant to the terms of California Code of Civil
Procedure §726.5, Lender may (i) waive its lien against (A) any parcel of “Real Property Security”
that is “environmentally impaired” (as such term is defined in California Code of Civil Procedure
§726.5(e)(3)), or is an “affected parcel” (as such term is defined in California Code Civil
Procedure §726.5(e)(1)), and (B) all or any portion of the personal property attached to such
parcels and (ii) exercise (A) the rights and remedies of an unsecured creditor including reduction
of its claim against Borrower to judgment and (B) any other rights and remedies permitted by law.
As between Lender and Borrower, for purposes of California Code of Civil Procedure §726.5, Borrower
shall have the burden of proving that (1) the Release or threatened Release was not (x) knowingly
or negligently caused or contributed to, or (y) knowingly or willfully






 


117









 







permitted or acquiesced to, by Borrower or any related party (as such term is defined in California
Code of Civil Procedure §726.5(e)(6)), or any affiliate or agent of Borrower or any related party,
and (2) in conjunction with the making, renewal or modification of the Debt, (x) neither Borrower,
any related party nor any affiliate or agent of Borrower or any related party had actual knowledge
or notice of the Release or threatened Release of any Hazardous Materials, or (y) if such a person
had knowledge or notice of the Release or threatened Release, Borrower made written disclosure
thereof to Lender after Lender’s written request for information concerning the environmental
condition of the Real Property Security, or (z) Lender otherwise obtained actual knowledge thereof
prior to the making, renewal or modification of the Debt.



(i) Reconveyance Upon Payment of Debt. In the event that Borrower shall
cause to be paid the entire Debt and perform in full all of its obligations under the Loan
Documents, Lender shall release and shall cause Trustee to release the Property from the lien of
this Security Instrument and to reconvey (without warranty by or recourse against Trustee or
Lender) the Property to Borrower. Upon Trustee’s receipt of Lender’s request for reconveyance,
Trustee shall reconvey, without warranty, the Property or that portion held. When the Property has
been fully reconveyed, the last reconveyance will operate as a reassignment of all future Rents to
the Person legally entitled.




(j) Environmental Addendum.




(i) Lender shall have the right, but not the obligation, to enter upon the
Property, from time to time upon prior reasonable notice, and in its sole and absolute
discretion, to conduct inspections of the Property and the activities conducted thereon to
determine the compliance with all Environmental Statutes, the presence of Hazardous
Materials and the existence of any potential damages as a result of the condition of the
Property. In furtherance thereof, Borrower hereby grants to Lender and its agents,
employees and qualified consultants and contractors, the right to enter upon the Property
and to perform such tests on the Property (including invasive tests) as are reasonably
necessary. Lender shall conduct such inspections and tests at reasonable times, shall use
its best efforts to minimize interference with the operation of the Property and agrees to
restore the condition of the Property, but Lender shall not be liable for any interference
caused thereby unless due to the gross negligence or willful misconduct or omission of
Lender. In furtherance of the purposes above, without limitation of any of Lender’s other
rights, Lender may: (x) obtain a court order to enforce Lender’s right to enter and inspect
the Property under California Civil Code §2929.5, to which the decision of Lender as to
whether there exists any Hazardous Materials on or about the Property in violation of any
Environmental Statutes, or a breach by Borrower of any environmental provision of this
Security Instrument or any of the other Loan Documents, will be deemed reasonable and
conclusive as between the parties; and (y) have a receiver be appointed under California
Code of Civil Procedure §564 to enforce Lender’s right to enter and inspect the Property
for the purpose set forth above.


 


118









 






(ii) Borrower and Lender agree that: (x) this paragraph is intended as
Lender’s written request for information and Borrower’s written response concerning the
environmental condition of the Property as provided in California Code of Civil
Procedure §726.5; and (y) each representation, warranty or covenant, or indemnity made by
Borrower in this Security Instrument or in the other Loan Documents that relates to the
environmental condition of the Property is intended by Borrower and Lender to be an
“environmental provision” for the purposes of California Code of Civil Procedure §736 and
will survive the payment of the Debt and the termination or expiration of this Security
Instrument and will not be affected by Lender’s acquisition of any interest in the
Property, whether by full credit bid at foreclosure, deed in lieu of that, or otherwise.
If there is any transfer of any portion of Borrower’s interest in the Property, any
successor-in-interest to Borrower agrees by its succession to that interest that the
written request made pursuant to this paragraph will be deemed remade to the
successor-in-interest without any further or additional action on the part of Lender and
that by assuming the Debt secured by this Security Instrument or by accepting the interest
of Borrower subject to the lien of this Security Instrument, the successor remakes each of
the representations and warranties in this Security Instrument and agrees to be bound by
each covenant in this Security Instrument, including but not limited to any indemnity
provision.



