Exhibit 10.2





EXHIBIT
10.2




 





AMENDED AND RESTATED LOAN AGREEMENT




Dated as of June 6, 2008




between




PGRT ESH, INC.,

as Borrower,




and




CITICORP USA, INC.,

as Lender




 




 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION
	 	 	1	 
	Section 1.1 Definitions
	 	 	1	 
	Section 1.2 Principles of Construction
	 	 	13	 
	II. GENERAL TERMS
	 	 	13	 
	Section 2.1 Loan
	 	 	13	 
	Section 2.2 Interest; Payments; Late Payment Charge; Restructuring Fee; Exit Fee
	 	 	14	 
	Section 2.3 Prepayments
	 	 	17	 
	Section 2.4 Release on Payment in Full
	 	 	20	 
	Section 2.5 Due Diligence Deposit Fee
	 	 	20	 
	III. CASH MANAGEMENT
	 	 	21	 
	Section 3.1 Establishment of Blocked Account
	 	 	21	 
	IV. REPRESENTATIONS AND WARRANTIES
	 	 	21	 
	Section 4.1 Borrower Representations
	 	 	21	 
	Section 4.2 Survival of Representations
	 	 	26	 
	V. BORROWER COVENANTS
	 	 	27	 
	Section 5.1 Affirmative Covenants
	 	 	27	 
	Section 5.2 Negative Covenants
	 	 	31	 
	VI. DEFAULTS
	 	 	34	 
	Section 6.1 Event of Default
	 	 	34	 
	Section 6.2 Remedies
	 	 	37	 
	Section 6.3 Remedies Cumulative; Waivers
	 	 	39	 
	Section 6.4 Rights to Cure Defaults
	 	 	39	 
	Section 6.5 Power of Attorney
	 	 	40	 
	VII. SPECIAL PROVISIONS
	 	 	40	 
	Section 7.1 Sale of Note
	 	 	40	 
	Section 7.2 Servicer
	 	 	40	 
	Section 7.3 Reinstatement
	 	 	40	 
	VIII. MISCELLANEOUS
	 	 	40	 
	Section 8.1 Survival
	 	 	40	 






 


i









 







	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Section 8.2 Lender’s Discretion
	 	 	40	 
	Section 8.3 Governing Law
	 	 	41	 
	Section 8.4 Modification, Waiver in Writing
	 	 	41	 
	Section 8.5 Delay Not a Waiver
	 	 	41	 
	Section 8.6 Notices
	 	 	42	 
	Section 8.7 Trial by Jury
	 	 	43	 
	Section 8.8 Headings
	 	 	43	 
	Section 8.9 Severability
	 	 	43	 
	Section 8.10 Preferences
	 	 	43	 
	Section 8.11 Waiver of Notice
	 	 	44	 
	Section 8.12 Remedies of Borrower
	 	 	44	 
	Section 8.13 Expenses; Indemnity
	 	 	44	 
	Section 8.14 Offsets, Counterclaims and Defenses
	 	 	45	 
	Section 8.15 No Joint Venture or Partnership; No Third Party Beneficiaries
	 	 	46	 
	Section 8.16 Publicity
	 	 	46	 
	Section 8.17 Waiver of Marshalling of Assets
	 	 	46	 
	Section 8.18 Waiver of Counterclaim
	 	 	46	 
	Section 8.19 Conflict; Construction of Documents; Reliance
	 	 	46	 
	Section 8.20 Brokers and Financial Advisors
	 	 	47	 
	Section 8.21 Prior Agreements
	 	 	47	 
	Section 8.22 Counterparts: Telecopied Signatures
	 	 	47	 
	IX. CONDITIONS OF EFFECTIVENESS
	 	 	47	 
	Section 9.1 Conditions to Effectiveness
	 	 	47	 






	 	 	 
	Schedule
	 	 
	 
	 	 
	Schedule 2.3.2(b)

	 	Scheduled Property
	 
	 	 
	Schedule 4.1.26

	 	Collateral Entities
	 
	 	 
	Schedule 4.1.28

	 	Certain Defaults
	 
	 	 
	Exhibit
	 	 
	 
	 	 
	Exhibit A

	 	Pledge Agreement





 


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AMENDED AND RESTATED LOAN AGREEMENT




THIS AMENDED AND RESTATED LOAN AGREEMENT, dated as of June 6, 2008 (as amended, restated,
replaced, supplemented or otherwise modified from time to time, this “Agreement”), between
CITICORP USA, INC., a Delaware corporation having an address at 101 John F. Kennedy Parkway, Short
Hills, New Jersey 07078 (“Lender”), and PGRT ESH, INC., a Delaware corporation, having its
principal place of business at 77 West Wacker Drive, Suite 3900, Chicago, Illinois 60601
(“Borrower”).



W I T N E S S E T H:




WHEREAS, pursuant to a Loan Agreement dated as of June 29, 2007 (the “2007 Loan
Agreement”) between Borrower and Lender, Borrower borrowed $120,000,000 from Lender, to be
repaid in full on June 10, 2008 (the “Original Maturity Date”);



WHEREAS, Borrower has requested Lender to extend the Original Maturity Date for approximately
one year, which Lender is willing to do, subject to amending certain other terms of the 2007 Loan
Agreement; and



WHEREAS, Borrower and Lender have agreed to amend and restate in its entirety the 2007 Loan
Agreement.



NOW, THEREFORE, in consideration of Lender’s agreement to extend the Original Maturity Date
and the other covenants, agreements, representations and warranties set forth in this Agreement,
the parties hereto hereby covenant, agree, represent and warrant as follows:



I. DEFINITIONS; PRINCIPLES OF CONSTRUCTION



Section 1.1 Definitions.



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



“Adjusted Base Rate” shall mean an interest rate per annum equal to four percent
(4.00%) (but during the Deferral Period, six percent (6.00%), which shall be applicable to all the
Obligations outstanding during the Deferral Period) above the Base Rate in effect from time to
time, but in no event less than eight percent (8.00%) per annum.



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



“Agreement” shall have the meaning set forth in the introductory paragraph hereto.



“Applicable Interest Rate” shall mean for each Interest Period through and including
the date on which the Debt is paid in full, an interest rate per annum equal to (i) the Eurodollar
Rate, or (ii) the Adjusted Base Rate, as Borrower may elect from time to time.


 


 









 







“Applicable Law” shall mean collectively all existing and future federal, state and
local laws, orders, ordinances, governmental rules and regulations and court orders.



“Appraised Value” shall mean the value of the applicable Collateral Entity Properties,
determined by a member of the Appraisal Institute in accordance with the Financial Institutions
Recovery, Reform and Enforcement Act of 1989, as amended, and as it may be further amended from
time to time, and any successor statutes thereto.



“Bankruptcy Code” shall mean Title 11 U.S.C. § 101 et seq., and the regulations
adopted and promulgated pursuant thereto (as the same may be amended from time to time).



“Base Rate” shall mean, on a particular date, a rate per annum equal at all times to
the rate of interest announced publicly by Citibank in New York, from time to time, as Citibank’s
base rate.



“BHAC” shall mean BHAC Capital IV, L.L.C., a Delaware limited liability company.



“Blocked Account” shall have the meaning set forth in Section 3.1 hereof.



“Borrower” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.



“Borrower Pledge Agreement” shall mean that certain Amended and Restated Pledge
Agreement together with all exhibits attached thereto dated as of the Closing Date, executed and
delivered by Borrower to Lender as security for the Loan and for other obligations of Borrower and
certain of its Affiliates, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.



“Breakage Costs” shall have the meaning set forth in Section 2.2.3(d) hereof.



“Business Day” shall mean any day (i) other than a Saturday, Sunday or any other day
on which national banks in New York, New York are not open for business, and (ii) on which banks
are open for dealing in foreign currency and exchange in London, England.



“Cap Rate Value” shall mean the present value, determined by applying a discount rate
of 7.5% (or such other discount rate as Lender may reasonably deem appropriate under prevailing
market conditions) per annum, of the Net Operating Income of the Person related to the applicable
Collateral Entity Properties.



“Citibank” shall mean Citibank, N.A., a national banking association.



“Closing Date” shall mean the date of this Agreement.



“Code” shall mean the Internal Revenue Code of 1986, as amended, as it may be further
amended from time to time, and any successor statutes thereto, and all applicable U.S. Department
of Treasury regulations issued pursuant thereto in temporary or final form.


 


2









 







“Collateral” shall mean (i) the Collateral as defined in the Pledge Agreements,
including, without limitation, the Specified Equity Interests pledged thereby, (ii) cash and cash
equivalents
on deposit in or credited to the Blocked Account or other accounts at Citibank (or as
otherwise agreed to by Lender) under the sole dominion and control of Lender and otherwise subject
to a valid, perfected first priority security interest in favor of Lender, and (iii) any and all
other collateral for the Loan granted under the Loan Documents.



“Collateral Entity” or “Collateral Entities” shall mean each of Borrower, the
Guarantors and their respective Affiliates, individually or collectively, as the context requires,
that directly or indirectly owns any legal or beneficial interest in any of Prime Retail Outlets,
Prime Office Chicago or Extended Stay of America Hotels.



“Collateral Entity Properties” shall have the meaning set forth in Section 2.3.2(b)
hereof.



“Collateral Proceeds” shall mean all dividends, distributions or other payments or
disbursements made or required to be made on account of or under, and all net proceeds of sale,
lease, refinancing or other disposition of, the Specified Equity Interests or the Collateral Entity
Properties.



“Collateral Value” shall mean, at any time, the value at such time of all of the
Specified Equity Interests and other Collateral, as determined by Lender (i) in its reasonable
discretion, without duplication, based on, (A) in the case of Specified Equity Interests in respect
of (I) Prime Retail Outlets or Prime Office Chicago, the lower of the most recent Appraised Value
or the Cap Rate Value of such Interests (which shall be determined by reference to the applicable
Collateral Entity Properties) and (II) Extended Stay of America Hotels, such multiple of the EBITDA
with respect to Extended Stay of America Hotels for the most recent twelve-month period reported by
Borrower pursuant to Section 5.1.7(g) as shall be reasonably determined by Lender based upon
applicable marketable data, and, in the case of the value of all Specified Equity Interests
included in the Collateral, which value shall be reduced (x) by all Indebtedness secured by the
Collateral Entity Properties owned indirectly through such Specified Equity Interests, (y) by the
value of any equity interests entitled to dividends or other distributions with a payment
preference over dividends or distributions payable on account of such Specified Equity Interests
and (z) to the percentage of such value equal to the percentage of the applicable Collateral
Entity’s indirect ownership interest in the applicable Collateral Entity Properties,
provided that, for purposes hereof, (1) the aggregate Collateral Value of all Specified
Equity Interests in respect of Extended Stay of America Hotels and its Affiliates shall be deemed
to be zero (0) on the Closing Date and, in any event, shall not be deemed to exceed $100,000,000 at
any time and (2) no Specified Equity Interest shall have any Collateral Value unless it
constitutes, together with all other Specified Equity Interests pledged to Lender, a controlling,
majority interest in the applicable issuer, and (B) in the case of any other Collateral, such
factors and information as Lender may reasonably consider, and (ii) as of the Closing Date and as
of the last day of each calendar quarter thereafter through the Maturity Date, commencing June 30,
2008, based upon valuations and other information proposed by Borrower but subject to adjustment by
Lender in its reasonable discretion, taking into consideration quarterly negative assurance by the
Valuation Firm received by Lender with respect to the fair market value of any applicable
Collateral Entity Properties; provided, however, that (a) in determining the
Appraised Value as of any date, Lender shall not be required to use any appraisal conducted more
than three months before such date, (b) if Borrower fails to provide any information necessary to
Lender’s determination of the Collateral Value, Lender may, in its sole discretion, assign any
value or use any information Lender deems appropriate in making such Collateral Value determination
and (c) the Collateral
Value of all cash and cash equivalents in any Deposit Account covered by a Control Agreement
shall be 100% of the face amount thereof.


 


3









 







“Contingent Liability” shall mean any direct, indirect, contingent or non-contingent
guaranty or other obligation for the Indebtedness of another Person (except endorsements in the
ordinary course of business).



“Control” (and the correlative terms “controlled by” and “controlling”) shall mean the
possession, directly or indirectly, of the power to direct or cause the direction of management and
policies of the business and affairs of the entity in question by reason of the ownership of
beneficial interests, by contract or otherwise.



“Control Agreement” shall mean an agreement, in form and substance satisfactory to
Lender, among Citibank, Lender and one or more Collateral Entities governing the deposits to and
disbursements from a Deposit Account, which shall provide that (i) so long as no Event of Default
has occurred and is continuing, Citibank shall (A) disburse from such Deposit Account all amounts
required from time to time to pay Indebtedness secured by first mortgages on Collateral Entity
Properties, but only to the extent that such Deposit Account contains Collateral Proceeds relating
to such Collateral Entity Properties, (B) establish, and re-establish, on a monthly basis, reserves
from such Deposit Account for the payment of such Indebtedness as Lender shall determine in its
reasonable discretion (to the extent such reserves are not then held by the holders of such first
mortgages), (C) pay from such Deposit Account, first, all amounts of interest due and
payable on account of the Obligations from time to time under Section 2.2 hereof and,
second, all amounts of principal, fees, costs, expenses and other amounts due and payable
hereunder including, without limitation, all prepayments required to be made from time to time
under Section 2.3.2, and (D) so long as the aggregate outstanding principal amount of the Loan is
equal to or less than $60,000,000, transfer, on a monthly basis, fifty percent (50%) of all surplus
amounts to one or more other deposit accounts as such Collateral Entity or Collateral Entities
direct, and (ii) at any time that an Event of Default has occurred and is continuing, Lender may
apply all amounts in such Deposit Account to such of the Obligations and in such order as Lender
may elect in its sole and absolute discretion.



“Debt” shall mean the outstanding principal amount set forth in, and evidenced by,
this Agreement and the Note together with all interest accrued and unpaid thereon and all other
sums due to Lender in respect of the Loan under the Note, this Agreement, the Pledge Agreements or
any other Loan Document.



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



“Default Rate” shall mean, with respect to the Loan, a rate per annum equal to the
lesser of (i) the Maximum Legal Rate, or (ii) four percent (4%) above the Applicable Interest Rate.



“Deferral Period” shall have the meaning set forth in Section 2.2.4 hereof.



“Deferred Amount” shall have the meaning set forth in Section 2.2.4 hereof.


 


4









 







“Deposit Account” shall mean, collectively, a deposit account, including, without
limitation, the Blocked Account, maintained by Citibank for the benefit of Lender, as secured party
of a Collateral Entity, and all sub-accounts and ancillary accounts established and maintained in
connection therewith.



