exv10w1






Exhibit 10.1




EXECUTION COPY




LOAN AGREEMENT




Dated as of January 21, 2011




between




TAR HEEL BORROWER LLC,




as Borrower,




TAR HEEL OWNER LLC,




as Maryland Guarantor,




and




GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P.,




as Lender









 









 








TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	ARTICLE I 
 GENERAL TERMS	 	 	 	 
	 
	Section 1.1. The Loan
	 	 	25	 
	Section 1.2. Interest and Principal
	 	 	26	 
	Section 1.3. Method and Place of Payment
	 	 	27	 
	Section 1.4. Taxes; Regulatory Change
	 	 	27	 
	Section 1.5. Release
	 	 	29	 
	 
	ARTICLE II
 DEFEASANCE AND ASSUMPTION	 	 	 	 
	 
	Section 2.1. Defeasance
	 	 	29	 
	Section 2.2. Assumption
	 	 	31	 
	Section 2.3. Transfers of Equity Interests in Borrower
	 	 	32	 
	 
	ARTICLE III
 ACCOUNTS	 	 	 	 
	 
	Section 3.1. Cash Management Account
	 	 	33	 
	Section 3.2. Distributions from Cash Management Account
	 	 	34	 
	Section 3.3. Loss Proceeds Account
	 	 	35	 
	Section 3.4. Basic Carrying Costs Escrow Account
	 	 	36	 
	Section 3.5. [Intentionally Omitted]
	 	 	37	 
	Section 3.6. FF&E Reserve Account
	 	 	37	 
	Section 3.7. Deferred Maintenance and Environmental Escrow Account
	 	 	38	 
	Section 3.8. Unfunded Obligations Account
	 	 	39	 
	Section 3.9. Account Collateral
	 	 	40	 
	Section 3.10. Bankruptcy
	 	 	41	 
	 
	ARTICLE IV 
 REPRESENTATIONS	 	 	 	 
	 
	Section 4.1. Organization
	 	 	41	 
	Section 4.2. Authorization
	 	 	42	 
	Section 4.3. No Conflicts
	 	 	42	 
	Section 4.4. Consents
	 	 	42	 
	Section 4.5. Enforceable Obligations
	 	 	42	 
	Section 4.6. No Default
	 	 	42	 
	Section 4.7. Payment of Taxes
	 	 	42	 
	Section 4.8. Compliance with Law
	 	 	42	 
	Section 4.9. ERISA
	 	 	43	 
	Section 4.10. Investment Company Act
	 	 	43	 
	Section 4.11. No Bankruptcy Filing
	 	 	43	 
	Section 4.12. Other Debt
	 	 	43	 
	Section 4.13. Litigation
	 	 	43	 






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	 	 	Page	 
	Section 4.14. Leases; Material Agreements
	 	 	44	 
	Section 4.15. Full and Accurate Disclosure
	 	 	45	 
	Section 4.16. Financial Condition
	 	 	45	 
	Section 4.17. Single-Purpose Requirements
	 	 	45	 
	Section 4.18. Use of Loan Proceeds
	 	 	45	 
	Section 4.19. Not Foreign Person
	 	 	45	 
	Section 4.20. Labor Matters
	 	 	45	 
	Section 4.21. Title
	 	 	46	 
	Section 4.22. No Encroachments
	 	 	46	 
	Section 4.23. Physical Condition
	 	 	46	 
	Section 4.24. Fraudulent Conveyance
	 	 	46	 
	Section 4.25. Management
	 	 	47	 
	Section 4.26. Condemnation
	 	 	47	 
	Section 4.27. Utilities and Public Access
	 	 	47	 
	Section 4.28. Environmental Matters
	 	 	47	 
	Section 4.29. Assessments
	 	 	48	 
	Section 4.30. No Joint Assessment
	 	 	48	 
	Section 4.31. Separate Lots
	 	 	48	 
	Section 4.32. Permits; Certificate of Occupancy
	 	 	48	 
	Section 4.33. Flood Zone
	 	 	48	 
	Section 4.34. Security Deposits
	 	 	48	 
	Section 4.35. Acquisition Documents
	 	 	49	 
	Section 4.36. Insurance
	 	 	49	 
	Section 4.37. No Dealings
	 	 	49	 
	Section 4.38. Estoppel Certificates
	 	 	49	 
	Section 4.39. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering Laws
	 	 	49	 
	Section 4.40. Survival
	 	 	50	 
	 
	ARTICLE V 
 AFFIRMATIVE COVENANTS	 	 	 	 
	 
	Section 5.1. Existence
	 	 	51	 
	Section 5.2. Maintenance of Property
	 	 	51	 
	Section 5.3. Compliance with Legal Requirements
	 	 	51	 
	Section 5.4. Impositions and Other Claims
	 	 	52	 
	Section 5.5. Access to Property
	 	 	52	 
	Section 5.6. Cooperate in Legal Proceedings
	 	 	52	 
	Section 5.7. Leases
	 	 	53	 
	Section 5.8. Plan Assets, etc.
	 	 	54	 
	Section 5.9. Further Assurances
	 	 	54	 
	Section 5.10. Management of Collateral
	 	 	55	 
	Section 5.11. Notice of Material Event
	 	 	56	 
	Section 5.12. Annual Financial Statements
	 	 	56	 
	Section 5.13. Quarterly Financial Statements
	 	 	56	 
	Section 5.14. Monthly Financial Statements; Non-Delivery of Financial Statements
	 	 	57	 
	Section 5.15. Insurance
	 	 	58	 
	Section 5.16. Casualty and Condemnation
	 	 	63	 






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	 	 	Page	 
	Section 5.17. Annual Budget
	 	 	65	 
	Section 5.18. Nonbinding Consultation
	 	 	66	 
	Section 5.19. Compliance with Encumbrances and Material Agreements
	 	 	66	 
	Section 5.20. Prohibited Persons
	 	 	66	 
	Section 5.21. Operating Lease
	 	 	67	 
	 
	ARTICLE VI 
 NEGATIVE COVENANTS	 	 	 	 
	 
	Section 6.1. Liens on the Collateral
	 	 	67	 
	Section 6.2. Ownership
	 	 	67	 
	Section 6.3. Transfer; Change of Control
	 	 	67	 
	Section 6.4. Debt
	 	 	67	 
	Section 6.5. Dissolution; Merger or Consolidation
	 	 	67	 
	Section 6.6. Change in Business
	 	 	68	 
	Section 6.7. Debt Cancellation
	 	 	68	 
	Section 6.8. Affiliate Transactions
	 	 	68	 
	Section 6.9. Misapplication of Funds
	 	 	68	 
	Section 6.10. Jurisdiction of Formation; Name
	 	 	68	 
	Section 6.11. Modifications and Waivers
	 	 	68	 
	Section 6.12. ERISA
	 	 	69	 
	Section 6.13. Alterations and Expansions
	 	 	69	 
	Section 6.14. Advances and Investments
	 	 	69	 
	Section 6.15. Single-Purpose Entity
	 	 	69	 
	Section 6.16. Zoning and Uses
	 	 	69	 
	Section 6.17. Waste
	 	 	70	 
	 
	ARTICLE VII 
 DEFAULTS	 	 	 	 
	 
	Section 7.1. Event of Default
	 	 	70	 
	Section 7.2. Remedies
	 	 	73	 
	Section 7.3. No Waiver
	 	 	74	 
	Section 7.4. Application of Payments after an Event of Default
	 	 	74	 
	 
	ARTICLE VIII 
 CONDITIONS PRECEDENT	 	 	 	 
	 
	Section 8.1. Conditions Precedent to Closing
	 	 	74	 
	 
	ARTICLE IX
 MISCELLANEOUS	 	 	 	 
	 
	Section 9.1. Successors
	 	 	77	 
	Section 9.2. GOVERNING LAW
	 	 	77	 
	Section 9.3. Modification, Waiver in Writing
	 	 	78	 
	Section 9.4. Notices
	 	 	78	 
	Section 9.5. TRIAL BY JURY
	 	 	79	 
	Section 9.6. Headings
	 	 	79	 
	Section 9.7. Assignment and Participation
	 	 	79	 
	Section 9.8. Severability
	 	 	80	 






iii









 






	 	 	 	 	 
	 	 	Page	 
	Section 9.9. Preferences; Waiver of Marshalling of Assets
	 	 	81	 
	Section 9.10. Remedies of Borrower
	 	 	81	 
	Section 9.11. Offsets, Counterclaims and Defenses
	 	 	82	 
	Section 9.12. No Joint Venture
	 	 	82	 
	Section 9.13. Conflict; Construction of Documents
	 	 	82	 
	Section 9.14. Brokers and Financial Advisors
	 	 	82	 
	Section 9.15. Counterparts
	 	 	82	 
	Section 9.16. Estoppel Certificates
	 	 	82	 
	Section 9.17. General Indemnity; Payment of Expenses; Mortgage Recording Taxes
	 	 	83	 
	Section 9.18. No Third-Party Beneficiaries
	 	 	85	 
	Section 9.19. Recourse
	 	 	85	 
	Section 9.20. Right of Set-Off
	 	 	88	 
	Section 9.21. Exculpation of Lender
	 	 	88	 
	Section 9.22. Servicer
	 	 	88	 
	Section 9.23. No Fiduciary Duty
	 	 	88	 
	Section 9.24. Borrower Information
	 	 	90	 
	Section 9.25. PATRIOT Act Records
	 	 	90	 
	Section 9.26. Prior Agreements
	 	 	90	 
	Section 9.27. Publicity
	 	 	91	 
	Section 9.28. Delay Not a Waiver
	 	 	91	 
	Section 9.29. Schedules and Exhibits Incorporated
	 	 	91	 
	Section 9.30. Independence of Covenants
	 	 	91	 






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Exhibits




	 	 	 

	A	 	Organizational Chart

	B	 	Form of Tenant Notice

	C	 	Form of Uniform System of Accounts






Schedules




	 	 	 

	A	 	Property

	B	 	Exception Report

	C	 	Deferred Maintenance Conditions

	D	 	Unfunded Obligations

	E	 	Material Agreements

	F-1	 	Capital Plan — Parking Component

	F-2	 	Capital Plan — PIP Component

	F-3	 	Capital Plan — Other Capital Improvements Component

	G	 	Leases








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LOAN AGREEMENT




          This Loan Agreement (this “Agreement”) is dated January 21, 2011 and is between
GOLDMAN SACHS COMMERCIAL MORTGAGE CAPITAL, L.P., a Delaware limited partnership, as lender
(together with its successors and assigns, including any lawful holder of any portion of the
Indebtedness, as hereinafter defined, “Lender”), and TAR HEEL BORROWER LLC, a Delaware
limited liability company, as borrower (together with its permitted successors and assigns,
“Borrower”) and TAR HEEL OWNER LLC, a Delaware limited liability company, as guarantor
(together with its permitted successors and assigns, “Maryland Guarantor,” and together
with Borrower, individually or collectively, as the context may require, “Obligor”).




RECITALS



          Borrower desires to obtain from Lender the Loan (as hereinafter defined) in connection with
the financing of the property known as the Doubletree Hotel Bethesda.




          Lender is willing to make the Loan on the terms and conditions set forth in this Agreement if
Obligor joins in the execution and delivery of this Agreement, issues the Note and executes and
delivers the other Loan Documents.




          In consideration of the premises and the agreements, provisions and covenants contained
herein, and for other good and valuable consideration, the sufficiency of which is hereby
acknowledged, Lender and Obligor agree as follows:




DEFINITIONS



          (a) When used in this Agreement, the following capitalized terms have the following meanings:




          “Account Collateral” means, collectively, the Collateral Accounts and all sums at any
time held, deposited or invested therein, together with any interest or other earnings thereon, and
all securities and investment property credited thereto and all proceeds thereof (including
proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper,
deposit accounts, instruments, documents or securities.




          “Agreement” means this Loan Agreement, as the same may from time to time hereafter be
amended, restated, replaced, supplemented or otherwise modified.




          “ALTA” means the American Land Title Association, or any successor thereto.




          “Alteration” means any demolition, alteration, installation, improvement or expansion
of or to the Property or any portion thereof.




          “Annual Budget” means, collectively, the Yearly Budgets and Annual Plan, as defined in
the Approved Management Agreement, which budget shall include, without limitation, an operating
plan, sales and marketing plan and a capital budget.







 









 








          “Appraisal” means an as-is appraisal of the Property that is prepared by a member of
the Appraisal Institute selected by Lender, meets the minimum appraisal standards for national
banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA) and complies with
the Uniform Standards of Professional Appraisal Practice (USPAP).




          “Approved Annual Budget” means (i) so long as no Event of Default or Trigger Period
shall be continuing, the Annual Budget and (ii) during the continuance of an Event of Default
and/or Trigger Period, the Annual Budget, as approved by Lender in accordance with Section
5.17.




          “Approved Franchise Agreement” means that certain Franchise License Agreement, dated
June 4, 2010, between Operating Lessee and the initial Approved Franchisor, as the same may be
amended, restated, replaced, supplemented or otherwise modified in accordance herewith with the
consent of Lender, and any other franchise agreement that is approved by Lender and with respect to
which the Rating Condition is satisfied, as the same may be amended, restated, replaced,
supplemented or otherwise modified in accordance herewith with the consent of Lender.




          “Approved Franchisor” means Doubletree Franchise LLC, Hilton Franchise LLC (so long as
it licenses the “Hilton” brand and no other brand) or any other hotel franchisor approved by Lender
and with respect to which the Rating Condition is satisfied, in each case unless and until Lender
requests the termination of that franchisor pursuant to Section 5.10(f).




          “Approved Management Agreement” means that certain Management Agreement, dated as of
June 4, 2010, between Operating Lessee and the initial Approved Property Manager, and acknowledged
and guaranteed by Maryland Guarantor, as the same may be amended, restated, replaced, supplemented
or otherwise modified in accordance herewith with the consent of Lender, and any other management
agreement that is approved by Lender and with respect to which the Rating Condition is satisfied,
as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance
herewith with the consent of Lender.




          “Approved Property Manager” means Thayer Lodging Group Inc., or any other management
company approved by Lender in accordance with Section 5.10(a) and with respect to which the
Rating Condition is satisfied, in each case unless and until Lender requests the termination of
that management company pursuant to Section 5.10(e).




          “Assignment” has the meaning set forth in Section 9.7(b).




          “Assumption” has the meaning set forth in Section 2.2.




          “Bankruptcy Code” has the meaning set forth in Section 7.1(d).




          “Basic Carrying Costs Escrow Account” has the meaning set forth in Section 3.4(a).




          “Blocked Account” has the meaning set forth in Section 3.1(b).







2









 








          “Blocked Account Agreement” has the meaning set forth in Section 3.1(b).




          “Blocked Account Bank” means an Eligible Institution at which a Blocked Account is
maintained.




          “Borrower” has the meaning set forth in the first paragraph of this Agreement.




          “Budgeted Operating Expenses” means, with respect to any calendar month, (i) an amount
equal to the Operating Expenses for such calendar month in the then-applicable Approved Annual
Budget, or (ii) such greater amount as shall equal Maryland Guarantor’s and/or Operating Lessee’s
actual Operating Expenses for such month, except that during the continuance of a
Trigger Period such greater amount may in no event exceed 105% of the amount specified in clause
(i), with no individual budget line item exceeding 110% of the amount set forth in the
then-applicable Approved Annual Budget with respect to such line item for such month, in each case
without the prior written consent of Lender, not to be unreasonably withheld or delayed.




          “Business Day” means any day other than (i) a Saturday and a Sunday and (ii) a day on
which federally insured depository institutions in the State of New York or the state in which the
offices of Lender, its trustee, its Servicer or its Servicer’s collection account are located are
authorized or obligated by law, governmental decree or executive order to be closed.




          “Capital Expenditure” means hard and soft costs incurred by Maryland Guarantor (or
Operating Lessee) with respect to replacements and capital repairs made to the Property (including
repairs to, and replacements of, structural components, roofs, building systems, parking garages
and parking lots, but excluding expenditures on FF&E), in each case to the extent capitalized in
accordance with GAAP.




          “Capital Plan” means the plan by which Maryland Guarantor will expend an aggregate
amount equal to the Capital Plan Minimum Expenditure to complete the capital improvements
contemplated in each Capital Plan Component described on Schedule F hereto, together with
such other capital improvement expenditures undertaken by Maryland Guarantor as a part thereof,
prior to the applicable Capital Plan Target Completion Date.




          “Capital Plan Completion Date” has the meaning set forth in Section 5.22(c).




          “Capital Plan Component” means each separate component of the Capital Plan, as
described on Schedule F hereto.




          “Capital Plan Minimum Expenditure” means $5,000,000.




          “Capital Plan Monthly Report” means a reasonably detailed report, accompanied by an
Officer’s Certificate (which Officer’s Certificate, for the avoidance of doubt, may be the same
Officer’s Certificate contemplated in the introductory paragraph of Section 5.14 of this
Agreement) of Maryland Guarantor’s progress on the Capital Plan, including (i) a narrative
description of the work conducted on the Capital Plan during the previous calendar month, (ii)
information regarding whether each Capital Plan Target Completion Date falling during such calendar
monthwas met, (iii) the updated projected completion date for each remaining Capital






3









 







Plan Component, (iv) if requested by Lender, copies of all invoices and canceled checks (or
other proof of expenditure acceptable to Lender) related to Capital Plan expenditures during the
previous calendar monthand (v) a certification of the total aggregate amount of the Capital Plan
expenditures made as of the end of the previous calendar month.




          “Capital Plan Target Completion Date” means, with respect to each Capital Plan
Component, the target completion date set forth on Schedule F hereto for such Capital Plan
Component (notwithstanding any “Finish Date” indicated in the PIP); provided that such Capital Plan
Target Completion Date (and the Capital Plan Completion Date) shall be extended to the extent of a
Force Majeure (including, for avoidance of doubt, the unavailability of goods and services
necessary for completion of the Capital Plan for reasons beyond the reasonable control of Maryland
Guarantor).




          “Cash Management Account” has the meaning set forth in Section 3.1(a).




          “Cash Management Agreement” has the meaning set forth in Section 3.1(a).




          “Cash Management Bank” means a depository institution selected by Maryland Guarantor
and reasonably approved by Lender in which Eligible Accounts may be maintained. The initial Cash
Management Bank shall be U.S. Bank, National Association.




          “Casualty” means a fire, explosion, flood, collapse, earthquake or other casualty
affecting all or any portion of the Property.




          “Cause” means, with respect to an Independent Director, (i) acts or omissions by such
Independent Director that constitute systematic and persistent or willful disregard of such
Independent Director’s duties, (ii) such Independent Director has been indicted or convicted for
any crime or crimes of moral turpitude or dishonesty or for any violation of any Legal
Requirements, (iii) such Independent Director no longer satisfies the requirements set forth in the
definition of “Independent Director”, (iv) the fees charged for the services of such Independent
Director are materially in excess of the fees charged by the other providers of Independent
Directors listed in the definition of “Independent Director “ or (v) any other reason for which the
prior written consent of Lender shall have been obtained .




          “Certificates” means, collectively, any senior and/or subordinate notes, debentures or
pass-through certificates, or other evidence of indebtedness, or debt or equity securities, or any
combination of the foregoing, representing a direct or beneficial interest, in whole or in part, in
the Loan.




          “Change of Control” means the occurrence of any of the following: (i) the failure of
Maryland Guarantor and Borrower to be 100% owned by the same Qualified Equityholder, (ii) the
failure of Operating Lessee to be Controlled by the same Qualified Equityholders that Control
Obligor or (iii) the failure of the Single-Purpose Equityholder (if any) to be Controlled by the
same Qualified Equityholders that Control Obligor.




          “Closing Date” means the date of this Agreement.




          “Closing Date NOI” means $4,345,365.







4









 








          “Code” means 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 issued pursuant thereto in temporary or final form.




          “Collateral” means (i) all assets owned from time to time by Obligor and Operating
Lessee including the Property, the FF&E, the Revenues and all other tangible and intangible
property (including any Defeasance Collateral and all of Maryland Guarantor’s and Operating
Lessee’s respective right, title and interest in and to the Operating Lease, the Approved
Management Agreement and Approved Franchise Agreement) in respect of which Lender is granted a Lien
under the Loan Documents, and all proceeds thereof and (ii) the Operating Lessee Pledged
Collateral.




          “Collateral Accounts” means, collectively, the Cash Management Account, any Blocked
Account, the Loss Proceeds Account, the Basic Carrying Costs Escrow Account, the FF&E Reserve
Account, the Maryland Guarantor FF&E Account, the Qualified Operating Expense Account, the Excess
Cash Flow Reserve Account, the Unfunded Obligations Account (if any) and the Deferred Maintenance
and Environmental Escrow Account (if any).




          “Completion Guaranty” means that certain Completion Guaranty dated as of the Closing
Date, executed by Maryland Guarantor and Sponsor for the benefit of Lender, as the same may be
amended, restated, replaced, supplemented or otherwise modified in accordance herewith.




          “Condemnation” means a taking or voluntary conveyance of all or part of the Property
or any interest therein or right accruing thereto or use thereof, as the result of, or in
settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority.




          “Contingent Obligation” means, with respect to any Person, any obligation of such
Person directly or indirectly guaranteeing any Debt of any other Person in any manner and any
contingent obligation to purchase, to provide funds for payment, to supply funds to invest in any
other Person or otherwise to assure a creditor against loss.




          “Control” of any entity means the ownership, directly or indirectly, of at least 51%
of the equity interests in, and the right to at least 51% of the distributions from, such entity
and the possession, directly or indirectly, of the power to direct or cause the direction of the
management or policies of such entity, whether through the ability to exercise voting power, by
contract or otherwise (“Controlled” and “Controlling” each have the meanings
correlative thereto).




          “Cooperation Agreement” means that certain Mortgage Loan Cooperation Agreement, dated
as of the Closing Date, among Borrower, Maryland Guarantor, Lender and Sponsor, as the same may
from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance
herewith.




          “Damages” to a party means any and all liabilities, obligations, losses, demands,
damages, penalties, assessments, actions, causes of action, judgments, proceedings, suits, claims,






5









 







costs, expenses and disbursements of any kind or nature whatsoever (including reasonable
attorneys’ fees and other costs of defense and/or enforcement whether or not suit is brought),
fines, charges, fees, settlement costs and disbursements imposed on, incurred by or asserted
against such party, whether based on any federal, state or foreign laws, statutes, rules or
regulations (including securities and commercial laws, statutes, rules or regulations and
Environmental Laws), on common law or equitable cause or on contract or otherwise.




          “DBRS” means DBRS, Inc. or its applicable affiliate.




          “Debt” means, with respect to any Person, without duplication:





     (i) all indebtedness of such Person to any other party (regardless of whether such
indebtedness is evidenced by a written instrument such as a note, bond or debenture),
including indebtedness for borrowed money or for the deferred purchase price of property or
services;




     (ii) all letters of credit issued for the account of such Person and all unreimbursed
amounts drawn thereunder;




     (iii) all indebtedness secured by a Lien on any property owned by such Person (whether
or not such indebtedness has been assumed) except obligations for impositions that are not
yet due and payable;




     (iv) all Contingent Obligations of such Person;




     (v) all payment obligations of such Person under any interest rate protection agreement
(including any interest rate swaps, floors, collars or similar agreements) and similar
agreements;




     (vi) all contractual indemnity obligations of such Person; and




     (vii) any material actual or contingent liability to any Person or Governmental
Authority with respect to any employee benefit plan (within the meaning of Section 3(3) of
ERISA) subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.



          “Default” means the occurrence of any event that, but for the giving of notice or the
passage of time, or both, would be an Event of Default.




          “Default Interest” means, during the continuance of an Event of Default, the amount by
which interest accrued on the Notes at their respective Default Rates exceeds the amount of
interest that would have accrued on the Notes at their respective Interest Rates.




          “Default Rate” means, with respect to any Note, the greater of (x) 4% per annum in
excess of the interest rate then applicable to such Note hereunder and (y) 1% per annum in excess
of the Prime Rate from time to time; provided that, if the foregoing would result in an interest
rate in excess of the maximum rate permitted by applicable law, the Default Rate shall be limited
to the maximum rate permitted by applicable law.







6









 








          “Defeasance Borrower” has the meaning set forth in Section 2.1(b).




          “Defeasance Collateral” means direct, non-callable obligations that are either the
direct obligations of, or are fully guaranteed by the full faith and credit of, the United States
of America.




          “Defeasance Pledge Agreement” has the meaning set forth in Section 2.1(a)(iii).




          “Defease” means to deliver Defeasance Collateral as substitute Collateral for the Loan
in accordance with Section 2.1 and to cause the Defeased Note to be assumed by a Defeasance
Borrower in accordance herewith; and the terms “Defeased” and “Defeasance” have
meanings correlative to the foregoing.




          “Deferred Maintenance Amount” means $0.




          “Deferred Maintenance Conditions” means those items described in Schedule C.




          “Deferred Maintenance and Environmental Escrow Account” has the meaning set forth in
Section 3.7(a).




          “Eligible Account” means (i) a segregated account maintained with a federal or
state-chartered depository institution or trust company that complies with the definition of
Eligible Institution, or (ii) a segregated trust account or accounts maintained with the corporate
trust department of a federal depository institution or state-chartered depository institution that
has an investment-grade rating and is subject to regulations regarding fiduciary funds on deposit
under, or similar to, Title 12 of the Code of Federal Regulations Section 9.10(b) that, in either
case, has corporate trust powers, acting in its fiduciary capacity.




          “Eligible Institution” means an institution (i) whose commercial paper, short-term
debt obligations or other short-term deposits are rated at least A—1 by S&P, Prime-1 by Moody’s
and/or F-1 by Fitch, and whose long-term senior unsecured debt obligations are rated at least A-by
S&P, A by Fitch, and A2 by Moody’s and whose deposits are insured by the FDIC or (ii) with respect
to which the Rating Condition is satisfied.




          “Embargoed Person” has the meaning set forth in Section 4.40.




          “Engineering Report” means a structural and seismic engineering report or reports
(including a “probable maximum loss” calculation, if applicable) with respect to the Property
prepared by an independent engineer approved by Lender and delivered to Lender in connection with
the Loan, and any amendments or supplements thereto delivered to Lender.




          “Environmental Claim” means any written notice, claim, proceeding, notice of
proceeding, investigation, demand, abatement order or other order or directive by any Person or
Governmental Authority alleging or asserting liability with respect to Obligor, Operating Lessee or
the Property arising out of, based on, in connection with, or resulting from (i) the actual or
alleged presence, Use or Release of any Hazardous Substance, (ii) any actual or alleged violation
of any Environmental Law, or (iii) any actual or alleged injury or threat of injury to property,
health or safety, natural resources or to the environment caused by Hazardous Substances.







7









 








          “Environmental Indemnity” means that certain environmental indemnity agreement
executed by Obligor and the Sponsor as of the Closing Date, as the same may from time to time be
amended, restated, replaced, supplemented or otherwise modified in accordance herewith.




          “Environmental Laws” means any and all present and future federal, state and local
laws, statutes, ordinances, orders, rules, regulations and the like, as well as common law, any
judicial or administrative orders, decrees or judgments thereunder, and any permits, approvals,
licenses, registrations, filings and authorizations, in each case as now or hereafter in effect,
relating to (i) the pollution, protection or cleanup of the environment, (ii) the impact of
Hazardous Substances on property, health or safety, (iii) the Use or Release of Hazardous
Substances, (iv) occupational safety and health, industrial hygiene or the protection of human,
plant or animal health or welfare or (v) the liability for or costs of other actual or threatened
danger to health or the environment. The term “Environmental Law” includes, but is not
limited to, the following statutes, as amended, any successors thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and
the like addressing similar issues: the Comprehensive Environmental Response, Compensation and
Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous Materials
Transportation Act; the Resource Conservation and Recovery Act (including Subtitle I relating to
underground storage tanks); the Clean Water Act; the Clean Air Act; the Toxic Substances Control
Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water
Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered
Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act.
The term “Environmental Law” also includes, but is not limited to, any present and future
federal state and local laws, statutes ordinances, rules, regulations and the like, as well as
common law, conditioning transfer of property upon a negative declaration or other approval of a
Governmental Authority of the environmental condition of a property; or requiring notification or
disclosure of Releases of Hazardous Substances or other environmental conditions of a property to
any Governmental Authority or other Person, whether or not in connection with transfer of title to
or interest in property.




          “Environmental Reports” means “Phase I Environmental Site Assessments” as referred to
in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-05 (and,
if necessary, “Phase II Environmental Site Assessments”), prepared by an independent environmental
auditor approved by Lender and delivered to Lender in connection with the Loan and any amendments
or supplements thereto delivered to Lender, and shall also include any other environmental reports
delivered to Lender pursuant to this Agreement and the Environmental Indemnity.




          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from
time to time, and the regulations promulgated thereunder.




          “ERISA Affiliate,” at any time, means each trade or business (whether or not
incorporated) that would, at the time, be treated together with any Obligor or Operating Lessee as
a single employer under Title IV or Section 302 of ERISA or Section 412 of the Code.




          “Event of Default” has the meaning set forth in Section 7.1.







8









 








          “Excess Cash Flow Reserve Account” has the meaning set forth in Section 3.9(a).




          “Exception Report” means the report prepared by Obligor and attached to this Agreement
as Schedule B, setting forth any exceptions to the representations set forth in Article
IV.




          “FF&E” means furniture, fixtures and equipment located in the Property.




          “Fiscal Quarter” means the three-month period ending on March 31, June 30, September
30 and December 31 of each year, or such other fiscal quarter of Maryland Guarantor as Maryland
Guarantor may select from time to time with the prior consent of Lender, such consent not to be
unreasonably withheld.




          “Fiscal Year” means the 12-month period ending on December 31 of each year, or such
other fiscal year of Maryland Guarantor as Maryland Guarantor may select from time to time with the
prior consent of Lender, not to be unreasonably withheld.




          “Fitch” means Fitch, Inc. and its successors.




          “Force Majeure” means a delay due to acts of God, governmental restrictions, stays,
judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppage,
shortages or unavailability of labor or materials or similar causes beyond the reasonable control
of Obligor; provided that, with respect to any of such circumstances, for the purposes of this
Agreement, (1) any period of Force Majeure shall apply only to performance of the obligations
necessarily affected by such circumstance and shall continue only so long as Obligor is
continuously and diligently using all reasonable efforts to minimize the effect and duration
thereof; and (2) Force Majeure shall not include the unavailability or insufficiency of funds.




          “Form W-8BEN” means Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for
United States Tax Withholding) of the Department of Treasury of the United States of America, and
any successor form.




          “Form W-8ECI” means Form W-8ECI (Certificate of Foreign Person’s Claim for Exemption
from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in
the United States) of the Department of the Treasury of the United States of America, and any
successor form.




          “Franchisor Comfort Letter” means that certain letter agreement from the Approved
Franchisor, for the benefit of Lender, as the same may from time to time be amended, restated,
replaced, supplemented or otherwise modified in accordance therewith.




          “GAAP” means generally accepted accounting principles in the United States of America,
consistently applied.




          “Governmental Authority” means any federal, state, county, regional, local or
municipal government, any bureau, department, agency or political subdivision thereof and any






9









 







Person with jurisdiction exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government (including any court).




          “Guaranty” means that certain guaranty, dated as of the Closing Date, executed by
Sponsor for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or
otherwise modified in accordance herewith.




          “Hazardous Substances” means any and all substances (whether solid, liquid or gas)
defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances,
hazardous materials, extremely hazardous wastes, toxic substances, toxic pollutants, contaminants,
pollutants or words of similar meaning or regulatory effect under any present or future
Environmental Laws or that may have a negative impact on human health or the indoor or outdoor
environment or the presence of which on, in or under the Property is prohibited or requires
investigation or remediation under Environmental Law, including petroleum and petroleum
by-products, asbestos and asbestos-containing materials, toxic mold, polychlorinated biphenyls,
lead and radon, and compounds containing them (including gasoline, diesel fuel, oil and lead-based
paint), pesticides and radioactive materials, flammables and explosives and compounds containing
them.




          “Increased Costs” has the meaning set forth in Section 1.4(d).




          “Indebtedness” means the Principal Indebtedness, together with interest and all other
obligations and liabilities of Borrower under the Loan Documents, including all transaction costs,
Yield Maintenance Premiums and other amounts due or to become due to Lender pursuant to this
Agreement, under the Notes (or in the case of Maryland Guarantor, the Maryland Guaranty) or in
accordance with any of the other Loan Documents, and all other amounts, sums and expenses
reimbursable by Obligor to Lender hereunder or pursuant to the Notes or any of the other Loan
Documents.




          “Indemnified Liabilities” has the meaning set forth in Section 9.19(b).




          “Indemnified Parties” has the meaning set forth in Section 9.17.




          “Independent Director” of any corporation or limited liability company means an
individual who is provided by CT Corporation, Corporation Service Company, National Registered
Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or,
if none of those companies is then providing professional independent directors, another
nationally-recognized company reasonably approved by Lender, in each case that is not an affiliate
of Borrower and that provides professional independent directors and other corporate services in
the ordinary course of its business, and which individual is duly appointed as a member of the
board of directors or board of managers of such corporation or limited liability company and is
not, and has never been, and will not while serving as Independent Director be, any of the
following:





     (i) a member (other than an independent, non-economic “springing” member), partner,
equityholder, manager, director, officer or employee of such corporation or limited
liability company or any of its equityholders or affiliates (other




10












 






than as an independent director or manager of an affiliate of such corporation or
limited liability company that is not in the direct chain of ownership of such corporation
or limited liability company and that is required by a creditor to be a single purpose
bankruptcy remote entity, provided that such independent director or manager is employed by
a company that routinely provides professional independent directors or managers);




     (ii) a creditor, supplier or service provider (including provider of professional
services) to such corporation or limited liability company or any of its equityholders or
affiliates (other than a nationally recognized company that routinely provides professional
independent managers or directors and that also provides lien search and other similar
services to such corporation or limited liability company or any of its equityholders or
affiliates in the ordinary course of business);




     (iii) a family member of any such member, partner, equityholder, manager, director,
officer, employee, creditor, supplier or service provider; or




     (iv) a Person that controls (whether directly, indirectly or otherwise) any of (i),
(ii) or (iii) above.