(k) Financing Statement. This Security Instrument shall also constitute a
financing statement pursuant to UCC §9502, and shall be filed as a fixture filing in the Official
Records of the County Recorder of the County in which the Property is located and covers goods
which are or are to become fixtures on the Property.




(l) Intentionally Omitted.




(m) Intentionally Omitted.




(n) Intentionally Omitted.



(o) Fixture Filing. The personal property in which Lender has a security
interest includes goods which are or shall become fixtures on the Property. This Security
Instrument is intended to serve as a fixture filing pursuant to the terms of the California Uniform
Commercial Code. This filing shall remain in effect as a fixture filing until this Security
Instrument is released or otherwise satisfied of record or its effectiveness otherwise terminates
with respect to the Property. In that regard, the following information is provided:



	 	 	 
	Name of Debtor:

	 	Mondrian Holdings LLC
	 
	 	 
	Address of Debtor:

	 	See Section 11.01 above.
	 
	 	 
	Name of Secured Party:

	 	Wachovia Bank, National Association
	 
	 	 
	Address of Secured Party:

	 	See Section 11.01 above.






 


119









 







(p) Waiver of Statutory Regulation. By initialing below, Borrower waives
any right under California Civil Code §2954.10 or otherwise to prepay the Note, in whole or in
part, without a Prepayment Charge (as described in Section 13.03 hereof). Borrower acknowledges
that prepayment of the Note may result in Lender’s incurring additional losses, costs, expenses,
and liabilities, including, but not limited to, lost revenue and lost profits. Borrower therefore
agrees to pay any prepayment charges on the terms and conditions provided herein, including,
without limitation, upon any Event of Default attributable to the transfer or conveyance of any
right, title, or interest in the Property.



BORROWER AGREES THAT LENDER’S WILLINGNESS TO MAKE THE LOAN AT THE INTEREST RATE FOR THE TERM
SET FORTH HEREIN CONSTITUTES ADEQUATE CONSIDERATION, GIVEN INDIVIDUAL WEIGHT BY BORROWER, FOR THIS
WAIVER AND AGREEMENT.




	 	 	 	 	 
	 

	 	 

[Borrower’s Initials]
	 	 






[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]







 


120









 







IN WITNESS WHEREOF, Borrower and Lender have duly executed this Security Instrument the day
and year first above written.



	 	 	 	 	 	 	 	 	 	 	 
	Borrower’s Organizational Identification	 	 	 	MONDRIAN HOLDINGS LLC,	 	 
	 
	 	 	 	 	 	Borrower	 	 
	Number:

	 	13-3880841	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Marc S. Gordon
 

	 	 
	 

	 	 	 	 	 	 	 	Name: Marc S. Gordon	 	 
	 

	 	 	 	 	 	 	 	Title: Authorized Signatory	 	 






The undersigned SPE Pledgors hereby agree and consent to the terms hereof.



MONDRIAN PLEDGOR LLC, a Delaware

limited liability company, SPE Pledgor




	 	 	 	 	 
	By:

	 	/s/ Marc S. Gordon
 

Name: Marc S. Gordon
	 	 
	 

	 	Title: Authorized Signatory	 	 
	 
	 	 	 	 
	8440 LLC, a California limited	 	 
	liability company, SPE Pledgor	 	 
	 
	 	 	 	 
	By:

	 	/s/ Marc S. Gordon
 

Name: Marc S. Gordon
	 	 
	 

	 	Title: Authorized Signatory	 	 







 


 











 





EXHIBIT
A


Legal Description of Premises





 














 




The land referred to in this policy is described as follows:



Real property in the City of West Hollywood, County of Los Angeles, State of California, described
as follows:



Lot “A”
of Tract No. 2527, in the city of West Hollywood, as per map recorded in Book 34 Page 14 of
Maps, in the office of the county recorder of said county.



EXCEPT
therefrom that portion thereof lying Southerly of a line bearing
North 89 degrees 54' West
from a point on the East line of said Lot, distant North 0 degrees
06' East thereon 320 feet from
the Southeast corner of said Lot.