“Dollars” shall mean U.S. dollars or any other lawful currency of the United States.



“EBITDA” means, for any period, with respect to Extended Stay of America Hotels on a
consolidated basis (i) net income (as that term is determined in accordance with GAAP) for such
period, plus (ii) the amount of depreciation and amortization of fixed and intangible
assets deducted in determining such net income for such period, plus (iii) all interest
with respect to Indebtedness (including, without limitation, the interest component of any rental
obligation which, under GAAP, is or will be required to be capitalized on the books of the lessee)
accrued or capitalized during such period (whether or not actually paid during such period)
determined in accordance with GAAP and all fees for the use of money or the availability of money,
including commitment, facility and like fees and charges upon Indebtedness (including Indebtedness
to Lender) paid or payable during such period, without duplication, plus (iv) all tax
liabilities paid or accrued during such period, without duplication, less (v) the amount of
all gains (or plus the amount of all losses) realized during such period upon the sale or other
disposition of property or assets that are sold or otherwise disposed of outside the ordinary
course of business that is included in the calculation of net income for such period.



“Embargoed Person” shall have the meaning set forth in Section 4.1.24 hereof.



“Eurodollar Rate” shall mean with respect to any Interest Period, an interest rate per
annum equal to LIBOR plus six percent (6.00%) (but during the Deferral Period, eight
percent (8.00%), which shall be applicable to all the Obligations outstanding during the Deferral
Period), but in no event less than eight percent (8.00%) per annum.



“Event of Default” shall have the meaning set forth in Section 6.1(a) hereof.



“Executive Order” shall have the meaning set forth in the definition of “Prohibited
Person” in this Section 1.1.



“Exit Fee” shall have the meaning set forth in Section 2.2.8 hereof.



“Extended Stay of America Hotels” shall mean, collectively, BHAC and Homestead Village
L.L.C., a Delaware limited liability company, and their Subsidiaries.



“Fiscal Year” shall mean each twelve (12) month period commencing on January 1 and
ending on December 31 during the term of the Loan.



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



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


 


5









 







“Guarantors” shall mean, collectively, Lichtenstein and Lightstone, and
“Guarantor” shall mean either of them individually.



“Guaranty” shall mean, individually, an Amended and Restated Continuing Guaranty dated
as of the Closing Date from a Guarantor to Lender, as the same may be amended, restated, replaced,
supplemented or otherwise modified from time to time, and “Guaranties” shall mean both such
Continuing Guaranties collectively.



“Immediate Family” shall have the meaning set forth in the definition of “Qualified
Lichtenstein Entity” in this Section 1.1.



“Indebtedness” means, with respect to any Person, as of the date of determination
thereof (without duplication of the same obligation under any other clause hereof), (i) all
obligations of such Person for borrowed money of any kind or nature, whether senior or
subordinated, including funded and unfunded debt, whether or not evidenced by a promissory note or
other instrument, (ii) all obligations of such Person under or in respect of any interest rate
protection agreement, foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging agreement, (iii) all
obligations of such Person to pay the deferred purchase price of property or services (other than
current trade accounts payable under normal trade terms and accrued expenses and which are incurred
in the ordinary course of business that are not overdue for a period greater than six months or
that are contested in good faith by appropriate proceedings), (iv) all obligations of such Person
to acquire or for the acquisition or use of any fixed asset, including capitalized lease
obligations (other than, in any such case, any portion thereof representing interest or deemed
interest or payments in respect of taxes, insurance, maintenance or service), or improvements which
are payable over a period longer than one year, regardless of the term thereof or the Person or
Persons to whom the same are payable, (v) all Indebtedness of others secured by (or for which the
holder of such Indebtedness has an existing right to be secured) a Lien on any asset of such Person
whether or not the Indebtedness is assumed by such Person, (vi) all Indebtedness of others to the
extent guaranteed by such Person, (vii) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to property acquired by such
Person (even though the rights and remedies of the seller or lender under such agreements in the
event of default are limited to repossession or sale of such property), and (viii) all
reimbursement or other obligations of such Person in respect of letters of credit, bankers
acceptances, surety bonds, performance bonds or similar instruments issued or accepted by banks or
other financial institutions for the account of such Person, whether or not matured.



“Indemnified Liabilities” shall have the meaning set forth in Section 8.13(b) hereof.



“Indemnified Party” shall mean each of Lender and any Affiliate of Lender who is or
will have been involved in the origination of the Loan, any Person who is or will have been
involved in the servicing of the Loan, any Person in whose name any encumbrance created by any
Pledge Agreement is or will have been recorded, Persons who may hold or acquire or will have held a
full or partial interest in the Loan (as well as custodians, trustees and other fiduciaries who
hold or have held a full or partial interest in the Loan for the benefit of third parties) as well
as the respective directors, officers, shareholders, partners, members, employees, agents,
servants, representatives, contractors, subcontractors, Affiliates, Subsidiaries, participants,
successors and assigns of any and all of the foregoing (including but not limited to any other
Person who holds
or acquires or will have held a participation or other full or partial interest in the Loan or
the Collateral, whether during the term of the Loan, as a part of or following foreclosure of the
Lien on any Collateral or upon an acceleration of the Loan, and including, but not limited to, any
successors by merger, consolidation or acquisition of all or a substantial portion of Lender’s
assets and business).


 


6









 







“Interest Period” shall mean the period commencing on the Closing Date and ending one
or three months thereafter as Borrower may elect, and each subsequent period of one or three months
commencing on the last day of the preceding Interest Period, as Borrower may elect;
provided, however, that (i) Borrower may not select any Interest Period that ends
after the Maturity Date; (ii) whenever the last day of an Interest Period would otherwise occur on
a day other than a Business Day, the last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, except that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month, then the last day of such Interest
Period shall occur on the next preceding Business Day; and (iii) if there is no corresponding date
of the month that is one or three months, as the case may be, after the first day of an Interest
Period, such Interest Period shall end on the last Business Day of such first or third month, as
the case may be.



“Interest Shortfall” shall have the meaning set forth in Section 2.3.1(b) hereof.



“Investor” shall have the meaning set forth in Section 5.1.7(j) hereof.



“Legal Requirements” shall mean all federal, State, county, municipal and other
governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and
injunctions of Governmental Authorities of the United States of America (or political subdivision
thereof) affecting the Collateral or any part thereof, or the zoning, construction, use,
alteration, occupancy or operation of any of the Collateral Entity Properties, or any part thereof,
whether now or hereafter enacted and in force, and all permits, licenses and authorizations and
regulations relating thereto, and all covenants, agreements, restrictions and encumbrances
contained in any instruments, either of record or known to Borrower, at any time in force affecting
the Collateral or any Collateral Entity Properties or any part thereof.



“Lender” shall have the meaning set forth in the introductory paragraph hereto,
together with its successors and assigns.



“LIBOR” shall mean the rate per annum calculated as set forth below. With respect to
each Interest Period, LIBOR shall mean the rate for deposits in Dollars, for a period equal to such
Interest Period, which appears on the Dow Jones Market Service (formerly Telerate) Page 3750 as of
11:00 a.m., London time, on the related LIBOR Determination Date. If such rate does not appear on
Dow Jones Market Service Page 3750, LIBOR for that Interest Period shall be determined on the basis
of the rates at which deposits in Dollars are offered by any four major reference banks in the
London interbank market selected by Lender to provide such bank’s offered quotation of such rates
at approximately 11:00 a.m., London time, on the related LIBOR Determination Date to prime banks in
the London interbank market for a period equal to such Interest Period, commencing on the first day
of such Interest Period and in an amount that is representative for a single such transaction in
the relevant market at the relevant time. Lender shall request the principal London office of any
four major reference banks in the London
interbank market selected by Lender to provide a quotation of such rates, as offered by each
such bank.



 


7









 








If at least two such quotations are provided, LIBOR for that Interest Period shall be
the arithmetic mean of the quotations. If fewer than two quotations are provided as requested,
LIBOR for that Interest Period shall be the arithmetic mean of the rates quoted by major banks in
New York City selected by Lender, at approximately 11:00 a.m., New York City time, on the LIBOR
Determination Date with respect to such Interest Period for loans in Dollars to leading European
banks for a period equal to such Interest Period, commencing on the first day of such Interest
Period and in an amount that is representative for a single transaction in the relevant market at
the relevant time. Lender shall determine LIBOR for each Interest Period and the determination of
LIBOR by Lender shall be binding upon Borrower absent manifest error.



“LIBOR Determination Date” shall mean two (2) Business Days before the commencement of
each Interest Period.



“Lichtenstein” shall mean David Lichtenstein, an individual residing at 5 Grand Park
Drive, Monsey, New York 10952.



“Lichtenstein Credit Agreement” shall have the meaning set forth in
Section 6.1(a)(xvi)(A) hereof.



“Lien” shall mean any mortgage, deed of trust, lien, pledge, hypothecation,
assignment, security interest, or any other encumbrance, charge or transfer of, on or affecting
Borrower, the Collateral, any portion thereof or any interest therein, including, without
limitation, any conditional sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, the filing of any financing
statement, and mechanic’s, materialmen’s and other similar liens and encumbrances.



“Lightstone” shall mean Lightstone Holdings LLC, a Delaware limited liability company.



“Loan” shall have the meaning set forth in Section 2.1.1 hereof.



“Loan Documents” shall mean, collectively, this Agreement, the Note, the Pledge
Agreements, the Control Agreements, the Guaranties and all other documents executed from time to
time in connection with the Loan.



“Loan Party” shall mean, individually or collectively, as the context requires,
Borrower, each Guarantor, each Pledgor and each other Collateral Entity.



“Market Rate” shall have the meaning set forth in Section 2.3.1(b) hereof.



“Material Adverse Effect” means (i) a material adverse effect on the business,
prospects, operations, results of operations, assets, liabilities or condition (financial or
otherwise) of a Loan Party, (ii) the impairment of (A) a Loan Party’s ability to perform its
obligations under the Loan Documents to which it is a party or (B) the ability of Lender to enforce
the Obligations or realize upon the Collateral or (iii) a material adverse effect on the value of
the Collateral or the amount that Lender would be likely to receive (after giving consideration to
delays in payment and costs of enforcement) in the liquidation of the Collateral.


 


8









 







“Material Indebtedness” shall mean Indebtedness in an amount in excess of $250,000,
whether or not such amount has been declared immediately due and payable.



“Maturity Date” shall mean June 15, 2009 or such other date on which the final payment
of the principal of the Note becomes due and payable as in the Note or herein provided, whether at
such stated maturity date, by declaration of acceleration, or otherwise.



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



“Net Cash Proceeds” means the aggregate cash proceeds received by any Person in
respect of (i) any sale of assets of such Person, (ii) any refinancing of Indebtedness of such
Person, or (iii) any issuance of Indebtedness or equity securities of such Person, in each case net
of (without duplication) (A) the amount required to repay any Indebtedness (other than the Loan)
incurred with respect to, or secured by a Permitted Encumbrance on, any assets of a Person that are
sold in connection with any such asset sale, (B) the reasonable out-of-pocket fees and expenses
incurred in effecting such sale, refinancing or issuance, (C) any taxes reasonably attributable to
any such asset sale and reasonably estimated by such Person to be actually payable and (D) reserves
to be taken by such Person in accordance with GAAP against any contingent liabilities incurred by
such Person in connection with such sale, refinancing or issuance; provided,
however, that (I) the calculation and determination of Net Cash Proceeds shall be subject
to the approval of Lender in its reasonable discretion, and in connection with any such calculation
and determination, Borrower shall furnish Lender within two (2) days after receipt by the
applicable Person of such Net Cash Proceeds all accounting and transaction documentation and
information necessary to verify the amount of such Net Cash Proceeds, as provided more fully in
Section 5.1.7(f), and (II) the amount of any reserve taken under the foregoing clause (D) that is
subsequently released from such reserve shall immediately thereupon be deemed Net Cash Proceeds.



“Net Operating Income” in respect of any Person related to Collateral Entity
Properties shall mean (i) the gross income of such Collateral Entity Properties determined as of
the end of any month, for the consecutive twelve-month period then ended, less (ii) (A) all
reasonable management fees, (B) all operating expenses and (C) all real estate taxes, in each case
paid or payable by the owner of such Collateral Entity Properties during such twelve-month period.



“Note” shall mean that certain amended and restated promissory note of even date
herewith in the original principal amount of One Hundred Ten Million and 00/100 Dollars
($110,000,000) made by Borrower in favor of Lender, as the same may be amended, restated, replaced,
extended, renewed, supplemented, severed, split, or otherwise modified from time to time.


 


9









 







“Obligations” means and includes the Loan and all other debts, including, without
limitation, the Debt, liabilities, obligations, covenants and duties owing by Borrower and the
other Loan Parties to Lender of any kind or nature, present or future, whether or not evidenced by
any note, guaranty or other instrument, which may arise under, out of, or in connection with,
this Agreement, the Note, the other Loan Documents or any other agreement executed in
connection herewith or therewith, whether or not for the payment of money, whether arising by
reason of an extension of credit, opening, guaranteeing or confirming of a letter of credit, loan,
guaranty or indemnification or in any other manner, whether direct or indirect (including those
acquired by assignment, purchase, discount or otherwise), whether absolute or contingent, due or to
become due, and however acquired. The term includes, without limitation, all interest (including
interest accruing on or after a bankruptcy or other insolvency event, whether or not such interest
constitutes an allowed claim), charges, expenses, commitment, facility, closing and collateral
management fees, letter of credit fees, attorneys’ fees, and any other sum properly chargeable to
any of the Loan Parties under this Agreement, the Note, the other Loan Documents or any other
agreement executed in connection herewith or therewith.



“Original Maturity Date” shall have the meaning set forth in the preamble hereto.



“Ownership Interest” shall have the meaning set forth in the definition of “Qualified
Lichtenstein Entity” in this Section 1.1.



“Payment Date” shall mean the last day of each month, or if such day is not a Business
Day, the immediately preceding Business Day.



“Permitted Encumbrances” shall mean, collectively, (i) the Liens and security
interests created by the Loan Documents, (ii) all Liens, encumbrances and other matters which would
not, individually or in the aggregate, be reasonably expected to have a material adverse effect on
Borrower’s ability to perform its obligations under the Loan Documents, (iii) Liens, if any, for
taxes not yet delinquent imposed by any Governmental Authority, and (iv) such other Liens or other
liabilities of which Lender is aware as of the date hereof or which Lender has approved or may
approve in writing in Lender’s sole discretion.



“Permitted Lichtenstein Owner” shall have the meaning set forth in the definition of
“Qualified Lichtenstein Entity” in this Section 1.1.