A natural person who otherwise satisfies the foregoing definition other than subparagraph (i) by
reason of being the Independent Director of a Single-Purpose Entity affiliated with the corporation
or limited liability company in question shall not be disqualified from serving as an Independent
Director of such corporation or limited liability company, provided that the fees that such natural
person earns from serving as Independent Director of affiliates of such the corporation or limited
liability company in any given year constitute in the aggregate less than five percent of such
natural person’s annual income for that year. The same natural persons may not serve as
Independent Directors of a corporation or limited liability company and, at the same time, serve as
Independent Directors of an equityholder or member of such corporation or limited liability
company.




          “Initial Interest Rate” means 5.2775% per annum.




          “Initial Principal Payment Date” means the Payment Date in March, 2012.




          “Insurance Requirements” means, collectively, (i) all material terms of any insurance
policy required pursuant to this Agreement and (ii) all material regulations and then-current
standards applicable to or affecting the Property or any portion thereof 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 any other body exercising similar functions.




          “Insurance Reserve Exemption Period” has the meaning set forth in Section
3.4(d)(iii).




          “Interest Accrual Period” means each period from and including the sixth day of a
calendar month through and including the fifth day of the immediately succeeding calendar month;
provided, that, prior to a Securitization, Lender shall have the right, in connection with
a change in the Payment Date in accordance with the definition thereof, to make a corresponding





11









 







change to the Interest Accrual Period. Notwithstanding the foregoing, the first Interest
Accrual Period shall commence on and include the Closing Date.




          “Interest Rate” means (i) with respect to the initial Note, the Initial Interest Rate,
and (ii) with respect to each Note resulting from the bifurcation of the initial Note into multiple
Notes pursuant to Section 1.1(c), the per annum interest rate of such Note as determined by
Lender in accordance with such Section.




          “Lease” means any lease (except the Operating Lease), license, letting, concession,
occupancy agreement or sublease to which Maryland Guarantor and/or Operating Lessee is a party or
has a consent right, or other agreement (whether written or oral and whether now or hereafter in
effect) under which Maryland Guarantor and/or Operating Lessee is a lessor, sublessor, licensor or
other grantor existing as of the Closing Date or thereafter entered into by Maryland Guarantor
and/or Operating Lessee, in each case pursuant to which any Person is granted a possessory interest
in, or right to use or occupy all or any portion of any space in the Property, and every
modification or amendment thereof, and every guarantee of the performance and observance of the
covenants, conditions and agreements to be performed and observed by the other party thereto,
excluding short-term agreements in the ordinary course of business pursuant to which hotel rooms
and facilities are made available to individual hotel guests.




          “Leasing Commissions” means leasing commissions required to be paid by Maryland
Guarantor or Operating Lessee in connection with the leasing of space to Tenants at the Property
pursuant to Leases entered into by Maryland Guarantor or Operating Lessee in accordance herewith
and payable in accordance with third-party/arm’s-length written brokerage agreements,
provided that the commissions payable pursuant thereto are commercially reasonable based
upon the then current brokerage market for property of a similar type and quality to the Property
in the geographic market in which the Property is located.




          “Legal Requirements” means all governmental statutes, laws, rules, orders,
regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including
Environmental Laws) affecting Borrower, Maryland Guarantor, Sponsor, Operating Lessee, the Property
or any other Collateral or any portion thereof or the construction, ownership, use, alteration or
operation thereof, or any portion thereof (whether now or hereafter enacted and in force), and all
permits, licenses and authorizations and regulations relating thereto.




          “Lender” has the meaning set forth in the first paragraph of this Agreement and in
Section 9.7.




          “Lender 80% Determination” means a reasonable determination by Lender that, based on a
current or updated appraisal by HVS (or such other appraiser satisfactory to Lender should HVS no
longer be actively engaged in the business of real estate valuation), a broker’s price opinion by
Jones Lang LaSalle or Eastdil Secured (or such other broker satisfactory to Lender should neither
Jones Lang LaSalle or Eastdil Secured be actively engaged in the business of real estate valuation)
or other written determination of value using a commercially reasonable valuation method
satisfactory to Lender, the fair market value of the Property securing the Indebtedness at the time
of such determination (but excluding any value attributable to property






12









 







that is not an interest in real property within the meaning of section 860G(a)(3)(A) of the
Code) is at least 80% of the amount of the Indebtedness (including any accrued and unpaid interest)
at the time of such determination.




          “Lien” means any mortgage, lien (statutory or other), pledge, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or charge on or
affecting any Collateral or any portion thereof, or any interest therein (including any conditional
sale or other title retention agreement, any sale-leaseback, any financing lease or similar
transaction having substantially the same economic effect as any of the foregoing, the filing of
any financing statement or similar instrument under the Uniform Commercial Code or comparable law
of any other jurisdiction, domestic or foreign, and mechanics’, materialmen’s and other similar
liens and encumbrances, as well as any option to purchase, right of first refusal, right of first
offer or similar right).




          “Loan” has the meaning set forth in Section 1.1(a).




          “Loan Amount” means $36,000,000.




          “Loan Documents” means this Agreement, the Note, the Mortgage (and related financing
statements), the Environmental Indemnity, the Subordination of Property Management Agreement, the
Franchisor Comfort Letter, the Subordination of Operating Lease, the Pledge and Security Agreement
(Equity), the Cash Management Agreement, any Blocked Account Agreement, the Cooperation Agreement,
the Guaranty, the Completion Guaranty, the Maryland Guaranty, any Defeasance Pledge Agreement, the
Qualified Operating Expense Account Agreement, the Maryland Guarantor FF&E Account Control
Agreement (if any), and all other agreements, instruments, certificates and documents necessary to
effectuate the granting to Lender of first-priority Liens on the Collateral or otherwise in
satisfaction of the requirements of this Agreement or the other documents listed above, as all of
the aforesaid may be amended, restated, replaced, supplemented or otherwise modified from time to
time in accordance herewith.




          “Lockout Period” means the period from the Closing Date to but excluding the first
Payment Date following the earlier to occur of (i) the third anniversary of the Closing Date and
(ii) the second anniversary of the date on which the entire Loan (including any subordinated
interest therein) has been Securitized pursuant to a Securitization or series of Securitizations.




          “Loss Proceeds” means amounts, awards or payments payable to Maryland Guarantor,
Operating Lessee or Lender in respect of all or any portion of the Property in connection with a
Casualty or Condemnation thereof (after the deduction therefrom and payment to Maryland Guarantor,
Operating Lessee and Lender, respectively, of any and all reasonable expenses incurred by Maryland
Guarantor, Operating Lessee and Lender in the recovery thereof, including all attorneys’ fees and
disbursements, the fees of insurance experts and adjusters and the costs incurred in any litigation
or arbitration with respect to such Casualty or Condemnation).




          “Loss Proceeds Account” has the meaning set forth in Section 3.3(a).







13









 








          “Major Lease” means any Lease that (i) when aggregated with all other Leases at the
Property with the same Tenant (or affiliated Tenants), and assuming the exercise of all expansion
rights and all preferential rights to lease additional space contained in such Lease, is expected
to cover more than 7,500 rentable square feet, (ii) contains an option or preferential right to
purchase all or any portion of the Property, (iii) is with an affiliate of Maryland Guarantor as
Tenant or (iv) is entered into during the continuance of an Event of Default.




          “Maryland Guarantor” has the meaning set forth in the first paragraph of this
Agreement.




          “Maryland Guarantor FF&E Account” has the meaning set forth in Section 3.6(d).




          “Maryland Guarantor FF&E Account Control Agreement” means an account control agreement
satisfactory to Lender which shall permit Obligor to have free access to the amounts contained
therein for the purposes permitted under the Approved Management Agreement and the Loan Documents,
provided that, during the continuance of a Trigger Period or Event of Default all amounts contained
therein shall be remitted to the FF&E Reserve Account and shall be administered in accordance with
Section 3.6.




          “Maryland Guaranty” means the Indemnity Guaranty of Payment dated the date hereof, by
Maryland Guarantor for the benefit of Lender.




          “Material Adverse Effect” means a material adverse effect upon (i) the ability of
Obligor or Sponsor to perform, or of Lender to enforce, any material provision of any Loan
Document, (ii) the enforceability of any material provision of any Loan Document, or (iii) the
value, Net Operating Income, use or enjoyment of the Property or the operation or occupancy
thereof.




          “Material Agreements” means (x) each contract and agreement (other than Leases)
relating to the Property, or otherwise imposing obligations on Maryland Guarantor or Operating
Lessee, under which Maryland Guarantor or Operating Lessee would have the obligation to pay more
than $250,000 per annum or that cannot be terminated by Maryland Guarantor or Operating Lessee
without cause upon 60 days’ notice or less without payment of a termination fee in excess of
$10,000, or that is with an affiliate of Maryland Guarantor or Operating Lessee, (y) any material
reciprocal easement agreement, declaration of covenants, condominium documents, ground lease,
material parking agreement or other material Permitted Encumbrance and (z) the Operating Lease.




          “Material Alteration” means any Alteration to be performed by or on behalf of Maryland
Guarantor or Operating Lessee at the Property that (a) is reasonably expected to result in a
Material Adverse Effect, (b) is reasonably expected to cost in excess of $1,800,000, as determined
by an independent architect, or (c) is reasonably expected to permit (or is reasonably likely to
induce) any Tenant under a Major Lease to terminate its Lease or abate rent.




          “Maturity Date” means the Payment Date in February, 2016, or such earlier date as may
result from acceleration of the Loan in accordance with this Agreement.




          “Minimum Balance” has the meaning set forth in Section 3.2(a).







14









 








          “Monthly FF&E Amount” means, with respect to any calendar month, an amount equal to 4%
of Operating Income for the immediately preceding calendar month.




          “Moody’s” means Moody’s Investors Service, Inc. and its successors.




          “Mortgage” means that certain indemnity deed of trust, assignment of rents and leases,
security agreement and fixture filing encumbering the Property executed by Maryland Guarantor as of
the Closing Date, as the same may from time to time be amended, restated, replaced, supplemented or
otherwise modified in accordance herewith.




          “Net Operating Income” means, with respect to any Test Period, the excess of (i)
Operating Income for such Test Period, minus (ii) Operating Expenses for such Test Period;
provided, that, for purposes of establishing a Trigger Period, Net Operating Income
shall be calculated using Operating Income and Operating Expenses from (x) December 2009, in lieu
of those for December 2010, so long as such Test Period includes December 2010, and (y) January
2010, in lieu of those for January 2011, so long as such Test Period includes January 2011.




          “Nonconsolidation Opinion” means the opinion letter, dated the Closing Date, delivered
by Obligor’s counsel to Lender and addressing issues relating to substantive consolidation in
bankruptcy.




          “Note(s)” means that certain promissory note, dated as of the Closing Date, made by
Borrower to the order of Lender to evidence the Loan, as such note may be replaced by multiple
Notes in accordance with Section 1.1(c) and as otherwise assigned (in whole or in part),
amended, restated, replaced, supplemented or otherwise modified in accordance herewith.




          “Obligor” has the meaning set forth in the first paragraph of this Agreement.




          “OFAC List” means 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 any other similar list maintained by the U.S. Treasury Department,
Office of Foreign Assets Control pursuant to any applicable governmental statutes, laws, rules,
orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities,
including trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of
the President of the United States. The OFAC List currently is accessible through the internet
website at www.treas.gov/ofac/t11sdn.pdf.




          “Officer’s Certificate” means a certificate delivered to Lender that is signed by an
authorized officer of Maryland Guarantor and certifies the information therein to the best of such
officer’s knowledge.




          “Operating Expenses” means, for any period, all operating, renting, administrative,
management, legal and other ordinary expenses of Maryland Guarantor and, without duplication,
Operating Lessee, Approved Property Manager and Approved Franchisor, during such period, determined
in accordance with GAAP and the Uniform System of Accounts (excluding reserves for or expenditures
on FF&E), plus a deemed expenditure in respect of FF&E in an amount equal to four percent (4%) of
Operating Income during such period; provided, however, that such expenses shall
not include (i) depreciation, amortization or other






15









 







non-cash items (other than expenses that are due and payable but not yet paid), (ii) interest,
principal or any other sums due and owing with respect to the Loan, (iii) income taxes or other
taxes in the nature of income taxes, (iv) Capital Expenditures, or (v) equity distributions.




          “Operating Income” means, for any period, all operating income of Maryland Guarantor
and, without duplication, Operating Lessee, and Approved Property Manager, from the Property during
such period, determined in accordance with GAAP and the Uniform System of Accounts (but without
straight-lining of rents), including without limitation: (i) all income and proceeds received from
any lease, Operating Lease and rental of rooms, exhibit, sales, commercial, meeting, conference or
banquet space within such Property, including net parking revenue, and net income from vending
machines, health club fees and service charges; (ii) all income and proceeds received from food and
beverage operations and from catering services conducted from such Property even though rendered
outside of such Property; (iii) all income and proceeds from business interruption, rental
interruption and use and occupancy insurance with respect to the operation of such Property (after
deducting therefrom all necessary costs and expenses incurred in the adjustment or collection
thereof and solely to the extent that such income and/or proceeds are allocable to such period);
(iv) all awards for temporary use (after deducting therefrom all costs incurred in the adjustment
or collection thereof and in restoration of such Property and solely to the extent that such award
is allocable to such period); (v) all income and proceeds from judgments, settlements and other
resolutions of disputes with respect to matters which would be includable in this definition of
“Operating Income” if received in the ordinary course of such Property’s operation (after
deducting therefrom all necessary costs and expenses incurred in the adjustment or collection
thereof); and (vi) interest on credit accounts, rent concessions or credits, and other required
pass-throughs; but excluding, (1) gross receipts received by lessees, licensees or concessionaires
of such Property; (2) consideration received at such Property for hotel accommodations, goods and
services to be provided at other hotels, although arranged by, for or on behalf of Maryland
Guarantor, Operating Lessee or Approved Property Manager; (3) income and proceeds from the sale or
other disposition of goods, capital assets and other items not in the ordinary course of such
Property’s operation; (4) federal, state and municipal excise, sales and use taxes collected
directly from patrons or guests of such Property as a part of or based on the sales price of any
goods, services or other items, such as gross receipts, room, admission, cabaret or equivalent
taxes; (5) awards (except to the extent provided in clause (iv) above); (6) refunds of amounts not
included in Operating Expenses at any time and uncollectible accounts; (7) gratuities collected by
employees at such Property; (8) the proceeds of any financing; (9) other income or proceeds
resulting other than from the use or occupancy of such Property, or any part thereof, or other than
from the sale of goods, services or other items sold on or provided from such Property in the
ordinary course of business; (10) any credits or refunds made to customers, guests or patrons in
the form of allowances or adjustments to previously recorded revenues; (11) any revenue
attributable to a Lease that is not a Qualifying Lease; (12) any revenue attributable to a Lease to
the extent it is paid more than 30 days prior to the due date, (13) any interest income from any
source (except to the extent provided in clause (vi) above); (14) any repayments received from any
third party of principal loaned or advanced to such third party by Maryland Guarantor or Operating
Lessee; (15) any proceeds resulting from the Transfer of all or any portion of such Property, (16)
Loss Proceeds (except to the
 extent provided in clause (iii) above); and (17) any other
extraordinary or non-recurring items.







16









 








          “Operating Lease” means that certain Agreement of Lease dated June 4, 2010 by and
between Maryland Guarantor and Operating Lessee.




          “Operating Lease Monthly Rent” means the greater of (x) the monthly rent payable by
Operating Lessee pursuant to the Operating Lease and (y) the sum, without duplication, of (i) the
Minimum Balance and (ii) Budgeted Operating Expenses for such month.




          “Operating Lessee” means Tar Heel Lessee, LLC.




          “Operating Lessee Pledged Collateral” means one hundred percent of the equity
interests in Operating Lessee, which shall be pledged by Pebblebrook Hotel Lessee, Inc. to Lender
as additional collateral for the Loan pursuant to the Pledge and Security Agreement (Equity).




          “Participation” has the meaning set forth in Section 9.7(b).




          “PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001), as amended from time to time.




          “Payment Date” means, with respect to each Interest Accrual Period, the sixth day of
the calendar month in which such Interest Accrual Period ends (or, if such day is not a Business
Day, the first preceding Business Day); provided, that prior to a Securitization, Lender
shall have the right to change the Payment Date so long as a corresponding change to the Interest
Accrual Period is also made.




          “Permits” means all licenses, permits, variances and certificates used in connection
with the ownership, operation, use or occupancy of the Property (including certificates of
occupancy, business licenses, state health department licenses, licenses to conduct business and
all such other permits, licenses and rights, obtained from any Governmental Authority or private
Person concerning ownership, operation, use or occupancy of the Property).




          “Permitted Debt” means:




          (i) the Indebtedness;




          (ii) Taxes that are not yet due and payable;





     (iii) tenant allowances and Capital Expenditure and product improvement plan costs
required under the Approved Management Agreement, Approved Franchise Agreement or any Leases
or otherwise permitted to be incurred under the Loan Documents that are paid on or prior to
the date when due; and




     (iv) Trade Payables not represented by a note, customarily paid by Maryland Guarantor
or Operating Lessee within 60 days of incurrence and in fact not more than 60 days
outstanding, which are incurred in the ordinary course of Maryland Guarantor ’s or Operating
Lessee’s business with respect to the Property, in amounts reasonable and



17









 






customary for similar properties and not exceeding 3.0% of the Loan Amount in the
aggregate.



          “Permitted Encumbrances” means:




          (i) the Liens created by the Loan Documents;





     (ii) all Liens and other matters specifically disclosed on Schedule B of the Qualified
Title Insurance Policy;




     (iii) Liens, if any, for Taxes not yet delinquent;




     (iv) mechanics’, materialmen’s or similar Liens, if any, and Liens for delinquent taxes
or impositions, in each case only if being diligently contested in good faith and by
appropriate proceedings, provided that no such Lien is in imminent danger of
foreclosure and provided further that either (a) each such Lien is released
or discharged of record or fully insured over by the title insurance company issuing the
Qualified Title Insurance Policy within 30 days of its creation, or (b) Maryland Guarantor
deposits with Lender, by the expiration of such 30-day period, an amount equal to 150% of
the dollar amount of such Lien or a bond in the aforementioned amount from such surety, and
upon such terms and conditions, as is reasonably satisfactory to Lender, as security for the
payment or release of such Lien;




     (v) rights of existing and future Tenants as tenants only pursuant to written Leases
entered into in conformity with the provisions of this Agreement; and




     (vi) easements and other encroachments placed on the Property with the prior written
consent of Lender.



          “Permitted Investments” means the following, subject to the qualifications hereinafter
set forth:





     (i) direct obligations of, or obligations fully and unconditionally guaranteed as to
principal and interest by, the U.S. government or any agency or instrumentality thereof,
when such obligations are backed by the full faith and credit of the United States of
America and have maturities not in excess of one year;




     (ii) federal funds, unsecured certificates of deposit, time deposits, banker’s
acceptances, and repurchase agreements, each having maturities of not more than 90 days, of
any commercial bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, the short-term debt obligations of which are rated A-1+
by S&P, F1+ by Fitch and P-1 by Moody’s (and if the term is between one and three months A1
by Moody’s) and, if it has a term in excess of three months, the long-term debt obligations
of which are rated AAA (or the equivalent) by each of the Rating Agencies, and that (a) is
at least “adequately capitalized” (as defined in the regulations of its primary Federal
banking regulator) and (b) has Tier 1 capital (as defined in such regulations) of not less
than $1,000,000,000;



18









 






     (iii) deposits that are fully insured by the Federal Deposit Insurance Corp. (FDIC);




     (iv) commercial paper rated A—1+ by S&P, F1+ by Fitch and P-1 Moody’s (and if the term
is between one and three months A1 by Moody’s) by each of the Rating Agencies and having a
maturity of not more than 90 days;




     (v) any money market funds that (a) has substantially all of its assets invested
continuously in the types of investments referred to in clause (i) above, (b) has net assets
of not less than $5,000,000,000, and (c) has a rating of AAAm or AAAm-G from S&P, Aaa by
Moody’s and the highest rating obtainable from Fitch; and




     (vi) such other investments as to which the Rating Condition has been satisfied.


Notwithstanding the foregoing, “Permitted Investments” (i) shall exclude any security with the
Standard & Poor’s “r” symbol (or any other Rating Agency’s corresponding symbol) attached to the
rating (indicating high volatility or dramatic fluctuations in their expected returns because of
market risk), as well as any mortgage-backed securities and any security of the type commonly known
as “strips”; (ii) shall not have maturities in excess of one year; (iii) shall be limited to those
instruments that have a predetermined fixed dollar of principal due at maturity that cannot vary or
change; and (iv) shall exclude any investment where the right to receive principal and interest
derived from the underlying investment provides a yield to maturity in excess of 120% of the yield
to maturity at par of such underlying investment. Interest on Permitted Investments may either be
fixed or variable, and any variable interest must be tied to a single interest rate index plus a
single fixed spread (if any), and move proportionately with that index. No Permitted Investments
shall require a payment above par for an obligation if the obligation may be prepaid at the option
of the issuer thereof prior to its maturity. All Permitted Investments shall mature or be
redeemable upon the option of the holder thereof on or prior to the earlier of (x) three months
from the date of their purchase or (y) the Business Day preceding the day before the date such
amounts are required to be applied hereunder.




          “Person” means any natural person, corporation, limited liability company,
partnership, joint venture, estate, trust, unincorporated association or Governmental Authority and
any fiduciary acting in such capacity on behalf of any of the foregoing.




          “PIP” means the Product Improvement Plan attached as Exhibit A to the Approved
Franchise Agreement.




          “Plan Assets” means assets of any (i) employee benefit plan (as defined in Section
3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in Section 4975(e)(1) of the
Code) subject to Section 4975 of the Code, or (iii) governmental plan (as defined in Section 3(32)
of ERISA) subject to federal, state or local laws, rules or regulations substantially similar to
Title I of ERISA or Section 4975 of the Code.




          “Pledge and Security Agreement (Equity)” means that certain Pledge and Security
Agreement (Equity) dated the date hereof, by Pebblebrook Hotel Lessee, Inc. in favor of Lender.







19









 








          “Policies” has the meaning set forth in Section 5.15(b).




          “Prepayment Period” means the final three Interest Accrual Periods prior to the
Maturity Date.




          “Prime Rate” means the “prime rate” published in the “Money Rates” section of The
Wall Street Journal. If The Wall Street Journal ceases to publish the “prime rate,”
then Lender shall select an equivalent publication that publishes such “prime rate,” and if such
“prime rate” is no longer generally published or is limited, regulated or administered by a
governmental or quasi-governmental body, then Lender shall reasonably select a comparable interest
rate index.




          “Principal Indebtedness” means the principal balance of the Loan outstanding from time
to time.




          “Prohibited Pledge” has the meaning set forth in Section 7.1(f).




          “Property” means the real property described on Schedule A, together with all
buildings and other improvements thereon and all personal property encumbered by the Mortgage,
together with all rights pertaining to such property.




          “Qualified Equityholder” means (i) Sponsor (ii) any Person approved by Lender with
respect to which the Rating Condition is satisfied, (iii) a bank, saving and loan association,
investment bank, insurance company, trust company, commercial credit corporation, pension plan,
pension fund or pension advisory firm, mutual fund, government entity or plan, real estate company,
investment fund or an institution substantially similar to any of the foregoing, provided in each
case under this clause (iii) that such Person (x) has total assets (in name or under management) in
excess of $500,000,000 and (except with respect to a pension advisory firm or similar fiduciary)
capital/statutory surplus or shareholder’s equity in excess of $200,000,000 (in both cases,
exclusive of the Property), and (y) is regularly engaged in the business of owning and operating
comparable properties in major metropolitan areas or (iv) any Person Controlled by a Person
satisfying the requirements of clause (iii), but only during such time period as such Person is so
Controlled.




          “Qualified Operating Expense Account” means an Eligible Account maintained by
Operating Lessee and/or Maryland Guarantor at an Eligible Institution, which account (i) shall only
contain amounts in respect of Operating Expenses for the Property (and no amounts unrelated to the
Property shall be deposited therein or otherwise commingled with the amounts on deposit in such
account) and (ii) is subject to a Qualified Operating Expense Account Agreement.




          “Qualified Operating Expense Account Agreement” means an agreement relating to the
Qualified Operating Expense Account, dated as of the date hereof, among Lender, Operating Lessee
and/or Maryland Guarantor and the Eligible Institution at which such account is maintained,
pursuant to which such account is pledged to the Lender and Operating Lessee is given full access
to the funds on deposit therein but provides for the discontinuance of such access upon receipt by
such Eligible Institution of written notice from Lender of the occurrence





20












 




of an Event of Default, as such agreement may be amended, restated, replaced,
supplemented or otherwise modified in accordance herewith.




          “Qualified Successor Borrower” means a Single-Purpose Entity that is Controlled by one
or more Qualified Equityholders.




          “Qualified Successor Operating Lessee” means a Single-Purpose Entity that is
Controlled by the same Qualified Equityholders that Control Qualified Successor Borrower and is a
successor to the Operating Lessee under the Operating Lease.




          “Qualified Survey” means that certain ALTA/ACSM land title survey of the Property
dated March 4, 1997, as revised March 30, 2010 and last revised December 29, 2010, prepared by
Greenhorne and O’Mara and certified to Maryland Guarantor, the title company issuing the Qualified
Title Insurance Policy and Lender and their respective successors and assigns, in form and
substance reasonably satisfactory to Lender.




          “Qualified Title Insurance Policy” means an ALTA extended coverage mortgagee’s title
insurance policy in form and substance reasonably satisfactory to Lender.




          “Qualifying Lease” means all Leases other than (i) Leases to a Tenant that is not in
occupancy at the Property and open for business at the Property and (ii) Leases to a Tenant that is
in default under its Lease or is the subject of bankruptcy or similar insolvency proceedings (to
the extent that such Tenant has not assumed such Lease in bankruptcy).




          “Rating Agency” shall mean, prior to the final Securitization of the Loan, each of
S&P, Moody’s, DBRS and Fitch, or any other nationally-recognized statistical rating agency that has
been designated by Lender and, after the final Securitization of the Loan, shall mean any of the
foregoing that have rated and continue to rate any of the Certificates (excluding unsolicited
ratings).




          “Rating Condition” means, with respect to any proposed action, the receipt by Lender
of confirmation in writing from each of the Rating Agencies that such action shall not result, in
and of itself, in a downgrade, withdrawal, or qualification of any rating then assigned to any
outstanding Certificates; except that if all or any portion of the Loan has not been Securitized
pursuant to a Securitization rated by the Rating Agencies, then “Rating Condition” shall instead
mean the receipt of prior written approval of both (x) the applicable Rating Agencies (if and to
the extent that any portion of the Loan has been Securitized pursuant to a Securitization or series
of Securitizations rated by such Rating Agencies (excluding shadow ratings)), and (y) Lender in its
sole discretion. No Rating Condition shall be regarded as having been satisfied unless and until
any conditions imposed on the effectiveness of any confirmation from any Rating Agency shall have
been satisfied. Lender shall have the right in its sole discretion to waive a Rating Condition
requirement with respect to any Rating Agency that Lender determines has declined to review the
applicable proposal; provided that if any Rating Agency affirmatively declines to review a
Defeasance, then the Rating Condition requirement shall not be waived but shall instead be deemed
satisfied as it relates to such Rating Agency for such Defeasance.


21









 







           “Regulatory Change” means any change after the Closing Date in federal, state or
foreign laws or regulations or the adoption or the making, after such date, of any interpretations,
directives or requests applying to a class of banks or companies controlling banks, including
Lender, of or under any federal, state or foreign laws or regulations (whether or not having the
force of law) by any court or governmental or monetary authority charged with the interpretation or
administration thereof.




          “Release” with respect to any Hazardous Substance means any release, deposit,
discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing or other movement of Hazardous Substances into the indoor or
outdoor environment (including the movement of Hazardous Substances through ambient air, soil,
surface water, ground water, wetlands, land or subsurface strata).




          “Rent Roll” has the meaning set forth in Section 4.14(a).




          “Revenues” means all rents (including percentage rent), rent equivalents, moneys
payable as damages pursuant to a Lease or in lieu of rent or rent equivalents, royalties (including
all oil and gas or other mineral royalties and bonuses), income and (without duplication) Operating
Income, receivables, receipts, revenues, deposits (including security, utility and other deposits),
accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever
form or nature received by or paid to or for the account of or benefit of Maryland Guarantor or
(without duplication) Operating Lessee or Approved Property Manager (only with respect to the
Property) from any and all sources including any obligations now existing or hereafter arising or
created out of the sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of property or rendering of services by Maryland Guarantor or Operating Lessee
and proceeds, if any, from business interruption or other loss of income insurance.




          “S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill
Companies, Inc., and its successors.




          “Securitization” means a transaction in which all or any portion of the Loan is
deposited into one or more trusts or entities that issue Certificates to investors, or a similar
transaction; and the term “Securitize” and “Securitized” have meanings correlative
to the foregoing.




          “Securitization Vehicle” means the issuer of Certificates in a Securitization of the
Loan.




          “Service” means the Internal Revenue Service or any successor agency thereto.




          “Servicer” means the entity or entities appointed by Lender from time to time to serve
as servicer and/or special servicer of the Loan. If at any time no entity is so appointed, the
term “Servicer” shall be deemed to refer to Lender.




          “Single Member LLC” means a limited liability company that either (x) has only one
member, or (y) has multiple members, none of which is a Single-Purpose Equityholder.


22









 







           “Single-Purpose Entity” means a Person that (a) was formed under the laws of the State
of Delaware solely for the purpose of (i) acquiring and holding an ownership or leasehold
interest in the Property (or, if applicable, Defeasance Collateral), (ii) in the case of
Borrower, entering into and incurring the Indebtedness and Obligations under this Agreement and the
other Loan Documents or (iii) in the case of a Single-Purpose Equityholder, acquiring and holding
an ownership interest in Borrower, Operating Lessee and/or Maryland Guarantor (or, if applicable,
Defeasance Collateral), (b) does not engage in any business unrelated to (i) the Property (or, if
applicable, Defeasance Collateral), or (ii) in the case of a Single-Purpose Equityholder, its
ownership interest in Borrower, Operating Lessee and/or Maryland Guarantor (or, if applicable,
Defeasance Collateral), (c) does not have any assets other than those related to (i) the Property
(or, if applicable, Defeasance Collateral), or (ii) in the case of a Single-Purpose Equityholder,
its ownership interest in Borrower, Operating Lessee and/or Maryland Guarantor (or, if applicable,
Defeasance Collateral), (d) does not have any Debt other than Permitted Debt, (e) maintains books,
accounts, records, financial statements, stationery, invoices and checks that are separate and
apart from those of any other Person (except that such Person’s financial position, assets, results
of operations and cash flows may be included in the consolidated financial statements of an
affiliate of such Person in accordance with GAAP, provided that any such consolidated
financial statements shall contain a note indicating that such Person and its affiliates are
separate legal entities and maintain records, books of account separate and apart from any other
Person), (f) is subject to and complies with all of the limitations on powers and separateness
requirements set forth in the organizational documentation of such Person as of the Closing Date,
(g) holds itself out as being a Person separate and apart from each other Person and not as a
division or part of another Person, (h) conducts its business in its own name (except for services
rendered under a management agreement with an affiliate, so long as the manager, or equivalent
thereof, under such management agreement holds itself out as an agent of such Person), (i)
exercises reasonable efforts to correct any known misunderstanding actually known to it regarding
its separate identity, and maintains an arm’s-length relationship with its affiliates, (j) pays its
own liabilities out of its own funds (including the salaries of its own employees) and reasonably
allocates any overhead that is shared with an affiliate, including paying for shared office space
and services performed by any officer or employee of an affiliate, (k) maintains a sufficient
number of employees in light of its contemplated business operations, (l) conducts its business so
that the assumptions made with respect to it that are contained in the Nonconsolidation Opinion
shall at all times be true and correct in all material respects, (m) maintains its assets in such a
manner that it will not be costly or difficult to segregate, ascertain or identify its individual
assets from those of any other Person, (n) observes
 all applicable entity-level formalities in all
material respects, (o) does not commingle its assets with those of any other Person and holds such
assets in its own name, (p) does not assume, guarantee or become obligated for the debts of any
other Person, and does not hold out its credit as being available to satisfy the obligations or
securities of others, (q) does not acquire obligations or securities of its shareholders, members
or partners, (r) does not pledge its assets for the benefit of any other Person and does not make
any loans or advances to any Person, (s) intends to maintain adequate capital in light of its
contemplated business operations, (t) has two Independent Directors on its board of directors or
board of managers, or, in the case of a limited partnership, has a Single-Purpose Equityholder with
two Independent Directors on such Single-Purpose Equityholder’s board of directors or board of
managers, and has organizational documents that prohibit replacing any Independent Director without
Cause and without giving at least two Business Days’ prior written notice to Lender



23









 






(except in the
case of the death, legal incapacity, or voluntary non-collusive resignation of an Independent
Director, in which case no prior notice to Lender or the Rating Agencies shall be
required in connection with the replacement of such Independent Director with a new
Independent Director that is provided by any of the companies listed in the definition of
“Independent Director”), (u) has by-laws or an operating agreement, or, in the case of a limited
partnership, has a Single-Purpose Equityholder with by-laws or an operating agreement, which
provides that, for so long as the Loan is outstanding, such Person shall not take or consent to any
of the following actions except to the extent expressly permitted in this Agreement and the other
Loan Documents:





     (i) the dissolution, liquidation, consolidation, merger or sale of all or substantially
all of its assets (and, in the case of a Single-Purpose Equityholder, the assets of any
Single-Purpose Entity in which such Single-Purpose Equityholder holds an interest);




     (ii) the engagement by such Person (and, in the case of a Single-Purpose Equityholder,
the engagement by any Single-Purpose Entity in which such Single-Purpose Equityholder holds
an interest) in any business other than the acquisition, development, management, leasing,
ownership, maintenance and operation of the Property and activities incidental thereto (and,
in the case of a Single-Purpose Equityholder, activities incidental to the acquisition and
ownership of its interest in each Single-Purpose Entity in which such Single-Purpose
Equityholder holds an interest);




     (iii) the filing, or consent to the filing, of a bankruptcy or insolvency petition, any
general assignment for the benefit of creditors or the institution of any other insolvency
proceeding, or the seeking or consenting to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator, custodian or any similar official in respect of such Person
without the affirmative vote of both of its Independent Directors (and, in the case of a
Single-Purpose Equityholder, in respect of any Single-Purpose Entity in which such
Single-Purpose Equityholder holds an interest, without the affirmative vote of both of such
Single-Purpose Entities’ Independent Directors); and




     (iv) any amendment or modification of any provision of its (and, in the case of a
Single-Purpose Equityholder, any Single-Purpose Entity in which such Single-Purpose
Equityholder holds an interest) organizational documents relating to qualification as a
“Single-Purpose Entity”,


and (v) if such entity is a Single Member LLC, has organizational documents that provide that upon
the occurrence of any event (other than a permitted equity transfer) that causes its sole member to
cease to be a member while the Loan is outstanding, at least one of its Independent Directors shall
automatically be admitted as the sole member of the Single Member LLC and shall preserve and
continue the existence of the Single Member LLC without dissolution.