 


 









 







EXHIBIT B 

SUMMARY OF RESERVES




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Monthly Installment	 
	Reserve Items	 	Initial Deposit Amount	 	 	Amount	 
	Basic Carrying Costs
	 	 	 	 	 	 	 	 
	• Taxes
	 	$	276,741.40	 	 	$	69,185.35	 
	• Insurance Premiums
	 	$	908,128.83	 	 	$	72,361.03	 
	 
	 	 	 	 	 	 
	SAOT Deposit
	 	$	0	 	 	TBD	 
	 
	 	 	 	 	 	 
	Recurring Replacement Reserve
	 	$	0	 	 	$	103,926	*
	 
	 	 	 	 	 	 
	Initial Engineering Deposits
	 	 	 	 	 	 	 	 
	• Immediate Repairs
	 	$	5,000,000	 	 	Not Applicable	 
	• Environmental
Remediation
	 	$	0	 	 	Not Applicable	 








	 	 	 
	*	 	This figure is only applicable during the first (1st) year of the Loan, after
which such amount shall adjust in accordance with the definition of “Recurring Replacement
Reserve”.





 


 









 







EXHIBIT C




	 	 	 
	 

	 	Property:                                         
	 

	 	Location:                                         
	Cash Flow Statement for Month of:                     

	 	Year:






	 	 	 	 	 	 	 	 	 
	 	 	Current	 	 	Year to	 
	 	 	Month	 	 	Date	 
	REVENUE
	 	 	 	 	 	 	 	 
	Net Rental Revenue
	 	 	 	 	 	 	 	 
	Other Revenue
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Effective Gross Income
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	OPERATING EXPENSES
	 	 	 	 	 	 	 	 
	Common Area Maintenance
	 	 	 	 	 	 	 	 
	Payroll
	 	 	 	 	 	 	 	 
	Administration
	 	 	 	 	 	 	 	 
	Leasing
	 	 	 	 	 	 	 	 
	Service
	 	 	 	 	 	 	 	 
	Clean & Decorate
	 	 	 	 	 	 	 	 
	Utilities
	 	 	 	 	 	 	 	 
	Repairs & Maintenance
	 	 	 	 	 	 	 	 
	Taxes
	 	 	 	 	 	 	 	 
	Insurance
	 	 	 	 	 	 	 	 
	Management Fees
	 	 	 	 	 	 	 	 
	Other
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Total
Operating Expenses
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Net Operating Income
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	RECURRING EXPENSES
	 	 	 	 	 	 	 	 
	To Include
Expenses for: Carpet Replacement, Appliance Replacement, HVAC/Water
Heater Replacement; Miniblinds/Drapes/Ceiling Fans:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	NON-RECURRING EXPENSES
	 	 	 	 	 	 	 	 
	To Include Capital Expenses for: Playground, Major Signage,
Lawns/Trees/Shrubs, Paving/Parking, Roof Replacement, Carpentry/Siding/Balconies,
Exterior Paint, Major Concrete/Sidewalks, Foundations, Major Exterior, Boiler
Replacement, Major HVAC Replacement, Plumbing Replace, Electrical Replace, Other
Major, Fire & Storm, Ins. Loss Recovery:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Net Cash Flow
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 






	 	 	 	 	 	 	 	 	 
	 
	 	Certified By:	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	Name:	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	Title:	 	 	 	 
	 
	 	 	 	 	 	 	 
	 
	 	Management Company:	 	 	 	 





 


 









 





EXHIBIT D 




Required Engineering Work




Renovation of the bathrooms and kitchenettes in guest rooms in an amount not to exceed $10,000,000.


 


 









 





EXHIBIT E 




Intentionally Omitted.





 


 









 







EXHIBIT F 

RESERVED





 


 









 







EXHIBIT
G 

CREDIT CARD PAYMENT DIRECTION LETTER




(For use with Chase Merchant Services, L.L.C. and Chase Manhattan Bank)




               
     , 2006



Chase Merchant Services, L.L.C. 
3975
Northwest 120th Avenue 
Coral
Springs, Florida 33065




Re:                                                              (the “Company”)



Gentlemen:



Chase Merchant Services, L.L.C. and Chase Manhattan Bank (collectively, the “Processor”) have
entered into arrangements pursuant to which Processor acts as credit card processing service
provider with respect to certain credit card and debit card sales by the
Company at, among other properties, the
           Hotel located at
           (the “Property”) and makes payments to the Company in respect of such
sales as set forth in the Merchant Services Bankcard Agreement between Processor and the Company
(and together with any replacement agreement thereto, referred to herein as the “Card Processing
Agreement”).