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



“PGRT Entities” shall mean the REIT, Prime Group Realty, L.P. and their direct and
indirect Subsidiaries. For the avoidance of uncertainty, it is agreed that the PGRT Entities shall
not include Extended Stay of America Hotels, Prime Retail Outlets or Prime Office Chicago.



“Pledge Agreements” shall mean (a) the Borrower Pledge Agreement, (b) the Amended and
Restated Pledge Agreement together with all exhibits attached thereto dated as of the Closing Date,
executed and delivered by The Lightstone Group, LLC to Lender as security for the Loan and for
other obligations of Borrower and certain of its Affiliates, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, (c) the Amended and Restated Pledge
Agreement together with all exhibits attached thereto dated as of the Closing Date, executed and
delivered by Lichtenstein to Lender pledging, among other things, Lichtenstein’s membership
interest in Park Avenue Funding, LLC as security for the Loan and for other obligations of Borrower
and certain of its Affiliates, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time,



 


10









 








(d) the
Amended and Restated Pledge Agreement together with all exhibits attached thereto dated as of the
Closing Date, executed and delivered by Lichtenstein to Lender pledging, among other things,
Lichtenstein’s membership interest in Lightstone Prime, LLC as security for the Loan and for other
obligations of Borrower and certain of its Affiliates, as the same may be amended, restated,
replaced, supplemented or otherwise modified from time to time, and (e) each other pledge
agreement, in substantially the form of Exhibit A and otherwise in form and substance satisfactory
to Lender, by a Collateral Entity in favor of Lender, granting to Lender a security interest in any
Specified Equity Interest, as the same may be amended, restated, replaced, supplemented or
otherwise modified from time to time.



“Pledgor” shall mean any pledgor under a Pledge Agreement.



“Prepayment Date” shall have the meaning set forth in Section 2.3.1(a) hereof.



“Prime Office Chicago” shall mean Prime Office Company, LLC, a Delaware limited
liability company.



“Prime Retail Outlets” shall mean Prime Outlets Acquisition Company LLC, a Delaware
limited liability company.



“Prohibited Person” shall mean any Person:




(a) listed in the Annex to, or otherwise subject to the provisions of, the Executive
Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to
Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit,
or Support Terrorism (the “Executive Order”);




(b) that is owned or controlled by, or acting for or on behalf of, any Person that is
listed to the Annex to, or is otherwise subject to the provisions of, the Executive Order;




(c) with whom Lender is prohibited from dealing or otherwise engaging in any
transaction by any terrorism or money laundering law, including the Executive Order;




(d) who commits, threatens or conspires to commit or supports “terrorism” as defined in
the Executive Order;




(e) that is named as a “specially designated national and blocked person” on the most
current list published by the U.S. Treasury Department Office of Foreign Assets Control at
its official website, http://www.treas.gov/ofac/t11sdn.pdf or at any replacement website or
other replacement official publication of such list; or




(f) who is an Affiliate of or affiliated with a Person listed above.


 


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“Qualified Lichtenstein Entity” shall mean a Person as to which each of the following
is true: (1) more than 49% of the Ownership Interest in such Person is held directly or indirectly
by one or more Permitted Lichtenstein Owners, and (2) Lichtenstein shall exercise managerial and
operational control over such Person. Notwithstanding the foregoing, in the event of the
death or incapacity of Lichtenstein, a Person over which one or more of the members of the
Immediate Family of Lichtenstein shall exercise managerial and operational control shall be deemed
to fulfill the requirements of clause (2) hereof. The term “Immediate Family” shall mean
and include, with respect to any Person, his spouse, children (including adopted children),
grandchildren (including adopted grandchildren) and the spouses of any of the foregoing. The term
“Ownership Interest” in a Person shall mean such interest (whether or not denominated as an
equity interest, and including, without limitation, a beneficial interest in a trust) as shall
entitle the owner thereof to a share in the profits, losses and distributions of such Person. The
term “Permitted Lichtenstein Owner” shall mean Lichtenstein or members of his Immediate
Family or trusts for the benefit of Lichtenstein or members of his Immediate Family.



“REIT” shall have the meaning set forth in Section 5.2.7 hereof.



“Restricted Party” shall mean either Guarantor or any other Qualified Lichtenstein
Entity.



“Restricted Payment Event” shall have the meaning set forth in Section 5.2.7 hereof.



“Restructuring Fee” shall have the meaning set forth in Section 2.2.7 hereof.



“Sale or Pledge” shall mean a voluntary or involuntary sale, conveyance, transfer,
assignment or pledge of a direct or indirect legal or beneficial interest.



“Scheduled Property” shall have the meaning set forth in Section 2.3.2(b) hereof.



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



“Severed Loan Documents” shall have the meaning set forth in Section 6.2(c) hereof.



“Specified Equity Interests” shall mean the shares of capital stock, partnership
interests, limited liability company membership interests, investment trust units and all other
equity interests that are legally or beneficially owned by Borrower, a Guarantor or any of their
respective Affiliates, directly or indirectly, in any of Prime Retail Outlets, Prime Office Chicago
or Extended Stay of America Hotels.



“State” shall mean a State or Commonwealth in the United States of America.



“Subsidiary” shall mean, as to any Person, a corporation or other entity in which that
Person directly or indirectly owns or controls the shares of stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors or other governing body,
or to appoint the majority of the managers of, such corporation or other entity.



“Transfer” shall have the meaning set forth in Section 5.2.6(a) hereof.



“2007 Loan Agreement” shall have the meaning set forth in the preamble hereto.



“UCC” or “Uniform Commercial Code” shall mean the Uniform Commercial Code as
in effect in the State of New York or the State in which Borrower or the applicable Collateral is
located, as the context may require.


 


12









 







“UCC Financing Statements” shall mean the UCC financing statements covering Collateral
pledged under the Pledge Agreements or any other Loan Document and filed in the applicable filing
offices.



“Units” shall mean those certain Series A-2 Units and Common A-2 Units in BHAC.



“Valuation Firm” shall mean Duff & Phelps, LLC or another valuation firm satisfactory
to Lender.



Section 1.2 Principles of Construction.



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



II. GENERAL TERMS



Section 2.1 Loan.



2.1.1 Loan Amount.



Pursuant to the 2007 Loan Agreement, Lender made a loan (the “Loan”) to Borrower in
the aggregate principal amount of $120,000,000. Prior to the Closing Date, Borrower prepaid the
Loan in the aggregate principal amount of $10,000,000. After giving effect to such prepayment,
the aggregate outstanding principal amount of the Loan on the Closing Date is $110,000,000.



2.1.2 The Note, the Pledge Agreements and Other Loan Documents.



The Loan shall be evidenced by the Note, secured by the Pledge Agreements and certain other
Loan Documents and entitled to the benefit of all the Loan Documents.



2.1.3 Use of Proceeds.



The proceeds of the Loan were used by Borrower to fund Borrower’s acquisition of certain
equity interests in the real estate portfolio known as Extended Stay of America Hotels and to pay
fees, costs and expenses incurred in connection with the closing of the Loan as approved by Lender.


 


13









 







Section 2.2 Interest; Payments; Late Payment Charge; Restructuring Fee; Exit Fee.



2.2.1 Interest; Payments.




(a) Interest on the outstanding principal balance of the Loan shall accrue from the
Closing Date to the Maturity Date at the Applicable Interest Rate and shall be payable
monthly. Not less than three Business Days prior to each Interest Period, Borrower
shall elect in writing which Applicable Interest Rate shall apply to the Loan for such
Interest Period. If Borrower shall fail to select, prior to the expiration of any Interest
Period, which Applicable Interest Rate shall apply during the next succeeding Interest
Period, Borrower shall be deemed to have selected the Eurodollar Rate for such succeeding
Interest Period. If Borrower shall fail to select, prior to the expiration of any Interest
Period, the duration of the next succeeding Interest Period, Borrower shall be deemed to
have selected an Interest Period of one month. Interest shall be paid in arrears on each
Payment Date commencing on June 30, 2008 and on each subsequent Payment Date thereafter up
to and including the Maturity Date.




(b) All payments and other amounts due under the Note, this Agreement and the other
Loan Documents shall be made without any setoff, defense or irrespective of, and without
deduction for, counterclaims.



2.2.2 Interest Calculation.



Interest on the outstanding principal balance of the Loan shall be calculated by multiplying
(a) the actual number of days elapsed in the period for which the calculation is being made, by (b)
a daily rate equal to the Applicable Interest Rate divided by 360, by (c) the outstanding principal
balance.



2.2.3 Eurodollar Rate Unascertainable; Illegality; Increased Costs.




(a) (i) In the event that Lender shall have determined (which determination shall be
conclusive and binding upon Borrower absent manifest error) that by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not exist for
ascertaining LIBOR, then Lender shall forthwith give notice by telephone of such
determination to Borrower with a written confirmation of such determination promptly
thereafter. If such notice is given, the Loan shall bear interest at the Adjusted Base Rate
beginning on the first day of the next succeeding Interest Period.




(ii) If, pursuant to the terms of this Section 2.2.3, the Loan is bearing interest at
the Adjusted Base Rate and Lender shall determine (which determination shall be conclusive
and binding upon Borrower absent manifest error) that the event(s) or circumstance(s) which
resulted in such conversion shall no longer be applicable, Lender shall give notice thereof
to Borrower by telephone of such determination, confirmed in writing, to Borrower as soon as
reasonably practical, but in no event later than three (3) Business Days prior to the last
day of the then current Interest Period. If such notice is given, and Borrower so requests,
the Loan may bear interest at the Eurodollar Rate beginning on the first day of the next
succeeding Interest Period.




(b) If any requirement of law or any change therein or in the interpretation or
application thereof, shall hereafter make it unlawful for Lender in good faith to make or
maintain the Loan bearing interest at the Eurodollar Rate, the Loan shall automatically bear
interest at the Adjusted Base Rate in the next succeeding Interest Period or within such
earlier period as required by Applicable Law. Borrower hereby agrees promptly to
pay Lender (within ten (10) days of Lender’s written demand therefor) any additional
amounts necessary to compensate Lender for any costs incurred by Lender in making any
conversion in accordance with this Agreement, including, without limitation, any interest or
fees payable by Lender to lenders of funds obtained by it in order to make or maintain the
Loan hereunder. Lender’s written notice of such costs, as certified to Borrower, shall be
conclusive absent manifest error.


 


14









 








(c) In the event that any change occurring after the date hereof in any requirement of
any Applicable Law or in the interpretation or application thereof, or compliance in good
faith by Lender with any request or directive (whether or not having the force of law)
hereafter issued from any Governmental Authority which is generally applicable to all
lenders subject to such Governmental Authority’s jurisdiction:




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




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




(iii) shall, if the Loan is then bearing interest at the Eurodollar Rate,
hereafter impose on Lender any other condition, the result of which is to increase
the cost to Lender of making, renewing or maintaining the Loans or to reduce any
amount receivable hereunder;




then, in any such case, Borrower shall promptly pay Lender (within ten (10) days of Lender’s
written demand therefor), any additional amounts necessary to compensate Lender for such
additional cost or reduced amount receivable on account of the Loan which Lender deems to be
material. If Lender becomes entitled to claim any additional amounts pursuant to this
Section 2.2.3(c), Lender shall provide Borrower with written notice specifying in reasonable
detail the event or circumstance by reason of which Lender has become so entitled and the
additional amount required to fully compensate Lender for such additional cost or reduced
amount. A certificate as to any additional costs or amounts payable pursuant to the
foregoing sentence submitted by Lender to Borrower shall be conclusive absent manifest
error. This provision shall survive payment of the Note and the satisfaction of all other
obligations of Borrower under the Note, this Agreement and the other Loan Documents.


 


15









 








(d) Borrower agrees to indemnify Lender and to hold Lender harmless from any loss or
expense which Lender sustains or incurs directly as a consequence of (i) any default by
Borrower in payment of the principal of or interest on the Loan while bearing interest at
the Eurodollar Rate, including, without limitation, any such loss or expense
arising from interest or fees payable by Lender to lenders of funds obtained by it in
order to maintain the Eurodollar Rate, (ii) any prepayment (whether voluntary or mandatory)
of the Loan while bearing interest at the Eurodollar Rate on a day that is not the last day
of the Interest Period with respect thereto, and (iii) the conversion (for any reason
whatsoever, whether voluntary or involuntary) of the Applicable Interest Rate from the
Eurodollar Rate to the Adjusted Base Rate with respect to the Loan while bearing interest at
the Eurodollar Rate on a date other than the last day of the Interest Period with respect
thereto, including, without limitation, such loss or expenses arising from interest or fees
payable by Lender to lenders of funds obtained by Lender in order to maintain the Eurodollar
Rate hereunder (the amounts referred to in clauses (i), (ii) and (iii) are herein referred
to collectively as the “Breakage Costs”). This provision shall survive payment of
the Note and the satisfaction of all other obligations of Borrower under this Agreement and
the other Loan Documents.



2.2.4 Scheduled Principal Payments.



Borrower shall make the following principal installment payments to Lender on account of the
Loan in accordance with the following amortization schedule:



	 	 	 	 	 
	June 30, 2008
	 	$	15,000,000	 
	 
	 	 	 	 
	July 31, 2008
	 	$	5,000,000	 
	 
	 	 	 	 
	September 30, 2008
	 	$	20,000,000	 
	 
	 	 	 	 
	December 31, 2008
	 	$	20,000,000	 
	 
	 	 	 	 
	March 31, 2009
	 	$	20,000,000	 






provided, however, that Borrower may, on written notice to Lender received by
Lender at least ten (10) days prior to September 30, 2008, elect to defer until not later than
December 31, 2008 (the period, if Borrower makes such deferral election, from September 30, 2008 to
the earlier of (a) December 31, 2008 and (b) the date on which the Deferred Amount is repaid in
full, the “Deferral Period”) up to $10,000,000 of the principal installment of the Loan
otherwise due and payable on September 30, 2008 (the principal amount which Borrower elects to
defer, the “Deferred Amount”). Notwithstanding anything to the contrary herein, Borrower
shall pay to Lender on the Maturity Date the remaining outstanding principal balance of the Loan,
all accrued and unpaid interest thereon, and all other amounts due hereunder and under the Note and
the other Loan Documents.



2.2.5 Payments after Default.



Upon the occurrence and during the continuance of an Event of Default, interest on the
outstanding principal balance of the Loan and, to the extent permitted by Applicable Law, overdue
interest and other amounts due in respect of the Loan, shall accrue at the Default Rate, calculated
from the date such payment was due after giving effect to any grace or cure periods contained
herein. Interest at the Default Rate shall be computed from the occurrence of the default until
the actual receipt and collection of the Debt (or that portion thereof that is then due). To the
extent permitted by Applicable Law, interest at the Default Rate shall be added to the Debt, shall
itself accrue interest at the same rate as the Loan and shall be secured by the Pledge Agreements.
This paragraph shall not be construed as an agreement or privilege to extend the
date of the payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default.