          “Single-Purpose Equityholder” means a Single-Purpose Entity that (x) is a limited
liability company or corporation formed under the laws of the State of Delaware, (y) owns at least
a 1% direct equity interest in Maryland Guarantor (or a lessor amount, providing that




24









 







Lender
receives appropriate legal opinions with respect thereto), and (z) serves as the general partner or
managing member of each Single-Purpose Entity in which it holds an interest.




          “Smith Travel Reports” means a “STAR Program Report” with respect to the Property
prepared by Smith Travel Research, Inc, or its successors and assigns.




          “Sponsor” means Pebblebrook Hotel Trust.




          “Subordination of Operating Lease” means that certain consent and agreement of
Operating Lessee and subordination of Operating Lease executed by Operating Lessee and Maryland
Guarantor as of the Closing Date, as the same may from time to time be amended, restated, replaced,
supplemented or otherwise modified in accordance herewith.




          “Subordination of Property Management Agreement” means that certain consent and
agreement of manager and subordination and non-disturbance of management agreement executed by
Operating Lessee and the Approved Property Manager as of the Closing Date, as the same may from
time to time be amended, restated, replaced, supplemented or otherwise modified in accordance
herewith.




          “Taxes” means all real estate and personal property taxes, assessments, fees, taxes on
rents or rentals, water rates or sewer rents, facilities and other governmental, municipal and
utility district charges or other similar taxes or assessments now or hereafter levied or assessed
or imposed against the Property, Maryland Guarantor or Operating Lessee with respect to the
Property or rents therefrom, or the Operating Lessee Pledged Collateral or that may become Liens
upon the Property, without deduction for any amounts reimbursable to Maryland Guarantor or
Operating Lessee by third parties.




          “Tax Reserve Exemption Period” has the meaning set forth in Section 3.4(d)(i).




          “Tenant” means any Person liable by contract or otherwise to pay monies (including a
percentage of gross income, revenue or profits) pursuant to a Lease.




          “Tenant Improvements” means, collectively, (i) tenant improvements to be undertaken
for any Tenant that are required to be completed by or on behalf of Borrower or Operating Lessee
pursuant to the terms of such Tenant’s Lease, and (ii) tenant improvements paid or reimbursed
through allowances to a Tenant pursuant to such Tenant’s Lease.




          “Tenant Notice” has the meaning set forth in Section 3.1(b).




          “Test Period” means each 12-month period ending on the last day of a Fiscal Quarter.




          “Trade Payables” means unsecured amounts payable by or on behalf of Maryland Guarantor
or Operating Lessee for or in respect of the operation of the Property in the ordinary course and
that would under GAAP and the Uniform System of Accounts be regarded as ordinary expenses,
including amounts payable to suppliers, vendors, contractors, mechanics, materialmen or other
Persons providing property or services to the Property, Maryland Guarantor or Operating Lessee and
the capitalized amount of any ordinary-course financing leases.






25









 








          “Transaction” means, collectively, the transactions contemplated and/or financed by
the Loan Documents.




          “Transfer” means the sale or other whole or partial conveyance of all or any portion
of the Property or any direct or indirect interest therein to a third party, including granting of
any purchase options, rights of first refusal, rights of first offer or similar rights in respect
of any portion of the Property or the subjecting of any portion of the Property to restrictions on
transfer; except that the conveyance of a space lease at the Property in accordance herewith shall
not constitute a Transfer.




          “Treasury Constant Yield” means the arithmetic mean of the rates published as
“Treasury Constant Maturities” as of 5:00 p.m., New York time, for the five Business Days preceding
the date on which acceleration has been declared or, as applicable, the date on which the Casualty
or Condemnation occurred, as shown on the USD screen of Reuters (or such other page as may replace
that page on that service, or such other page or replacement therefor on any successor service), or
if such service is not available, the Bloomberg Service (or any successor service), or if neither
Reuters nor the Bloomberg Service is available, under Section 504 in the weekly statistical release
designated H.15(519) (or any successor publication) published by the Board of Governors of the
Federal Reserve System, for “On the Run” U.S. Treasury obligations corresponding to the third
Payment Date prior to the scheduled Maturity Date. If no such maturity shall so exactly
correspond, yields for the two most closely corresponding published maturities shall be calculated
pursuant to the foregoing sentence and the Treasury Constant Yield shall be interpolated or
extrapolated (as applicable) from such yields on a straight-line basis (rounding, in the case of
relevant periods, to the nearest month).




          “Trigger Level” means Closing Date NOI times 85%.




          “Trigger Period” means any period (i) from (a) the conclusion of any Test Period
during which Net Operating Income is less than the Trigger Level, to (b) the conclusion of any Test
Period thereafter during which Net Operating Income is equal to or greater than the Trigger Level
or (ii) from (a) the date on which Lender determines, by written notice to Maryland Guarantor, that
Maryland Guarantor has failed to meet any applicable Capital Plan Target Completion Date and failed
to cure within 10 days after written notice from Lender, or that Maryland Guarantor has failed to
certify that such Capital Plan Target Completion Date has been met pursuant to Section
5.13(iv), to (b) the date on which the Capital Plan is completed, as determined by Lender in
its reasonable discretion. If any of the reports required under Sections 5.12,
5.13 or 5.14 are not delivered to Lender as and when required hereunder, a Trigger
Period shall (after notice and expiration of the cure periods as described in Section
5.14(b)) be deemed to have commenced and be ongoing, unless and until such reports are
delivered and they indicate that, in fact, no Trigger Period is ongoing.




          “Unfunded Obligations” means the items described in Schedule D.




          “Unfunded Obligations Account” has the meaning set forth in Section 3.8(a).




          “Unfunded Obligations Amount” means $0.






26









 








          “Uniform System of Accounts” means the “Uniform System of Accounts for the Lodging
Industry” (tenth edition) published by The American Hotel & Lodging Association Educational
Institute.




          “Use” means, with respect to any Hazardous Substance, the generation, manufacture,
processing, distribution, handling, possession, use, discharge, placement, treatment, disposal,
disposition, removal, abatement, recycling or storage of such Hazardous Substance or transportation
of such Hazardous Substance.




          “U.S. Person” means a United States person within the meaning of Section 7701(a)(30)
of the Code.




          “U.S. Tax” means any present or future tax, assessment or other charge or levy imposed
by or on behalf of the United States of America or any taxing authority thereof.




          “Waste” means any material abuse or destructive use (whether by action or inaction) of
the Property.




          “Yield Maintenance Premium” shall mean, with respect to any payment of principal (or
any portion thereof) during the continuance of an Event of Default or, pursuant to Section
5.16(f), following any Casualty or Condemnation, the product of:





     (A) a fraction whose numerator is the amount so paid and whose denominator is the
outstanding principal balance of the Loan before giving effect to such payment,
times




     (B) the excess of (1) the sum of the respective present values, computed as of the date
of such prepayment, of the remaining scheduled payments of principal and interest with
respect to the Loan (assuming no prepayments or acceleration of the Loan), determined by
discounting such payments to the date on which such payments are made at the Treasury
Constant Yield, over (2) the outstanding principal balance of the Loan on such date
immediately prior to such payment;


provided that, except in the case of a prepayment of principal (or any portion thereof) pursuant to
Section 5.16(f), the Yield Maintenance Premium shall not be less than 3% of the amount
prepaid.




          The calculation of the Yield Maintenance Premium shall be made by Lender and shall, absent
manifest error, be final, conclusive and binding upon all parties.




          (b) Rules of Construction. All references to sections, schedules and exhibits are to
sections, schedules and exhibits in or to this Agreement unless otherwise specified. Unless
otherwise specified: (i) all meanings attributed to defined terms in this Agreement shall be
equally applicable to both the singular and plural forms of the terms so defined, (ii) “including”
means “including, but not limited to”, (iii) “mortgage” means a mortgage, deed of trust, deed to
secure debt, indemnity deed of trust or similar instrument, as applicable, and “mortgagee” means
the secured party under a mortgage, deed of trust, deed to secure debt, indemnity deed of trust or
similar instrument and (iv) the words “hereof,” “herein,” “hereby,” “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision, article, section or other subdivision of this Agreement. All accounting





27









 







terms not specifically defined in this Agreement shall be construed in accordance with GAAP, as the
same may be modified in this Agreement. Each covenant of Maryland Guarantor contained herein with
respect to the operation and maintenance of or otherwise relating to the Property shall be
construed to mean that Maryland Guarantor shall comply or use commercially
reasonable efforts to cause the Operating Lessee to comply with such covenant; and any failure
by the Operating Lessee to comply therewith shall constitute a Default hereunder even though
Operating Lessee is not a party to this Agreement.




ARTICLE I




GENERAL TERMS



          Section 1.1. The Loan.




          (a) On the Closing Date, subject to the terms and conditions of this Agreement, Lender shall
make a loan to Borrower (the “Loan”) in an amount equal to the Loan Amount. The Loan shall
initially be represented by a single Note that shall bear interest as described in this Agreement
at a per annum rate equal to the Initial Interest Rate.




          (b) The Loan shall be secured by the Collateral pursuant to the Mortgage and the other Loan
Documents.




          (c) Lender shall have the right at any time, at Lender’s sole discretion, to replace the
initial Note with two or more replacement Notes, and the holder of each replacement Note shall
similarly have the right at any time, at such holder’s sole discretion, to replace its Note with
two or more replacement Notes. Each replacement Note shall be in the form of the Note so replaced,
but for its principal amount and Interest Rate. The principal amount of each Note shall be
determined by the applicable holder in its sole discretion, provided that the initial sum
of the principal amounts of the replacement Notes shall equal the then-outstanding principal
balance of the Notes that are so replaced. The Interest Rate of each replacement Note shall be
determined by the applicable holder in its sole discretion, provided that the initial
weighted average of such Interest Rates, weighted on the basis of the principal balances of the
respective Notes, shall initially equal the Interest Rate of the Note so replaced. Borrower shall
execute and return to Lender each such Note within two Business Days after Borrower’s receipt of an
execution copy thereof, and Borrower’s failure to do so within such time period shall, at Lender’s
election, constitute an immediate Event of Default hereunder. Borrower hereby authorizes and
appoints Lender as its attorney-in-fact to execute such replacement Notes on Borrower’s behalf
should Borrower fail to do so. The foregoing grant of authority is a power of attorney coupled
with an interest and such appointment shall be irrevocable for the term of this Agreement.
Borrower hereby ratifies all actions that such attorney shall lawfully take or cause to be taken in
accordance with this Section 1.1(c). If requested by Lender, Borrower shall deliver to
Lender, together with such replacement Notes, an opinion of counsel with respect to the due
authorization and enforceability of such replacement Notes and confirming that the delivery of such
replacement Notes does not alter the conclusions reached in the legal opinions delivered to Lender
at Closing.






28









 








          (d) To secure the full and timely payment of the Indebtedness, Borrower hereby grants to
Lender, its heirs, successors and assigns, a first-priority Lien on all Collateral, wherever
located, now or hereafter owned from time to time by Borrower, including, without limitation, all
“goods,” “consumer goods,” “equipment,” “inventory,” “fixtures,” “farm
products,” “accounts,” “deposit accounts,” “chattel paper,” “general intangibles,” “software,”
“instruments” and “proceeds” of any of the foregoing (all as defined under the Uniform Commercial
Code as in effect from time to time in the State of New York). Borrower hereby authorizes Lender to
file any appropriate financing statements with the Secretary of State of the State of Delaware or
any other applicable jurisdiction, which financing statements may include a description of the
collateral covered thereby as “all assets” or “all personal property” of the Borrower.




          Section 1.2. Interest and Principal.




          (a) On each Payment Date prior to the Initial Principal Payment Date, Borrower shall pay to
Lender interest on each Note for the applicable Interest Accrual Period at the applicable Interest
Rate (except that in each case, interest shall be payable on the Indebtedness, including due but
unpaid interest, at the Default Rate with respect to any portion of such Interest Accrual Period
falling during the continuance of an Event of Default, in which case the monthly payment shall be
increased by the amount of Default Interest accrued on the Notes during the applicable Interest
Accrual Period). On the Closing Date, Borrower shall pay interest from and including the Closing
Date through the end of the first Interest Accrual Period. Interest payable hereunder shall be
computed on the basis of a 360-day year and the actual number of days elapsed in the related
Interest Accrual Period.




          (b) Commencing with the Initial Principal Payment Date, and on each and every Payment Date
thereafter, Borrower shall pay to Lender a constant monthly payment of $199,406.96, which amount
shall be applied first toward the payment of interest on each Note for the applicable Interest
Accrual Period at the applicable Interest Rate (except that in each case, interest shall be payable
at the Default Rate with respect to any portion of such Interest Accrual Period falling during the
continuance of an Event of Default, in which case the monthly payment shall be increased by the
amount of Default Interest accrued on the Notes during the applicable Interest Accrual Period), and
the balance shall be applied toward the reduction of the outstanding principal balances of the
Notes pro rata in accordance with their then outstanding principal balances.




          (c) No prepayments of the Loan shall be permitted except for (i) prepayments resulting from
Casualty or Condemnation as described in Section 5.16(f), and (ii) a prepayment of the Loan
in whole (but not in part) during the Prepayment Period on not less than 15 days prior written
notice; provided that any prepayment hereunder shall be accompanied by all interest accrued
on the amount prepaid, plus the amount of interest that would have accrued thereon if the Loan had
remained outstanding through the end of the Interest Accrual Period in which such prepayment
occurs, plus all other amounts then due under the Loan Documents. Borrower’s notice of prepayment
shall create an obligation of Borrower to prepay the Loan as set forth therein, but may be
rescinded with five days’ written notice to Lender (subject to payment of any out-of-pocket costs
and expenses resulting from such rescission). In addition, Defeasance




29









 







shall be permitted after the
expiration of the Lockout Period as described in Section 2.1. The entire outstanding
principal balance of the Loan, together with interest through the end of the
applicable Interest Accrual Period and all other amounts then due under the Loan Documents,
shall be due and payable by Borrower to Lender on the Maturity Date.




          (d) If all or any portion of the Principal Indebtedness is paid to Lender following
acceleration of the Loan or as a result of a Casualty or Condemnation, Borrower shall pay to Lender
an amount equal to the applicable Yield Maintenance Premium. Amounts received in respect of the
Indebtedness during the continuance of an Event of Default shall be applied toward interest,
principal and other components of the Indebtedness (in such order as Lender shall determine) before
any such amounts are applied toward payment of Yield Maintenance Premiums, with the result that
Yield Maintenance Premiums shall accrue as the Principal Indebtedness is repaid but no amount
received from Borrower shall constitute payment of a Yield Maintenance Premium until the remainder
of the Indebtedness shall have been paid in full. Borrower acknowledges that (i) a prepayment will
cause damage to Lender; (ii) the Yield Maintenance Premium is intended to compensate Lender for the
loss of its investment and the expense incurred and time and effort associated with making the
Loan, which will not be fully repaid if the Loan is prepaid; (iii) it will be extremely difficult
and impractical to ascertain the extent of Lender’s damages caused by a prepayment after an
acceleration or any other prepayment not permitted by the Loan Documents; and (iv) the Yield
Maintenance Premium represents Lender’s and Borrower’s reasonable estimate of Lender’s damages from
the prepayment and is not a penalty.




          (e) Any payments of interest and/or principal not paid when due hereunder shall bear interest
at the applicable Default Rate and, in the case of all payments due hereunder other than the
repayment of the Principal Indebtedness on the Maturity Date or on any other earlier date as a
result of an acceleration of the Loan, when paid, shall be accompanied by a late fee in an amount
equal to the lesser of three percent of such unpaid sum and the maximum amount permitted by
applicable law in order to defray a portion of the expense incurred by Lender in handling and
processing such delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment.




          Section 1.3. Method and Place of Payment. Except as otherwise specifically provided
in this Agreement, all payments and prepayments under this Agreement and the Notes (including any
deposit into the Cash Management Account pursuant to Section 3.2(c)) shall be made to
Lender not later than 1:00 p.m., New York City time, on the date when due (except in the case of
the payment made on the Maturity Date, which shall be made not later than 2:00 p.m., New York City
time) and shall be made in lawful money of the United States of America by wire transfer in federal
or other immediately available funds to the account specified from time to time by Lender. Any
funds received by Lender after such time shall be deemed to have been paid on the next succeeding
Business Day. Lender shall notify Borrower in writing of any changes in the account to which
payments are to be made. If the amount received from Borrower (or from the Cash Management Account
pursuant to Section 3.2(b)) is less than the sum of all amounts then due and payable
hereunder, such amount shall be applied, at Lender’s sole discretion, either toward the components
of the Indebtedness (e.g., interest, principal and other amounts payable hereunder) and the
Notes, in such sequence as Lender shall elect in its sole discretion, or toward the payment of
Property expenses.





30












 





          Section 1.4. Taxes; Regulatory Change.




          (a) Obligor agrees to indemnify Lender against any present or future stamp, documentary or
other similar or related taxes or other similar or related charges now or hereafter imposed,
levied, collected, withheld or assessed by any United States Governmental Authority by reason of
the execution and delivery of the Loan Documents and any consents, waivers, amendments and
enforcement of rights under the Loan Documents.




          (b) If Obligor is required by law to withhold or deduct any amount from any payment hereunder
in respect of any U.S. Tax, Obligor shall withhold or deduct the appropriate amount, remit such
amount to the appropriate Governmental Authority and pay to each Person to whom there has been an
Assignment or Participation of a Loan and who is not a U.S. Person such additional amounts as are
necessary in order that the net payment of any amount due to such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Tax imposed with respect to such payment (or in
lieu thereof, payment of such U.S. Tax by such non-U.S. Person), will not be less than the amount
stated in this Agreement to be then due and payable; except that the foregoing obligation to pay
such additional amounts shall not apply (i) to any assignee that has not complied with the
obligations contained in Section 9.7(c), (ii) to any U.S. Taxes imposed solely by reason of
the failure by such Person (or, if such Person is not the beneficial owner of the relevant Loan,
such beneficial owner) to comply with applicable certification, information, documentation or other
reporting requirements concerning the nationality, residence, identity or connections with the
United States of America of such Person (or beneficial owner, as the case may be) if such
compliance is required by statute or regulation of the United States of America as a precondition
to relief or exemption from such U.S. Taxes; or (iii) with respect to any Person who is a fiduciary
or partnership or other than the sole beneficial owner of such payment, to any U.S. Tax imposed
with respect to payments made under any Note to a fiduciary or partnership to the extent that the
beneficial owner or member of the partnership would not have been entitled to the additional
amounts if such beneficial owner or member of the partnership had been the holder of the Note.




          (c) Within 30 days after paying any amount from which it is required by law to make any
deduction or withholding, and within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, Obligor shall deliver to such non-U.S.
Person satisfactory evidence of such deduction, withholding or payment (as the case may be).




          (d) If, as a result of any Regulatory Change, any reserve, special deposit or similar
requirements relating to any extensions of credit or other assets of, or any deposits with, Lender
or any holder of all or a portion of the Loan is imposed, modified or deemed applicable and the
result is to increase the cost to such Lender or such holder of making or holding the Loan, or to
reduce the amount receivable by Lender or such holder hereunder in respect of any portion of the
Loan by an amount deemed by Lender or such holder to be material (such increases in cost and
reductions in amounts receivable, “Increased Costs”), then Obligor agrees that it will pay to Lender or such holder upon Lender’s or such holder’s request such
additional amount or amounts as will compensate Lender and/or such holder for such Increased Costs
to the extent that such Increased Costs are reasonably allocable to the Loan. Lender will notify
Obligor in writing of any event occurring after the Closing Date that will entitle Lender or any
holder of






31









 







the Loan to compensation pursuant to this Section 1.4(d) as promptly as
practicable after it obtains knowledge thereof and determines to request such compensation and will
designate a different lending office if such designation will avoid the need for, or reduce the
amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise
disadvantageous to such Lender. If such Lender shall fail to notify Obligor of any such event
within 90 days following the end of the month during which such event occurred, then Obligor’s
liability for any amounts described in this Section incurred by such Lender as a result of such
event shall be limited to those attributable to the period occurring subsequent to the 90th day
prior to the date upon which such Lender actually notified Obligor of the occurrence of such event.
Notwithstanding the foregoing, in no event shall Obligor be required to compensate Lender or any
holder of the Loan for any portion of the income or franchise taxes of Lender or such holder,
whether or not attributable to payments made by Obligor. If Lender requests compensation under
this Section 1.4(d), Obligor may, by notice to Lender, require that such Lender furnish to
Obligor a statement setting forth in reasonable detail the basis for requesting such compensation
and the method for determining the amount thereof.




          Section 1.5. Release. Upon payment of the Indebtedness in full when permitted or
required hereunder, Lender shall execute instruments prepared by Borrower and reasonably
satisfactory to Lender, which, at Borrower’s election and at Borrower’s sole cost and expense: (a)
release and discharge all Liens on all Collateral securing payment of the Indebtedness (subject to
Borrower’s obligation to pay any associated fees and expenses), including all balances in the
Collateral Accounts; or (b) assign such Liens (and the Loan Documents) to a new lender designated
by Borrower. Any release or assignment provided by Lender pursuant to this Section 1.5
shall be without recourse, representation or warranty of any kind.




ARTICLE II




DEFEASANCE AND ASSUMPTION



          Section 2.1. Defeasance.




          (a) On any date after the expiration of the Lockout Period, provided no Event of Default is
then continuing and subject to the notice requirement described in Section 2.1(c), Obligor
may obtain the release of the Collateral (other than the Defeasance Collateral) from the Liens of
the Loan Documents upon the payment to Lender of all sums then due under the Loan Documents and the
delivery of the following to Lender:





     (i) Defeasance Collateral sufficient to provide payments on or prior to, and in any
event as close as possible to, all successive Payment Dates in an amount sufficient to make
all payments of interest and principal due hereunder, including the then outstanding
Principal Indebtedness, on the first Payment Date in the Prepayment Period or such
other Payment Date in the Prepayment Period as Obligor shall elect;




     (ii) written confirmation from an independent certified public accounting firm
reasonably satisfactory to Lender that such Defeasance Collateral is sufficient to provide
the payments described in clause (i) above;



32









 






     (iii) a security agreement, in form and substance reasonably satisfactory to Lender,
creating in favor of Lender a first priority perfected security interest in such Defeasance
Collateral (a “Defeasance Pledge Agreement”);




     (iv) an opinion of counsel for Obligor, in form and substance reasonably satisfactory
to Lender and delivered by counsel reasonably satisfactory to Lender, opining that (1) the
Defeasance Pledge Agreement has been duly authorized and is enforceable against Obligor in
accordance with its terms and that Lender has a perfected first priority security interest
in such Defeasance Collateral; and (2) if the Loan has been Securitized, the Defeasance,
including any assumption under Section 2.1(b), does not cause a tax to be imposed
on the Securitization Vehicle or, if the Securitization Vehicle is a REMIC, does not cause
any portion of the Loan to cease to be a “qualified mortgage” within the meaning of section
860G(a)(3) of the Code, and (3) that the Defeasance does not constitute a “significant
modification” of the Loan under Section 1001 of the Code;




     (v) if the Loan has been Securitized, the Rating Condition with respect to such
Defeasance shall have been satisfied;




     (vi) instruments reasonably satisfactory to Lender releasing and discharging or
assigning to a third party Lender’s Liens on the Collateral (other than the Defeasance
Collateral);




     (vii) such other customary certificates, opinions, documents or instruments as Lender
and the Rating Agencies may reasonably request; and




     (viii) reimbursement for any costs and expenses incurred in connection with this
Section 2.1 (including Rating Agency and Servicer fees and expenses, reasonable fees
and expenses of legal counsel and any revenue, documentary stamp or intangible taxes or any
other tax or charge due in connection herewith).


Lender shall reasonably cooperate with Maryland Guarantor to avoid the incurrence of mortgage
recording taxes in connection with a Defeasance at Maryland Guarantor’s sole cost and expense.




          (b) At the time of the Defeasance, the Loan shall be assumed by a bankruptcy-remote entity
established or designated by the initial Lender hereunder or its designee, to which Obligor shall
transfer all of the Defeasance Collateral (a “Defeasance Borrower”). The right of the
initial Lender hereunder or its designee to establish or designate a Defeasance Borrower shall be
retained by the initial Lender notwithstanding the sale or transfer of the Loan unless such
obligation is specifically assigned to and assumed by the transferee. Such Defeasance Borrower
shall execute and deliver to Lender an assumption agreement in form and substance reasonably
satisfactory to Lender, such Uniform Commercial Code financing statements as may be
reasonably requested by Lender and legal opinions of counsel reasonably acceptable to Lender
that are substantially equivalent to the opinions delivered to Lender on the Closing Date,
including new nonconsolidation opinions reasonably satisfactory to Lender and satisfactory to the
Rating Agencies; and Obligor and the Defeasance Borrower shall deliver such other documents,
certificates and legal opinions as Lender shall reasonably request.




33









 








          (c) Obligor must give Lender and each Rating Agency at least 30 days’ (and not more than 90
days’) prior written notice of any Defeasance under this Section 2.1, specifying the date
on which the Defeasance is to occur. If such Defeasance is not made on such date (x) Obligor’s
notice of Defeasance will be deemed rescinded, and (y) Obligor shall on such date pay to Lender all
reasonable losses, costs and expenses suffered by Lender as a consequence of such rescission.




          (d) Upon satisfaction of the requirements contained in this Section 2.1, Lender will
execute and deliver to Obligor such instruments, prepared by Obligor and approved by Lender, as
shall be necessary to release the Property from the Liens of the Loan Documents.




          Section 2.2. Assumption. The initial Obligor shall have the right to Transfer all of
the Collateral to a Qualified Successor Borrower that will, contemporaneously with such Transfer,
assume all of the obligations of Obligor hereunder and under the other Loan Documents (an
“Assumption”), provided no Event of Default or material monetary Default is then continuing
or would result therefrom and the following conditions are met to the reasonable satisfaction of
Lender:





     (i) such Qualified Successor Borrower shall have executed and delivered to Lender an
assumption agreement (including an assumption of the Mortgage in recordable form, if
requested by Lender), in form and substance reasonably acceptable to Lender, evidencing its
agreement to abide and be bound by the terms of the Loan Documents and containing
representations substantially equivalent to those contained in Article IV (recast,
as necessary, such that representations that specifically relate to Closing Date are remade
as of the date of such assumption), and such other representations (and evidence of the
accuracy of such representations) as the Servicer shall reasonably request;




     (ii) the obligations of Operating Lessee under the Operating Lease shall have been
assumed by a Qualified Successor Operating Lessee pursuant to an assumption agreement, in
form and substance reasonably acceptable to Lender, and such Qualified Successor Operating
Lessee shall have delivered to Lender all documents reasonably requested by Lender relating
to the existence of such Qualified Successor Operating Lessee and the due authorization of
such Qualified Operating Lessee to assume the obligations under the Operating Lease, each in
form and substance reasonably satisfactory to Lender, including a certified copy of the
applicable resolutions from all appropriate persons, certified copies of the organizational
documents of the Qualified Successor Operating Lessee, together with all amendments thereto,
and certificates of good standing or existence for the Qualified Successor Operating Lessee
issued as of a recent date by its state of organization and each other state where such
entity, by the nature of its business, is required to qualify or register;




     (iii) such Uniform Commercial Code financing statements as may be reasonably requested
by Lender shall be filed;




     (iv) a party satisfactory to Lender in its sole discretion assumes all obligations,
liabilities, guarantees and indemnities of Sponsor and any other guarantor under the Loan
Documents pursuant to documentation satisfactory to Lender (and upon such assumption



34









 




by such party, Sponsor and any other such guarantor shall be released from such obligations,
liabilities, guarantees and indemnities);





     (v) such Qualified Successor Borrower shall have delivered to Lender legal opinions of
counsel reasonably acceptable to Lender that are equivalent to the opinions delivered to
Lender on the Closing Date, including new nonconsolidation opinions that are reasonably
satisfactory to Lender and satisfactory to each of the Rating Agencies; and Obligor and the
Qualified Successor Borrower shall have delivered such other documents, certificates and
legal opinions, including relating to REMIC matters, as Lender shall reasonably request;



     (vi) such Qualified Successor Borrower shall have delivered to Lender all documents
reasonably requested by it relating to the existence of such Qualified Successor Borrower
and the due authorization of the Qualified Successor Borrower to assume the Loan and to
execute and deliver the documents described in this Section 2.2, each in form and
substance reasonably satisfactory to Lender, including a certified copy of the applicable
resolutions from all appropriate persons, certified copies of the organizational documents
of the Qualified Successor Borrower, together with all amendments thereto, and certificates
of good standing or existence for the Qualified Successor Borrower issued as of a recent
date by its state of organization and each other state where such entity, by the nature of
its business, is required to qualify or register;



     (vii)
the Qualified Title Insurance Policy shall have been properly endorsed to reflect
the Transfer of the Property to the Qualified Successor Borrower;



     (viii)
the Rating Condition shall have been satisfied with respect to the legal
structure of the Qualified Successor Borrower, the documentation of the Assumption and the
related legal opinions; and



     (ix)
Obligor shall have paid to Lender a nonrefundable assumption fee in an amount
equal to 1.0% of the Principal Indebtedness, and Obligor shall have reimbursed Lender for
its reasonable out-of-pocket costs and expenses incurred in connection with such assumption.



          Section 2.3. Transfers of Equity Interests in Obligor.




          (a) No direct or indirect equity interests in Obligor shall be conveyed or otherwise
transferred to any Person prior to the first anniversary of the Closing Date. From and after the
first anniversary of the Closing Date, provided that no Event of Default is continuing, transfers
(but not pledges, except as permitted under Section 7.1(f)) of direct and indirect equity
interests in Obligor shall be permitted upon 10 days advance written notice thereof to Lender,
provided that:




          (i) no such transfer shall result in a Change of Control;




          (ii) as a condition to any such transfer that results in Obligor ceasing to be
Controlled by Sponsor, and each subsequent transfer that again changes the identity of the
Qualified Equityholder that Controls Obligor, shall be conditioned upon payment to





35









 







Lender of a transfer fee in an amount equal to 1.0% of the Principal Indebtedness at the time of such
transfer;





     (iii) as a condition to any such transfer that results in any Person acquiring more
than 49% of the direct or indirect equity interest in Obligor or a Single-Purpose
Equityholder (even if not constituting a Change of Control), Obligor shall deliver to Lender
with respect to such Person a new non-consolidation opinion satisfactory to (A) prior to the
occurrence of any Securitization of the Loan, Lender (Lender’s approval of any such
non-consolidation opinion that is in substantially the form of the Nonconsolidation Opinion
not to be unreasonably withheld), and (B) at any time following any Securitization or series
of Securitizations of the Loan, each of the Rating Agencies rating such Securitization or
Securitizations; and




     (iv) Obligor shall have reimbursed Lender for its reasonable out-of-pocket costs and
expenses actually incurred in connection with any such transfer.



          (b) Notwithstanding Section 2.3(a) above, the following transactions shall not be
deemed prohibited transfers under this Agreement and shall not require the consent of Lender:





     (i) the issuance of additional shares or the transfer of existing shares of Sponsor on
any public exchange or the issuance of new units or transfers of existing units in
Pebblebrook Hotel, L.P. (the “Operating Partnership”), provided that it shall
continue to be Controlled by Sponsor; and




     (ii) any merger of Sponsor or the Operating Partnership or a sale of all or
substantially all of the assets of Sponsor or the Operating Partnership, provided that the
new direct or indirect owner of Obligor resulting from such transaction assumes all
obligations of Sponsor under the Loan Documents.



ARTICLE III




ACCOUNTS



          Section 3.1. Cash Management Account.




          (a) On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the
Cash Management Bank a cash management account into which income from the Property payable to
Maryland Guarantor or Operating Lessee will be deposited (the “Cash
Management Account”), which account shall be owned by Borrower but remain under the
sole and exclusive control (as defined in the New York Uniform Commercial Code) of Lender. As a
condition precedent to the closing of the Loan, Borrower shall cause the Cash Management Bank to
execute and deliver an agreement (as amended, restated, replaced, supplemented or otherwise
modified in accordance herewith, a “Cash Management Agreement”) that provides,
inter alia, that no party other than Lender and Servicer shall have the right to
withdraw funds from the Cash Management Account and that the Cash Management Bank shall comply with
all instructions and entitlement orders of Lender relating to the Cash Management Account and the
other Collateral Accounts, in each case, without the consent of Borrower, Operating Lessee or





36









 







any other Person. Notwithstanding any term herein or in the Cash Management Agreement, at any time that
(i) a Tax Reserve Exemption Period shall be continuing, to the extent provided in Section
3.4(c), the amount remitted to the Cash Management Account shall be net of any amounts needed
to pay Taxes as and when due and (ii) an Insurance Reserve Exemption Period shall be continuing, to
the extent provided in Section 3.4(c), the amount remitted to the Cash Management Account
shall be net of any amounts needed to pay insurance premiums as and when due. The fees and expenses
of the Cash Management Bank shall be paid by Borrower.