Please be advised that certain affiliates of the Company, including the owner of the Property,
have entered or are about to enter into financing arrangements with Wachovia Bank, National
Association (the “Lender”) pursuant to which Lender may from time to time make loans and advances
and provide other financial accommodations to certain affiliates of the Company, including the
owner of the Property, secured by, among other things, all of the Property owner’s right, title and
interest in and to all deposit and other bank accounts and proceeds of the foregoing, including all
amounts at any time payable by Processor to the Company, with respect to the Property pursuant to
the Card Processing Agreement or otherwise.



Notwithstanding anything to the contrary contained in the Card Processing Agreement or any
prior instructions to Processor, unless and until Processor receives written instructions from
Lender to the contrary, effective as of the day after the date of Processor’s written
acknowledgment below all amounts payable by Processor to the Company pursuant to the Card
Processing Agreement or otherwise shall be sent by federal funds wire transfer or electronic
depository transfer to the following bank account of the Lender:



Wachovia
Bank, National Association 
ABA # 053-000-219

Acct Name-              
       

Acct #          
              
              
   

Ref Loan # when available




 


 









 






MERCHANT




In the event Processor at any time receives any other instructions from Lender with respect to
the disposition of amounts payable by or through Processor to the Company, which relate to the
Property, pursuant to the Card Processing Agreement or otherwise, Processor is hereby irrevocably
authorized and directed to follow such instructions, without inquiry as to Lender’s right or
authority to give such instructions. Company and Lender acknowledge that (a) any instructions from
Lender to Processor to change the account to which funds must be sent by a vice president or other
officer of Lender to Chase Merchant Services, L.L.C., 3975 Northwest 120th Avenue, Coral Springs,
Florida 33065, Attention: Vice President — Risk Management; (b) such instructions shall only
provide for funds to be sent to a single deposit account of Lender, in a manner with respect to the
nature of the funds transfer and at times consistent with the payment practices of Processor as
then in effect, unless otherwise agreed by Processor. The Company agrees to hold harmless Processor
for any action taken by Processor in accordance with the terms of this letter and the Card
Processing Agreement; and Lender shall complete such account change forms as Processor may require.
The Company hereby acknowledges that the account set forth above is owned by the Company but is
under the control of Lender.



Lender and the Company hereby confirm and agree as follows: (i) the Card Processing Agreement
is in full force and effect, and (ii) this Assignment does not prohibit or limit any rights
Processor possesses under the Card Processing Agreement, including but not limited to Processor’s
right to debit, offset or charge back any amounts owing to Processor under the Card Processing
Agreement or any replacement or renewal thereof, against funds sent to or to be sent to the above
referenced bank account.



This Irrevocable Payment Instruction cannot be changed, modified, or terminated, except by
written agreement signed by Lender, Company, and Processor. This Irrevocable Payment Instruction
supersedes and replaces any prior instructions provided to Processor to date. Processor agrees to
use reasonable efforts to ensure payment instructions are followed, but Lender and Company herein
acknowledge that Processor shall incur no liability for changes or modifications wherein Processor
has received instructions from Company or Lender to change the deposit account.


 


ii









 





Please acknowledge your receipt of, and agreement to, the foregoing by signing in the space
provided below.



	 	 	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	                                                            , a
           
          
limited liability company 
(the “Company”)	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

(Duly Authorized)
	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	Date:	 	 	 	 





 


iii









 





	 	 	 	 	 	 	 
	ACKNOWLEDGED AND AGREED:	 	 
	 
	 	 	 	 	 	 
	Wachovia Bank, National Association	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

(Duly Authorized)
	 	 
	 

	 	Title:	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 
	ACKNOWLEDGED AND AGREED:	 	 
	 
	 	 	 	 	 	 
	CHASE MERCHANT SERVICES, L.L.C.	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

(Duly Authorized)
	 	 
	 

	 	Title:	 	 	 	 
	 

	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 
	ACKNOWLEDGED AND AGREED:	 	 
	 
	 	 	 	 	 	 
	CHASE MANHATTAN BANK	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 

(Duly Authorized)
	 	 
	 

	 	Title:	 	 	 	 
	 

	 	Date:	 	 	 	 







 


iv









 







(For use with American Express)




TO BE COMPLETED BY AUTHORIZED REPRESENTATIVES OF THE MERCHANT AND THE LENDING INSTITUTION




	 	 	 
	 

	 	               
     , 2006






General Counsel’s Office

American Express Travel Related Services Company, Inc.