 


16









 







2.2.6 Usury Savings.



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



2.2.7 Restructuring Fee.



Borrower shall pay to Lender a fully-earned and non-refundable restructuring fee in the
aggregate amount of $3,000,000 (the “Restructuring Fee”) in accordance with the following
schedule: $1,000,000 at the time of the execution of the Summary of Terms dated April 28, 2008
accepted by Borrower on April 28, 2008 (which amount Lender acknowledges and agrees that Borrower
has paid), $1,000,000 on June 30, 2008, and $1,000,000 on September 30, 2008.



2.2.8 Exit Fee.



Borrower shall pay to Lender, upon the earliest of (a) the Maturity Date, (b) the date of the
prepayment of the Loan in full, or (c) the date of the occurrence of an Event of Default, whether
or not the Loan has been declared immediately due and payable, a fully earned and non-refundable
exit fee in the amount of $1,100,000 (the “Exit Fee”).



Section 2.3 Prepayments.



2.3.1 Voluntary Prepayments.



Borrower shall have the right to prepay the Loan in whole or in part at any time (so long as
any partial payment is not less than $250,000) upon satisfaction of the following conditions:




(a) Borrower shall provide prior written notice to Lender specifying the amount of such
prepayment and the date (the “Prepayment Date”) upon which the prepayment is to be
made, which notice shall be delivered to Lender not less than three days prior to such
prepayment; and


 


17









 








(b) Borrower shall pay to Lender, simultaneously with such prepayment, (i) all accrued
and unpaid interest calculated at the Applicable Interest Rate on the amount of principal
being prepaid through and including the Prepayment Date, together with, if the Loan is then
bearing interest by reference to the Eurodollar Rate and the payment is not being made on
the last day of the applicable Interest Period, an amount equal to (A) the interest that
would have accrued at the Eurodollar Rate on the then outstanding principal balance of the
Loan through the end of the Interest Period in which such prepayment occurs less
(B) the amount of interest that would accrue on such amount prepaid for the remainder of
such Interest Period at the Market Rate (as defined below) (the “Interest
Shortfall”); (ii) Breakage Costs, if any, without duplication of any sums paid pursuant
to the preceding clause (i); and (iii) all other sums then due under this Agreement, the
Note or the other Loan Documents, without duplication. The term “Market Rate” means
the rate of interest per annum at which deposits in United States dollars are offered by
Citibank’s principal office in London, England, to prime banks in the London interbank
market at 11:00 a.m. (London time) two Business Days before the date of such prepayment in
an amount substantially equal to the amount of such prepayment and for a deposit period
comparable to the remaining Interest Period, as determined by Lender in its sole discretion,
which determination shall be conclusive absent manifest error.



2.3.2 Mandatory Prepayments.




(a) If, as of the end of any calendar quarter, commencing June 30, 2008, the then
outstanding principal amount of the Loan exceeds an amount equal to thirty percent (30%) of
the Collateral Value most recently determined, Borrower shall, within ten (10) days after
Lender’s notice to Borrower that such excess exists, prepay the Loan by an amount equal to
or greater than such excess amount.




(b) If any of Borrower, the Guarantors or any of their Affiliates sells all or any
portion of the Specified Equity Interests, Borrower shall prepay the Loan by an amount equal
to the Net Cash Proceeds of such sale (but after the aggregate outstanding principal amount
of the Loan is equal to or less than $60,000,000, if such a sale occurs, Borrower shall
prepay the Loan by an amount equal to fifty percent (50%) of the Net Cash Proceeds of such
sale). If (i)(A) any of the real estate interests owned directly or indirectly by Prime
Retail Outlets, Prime Office Chicago or Extended Stay of America Hotels (the “Collateral
Entity Properties”) is sold, or (B) any of the real property specified in Schedule
2.3.2(b) (the “Scheduled Property”) is sold, or (ii) any of Borrower, the Guarantors
or any of their Affiliates refinances any Indebtedness secured by any of the Specified
Equity Interests, the Collateral Entity Properties or the Scheduled Property, Borrower shall
prepay the Loan by an amount equal to the Net Cash Proceeds of such sale or such refinancing
(but after the aggregate outstanding principal amount of the Loan is equal to or less than
$60,000,000, if such a sale or refinancing occurs, Borrower shall prepay the Loan by an
amount equal to fifty percent (50%) of the Net Cash Proceeds of such sale or such
refinancing).


 


18









 








(c) If any of Borrower, Lightstone or any of their Affiliates issues any Indebtedness
or equity securities in a private or public offering, Borrower shall prepay the Loan by an
amount equal to the Net Cash Proceeds of such issuance received by
Borrower or Lightstone, or in the case of any of their Affiliates, equal to the maximum
amount of such Net Cash Proceeds that is permitted to be declared and paid to Borrower or
Lightstone as dividends or other distributions by Applicable Law (but after the aggregate
outstanding principal amount of the Loan is equal to or less than $60,000,000, if such an
issuance occurs, Borrower shall prepay the Loan by an amount equal to fifty percent (50%) of
the Net Cash Proceeds of such issuance).




(d) If any of Borrower, the Guarantors or any of their Affiliates receives any cash
dividends or other distributions on account of the Specified Equity Interests, Borrower
shall prepay the Loan by an amount equal to the amount of such dividends or other
distributions (but after the aggregate outstanding principal amount of the Loan is equal to
or less than $60,000,000, if such dividends or other distributions are received, Borrower
shall prepay the Loan by an amount equal to fifty percent (50%) of the amount of such
dividends or other distributions).




(e) All Net Cash Proceeds of asset sales, refinancings and Indebtedness and equity
offerings and all dividends and other distributions (or, if applicable, 50% thereof) subject
to the terms of this Section 2.3.2 shall be deposited in or otherwise credited to the
Blocked Account within two (2) days after receipt by the applicable Person of such Net Cash
Proceeds or such dividends or other distributions.




(f) If an Affiliate of the Borrower or a Guarantor that is not a Pledgor effects an
asset sale, refinancing or issuance of Indebtedness or equity securities or receives
dividends or other distributions and any such transaction would require a mandatory
prepayment pursuant to the terms of this Section 2.3.2, notwithstanding anything to the
contrary herein, the prepayment required by this Section 2.3.2 shall be in the amount of Net
Cash Proceeds or dividends or other distributions that such Affiliate actually pays to a
Pledgor as contemplated by Section 5.1.13 hereof.




(g) Borrower shall pay to Lender, simultaneously with any prepayment under this
Section 2.3.2, all accrued and unpaid interest calculated at the Applicable Interest Rate on
the amount of principal being prepaid through and including the date such principal is
prepaid, plus, if the Loan is then bearing interest by reference to the Eurodollar Rate and
the terms of Section 2.3.6 do not apply, the amount of any Interest Shortfall and, without
duplication thereof, all Breakage Costs.



2.3.3 Prepayments After Default.



If, following an Event of Default, Borrower tenders payment of all or any part of the Debt, or
if all or any portion of the Debt is recovered by Lender after such Event of Default, such tender
or recovery shall be deemed a voluntary prepayment by Borrower, and Borrower shall pay, in addition
to the Debt, (i) all accrued and unpaid interest calculated at the Applicable Interest Rate on the
amount of principal being prepaid through and including the Prepayment Date, (ii) the Interest
Shortfall, if applicable, with respect to the amount prepaid, (iii) Breakage Costs, if any, without
duplication of any sums paid pursuant to the preceding clause (ii), (iv) if all of the Debt is paid
or recovered by Lender, the Exit Fee, and (v) all other sums due under this Agreement, the Note or
the other Loan Documents in connection with a partial or total prepayment.


 


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2.3.4 Making of Payments.



Each payment by Borrower hereunder or under the Note shall be made in federal funds or other
funds immediately available to Lender by 12:00 p.m., New York City time, on or prior to the date
such payment is due, to Lender by deposit to such account as Lender may designate by written notice
to Borrower. Whenever any payment hereunder or under the Note shall be stated to be due on a day
which is not a Business Day, such payment shall be made on the first Business Day succeeding such
scheduled due date.



2.3.5 Application of Prepayments.



All prepayments received pursuant to this Section 2.3 shall be applied first, to
interest on the outstanding principal balance being prepaid that accrued through and including the
Prepayment Date or mandatory date of prepayment, as the case may be, second, to the
Interest Shortfall and Breakage Costs, if any, and third, to the payment of principal due
under the Loan in the regular order of maturity, provided that, if there is any Deferred
Amount then outstanding, principal payments shall be applied to the Deferred Amount first, and any
other amounts due under this Agreement, the Note or the other Loan Documents, including, if the
Loan is being prepaid in full, the Exit Fee.



2.3.6 Escrow of Certain Prepayments.



Notwithstanding anything to the contrary in this Section 2.3, so long as no Event of Default
has occurred and is continuing, at Borrower’s option, Lender shall hold in escrow for its own
benefit all amounts intended or required to be applied as prepayments of any principal amounts of
the Loan that bear interest by reference to the Eurodollar Rate and shall release such amounts from
escrow and apply them to such principal amounts upon the next applicable Payment Date(s) in
prepayment thereof, it being understood and agreed that interest shall continue to accrue on such
principal amounts until such time as such prepayments are released from escrow and applied to
reduce such principal amounts; provided, however, that, upon the occurrence and
during the continuance of an Event of Default, such escrowed amounts may be immediately applied to
any of the Obligations without regard to any such Payment Date(s).



Section 2.4 Release on Payment in Full.



Lender shall, upon the written request and at the expense of Borrower, upon payment in full of
all principal and interest on the Loan and all other amounts due and payable under the Loan
Documents, including, without limitation, the Exit Fee, in accordance with the terms and provisions
of the Note and this Agreement, (i) release the Lien of the Pledge Agreements and any other Loan
Documents on the Collateral, and (ii) terminate the other Loan Documents.



Section 2.5 Due Diligence Deposit Fee.



Borrower has paid, prior to the Closing Date, a fully earned and non-refundable due diligence
deposit fee in the amount of $100,000. If the amount of the due diligence deposit fee is not
sufficient to reimburse Lender in full for its legal and other out-of-pocket costs and expenses
incurred in connection with the preparation, execution and delivery of this Agreement and the other
Loan Documents, Borrower shall promptly pay any additional amount required to reimburse Lender in
full for such costs and expenses. If the amount of the due diligence deposit
fee exceeds Lender’s legal and other out-of-pocket costs and expenses incurred in connection
with the preparation, execution and delivery of this Agreement and the other Loan Documents, Lender
shall return such excess to Borrower.


 


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III. CASH MANAGEMENT



Section 3.1 Establishment of Blocked Account.



Borrower shall establish and maintain with and at Citibank a segregated account (the
“Blocked Account”) in accordance with Citibank’s standard account documents for the benefit
of Lender, which Blocked Account shall be under the sole dominion and control of Lender and shall
be subject to a valid, perfected first priority security interest in favor of Lender. Borrower
shall cause all payments made in respect of the Units to be made to the Blocked Account, unless and
until otherwise directed by Lender, and shall deposit into the Blocked Account an amount equal to
the principal or interest due and payable hereunder no later than one Business Day before such
payment is due and owing to Lender. Lender and its servicer, if any, shall have the sole right at
all times to make withdrawals from the Blocked Account, and Borrower hereby authorizes Lender to
instruct Citibank to debit the Blocked Account by the amount of the principal and interest payment
due on each date on which such principal or interest is due (and Lender will make withdrawals
therefrom to make payments of accrued interest and/or principal due and unpaid hereunder without
duplication). If Lender or its servicer withdraws from the Blocked Account an amount sufficient to
pay accrued interest on any Payment Date or any principal then due and there are any amounts
remaining in the Blocked Account after such payment of accrued interest or such principal amount,
Lender shall, so long as no Deferred Amount is outstanding and the aggregate outstanding principal
amount of the Loan is equal to or less than $60,000,000, transfer, on a monthly basis, fifty
percent (50%) of such remaining amounts to any account to which Borrower directs promptly upon
receipt of such direction. Borrower shall pay all costs and expenses for establishing and
maintaining the Blocked Account. If, on any Payment Date or any other principal payment date, the
amount then on deposit in the Blocked Account is less than the amount of the accrued interest or
principal required to be paid to Lender under this Agreement and the Note on such Payment Date or
other principal payment date, Borrower shall deposit in a deposit account of Borrower maintained
with and at Citibank the amount of such deficiency. Borrower shall have ten (10) days following
Borrower’s receipt of notice from Lender of such deficiency to pay such deficiency except that any
such deficiency shall be paid immediately on the Maturity Date.



IV. REPRESENTATIONS AND WARRANTIES



Section 4.1 Borrower Representations.



Borrower represents and warrants as of the Closing Date that:



4.1.1 Organization.



Borrower is duly organized, with requisite power and authority to own its assets, to transact
the businesses in which it is now engaged and to execute, deliver and perform this Agreement and
the other Loan Documents to which it is or will be a party. Borrower possesses all rights,
licenses, permits and authorizations, governmental or otherwise, necessary to entitle it to own its
assets and to transact the businesses in which it is now engaged.


 


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4.1.2 Proceedings.



Borrower has taken all necessary action to authorize the execution, delivery and performance
of this Agreement and the other Loan Documents to which it is or will be a party. This Agreement
and the other Loan Documents to which it is or will be a party have been duly executed and
delivered by or on behalf of Borrower and constitute legal, valid and binding obligations of
Borrower enforceable against Borrower in accordance with their respective terms, subject only to
applicable bankruptcy, insolvency and similar laws affecting rights of creditors generally, and
subject, as to enforceability, to general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).



4.1.3 No Conflicts.



The execution, delivery and performance by Borrower of this Agreement and the other Loan
Documents to which it is or will be a party will not conflict with or result in a breach of any of
the terms or provisions of, or constitute a default under, or result in the creation or imposition
of any Lien, charge or encumbrance (other than pursuant to the Loan Documents) upon any of the
property or assets of Borrower pursuant to the terms of any indenture, mortgage, deed of trust,
loan agreement, partnership agreement, management agreement or other agreement or instrument
(including, without limitation, its charter or by-laws) to which Borrower is or will be a party or
by which any of Borrower’s property or assets is subject, nor will such action result in any
violation of the provisions of any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over Borrower or any of Borrower’s assets, or any
license or other approval required to own and manage its assets, and any consent, approval,
authorization, order, registration or qualification of or with any Governmental Authority required
for the execution, delivery and performance by Borrower of this Agreement or any other Loan
Documents to which it is or will be a party has been obtained and is in full force and effect.