          (b) Maryland Guarantor shall cause Approved Property Manager to remit all amounts payable to
Maryland Guarantor or Operating Lessee (other than tenant security deposits required to be held in
escrow accounts) to the Cash Management Account or a Blocked Account immediately at such times as
Maryland Guarantor or Operating Lessee are entitled to receive such funds pursuant to the Approved
Management Agreement. Notwithstanding the foregoing, so long as no Trigger Period or Event of
Default is continuing, the amount remitted each month into the Cash Management Account shall not be
required to exceed the Operating Lease Monthly Rent. “Blocked Account” means an Eligible
Account maintained with a financial institution satisfactory to Lender that enters into a blocked
account agreement in form and substance satisfactory to Lender (as amended, restated, replaced,
supplemented or otherwise modified in accordance herewith, the “Blocked Account Agreement”)
satisfactory to Lender pursuant to which such financial institution will remit, at the end of each
Business Day, all amounts contained therein to an account specified by Lender (Lender hereby
agreeing to specify the Cash Management Account so long as no Event of Default has occurred and is
then continuing).




          (c) Lender shall have the right at any time, upon not less than 30 days’ prior written notice
to Obligor, to replace the Cash Management Bank with any Eligible Institution at which Eligible
Accounts may be maintained that will promptly execute and deliver to Lender a Cash Management
Agreement substantially identical to the Cash Management Agreement executed at Closing. In
addition, during the continuance of an Event of Default or if the Blocked Account Bank fails to
comply with the Blocked Account Agreement or ceases to be an Eligible Institution, Lender shall
have the right at any time, upon not less than 30 days’ prior written notice to Obligor, to replace
the Blocked Account Bank with any Eligible Institution at which Eligible Accounts may be maintained
that will promptly execute and deliver to Lender a Blocked Account Agreement satisfactory to
Lender.




          (d) Maryland Guarantor shall cause Operating Lessee to maintain at all times a Qualified
Operating Expense Account. Maryland Guarantor shall not permit any amounts unrelated to the
Property to be commingled with amounts on deposit in the Qualified Operating Expense Account and
shall cause all amounts payable with respect to Operating Expenses for the
Property (to the extent such Operating Expenses have not previously been paid by Approved
Property Manager in accordance with the Approved Management Agreement) to be paid from the
Qualified Operating Expense Account or the Cash Management Account (to the extent required or
permitted hereunder) and no other account. Maryland Guarantor shall, or shall cause Operating
Lessee to, deliver to Lender each month the monthly bank statement related to such Qualified
Operating Expense Account. Unless and until an Event of Default shall occur, Operating Lessee
shall have direct access to, and shall be permitted to make withdrawals and, except during the
continuance of a Trigger Period, equity distributions from, the Qualified Operating Expense
Account, without the consent of Lender. During the continuance of an Event






37









 







of Default, all amounts
contained in the Qualified Operating Expense Account shall be remitted to the Cash Management
Account.




          Section 3.2. Distributions from Cash Management Account.




          (a) The Cash Management Agreement shall provide that the Cash Management Bank shall remit to
the Qualified Operating Expense Account, at the end of each Business Day (or, at Borrower’s
election, on a less frequent basis), the amount, if any, by which amounts then contained in the
Cash Management Account exceed the aggregate amount required to be paid to or reserved with Lender
on the next Payment Date pursuant hereto (the “Minimum Balance”); provided,
however, that Lender shall terminate such remittances during the continuance of an Event of
Default or Trigger Period upon notice to the Cash Management Bank. Lender may notify the Cash
Management Bank at any time of any change in the Minimum Balance.




          (b) On each Payment Date, provided no Event of Default is continuing, Lender shall transfer
amounts from the Cash Management Account, to the extent available therein, to make the following
payments in the following order of priority:





     (i) to the Basic Carrying Costs Escrow Account, the amounts then required to be
deposited therein pursuant to Section 3.4;




     (ii) to Lender, the amount of all scheduled or delinquent interest and principal on the
Loan and all other amounts then due and payable under the Loan Documents (with any amounts
in respect of principal paid last);




     (iii) during the continuance of a Trigger Period, to the Qualified Operating Expense
Account, an amount equal to the Budgeted Operating Expenses for the month in which such
Payment Date occurs, to the extent such Budgeted Operating Expenses have not previously been
paid by Approved Property Manager in accordance with the Approved Management Agreement, as
certified by Maryland Guarantor in an Officer’s Certificate delivered to Lender at least
five Business Days prior to such payment date, provided that the amounts disbursed
to such account pursuant to this clause (iii) shall be used solely to pay Budgeted Operating
Expenses for such month (Obligor agreeing that, in the event that such Budgeted Operating
Expenses exceed the actual operating expenses for such month, such excess amounts shall be
remitted to the Cash Management Account prior to the next succeeding Payment Date);




     (iv) to the FF&E Reserve Account, the amounts, if any, required to be deposited
therein pursuant to Section 3.6;




     (v) during the continuance of a Trigger Period, all remaining amounts to the Excess
Cash Flow Reserve Account; and




     (vi) if no Trigger Period is continuing, all remaining amounts to the Qualified
Operating Expense Account.



38









 





          (c) If on any Payment Date the amount in the Cash Management Account shall be insufficient to
make all of the transfers described in Section 3.2(b)(i) through (iv), Borrower
shall deposit into the Cash Management Account on such Payment Date the amount of such deficiency.
If Borrower shall fail to make such deposit, the same shall constitute an Event of Default and, in
addition to all other rights and remedies provided for under the Loan Documents, Lender may
disburse and apply the amounts in the Collateral Accounts in accordance with Section
3.10(c).




          Section 3.3. Loss Proceeds Account.




          (a) On or prior to the Closing Date, Maryland Guarantor shall establish and thereafter
maintain with the Cash Management Bank an account for the purpose of depositing any Loss Proceeds
(the “Loss Proceeds Account”).




          (b) Provided no Event of Default is continuing, funds in the Loss Proceeds account shall be
applied in accordance with Section 5.16.




          Section 3.4. Basic Carrying Costs Escrow Account.




          (a) On or prior to the Closing Date, Maryland Guarantor shall establish and thereafter
maintain with the Cash Management Bank an account for the purpose of reserving amounts payable by
Maryland Guarantor in respect of Taxes and insurance premiums (the “Basic Carrying Costs Escrow
Account”).




          (b) On the Closing Date, the Basic Carrying Costs Escrow Account shall be funded in an amount
equal to the sum of (i) an amount sufficient to pay all Taxes by the 30th day prior to
the date they come due, assuming subsequent monthly fundings on Payment Dates of 1/12 of projected
annual Taxes, plus (ii) an amount sufficient to pay all insurance premiums by the
30th day prior to the date they come due, assuming subsequent monthly fundings on
Payment Dates of 1/12 of projected annual insurance premiums.




          (c) On each subsequent Payment Date, an additional deposit shall be made therein in an amount
equal to the sum of:





     (A) 1/12 of the Taxes that Lender reasonably estimates, based on information provided
by Maryland Guarantor, will be payable during the next ensuing 12 months, plus




     (B) 1/12 of the insurance premiums that Lender reasonably estimates, based on
information provided by Maryland Guarantor, will be payable during the next ensuing 12
months;


provided, however, that if at any time Lender reasonably determines that the amount
in the Basic Carrying Costs Escrow Account will not be sufficient to accumulate (upon payment of
subsequent monthly amounts in accordance with the provisions of this Agreement) the full amount of
all installments of Taxes and insurance premiums by the date on which such amounts come due, then
Lender shall notify Maryland Guarantor of such determination and Maryland




39









 





Guarantor shall increase
its monthly payments to the Basic Carrying Costs Escrow Account by the amount that Lender
reasonably estimates is sufficient to achieve such accumulation.




          (d) Notwithstanding the terms and provisions of the foregoing paragraphs of this Section
3.4:





     (i) Maryland Guarantor shall have no obligation to comply with subclause (i) of
Section 3.4(b) and Section 3.4(c)(A) for so long as (i) no Event of Default
or Trigger Period shall be continuing, (ii) no Taxes that are currently due and payable
remain unpaid; and (iii) Maryland Guarantor shall maintain in the Basic Carrying Costs
Escrow Account funds sufficient to pay all of the Taxes that Lender reasonably estimates,
based on information provided by Maryland Guarantor , will accrue or be payable during the
next ensuing six months (such estimate not to be reduced to the extent of any actual or
proposed tax appeal) (any such period, a “Tax Reserve Exemption Period”); and




     (ii) Maryland Guarantor shall have no obligation to comply with subclause (iii) of
Section 3.4(b) and Section 3.4(c)(C) for so long as (i) no Event of Default
or Trigger Period shall be continuing, (ii) no insurance premiums that are currently due and
payable remain unpaid; and (iii) Maryland Guarantor shall maintain in the Basic Carrying
Costs Escrow Account funds sufficient to pay all of the insurance premiums that Lender
reasonably estimates, based on information provided by Maryland Guarantor, will accrue or be
payable during the next ensuing six months (such estimate not to be reduced to the extent of
any actual or proposed tax appeal) (any such period, a “Insurance Reserve Exemption
Period”).



          (e) Maryland Guarantor shall provide Lender with copies of all tax, and insurance bills
relating to the Property promptly after Maryland Guarantor’s receipt thereof. During any Tax
Reserve Exemption Period, Maryland Guarantor shall make all Tax payments on or before the date due.
During any Insurance Reserve Exemption Period, Maryland Guarantor shall make all insurance premium
payments on or before the date due. At all other times, Lender will apply amounts in the Basic
Carrying Costs Escrow Account toward the purposes for which such amounts are deposited therein,
including, for the avoidance of doubt, Taxes due and payable. In connection with the making of any
payment from the Basic Carrying Costs Escrow Account, Lender may cause such payment to be made
according to any bill, statement or estimate procured from the appropriate public office or
insurance carrier, without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof unless
given written advance notice by Maryland Guarantor of such inaccuracy, invalidity or other contest.




          Section 3.5. [Intentionally Omitted].

Section 3.6. FF&E Reserve Account.




          (a) On or prior to the Closing Date, Maryland Guarantor shall establish and thereafter
maintain with the Cash Management Bank an account for the purpose of reserving amounts in respect
of FF&E expenditures (the “FF&E Reserve Account”).





40












 





          (b) On each Payment Date there shall be deposited into the FF&E Reserve Account an amount
equal to the Monthly FF&E Amount.




          (c) Upon the request of Maryland Guarantor at any time that no Event of Default is continuing
(but not more often than once per calendar month), Lender shall cause disbursements to Maryland
Guarantor from the FF&E Reserve Account to reimburse Maryland Guarantor for FF&E expenditures that
are consistent with the Approved Annual Budget; provided that:





     (i) Maryland Guarantor shall deliver to Lender invoices evidencing that the costs for
which such disbursements are requested are due and payable;




     (ii) Maryland Guarantor shall deliver to Lender an Officer’s Certificate confirming
that all such costs have been previously paid by Maryland Guarantor or will be paid from the
proceeds of the requested disbursement and that all conditions precedent to such
disbursement required by the Loan Documents have been satisfied;




     (iii) Lender may condition the making of a requested disbursement on (1) reasonable
evidence establishing that Maryland Guarantor has applied any amounts previously received by
it in accordance with this Section for the expenses to which specific draws made hereunder
relate, (2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and
waivers from any contractors, subcontractors and others with respect to such amounts; and




     (iv) No amounts reserved in the FF&E Reserve Account shall be used to pay expenses in
respect of the Capital Plan.



          (d) Notwithstanding the foregoing, Maryland Guarantor shall have no obligation to comply with
subclause (b) of this Section 3.6 for so long as (i) no Event of Default or Trigger Period
is continuing, (ii) Maryland Guarantor maintains with an Eligible Institution a separate account
(the “Maryland Guarantor FF&E Account”) owned by Maryland Guarantor but subject to a
Maryland Guarantor FF&E Account Control Agreement, into which Maryland Guarantor shall deposit, on
a monthly basis, an amount equal to or greater than the Monthly FF&E Amount and (iii) Maryland
Guarantor’s chief financial officer shall deliver to Lender within ten Business Days of the end of
each Fiscal Quarter, an Officer’s Certificate certifying as to the amount contained in the Maryland
Guarantor FF&E Account on the last day of such Fiscal Quarter and, upon Lender’s request, further
certifying that (1) no amount has been remitted from the Maryland Guarantor FF&E Account for any purpose other than the payment of FF&E
expenditures pursuant to the Approved Annual Budget and (2) no amounts reserved in the FF&E Reserve
Account have been used to pay expenses in respect of the Capital Plan. Upon the occurrence of a
Trigger Period or an Event of Default all amounts contained in the Maryland Guarantor FF&E Account
shall be remitted into the FF&E Reserve Account.




          Section 3.7. Deferred Maintenance and Environmental Escrow Account.




          (a) On or prior to the Closing Date, if the Deferred Maintenance Amount is greater than zero,
Maryland Guarantor shall establish and thereafter maintain with the Cash




41









 







Management Bank an account for the purpose of reserving amounts anticipated to be required to correct Deferred Maintenance
Conditions (the “Deferred Maintenance and Environmental Escrow Account”).




          (b) On the Closing Date, Borrower shall deposit into the Deferred Maintenance and
Environmental Escrow Account, from the proceeds of the Loan, an amount equal to the Deferred
Maintenance Amount.




          (c) Upon the request of Maryland Guarantor at any time that no Event of Default is continuing
(but not more often than once per calendar month), Lender shall cause disbursements to Maryland
Guarantor from the Deferred Maintenance and Environmental Escrow Account to reimburse Maryland
Guarantor for reasonable costs and expenses incurred in order to correct Deferred Maintenance
Conditions, provided that:





     (i) Maryland Guarantor shall deliver to Lender invoices evidencing that the costs for
which such disbursements are requested are due and payable;




     (ii) Maryland Guarantor shall deliver to Lender an Officer’s Certificate confirming
that all such costs have been previously paid by Maryland Guarantor or will be paid from the
proceeds of the requested disbursement and that all conditions precedent to such
disbursement required by the Loan Documents have been satisfied; and




     (iii) Lender may condition the making of a requested disbursement on (1) reasonable
evidence establishing that Borrower has applied any amounts previously received by it in
accordance with this Section for the expenses to which specific draws made hereunder relate,
(2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and waivers
from any contractors, subcontractors and others with respect to such amounts.




     (iv) No amounts reserved in the Deferred Maintenance and Environmental Escrow Account
shall be used to pay expenses in respect of the Capital Plan, except for any maintenance
requirements called for in the Capital Plan which, absent the Capital Plan, would ordinarily
be funded from the Deferred Maintenance and Environmental Escrow Account.



          (d) Upon substantial completion (as reasonably determined by Lender) of the portion of the
Deferred Maintenance Conditions identified on any line on Schedule C, and provided no Event
of Default is then continuing, the remainder of the portion of the Deferred Maintenance Reserve
Account held for such line item (as shown adjacent to such line item on Schedule C) shall
promptly be remitted to Maryland Guarantor. Upon the correcting of all Deferred Maintenance
Conditions, provided no Event of Default or Trigger Period is then continuing, any amounts then
remaining in the Deferred Maintenance Reserve Account shall promptly be remitted to Maryland
Guarantor and the Deferred Maintenance Account will no longer be maintained.




          Section 3.8. Unfunded Obligations Account.





42









 








          (a) On or prior to the Closing Date, if the Unfunded Obligations Amount is greater than zero,
Maryland Guarantor shall establish and thereafter maintain with the Cash Management Bank an account
for the purpose of reserving for Unfunded Obligations required to be funded by Maryland Guarantor
(the “Unfunded Obligations Account”).




          (b) On the Closing Date, Borrower shall deposit into the Unfunded Obligations Account, from
the proceeds of the Loan, an amount equal to the Unfunded Obligations Amount.




          (c) Maryland Guarantor shall perform its obligations in respect of the Unfunded Obligations
when and as due under the respective Leases or other applicable agreements. Upon the request of
Maryland Guarantor at any time that no Event of Default is continuing (but not more often than once
per calendar month), Lender shall cause disbursements to Maryland Guarantor from the Unfunded
Obligations Account to reimburse Maryland Guarantor for reasonable costs and expenses incurred in
the performance of Unfunded Obligations, provided that:





     (i) Maryland Guarantor shall deliver to Lender invoices evidencing that the costs for
which such disbursements are requested are due and payable;




     (ii) Maryland Guarantor shall deliver to Lender an Officer’s Certificate confirming
that all such costs have been previously paid by Maryland Guarantor or will be paid from the
proceeds of the requested disbursement and that all conditions precedent to such
disbursement required by the Loan Documents have been satisfied; and




     (iii) Lender may condition the making of a requested disbursement on (1) reasonable
evidence establishing that Maryland Guarantor has applied any amounts previously received by
it in accordance with this Section for the expenses to which specific draws made hereunder
relate, (2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and
waivers from any contractors, subcontractors and others with respect to such amounts.



          (d) Upon payment or performance, as applicable, of the Unfunded Obligations identified on any
line on Schedule D, and provided no Event of Default is then continuing, the remainder of the portion of the Unfunded Obligations Account held for such line item (as shown
adjacent to such line item on Schedule D) shall promptly be remitted to Maryland Guarantor,
except that any amounts in respect of free rent shall be remitted to the Cash Management Account.
Upon the payment or performance in full of all Unfunded Obligations, provided no Event of Default
or Trigger Period is then continuing, any amounts then remaining in the Unfunded Obligations
Account shall promptly be remitted to Maryland Guarantor and the Unfunded Obligations Account will
no longer be maintained.




          Section 3.9. Excess Cash Flow Reserve Account.




          (a) On or prior to the Closing Date, Borrower shall establish and thereafter maintain with the
Cash Management Bank an account for the deposit of amounts required to be




43









 







deposited therein in accordance with Section 3.2(b)(v) (the “Excess Cash Flow Reserve Account”).




          (b) Provided that no Event of Default is then continuing, Lender shall release to the Cash
Management Account all amounts then contained in the Excess Cash Flow Reserve Account on the first
Payment Date after Borrower delivers to Lender evidence reasonably satisfactory to Lender
establishing that no Trigger Period is then continuing. Such a release shall not preclude the
subsequent commencement of a Trigger Period and the deposit of amounts into the Excess Cash Flow
Reserve Account as set forth in Section 3.2(b)(v).




          Section 3.10. Account Collateral.




          (a) Obligor hereby grants a perfected first-priority security interest in favor of Lender in
and to the Account Collateral as security for the Indebtedness, together with all rights of a
secured party with respect thereto. Each Collateral Account shall be an Eligible Account under the
sole dominion and control of Lender and shall be in the name of Obligor, as pledgor, and Lender, as
pledgee. Obligor shall have no right to make withdrawals from any of the Collateral Accounts.
Funds in the Collateral Accounts shall not be commingled with any other monies at any time.
Obligor shall execute any additional documents that Lender in its reasonable discretion may require
and shall provide all other evidence reasonably requested by Lender to evidence or perfect its
first-priority security interest in the Account Collateral. Funds in the Collateral Account shall
be invested at Lender’s discretion only in Permitted Investments, which Permitted Investments shall
be credited to the related Collateral Account. All income and gains from the investment of funds
in the Collateral Accounts other than the Basic Carrying Costs Escrow Account shall be retained in
the Collateral Accounts from which they were derived. Unless otherwise required by applicable law,
all income and gains from the investment of funds in the Basic Carrying Costs Escrow Account shall
be for the account of Lender in consideration of its administration of such Collateral Account, and
Lender shall have the right at any time to cause the Cash Management Bank to remit such amounts to
Lender. After the Loan and all other Indebtedness have been paid in full, the Collateral Accounts
shall be closed and the balances therein, if any, shall be paid to Borrower.




          (b) The insufficiency of amounts contained in the Collateral Accounts shall not relieve
Obligor from its obligation to fulfill all covenants contained in the Loan Documents.




          (c) During the continuance of an Event of Default, Lender may, in its sole discretion, apply
funds in the Collateral Accounts, and funds resulting from the liquidation of Permitted Investments
contained in the Collateral Accounts, either toward the components of the Indebtedness
(e.g., interest, principal and other amounts payable hereunder), the Loan and the Notes in
such sequence as Lender shall elect in its sole discretion, and/or toward the payment of Property
expenses.




          Section 3.11. Bankruptcy. Borrower and Lender acknowledge and agree that upon the
filing of a bankruptcy petition by or against Obligor under the Bankruptcy Code, the Account
Collateral and the Revenues (whether then already in the Collateral Accounts, or then due or
becoming due thereafter) shall be deemed not to be property of Obligor’s bankruptcy estate within
the meaning of Section 541 of the Bankruptcy Code. If, however, a court of




44









 







competent jurisdiction determines that, notwithstanding the foregoing characterization of the Account Collateral and the
Revenues by Obligor and Lender, the Account Collateral and/or the Revenues do constitute property
of Obligor’s bankruptcy estate, then Obligor and Lender further acknowledge and agree that all such
Revenues, whether due and payable before or after the filing of the petition, are and shall be cash
collateral of Lender. Obligor acknowledges that Lender does not consent to Obligor’s use of such
cash collateral and that, in the event Lender elects (in its sole discretion) to give such consent,
such consent shall only be effective if given in writing signed by Lender. Except as provided in
the immediately preceding sentence, Obligor shall not have the right to use or apply or require the
use or application of such cash collateral (i) unless Obligor shall have received a court order
authorizing the use of the same, and (ii) Obligor shall have provided such adequate protection to
Lender as shall be required by the bankruptcy court in accordance with the Bankruptcy Code.




ARTICLE IV




REPRESENTATIONS



          Obligor represents to Lender solely with respect to itself, the Property and the Leases and
all other related agreements with respect to the Property and Borrower represents to Lender solely
with respect to itself that, as of the Closing Date, except as set forth in the Exception Report:




          Section 4.1. Organization.




          (a) Obligor and Operating Lessee each are duly organized, validly existing and in good
standing under the laws of the State of Delaware, and is in good standing in each other
jurisdiction where ownership of its properties or the conduct of its business requires it to be so,
and each has all power and authority under such laws and its organizational documents and all
material governmental licenses, authorizations, consents and approvals required to carry on its
business as now conducted.




          (b) Borrower and Operating Lessee each have no subsidiaries and do not own any equity interest
in any other Person. Maryland Guarantor does not own any equity interest in any Person.




          (c) The organizational chart contained in Exhibit A is true and correct as of the date
hereof.




          (d) The limited liability company interests of Obligor and Operating Lessee are not
represented by any limited liability company certificates, other certificates or other instruments
of any kind.




          Section 4.2. Authorization. Obligor has the power and authority to enter into this
Agreement and the other Loan Documents, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated by the Loan Documents and has by proper action duly
authorized the execution and delivery of the Loan Documents.




45









 








          Section 4.3. No Conflicts. Neither the execution and delivery of the Loan Documents,
nor the consummation of the transactions contemplated therein, nor performance of and compliance
with the terms and provisions thereof will (i) violate or conflict with any provision of its
formation and governance documents, (ii) violate any Legal Requirement, regulation (including
Regulation U, Regulation X or Regulation T), order, writ, judgment, injunction, decree or permit
applicable to it, (iii) violate or conflict with contractual provisions of, or cause an event of
default under, any indenture, loan agreement, mortgage, contract or other Material Agreement to
which Obligor, Operating Lessee or Sponsor is a party or by which Obligor, Operating Lessee or
Sponsor may be bound, or (iv) result in or require the creation of any Lien or other charge or
encumbrance upon or with respect to the Collateral in favor of any party other than Lender.




          Section 4.4. Consents. No consent, approval, authorization or order of, or
qualification with, any court or Governmental Authority is required in connection with the
execution, delivery or performance by Obligor of this Agreement or the other Loan Documents, except
for any of the foregoing that have already been obtained.




          Section 4.5. Enforceable Obligations. This Agreement and the other Loan Documents
have been duly executed and delivered by Obligor and constitute Obligor’s legal, valid and binding
obligations, enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency and similar laws of general applicability relating to or affecting creditors’ rights and
to general equity principles. The Loan Documents are not subject to any right of rescission,
set-off, counterclaim or defense by Obligor, including the defense of usury.




          Section 4.6. No Default. No Default or Event of Default will exist immediately
following the making of the Loan.




          Section 4.7. Payment of Taxes. Obligor and Operating Lessee each have filed, or
caused to be filed, all tax returns (federal,state, local and foreign) required to be filed and paid all amounts of taxes due (including
interest and penalties) except for taxes that are not yet delinquent and has paid all other taxes,
fees, assessments and other governmental charges (including mortgage recording taxes, documentary
stamp taxes and intangible taxes) owing by it necessary to preserve the Liens in favor of Lender.




          Section 4.8. Compliance with Law. Maryland Guarantor, Operating Lessee, the Property
and the use thereof comply in all material respects with all applicable Insurance Requirements and
Legal Requirements, including building and zoning ordinances and codes. The Property conforms to
current zoning requirements (including requirements relating to parking) and is neither an illegal
nor a legal nonconforming use. Neither Obligor nor Operating Lessee is in default or violation of
any order, writ, injunction, decree or demand of any Governmental Authority the violation of which
could adversely affect the Property or the condition (financial or otherwise) or business of
Obligor or Operating Lessee. There has not been committed by or on behalf of Maryland Guarantor,
Operating Lessee or, to the best of Maryland Guarantor’s knowledge, any other person in occupancy
of or involved with the operation or use of the Property, any act or omission affording any federal
Governmental Authority or any state or local Governmental Authority the right of forfeiture as
against the Property or any portion thereof or any monies paid in performance of its obligations
under any of





46









 







the Loan Documents. None of Maryland Guarantor, Operating Lessee or Sponsor has
purchased any portion of the Property with proceeds of any illegal activity.




          Section 4.9. ERISA. None of Obligor, Operating Lessee, or any ERISA Affiliate of
Obligor or Operating Lessee has incurred or could be subjected to any liability under Title IV or
Section 302 of ERISA or Section 412 of the Code or maintains or contributes to, or is or has been
required to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of
ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code. The consummation of
the transactions contemplated by this Agreement will not constitute or result in any non-exempt
prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or substantially
similar provisions under federal, state or local laws, rules or regulations.




          Section 4.10. Investment Company Act. Neither Obligor nor Operating Lessee is an
“investment company”, or a company “controlled” by an “investment company”, registered or required
to be registered under the Investment Company Act of 1940, as amended.




          Section 4.11. No Bankruptcy Filing. Neither Obligor nor Operating Lessee is
contemplating either the filing of a petition by it under any state or federal bankruptcy or
insolvency laws or the liquidation of all or a major portion of its assets or property. Neither
Obligor nor Operating Lessee has knowledge of any Person contemplating the filing of any such
petition against it. During the ten year period preceding the Closing Date, no petition in
bankruptcy has been filed by or against Obligor, Operating Lessee, any Single-Purpose Equityholder
or Sponsor, or any affiliate of any of the aforementioned Persons, or any person who owns or
controls, directly or indirectly, ten percent or more of the beneficial ownership interests of any
such Person.




          Section 4.12. Other Debt. Neither Obligor nor Operating Lessee has outstanding any
Debt other than Permitted Debt.




          Section 4.13. Litigation. There are no actions, suits, proceedings, arbitrations or
governmental investigations by or before any Governmental Authority or other court or agency now
pending, and to the best of Obligor’s knowledge there are no such actions, suits, proceedings,
arbitrations or governmental investigations threatened against or affecting Obligor, Operating
Lessee or the Collateral, in each case, except as listed in the Exception Report (and none of the
matters listed in the Exception Report, even if determined against Obligor, Operating Lessee or the
Collateral, could reasonably be expected to result in a Material Adverse Effect).




          Section 4.14. Leases; Material Agreements.




          (a) There are no Leases and neither Maryland Guarantor nor Operating Lessee is currently
engaged in negotiations with any prospective tenant to enter into a Major Lease.




          (b) There are no Material Agreements except as described in Schedule E. Obligor has
made available to Lender true and complete copies of all Material Agreements. Each Material
Agreement has been entered into at arm’s length in the ordinary course of business by or on behalf
of Maryland Guarantor or Operating Lessee. The Material Agreements




47









 







are in full force and effect and there are no defaults thereunder by Obligor, Operating Lessee, or to Obligor’s knowledge, any
other party thereto. Neither Maryland Guarantor nor Operating Lessee is in default in any material
respect in the performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it
is a party or by which it or the Property is bound (including, for the avoidance of doubt, the
Operating Lease).




          (c) Other than as disclosed on Schedule E, Operating Lessee is not a party to any
Material Agreements related to the Property.




          Section 4.15. Full and Accurate Disclosure. No statement of fact heretofore delivered
by Obligor, Sponsor or Operating Lessee to Lender in writing in respect of the Property, Obligor,
Sponsor or Operating Lessee contains any untrue statement of a material fact or omits to state any
material fact necessary to make statements contained therein not misleading unless subsequently
corrected. There is no fact, event or circumstance presently known to Obligor, Sponsor or
Operating Lessee that has not been disclosed to Lender that has had or could reasonably be expected
to result in a Material Adverse Effect.




          Section 4.16. Financial Condition. All financial data concerning Obligor, Operating
Lessee and the Property heretofore provided to Lender fairly presents in accordance with GAAP the
financial position of Obligor and Operating Lessee in all material respects, as of the date on
which it was made, and does not omit to state any fact necessary to make statements contained
herein or therein not misleading. Since the delivery of such data, except as otherwise disclosed
in writing to Lender,there have occurred no changes or circumstances that have had or are reasonably expected to
result in a Material Adverse Effect.




          Section 4.17. Single-Purpose Requirements.




          (a) Each of Obligor and Operating Lessee is now, and has always been since its formation, a
Single-Purpose Entity and has conducted its business in substantial compliance with the provisions
of its organizational documents. Neither Obligor nor Operating Lessee has ever (i) owned any
property other than the Property and/or related personal property (ii) engaged in any business,
except the ownership and/or operation of the or (iii) had any material contingent or actual
obligations or liabilities unrelated to the Property.




          (b) Obligor has provided Lender with true, correct and complete copies of (i) Obligor’s and
Operating Lessee’s current financial statements; and (ii) Obligor’s and Operating Lessee’s
respective current operating agreements, together with all amendments and modifications thereto.




          Section 4.18. Use of Loan Proceeds. No part of the proceeds of the Loan will be used
for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulations T,
U or X of the Board of Governors of the Federal Reserve System or for any other purpose that would
be inconsistent with such Regulations T, U or X or any other Regulations of such Board of
Governors, or for any purpose prohibited by Legal Requirements or by the terms and conditions of
the Loan Documents. The Loan is solely for the business purpose of Borrower or for distribution to
Borrower’s equityholders in accordance with Legal Requirements.




48









 








          Section 4.19. Not Foreign Person. Neither Obligor nor Operating Lessee is a “foreign
person” within the meaning of Section 1445(f)(3) of the Code.




          Section 4.20. Labor Matters. Neither Obligor nor Operating Lessee is a party to any
collective bargaining agreements.




          Section 4.21. Title. Maryland Guarantor owns good, marketable and insurable fee title
to the Property. Maryland Guarantor owns good and marketable title to the FF&E. Maryland Guarantor
and/or Operating Lessee own good and marketable title to all personal property related to the
Property (other than the FF&E, which is owned solely by Maryland Guarantor), to the Collateral
Accounts and to any other Collateral, in each case free and clear of all Liens whatsoever except
the Permitted Encumbrances. The Mortgage, when properly recorded in the appropriate records,
together with any Uniform Commercial Code financing statements required to be filed in connection
therewith, will create (i) a valid, perfected first priority Lien on the Property and the rents
therefrom, enforceable as such against creditors of and purchasers from Maryland Guarantor or
Operating Lessee and subject only to Permitted Encumbrances, and (ii) perfected Liens (pursuant to
the Uniform Commercial Code of the State of New York) in and to all personalty, all in accordance
with the terms thereof, in each case subject only to any applicable Permitted Encumbrances. The Permitted Encumbrances do not and will not materially and adversely affect
or interfere with the value, or current or contemplated use or operation, of the Property, or the
security intended to be provided by the Mortgage or Borrower’s ability to repay the Indebtedness in
accordance with the terms of the Loan Documents. Except as insured over by a Qualified Title
Insurance Policy, there are no claims for payment for work, labor or materials affecting the
Property that are or may become a Lien prior to, or of equal priority with, the Liens created by
the Loan Documents. No creditor of Maryland Guarantor (other than Lender) or Operating Lessee has
in its possession any goods that constitute or evidence the Collateral.




          Section 4.22. No Encroachments. Except as shown on the Qualified Survey, all of the
improvements on the Property lie wholly within the boundaries and building restriction lines of the
Property, and no improvements on adjoining property encroach upon the Property, and no easements or
other encumbrances upon the Property encroach upon any of the improvements, so as, in either case,
to adversely affect the value or marketability of the Property, except those that are insured
against by a Qualified Title Insurance Policy.




          Section 4.23. Physical Condition.




          (a) Except for matters set forth in the Engineering Reports, the Property (including
sidewalks, storm drainage system, roof, plumbing system, HVAC system, fire protection system,
electrical system, equipment, elevators, exterior sidings and doors, irrigation system and all
structural components) is in good condition, order and repair in all respects material to its use,
operation or value.




          (b) Maryland Guarantor is not aware of any material structural or other material defect or
damages in the Property, whether latent or otherwise.





49









 








          (c) Maryland Guarantor has not received and is not aware of any other party’s receipt of
notice from any insurance company or bonding company of any defects or inadequacies in the Property
that would, alone or in the aggregate, adversely affect in any material respect 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.