3 World Financial Center

200 Vesey Street

New York, NY 10285-4906

Attn: Establishment Services Practice Group




RE: FINANCING AGREEMENT — ASSIGNMENT OF CREDIT CARD RECEIVABLES



Dear Sir/Madam:




                     (the “Company”) has recently entered into a new financing facility with Wachovia Bank,
National Association (the “Assignee”). In accordance with the terms of that loan facility, the
Company granted to Assignee a security interest in Company’s inventory, accounts and
substantially all of Company’s tangible and intangible personal property, including, without
limitation, all rights of the Company to receive payments in respect of proceeds of American
Express card sales in the Company’s stores pursuant to that certain American Express® Card
Acceptance Agreement between American Express Travel Related Services Company, Inc.
(“American Express”) and the Company in effect as of the
date hereof (the “Agreement”).




Pursuant
to the loan facility, the Company is obligated to arrange for the proceeds of American
Express card sales in the Company’s stores to be routed by American Express to a new cash
concentration account under the control of the Assignee, as opposed to the account routing
instructions that are presently in place. Accordingly, by this letter, the Company instructs
American Express to immediately begin routing all proceeds of American
Express card sales in the Company’s stores (under Service
Establishment No. ______) to the
new Company account (“Account”) set forth below.



	 	 	 
	Account No:

	 	                                        
	Account Name:

	 	Wachovia Bank, National Association,
as 
beneficiary/mortgagee of __________, a _____

limited liability company
	ABA Routing No.:

	 	053-000-219
	Bank Name:

	 	Wachovia Bank, National Association
	Contact:

	 	David Tucker
(704) 593-7735





 


v









 






All payments under the Agreement should continue to be made to the Account and to
no other account unless and until you receive express prior written notification
from an officer of Assignee. Such notification will only be valid if made in
writing and sent, via first-class mail or overnight delivery, to American Express
at the following address:




General Counsel’s Office

American Express Travel Related Services Company, Inc.

3 World Financial Center

200 Vesey Street

New York, NY 10285-4906

Attn: Establishment Services Practice Group



The Company acknowledges that American Express retains all of its rights under the Agreement,
including, but not limited to, American Express’ rights to Full Recourse, as such term is defined
in the Agreement. Furthermore, the Company acknowledges and agrees that American Express is not
required to alter its regular course of business with respect to acceptance of payment
instructions from merchants and that American Express will have no liability if it acts in
accordance with payment instructions received from an employee or agent of the Company acting with
apparent authority.



The Company will indemnify and hold harmless American Express from any and all liabilities, claims,
demands, actions or judgments, including but not limited to attorneys’ fees, arising out of or
resulting from the acts or omissions of the Company, its employees, officers or agents in
connection with this letter agreement.



The Company appreciates American Express’ anticipated cooperation and assistance in effectuating
this request. Should you have any questions concerning this matter, please do not hesitate to
contact us at your convenience, or feel free to contact the Assignee directly at Wachovia Bank,
National Association, Commercial Real Estate National Association, 8739 Research Drive URP4, NC
175, Charlotte, North Carolina 28262, Attention: Portfolio Management, Telecopier (704) 715-0036.



	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name: Marc S. Gordon
	 	 
	 

	 	 	 	Title: Authorized Signatory	 	 
	 

	 	 	 	Date:                     
 _____, 2006	 	 







 


vi









 







	 	 	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 
	 
	 	 	 	 	 	 
	WACHOVIA BANK, NATIONAL ASSOCIATION	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Name	 	 	 	 
	 

	 	Title	 	 	 	 
	 

	 	Date	 	 	 	 





 


vii









 





EXHIBIT H 


CERTAIN DEFINITIONS



“Food and Beverage Lessee/Operator” shall mean, collectively, 8440 LLC, a California
limited liability company and Sunset Restaurants LLC, a California limited liability company.



“SPE
Pledgor” shall mean, collectively, Mondrian Pledgor LLC, a Delaware limited liability company,
and 8440 LLC, California limited liability company.


 


 









 





INDEX




	 	 	 	 
	 	 		Page
	 
	 	 	 
	EXHIBITS	 	 
	
	 	 	 
	
	EXHIBIT A	 	Legal Description of Premises
	
	EXHIBIT B	 	Summary Of Reserves
	
	EXHIBIT C	 	Cash Flow Statement
	
	EXHIBIT D	 	Required Engineering Work
	
	EXHIBIT E	 	Intentionally Omitted
	
	EXHIBIT F	 	Reserved
	
	EXHIBIT G	 	Credit Card Payment Direction Letter
	
	EXHIBIT H	 	Certain Definitions