4.1.4 Litigation.



There are no actions, suits or proceedings at law or in equity by or before any Governmental
Authority or other agency now pending or threatened against or affecting Borrower or the Collateral
which actions, suits or proceedings, if determined against Borrower or the Collateral, might
materially adversely affect the condition (financial or otherwise) or business of Borrower or the
Collateral.



4.1.5 Agreements.



Borrower is not a party to any agreement or instrument or subject to any restriction which
might materially and adversely affect Borrower or the Collateral or Borrower’s business, properties
or assets, operations or condition, financial or otherwise. Borrower is not in default in any
material respect in the performance, observance or fulfillment of any of the obligations, covenants
or conditions contained in any agreement or instrument to which it is a party or by which Borrower
or the Collateral is bound.


 


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4.1.6 Solvency.



Borrower (a) has not entered into the transaction or executed the Note, this Agreement or any
other Loan Documents with the actual intent to hinder, delay or defraud any creditor, and
(b) has received reasonably equivalent value in exchange for its obligations under the Loan
Documents. The fair saleable value of Borrower’s assets exceeds Borrower’s total liabilities,
including, without limitation, subordinated, unliquidated, disputed and contingent liabilities.
Borrower’s assets do not constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to incur debt and liabilities
(including contingent liabilities and other commitments) beyond its ability to pay such debt and
liabilities as they mature (taking into account the timing and amounts of cash to be received by
Borrower and the amounts to be payable on or in respect of obligations of Borrower). No petition
under the Bankruptcy Code or similar state bankruptcy or insolvency law has been filed against
Borrower in the last seven (7) years, and Borrower has not made an assignment for the benefit of
creditors or taken advantage of any insolvency act for the benefit of debtors during such period.
Borrower is not contemplating either the filing of a petition by it under the Bankruptcy Code or
similar state bankruptcy or insolvency law or the liquidation of all or a major portion of
Borrower’s assets or property, and Borrower has no knowledge of any Person contemplating the filing
of any such petition against it.



4.1.7 Full and Accurate Disclosure.



No statement of fact made by Borrower in this Agreement or the other Loan Documents contains
any untrue statement of a material fact or omits to state any material fact necessary to make
statements contained herein or therein not misleading.



4.1.8 Compliance.



Borrower is not in default or violation of any order, writ, injunction, decree or demand of
any Governmental Authority.



4.1.9 Financial Information.



All financial data including, without limitation, the statements of cash flow and income and
operating expense, if any, that have been delivered by Borrower to Lender in respect of Borrower
and the Collateral (i) are true, complete and correct in all
material respects, (ii) accurately represent the financial condition of Borrower and the Collateral, as of the
date of such reports, and (iii) have been prepared in accordance with GAAP throughout the periods
covered, except as disclosed therein. Except for Permitted Encumbrances, Borrower does not have
any contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated losses from any unfavorable commitments that are known to Borrower and
reasonably likely to have a materially adverse effect on Borrower or the Collateral except as
referred to or reflected in said financial statements. Since the date of such financial
statements, there has been no materially adverse change in the financial condition, operations or
business of Borrower from that set forth in such financial statements provided by Borrower.



4.1.10 Federal Reserve Regulations.



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


 


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4.1.11 Not a Foreign Person.



Borrower is not a “foreign person” within the meaning of Section 1445(f)(3) of the Code.



4.1.12 Enforceability.



The Loan Documents are not subject to any right of rescission, set-off, counterclaim or
defense by Borrower, including the defense of usury, and Borrower has not asserted any right of
rescission, set-off, counterclaim or defense with respect thereto.



4.1.13 No Prior Assignment.



There are no prior assignments or pledges of the Collateral which are currently outstanding.



4.1.14 Filing and Recording Taxes.



All transfer taxes, deed stamps, intangible taxes or other amounts in the nature of transfer
taxes required to be paid by Borrower under applicable Legal Requirements currently in effect in
connection with the making of the Loan have been paid. All stamp, intangible or other similar tax
required to be paid under applicable Legal Requirements currently in effect in connection with the
execution, delivery, recordation, filing, registration, perfection or enforcement of the Pledge
Agreements, the Control Agreements or the UCC Financing Statements in existence on the Closing Date
have been paid.



4.1.15 Illegal Activity.



No portion of the Collateral has been or will be purchased with proceeds of any illegal
activity.



4.1.16 No Change in Facts or Circumstances; Disclosure.



All material information submitted by Borrower to Lender and in all financial statements,
reports, certificates and other documents submitted by Borrower in connection with the Loan or in
satisfaction of the terms hereof and all statements of fact made by Borrower in this Agreement or
any other Loan Document are accurate, complete and correct in all material respects. To the best
of Borrower’s knowledge, there has been no material adverse change in any condition, fact,
circumstance or event that would make any such information inaccurate, incomplete or otherwise
misleading in any material respect or that otherwise materially and adversely affects or might
materially and adversely affect the use, operation or value of the Collateral or the business
operations or the financial condition of Borrower.



4.1.17 Investment Company Act.



Borrower is not (a) an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended; or (b) subject to
any other federal or State law or regulation which purports to restrict or regulate its ability to
borrow money.


 


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4.1.18 Principal Place of Business; State of Organization.



Borrower’s principal place of business as of the date hereof is the address set forth in the
introductory paragraph of this Agreement. Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.



4.1.19 Business Purposes.



The Loan was made solely for the business purpose of Borrower.



4.1.20 Taxes.



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



4.1.21 Forfeiture.



Borrower has not committed any act or omission affording the federal government or any State
or local government the right of forfeiture as against any monies paid in performance of Borrower’s
obligations under the Note, this Agreement or the other Loan Documents. Borrower hereby covenants
and agrees not to commit, permit or suffer to exist any act or omission affording such right of
forfeiture.



4.1.22 Taxpayer Identification Number.



Borrower’s United States taxpayer identification number is 26-0304375.



4.1.23 OFAC.



Borrower represents and warrants that neither Borrower nor any of its Affiliates is a
Prohibited Person, and Borrower and its Affiliates are in full compliance with all applicable
orders, rules, regulations and recommendations of The Office of Foreign Assets Control of the U.S.
Department of the Treasury.



4.1.24 Embargoed Person.



As of the date hereof and at all times throughout the term of the Loan, including after giving
effect to any Transfers permitted pursuant to the Loan Documents, (a) none of the funds or other
assets of Borrower constitute property of, or are beneficially owned, directly or indirectly, by
any person, entity or government subject to trade restrictions under U.S. law (such a person,
entity or government, an “Embargoed Person”), including but not limited to, the
International Emergency Economic Powers Act, 50 U.S.C. §§ 1701 et seq., The Trading
with the Enemy Act, 50 U.S.C. App. 1 et seq., and any Executive Orders or
regulations promulgated thereunder, with the result that an investment in Borrower (whether
directly or indirectly) is prohibited by law or the Loan made by Lender is in violation of law; (b)
to the knowledge of Borrower, after due inquiry, no Embargoed Person has any interest of any nature
whatsoever in
Borrower, with the result that the investment in BHAC (whether directly or indirectly) is
prohibited by law or the Loan is in violation of law; and (c) none of the funds of Borrower have
been derived from any unlawful activity with the result that an investment in Borrower (whether
directly or indirectly) is prohibited by law or the Loan is in violation of law.


 


25









 







4.1.25 Collateral.



The Pledge Agreements and the Control Agreements in existence on the Closing Date create
valid, perfected first priority security interests in and to the collateral described therein, all
in accordance with such Loan Documents, for which a Lien can be perfected pursuant to and in
accordance with the UCC.



4.1.26 Collateral Entities.



Schedule 4.1.26 sets forth all of the Affiliates of Borrower and Guarantors that own, directly
or indirectly, any Specified Equity Interests.



4.1.27 Contingent Obligations.



None of Borrower, either Guarantor, any Pledgor or any of their respective Affiliates has
incurred any Contingent Liability since March 31, 2008, other than guaranties or other such
obligations disclosed in their financial statements dated as of and for the period ended December
31, 2007 and previously delivered to Lender.



4.1.28 Certain Defaults.



Except as specified in Schedule 4.1.28, none of Borrower, either Guarantor, any Pledgor or any
of their respective Affiliates is in default under any loan agreement, mortgage or other instrument
or agreement relating, directly or indirectly, to any of the Collateral Entity Properties.



Section 4.2 Survival of Representations.



Borrower agrees that all of the representations and warranties of Borrower set forth in
Section 4.1 hereof and elsewhere in this Agreement and the other Loan Documents shall survive for
so long as any amount remains owing to Lender under this Agreement or any of the other Loan
Documents by Borrower or any other Loan Party. All representations, warranties, covenants and
agreements made in this Agreement and the other Loan Documents by Borrower shall be deemed to have
been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender
or on its behalf.


 


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V. BORROWER COVENANTS



Section 5.1 Affirmative Covenants.



From the date hereof and until payment and performance in full of all obligations of Borrower
and the other Loan Parties under the Loan Documents and the release of Lender’s Liens encumbering
the Collateral (and all related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower hereby covenants and agrees with Lender that:



5.1.1 Existence; Compliance with Legal Requirements.




(a) Borrower shall do or cause to be done all things necessary to preserve, renew and
keep in full force and effect its existence, rights, licenses, permits and franchises and
comply in all material respects with all Legal Requirements applicable to it and the
Collateral. There shall never be committed by Borrower any act or omission affording the
federal government or any State or local government the right of forfeiture against any
monies paid in performance of Borrower’s obligations under any of the Loan Documents.




(b) After prior written notice to Lender, Borrower, at its own expense, may contest by
appropriate legal proceeding promptly initiated and conducted in good faith and with due
diligence, the validity of any Legal Requirement, the applicability of any Legal Requirement
to Borrower or any alleged violation of any Legal Requirement, provided that (i) no
Default or Event of Default has occurred and remains uncured; (ii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any instrument to
which Borrower is subject and shall not constitute a default thereunder and such proceeding
shall be conducted in accordance with Applicable Law; (iii) neither the Collateral nor any
part thereof or interest therein will be in danger of being sold, forfeited, terminated,
cancelled or lost; (iv) Borrower shall promptly upon final determination thereof comply with
any such Legal Requirement determined to be valid or applicable or cure any violation of any
Legal Requirement; (v) such proceeding shall suspend the enforcement of the contested Legal
Requirement against Borrower; and (vi) Borrower shall furnish such security as may be
required in the proceeding, or as may be reasonably requested by Lender, to insure
compliance with such Legal Requirement, together with all interest and penalties payable in
connection therewith. Lender may apply any such security or part thereof as necessary to
cause compliance with such Legal Requirement at any time when, in the judgment of Lender,
the validity, applicability or violation of such Legal Requirement is finally established.



5.1.2 Litigation.



Borrower shall give prompt written notice to Lender of any litigation or governmental
proceedings pending or threatened against Borrower which might materially adversely affect
Borrower’s condition (financial or otherwise) or business or the Collateral.



5.1.3 Notice of Default.



Borrower shall promptly advise Lender of any material adverse change in Borrower’s condition,
financial or otherwise, of the occurrence of any Default or Event of Default of which Borrower has
knowledge or of the occurrence of any default under any loan agreement, mortgage or other material
instrument or agreement to which Borrower, either Guarantor or any of their respective Affiliates
is a party relating, directly or indirectly, to any of the Collateral Entity Properties.



5.1.4 Cooperate in Legal Proceedings.



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


 


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5.1.5 Further Assurances.



Borrower shall, at Borrower’s sole cost and expense:




(a) furnish to Lender each and every document, certificate, agreement and instrument
required to be furnished by Borrower pursuant to the terms of the Loan Documents or
reasonably requested by Lender in connection therewith;




(b) execute and deliver to Lender such documents, instruments, certificates,
assignments and other writings, and do such other acts necessary or desirable, to evidence,
preserve and/or protect the Collateral as Lender may reasonably require, including, without
limitation, the authorization by Borrower of UCC Financing Statements and any other
financing statements; and




(c) do and execute all and 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 require from time to
time.



5.1.6 Intangible Taxes.



Borrower shall pay all State, county and municipal recording, and intangible, and all other
taxes imposed upon the execution and recordation of UCC Financing Statements and/or upon the
execution and delivery of the Note.



5.1.7 Financial and Other Reporting.




(a) Borrower will keep and maintain on a Fiscal Year basis, in accordance with GAAP or
on a federal income tax basis (or such other accounting basis reasonably acceptable to
Lender), proper and accurate books, records and accounts reflecting all of the financial
affairs of Borrower and all items of income and expense in connection with the Collateral
owned by Borrower. Lender shall have the right from time to time at all times during normal
business hours upon reasonable notice to examine such books, records and accounts at the
office of Borrower or any other Person maintaining such books, records and accounts and to
make such copies or extracts thereof as Lender shall desire. After the occurrence of an
Event of Default, Borrower shall pay any costs and expenses incurred by Lender to examine
Borrower’s accounting records with respect to the Collateral owned by Borrower as Lender
shall determine to be necessary or appropriate in the protection of Lender’s interest.
Borrower shall permit Lender and its authorized agents to inspect from time to time any part
of the Collateral owned by Borrower.


 


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(b) Borrower will furnish to Lender by April 10, 2009, a complete copy of Borrower’s,
each Guarantor’s, each Pledgor’s and each of their Affiliates’ unaudited consolidated and
consolidating annual financial statements for the Fiscal Year ended
December 31, 2008 including statements of profit and loss and balance sheets, in each
case prepared in accordance with GAAP or on a federal income tax basis on a consolidated and
consolidating basis and certified by the chief financial officer of Borrower.




(c) Borrower will furnish to Lender a copy of each annual Federal income tax return of
Borrower, each Guarantor and each Pledgor within thirty (30) days after the filing thereof.




(d) Borrower will furnish to Lender, within ten (10) Business Days after request, a
statement of the administrative expenses incurred by Borrower in any month and any such
further detailed information with respect the financial affairs of Borrower as may be
reasonably requested by Lender.




(e) Borrower shall furnish to Lender, within ten (10) days after the end of each month,
(i) detailed reports as to the status of any projected sale of Specified Equity Interests,
Collateral Entity Properties or Scheduled Property or any refinancing of Indebtedness
secured by any Specified Equity Interests, Collateral Entity Properties or Scheduled
Property and (ii) an update to Schedule 2.3.2(b) reflecting the addition to such Schedule of
all other real estate that the Borrower, the Guarantors and their Affiliates thereafter
intend to sell at such time.