          Section 4.24. Fraudulent Conveyance. Obligor has not entered into the Transaction or
any of the Loan Documents with the actual intent to hinder, delay or defraud any creditor. Obligor
has received reasonably equivalent value in exchange for its obligations under the Loan Documents.
On the Closing Date, the fair salable value of Obligor’s aggregate assets is and will, immediately
following the making of the Loan and the use and disbursement of the proceeds thereof, be greater
than Obligor’s probable aggregate liabilities (including subordinated, unliquidated, disputed and
Contingent Obligations and, in the case of Borrower, taking into account Borrower’s right of
contribution from Maryland Guarantor, as set forth in Section 9.31of this Agreement). Obligor’s
aggregate assets do not and, immediately following the making of the Loan and the use and
disbursement of the proceeds thereof will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted. Obligor
does not intend to, and does not believe that it will, incur debts and liabilities (including
Contingent Obligations and other commitments) beyond its ability to pay such debts as they mature
(taking into account the timing and amounts to be payable on or in respect of obligations of
Obligor).




          Section 4.25. Management; Franchise. Except for any Approved Management Agreement, no
property management agreements are in effect with respect to the Property. The Approved Management
Agreement is in full force and effect and there is no event of default thereunder by any party
thereto and no event has occurred that, with the passage of time and/or the giving of notice would
constitute a default thereunder. Except for any Approved Franchise Agreement, no franchise license
agreements are in effect with respect to the Property. The Approved Franchise Agreement is in full
force and effect and there is no event of default thereunder by any party thereto and no event has
occurred that, with the passage of time and/or the giving of notice would constitute a default
thereunder.




          Section 4.26. Condemnation. No Condemnation has been commenced or, to Maryland
Guarantor’s knowledge, is contemplated with respect to all or any portion of the Property or for
the relocation of roadways providing access to the Property.




          Section 4.27. Utilities and Public Access. The Property has adequate rights of access
to dedicated public ways (and makes no material use of any means of access or egress that is not
pursuant to such dedicated public ways or recorded, irrevocable rights-of-way or easements) and is
adequately served by all public utilities necessary to the continued use and enjoyment of the
Property as presently used and enjoyed.




          Section 4.28. Environmental Matters. Except as disclosed in the Environmental
Reports:





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     (i) The Property is in compliance in all material respects with all Environmental Laws
applicable to the Property (which compliance includes, but is not limited to, the possession
of, and compliance with, all environmental, health and safety permits, approvals, licenses,
registrations and other governmental authorizations required in connection with the
ownership and operation of the Property under all Environmental Laws).




     (ii) No Environmental Claim is pending with respect to the Property, nor, to Maryland
Guarantor’s knowledge, is any threatened, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other administrative or
judicial requirements outstanding under any Environmental Law with respect to Maryland
Guarantor, Operating Lessee or the Property.




     (iii) Without limiting the generality of the foregoing, there is not present at, on, in
or under the Property, any Hazardous Substances, PCB-containing equipment, asbestos or
asbestos containing materials, underground storage tanks or surface impoundments for any
Hazardous Substance, lead in drinking water (except in concentrations that comply with all
Environmental Laws), or lead-based paint.




     (iv) There have not been and are no past, present or threatened Releases of any
Hazardous Substance from or at the Property that are reasonably likely to form the basis of
any Environmental Claim, and, to Maryland Guarantor’s knowledge, there is no threat of any
Release of any Hazardous Substance migrating to the Property.




     (v) No Liens are presently recorded with the appropriate land records under or pursuant
to any Environmental Law with respect to the Property and, to Maryland Guarantor’s
knowledge, no Governmental Authority has been taking any action to subject the Property to
Liens under any Environmental Law.




     (vi) There have been no material environmental investigations, studies, audits, reviews
or other analyses conducted by or that are in the possession of Maryland Guarantor or
Operating Lessee in relation to the Property that have not been made available to Lender.



          Section 4.29. Assessments. There are no pending or, to Maryland Guarantor’s
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. No extension of time for assessment or payment of Taxes is in
effect.




          Section 4.30. No Joint Assessment. Maryland Guarantor has not suffered, permitted or
initiated the joint assessment of the Property (i) with any other real property constituting a
separate tax lot, or (ii) with any personal property, or any other procedure whereby the Lien of
any Taxes that may be levied against such other real property or personal property shall be
assessed or levied or charged to the Property as a single Lien.







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          Section 4.31. Separate Lots. No portion of the Property is part of a tax lot that
also includes any real property that is not Collateral.




          Section 4.32. Permits; Certificate of Occupancy. Maryland Guarantor, Operating Lessee
and/or Approved Property Manager have obtained all Permits necessary for the present and
contemplated use and operation of the Property. The uses being made of the Property are in
conformity in all material respects with the certificate of occupancy and/or Permits for the
Property and any other restrictions, covenants or conditions affecting the Property.




          Section 4.33. Flood Zone. None of the improvements on the Property is located in an
area identified by the Federal Emergency Management Agency or the Federal Insurance Administration
as a “100 year flood plain” or as having special flood hazards (including Zones A and V), or, to
the extent that any portion of the Property is located in such an area, the Property is covered by
flood insurance meeting the requirements set forth in Section 5.15(a)(ii).




          Section 4.34. Security Deposits. Maryland Guarantor and Operating Lessee are in
compliance in all material respects with all Legal Requirements relating to security deposits.




          Section 4.35. Acquisition Documents. Maryland Guarantor has delivered to Lender true
and complete copies of all material agreements and instruments under which Maryland Guarantor,
Operating Lessee or any of their affiliates or the seller of the Property have remaining rights or
obligations in respect of Maryland Guarantor’s acquisition of the Property.




          Section 4.36. Insurance. Maryland Guarantor or Operating Lessee has obtained, or
caused to be obtained, insurance policies reflecting the insurance coverages, amounts and other
requirements set forth in this Agreement. All premiums on such insurance policies required to be
paid as of the Closing Date have been paid for the current policy period. No Person, including
Maryland Guarantor and Operating Lessee, has done, by act or omission, anything that would impair
the coverage of any such policy.




          Section 4.37. No Dealings. Maryland Guarantor, Operating Lessee and the Sponsor are
not aware of any unlawful influence on the assessed value of the Property.




          Section 4.38. Estoppel Certificates. Maryland Guarantor has delivered to Lender true
and complete copies of (a) the form(s) of estoppel certificate heretofore sent by Maryland
Guarantor, Operating Lessee or any of their affiliates to every Tenant at the Property, and (b)
each estoppel certificate received back from any such Tenant prior to the Closing Date.




          Section 4.39. Compliance with Anti-Terrorism, Embargo, Sanctions and Anti-Money Laundering
Laws. (a) None of the funds or other assets of any Obligor, Operating Lessee, any
Single-Purpose Equityholder or Sponsor constitute property of, or are beneficially owned, directly
or indirectly, by any person, entity or government subject to trade restrictions under federal law,
including the International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The
Trading with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or
regulations promulgated thereunder, with the result that (i) the investment in any of Obligor,
Operating Lessee, any Single-Purpose Equityholder or Sponsor, as applicable (whether





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directly or indirectly), is prohibited by law or (ii) the Loan is in violation of law (any such person, entity
or government, an “Embargoed Person”); (b) no Embargoed Person has any interest of any
nature whatsoever in any of Obligor, Operating Lessee, any Single-Purpose Equityholder or Sponsor,
as applicable (whether directly or indirectly), with the result that (i) the investment in any of
Obligor, Operating Lessee, any Single-Purpose Equityholder or Sponsor, as applicable (whether
directly or indirectly) is prohibited by law or (ii) the Loan is in violation of law, (c) none of
the funds of any of Obligor, Operating Lessee, any Single-Purpose Equityholder or Sponsor, as
applicable, have been derived from any unlawful activity with the result that (i) the investment in
any of Obligor, Operating Lessee, any Single-Purpose Equityholder or Sponsor, as applicable
(whether directly or indirectly) is prohibited by law or (ii) the Loan is in violation of law, (d)
to the best of Obligor’s knowledge, no Tenant at the Property is identified on the OFAC List and
(e) Obligor, Operating Lessee, any Single-Purpose Equityholder and Sponsor are in material
compliance with the PATRIOT Act. Obligor has implemented procedures, and will consistently apply
those procedures throughout the term of the Loan, to ensure the foregoing representations and
warranties remain true and correct during the term of the Loan. Notwithstanding Section
4.42 to the contrary, the representations and warranties contained in this Section 4.39
shall survive in perpetuity.




          Section 4.40. Survival. Obligor agrees that all of the representations of Obligor set
forth in this Agreement and in the other Loan Documents shall survive for so long as any portion of
the Indebtedness is outstanding. All representations, covenants and agreements made by Obligor in
this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender
notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf. On the
date of any Securitization, on not less than three days’ prior written notice, Obligor shall
deliver to Lender a certification (x) confirming that all of the representations contained in this
Agreement are true and correct as of the date of such Securitization, or (y) otherwise specifying
any changes in or qualifications to such representations as of such date as may be necessary to
make such representations consistent with the facts as they exist on such date.




          Section 4.41. Capital Plan. As of the Closing Date, $2,135,986 has been expended
towards the Capital Plan.




          Section 4.42. ADA Compliance. The Property is in compliance with Americans with
Disabilities Act of 1990 with respect to the required number of accessible bathrooms




ARTICLE V




AFFIRMATIVE COVENANTS



          Section 5.1. Existence. Obligor, Operating Lessee and if applicable, any
Single-Purpose Equityholder shall do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its existence and all rights, licenses, Permits, franchises and
other agreements necessary for the continued use and operation of its business. Obligor, Operating
Lessee and, if applicable, each Single-Purpose Equityholder shall deliver to Lender a copy of each
amendment or other modification to any of its organizational documents promptly after the execution
thereof.





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          Section 5.2. Maintenance of Property.




          (a) Maryland Guarantor shall cause the Property to be maintained in good and safe working
order and repair, reasonable wear and tear excepted, and in keeping with the condition and repair
of properties of a similar use, value, age, nature and construction. Maryland Guarantor shall not,
and shall not cause or permit Operating Lessee or Approved Property Manager to, use, maintain or
operate the Property in any manner that constitutes a public or private nuisance or that makes
void, voidable, or cancelable, or increases the premium of, any insurance then in force with
respect thereto. Subject to Section 6.13, without the prior written consent of Lender, no
improvements or equipment located at or on the Property shall be removed, demolished or materially
altered (except for replacement of equipment in the ordinary course of Maryland Guarantor’s or
Operating Lessee’s business with items of the same utility and of equal or greater value and sales
of obsolete equipment no longer needed for the operation of the Property). Subject to Section
6.13, Maryland Guarantor shall from time to time make, or cause to be made, all reasonably
necessary and desirable repairs, renewals, replacements, betterments and improvements to the
Property. Maryland Guarantor shall not, and shall not cause or permit Operating Lessee or Approved
Property Manager to, make any change in the use of the Property that would materially increase the
risk of fire or other hazard arising out of the operation of the Property, or do or permit to be
done thereon anything that may in any way impair the value of the Property in any material respect
or the Lien of the Mortgage or otherwise cause or reasonably be expected to result in a Material
Adverse Effect. Maryland Guarantor shall not install or permit to be installed on the Property any
underground storage tank. Maryland Guarantor shall not, without the prior written consent of
Lender, permit any drilling or exploration for or extraction, removal, or production of any
minerals from the surface or the subsurface of the Property, regardless of the depth thereof or the
method of mining or extraction thereof.




          (b) Maryland Guarantor shall remediate the Deferred Maintenance Conditions within 12 months
following the Closing Date, subject to Force Majeure, and upon request from Lender after the
expiration of such period shall deliver to Lender an Officer’s Certificate confirming that such
remediation has been completed and that all associated expenses have been paid.




          Section 5.3. Compliance with Legal Requirements. Maryland Guarantor shall, and shall
cause Operating Lessee to, comply with, and shall cause the Property to comply with and be
operated, maintained, repaired and improved in compliance with, all Legal Requirements, Insurance
Requirements and all material contractual obligations by which Maryland Guarantor is legally bound.




          Section 5.4. Impositions and Other Claims. Maryland Guarantor shall pay and discharge
all taxes, assessments and governmental charges levied upon it, its income and its assets as and
when such taxes, assessments and charges are due and payable, as well as all lawful claims for
labor, materials and supplies or otherwise, subject to any rights to contest contained in the
definition of Permitted Encumbrances. Maryland Guarantor shall file all federal, state and local
tax returns and other reports that it is required by law to file. If any law or regulation
applicable to Lender, any Note, any of the Collateral or the Mortgage is enacted that deducts from
the value of property for the purpose of taxation any Lien thereon, or imposes upon Lender




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the payment of the whole or any portion of the taxes or assessments or charges or Liens required by
this Agreement to be paid by Maryland Guarantor, or changes in any way the laws or regulations
relating to the taxation of mortgages or security agreements or debts secured by mortgages or
security agreements or the interest of the mortgagee or secured party in the property covered
thereby, or the manner of collection of such taxes, so as to affect the Mortgage, the Indebtedness
or Lender, then Maryland Guarantor, upon demand by Lender, shall pay such taxes, assessments,
charges or Liens, or reimburse Lender for any amounts paid by Lender. If in the opinion of
Lender’s counsel it might be unlawful to require Maryland Guarantor to make such payment or the
making of such payment might result in the imposition of interest beyond the maximum amount
permitted by applicable Law, Lender may elect to declare all of the Indebtedness to be due and
payable 90 days from the giving of written notice by Lender to Obligor.




          Section 5.5. Access to Property. Maryland Guarantor shall, and shall cause Operating
Lessee and Approved Property Manager to permit agents, representatives and employees of Lender and
the Servicer to enter and inspect the Property or any portion thereof, and/or inspect, examine,
audit and copy the books and records of Maryland Guarantor, Operating Lessee and Approved Property
Manager (including all recorded data of any kind or nature, regardless of the medium of recording),
at such reasonable times as may be requested by Lender upon reasonable advance notice ( all subject
to the terms and conditions of the Approved Management Agreement). The cost of such inspections,
examinations, copying or audits shall be borne by Maryland Guarantor, including the cost of all
follow up or additional investigations, audits or inquiries deemed reasonably necessary by Lender
(i) if Lender shall determine that an Event of Default exists or (ii) such inspections,
examinations, copying or audits are conducted by Lender in connection with its verification of
completion of any Capital Plan Component pursuant to Section 5.22(b). The cost of such
inspections, examinations, audits and copying, if not paid for by Maryland Guarantor following
demand, may be added to the Indebtedness and shall bear interest thereafter until paid at the
Default Rate. If Maryland Guarantor prohibits, bars or fails to permit agents, representatives and
employees of Lender and Servicer from entering and inspecting the Property or from inspecting,
examining, auditing and copying the books and records of Maryland Guarantor, Operating Lessee and
Approved Property Manager, as required by this Section, for more than five days after a written request is made by Lender to do so, Maryland Guarantor
agrees to pay Lender on demand the sum of $1,000.00 for each day after such five-day period that
Maryland Guarantor so prohibits or bars such inspection, and such sum or sums shall be part of the
Indebtedness. Notwithstanding any of Lender’s or Servicer’s rights in this Section, in no event
shall Lender or Servicer have any right to enter or inspect the Property or inspect, examine, audit
or copy the books and records of Approved Property Manager that is greater than or inconsistent
with the access afforded to Maryland Guarantor and Operating Lessee under the terms of the Approved
Management Agreement.




          Section 5.6. Cooperate in Legal Proceedings. Except with respect to any claim by
Obligor against Lender, Obligor shall, and shall cause Operating Lessee to, cooperate fully with
Lender with respect to any proceedings before any Governmental Authority that may in any way affect
the rights of Lender hereunder or under any of the Loan Documents and, in connection therewith,
Lender may, at its election, participate or designate a representative to participate in any such
proceedings.




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          Section 5.7. Leases.




          (a) Maryland Guarantor shall furnish Lender with executed copies of all Leases, together with
a detailed breakdown of income and cost associated therewith. All new Leases and renewals or
amendments of Leases must (i) be entered into on an arms-length basis with Tenants that are not
affiliates of Maryland Guarantor and whose identity and creditworthiness is appropriate for tenancy
in property of comparable quality, (ii) provide for rental rates and other economic terms that,
taken as a whole, are at least equivalent to then-existing market rates, based on the applicable
market, and otherwise contain terms and conditions that are commercially reasonable, (iii) have an
initial term of not more than 10 years, (iv) not have or reasonably be expected to result in a
Material Adverse Effect, (v) be expressly subject and subordinate to the Mortgage and contain
provisions for the agreement by the Tenant thereunder to attorn to Lender and any purchaser at a
foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to
the Property by any purchaser at a foreclosure sale and (vi) require the Tenant thereunder to
execute and deliver to Maryland Guarantor an estoppel certificate addressing the issues set forth
in Section 9.16(b) of this Agreement (in each case, unless Lender consents to such Lease in
its sole discretion).




          (b) All new Leases that are Major Leases, and all terminations, renewals and amendments of
Major Leases, and any surrender of rights under any Major Lease, shall be subject to the prior
written consent of Lender. If Lender shall fail to respond to Maryland Guarantor’s request for such
consent within five Business Days of Lender’s receipt thereof, Maryland Guarantor may deliver to
Lender a second request for consent stating in bold and capitalized type that “LENDER’S FAILURE TO
RESPOND TO THE ENCLOSED REQUEST WITHIN TEN BUSINESS DAYS SHALL BE DEEMED LENDER’S APPROVAL.” In
the event Lender fails to approve or disapprove such request within ten Business Days of Lender’s
receipt of such second request, such request shall be deemed approved.




          (c) Maryland Guarantor shall, and shall cause Operating Lessee to, (i) observe and punctually
perform all the material obligations imposed upon the lessor under the Leases; (ii) enforce all of the material terms, covenants and conditions contained in the Leases on the
part of the lessee thereunder to be observed or performed, short of termination thereof, except
that the lessor may terminate any Lease following a material default thereunder by the respective
Tenant; (iii) not collect any of the rents thereunder more than one month in advance; (iv) not
execute any assignment of lessor’s interest in the Leases or associated rents other than the
assignment of rents and leases under the Mortgage; (v) not cancel or terminate any guarantee of any
of the Major Leases without the prior written consent of Lender; and (vi) not permit any subletting
of any space covered by a Lease or an assignment of the Tenant’s rights under a Lease, except in
strict accordance with the terms of such Lease. Maryland Guarantor shall, or shall cause Operating
Lessee to, deliver to each new Tenant a Tenant Notice upon execution of such Tenant’s Lease, and
promptly thereafter deliver to Lender a copy thereof and evidence of such Tenant’s receipt thereof.




          (d) Security deposits of Tenants under all Leases, whether held in cash or any other form,
shall not be commingled with any other funds of Maryland Guarantor or Operating Lessee and, if
cash, shall be deposited by Maryland Guarantor or Operating Lessee in an account at such commercial
or savings bank as may be reasonably satisfactory to Lender, which account





56









 







shall be pledged to Lender. Maryland Guarantor shall, or shall cause Operating Lessee to, maintain books and records
of sufficient detail to identify all security deposits of Tenants separate and apart from any other
payments received from Tenants. Any bond or other instrument that Maryland Guarantor or Operating
Lessee is permitted to hold in lieu of cash security deposits under any applicable Legal
Requirements shall be maintained in full force and effect unless replaced by cash deposits as
described above, shall be issued by an institution reasonably satisfactory to Lender, shall (if not
prohibited by any Legal Requirements) name Lender as payee or mortgagee thereunder (or at Lender’s
option, be fully assignable to Lender) or may name Maryland Guarantor or Operating Lessee as payee
thereunder so long as such bond or other instrument is pledged to Lender as security for the
Indebtedness and shall, in all respects, comply with any applicable Legal Requirements and
otherwise be reasonably satisfactory to Lender. Maryland Guarantor shall, upon Lender’s request,
provide Lender with evidence reasonably satisfactory to Lender of Maryland Guarantor’s and
Operating Lessee’s compliance with the foregoing. During the continuance of any Trigger Period or
Event of Default, Maryland Guarantor shall, upon Lender’s request, cause to be deposited with
Lender in an Eligible Account pledged to Lender an amount equal to the aggregate security deposits
of the Tenants (and any interest theretofore earned on such security deposits and actually received
by Maryland Guarantor or Operating Lessee) that Maryland Guarantor and Operating Lessee had not
returned to the applicable Tenants or applied in accordance with the terms of the applicable Lease.




          (e) Maryland Guarantor shall cause to be promptly delivered to Lender a copy of each written
notice from a Tenant under any Major Lease claiming that Maryland Guarantor or Operating Lessee is
in default in the performance or observance of any of the material terms, covenants or conditions
thereof. Maryland Guarantor shall cause each Major Lease executed after the Closing Date to which
Maryland Guarantor or Operating Lessee is a party to provide that any Tenant delivering any such
notice shall send a copy of such notice directly to Lender.




          Section 5.8. Plan Assets, etc. Obligor will do, or cause to be done, all things
necessary to ensure that neither Obligor nor Operating Lessee will be deemed to hold Plan Assets at
any time.




          Section 5.9. Further Assurances. Obligor shall (and, as applicable, shall cause
Operating Lessee to), at Obligor’s sole cost and expense, from time to time as reasonably requested
by Lender, execute, acknowledge, record, register, file and/or deliver to Lender such other
instruments, agreements, certificates and documents (including Uniform Commercial Code financing
statements and amended or replacement mortgages) as Lender may reasonably request to evidence,
confirm, perfect and maintain the Liens securing or intended to secure the obligations of Obligor
and the rights of Lender under the Loan Documents or to facilitate a replacement of the Cash
Management Bank pursuant to Section 3.1(c) or a bifurcation of the Notes pursuant to Sections
1.1(c) and/or 9.7(b) or a restructuring of the Loan pursuant to the Cooperation
Agreement, in each case if requested by Lender, and do and execute all such further lawful and
reasonable acts, conveyances and assurances for the better and more effective carrying out of the
intents and purposes of this Agreement and the other Loan Documents as Lender shall reasonably
request from time to time. Upon foreclosure, the appointment of a receiver or any other relevant
action, Maryland Guarantor shall (and, as applicable, shall cause Operating Lessee or Approved
Property Manager to), at Maryland Guarantor’s sole cost and




57









 







expense, cooperate fully and completely to effect the assignment or transfer of any license, permit, agreement or any other right necessary
or useful to the operation of the Collateral. Obligor hereby authorizes and appoints Lender as its
attorney-in-fact to execute, acknowledge, record, register and/or file such instruments,
agreements, certificates and documents, and to do and execute such acts, conveyances and
assurances, should Obligor fail to do so itself in violation of this Agreement or the other Loan
Documents following written request from Lender, in each case without the signature of Obligor.
The foregoing grant of authority is a power of attorney coupled with an interest and such
appointment shall be irrevocable for the term of this Agreement. Obligor hereby ratifies all
actions that such attorney shall lawfully take or cause to be taken in accordance with this
Section 5.9.




          Section 5.10. Management of Collateral.




          (a) The Property shall be managed at all times by an Approved Property Manager pursuant to an
Approved Management Agreement. Pursuant to the Subordination of Property Management Agreement,
Approved Property Manager shall agree that the Approved Management Agreement and the incentive fee
payable thereunder are subject and subordinate to the Indebtedness. Maryland Guarantor may from
time to time, with Lender’s consent (subject to the terms of this Section 5.10(a)), appoint
an Approved Property Manager to manage the Property pursuant to an Approved Management Agreement,
and such successor manager shall execute for Lender’s benefit a Subordination of Property
Management Agreement in form and substance reasonably satisfactory to Lender. Lender shall not
withhold its consent to the appointment of any replacement property manager that (a) is a reputable
and experienced third-party management organization, (b) possesses no less than ten years’
experience in managing hotel properties similar in size, quality and value to the Property, (c) has
been approved by the Approved Franchisor, (d) manages at least 10 hotels in multiple states, with
multiple franchisors and with at least an aggregate of 2,000 rooms and (e) is appointed pursuant to
an Approved Management Agreement with substantially comparable economics as the existing Approved
Management Agreement, including (1) no greater than a 3.0% base management fee and (2) per annum
fees (including any incentive fees) that do not exceed the fees specified in the Approved
Management Agreement. Lender shall confirm any proposed Approved Property Manager’s compliance
with the foregoing within 10 Business Days of Lender’s receipt of Maryland Guarantor’s written
request together with all information reasonably necessary to make such determination. If Lender
shall fail to respond within such 10 Business Day period, Maryland Guarantor shall have the right
to send Lender a notice requesting Lender to respond within 5 Business Days in an envelope and
letter marked “LENDER’S IMMEDIATE ATTENTION REQUIRED — FAILURE TO RESPOND WITHIN 5 BUSINESS DAYS
SHALL CONSTITUTE A DEEMED CONSENT.” If Lender shall fail to respond within such 5 Business Day
period, Lender shall have been deemed to have confirmed such proposed Approved Property Manager’s
compliance with the foregoing requirements.




          (b) The Property shall be branded at all times by an Approved Franchisor pursuant to an
Approved Franchise Agreement. Lender shall have the rights and remedies granted to Lender under
the Franchisor Comfort Letter. Maryland Guarantor may from time to time appoint an Approved
Franchisor to brand the Property pursuant to an Approved Franchise Agreement, and such successor
franchisor shall execute for Lender’s benefit a franchisor comfort letter in form and substance
reasonably satisfactory to Lender. In no event shall it be deemed




58









 







unreasonable for Lender to require that the franchisor comfort letter delivered by any successor franchisor be substantially
in the form of the Franchisor Comfort Letter. The per annum fees of the Approved Franchisor shall
not exceed the fees specified in the Approved Franchise Agreement.




          (c) Maryland Guarantor shall cause each Approved Property Manager (including any successor
Approved Property Manager) to maintain at all times worker’s compensation insurance as required by
Governmental Authorities.




          (d) Maryland Guarantor shall notify Lender in writing of any default of (i) Maryland
Guarantor, Operating Lessee or the Approved Property Manager under the Approved Management
Agreement and (ii) Maryland Guarantor, Operating Lessee or the Approved Franchisor under the
Approved Franchise Agreement, in each case, after the expiration of any applicable cure periods, of
which Maryland Guarantor has actual knowledge. After reasonable notice to Maryland Guarantor,
Lender shall have the right to cure defaults of Maryland Guarantor or Operating Lessee under (i)
the Approved Management Agreement (in accordance with the Subordination of Management Agreement)
and (ii) the Approved Franchise Agreement (in accordance with the Franchisor Comfort Letter). Any
out-of-pocket expenses incurred by Lender to cure any such default shall constitute a part of the
Indebtedness and shall be due from Borrower upon demand by Lender.




          (e) Upon an Event of Default followed by acceleration of the Loan, Lender may, in its sole
discretion (in accordance with Section 3(d) of the Subordination of Management Agreement),
require Maryland Guarantor to cause the termination of the Approved Management Agreement and the
engagement of an Approved Property Manager selected by Lender to serve as replacement Approved
Property Manager pursuant to an Approved Management Agreement.




          (f) If Lender forecloses on the Property, Lender may, in its sole discretion (and without any
obligation to pay any related termination fee, which termination fee, if any, shall be the sole
obligation of Maryland Guarantor), terminate or require Maryland Guarantor to cause the termination
of the Approved Franchise Agreement as provided in the Franchisor Comfort Letter and the engagement
of an Approved Franchisor selected by Lender to serve as replacement Approved Franchisor pursuant
to an Approved Franchise Agreement. In the event of (i) a material default by the Approved
Franchisor under the Approved Franchise Agreement after the expiration of any applicable cure
period or (ii) the filing of a bankruptcy petition or the occurrence of a similar event with
respect to the Approved Franchisor, Lender may, in its sole discretion (and without any obligation
to pay any related termination fee, which termination fee shall be the sole obligation of Maryland
Guarantor ), require Maryland Guarantor to cause the termination of the Approved Franchise
Agreement (to the extent provided in the Franchisor Comfort Letter) and the engagement of a new
Approved Franchisor.




          (g) Maryland Guarantor shall promptly deliver to Approved Property Manager, in accordance with
Section 4.02(b) of the Approved Management Agreement, any notice of default or Event of
Default delivered to Obligor under this Agreement.




          Section 5.11. Notice of Material Event.




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     (i) Maryland Guarantor shall give Lender prompt notice (containing reasonable detail)
of (i) any material change in the financial or physical condition of the Property, as
reasonably determined by Maryland Guarantor, including the termination or cancellation of
any Major Lease and the termination or cancellation of terrorism or other insurance required
by this Agreement, (ii) any notice from the Approved Property Manager or Approved
Franchisor, to the extent such notice relates to a matter that is reasonably expected to
result in a Material Adverse Effect, (iii) any litigation or governmental proceedings
pending or threatened in writing against Obligor, Operating Lessee or the Property that is
reasonably expected to result in a Material Adverse Effect, (iv) the insolvency or
bankruptcy filing of Obligor, Operating Lessee, any Single-Purpose Equityholder, Sponsor or
an affiliate of any of the foregoing and (v) any other circumstance or event reasonably
expected to result in a Material Adverse Effect.




     (ii) Maryland Guarantor shall deliver to Lender, within three Business Days of receipt
thereof, the periodic reports regarding the Property, if any, delivered to Maryland
Guarantor and/or Operating Lessee by Approved Property Manager.



          Section 5.12. Annual Financial Statements. As soon as available, and in any event
within 90 days after the close of each Fiscal Year, Obligor shall furnish to Lender, in an Excel
spreadsheet file in electronic format (which may be via an intralinks site at Obligor’s sole cost
and expense), or, in the case of predominantly text documents, in Adobe pdf format, a balance sheet
of Obligor as of the end of such year, together with related statements of income and
equityholders’ capital for such Fiscal Year, in each case either audited or reviewed by a certified
public accounting firm reasonably satisfactory to Lender. Together with Obligor’s annual financial
statements, Obligor shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via
an intralinks site at Obligor’s sole cost and expense), or, in the case of predominantly text
documents, in Adobe pdf format:





     (i) a statement of cash flows and income and expenses in the format set forth in the
most recent Uniform System of Accounts (as shown on Exhibit C);




     (ii) average daily room rates, sales reports, Smith Travel Reports (to the extent
available) and occupancy reports;




     (iii) an annual report for the most recently completed fiscal year, describing Capital
Expenditures (stated separately with respect to any project costing in excess of $100,000);
and




     (iv) such other information as Lender shall reasonably request.



          Section 5.13. Quarterly Financial Statements. As soon as available, and in any event
within 45 days after the end of each Fiscal Quarter (including year-end), Obligor shall furnish to
Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at
Obligor’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf
format, quarterly and year-to-date unaudited financial statements prepared for such fiscal quarter
with respect to Obligor, including a balance sheet and operating statement as of the end of such
Fiscal Quarter, together with related statements of income,





60












 




equityholders’ capital and cash flows for such
Fiscal Quarter and for the portion of the Fiscal Year ending with such Fiscal Quarter, which
statements shall include income and expenses in the format set forth in the most recent Uniform
System of Accounts (as shown on Exhibit C) and be accompanied by an Officer’s Certificate
certifying that the same are true, correct and complete and were prepared in accordance with GAAP
applied on a consistent basis, subject to changes resulting from audit and normal year-end audit
adjustments. Each such quarterly report shall be accompanied by the following, in an Excel
spreadsheet file in electronic format (which may be via an intralinks site at Obligor’s sole cost
and expense), or, in the case of predominantly text documents, in Adobe pdf format:





     (i) a statement in reasonable detail that calculates Net Operating Income for each of
the Fiscal Quarters in the Test Period ending in such Fiscal Quarter, in the case of each
such Fiscal Quarter, ending at the end thereof;




     (ii) copies of each of the Leases signed during such quarter, together with a summary
thereof that shall include the Tenant’s name, lease term, base rent, Tenant Improvements,
leasing commissions paid, free rent and other material tenant concessions;




     (iii) the current franchise reports, average daily room rates, sales reports, Smith
Travel Reports (to the extent available) and occupancy reports; and




     (iv) such other information as Lender shall reasonably request.



          Section 5.14. Monthly Financial Statements; Non-Delivery of Financial Statements.




          (a) Until the occurrence of a Securitization and during the continuance of a Trigger Period or
an Event of Default (or, in the case of item (iii) below, at all times), Obligor shall furnish
within 30 days after the end of each calendar month (other than the calendar month immediately
following the final calendar month of any Fiscal Year or Fiscal Quarter), in an Excel spreadsheet
file in electronic format (which may be via an intralinks site at Obligor’s sole cost and expense),
or, in the case of predominantly text documents, in Adobe pdf format, monthly and year-to-date
unaudited financial statements prepared for the applicable month with respect to Obligor, including
a balance sheet and operating statement as of the end of such month, together with related
statements of income, equityholders’ capital and cash flows for such month and for the portion of
the Fiscal Year ending with such month , which statements shall include income and expenses in the
format set forth in the most recent Uniform System of Accounts (as shown on Exhibit C) and
be accompanied by an Officer’s Certificate certifying that the same are true, correct and complete
and were prepared in accordance with GAAP applied on a consistent basis, subject to changes
resulting from audit and normal year-end audit adjustments. Each such monthly report shall be
accompanied by the following:





     (i) a summary of Leases signed during such month, which summary shall include the
Tenant’s name, lease term, base rent, escalations, Tenant Improvements, leasing commissions
paid, free rent and other concessions;



61









 






     (ii) then current rent roll, average daily room rates, sales reports, Smith Travel
Reports (to the extent available) and occupancy reports;




     (iii) the Capital Plan Monthly Report; and




     (iv) such other information as Lender shall reasonably request.



          (b) If Obligor fails to provide to Lender any of the financial statements and other
information specified in Sections 5.12, 5.13 or this Section 5.14 within
the respective time period specified in such Sections, Lender shall deliver to Obligor written
notice of such failure. If Obligor fails to provide such financial statements and other information
within ten Business Days after receipt of such notice such failure shall constitute a Trigger
Period.




          Section 5.15. Insurance.