(f) Borrower shall furnish to Lender, within two (2) days after the consummation of any
(i) sale by Borrower, either Guarantor or any of their Affiliates of any Specified Equity
Interests, (ii) sale by any Person of any of the Collateral Entity Properties or of any of
the Scheduled Property, (iii) refinancing of any Indebtedness of Borrower, either Guarantor
or any of their Affiliates secured by any of the Specified Equity Interests, the Collateral
Entity Properties or the Scheduled Property or (iv) issuance by Borrower, Lightstone or any of their Affiliance of any Indebtedness or
equity securities in a private or public offering, a description of such sale, refinancing
or issuance and an accounting of the distribution of all Net Cash Proceeds thereof including
without limitation, the amount of such Net Cash Proceeds (if any) required to be deposited
to the Blocked Account, in form, substance and detail satisfactory to Lender.




(g) Borrower shall furnish to Lender, within forty-five (45) days of each calendar
quarter, operating statements and rent rolls for the Collateral Entity Properties, together
with evidence, in form and substance satisfactory to Lender, of the Collateral Value as of
the end of such calendar quarter, in each case certified by the chief financial officer of
Lightstone.




(h) Borrower shall furnish to Lender, within thirty (30) days after the end of each
month, financial statements of Extended Stay of America Hotels as of the end of or for such
month including income statements and cash flow statements reflecting, among other things, a
calculation of the EBITDA and revenue per average room of Extended Stay of America Hotels
for such month and for the twelve-month period ending on the last day of such month,
together with a comparison of such financial statements to the projected financial
statements of Extended Stay of America Hotels previously provided by the Loan Parties to
Lender for such month, in a form consistent with the form of
financial statements of Extended Stay of America Hotels previously furnished to Lender,
certified by the chief financial officer of Lightstone.


 


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(i) Any reports, statements or other information required to be delivered under this
Agreement shall be delivered (i) in paper form, (ii) on a diskette, and (iii) if requested
by Lender and within the capabilities of Borrower’s data systems without change or
modification thereto, in electronic form and prepared using a Microsoft Word for Windows or
WordPerfect for Windows files (which files may be prepared using a spreadsheet program and
saved as word processing files).




(j) Borrower agrees that Lender may forward to each purchaser, transferee, assignee,
servicer, participant or investor in all or any portion of the Loan (collectively, an
“Investor”) and each prospective Investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower, Guarantors and
the other Loan Parties, whether furnished by Borrower or either Guarantor or otherwise, as
Lender determines necessary or desirable provided that such disclosure is subject to written
confidentiality arrangements customary for assignment, servicing, participation or other
investment transactions of such type. Borrower irrevocably waives any and all rights it may
have under Applicable Law to prohibit such disclosure, including, but not limited, to any
right of privacy.



5.1.8 Costs of Enforcement.



In the event (a) that Lender exercises any of its rights or remedies under any of the Pledge
Agreements or the other Loan Documents as and when permitted thereby, (b) of the bankruptcy,
insolvency, rehabilitation or other similar proceeding in respect of Borrower or an assignment by
Borrower for the benefit of its creditors, or (c) Lender incurs any costs or expenses in connection
with any refinancing or restructuring of the Loan in the nature of a workout, Borrower, its
successors or assigns, shall be chargeable with and agrees to pay all costs of collection and
defense, including reasonable attorneys’ fees and costs, incurred by Lender or Borrower in
connection therewith and in connection with any appellate proceeding or post-judgment action
involved therein, together with all required service or use taxes.



5.1.9 Estoppel Statement.




(a) After request by Lender, Borrower shall within ten (10) days furnish Lender with a
statement, duly acknowledged and certified, setting forth (i) the amount of the original
principal amount of the Note, (ii) the unpaid principal amount of the Note, (iii) the
Applicable Interest Rate on the Note as of the date of such statement, (iv) the date
interest and/or principal were last paid, (v) any offsets or defenses to the payment of the
Debt, and (vi) that the Note, this Agreement, the Pledge Agreements and the other Loan
Documents to which Borrower is a party are valid, legal and binding obligations of Borrower
and have not been modified or if modified, giving particulars of such modification.




(b) After written request by Borrower, Lender shall furnish to Borrower a statement
setting forth (i) the amount of the original principal amount of the Note, (ii) the unpaid
principal amount of the Note, (iii) that there are no currently outstanding notices
of Default sent to Borrower (or listing such notices, if applicable), and (iv) the date
the last interest and, if applicable, principal has been paid.


 


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5.1.10 Performance by Borrower.



Borrower shall in a timely manner observe, perform and fulfill each and every covenant, term
and provision of each Loan Document executed and delivered by, or applicable to, Borrower, and
shall not enter into or otherwise suffer or permit any amendment, waiver, supplement, termination
or other modification of any Loan Document executed and delivered by, or applicable to, Borrower
without the prior written consent of Lender.



5.1.11 OFAC.



At all times throughout the term of the Loan, Borrower shall be in full compliance with all
applicable orders, rules, regulations and recommendations of The Office of Foreign Assets Control
of the U.S. Department of the Treasury.



5.1.12 Periodic Inspections.



Borrower shall permit Lender and its agents and representatives to conduct periodic
inspections and appraisals of the Collateral Entity Properties (which shall be at Borrower’s
expense at any time that an Event of Default has occurred and is continuing or as required by
Applicable Law) and information relating to the Collateral.



5.1.13 Payment of Dividends and Distributions.



Borrower shall cause BHAC and other issuers of Specified Equity Interests pledged to Lender
pursuant to one or more Pledge Agreements to declare and pay dividends and other distributions in
the maximum amounts allowed, and as frequently as permitted, by Applicable Law such that such
dividends and other distributions, shall be sufficient, in the aggregate, to make timely payment of
accrued interest on, and regularly-scheduled principal installment payments in respect of, the
Loan, together with fees, costs, expenses and other amounts required to be paid by the Loan Parties
pursuant to the Loan Documents.



Section 5.2 Negative Covenants.



From the date hereof until payment and performance in full of all obligations of Borrower and
the other Loan Parties under the Loan Documents or the earlier release of Lender’s Liens on the
Collateral (and all related obligations) in accordance with the terms of this Agreement and the
other Loan Documents, Borrower covenants and agrees with Lender that it will not do, directly or
indirectly, any of the following:




5.2.1 Liens.



Borrower shall not create, incur, assume or suffer to exist any Lien on any portion of the
Collateral or any other assets now owned or hereafter acquired, other than Permitted Encumbrances
described in parts (i), (iii) or (iv) of the definition thereof.



 


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5.2.2 Dissolution.



Borrower shall not (a) engage in any dissolution, liquidation or consolidation or merger with
or into any other business entity or (b) transfer, lease or sell, in one transaction or any
combination of transactions, all or substantially all of the properties or assets of Borrower
except to the extent expressly permitted by the Loan Documents.



5.2.3 Indebtedness.



Borrower shall not, and shall not permit any of its Affiliates with direct or indirect
interests in the Collateral Entity Properties to, incur, create or suffer to exist any Indebtedness
or Contingent Liability, other than (a) the Indebtedness created hereunder, (b) unsecured trade
debt incurred in the ordinary course of business, (c) Indebtedness incurred solely to refinance
existing Indebtedness, so long as the principal amount of such new Indebtedness does not exceed the
principal amount of the refinanced Indebtedness, (d) Indebtedness incurred after the Closing Date
so long as all the Net Cash Proceeds thereof received by Borrower or either Guarantor or, in the
case of any of their Affiliates, the maximum amount of such Net Cash Proceeds that is permitted to
be declared and paid to Borrower or either Guarantor as dividends or other distributions by
Applicable Law (or, if applicable, 50% thereof), are applied to repay or prepay the Loan within two
(2) days following receipt of such Net Cash Proceeds, or (e) other Indebtedness to Lender and its
Affiliates.



5.2.4 Name, Identity, Structure, or Principal Place of Business.



Borrower shall not change its name, identity (including its trade name or names), place or
form of organization or chief executive office, without, in each case, first giving Lender thirty
(30) days prior written notice.



5.2.5 Affiliate Transactions.



Borrower shall not enter into, or be a party to, any transaction with an Affiliate of Borrower
or either Guarantor or any of the shareholders of Borrower except in the ordinary course of
business and on terms which are no less favorable to Borrower than would be obtained in a
comparable arm’s-length transaction with an unrelated third party.


 


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5.2.6 Transfers.




(a) Borrower shall not effect, permit or suffer a Sale or Pledge by Borrower of an
interest in any of the Collateral, the Collateral Entity Properties or any other assets now
owned or hereafter acquired (collectively, a “Transfer”), other than Permitted
Encumbrances, without the prior written consent of Lender which shall not be unreasonably
withheld or delayed.




(b) Notwithstanding the provisions of Section 5.2.6(a) hereof, a transfer to a
Restricted Party or by devise or descent or by operation of law upon the death of a grantor,
trustee, beneficiary, member, partner or shareholder to a Restricted Party shall not be
deemed to be a Transfer, so long as such Transfer does not relate to any of the Collateral
without Lender’s prior written consent and does not impair or limit the first priority Liens
in favor of Lender pursuant to any Pledge Agreement or other Loan Document.




(c) Lender shall not be required to demonstrate any actual impairment of its security
or any increased risk of default hereunder in order to declare the Debt immediately due and
payable upon a Transfer in violation of this Section 5.2.6. This provision shall apply to
every Transfer regardless of whether voluntary or not, or whether or not Lender has
consented to any previous Transfer. Notwithstanding anything to the contrary contained in
this Section 5.2.6, no transfer (whether or not such transfer shall constitute a Transfer)
shall be made to a Prohibited Person.



5.2.7 Distributions and Payments.



Borrower will not, directly or indirectly, pay any dividends or distributions on, purchase,
redeem or retire any shares of any class of its capital stock or other equity interests or any
warrants, options or rights to purchase any such capital stock or other equity interests, whether
now or hereafter outstanding, or make any other distribution in respect thereof, either directly or
indirectly, whether in cash or property, or make any other payment or transfer of cash to a third
party (other than the payment of expenses in the ordinary course of business), without Lender’s
prior written consent; provided, however, that so long as there is no then-existing
Default or Event of Default, Borrower shall be permitted to declare and pay dividends and
distributions on its capital stock from time to time, provided that in the case of a
Default, such dividends and distributions shall not constitute a violation of the terms of this
Section 5.2.7 so long as such Default does not become an Event of Default. Notwithstanding the
foregoing, even if a Default or Event of Default exists, so long as no “Restricted Payment Event”
exists Borrower shall be permitted to declare and pay dividends and distributions on its capital
stock from time to time in an amount necessary for Prime Group Realty Trust (the “REIT”) to
maintain its status as a real estate investment trust under the Code and to avoid the imposition of
any corporate level tax on the REIT on the net income attributable to the Units (the amount of such
permitted distribution being determined by the total net income of the REIT attributable to the
Units). As used herein, “Restricted Payment Event” shall mean any of the following:
(i) the non-payment of any principal payment due hereunder or under the Note when due (whether by
acceleration or otherwise), (ii) non-payment of any principal payment required pursuant to
Section 2.3.2 hereof, (iii) nonpayment of interest upon the Note or of any fee or other payment
Obligations under any of the Loan Documents when due, (iv) the breach of any of the terms or
provisions of
Sections 5.2.1 or 5.2.6, (v) an Event of Default under clauses (iv) or (v) of Section 6.1(a)
hereof, or (vi) a default under paragraph IV(c) or (d) of either Guaranty. If any Restricted
Payment Event occurs that is not an immediate Event of Default because a grace or notice period has
not expired, and such Restricted Payment Event is cured prior to the time the Restricted Payment
Event would constitute an Event of Default, then for purposes of this Section 5.2.7, such
Restricted Payment Event shall be deemed not to have occurred.


 


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VI. DEFAULTS



Section 6.1 Event of Default.




(a) Each of the following events shall constitute an event of default hereunder (an
“Event of Default”):




(i) if any portion of the Debt is not paid on or before the date the same is
due and payable and remains unpaid for ten (10) Business Days following written
notice thereof by Lender to Borrower, except that all the Debt shall be paid in full
on the Maturity Date;




(ii) if Borrower or any other Loan Party transfers or encumbers any portion of
the Collateral in violation of any Pledge Agreement or other Loan Document;




(iii) if any representation or warranty made by Borrower, either Guarantor or
any other Loan Party herein or in any other Loan Document, or in any report,
certificate, financial statement or other instrument, agreement or document
furnished to Lender shall have been false or misleading in any material respect as
of the date the representation or warranty was made;




(iv) if Borrower, either Guarantor or any other Loan Party shall make an
assignment for the benefit of creditors;




(v) if a receiver, liquidator or trustee shall be appointed for Borrower,
either Guarantor or any other Loan Party, or if Borrower, either Guarantor or any
other Loan Party shall be adjudicated a bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or arrangement pursuant to the Bankruptcy Code, or
any similar federal or State law, shall be filed by or against, consented to, or
acquiesced in by, Borrower, either Guarantor or any other Loan Party, or if any
proceeding for the dissolution or liquidation of Borrower, either Guarantor or any
other Loan Party shall be instituted; provided, however, if such
appointment, adjudication, petition or proceeding was involuntary and not consented
to by Borrower, either Guarantor or such other Loan Party, upon the same not being
discharged, stayed or dismissed within ninety (90) days, provided that any
reference in Section 4.1.6 or 5.1.8 hereof or this clause (v) to the commencement of
a bankruptcy case by or against Borrower, either Guarantor or any other Loan Party
shall not be deemed to constitute an admission by Lender as to the eligibility of
Borrower, either Guarantor or any other Loan Party for relief as a debtor under the
Bankruptcy Code;


 


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(vi) if Borrower or any other Loan Party attempts to assign such Loan Party’s
rights under this Agreement or any of the other Loan Documents or any interest
herein or therein in contravention of the Loan Documents;




(vii) if Borrower breaches any of its covenants contained in
(A) Section 5.1.11, or (B) any other provision of this Agreement and such breach
under this clause (B) is not cured within fifteen (15) days of notice thereof by
Lender to Borrower;




(viii) if any federal tax Lien or State or local income tax Lien is filed
against Borrower, either Guarantor or any other Loan Party or any of the Collateral
and same is not discharged of record within forty-five (45) days after same is
filed;




(ix) Lichtenstein shall die, be declared incompetent or be incapacitated;




(x) if any default occurs under either Guaranty and, other than in the case of
a breach under paragraph IV(c), (d) or (e) thereof or under the second sentence of
paragraph IV thereof (which shall not be subject to cure), such default is not cured
within fifteen (15) days of notice thereof by Lender to Borrower and Guarantors, or
either Guarantor shall dispute or contest his or its liability under the applicable
Guaranty;