          (a) Maryland Guarantor shall cause to be obtained and maintained with respect to the Property,
for the mutual benefit of Maryland Guarantor and Lender at all times, the following policies of
insurance:





     (i) insurance against loss or damage by standard perils included within the
classification “All Risks Special Form Cause of Loss” (including coverage for damage caused
by windstorm and hail). Such insurance shall (A) be in an amount equal to the full
replacement cost of the Property and fixtures (without deduction for physical depreciation);
(B) have deductibles acceptable to Lender (but in any event not in excess of $50,000, except
in the case of windstorm and earthquake coverage, which shall have deductibles not in excess
of 5% of the total insurable value of the Property); (C) be paid annually in advance; (D)
contain a “Replacement Cost Endorsement” with a waiver of depreciation and an “Agreed Upon
Amount Endorsement” waiving all coinsurance provisions; (E) include an ordinance or law
coverage endorsement containing Coverage A: “Loss Due to Operation of Law” (with a limit
equal to replacement cost, provided that the limit under the coverage in effect as of the
Closing Date may be maintained so long as the Property remains legal and conforming under
all applicable zoning requirements), Coverage B: “Demolition Cost” and Coverage C:
“Increased Cost of Construction” coverages each with limits of no less than 10% of
replacement cost or such lesser amounts as Lender may require in its sole discretion; (F)
permit that the improvements and other property covered by such insurance be rebuilt at
another location in the event that such improvements and other property cannot be rebuilt at
the location on which they are situated as of the date hereof. If such insurance excludes
mold, Maryland Guarantor shall implement a mold prevention program satisfactory to Lender;




     (ii) flood insurance if the Property is located in a “100 Year Flood Plain”, “special
hazard area” (Zones A and V) in an amount equal to the maximum limit of coverage available
from FEMA/FIA, plus such excess limits requested by Lender, with a deductible not in excess
of $25,000;




     (iii) commercial general liability insurance, including broad form coverage of property
damage, blanket contractual liability and personal injury (including death



62









 






resulting therefrom), to be on the so-called “occurrence” form containing minimum
limits per occurrence of not less than $1,000,000 with not less than a $2,000,000 general
aggregate for any policy year (with a per location aggregate if the Property is on a blanket
policy). In addition, at least $50,000,000 excess and/or umbrella liability insurance shall
be obtained and maintained for any and all claims, including all legal liability imposed
upon Maryland Guarantor and all related court costs and attorneys’ fees and disbursements;




     (iv) rental loss and/or business interruption insurance covering all risks required to
be covered by the insurance provided for herein, including but not limited to, clauses
(i), (ii), (v), (vii), (viii) and (ix) of this Section 5.15(a), and covering the
18month period commencing on the date of any Casualty or Condemnation, and containing an
extended period of indemnity endorsement covering the 12 month period commencing on the date
on which the Property has been restored, as reasonably determined by the applicable insurer
(even if the policy will expire prior to the end of such period). The amount of such
insurance shall be increased from time to time as and when the gross revenues from the
Property increase;




     (v) insurance against loss or damage from (A) leakage of sprinkler systems, if not
provided by the policy required by Section 5.15(a)(i), and (B) explosion of steam
boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure
vessels or similar apparatus now or hereafter installed in any of the improvements (without
exclusion for explosions) and insurance against loss of occupancy or use arising from any
breakdown, in such amounts as are generally available and are generally required by
institutional lenders for properties comparable to the Property;




     (vi) worker’s compensation insurance with respect to all employees of Maryland
Guarantor as and to the extent required by any Governmental Authority or Legal Requirement
and employer’s liability coverage of at least $1,000,000 (if applicable);




     (vii) during any period of repair or restoration, and only if the property and
liability coverage forms do not otherwise apply, owner’s contingent or protective liability
insurance covering claims not covered by or under the terms or provisions of the insurance
provided for in Section 5.15(a)(iii). The insurance provided for in Section
5.15(a) shall (1) be written in a so-called builder’s risk completed value form or
equivalent coverage, including coverage for 100% of the total costs of construction on a
non-reporting basis and against all risks insured against pursuant to clauses (i), (ii),
(iv), (v), (viii) and (ix) of Section 5.15(a), (2) shall include
permission to occupy the Property, and (3) shall contain an agreed amount endorsement
waiving co-insurance provisions;




     (viii) if required by Lender, earthquake insurance (A) with minimum coverage equivalent
to the greater of 1.0x SUL (scenario upper loss) and 1.5x SEL (scenario expected loss)
multiplied by the full replacement cost of the building plus business income, (B) having a
deductible approved by Lender (but in any event not be in excess of 5% of the total
insurable value of the Property), and (C) if the Property is legally



63









 




nonconforming under applicable zoning ordinances and codes, containing ordinance of law
coverage in amounts as required by Lender;





     (ix) so long as the Terrorism Risk Insurance Program Reauthorization Act of 2007
(“TRIPRA”) or a similar statute is in effect, terrorism insurance for Certified and
Non-Certified acts (as such terms are defined in TRIPRA or similar statute) in an amount
equal to the full replacement cost of the Property (plus twelve months of business
interruption coverage). If TRIPRA or a similar statute is not in effect, then provided that
terrorism insurance is commercially available, Maryland Guarantor shall be required to carry
terrorism insurance throughout the term of the Loan as required by the preceding sentence,
but in such event Maryland Guarantor shall not be required to spend on terrorism insurance
coverage more than two times the amount of the insurance premium that is payable at such
time in respect of the casualty and business interruption/rental loss insurance required
hereunder (without giving effect to the cost of terrorism and earthquake components of such
casualty and business interruption/rental loss insurance), and if the cost of terrorism
insurance exceeds such amount, Maryland Guarantor shall purchase the maximum amount of
terrorism insurance available with funds equal to such amount;




     (x) liquor liability insurance in an amount of at least $10,000,000 or in such greater
amount as may be required by applicable Legal Requirements against claims or liability
arising directly or indirectly to persons or property on account of the sale or dispensing
of alcoholic beverages at the Property and public liability insurance in an amount of at
least $10,000,000 or in such greater amount as may be required by applicable Legal
Requirements providing coverage against such claims or liability;




     (xi) crime coverage in an amount not less than $2,000,000 to protect against employee
dishonesty and related incidents, containing minimum limits per occurrence of $1,000,000;




     (xii) motor vehicle liability coverage for all owned and non owned vehicles, including
rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00 (if
applicable); and




     (xiii) such other insurance as may from time to time be requested by Lender.



          (b) All policies of insurance (the “Policies”) required pursuant to this Section
5.15 shall be issued by one or more primary insurers having a claims-paying ability of at least
“A” or “A2” by each of the Rating Agencies, or by a syndicate of insurers through which at least
75% of the coverage (if there are 4 or fewer members of the syndicate) or at least 60% of the
coverage (if there are 5 or more members of the syndicate) is with carriers having such
claims-paying ability ratings (provided that the first layers of coverage are from carriers rated
at least “A” or “A2” and all such carriers shall have claims-paying ability ratings of not less
than “BBB+” or “Baa1”). Notwithstanding anything to the contrary herein, for purposes of
determining whether the insurer ratings requirements set forth above have been satisfied, (1) any
insurer that is not rated by Fitch will be regarded as having a Fitch rating that is the equivalent
of the rating given to such insurer by any of Moody’s and S&P that does rate such insurer (or, if






64









 







both such rating agencies rate such insurer, the lower of the two ratings), (2) any insurer
that is not rated by Moody’s will be regarded as having a Moody’s rating of “Baa1” or better if it
is rated “A-” or better by S&P and will be regarded as having a Moody’s rating of “A2” or better
if it is rated “A+” or better by S&P, (3) RSUI Indemnity Company shall be deemed to have satisfied
such insurer ratings requirements with respect to insurance coverage provided by it as of the
Closing Date so long as it maintains a Moody’s rating of A3 and (4) Ironshore Inc. shall be deemed
to have satisfied such insurer ratings requirements with respect to insurance coverage provided by
it as of the Closing Date so long as it maintains a Moody’s rating of Baa1.




          (c) All Policies required pursuant to this Section 5.15:





     (i) shall contain deductibles that, in addition to complying with any other
requirements expressly set forth in Section 5.15(a), are approved by Lender (such
approval not to be unreasonably withheld, delayed or conditioned, but subject to the
requirements of each Rating Agency) and are no larger than is customary for similar policies
covering similar properties in the geographic market in which the Property is located, but
in any event are not in excess of $50,000 (except in the case of windstorm and earthquake
coverage, which shall have deductibles not in excess of 5% of the total insurable value of
the Property);




     (ii) shall be maintained throughout the term of the Loan without cost to Lender and
shall name Maryland Guarantor as the named insured;




     (iii) with respect to casualty policies, shall contain a standard noncontributory
mortgagee clause naming Lender and its successors and assigns as their interests may appear
as first mortgagee and loss payee;




     (iv) with respect to liability policies, shall name Lender and its successors and
assigns as their interests may appear as additional insureds;




     (v) with respect to rental or business interruption insurance policies, shall name
Lender and its successors and/or assigns as their interests may appear as loss payee;




     (vi) shall contain an endorsement providing that neither Maryland Guarantor nor Lender
nor any other party shall be a co-insurer under said Policies;




     (vii) shall contain an endorsement providing that Lender shall receive at least 30
days’ prior written notice of any modification, reduction or cancellation thereof;




     (viii) shall contain an endorsement providing that no act or negligence of Maryland
Guarantor or of a Tenant or other occupant or any foreclosure or other proceeding or notice
of sale relating to the Property shall affect the validity or enforceability of the
insurance insofar as a mortgagee is concerned;




     (ix) shall provide that Lender shall not be liable for any insurance premiums thereon
or subject to any assessments thereunder;




     (x) shall contain a waiver of subrogation against Lender;



65









 






     (xi) may be in the form of a blanket policy, provided that Maryland Guarantor
shall provide evidence satisfactory to Lender that the insurance premiums for the Property
are separately allocated under such Policy to the Property and that (i) payment of such
allocated amount shall maintain the effectiveness of such Policy as to the Property
notwithstanding the failure of payment of any other portion of premiums, and (ii) overall
insurance limits will under no circumstance limit the amount that will be paid in respect of
the Property, and provided further that any such blanket policy shall specifically
allocate to the Property the amount of coverage from time to time required hereunder or
shall otherwise provide the same protection as would a separate Policy in Lender’s
discretion, subject to review and approval by Lender based on the schedule of locations and
values; and




     (xii) shall otherwise be reasonably satisfactory in form and substance to Lender and
shall contain such other provisions as Lender deems reasonably necessary or desirable to
protect its interests.



          (d) Maryland Guarantor shall pay the premiums for all Policies as the same become due and
payable. Copies of such Policies, certified as true and correct by Maryland Guarantor, shall be
delivered to Lender promptly upon request. Not later than 30 days prior to the expiration date of
each Policy, Maryland Guarantor shall deliver to Lender evidence, reasonably satisfactory to
Lender, of its renewal. Maryland Guarantor shall promptly forward to Lender a copy of each written
notice received by Maryland Guarantor of any modification, reduction or cancellation of any of the
Policies or of any of the coverages afforded under any of the Policies. Within 30 days after
request by Lender, Maryland Guarantor shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested by Lender, taking into consideration changes in
the value of money over time, changes in liability laws, changes in prudent customs and practices,
and the like.




          (e) Maryland Guarantor shall not procure any other insurance coverage that would be on the
same level of payment as the Policies or would adversely impact in any way the ability of Lender or
Maryland Guarantor to collect any proceeds under any of the Policies. If at any time Lender is not
in receipt of written evidence that all Policies are in full force and effect when and as required
hereunder, Lender shall have the right to take such action as Lender deems necessary to protect its
interest in the Property, including the obtaining of such insurance coverage as Lender in its sole
discretion deems appropriate (but limited to the coverages and amounts required hereunder). All
premiums incurred by Lender in connection with such action or in obtaining such insurance and
keeping it in effect shall be paid by Maryland Guarantor to Lender upon demand and, until paid, and
shall bear interest at the Default Rate.




          (f) In the event of foreclosure of the Mortgage or other transfer of title to the Property in
extinguishment in whole or in part of the Indebtedness, all right, title and interest of Maryland
Guarantor in and to the Policies then in force with respect to the Property and all proceeds
payable thereunder shall thereupon vest in the purchaser at such foreclosure or in Lender or other
transferee in the event of such other transfer of title.




          Section 5.16. Casualty and Condemnation.







66









 








          (a) Maryland Guarantor shall give prompt notice to Lender of any Casualty or Condemnation or
of the actual or threatened commencement of proceedings that would result in a Condemnation.




          (b) Lender may participate in any proceedings for any taking by any public or quasi-public
authority accomplished through a Condemnation or any transfer made in lieu of or in anticipation of
a Condemnation, to the extent permitted by law. Upon Lender’s request, Maryland Guarantor shall
deliver to Lender all instruments reasonably requested by it to permit such participation.
Maryland Guarantor shall, at its sole cost and expense, diligently prosecute any such proceedings,
and shall consult with Lender, its attorneys and experts, and cooperate with them in the carrying
on or defense of any such proceedings. Maryland Guarantor shall not consent or agree to a
Condemnation or action in lieu thereof without the prior written consent of Lender in each
instance, which consent shall not be unreasonably withheld or delayed in the case of a taking of an
immaterial portion of the Property.




          (c) Lender may (x) jointly with Maryland Guarantor settle and adjust any claims, (y) during
the continuance of an Event of Default, settle and adjust any claims without the consent or
cooperation of Maryland Guarantor, or (z) allow Maryland Guarantor to settle and adjust any claims;
except that if no Event of Default is continuing, Maryland Guarantor may settle and adjust claims
aggregating not in excess of $500,000 if such settlement or adjustment is carried out in a
competent and timely manner, but Lender shall be entitled to collect and receive (as set forth
below) any and all Loss Proceeds. The reasonable expenses incurred by Lender in the adjustment and
collection of Loss Proceeds shall become part of the Indebtedness and shall be reimbursed by
Maryland Guarantor to Lender upon demand therefor.




          (d) All Loss Proceeds from any Casualty or Condemnation shall be immediately deposited into
the Loss Proceeds Account (monthly rental loss/business interruption proceeds to be initially
deposited into the Loss Proceeds Account and subsequently deposited into the Cash Management
Account in installments as and when the lost rental income covered by such proceeds would have been
payable). Following the occurrence of a Casualty, Maryland Guarantor, regardless of whether
proceeds are available, shall in a reasonably prompt manner proceed to restore, repair, replace or
rebuild the Property to be of at least equal value and of substantially the same character as prior
to the Casualty, all in accordance with the terms hereof applicable to Alterations. If any
Condemnation or Casualty occurs as to which, in the reasonable judgment of Lender:





     (i) in the case of a Casualty, the cost of restoration would not exceed 25% of the Loan
Amount and the Casualty does not render untenantable, or result in the cancellation of
Leases covering, more than 25% of the gross rentable area of the Property, or result in
cancellation of Leases covering more than 25% of the base contractual rental revenue of the
Property;




     (ii) in the case of a Condemnation, the Condemnation does not render untenantable, or
result in the cancellation of Leases covering, more than 15% of the gross rentable area of
the Property;



67









 







     (iii) restoration of the Property is reasonably expected to be completed prior to the
expiration of rental interruption insurance and at least six months prior to the Maturity
Date;




     (iv) after such restoration, the fair market value of the Property is reasonably
expected to equal at least the fair market value of the Property immediately prior to such
Condemnation or Casualty; and




     (v) all necessary approvals and consents from Governmental Authorities will be obtained
to allow the rebuilding and re-occupancy of the Property;


or if Lender otherwise elects to allow Maryland Guarantor to restore the Property, then, provided
no Event of Default is continuing, the Loss Proceeds after receipt thereof by Lender and
reimbursement of any reasonable expenses incurred by Lender in connection therewith shall be
applied to the cost of restoring, repairing, replacing or rebuilding the Property or part thereof
subject to the Casualty or Condemnation, in the manner set forth below (and Maryland Guarantor
shall commence, as promptly and diligently as practicable, to prosecute such restoring, repairing,
replacing or rebuilding of the Property in a workmanlike fashion and in accordance with applicable
law to a status at least equivalent to the quality and character of the Property immediately prior
to the Condemnation or Casualty). Provided that no Event of Default shall have occurred and be
then continuing, Lender shall disburse such Loss Proceeds to Maryland Guarantor upon Lender’s
being furnished with (i) evidence reasonably satisfactory to it of the estimated cost of completion
of the restoration, (ii) funds, or assurances reasonably satisfactory to Lender that such funds are
available and sufficient in addition to any remaining Loss Proceeds, to complete the proposed
restoration (including for any reasonable costs and expenses of Lender to be incurred in
administering such restoration) and for payment of the Indebtedness as it becomes due and payable
during the restoration, and (iii) such architect’s certificates, waivers of lien, contractor’s
sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of
cost, payment and performance as Lender may reasonably request; and Lender may, in any event,
require that all plans and specifications for restoration reasonably estimated by Lender to exceed
$500,000 be submitted to and approved by Lender prior to commencement of work (which approval shall
not be unreasonably withheld). If Lender reasonably estimates that the cost to restore will exceed
$500,000, Lender may retain a local construction consultant to inspect such work and review
Maryland Guarantor’s request for payments and Maryland Guarantor shall, on demand by Lender,
reimburse Lender for the reasonable fees and expenses of such consultant (which fees and expenses
shall constitute Indebtedness). No payment shall exceed 90% of the value of the work performed
from time to time until such time as 50% of the restoration (calculated based on the anticipated
aggregate cost of the work) has been completed, and amounts retained prior to completion of 50% of
the restoration shall not be paid prior to the final completion of the restoration. Funds other
than Loss Proceeds shall be disbursed prior to disbursement of such Loss Proceeds, and at all times
the undisbursed balance of such proceeds remaining in the Loss Proceeds Account, together with any
additional funds irrevocably and unconditionally deposited therein or irrevocably and
unconditionally committed for that purpose, shall be at least sufficient in the reasonable judgment
of Lender to pay for the cost of completion of the restoration free and clear of all Liens or
claims for Lien.







68









 








          (e) Maryland Guarantor shall cooperate with Lender in obtaining for Lender the benefits of any
Loss Proceeds lawfully or equitably payable to Lender in connection with the Property. Lender
shall be reimbursed for any expenses reasonably incurred in connection therewith (including
reasonable attorneys’ fees and disbursements, and, if reasonably necessary to collect such
proceeds, the expense of an Appraisal on behalf of Lender) out of such Loss Proceeds or, if
insufficient for such purpose, by Maryland Guarantor. Maryland Guarantor hereby irrevocably
constitutes and appoints Lender as the attorney-in-fact of Maryland Guarantor for matters in excess
of $500,000.00 with respect to the Property, with full power of substitution, subject to the terms
of this Section 5.16, to settle for, collect and receive all Loss Proceeds and any other
awards, damages, insurance proceeds, payments or other compensation from the parties or authorities
making the same, to appear in and prosecute any proceedings therefor and to give receipts and
acquittance therefor (which power of attorney shall be irrevocable so long as any of the
Indebtedness is outstanding, shall be deemed coupled with an interest, and shall survive the
voluntary or involuntary dissolution of Maryland Guarantor).




          (f) If Maryland Guarantor is not entitled to apply Loss Proceeds toward the restoration of the
Property pursuant to Section 5.16(d) and Lender elects not to permit such Loss Proceeds to
be so applied, such Loss Proceeds shall be applied on the first Payment Date following such
election to the prepayment of the principal of the Loan and shall be accompanied by interest
through the end of the applicable Interest Accrual Period (calculated as if the amount prepaid were
outstanding for the entire Interest Accrual Period). If the Note has been bifurcated into multiple
Notes pursuant to Section 1.1(c), all prepayments of the Loan made by Obligor in accordance
with this Section 5.16(f) shall be applied to the Notes in ascending order of interest rate
(i.e., first to the Note with the lowest interest rate until its outstanding principal
balance has been reduced to zero, then to the Note with the second lowest interest rate until its
outstanding principal balance has been reduced to zero, and so on) or in such other order as Lender
shall determine.




          (g) Notwithstanding the foregoing provisions of this Section 5.16, if the Loan is
included in a REMIC and immediately following a release of any portion of the applicable Property
from the Lien of the Loan Documents in connection with a Casualty or Condemnation the Loan would
fail to satisfy a Lender 80% Determination, then the principal of the Loan shall be prepaid in
accordance with Section 5.16(f) in an amount equal to either (i) so much of the Loss
Proceeds as are necessary to cause the Lender 80% Determination to be satisfied, or if the
aggregate Loss Proceeds are insufficient for such purpose, then the amount realized by Maryland
Guarantor from the Casualty or Condemnation for purposes of computing gain or loss under section
1001 of the Code, or (ii) a lesser amount provided Maryland Guarantor delivers to Lender an opinion
of counsel for Maryland Guarantor, in form and substance reasonably satisfactory to Lender and
delivered by counsel reasonably satisfactory to Lender, opining that such release of Property from
the Lien does not cause any portion of the Loan to cease to be a “qualified mortgage” within the
meaning of section 860G(a)(3) of the Code.




          Section 5.17. Annual Budget. Each calendar year during the term of the Loan, as soon
as made available to Maryland Guarantor and/or Operating Lessee in accordance with the terms of
Section 7.02 of the Approved Management Agreement, Maryland Guarantor or Operating Lessee
shall deliver or shall cause Approved Property Manager to deliver to Lender, for informational
purposes only, the Annual Budget and, promptly after preparation thereof, any






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subsequent revisions to the Annual Budget.
If the budget approval process under the Approved Management Agreement shall be ongoing during the
continuance of a Trigger Period or an Event of Default, neither Maryland Guarantor nor Operating
Lessee shall exercise any budget approval right they may have under the Approved Management
Agreement without the approval of Lender, such approval not to be unreasonably conditioned,
withheld or delayed. For so long as Lender shall withhold its consent to any Annual Budget or any
revisions thereto, the Annual Budget in effect prior to any such request for approval shall remain
in effect. Without the prior written consent of Lender, which consent shall not be unreasonably
withheld or delayed, during the continuance of a Trigger Period neither Maryland Guarantor nor
Operating Lessee shall make or approve any expenditures that are either not provided for in the
Approved Annual Budget or that would, in the aggregate, cause any line item in the Approved Annual
Budget to be exceeded by 5% or more measured on an annual basis, other than expenditures for
non-discretionary items and expenditures required to be made by reason of the occurrence of any
emergency (i.e., an unexpected event that threatens imminent harm to persons or property at
the Property) and with respect to which it would be impracticable, under the circumstances, to
obtain Lender’s prior consent thereto. For the avoidance of doubt, decreases made or approved to
any line item in the Approved Annual Budget shall not require Lender’s consent. Borrower and/or
Operating Lessee shall deliver, or cause to be delivered, the 2011 Annual Budget as soon as is
practical.




          Section 5.18. Nonbinding Consultation. Lender shall have the right to consult with
and advise Obligor regarding significant business activities and business and financial
developments of Obligor and Operating Lessee, provided that any such advice or consultation or the
result thereof shall be completely nonbinding on Obligor.




          Section 5.19. Compliance with Encumbrances and Material Agreements. Maryland
Guarantor covenants and agrees as follows:





     (i) Maryland Guarantor shall, and shall cause Operating Lessee to, comply with all
material terms, conditions and covenants of each Material Agreement and each material
Permitted Encumbrance, including any reciprocal easement agreement, any declaration of
covenants, conditions and restrictions, and any condominium arrangements.




     (ii) Maryland Guarantor shall, and shall cause Operating Lessee to, promptly deliver to
Lender a true, correct and complete copy of each and every notice of default received by
Maryland Guarantor or Operating Lessee with respect to any obligation of such Maryland
Guarantor or Operating Lessee under the provisions of any Material Agreement and/or
Permitted Encumbrance.




     (iii) Maryland Guarantor shall, and shall cause Operating Lessee to, deliver to Lender
copies of any written notices of default or event of default relating to any Material
Agreement and/or Permitted Encumbrance served by Maryland Guarantor or Operating Lessee.




     (iv) After the occurrence of an Event of Default, so long as the Loan is outstanding,
Maryland Guarantor shall not, and shall not cause Operating Lessee to, grant



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or withhold any
material consent, approval or waiver under any Material Agreement or Permitted Encumbrance
without the prior written consent of Lender.




     (v) Maryland Guarantor shall, and shall cause Operating Lessee to, deliver to each
other party to any Permitted Encumbrance and any Material Agreement notice of the identity
of Lender and each assignee of Lender of which Maryland Guarantor is aware if such notice is
required in order to protect Lender’s interest thereunder.




     (vi) Maryland Guarantor shall, and shall cause Operating Lessee to, enforce, short of
termination thereof, the performance and observance of each and every material term,
covenant and provision of each Material Agreements to be performed or observed, if any.



          Section 5.20. Prohibited Persons. None of Obligor, Operating Lessee, Sponsor or any
Person owning a direct or indirect beneficial interest in Obligor, Operating Lessee, or Sponsor
shall (i) knowingly conduct any business, or engage in any transaction or dealing, with any
Embargoed Person, including, but not limited to, the making or receiving of any contribution of
funds, goods, or services, to or for the benefit of a Embargoed Person, or (ii) knowingly engage in
or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order 13224.
Obligor shall deliver to Lender from time to time written certification or other evidence as may be
reasonably requested by Lender, confirming that (x) none of Obligor, Operating Lessee, Sponsor or,
to Obligor’s knowledge, any Person owning a direct or indirect beneficial interest in Obligor,
Operating Lessee, or Sponsor is an Embargoed Person and (y) none of Obligor, Operating Lessee,
Sponsor or, to Obligor’s knowledge, any Person owning a direct or indirect beneficial interest in
Obligor, Operating Lessee, or Sponsor has knowingly engaged in any business, transaction or
dealings with a Embargoed Person, including, but not limited to, the making or receiving of any
contribution of funds, goods, or services, to or for the benefit of a Embargoed Person.




          Section 5.21. Operating Lease.




          (i) Maryland Guarantor shall cause Operating Lessee to comply with the affirmative and
negative covenants contained in this Agreement as if Operating Lessee were an Obligor
hereunder and no Default hereunder shall be excused by virtue of the fact that such Default
was caused by Operating Lessee.




          (ii) Notwithstanding anything to the contrary herein or in any other Loan Documents or
in the Operating Lease, during the continuance of an Event of Default (but only after Lender
shall have exercised its rights and remedies under the Mortgage), Lender may, at its sole
option and regardless of whether Operating Lessee is in default or compliance with the terms
of the Operating Lease, terminate the Operating Lease without payment of any termination
fee, penalty or other amount (the parties hereto agreeing that
any such fee, penalty or other amount shall be solely the obligation of Sponsor and
shall be paid by Sponsor or an affiliate of Sponsor other than Obligor or Operating Lessee).



          Section 5.22. Capital Plan.



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          (a) Maryland Guarantor shall do or cause to be done all things necessary to cause each Capital
Plan Component to be completed prior to the applicable Capital Plan Target Completion Date.




          (b) Maryland Guarantor shall deliver to Lender, within ten (10) days of completion of any
Capital Plan Component, an Officer’s Certificate certifying as to completion of such Capital Plan
Component and the total cost of completion. Lender shall have the right to (i) inspect the Property
(in accordance with Section 5.5 of this Agreement) to verify completion of such Capital
Plan Component and (ii) request backup documentation, including copies of invoices and cancelled
checks related to such Capital Plan Component and/or a summary of such invoices and cancelled
checks in a spreadsheet that also indicates the associated line item identified for such Capital
Plan Component on Schedule F hereto.




          (c) Within three (3) Business Days of the date on which all Capital Plan Components shall have
been completed (such date, the “Capital Plan Completion Date”), Maryland Guarantor shall
deposit or cause to be deposited into the Maryland Guarantor FF&E Account funds equal to the
amount, if any, by which the Capital Plan Minimum Expenditure exceeds the amount expended by
Maryland Guarantor in connection with the Capital Plan as of the Capital Plan Completion Date.




          (d) Maryland Guarantor shall, if required to do so under applicable Legal Requirements, obtain
a new certificate of occupancy for the Property in connection with the Capital Plan or any future
renovations. Maryland Guarantor shall deliver a copy of any such new certificate of occupancy,
promptly, and in no case later than three Business Days after receipt thereof.




ARTICLE VI




NEGATIVE COVENANTS



          Section 6.1. Liens on the Collateral. None of Maryland Guarantor, Operating Lessee
or, if applicable, any Single-Purpose Equityholder shall permit or suffer the existence of any Lien
on any of its assets, other than Permitted Encumbrances.




          Section 6.2. Ownership. Operating Lessee shall not hold any interest in any assets
other than the Property and related personal property and fixtures located therein or used in
connection therewith. Maryland Guarantor shall not own any assets other than (i) an equity interest
in Borrower and (ii) the Property and related
personal property and fixtures located therein or used in connection therewith. Borrower shall
not own any assets.




          Section 6.3. Transfer; Change of Control. Neither Obligor nor Operating Lessee shall
Transfer any Collateral other than in compliance with Article II and other than the
replacement or other disposition of obsolete or non-useful personal property and fixtures in the
ordinary course of business, and neither Maryland Guarantor nor Operating Lessee shall hereafter
file a declaration of condominium with respect to the Property. No Change of Control or Prohibited
Pledge shall occur.




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          Section 6.4. Debt. Neither Obligor nor Operating Lessee shall have any Debt, other
than Permitted Debt.




          Section 6.5. Dissolution; Merger or Consolidation. None of Obligor, Operating Lessee
or, if applicable, any Single-Purpose Equityholder shall dissolve, terminate, liquidate, merge
with or consolidate into another Person without first causing the Loan to be assumed by a Qualified
Successor Borrower pursuant to Section 2.2.




          Section 6.6. Change in Business. Neither Obligor nor Operating Lessee shall make any
material change in the scope or nature of its business objectives, purposes or operations or
undertake or participate in activities other than the continuance of its present business.




          Section 6.7. Debt Cancellation. Neither Obligor nor Operating Lessee shall cancel or
otherwise forgive or release any material claim or Debt owed to it by any Person, except for
adequate consideration or in the ordinary course of its business.




          Section 6.8. Affiliate Transactions. Neither Obligor nor Operating Lessee shall enter
into, or be a party to, any transaction with any affiliate of Obligor and/or Operating Lessee,
except on terms that are no less favorable to Obligor or Operating Lessee than would be obtained in
a comparable arm’s length transaction with an unrelated third party.




          Section 6.9. Misapplication of Funds. Neither Obligor nor Operating Lessee shall (a)
distribute any Revenue or Loss Proceeds in violation of the provisions of this Agreement (and shall
promptly cause the reversal of any such distributions made in error of which Obligor becomes
aware), (b) fail to remit amounts to the Cash Management Account as required by Section
3.1, or (c) misappropriate any security deposit or portion thereof.




          Section 6.10. Jurisdiction of Formation; Name. Neither Obligor nor Operating Lessee
shall change its jurisdiction of formation or name without receiving Lender’s prior written consent
and promptly providing Lender such information and replacement Uniform Commercial Code financing statements
and legal opinions as Lender may reasonably request in connection therewith.




          Section 6.11. Modifications and Waivers. Unless otherwise consented to in writing by
Lender, none of Maryland Guarantor, Operating Lessee or, in the case of clause (ii) below, any
Single-Purpose Equityholder (if applicable) shall:





     (i) amend, modify, terminate, renew, or surrender any rights or remedies under any
Lease, or enter into any Lease, except in compliance with Section 5.7;




     (ii) terminate, amend or modify its organizational documents (including any operating
agreement, limited partnership agreement, by-laws, certificate of formation, certificate of
limited partnership or certificate of incorporation);




     (iii) terminate, amend or modify the Approved Management Agreement, except immaterial
amendments and modifications that have no adverse effect on Lender and do not alter any
economic term of the Approved Management Agreement;



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     (iv) terminate, amend or modify the Approved Franchise Agreement, except immaterial
amendments and modifications that have no adverse effect on Lender and do not alter any
economic term of the Approved Franchise Agreement; and




     (v) amend, modify, surrender or waive any material rights or remedies under, or enter
into or terminate, or default in its obligations under, any Material Agreement.



          Section 6.12. ERISA.




          (a) Neither Obligor nor Operating Lessee shall maintain or contribute to, or agree to maintain
or contribute to, or permit any ERISA Affiliate to maintain or contribute to or agree to maintain
or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title
IV or Section 302 of ERISA or Section 412 of the Code.




          (b) Neither Obligor nor Operating Lessee shall engage in a non-exempt prohibited transaction
under Section 406 of ERISA, Section 4975 of the Code, or substantially similar provisions under
federal, state or local laws, rules or regulations or in any transaction that would cause any
obligation or action taken or to be taken hereunder (or the exercise by Lender of any of its rights
under the Notes, this Agreement, the Mortgage or any other Loan Document) to be a non-exempt
prohibited transaction under such provisions.




          Section 6.13. Alterations and Expansions. During the continuance of any Trigger
Period or Event of Default, Maryland Guarantor shall not, and shall not permit Operating Lessee to,
perform or contract to perform any capital improvements requiring Capital Expenditures that are not
consistent with the Approved Annual Budget. Maryland Guarantor shall not, and shall not permit
Operating Lessee to, perform, undertake, contract to perform or consent to any Material Alteration
without the prior written consent of Lender, which consent (in the absence of an Event of Default)
shall not be unreasonably withheld, but such consent may be conditioned on the delivery of
additional
collateral acceptable to Lender in respect of the unpaid cost of any such Material Alteration.
If Lender’s consent is requested hereunder with respect to a Material Alteration, Lender may
retain a construction consultant to review such request and, if such request is granted, Lender may
retain a construction consultant to inspect the work from time to time. Obligor shall, on demand
by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant.




          Section 6.14. Advances and Investments. Neither Obligor nor Operating Lessee shall
lend money or make advances to any Person, or purchase or acquire any stock, obligations or
securities of, or any other interest in, or make any capital contribution to, any Person, except
for Permitted Investments.




          Section 6.15. Single-Purpose Entity. Neither Obligor nor Operating Lessee shall cease
to be a Single-Purpose Entity. Neither Obligor nor Operating Lessee shall remove or replace any
Independent Director without Cause and without providing at least two Business Days’ advance
written notice thereof to Lender and the Rating Agencies.




          Section 6.16. Zoning and Uses. Neither Maryland Guarantor nor Operating Lessee shall
do any of the following:





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     (i) initiate or support any limiting change in the permitted uses of the
Property (or to the extent applicable, zoning reclassification of the Property) or any
portion thereof, seek any variance under existing land use restrictions, laws, rules or
regulations (or, to the extent applicable, zoning ordinances) applicable to the Property, or
use or permit the use of the Property in a manner that would result in the use of the
Property becoming a nonconforming use under applicable land-use restrictions or zoning
ordinances or that would violate the terms of any Lease, Material Agreement or Legal
Requirement (and if under applicable zoning ordinances the use of all or any portion of the
Property is a nonconforming use, Maryland Guarantor shall not cause or permit such
nonconforming use to be discontinued or abandoned without the express written consent of
Lender);




     (ii) consent to any modification, amendment or supplement to any of the terms of,
or materially default in its obligations under, any Permitted Encumbrance;




     (iii) impose or consent to the imposition of any restrictive covenants, easements
or encumbrances upon the Property in any manner that adversely affects in any material
respect its value, utility or transferability;




     (iv) execute or file any subdivision plat affecting the Property, or institute, or
permit the institution of, proceedings to alter any tax lot comprising the Property;




     (v) amend or cause to be amended any Material Agreement in any manner that might
(x) diminish the value of the Property, (y) diminish the rights of Maryland Guarantor or
Lender thereunder or (z) or otherwise cause or reasonably be expected to result in a
Material Adverse Effect, or terminate the same for any reason or purpose whatsoever, in each
case, without the prior written consent of Lender; or




     (vi) permit or consent to the Property’s being used by the public or any Person in
such manner as might make possible a claim of adverse usage or possession or of any implied
dedication or easement.



          Section 6.17. Waste. Neither Obligor nor Operating Lessee shall commit or permit
any Waste on the Property, nor take any actions that might invalidate any insurance carried on the
Property (and Obligor shall promptly correct any such actions of which Obligor becomes aware).



ARTICLE VII




DEFAULTS



          Section 7.1. Event of Default. The occurrence of any one or more of the following
events shall be, and shall constitute the commencement of, an “Event of Default” hereunder
(any Event of Default that has occurred shall continue unless and until waived by Lender in writing
in its sole discretion):



          (a) Payment.



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     (i) Borrower shall default in the payment when due of any principal or interest
owing hereunder or under the Notes (including any mandatory prepayment required hereunder)
provided that the Default Rate shall not apply to any amount owing hereunder or under the
Notes unless and until Borrower and Borrower’s counsel shall have received email
notification at the email addresses provided in Section 9.4, or any other form of
notice permitted under this Agreement, setting forth the payment amount and the due date
thereof; or




     (ii) Borrower shall default, and such default shall continue for at least five
Business Days after notice to Borrower that such amounts are owing, in the payment when due
of fees, expenses or other amounts owing hereunder, under the Notes or under any of the
other Loan Documents (other than principal and interest owing hereunder or under the Note).



          (b) Representations. Any representation made by any Obligor, Sponsor or Operating
Lessee in any of the Loan Documents, or in any report, certificate, financial statement or other
instrument, agreement or document furnished to Lender proves to be untrue in any material respect
(or, with respect to any representation that itself contains a materiality qualifier, in any
respect) as of the date such representation was made.



          (c) Other Loan Documents. Any Loan Document shall fail to be in full force and
effect or to convey the material Liens, rights, powers and privileges purported to be created
thereby; or a default shall occur under any of the other Loan Documents or Material Agreements, or
a default by Maryland Guarantor or Operating Lessee, as applicable, shall occur under the Approved
Management Agreement, Approved Franchise Agreement or the Operating Lease, in each case, beyond the
expiration of any applicable cure period.



          (d) Bankruptcy; Reorganization; Receivership; and Insolvency.




     (i) Any Obligor, Operating Lessee or, if applicable, any Single-Purpose
Equityholder shall commence a voluntary case concerning itself under Title 11 of the United
States Code (as amended, modified, succeeded or replaced, from time to time, the
“Bankruptcy Code”);




     (ii) any Obligor, Operating Lessee or, if applicable, any Single-Purpose
Equityholder shall commence any other proceeding under any reorganization, arrangement,
adjustment of debt, relief of creditors, dissolution, insolvency or similar law of any
jurisdiction whether now or hereafter in effect relating to any Obligor, Operating Lessee or
such Single-Purpose Equityholder, or shall dissolve or otherwise cease to exist;




     (iii) there is commenced against any Obligor, Operating Lessee or, if applicable,
any Single-Purpose Equityholder an involuntary case under the Bankruptcy Code, or any such
other proceeding, which remains undismissed for a period of 60 days after commencement;




     (iv) any Obligor, Operating Lessee or, if applicable, any Single-Purpose
Equityholder is adjudicated insolvent or bankrupt;



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     (v) any Obligor, Operating Lessee or, if applicable, any Single-Purpose
Equityholder suffers appointment of any custodian or the like for it or for any substantial
portion of its property and such appointment continues unchanged or unstayed for a period of
60 days after commencement of such appointment;




     (vi) any Obligor, Operating Lessee or, if applicable, any Single-Purpose
Equityholder makes a general assignment for the benefit of creditors; or




     (vii) any action is taken by any Obligor, Operating Lessee or, if applicable, any
Single-Purpose Equityholder for the purpose of effecting any of the foregoing.



          (e) Change of Control.




     (i) A Change of Control shall occur; or




     (ii) the failure to deliver any Nonconsolidation Opinion required pursuant to
Section 2.3.



          (f) Equity Pledge; Preferred Equity. Any direct or indirect equity interest in or
right to distributions from any Obligor or Operating Lessee shall be subject to a Lien in favor of
any Person, or any Obligor, Operating Lessee or any holder of a direct or indirect interest in any
Obligor or Operating Lessee shall issue preferred equity (or debt granting the holder thereof
rights substantially similar to those generally associated with preferred equity); except that the
following shall be permitted:




     (i) any pledge of direct and indirect equity interests in and rights to
distributions from a Qualified Equityholder meeting the requirements of subclauses (i), (ii)
or (iii) of the definition of Qualified Equityholder; and




     (ii) the issuance of preferred equity interests in a Qualified Equityholder meeting
the requirements of subclauses (i), (ii) or (iii) of the definition of Qualified
Equityholder.


Any act, action or state of affairs that would result in an Event of Default pursuant to this
Section 7.1(f) shall be referred to in this Agreement as a “Prohibited Pledge”.




          (g) Insurance. Any of the Policies required hereunder shall not be maintained in
full force and effect.



          (h) ERISA; Negative Covenants. A default shall occur in the due performance or
observance by any Obligor or Operating Lessee of any term, covenant or agreement contained in
Section 5.8 or in Article VI.



          (i) Legal Requirements. If Maryland Guarantor fails to cure or cause the cure of
any violations of Legal Requirements affecting all or any portion of the Property within 30 days
after Maryland Guarantor first receives written notice of any such violations; provided,
however, if any such violation is reasonably susceptible of cure, but not within such 30
day period, then Maryland Guarantor shall be permitted up to an additional 30 days to cure such



77









 




violation provided that cure is commenced within such initial 30 day period and thereafter
diligently and continuously pursued.




          (j) Other Covenants. A default shall occur in the due performance or observance
by any Obligor of any term, covenant or agreement (other than those referred to in any other
subsection of this Section 7.1) contained in this Agreement or in any of the other Loan
Documents, except that in the case of a default that can be cured by the payment of money, such
default shall not constitute an Event of Default unless and until it shall remain uncured for 10
days after Obligor receives written notice thereof; and in the case of a default that cannot be
cured by the payment of money but is susceptible of being cured within 30 days, such default shall
not constitute an Event of Default unless and until it remains uncured for 30 days after Obligor
receives written notice thereof, provided that within 5 days of its receipt of such written notice,
Obligor delivers written notice to Lender of its intention and ability to effect such cure within
such 30 day period; and if such non-monetary default is not cured within such 30 day period despite
Obligor’s diligent efforts but is susceptible of being cured within 90 days of Obligor’s receipt of
Lender’s original notice, then Obligor shall have such additional time as is reasonably necessary
to effect such cure, but in no event in excess of 90 days from Obligor’s receipt of Lender’s
original notice, provided that prior to the expiration of the initial 30 day period, Obligor
delivers written notice to Lender of its intention and ability to effect such cure prior to the
expiration of such 90 day period.



          (k) Operating Lease. The Operating Lease shall no longer be in effect for any
reason whatsoever, including, without limitation, expiration of the Operating Lease by its terms
absent renewal or extension of the Operating Lease.



          Section 7.2. Remedies.



          (a) During the continuance of an Event of Default, Lender may by written notice to
Borrower, in addition to any other rights or remedies available pursuant to this Agreement, the
Notes (or, with respect to Maryland Guarantor, the Maryland Guaranty), the Mortgage and the other
Loan Documents, at law or in equity, declare by written notice to Borrower all or any portion of
the Indebtedness to be immediately due and payable, whereupon all or such portion of the
Indebtedness shall so become due and payable, and Lender may enforce or avail itself of any or all
rights or remedies provided in the Loan Documents against Obligor and the Collateral (including all
rights or remedies available at law or in equity); provided, however, that,
notwithstanding the foregoing, if an Event of Default specified in paragraph 7.1(d) shall
occur, then the Indebtedness shall immediately become due and payable without the giving of any
notice or other action by Lender. Any actions taken by Lender shall be cumulative and concurrent
and may be pursued independently, singly, successively, together or otherwise, at such time and in
such order as Lender may determine in its sole discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth in this Agreement or in the other Loan Documents.



          (b) If Lender forecloses on the Property, Lender shall apply all net proceeds of such
foreclosure to repay the Indebtedness, the Indebtedness shall be reduced to the extent of such net
proceeds and the remaining portion of the Indebtedness shall remain outstanding and



78









 




secured by the Property and the other Loan Documents, it being understood and agreed by
Borrower that Borrower is liable for the repayment of all the Indebtedness; provided,
however, that at the election of Lender, the Notes shall be deemed to have been accelerated
only to the extent of the net proceeds actually received by Lender with respect to the Property and
applied in reduction of the Indebtedness.




          (c) During the continuance of any Event of Default (including an Event of Default
resulting from a failure to satisfy the insurance requirements specified herein), Lender may, but
without any obligation to do so and without notice to or demand on Obligor and without releasing
Obligor from any obligation hereunder, take any action to cure such Event of Default. Lender may
enter upon any or all of the Property upon reasonable notice to Maryland Guarantor for such
purposes or appear in, defend, or bring any action or proceeding to protect its interest in the
Collateral or to foreclose the Mortgage or collect the Indebtedness. The costs and expenses
incurred by Lender in exercising rights under this Section (including reasonable attorneys’ fees),
with interest at the Default Rate for the period after notice from Lender that such costs or
expenses were incurred to the date of payment to Lender, shall constitute a portion of the
Indebtedness, shall be secured by the Mortgage and other Loan Documents and shall be due and
payable to Lender upon demand therefor.



          (d) Interest shall accrue on any judgment obtained by Lender in connection with its
enforcement of the Loan at a rate of interest equal to the Default Rate.



          Section 7.3. No Waiver. No delay or omission to exercise any remedy, right or
power accruing upon an Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be exercised from time to
time and as often as may be deemed by Lender to be expedient. A waiver of any Default or Event of
Default shall not be construed to be a waiver of any subsequent Default or Event of Default or to
impair any remedy, right or power consequent thereon.



          Section 7.4. Application of Payments after an Event of Default. Notwithstanding
anything to the contrary contained herein, during the continuance of an Event of Default, all
amounts received by Lender in respect of the Loan shall be applied at Lender’s sole discretion
either toward the components of the Indebtedness (e.g., Lender’s expenses in enforcing the
Loan, interest, principal and other amounts payable hereunder) and the Notes in such sequence as
Lender shall elect in its sole discretion, or toward the payment of Property expenses.



ARTICLE VIII




CONDITIONS PRECEDENT



          Section 8.1. Conditions Precedent to Closing. This Agreement shall become
effective on the date that all of the following conditions shall have been satisfied (or waived in
accordance with Section 9.3):



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          (a) Loan Documents. Lender shall have received a duly executed copy of each Loan
Document. Each Loan Document that is to be recorded in the public records shall be in form
suitable for recording.



          (b) Collateral Accounts. Each of the Collateral Accounts shall have been
established with the Cash Management Bank and funded to the extent required under Article
III.



          (c) Opinions of Counsel. Lender shall have received, in each case in form and
substance satisfactory to Lender, (i) a New York legal opinion, (ii) a legal opinion with respect
to the laws of the state in which the Property is located, (iii) a bankruptcy nonconsolidation
opinion with respect to each Person owning at least a 49% direct or indirect equity interest in
Obligor, if applicable, any Single-Purpose Equityholder and any affiliated property manager, and
(iv) a Delaware legal opinion regarding matters related to Single Member LLC’s.



          (d) Organizational Documents. Lender shall have received all documents reasonably
requested by Lender relating to the existence of Sponsor, Obligor and Operating Lessee, the
validity of the Loan Documents and other matters relating thereto, in form and substance
satisfactory to Lender, including:




     (i) Authorizing Resolutions. A certified copy of the resolutions approving
and adopting the Loan Documents to be executed by Obligor, Operating Lessee and Sponsor and
authorizing the execution and delivery thereof.




     (ii) Organizational Documents. Certified copies of the organizational
documents of Sponsor, Obligor, Operating Lessee and, if applicable, any Single-Purpose
Equityholder (including any certificate of formation, certificate of limited partnership,
certificate of incorporation, operating agreement, limited partnership agreement or
by-laws), in each case together with all amendments thereto.




     (iii) Certificates of Good Standing or Existence. Certificates of good
standing or existence for Sponsor, Obligor, Operating Lessee and, if applicable, any
Single-Purpose Equityholder issued as of a recent date by its state of organization and by
the state in which the Property is located.




     (iv) Recycled Entity Certificate. A recycled entity certificate acceptable
to Lender, to the extent that Obligor was formed more than 60 days prior to the date hereof.



          (e) Lease; Material Agreements. Lender shall have received true, correct and
complete copies of all Leases and all Material Agreements.



          (f) Lien Search Reports. Lender shall have received satisfactory reports of
Uniform Commercial Code, tax lien, bankruptcy and judgment searches conducted by a search firm
acceptable to Lender with respect to the Property and Borrower, such searches to be conducted in
such locations as Lender shall have requested.



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          (g) No Default or Event of Default. No Default or Event of Default shall have
occurred and be continuing on such date either before or after the execution and delivery of this
Agreement.



          (h) No Injunction. No Legal Requirement shall exist, and no litigation shall be
pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or
restrain, or impose or result in the imposition of any material adverse condition upon, the making
or repayment of the Loan or the consummation of the Transaction.



          (i) Representations. The representations in this Agreement and in the other Loan
Documents shall be true and correct in all respects on and as of the Closing Date with the same
effect as if made on such date.



          (j) [Intentionally Omitted].



          (k) No Material Adverse Effect. No event or series of events shall have occurred,
affecting Obligor, Operating Lessee, or Sponsor, that Lender reasonably believes has had or is
reasonably expected to result in a Material Adverse Effect.



          (l) Transaction Costs. Borrower shall have paid all transaction costs (or
provided for the direct payment of such transaction costs by Lender from the proceeds of the Loan).



          (m) Insurance. Lender shall have received certificates of insurance on ACORD Form
25 for liability insurance and ACORD Form 28 for casualty insurance demonstrating insurance
coverage in respect of the Property of types, in amounts, with insurers and otherwise in compliance
with the terms, provisions and conditions set forth in this Agreement. Such certificates shall
indicate that Lender and its successors and assigns are named as additional insured on each
liability policy, and that each casualty policy and rental interruption policy contains a loss
payee and mortgagee endorsement in favor of Lender, its successors and assigns.



          (n) Title. Lender shall have received a marked, signed commitment to issue, or a
signed pro-forma version of, a Qualified Title Insurance Policy in respect of the Property, listing
only such exceptions as are reasonably satisfactory to Lender. If the Qualified Title Insurance
Policy is to be issued by, or if disbursement of the proceeds of the Loan are to be made through,
an agent of the actual insurer under the Qualified Title Insurance Policy (as opposed to the
insurer itself), the actual insurer shall have issued to Lender for Lender’s benefit a so-called
“Insured Closing Letter.”



          (o) Zoning. Lender shall have received evidence reasonably satisfactory to Lender
that the Property is in compliance with all applicable zoning requirements (including a zoning
report, a zoning endorsement if obtainable and a letter from the applicable municipality if
obtainable).



          (p) Permits; Certificate of Occupancy. Lender shall have received a copy of all
Permits necessary for the use and operation of the Property and the certificate(s) of



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occupancy, if required, for the Property, all of which shall be in form and substance
reasonably satisfactory to Lender.




          (q) Engineering Report. Lender shall have received a current Engineering Report
with respect to the Property, which report shall be in form and substance reasonably satisfactory
to Lender.



          (r) Environmental Report. Lender shall have received an Environmental Report (not
more than six months old) with respect to the Property that discloses no material environmental
contingencies with respect to the Property.



          (s) Qualified Survey. Lender shall have received a Qualified Survey with respect
to the Property in form and substance reasonably satisfactory to Lender.



          (t) Appraisal. Lender shall have obtained an Appraisal of the Property
satisfactory to Lender.



          (u) Consents, Licenses, Approvals, etc. Lender shall have received copies of all
consents, licenses and approvals, if any, required in connection with the execution, delivery and
performance by Obligor, Sponsor and Operating Lessee, and the validity and enforceability, of the
Loan Documents, and such consents, licenses and approvals shall be in full force and effect.



          (v) Financial Information. Lender shall have received financial information
relating to the Sponsor, Obligor and the Property that is satisfactory to Lender, including,
without limitation, financial statements and operating statements with respect to the Property
(audited to the extent available), in each case for the prior three calendar years and trailing
twelve-month operating statements certified by the Chief Financial Officer of Sponsor.



          (w) [Intentionally Omitted].



          (x) Know Your Customer Rules. At least 10 days prior to the Closing Date, the
Lender shall have received all documentation and other information required by bank regulatory
authorities under applicable “know-your-customer” and anti-money laundering rules and regulations,
including the PATRIOT Act.



          (y) Capital Plan. Lender shall have received and approved the Capital Plan.



          (z) Additional Matters. Lender shall have received such other certificates,
opinions, documents and instruments relating to the Loan as may have been reasonably requested by
Lender. All corporate and other proceedings, all other documents (including all documents referred
to in this Agreement and not appearing as exhibits to this Agreement) and all legal matters in
connection with the Loan shall be reasonably satisfactory in form and substance to Lender.



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ARTICLE IX




MISCELLANEOUS




          Section 9.1. Successors. Except as otherwise provided in this Agreement, whenever
in this Agreement any of the parties to this Agreement is referred to, such reference shall be
deemed to include the successors and permitted assigns of such party. All covenants, promises and
agreements in this Agreement contained, by or on behalf of Obligor, shall inure to the benefit of
Lender and its successors and assigns.



          Section 9.2. GOVERNING LAW.




     (A) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES TO THE EXTENT THE APPLICATION
OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.




     (B) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER, OBLIGOR, OPERATING LESSEE
OR SPONSOR ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
(OTHER THAN ANY ACTION IN RESPECT OF THE CREATION, PERFECTION OR ENFORCEMENT OF A LIEN OR
SECURITY INTEREST CREATED PURSUANT TO ANY LOAN DOCUMENTS NOT GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK) SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK.
OBLIGOR, OPERATING LESSEE AND SPONSOR HEREBY (i) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (ii)
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING, AND (iii) IRREVOCABLY CONSENT TO SERVICE OF PROCESS BY MAIL, PERSONAL SERVICE
OR IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW, AT THE ADDRESS SPECIFIED IN SECTION
9.4 (AND AGREES THAT SUCH SERVICE AT SUCH ADDRESS IS SUFFICIENT TO CONFER PERSONAL
JURISDICTION OVER ITSELF IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT, AND
OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT).



          Section 9.3. Modification, Waiver in Writing. Neither this Agreement nor any
other Loan Document may be amended, changed, waived, discharged or terminated, nor shall any
consent or approval of Lender be granted hereunder, unless such amendment, change, waiver,
discharge, termination, consent or approval is in writing signed by Lender.



          Section 9.4. Notices. All notices, consents, approvals and requests required or
permitted hereunder or under any other Loan Document shall be given either (i) in writing by



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expedited prepaid delivery service, either commercial or United States Postal Service, with proof
of delivery or attempted delivery, addressed as follows (or at such other address and person as
shall be designated from time to time by any party to this Agreement, as the case may be, in a
written notice to the other parties to this Agreement in the manner provided for in this Section)
or (ii) by email at the email addresses provided below, provided that such email notification is
followed by an additional written notice delivered in accordance with clause (i) of this paragraph,
provided, however, that no such additional notification shall be required in the
case of email notice of a payment default, as provided for in Section 7.1(a). A notice
shall be deemed to have been given when delivered or upon refusal to accept delivery.


If to Lender:



Goldman Sachs Commercial Mortgage Capital, L.P.

6011 Connection Drive, Suite 550

Irving, Texas 75039

Attention: Michael Forbes

Email: michael.forbes@archongroup.com



with copies to:



Goldman Sachs Mortgage Company

200 West Street

New York, New York 10282

Attention: Daniel Bennett and Rene J. Theriault

Email: daniel.bennett@gs.com and rene.theriault@gs.com



and



Cleary Gottlieb Steen & Hamilton LLP

One Liberty Plaza

New York, New York 10006

Attention: Michael Weinberger, Esq.

Email: mweinberger@cgsh.com



If to and Obligor:



Tar Heel Borrower LLC and Tar Heel Owner LLC

c/o Pebblebrook Hotel Trust

2 Bethesda Metro Center

Suite 1530

Bethesda, MD 20814

Attention: Raymond D. Martz

Email: rmartz@pebblebrookhotels.com



with a copy to:




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Hunton & Williams LLP

1900 K Street, NW

Suite 1200

Washington, D.C. 20006

Attention: Thomas F. Kaufman

Email: tkaufman@hunton.com




          Section 9.5. TRIAL BY JURY. LENDER, OBLIGOR, OPERATING LESSEE AND SPONSOR, TO THE
FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE
TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR
OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY LENDER, OBLIGOR, OPERATING LESSEE AND SPONSOR AND IS INTENDED TO
ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. LENDER, OBLIGOR, OPERATING LESSEE AND/OR SPONSOR ARE HEREBY AUTHORIZED TO FILE A
COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY OBLIGOR,
OPERATING LESSEE AND SPONSOR.



          Section 9.6. Headings. The Article and Section headings in this Agreement are
included in this Agreement for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.



          Section 9.7. Assignment and Participation.



          (a) Except as explicitly set forth in Sections 2.1 and 2.2, Obligor may
not sell, assign or transfer any interest in the Loan Documents or any portion thereof (including
Obligor’s rights, title, interests, remedies, powers and duties hereunder and thereunder).



          (b) Lender and each assignee of all or a portion of the Loan shall have the right from
time to time in its discretion to sell one or more of the Notes or any interest therein (an
“Assignment”) and/or sell a participation interest in one or more of the Notes (a
“Participation”). Obligor agrees to reasonably cooperate with Lender, at Lender’s request,
in order to effectuate any such Assignment or Participation, and Obligor shall promptly provide
such information, legal opinions and documents relating to Obligor, any Single-Purpose
Equityholder, Sponsor, the Property, the Approved Property Manager and any Tenants as Lender may
reasonably request in connection with such Assignment or Participation. In the case of an
Assignment, (i) each assignee shall have, to the extent of such Assignment, the rights, benefits
and obligations of the assigning Lender as a “Lender” hereunder and under the other Loan Documents,
(ii) the assigning Lender shall, to the extent that rights and obligations hereunder have been
assigned by
it pursuant to an Assignment, relinquish its rights and be released from its obligations under
this Agreement, and (iii) one Lender shall serve as agent for all Lenders and shall be the sole
Lender to whom notices, requests and other communications shall be addressed and the sole party
authorized to grant or withhold consents hereunder on behalf of the Lenders (subject, in each




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case, to appointment of a Servicer, pursuant to Section 9.22, to receive such notices,
requests and other communications and/or to grant or withhold consents, as the case may be) and to
be the sole Lender to designate the account to which payments shall be made by Borrower to the
Lenders hereunder. Goldman Sachs Mortgage Company or, upon the appointment of a Servicer, such
Servicer, shall maintain, or cause to be maintained, as agent for Borrower, a register on which it
shall enter the name or names of the registered owner or owners from time to time of the Notes.
Borrower agrees that upon effectiveness of any Assignment of any Note in part, Borrower will
promptly provide to the assignor and the assignee separate promissory notes in the amount of their
respective interests (but, if applicable, with a notation thereon that it is given in substitution
for and replacement of an original Note or any replacement thereof), and otherwise in the form of
such Note, upon return of the Note then being replaced. The assigning Lender shall notify in
writing each of the other Lenders of any Assignment. Each potential or actual assignee,
participant or investor in a Securitization, and each Rating Agency, shall be entitled to receive
all information received by Lender under this Agreement. After the effectiveness of any
Assignment, the party conveying the Assignment shall provide notice to Borrower and each Lender of
the identity and address of the assignee. Notwithstanding anything in this Agreement to the
contrary, after an Assignment, the assigning Lender (in addition to the assignee) shall continue to
have the benefits of any indemnifications contained in this Agreement that such assigning Lender
had prior to such assignment with respect to matters occurring prior to the date of such
assignment.




          (c) If, pursuant to this Section 9.7, any interest in this Agreement or any Note is
transferred to any transferee that is not a U.S. Person, the transferor Lender shall cause such
transferee, concurrently with the effectiveness of such transfer, (i) to furnish to the transferor
Lender either Form W-8BEN or Form W-8ECI or any other form in order to establish an exemption from,
or reduction in the rate of, U.S. withholding tax on all interest payments hereunder, and (ii) to
agree (for the benefit of Lender and Obligor) to provide the transferor Lender a new Form W-8BEN or
Form W-8ECI or any forms reasonably requested in order to establish an exemption from, or reduction
in the rate of, U.S. withholding tax upon the expiration or obsolescence of any previously
delivered form and comparable statements in accordance with applicable U.S. laws and regulations
and amendments duly executed and completed by such transferee, and to comply from time to time with
all applicable U.S. laws and regulations with regard to such withholding tax exemption.




          Section 9.8. Severability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective to the extent of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement.




          Section 9.9. Preferences; Waiver of Marshalling of Assets. Lender shall have no
obligation to marshal any assets in favor of Obligor or any other party or against or in payment of
any or all of the obligations of Obligor pursuant to this Agreement, the Notes, the Maryland
Guaranty or any other Loan Document. Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by Obligor to any portion of
the obligations of Obligor hereunder and under the Loan Documents. To the extent Obligor
makes a payment or payments to Lender, which payment or proceeds or any portion thereof are




86









 







subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law,
common law or equitable cause, then, to the extent of such payment or proceeds received, the
obligations hereunder or portion thereof intended to be satisfied shall be revived and continue in
full force and effect, as if such payment or proceeds had not been received by Lender. To the
fullest extent permitted by law, Obligor, for itself and its permitted successors and assigns,
waives all rights to a marshalling of the assets of Obligor, and Obligor’s partners and others with
interests in Obligor, or to a sale in inverse order of alienation in the event of foreclosure of
the Mortgage, and agrees not to assert any right under any laws pertaining to the marshalling of
assets, the sale in inverse order of alienation, homestead exemption, the administration of estates
of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under
the Loan Documents to a sale of the Property for the collection of the Indebtedness without any
prior or different resort for collection or of the right of Lender to the payment of the
Indebtedness out of the net proceeds of the Properties in preference to every other claimant
whatsoever. In addition, to the fullest extent permitted by law, Obligor, for itself and its
successors and assigns, waives in the event of foreclosure of the Mortgage, any legal right
otherwise available to Obligor that would require the separate sale of any Collateral or require
Lender to exhaust its remedies against any Collateral before proceeding against any other
Collateral; and further in the event of such foreclosure, Obligor does hereby expressly consent to
and authorize, at the option of Lender, the foreclosure and sale either separately or together of
any combination of the Collateral.




          Section 9.10. Remedies of Obligor. If a claim is made that Lender or its agents have
unreasonably delayed acting or acted unreasonably in any case where by law or under this Agreement,
the Notes, the Mortgage or the other Loan Documents, any of such Persons has an obligation to act
promptly or reasonably, Obligor agrees that no such Person shall be liable for any monetary
damages, and Obligor’s sole remedy shall be limited to commencing an action seeking specific
performance, injunctive relief and/or declaratory judgment. Without in any way limiting the
foregoing, Obligor shall not assert, and hereby waives, any claim against Lender and/or its
affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for
direct, special, indirect, consequential or punitive damages (whether or not the claim therefor is
based on contract, tort or duty imposed by any applicable legal requirement) arising out of, as a
result of, or in any way related to, the Loan Agreement or any other Loan Document or any agreement
or instrument contemplated hereby or thereby or referred to herein or therein, the transactions
contemplated hereby or thereby, the Loan or the use of the proceeds thereof or any act or omission
or event occurring in connection therewith, and Obligor hereby waives, releases and agrees not to
sue upon any such claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.




          Section 9.11. Offsets, Counterclaims and Defenses. All payments made by Borrower
hereunder or under the other Loan Documents (or made by Maryland Guarantor under the Maryland
Guaranty) shall be made irrespective of, and without any deduction for, any setoffs or
counterclaims. Obligor waives the right to assert a counterclaim, other than a
mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender
arising out of or in any way connected with the Notes, the Maryland Guaranty (with respect to
Maryland Guarantor), this Agreement, the other Loan Documents or the Indebtedness. Any assignee of





87









 







Lender’s interest in the Loan shall take the same free and clear of all offsets, counterclaims or
defenses that are unrelated to the Loan.




          Section 9.12. No Joint Venture. Nothing in this Agreement is intended to create a
joint venture, partnership, tenancy-in-common, or joint tenancy relationship between Obligor and
Lender, nor to grant Lender any interest in the Property other than that of mortgagee or lender.




          Section 9.13. Conflict; Construction of Documents. In the event of any conflict
between the provisions of this Agreement and the provisions of the Notes, the Mortgage or any of
the other Loan Documents, the provisions of this Agreement shall prevail.




          Section 9.14. Brokers and Financial Advisors. Obligor and Sponsor each represent that
they have dealt with no financial advisors, brokers, underwriters, placement agents, agents or
finders in connection with the transactions contemplated by this Agreement. Obligor and Sponsor
each agree, jointly and severally, to indemnify and hold Lender harmless from and against any and
all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a
claim by any Person that such Person acted on behalf of Obligor in connection with the transactions
contemplated in this Agreement. The provisions of this Section 9.14 shall survive the
expiration and termination of this Agreement and the repayment of the Indebtedness.




          Section 9.15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. Any counterpart delivered by facsimile, pdf
or other electronic means shall have the same import and effect as original counterparts and shall
be valid, enforceable and binding for the purposes of this Agreement.




          Section 9.16. Estoppel Certificates.




          (a) Obligor agrees at any time and from time to time, to execute, acknowledge and deliver to
Lender, within five days after receipt of Lender’s written request therefor, a statement in writing
setting forth (A) the Principal Indebtedness, (B) the date on which installments of interest and/or
principal were last paid, (C) any offsets or defenses to the payment of the Indebtedness, (D) that
the Notes, this Agreement, the Mortgage and the other Loan Documents are valid, legal and binding
obligations and have not been modified or if modified, giving particulars of such modification, (E)
that neither Obligor nor, to Obligor’s knowledge, Lender, is in default under the Loan Documents
(or specifying any such default), (F) that all Leases are in full force and effect and have not
been modified (except in accordance with the Loan Documents), (G) whether or not any of the Tenants
under the Leases are in material default under the Leases (setting forth the specific nature of any
such material defaults) and (H) such
other matters as Lender may reasonably request. Any prospective purchaser of any interest in
a Loan shall be permitted to rely on such certificate.




          (b) Upon Lender’s written request, Maryland Guarantor shall use commercially reasonable
efforts to obtain from each Tenant whose Lease requires such Tenant to execute and deliver an
estoppel certificate, and shall thereafter promptly deliver to Lender duly




88









 







executed estoppel
certificates from any one or more Tenants under the Leases as requested by Lender, attesting to
such facts regarding the Leases as Lender may reasonably require, including, but not limited to,
attestations that each Lease covered thereby is in full force and effect with no material defaults
thereunder on the part of any party, that rent has not been paid more than one month in advance,
except as security, and that the Tenant claims no defense or offset against the full and timely
performance of its obligations under the Lease. Maryland Guarantor shall not be required to
deliver such certificates more frequently than one time in any 12-month period, other than the
12-month period during which a Securitization occurs or is attempted.




          Section 9.17. General Indemnity; Payment of Expenses; Mortgage Recording Taxes.




          (a) Obligor, at its sole cost and expense, shall protect, indemnify, reimburse, defend and
hold harmless Lender and its officers, partners, members, directors, trustees, advisors, employees,
agents, sub-agents, affiliates, successors, participants and assigns of any and all of the
foregoing (collectively, the “Indemnified Parties”) for, from and against, and shall be
responsible for, any and all Damages of any kind or nature whatsoever that may be imposed on,
incurred by, or asserted against any of the Indemnified Parties arising out of (i) any negligence
or tortious act or omission on the part of Obligor, Operating Lessee, Sponsor or any of their
respective agents, contractors, servants, employees, sublessees, licensees or invitees; (ii) any
accident, injury to or death of persons or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (iii) any use, nonuse or condition in, on or about the
Property any part thereof or on adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (iv) any failure on the part of Obligor, Operating Lessee or Sponsor to
perform or comply with any of the terms of the Loan Documents; (v) performance of any labor or
services or the furnishing of any materials or other property in respect of the Property or any
part thereof; (vi) any failure of the Property, Maryland Guarantor, Operating Lessee or Sponsor to
comply with any Legal Requirements; (vii) 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 under any legal requirement or any liability asserted against any
Indemnified Party with respect thereto; and (viii) any and all claims and demands whatsoever that
may be asserted against any Indemnified Party by reason of any alleged obligations or undertakings
on such party’s part to perform or discharge any of the terms, covenants, or agreements contained
in any Lease, in each case, to the extent resulting, directly or indirectly, from any claim
(including any Environmental Claim) made (whether or not in connection with any legal action, suit,
or proceeding) by or on behalf of any Person; provided, however, that no
Indemnified Party shall have the right to be indemnified hereunder to the extent that such Damages
have been found by a final, non-appealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of such
Indemnified Party.