(xi) with respect to any term, covenant or provision set forth herein or in any
of the other Loan Documents, which specifically contains a notice requirement or
grace period, if Borrower or any other Loan Party shall be in default under such
term, covenant or condition after the giving of such notice or the expiration of
such grace period;




(xii) if Borrower or any other Loan Party shall continue to be in default under
any of the other terms, covenants or conditions of this Agreement or any other Loan
Document not specified in subsections (i) through (xi) above, for ten (10) days
after notice to Borrower or such other Loan Party from Lender, in the case of any
default which can be cured by the payment of a sum of money, or for thirty (30) days
after notice from Lender in the case of any other default; provided,
however, that if such non-monetary default is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period and provided,
further, that Borrower or such other Loan Party shall have commenced to cure
such default within such thirty (30) day period and thereafter diligently and
expeditiously proceeds to cure the same, such thirty (30) day period shall be
extended for such time as is reasonably necessary for Borrower in the exercise of
due diligence to cure such default;




(xiii) Lichtenstein (A) shall cease to control day-to-day operations and
management of Lightstone, Borrower and each of the other Loan Parties, or (B) shall
cease to own, directly or indirectly, a majority of the equity interests of
Lightstone, Borrower or any of the other Loan Parties;


 


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(xiv) if any default occurs under any Control Agreement or any Pledge
Agreement, whether as to Borrower, another Loan Party or the Collateral, and, other
than in the case of a breach under Section 4(c) of any Pledge Agreement (which shall
not be subject to cure), such default is not cured within fifteen (15) days of
notice thereof by Lender to Borrower, or any Control Agreement or any Pledge
Agreement shall cease to be in full force and effect, or any of the Loan Parties
shall so assert or dispute or contest any Loan Document to which such Loan Party is
a party, or any Control Agreement or any Pledge Agreement shall cease to create in
favor of Lender a valid, perfected, first priority Lien on the Collateral purported
to be covered thereby;




(xv) Borrower, either Guarantor, any other Loan Party or any of their
Affiliates (including, without limitation, Prime Office Chicago and Prime Retail
Outlets) shall fail to make any payment (whether of principal, interest or otherwise
and regardless of amount) in respect of any Material Indebtedness of Borrower,
either Guarantor, such other Loan Party or any of their Affiliates (but in the case
of Prime Office Chicago and Prime Retail Outlets, only any senior Indebtedness
thereof) to any lender or creditor, including, without limitation, Lender or any of
Lender’s Affiliates, when due (whether at scheduled maturity or by required
prepayment, acceleration, demand or otherwise, but subject to applicable grace
periods), or any event or condition occurs that results in any Material Indebtedness
of Borrower, either Guarantor, any other Loan Party or any of their Affiliates (but
in the case of Prime Office Chicago and Prime Retail Outlets, only any senior
Indebtedness thereof) to any lender or creditor, including, without limitation,
Lender or any of Lender’s Affiliates, becoming due prior to its scheduled maturity
or that enables or permits any lender or creditor, including, without limitation,
Lender or any of Lender’s Affiliates, to declare any Material Indebtedness of
Borrower, either Guarantor, such other Loan Party or any of their Affiliates (but in
the case of Prime Office Chicago and Prime Retail Outlets, only any senior
Indebtedness thereof) to such lender or creditor to be due, or to require the
prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled
maturity;




(xvi) (A) an Event of Default under and as defined in the Revolving Line of
Credit Agreement dated as of August 10, 2001 among Lichtenstein, Shifra Lichtenstein
and Lender, as amended, restated, replaced, supplemented or otherwise modified from
time to time (the “Lichtenstein Credit Agreement”), shall occur and be
continuing or (B) a default or event of default under any agreement, instrument or
other document evidencing any other Indebtedness of any Affiliate of either
Guarantor in favor of Lender or Citibank or any of their respective Affiliates shall
occur and be continuing;




(xvii) the occurrence of any event or condition or change therein that, in
Lender’s reasonable judgment, could reasonably be expected to have a material
adverse effect on (A) the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of Borrower, either
Guarantor or any other Loan Party, (B) (I) Borrower’s, either Guarantor’s or any
other Loan Party’s ability to perform its or his material obligations under the Loan
Documents to which it or he is a party or (II) the ability of Lender to enforce
the Debt or realize upon the Collateral, or (C) the value of the Collateral or the
amount that Lender would be likely to receive (after giving consideration to delays
in payment and costs of enforcement) in the liquidation of the Collateral;


 


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(xviii) any judgment or order for the payment of money which, when taken
together with all other judgments and orders rendered against the Loan Parties taken
together, exceeds $250,000 in the aggregate shall be rendered against the Loan
Parties and shall not be stayed (pending appeal or otherwise), vacated, bonded or
discharged within thirty days; or




(xix) the Collateral Value at any time shall be less than $250,000,000 as
determined by Lender.




(b) Upon the occurrence of an Event of Default (other than an Event of Default
described in clauses (iv) or (v) above) and at any time thereafter while such Event of
Default is continuing, in addition to any other rights or remedies available to Lender
pursuant to this Agreement and the other Loan Documents or at law or in equity, Lender may
take such action, without notice or demand, that Lender deems advisable to protect and
enforce its rights against Borrower or the other Loan Parties and the Collateral, including,
without limitation, declaring the Debt and all other Obligations to be immediately due and
payable, and Lender may enforce or avail itself of any or all rights or remedies provided in
the Loan Documents against Borrower or the other Loan Parties and may exercise all the
rights and remedies of a secured party under the Uniform Commercial Code against Borrower
and the Collateral, including, without limitation, all rights or remedies available at law
or in equity; and upon any Event of Default described in clauses (iv) or (v) above, the Debt
and all other Obligations of Borrower and the other Loan Parties hereunder and under the
other Loan Documents shall immediately and automatically become due and payable, without
notice or demand, and Borrower hereby expressly waives any such notice or demand, anything
contained herein or in any other Loan Document to the contrary notwithstanding.



Section 6.2 Remedies.




(a) During the continuance of an Event of Default, all or any one or more of the
rights, powers, privileges and other remedies available to Lender against Borrower or the
other Loan Parties under this Agreement or any of the other Loan Documents executed and
delivered by, or applicable to, Borrower or the other Loan Parties or at law or in equity
may be exercised by Lender at any time and from time to time, whether or not all or any of
the Debt shall be declared due and payable, and whether or not Lender shall have commenced
any foreclosure proceeding or other action for the enforcement of its rights and remedies
under any of the Loan Documents with respect to the Collateral. Any such 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 Applicable Law, without impairing
or otherwise affecting the other rights and remedies of Lender permitted by Applicable Law,
equity or contract or as set forth herein or in the other Loan Documents. Without limiting
the generality of the foregoing,
Borrower agrees that if an Event of Default is continuing (i) to the extent permitted
by Applicable Laws, Lender is not subject to any “one action” or “election of remedies” law
or rule, and (ii) all Liens and other rights, remedies or privileges provided to Lender
shall remain in full force and effect until Lender has exhausted all of its remedies against
the Collateral and the Collateral has been foreclosed, sold and/or otherwise realized upon
in satisfaction of the Debt or the Debt has been paid in full.


 


37









 








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




(c) Lender shall have the right, from time to time (at Lender’s cost and expense or, if
an Event of Default has occurred and is continuing, at Borrower’s sole cost and expense), to
sever the Note and the other Loan Documents into one or more separate notes, pledges and
other security documents (the “Severed Loan Documents”) in such denominations as
Lender shall determine in its sole discretion for purposes of evidencing and enforcing its
rights and remedies provided hereunder. Borrower shall execute and deliver to Lender from
time to time, promptly after the request of Lender, a severance agreement and such other
documents as Lender shall request in order to effect the severance described in the
preceding sentence, all in form and substance reasonably satisfactory to Lender and
Borrower. The Severed Loan Documents shall not contain any representations, warranties or
covenants not contained in the Loan Documents, any such representations and warranties
contained in the Severed Loan Documents will be given by Borrower only as of the Closing
Date, and the Severed Loan Documents shall not increase Borrower’s obligations or decrease
Borrower’s rights under the Loan Documents.




(d) Any amounts recovered from the Collateral after an Event of Default may be applied
by Lender toward the payment of any interest on and/or principal of the Loan and/or any
other amounts due under the Loan Documents in such order, priority and proportions as Lender
in its sole discretion shall determine.


 


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(e) Notwithstanding anything herein or in any other Loan Document to the contrary,
Borrower shall be fully liable for repayment of all the Obligations, provided that
Lender agrees not to enforce any judgment it may obtain against Borrower with respect to the
Obligations against any of Borrower’s assets other than the Collateral pledged by Borrower.
Lender further agrees that it shall not have or seek recourse to the PGRT Entities (other
than to realize on pledges of the equity interests in the REIT and Prime Group Realty, L.P.)
or their respective assets, other than to Borrower to the extent described in the previous
sentence as to the Collateral pledged by Borrower, for the payment of the Obligations.
Lender’s recourse against Guarantors under the Guaranties, and Lender’s rights and remedies
against all other Collateral Entities and all other Collateral, shall in no way be limited
or otherwise be affected hereby.



Section 6.3 Remedies Cumulative; Waivers.



Subject to Section 6.2(e) above, the rights, powers and remedies of Lender under this
Agreement shall be cumulative and not exclusive of any other right, power or remedy which Lender
may have against Borrower or the other Loan Parties pursuant to this Agreement or the other Loan
Documents, or existing at law or in equity or otherwise. Lender’s rights, powers and remedies may
be pursued singularly, concurrently or otherwise, at such time and in such order as Lender may
determine in Lender’s sole discretion. No delay or omission to exercise any remedy, right or power
accruing upon an Event of Default shall impair any such remedy, right or power or shall be
construed as a waiver thereof, but any such remedy, right or power may be exercised from time to
time and as often as may be deemed expedient. A waiver of one or more Defaults or Events of
Default with respect to Borrower shall not be construed to be a waiver of any subsequent Default or
Event of Default by Borrower or to impair any remedy, right or power consequent thereon.



Section 6.4 Rights to Cure Defaults.



Upon the occurrence and during the continuance of any Event of Default, Lender may, but
without any obligation to do so and without notice to or demand on Borrower and without releasing
Borrower from any obligation hereunder or any other Loan Party from any obligation under any other
Loan Document, make any payment or do any act required of Borrower hereunder in such manner and to
such extent as Lender may deem reasonably necessary to protect the security hereof. All such costs
and expenses incurred by Lender in remedying such Event of Default or such failed payment or act or
in appearing in, defending, or bringing any action or proceeding shall bear interest at the Default
Rate, for the period after notice from Lender that such cost or expense was incurred to the date of
payment to Lender. All such costs and expenses incurred by Lender together with interest thereon
calculated at the Default Rate shall be deemed to constitute a portion of the Debt and be secured
by the liens, claims and security interests provided to Lender under the Loan Documents and shall
be immediately due and payable upon demand by Lender therefor.


 


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Section 6.5 Power of Attorney.



For the purpose of carrying out the provisions and exercising the rights, powers and
privileges granted in this Article VI, Borrower hereby absolutely and irrevocably appoints Lender
as its true and lawful attorney-in-fact to execute, acknowledge and deliver any
instruments and do and perform any acts as are referred to in this Article VI in the name and
on behalf of Borrower; provided, however, that Lender shall not make or execute any
such instruments or do or perform any such acts until ten (10) days after notice has been given to
Borrower by Lender of Lender’s intent to exercise its rights under such power. This power of
attorney is a power coupled with an interest and cannot be revoked.



VII. SPECIAL PROVISIONS



Section 7.1 Sale of Note.



Lender may, at any time, sell, transfer pledge or assign the Note, this Agreement, the Pledge
Agreements and the other Loan Documents, and any or all servicing rights with respect thereto, or
grant participations therein.



Section 7.2 Servicer.



At the option of Lender, the Loan may be serviced by a servicer/trustee (the
“Servicer”) selected by Lender, and Lender may delegate all or any portion of its
responsibilities under this Agreement and the other Loan Documents to the Servicer pursuant to a
servicing agreement between Lender and Servicer.



Section 7.3 Reinstatement.



This Agreement and each other Loan Document shall continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Debt or any part thereof, is,
pursuant to Applicable Law, rescinded or reduced in amount, or must otherwise be restored or
returned by Borrower, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise,
all as though such payment or performance had not been made. In the event that any payment, or any
part thereof, is rescinded, reduced, restored or returned, the Debt shall be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or returned.



VIII. MISCELLANEOUS



Section 8.1 Survival.



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



Section 8.2 Lender’s Discretion.



Whenever pursuant to this Agreement, Lender exercises any right given to it to approve or
disapprove, or any arrangement or term is to be satisfactory to Lender, the decision of Lender
to approve or disapprove or to decide whether arrangements or terms are satisfactory or not
satisfactory shall (except as is otherwise specifically herein provided) be in the sole discretion
of Lender and shall be final and conclusive.


 


40









 







Section 8.3 Governing Law.




(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS
OF THE STATE OF NEW YORK AND SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAWS).




(b) WITH RESPECT TO ANY CLAIM OR ACTION ARISING HEREUNDER OR UNDER THIS AGREEMENT, THE
NOTE, OR THE OTHER LOAN DOCUMENTS, BORROWER (A) IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT
LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK, NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF, AND (B) IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS
AGREEMENT, THE NOTE OR THE OTHER LOAN DOCUMENTS INSTRUMENT WILL BE DEEMED TO PRECLUDE LENDER
FROM BRINGING AN ACTION OR PROCEEDING WITH RESPECT HERETO IN ANY OTHER JURISDICTION.



Section 8.4 Modification, Waiver in Writing.



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



Section 8.5 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 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.


 


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Section 8.6 Notices.



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



	 	 	 
	If to Borrower:

	 	PGRT ESH, Inc.

77 West Wacker Drive, Suite 3900

Chicago, Illinois 60601

Attention: Mr. Jeffrey A. Patterson

Facsimile No.: (312) 917-1597
	 
	 	 
	With a copy to:

	 	PGRT ESH, Inc.

77 West Wacker Drive, Suite 3900

Chicago, Illinois 60601

Attention: James Hoffman, Esq.

Facsimile No.: (312) 917-3937

	 
	 

	 	and

	 
	 

	 	The Lightstone Group 


326 Third Street

Lakewood, New Jersey 08701

Attention: Joseph E. Teichman, Esq.

Facsimile No.: (732) 612-1444
	 
	 	 
	If to Lender:

	 	Citicorp USA, Inc.