          (b) If for any reason (including violation of law or public policy) the undertakings to
defend, indemnify, pay and hold harmless set forth in this Section 9.17 are unenforceable
in whole or in part or are otherwise unavailable to Lender or insufficient to hold it harmless,
then Obligor shall contribute to the amount paid or payable by Lender as a result of any Damages
the maximum amount Obligor is permitted to pay under Legal Requirements. The




89









 







obligations of
Obligor under this Section 9.17 will be in addition to any liability that Obligor may
otherwise have hereunder and under the other Loan Documents, will extend upon the same terms and
conditions to any affiliate of Lender and the partners, members, directors, agents, employees and
controlling persons (if any), as the case may be, of Lender and any such affiliate, and will be
binding upon and inure to the benefit of any successors, assigns, heirs and personal
representatives of Obligor, Lender, any such affiliate and any such person.




          (c) At the option of the Indemnified Parties and in their sole discretion, upon written
request by any Indemnified Party, Obligor shall defend such Indemnified Party (if requested by any
Indemnified Party, in the name of the Indemnified Party) by attorneys and other professionals
reasonably approved by such Indemnified Party. Notwithstanding the foregoing, any Indemnified
Party may engage its own attorneys and other professionals to defend or assist it (chosen at
Lender’s sole discretion), and, at the option of such Indemnified Party, its attorneys shall
control the resolution of any claim or proceeding. Upon demand, Obligor shall pay or, in the sole
discretion of the Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable and actual fees and disbursements of attorneys, engineers, environmental consultants,
laboratories and other professionals in connection therewith.




          (d) Any amounts payable to Lender by reason of the application of this Section 9.17
shall be secured by the Mortgage and shall become immediately due and payable and shall bear
interest at the Default Rate from the date Damages are sustained by the Indemnified Parties until
paid.




          (e) The provisions of and undertakings and indemnification set forth in this Section
9.17 shall survive the satisfaction and payment in full of the Indebtedness and termination of
this Agreement.




          (f) Obligor shall reimburse Lender upon receipt of written notice from Lender for (i) all
out-of-pocket costs and expenses incurred by Lender (or any of its affiliates) in connection with
the Transaction and the origination of the Loan, including legal fees and disbursements, fees of
auditors and consultants, accounting fees, and the costs of the Appraisal, the Engineering Report,
the Qualified Title Insurance Policy, the Qualified Survey, the Environmental Report and any other
third-party diligence materials; (ii) all out-of-pocket costs and expenses incurred by Lender (or
any of its affiliates) in connection with (A) monitoring Obligor’s ongoing performance of and
compliance with Obligor’s agreements and covenants contained in this Agreement and the other Loan
Documents on its part to be performed or complied with after the Closing Date, including confirming
compliance with environmental and insurance requirements, (B) the negotiation, preparation,
execution, delivery and administration of any consents, amendments, waivers or other modifications
to this Agreement and the other
Loan Documents and any other documents or matters requested by Obligor or by Lender (including
Leases, Material Agreements, and Permitted Encumbrances), (C) filing, registration or recording
fees and expenses and other similar expenses incurred in creating and perfecting the Liens in favor
of Lender pursuant to this Agreement and the other Loan Documents (including the filing,
registration or recording of any instrument of further assurance) and all federal, state, county
and municipal, taxes (including, if applicable, intangible taxes), search fees, title insurance
premiums, duties, imposts, assessments and charges arising out of or in connection with the
execution and delivery of the Loan Documents, any mortgage supplemental thereto, any




90









 







security
instrument with respect to the Collateral or any instrument of further assurance, (D) enforcing or
preserving any rights, in response to third party claims or the prosecuting or defending of any
action or proceeding or other litigation, in each case against, under or affecting Obligor, this
Agreement, the other Loan Documents or any Collateral and (E) the satisfaction of the Rating
Condition required or requested by Obligor hereunder; and (iii) all actual out-of-pocket costs and
expenses (including attorney’s fees and, if the Loan has been Securitized, special servicing fees)
incurred by Lender (or any of its affiliates) in connection with the enforcement of any obligations
of Obligor, or a Default by Obligor, under the Loan Documents, including any actual or attempted
foreclosure, deed-in-lieu of foreclosure, refinancing, restructuring, settlement or workout and any
insolvency or bankruptcy proceedings (including any applicable transfer taxes).




          Section 9.18. No Third-Party Beneficiaries. This Agreement and the other Loan
Documents are solely for the benefit of Lender and Obligor, and nothing contained in this Agreement
or the other Loan Documents shall be deemed to confer upon anyone other than Lender, Obligor and
Indemnified Parties any right to insist upon or to enforce the performance or observance of any of
the obligations contained herein or therein. All conditions to the obligations of Lender to make
the Loan hereunder are imposed solely and exclusively for the benefit of Lender, and no other
Person shall have standing to require satisfaction of such conditions in accordance with their
terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict
compliance with any or all thereof, and no other Person shall under any circumstances be deemed to
be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part
by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.




          Section 9.19. Recourse.




          (a) Except for any indemnification by Obligor under this Agreement, the Maryland Guaranty or
any of the other Loan Documents, the Loan shall not be recourse to Maryland Guarantor and,
subject to Section 9.19(c), Lender’s recourse shall be solely to Borrower, the Property and
the Collateral, except as set forth below. In addition, no recourse shall be had for the Loan
against any other Person, including any affiliate of Obligor or any officer, director, partner or
equityholder of Obligor or any such affiliate, unless expressly set forth in a Loan Document or
other written agreement to which such Person is a party.




          (b) Obligor shall indemnify Lender and hold Lender harmless from and against any and all
Damages to Lender (including the legal and other expenses of enforcing the obligations of Obligor
under this Section 9.19, Maryland Guarantor under the Maryland
Guaranty and the Sponsor under the Guaranty and the Completion Guaranty) resulting from or
arising out of any of the following (the “Indemnified Liabilities”), which Indemnified
Liabilities shall be guaranteed by Sponsor pursuant to the Guaranty:





     (i) any intentional or grossly negligent physical Waste with respect to the Property or
FF&E committed or permitted by Obligor, Operating Lessee, the Sponsor or any of their
respective affiliates;



91









 






     (ii) any fraud or intentional misrepresentation committed by Obligor, Operating Lessee,
the Sponsor or any of their respective affiliates;




     (iii) any willful misconduct by Obligor, Operating Lessee, the Sponsor or any of their
respective affiliates in violation of the Loan Documents (including wrongful interference by
any such Person with the exercise of remedies by Lender during the continuance of an Event
of Default);




     (iv) the misappropriation or misapplication by Obligor, Operating Lessee, the Sponsor
or any of their respective affiliates of any funds in violation of the Loan Documents
(including misappropriation or misapplication of Revenues, security deposits and/or Loss
Proceeds and the violation of the last sentence of Section 5.7(d));




     (v) voluntary Debt prohibited hereunder, provided that, for the purpose of this clause
(v), Debt will be regarded as voluntary if such Debt is incurred voluntarily or incurred
involuntarily and not repaid despite the availability of sufficient cash flow from the
Property;




     (vi) any breach by Obligor, Operating Lessee or the Sponsor of any representation or
covenant regarding environmental matters contained in this Agreement or in the Environmental
Indemnity;




     (vii) the failure to pay or maintain the Policies or pay the amount of any deductible
required thereunder following a Casualty or other insurance claim, provided Lender permits
cash flow from the Property to be applied for such purpose;




     (viii) the failure of any Obligor or Operating Lessee to be, and to at all times have
been, a Single-Purpose Entity;




     (ix) removal of personal property or FF&E from the Property during or in anticipation
of an Event of Default, unless replaced with personal property or FF&E, as applicable, of
the same utility and of the same or greater value and utility;




     (x) any fees or commissions paid by Obligor or Operating Lessee to any affiliate in
violation of the terms of the Loan Documents;




     (xi) any bankruptcy of any Obligor or Operating Lessee, provided that, for the purpose
of this clause (xi) “Damages” shall be limited to the amount by which such costs and
expenses exceed the costs and expenses Lender would have incurred in an uncontested
foreclosure on the Property (for the avoidance of doubt, the recourse
described in this clause shall be in addition to the full recourse for bankruptcy
described below);




     (xii) the failure of Maryland Guarantor to maintain the required account balance in the
Maryland Guarantor FF&E Account (it being agreed that Damages in such event shall include
the amount of any funds not deposited to the Maryland Guarantor FF&E Account);



92









 






     (xiii) any and all liabilities, contingent or otherwise, arising from or related to (x)
the actions, conduct and/or operating history of Obligor (or any Person merged into Obligor)
prior to the Closing Date and (y) Obligor’s ownership (or the ownership of any Person merged
into Obligor) of assets prior to the Closing Date that do not constitute a portion of the
Collateral;




     (xiv) the use of an IDOT structure (i.e., the ownership of the Property by Maryland
Guarantor rather than by Borrower) in the origination of the Loan (it being agreed that
Damages in such event shall include any increased costs and expenses of Lender in connection
with foreclosure on the Property due to the IDOT structure); and




     (xv) any breach by Maryland Guarantor or Operating Lessee of any representation or
covenant contained in the Subordination of Operating Lease.



     In addition to the foregoing, the Loan shall be fully recourse to Obligor and Sponsor, jointly
and severally, upon (i) any unauthorized Transfer of the Property, unauthorized transfer of any of
the Collateral (including unauthorized Liens and encumbrances on the Collateral) or Change of
Control, in each case, in violation of the Loan Documents, (ii) the occurrence of any filing by any
Obligor or Operating Lessee under the Bankruptcy Code or any joining or colluding by any Obligor,
Operating Lessee or any of their respective affiliates (including Sponsor) in the filing of an
involuntary case in respect of any Obligor or Operating Lessee under the Bankruptcy Code
(provided, however, that if such involuntary case is dismissed within 60 days of
such filing the Loan shall not be fully recourse to Obligor and Sponsor, however Obligor and
Sponsor shall indemnify Lender and hold Lender harmless from and against any and all Damages to
Lender arising from or related to the filing of such involuntary case) or (iii) the failure of any
Obligor to be, and to at all times have been, a Single-Purpose Entity, which failure results in a
substantive consolidation of such Obligor with any affiliate in a bankruptcy or similar proceeding
(or the filing of a motion for substantive consolidation in bankruptcy citing any such failure,
provided, however, that if such motion is dismissed within 60 days of filing the
Loan shall not be fully recourse to Obligor and Sponsor, however Obligor and Sponsor shall
indemnify Lender and hold Lender harmless from and against any and all Damages to Lender arising
from or related to such motion). The Loan shall be fully recourse to Sponsor in an amount equal to
its unpaid Guaranteed Obligations (as such term is defined in the Completion Guaranty) under the
Completion Guaranty.



          (c) The foregoing limitations on personal liability shall in no way impair or constitute a
waiver of the validity of the Notes, the Indebtedness secured by the Collateral, or the Liens on
the Collateral, or the right of Lender, as mortgagee or secured party, to foreclose and/or enforce
its rights with respect to the Collateral after an Event of Default. Nothing in this
Agreement shall be deemed to be a waiver of any right which Lender may have under the
Bankruptcy Code to file a claim for the full amount of the debt owing to Lender by Borrower or to
require that all Collateral shall continue to secure all of the Indebtedness owing to Lender in
accordance with the Loan Documents. Lender may seek a judgment on the Note (and, if necessary,
name Borrower in such suit) as part of judicial proceedings to foreclose under the Mortgage or to
foreclose pursuant to any other Loan Documents, or as a prerequisite to any such foreclosure or to
confirm any foreclosure or sale pursuant to power of sale thereunder, and in the event any suit is
brought on the Notes, or with respect to any Indebtedness or any judgment




93









 







rendered in such judicial
proceedings, such judgment shall constitute a Lien on and will be and can be enforced on and
against the Collateral and the rents, profits, issues, products and proceeds thereof. Nothing in
this Agreement shall impair the right of Lender to accelerate the maturity of the Note upon the
occurrence of an Event of Default, nor shall anything in this Agreement impair or be construed to
impair the right of Lender to seek personal judgments, and to enforce all rights and remedies under
applicable law, jointly and severally against any guarantors to the extent allowed by any
applicable guarantees. The provisions set forth in this Section 9.19 are not intended as a
release or discharge of the obligations due under the Note or under any Loan Documents, but are
intended as a limitation, to the extent provided in this Section, on Lender’s right to sue for a
deficiency or seek a personal judgment against Borrower or Sponsor except as required in order to
realize on the Collateral.




          Section 9.20. Right of Set-Off. In addition to any rights now or hereafter granted
under applicable law or otherwise, and not by way of limitation of any such rights, during the
continuance of an Event of Default, Lender may from time to time, without presentment, demand,
protest or other notice of any kind (all of such rights being hereby expressly waived), set-off and
appropriate and apply any and all deposits (general or special) and any other indebtedness at any
time held or owing by Lender (including branches, agencies or affiliates of Lender wherever
located) to or for the credit or the account of Obligor against the obligations and liabilities of
Obligor to Lender hereunder, under the Notes, the Maryland Guaranty, the other Loan Documents or
otherwise, irrespective of whether Lender shall have made any demand hereunder and although such
obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such
set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default
even though such charge is made or entered on the books of Lender subsequent thereto.




          Section 9.21. Exculpation of Lender. Lender neither undertakes nor assumes any
responsibility or duty to Obligor or any other party to select, review, inspect, examine,
supervise, pass judgment upon or inform Obligor or any third party of (a) the existence, quality,
adequacy or suitability of Appraisals of the Property or other Collateral, (b) any environmental
report, or (c) any other matters or items, including engineering, soils and seismic reports that
are contemplated in the Loan Documents. Any such selection, review, inspection, examination and
the like, and any other due diligence conducted by Lender, is solely for the purpose of protecting
Lender’s rights under the Loan Documents, and shall not render Lender liable to Obligor or any
third party for the existence, sufficiency, accuracy, completeness or legality thereof.




          Section 9.22. Servicer. Lender may delegate any and all rights and obligations of
Lender hereunder and under the other Loan
Documents to the Servicer upon notice by Lender to Borrower, whereupon any notice or consent
from the Servicer to Borrower, and any action by Servicer on Lender’s behalf, shall have the same
force and effect as if Servicer were Lender.




          Section 9.23. No Fiduciary Duty.




          (a) Obligor acknowledges that, in connection with this Agreement, the other Loan Documents and
the Transaction, Lender has relied upon and assumed the accuracy and completeness of all of the
financial, legal, regulatory, accounting, tax and other information provided to, discussed with or
reviewed by Lender for such purposes, and Lender does not




94









 







assume any liability therefor or
responsibility for the accuracy, completeness or independent verification thereof. Lender, its
affiliates and their respective stockholders and employees (for purposes of this Section, the
“Lending Parties”) have no obligation to conduct any independent evaluation or appraisal of
the assets or liabilities (including any contingent, derivative or off-balance sheet assets and
liabilities) of Sponsor, Obligor or any other Person or any of their respective affiliates or to
advise or opine on any related solvency or viability issues.




          (b) It is understood and agreed that (i) the Lending Parties shall act under this Agreement
and the other Loan Documents as an independent contractor, (ii) the Transaction is an arm’s-length
commercial transactions between the Lending Parties, on the one hand, and Obligor, on the other,
(iii) each Lending Party is acting solely as principal and not as the agent or fiduciary of
Obligor, Sponsor or their respective affiliates, stockholders, employees or creditors or any other
Person and (iv) nothing in this Agreement, the other Loan Documents, the Transaction or otherwise
shall be deemed to create (a) a fiduciary duty (or other implied duty) on the party of any Lending
Party to Sponsor, Obligor, any of their respective affiliates, stockholders, employees or
creditors, or any other Person or (b) a fiduciary or agency relationship between Sponsor, Obligor
or any of their respective affiliates, stockholders, employees or creditors, on the one hand, and
the Lending Parties, on the other. Obligor agrees that neither it nor Sponsor nor any of their
respective affiliates shall make, and hereby waives, any claim against the Lending Parties based on
an assertion that any Lending Party has rendered advisory services of any nature or respect, or
owes a fiduciary or similar duty to Obligor, Sponsor of their respective affiliates, stockholders,
employees or creditors. Nothing in this Agreement or the other Loan Documents is intended to
confer upon any other Person (including affiliates, stockholders, employees or creditors of Obligor
and Sponsor) any rights or remedies by reason of any fiduciary or similar duty.




          (c) Obligor acknowledges that it has been advised that the Lending Parties are a full service
financial services firm engaged, either directly or through affiliates in various activities,
including securities trading, investment banking and financial advisory, investment management,
principal investment, hedging, financing and brokerage activities and financial planning and
benefits counseling for both companies and individuals. In the ordinary course of these
activities, the Lending Parties may make or hold a broad array of investments and actively trade
debt and equity securities (or related derivative securities) and/or financial instruments
(including loans) for their own account and for the accounts of their customers and may at any time
hold long and short positions in such securities and/or instruments. Such investment and other
activities may involve securities and instruments of affiliates of Obligor, including
Sponsor, as well as of other Persons that may (i) be involved in transactions arising from or
relating to the Transaction, (ii) be customers or competitors of Obligor, Sponsor and/or their
respective affiliates, or (iii) have other relationships with Obligor, Sponsor and/or their
respective affiliates. In addition, the Lending Parties may provide investment banking,
underwriting and financial advisory services to such other Persons. The Lending Parties may also
co-invest with, make direct investments in, and invest or co-invest client monies in or with funds
or other investment vehicles managed by other parties, and such funds or other investment vehicles
may trade or make investments in securities of affiliates of Obligor, including Sponsor, or such
other Persons. The Transaction may have a direct or indirect impact on the investments, securities
or instruments referred to in this paragraph. Although the Lending Parties in the course of such
other activities and relationships may acquire information about the Transaction





95












 




or other Persons that may be the subject of the Transaction, the Lending Parties shall have no
obligation to disclose such information, or the fact that the Lending Parties are in possession of
such information, to Obligor, Sponsor or any of their respective affiliates or to use such
information on behalf of Obligor, Sponsor or any of their respective affiliates.




          (d) Obligor acknowledges and agrees that Obligor has consulted its own legal and financial
advisors to the extent it deemed appropriate and that it is responsible for making its own
independent judgment with respect to this Agreement, the other Loan Documents, the Transaction and
the process leading thereto.




          Section 9.24. Obligor Information. Obligor shall make available to Lender all
information concerning its business and operations that Lender may reasonably request, provided
that disclosure of such information does not and will not violate any securities laws or violate
the terms of any confidentiality agreement between Obligor and/or any affiliate of Obligor on the
one hand, and any third party, on the other hand. Lender shall have the right to disclose any and
all information provided to Lender by Obligor or Sponsor regarding Obligor, Sponsor, the Loan and
the Property (i) to affiliates of Lender and to Lender’s agents and advisors, (ii) to any bona fide
or potential assignee, transferee or participant in connection with the contemplated assignment,
transfer, participation or Securitization of all or any portion of the Loan or any participations
therein or by any direct or indirect contractual counterparties (or the professional advisors
thereto) to any swap or derivative transaction relating to Obligor and its obligations, in each
case, to the extent reasonably required by such Person, (iii) to any Rating Agency in connection
with a Securitization or as otherwise required in connection with a disposition of the Loan, (iv)
to any Person necessary or desirable in connection with the exercise of any remedies hereunder or
under any other Loan Document, (v) to any governmental agency or representative thereof or by the
National Association of Insurance Commissioners or pursuant to legal or judicial process and (vi)
in any Disclosure Document (as defined in the Cooperation Agreement). In addition, Lender may
disclose the existence of this Agreement and the information about this Agreement to market data
collectors, similar services providers to the lending industry, and service providers to Lender in
connection with the administration and management of this Agreement and the other Loan Documents.
Each party hereto (and each of their respective affiliates, employees, representatives or other
agents) may disclose to any and all Persons, without limitation of any kind, the tax treatment and
tax structure of the Transaction and all materials of any kind (including opinions and other tax
analyses) that are provided to any such party relating to such tax treatment and tax structure.
For the purpose of this Section 9.24, “tax structure” means any facts relevant to the
federal income tax treatment of the Transaction but does not include information relating to the
identity of any of the parties hereto or any of their respective affiliates.




          Section 9.25. PATRIOT Act Records. Lender hereby notifies Obligor that pursuant to
the requirements of the PATRIOT Act, it is required to obtain, verify and record information that
identifies Obligor and Sponsor, which information includes the name and address of Obligor and
Sponsor and other information that will allow Lender to identify Obligor or Sponsor in accordance
with the PATRIOT Act.




          Section 9.26. Prior Agreements. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN
THE ENTIRE AGREEMENT OF THE PARTIES HERETO



96









 






AND THERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED
HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR
WRITTEN, INCLUDING ANY TERM SHEETS, CONFIDENTIALITY AGREEMENTS AND COMMITMENT LETTERS, ARE
SUPERSEDED BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT THAT ANY ORIGINATION
FEE SPECIFIED IN ANY TERM SHEET, COMMITMENT LETTER OR FEE LETTER SHALL BE AN OBLIGATION OF OBLIGOR
AND SHALL BE PAID AT CLOSING, AND ANY INDEMNIFICATIONS, FLEX PROVISION, EXIT FEES AND THE LIKE
PROVIDED FOR THEREIN SHALL SURVIVE THE CLOSING).




          Section 9.27. Publicity. If the Loan is made, Lender may issue press releases,
advertisements and other promotional materials describing in general terms or in detail Lender’s
participation in such transaction, and may utilize photographs of the Property in such promotional
materials. Obligor shall not make any references to Lender in any press release, advertisement or
promotional material issued by Obligor or Sponsor, unless Lender shall have approved of the same in
writing prior to the issuance of such press release, advertisement or promotional material.




          Section 9.28. Delay Not a Waiver. Neither any failure nor any delay on the part of
Lender in insisting upon strict performance of any term, condition, covenant or agreement, or
exercising any right, power, remedy or privilege hereunder, or under the Note or under any other
Loan Document, or under any other instrument given as security therefor, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other
future exercise, or the exercise of any other right, power, remedy or privilege. In particular,
and not by way of limitation, by accepting payment after the due date of any amount payable under
this Agreement, the Note or any other Loan Document, Lender shall not be deemed to have waived any
right either to require prompt payment when due of all other amounts due under this Agreement, the
Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of
any such other amount.




          Section 9.29. Schedules and Exhibits Incorporated. The Schedules and Exhibits annexed
hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set
forth in the body hereof.




          Section 9.30. Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default
if such action is taken or condition exists.




          Section 9.31. Joint and Several Liability; Contribution. The representations,
covenants, warranties and obligations of Obligor hereunder are joint and several. In the event of
any payment by Borrower of any amount due to Lender under this Agreement, Borrower shall be
entitled, after payment in full of the Note and the satisfaction of all the Obligor’s other
obligations to the Lender under the Loan Documents, to contribution from Maryland Guarantor



97









 






for the amounts so paid. Borrower’s right to such contribution shall be subordinate in all respects to the
Loan.




[The remainder of this page is intentionally blank; signatures follow]



98









 





          Lender, Borrower and Maryland Guarantor are executing this Agreement as of the date first
above written.




	 	 	 	 	 
	 	LENDER:

 	 
	 	GOLDMAN SACHS COMMERCIAL MORTGAGE

CAPITAL, L.P., a Delaware limited partnership

 	 
	 	By:  	/s/ Rene Theriault
 	 
	 	 	Name:  	Rene Theriault      	 
	 	 	Title:  	Director 	 
	 
	 	BORROWER: 




TAR HEEL BORROWER LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Raymond D. Martz
 	 
	 	 	Name:  	Raymond D. Martz 	 
	 	 	Title:  	President 	 
	 
	 	MARYLAND GUARANTOR:




TAR HEEL OWNER LLC,

a Delaware limited liability company

 	 
	 	By:  	/s/ Raymond D. Martz
 	 
	 	 	Name:  	Raymond D. Martz 	 
	 	 	Title:  	President 	 



99









 







	 	 	 	 	 



Exhibit A




Organizational Chart



OWNER ORGANIZATIONAL CHART

Bethesda Doubletree Hotel







 









 





Exhibit B




Form of Tenant Notice



[BORROWER’S LETTERHEAD]



                    , 20___



	 	 	 	 	 

	 

	 	Re:
	 	Lease dated [                    ], 200___between [                    ],
	 

	 	 	 	as Landlord, and [                    ], as Tenant,
	 

	 	 	 	concerning premises known as [                    ] (the “Building”).





Dear Tenant:




     [As of                     , 200_,                     , the owner of the Building, has transferred the Building to
                     (the “New Landlord”).] The undersigned hereby directs and authorizes you to make all
rental payments and other amounts payable by you pursuant to your lease as follows:


(x) If the payment is made by wire transfer, you shall transfer the applicable funds to the
following account::



Bank:

Account Name

Account No.:

ABA No.:

Contact:



(y) If the payment is made by check, you shall deliver your payment to the following address:
[LOCKBOX ADDRESS].




     [In addition, please amend the insurance policies that you are required to maintain under your
lease to include the new owner as an additional insured thereon.]



     The instructions set forth herein are irrevocable and are not subject to modification by us or
the New Landlord in any manner. Only [name of then-current Lender], or its successors and assigns,
may by written notice to you rescind or modify the instructions contained herein.



     Thank you in advance for your cooperation and if you have any questions, please call                     
at (___) ___-                    .



Very truly yours,



 









 





Exhibit C




Summary Operating Statement

10th Edition USALI Summary Operating Statement



Revenue

Rooms

Food and Beverage

Other Operated Departments

Rentals and Other Income

Total Revenue




Departmental Expenses

Rooms

Food and Beverage

Other Operated Departments

Total Departmental Expenses




Total Departmental Income




Undistributed Operating Expenses

Administrative and General

Sales and Marketing

Property Operations and Maintenance

Utilities

Total Undistributed Expenses




Gross Operating Profit




Management Fees




Income Before Fixed Charges




Fixed Charges

Rent

Property and Other Taxes

Insurance

Fixed Charges




Net Operating Income




Less: Replacement Reserves




Adjusted Net Operating Income






 









 








Schedule A




Property


All that lot of ground situated in Montgomery County, State of Maryland and described as follows:



BEING all that tract or parcel of land shown as Lot 622 on a plat of Subdivision entitled
“Woodmont”, recorded among the Land Records of Montgomery County, Maryland in Plat Book 88 at Plat
Number 9370, and being more particularly described as follows:



BEGINNING FOR THE SAME at a point at the southwest corner of the aforesaid Lot 622, said point also
lying on the easterly right-of-way line of Woodmont Avenue; thence with the outline of said Lot 622
for the next 4 courses and distances, and with said right-of-way.



1. North 09 degrees 29 minutes 20 seconds West, 125.00 feet to a point thence leaving said
right-of-way line



2. North 80 degrees 30 minutes 40 seconds East, 202.77 feet to a point on the westerly right-of-way
line of Wisconsin Avenue; thence with said right-of-way line



3. South 09 degrees 20 minutes 00 seconds East, 125.00 feet to a point; thence leaving said
right-of-way line



4. South 80 degrees 30 minutes 40 seconds West, 202.43 feet to a point of beginning, containing
25,325 square feet or 0.5841 acres of land.



The improvements thereon being known as 8120 Wisconsin Avenue, Bethesda, Maryland 20814.



Tax Account No. 07-00550732





 











 





Schedule B




Exception Report



None.



 









 





Schedule C




Deferred Maintenance Conditions




	1.	 	Repair hydraulic leak in the hydraulic elevator equipment room associated with elevator
number 5 and observed in the Environmental Report. Remove all spilled hydraulic fluid and
clean staining observed in the Environmental Report. Following completion of the Capital
Plan, re-inspect elevator equipment room to confirm successful remediation of environmental
issues.
	 
	2.	 	Update and maintain an O&M Plan to reflect any known asbestos containing materials at
the Hotel. Should future renovation/demolition activities impact the remaining asbestos
containing materials, a contractor holding a current Maryland Asbestos Abatement license
should perform abatement of all identified asbestos-containing materials. The abatement
contractor must comply with Maryland laws, regulations and standards.
	 
	3.	 	Remediate water damage and mold identified in services areas, vending machine areas,
parking garage, certain guest bathrooms and certain exterior features, as observed in the
Environmental Report. Following completion of the Capital Plan, re-inspect subject areas to
confirm remediation of water damage and mold.




 









 











Schedule D




Unfunded Obligations



None.



 









 





Schedule E




Material Agreements




	1.	 	Management Agreement dated June 4, 2010 by Tar Heel Lessee LLC and Thayer Lodging
Group, Inc.
	 
	2.	 	Franchise License Agreement dated June 4, 2010 by Tar Heel Lessee LLC and Doubletree
Franchise LLC.




 









 











Schedule F




Capital Plan



Schedule F-1 — Parking Component


Target Completion Date: June 20, 2011.





Construction generally in accordance with November 24, 2010 Project Manual for Doubletree
Hotel Parking Garage Repairs, prepared by Ares Engineering, Inc./Building Evaluations, LLC
(the “Project Manual”) per the completion schedules described on page L101 therein.
Items marked as “Alternate #1, Alternate #2, and Alternate #3 shall not be required, but may
be completed at Borrower’s option. For the avoidance of doubt, the plans and
specifications are included in the following sections of Project Manual:




	 	a.	 	Cover Page
	 
	 	b.	 	L101 — L106
	 
	 	c.	 	A100, A110, A120, A130, A140, A150, A160, A170
	 
	 	d.	 	B100, B110, B120, B130, B140
	 
	 	e.	 	C100, C110, C120, C130
	 
	 	f.	 	D100, D110, D120, D130, D140, D150, D160
	 
	 	g.	 	Section 01040-1 & 2
	 
	 	h.	 	Section 01100-1
	 
	 	i.	 	Section 01400-1
	 
	 	j.	 	Section 01500-1 & 2
	 
	 	k.	 	Section 01700-1 & 2
	 
	 	l.	 	Section 02140-1
	 
	 	m.	 	Section 02150-1 & 2
	 
	 	n.	 	Section 02761-1 & 2
	 
	 	o.	 	 Section 02780-1 & 2
	 
	 	p.	 	Section 03010-1 & 2
	 
	 	q.	 	Section 03100-1 & 2
	 
	 	r.	 	Section 03325-1 thru 4
	 
	 	s.	 	Section 03730-1 thru 3
	 
	 	t.	 	Section 03910-1 & 2
	 
	 	u.	 	Section 07570-1 thru 3
	 
	 	v.	 	Section 07901-1 thru 3
	 
	 	w.	 	Section 15010-1 & 2
	 
	 	x.	 	Section 15140-1 & 2
	 
	 	y.	 	Section 15410-1 & 2
	 
	 	z.	 	Section 16050-1 thru 3




 









 











Schedule F-2 — PIP Component



Target Completion Date: May 20, 2011.



All items described in the Product Improvement Plan for the Doubletree Hotel Bethesda, MD dated
with a “Final PIP Approval Date” of April 6, 2010 attached as Exhibit A to the Franchise
License Agreement for the Doubletree Hotel Bethesda, dated June 4, 2010, between Tar Heel Lessee
LLC and Doubletree Franchise LLC.










 









 








Schedule F-3 — Other Capital Improvements Component



Target Completion Date: May 20, 2011.





The following additional projects, in each case in the manner approved by Approved
Franchisor and in compliance with Franchise Agreement and PIP requirements:




	 	a.	 	With respect to corridors:






	 	1.	 	Paint millwork and ceilings.
	 
	 	2.	 	Paint and repair exterior/corridor side
of guestroom and other corridor doors.






	 	b.	 	With respect to guestrooms:






	 	1.	 	Conversion of 9 hotel rooms to extended
stay product with a quality of construction, FF&E and amenities
consistent with the majority of other 260 rooms in the hotel and
additionally with kitchen facilities appropriate to an extended stay
product.
	 
	 	2.	 	Conversion of room #1218 to the
270th hotel room with a quality of construction, FF&E and
amenities consistent with the majority of other 269 rooms in the hotel.
	 
	 	3.	 	Cover PTAC units.






	 	c.	 	With respect to guest bathrooms:






	 	1.	 	Paint/repair ceilings.






	 	d.	 	With respect to the lobby area:






	 	1.	 	Removal of the current breakfast counter
and construction of a soft seating area adjacent to the lobby with a
quality of construction, FF&E and amenities consistent with other hotel
public areas.
	 
	 	2.	 	Construction and fit out of the former
sushi bar area to a coffee kiosk with a quality of construction
consistent with other hotel public areas.
	 
	 	3.	 	Construction of main entrance with a
quality of construction, FF&E and amenities consistent with other hotel
public areas.






	 	e.	 	With respect to ADA compliance:






	 	1.	 	Install compliant call alarms in the
accessible unisex bathrooms.
	 
	 	2.	 	Acquire four additional hearing impaired
loaner kits.






	 	f.	 	With respect to pool:






	 	1.	 	Resurface pool.






	 	g.	 	With respect to exterior facade:






	 	1.	 	Repair water damage to section of soffit
at southwest corner of the building.






	 	h.	 	With respect to interior finishes:






	 	1.	 	Repair water damage in the third floor
men’s bathroom.
	 
	 	2.	 	Patch ceiling in third floor men’s
bathroom.














 









 








Schedule G




Leases



None.