101 John F. Kennedy Parkway

Fourth Floor

Short Hills, New Jersey 07078

Attention: Ms. Diana Yusun

Facsimile No.: (973) 921-2435
	 
	 	 
	With a copy to:

	 	Luskin, Stern & Eisler LLP

330 Madison Avenue

New York, New York 10017

Attention: Nathan M. Eisler, Esq.

Facsimile No.: (212) 293-2705





 


42









 







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



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



Section 8.7 Trial by Jury.



EACH OF BORROWER AND LENDER HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF
RIGHT BY JURY, AND WAIVES 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 EACH OF BORROWER AND LENDER, 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 IS
HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS
WAIVER BY BORROWER.



Section 8.8 Headings.



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



Section 8.9 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 8.10 Preferences.



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


 


43









 







Section 8.11 Waiver of Notice.



Borrower shall not be entitled to any notices of any nature whatsoever from Lender except with
respect to matters for which this Agreement or the other Loan Documents specifically and expressly
provide for the giving of notice by Lender to Borrower and except with respect to matters for which
Borrower is not, pursuant to applicable Legal Requirements, permitted to waive the giving of
notice. Borrower hereby expressly waives the right to receive any notice from Lender with respect
to any matter for which this Agreement or the other Loan Documents do not specifically and
expressly provide for the giving of notice by Lender to Borrower.



Section 8.12 Remedies of Borrower.



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



Section 8.13 Expenses; Indemnity.




(a) Borrower covenants and agrees to pay or, if Borrower fails to pay, to reimburse
Lender within five (5) days of receipt of written notice from Lender for all reasonable
costs and expenses (including reasonable attorneys’ fees and disbursements) incurred by
Lender in connection with (i) the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents and the consummation of the transactions contemplated
hereby and thereby and all the costs of furnishing all opinions by counsel for Borrower
(including without limitation any opinions reasonably requested by Lender as to any legal
matters arising under this Agreement and the other Loan Documents); (ii) Borrower’s ongoing
performance of and compliance with Borrower’s respective 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; (iii) Lender’s ongoing performance and compliance with all
agreements and conditions contained in this Agreement and the other Loan Documents on its
part to be performed or complied with after the Closing Date; (iv) if requested by or on
behalf of Borrower, 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 reasonably requested by Lender;
(v) securing Borrower’s compliance with any requests made pursuant to the provisions of this
Agreement; (vi) the filing (including, without limitation, UCC Financing Statements) and
recording fees and expenses, and reasonable fees and expenses of counsel for providing to
Lender all required legal opinions, and other similar expenses incurred in creating and
perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan
Documents; 


 


44









 








(vii) enforcing or preserving any rights, in response to third party claims or
the prosecuting or defending of any action or
proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan
Documents, the Collateral, or any other security given for the Loan; (viii) enforcing any
obligations of or collecting any payments due from Borrower under this Agreement, the other
Loan Documents or with respect to the Collateral or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the nature of a
“work-out” or of any insolvency or bankruptcy proceedings; (ix) conducting appraisals of the
Collateral Entity Properties and/or the Collateral; provided, however, that
Borrower shall not be obligated to pay or reimburse the cost of such appraisals unless there
shall then exist an Event of Default or a Default or if required under Applicable Law; and
(x) obtaining from the Valuation Firm, on a quarterly basis, a negative assurance as to the
fair market value of the Collateral Entity Properties; provided, however,
that, in the case of clauses (v), (vii) and (viii) hereof, Borrower shall not be liable for
the payment of any such costs and expenses to the extent the same arise by reason of the
gross negligence, illegal acts, fraud or willful misconduct of Lender or any other
Indemnified Party. Any cost and expenses due and payable to Lender may be paid from any
amounts in the Blocked Account.




(b) Borrower shall indemnify, defend and hold harmless each Indemnified Party from and
against any and all other liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, the reasonable fees and disbursements of counsel for Lender
in connection with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not Lender shall be designated a party thereto), that may be imposed
on, incurred by, or asserted against Lender in any manner relating to or arising out of (i)
any breach by Borrower of its obligations under, or any material misrepresentation by
Borrower contained in, this Agreement, the 2007 Loan Agreement or the other Loan Documents,
or (ii) the use of the proceeds of the Loan (collectively, the “Indemnified
Liabilities”); provided, however, that Borrower shall not have any
obligation to Lender hereunder to the extent that such Indemnified Liabilities arise from
the gross negligence, illegal acts, fraud or willful misconduct of Lender or any other
Indemnified Party. To the extent that the undertaking to indemnify, defend and hold
harmless set forth in the preceding sentence may be unenforceable because it violates any
law or public policy, Borrower shall pay the maximum portion that it is permitted to pay and
satisfy under Applicable Law to the payment and satisfaction of all Indemnified Liabilities
incurred by Lender.



Section 8.14 Offsets, Counterclaims and Defenses.



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


 


45









 







Section 8.15 No Joint Venture or Partnership; No Third Party Beneficiaries.




(a) Borrower and Lender intend that the relationships created hereunder and under the
other Loan Documents be solely that of borrower and lender. Nothing herein or therein is
intended to create a joint venture, partnership, tenancy-in-common, or joint tenancy
relationship between Borrower and Lender.




(b) This Agreement and the other Loan Documents are solely for the benefit of Lender
and Borrower and nothing contained in this Agreement or the other Loan Documents shall be
deemed to confer upon anyone other than Lender and Borrower any right to insist upon or to
enforce the performance or observance of any of the obligations contained herein or therein.



Section 8.16 Publicity.



All news releases, publicity or advertising by Borrower, either Guarantor or their respective
Affiliates through any media intended to reach the general public which refers to the Loan
Documents or the financing evidenced by the Loan Documents to Lender or any of its Affiliates shall
be subject to the prior written approval of Lender. Notwithstanding the foregoing, disclosure
required by any federal or State securities laws, rules or regulations, as determined by Borrower’s
counsel, shall not be subject to the prior written approval of Lender.



Section 8.17 Waiver of Marshalling of Assets.



To the fullest extent permitted by Applicable Law, Borrower, for itself and its successors and
assigns, waives all rights to a marshalling of the assets of Borrower, Borrower’s equity holders
and others with interests in Borrower, and of the Collateral, or to a sale in inverse order of
alienation in the event of foreclosure of all or part of the Collateral, and agrees not to assert
any right under any laws pertaining to the marshalling of assets, the sale in inverse order of
alienation or any other matters whatsoever to defeat, reduce or affect the right of Lender under
the Loan Documents to a sale of the Collateral for the collection of the Debt without any prior or
different resort for collection or of the right of Lender to the payment of the Debt out of the net
proceeds of the Collateral in preference to every other claimant whatsoever.



Section 8.18 Waiver of Counterclaim.



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



Section 8.19 Conflict; Construction of Documents; Reliance.



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


 


46









 







Section 8.20 Brokers and Financial Advisors.



Borrower hereby represents that it has dealt with no financial advisors, brokers,
underwriters, placement agents, agents or finders in connection with the transactions contemplated
by this Agreement. Borrower hereby agrees to indemnify, defend and hold Lender harmless from and
against any and all claims, liabilities, costs and expenses of any kind (including Lender’s
attorneys’ fees and expenses) in any way relating to or arising from a claim by any Person that
such Person acted on behalf of Borrower or Lender in connection with the transactions contemplated
herein. The provisions of this Section 8.20 shall survive the expiration and termination of this
Agreement and the payment of the Debt.



Section 8.21 Prior Agreements.



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



Section 8.22 Counterparts: Telecopied Signatures



This Agreement and any waiver or amendment hereto may be executed in counterparts and by the
parties hereto in separate counterparts, each of which when so executed and delivered shall be an
original, but both of which shall together constitute one and the same instrument. This Agreement
and each of the other Loan Documents may be executed and delivered by telecopier or other facsimile
transmission all with the same force and effect as if the same was a fully executed and delivered
original manual counterpart.



IX. CONDITIONS OF EFFECTIVENESS



Section 9.1 Conditions to Effectiveness



The effectiveness of this Agreement (other than this Article IX and Sections 8.3, 8.7 and 8.13
hereof) is subject to the satisfaction of the following conditions:




(a) Lender shall have received the following, each dated the Closing Date or another
date acceptable to Lender, in form and substance satisfactory to Lender and its counsel:




(i) the Note, duly executed by Borrower;




(ii) Control Agreements, each in form and substance satisfactory to Lender,
duly executed by Borrower, Lightstone Prime, LLC, Prime Office Chicago and
Lichtenstein;





 


47









 








(iii) amendments, in form and substance satisfactory to Lender, to each of the
Pledge Agreement and the Third Party Security Agreements as defined in, and securing
the Indebtedness evidenced by, the Lichtenstein Credit Agreement, providing that the
collateral referred to in such Security Agreements shall also secure, on a
pari passu basis, the Obligations, duly executed by each of the
grantors parties thereto;




(iv) the Guaranties, duly executed by Guarantors;




(v) (A) financial statements of Guarantors for the year ended December 31,
2007, certified by Guarantors, and (B) pro forma financial statements for Borrower
in form and substance satisfactory to Lender;




(vi) an opinion of counsel for Borrower and Guarantors covering such matters
incident to the transactions contemplated by this Agreement as Lender may reasonably
require, which such counsel is hereby requested by Borrower on behalf of Borrower
and Guarantors to provide;




(vii) copies of the certificate of incorporation and by-laws of Borrower and a
copy of the resolutions of the Board of Directors (or similar evidence of
authorization) of Borrower authorizing the execution, delivery and performance of
this Agreement and the other Loan Documents to which Borrower is or is to be a
party, and the transactions contemplated hereby and thereby, attached to which is a
certificate of the Secretary or an Assistant Secretary of Borrower certifying (A)
that such certificate of incorporation and by-laws of Borrower and resolutions (or
similar evidence of authorization) relating to Borrower are true, complete and
accurate copies thereof, have not been amended or modified since the date of such
certificate and are in full force and effect and (B) the incumbency, names and true
signatures of the officers of Borrower authorized to sign the Loan Documents to
which it is a party;




(viii) a certified copy of a certificate of the Secretary of State of the state
of incorporation of Borrower, as of a recent date, listing the certificate of
incorporation of Borrower and each amendment thereto on file in such official’s
office and certifying that (A) such amendments are the only amendments to such
certificate of incorporation on file in that office, (B) Borrower has paid all
franchise taxes to the date of such certificate, and (C) Borrower is in good
standing in that jurisdiction;




(ix) a good standing certificate from the Secretary of State of each state in
which Borrower is qualified as a foreign corporation, each dated within ten days of
the Closing Date;


 


48









 








(x) statements from each Guarantor, in form and substance satisfactory to
Lender, detailing all distributions received by such Guarantor in 2007 and 2008
(through the Closing Date and estimated for the remainder of 2008) and cash flows
(through the Closing Date and estimated for the remainder of 2008, including actual
and estimated sources and uses of cash), with related real estate and cash flow
disclosures;




(xi) a projection of income, expenses and cash flow, in form and substance
satisfactory to Lender, in respect of the Collateral Entity Properties for the
period from the Closing Date through the Maturity Date;




(xii) an updated status report, in form and substance satisfactory to Lender,
as to any projected sale (and estimated amount of proceeds) of any of the Scheduled
Property;




(xiii) the initial negative assurance valuation from the Valuation Firm as to
the fair market value of the Collateral Entity Properties; and




(xiv) such other agreements, instruments and evidence as Lender deems necessary
in its sole and absolute discretion in connection with the transactions contemplated
hereby.




(b) There shall be no pending or, to the knowledge of Borrower after due inquiry,
threatened litigation, proceeding, inquiry or other action (i) seeking an injunction or
other restraining order, damages or other relief with respect to the transactions
contemplated by this Agreement or the other Loan Documents, or (ii) which affects or could
affect the business, prospects, operations, assets, liabilities or condition (financial or
otherwise) of any Loan Party, except, in the case of clause (ii), where such litigation,
proceeding, inquiry or other action could not reasonably be expected to have a Material
Adverse Effect.




(c) Borrower shall have paid, or delivered evidence satisfactory to Lender in its sole
discretion that Borrower shall immediately pay, (i) all reasonable fees and expenses of
Lender in connection with the negotiation, preparation, execution and delivery of the Loan
Documents (including, without limitation, all of Lender’s examination, audit, appraisal,
valuation and travel expenses and the fees and expenses of counsel to Lender), (ii) the fees
referred to in this Agreement that are required to be paid on or before the Closing Date,
including, without limitation, the due diligence deposit fee referred to in Section 2.5
hereof, and (iii) $1,200,000 representing the exit fee payable pursuant to Section 2.2.9 of
the 2007 Loan Agreement.




(d) Except for consents or authorizations which have been obtained under Section 4.1.3
hereof, no consent or authorization of, filing with or other act by or in respect of any
Governmental Authority or any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement, the Note or the other
Loan Documents or the consummation of the transactions contemplated hereby or thereby or the
continuing operations of Borrower following the consummation of such transactions.


 


49









 








(e) No Material Adverse Effect shall have occurred, and no change, occurrence, event or
development or event involving a prospective change that could reasonably be expected to
have a Material Adverse Effect shall have occurred and be continuing.




(f) The Loan Parties shall be in compliance with all Legal Requirements and material
contracts, other than such noncompliance that could not reasonably be expected to have a
Material Adverse Effect.




(g) The Liens in favor of Lender under the Pledge Agreements and the Control Agreement
shall have been duly perfected and shall constitute first priority Liens, and the Collateral
subject thereto shall be free and clear of all Liens other than Liens in favor of Lender and
Permitted Encumbrances.




(h) Lender shall have received evidence satisfactory to it in its sole discretion that
Guarantors hold and maintain on a combined basis (without duplication) at least $40,000,000
of Unencumbered Liquid Assets (as defined in the Guaranties).




(i) No Default or Event of Default shall have occurred and be continuing or would
result from the effectiveness of this Agreement.


 


50









 







IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by
their duly authorized officer, as of the day and year first above written.



	 	 	 	 	 
	 	BORROWER:



PGRT ESH, INC.

 	 
	 	By:  	/s/ David Lichtenstein
 	 
	 	 	David Lichtenstein 	 
	 	 	Chairman 	 
	 
	 	LENDER:



CITICORP USA, INC.

 	 
	 	By:  	/s/ William Bendernagel
 	 
	 	 	William Bendernagel 	 
	 	 	Vice President 	 
	 



 


51









 







Schedule 2.3.2(b)




Intentionally Omitted




Does not include any properties of Prime Group Realty Trust or its subsidiaries






 


 









 









Schedule 4.1.26




Collateral Entities




Intentionally Omitted




 


 









 









Schedule 4.1.28




Certain Defaults




Intentionally Omitted