Exhibit 10.1


 




 





LOAN AGREEMENT


 


Dated as of
May 19, 2006


 


Between


 


MHG SCOTTSDALE HOLDINGS LLC

as Borrower


 


And


 


GREENWICH
CAPITAL FINANCIAL PRODUCTS, INC.

as Lender


 




 





 

















 


TABLE OF CONTENTS


 


	
  1.

  	
  DEFINITIONS;
  PRINCIPLES OF CONSTRUCTION

  	
  1

  
	
   

  	
  1.1

  	
  Specific
  Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Index of
  Other Definitions

  	
  14

  
	
   

  	
  1.3

  	
  Principles
  of Construction

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  GENERAL
  LOAN TERMS

  	
  16

  
	
   

  	
  2.1

  	
  The Loan

  	
  16

  
	
   

  	
  2.2

  	
  Interest;
  Monthly Payments

  	
  16

  
	
   

  	
   

  	
  2.2.1

  	
  Generally

  	
  16

  
	
   

  	
   

  	
  2.2.2

  	
  Default Rate

  	
  17

  
	
   

  	
   

  	
  2.2.3

  	
  Taxes

  	
  17

  
	
   

  	
   

  	
  2.2.4

  	
  Breakage
  Indemnity

  	
  17

  
	
   

  	
   

  	
  2.2.5

  	
  New Payment
  Date

  	
  17

  
	
   

  	
  2.3

  	
  Loan
  Repayment

  	
  17

  
	
   

  	
   

  	
  2.3.1

  	
  Repayment

  	
  17

  
	
   

  	
   

  	
  2.3.2

  	
  Mandatory
  Prepayments

  	
  18

  
	
   

  	
   

  	
  2.3.3

  	
  Optional
  Prepayments

  	
  18

  
	
   

  	
  2.4

  	
  Release of
  Property

  	
  18

  
	
   

  	
  2.5

  	
  Payments and
  Computations

  	
  19

  
	
   

  	
   

  	
  2.5.1

  	
  Making of
  Payments

  	
  19

  
	
   

  	
   

  	
  2.5.2

  	
  Computations

  	
  19

  
	
   

  	
   

  	
  2.5.3

  	
  Late Payment
  Charge

  	
  19

  
	
   

  	
  2.6

  	
  Interest
  Rate Protection Agreements

  	
  19

  
	
   

  	
   

  	
  2.6.1

  	
  Interest
  Rate Protection Agreement

  	
  19

  
	
   

  	
   

  	
  2.6.2

  	
  Execution of
  Documents

  	
  20

  
	
   

  	
   

  	
  2.6.3

  	
  No
  Obligation of Lender

  	
  20

  
	
   

  	
   

  	
  2.6.4

  	
  Receipts
  from Interest Rate Protection Agreements

  	
  21

  
	
   

  	
  2.7

  	
  Fees; Spread
  Maintenance Premium

  	
  21

  
	
   

  	
   

  	
  2.7.1

  	
  Origination
  Fee

  	
  21

  
	
   

  	
   

  	
  2.7.2

  	
  Spread
  Maintenance Premium /Prepayment Premium

  	
  21

  
	
   

  	
  2.8

  	
  Extension
  Options

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CASH
  MANAGEMENT AND RESERVES

  	
  23

  
	
   

  	
  3.1

  	
  Cash
  Management Arrangements

  	
  23

  
	
   

  	
  3.2

  	
  Required
  Repairs

  	
  23

  
	
   

  	
   

  	
  3.2.1

  	
  Completion
  of Required Repairs

  	
  23

  
	
   

  	
   

  	
  3.2.2

  	
  Required
  Repairs Reserves

  	
  23

  
	
   

  	
  3.3

  	
  Taxes and
  Insurance

  	
  24

  
	
   

  	
  3.4

  	
  Capital
  Expense Reserves

  	
  24

  
	
   

  	
  3.5

  	
  [Intentionally
  Deleted]

  	
  25

  
	
   

  	
  3.6

  	
  Operating
  Expense Subaccount/Third Party Disbursements

  	
  25

  
	
   

  	
  3.7

  	
  Casualty/Condemnation
  Subaccount

  	
  26

  
	
   

  	
  3.8

  	
  Security
  Deposits

  	
  27

  
	
   

  	
  3.9

  	
  Cash
  Collateral Subaccount

  	
  27

  



 


i

















 


	
   

  	
  3.10

  	
  Grant of
  Security Interest; Application of Funds

  	
  28

  
	
   

  	
  3.11

  	
  Property
  Cash Flow Allocation

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS
  AND WARRANTIES

  	
  29

  
	
   

  	
  4.1

  	
  Organization;
  Special Purpose

  	
  29

  
	
   

  	
  4.2

  	
  Proceedings;
  Enforceability

  	
  30

  
	
   

  	
  4.3

  	
  No Conflicts

  	
  30

  
	
   

  	
  4.4

  	
  Litigation

  	
  30

  
	
   

  	
  4.5

  	
  Agreements

  	
  30

  
	
   

  	
  4.6

  	
  Title

  	
  30

  
	
   

  	
  4.7

  	
  No
  Bankruptcy Filing

  	
  31

  
	
   

  	
  4.8

  	
  Full and
  Accurate Disclosure

  	
  32

  
	
   

  	
  4.9

  	
  Tax Filings

  	
  32

  
	
   

  	
  4.10

  	
  ERISA; No
  Plan Assets

  	
  32

  
	
   

  	
  4.11

  	
  Compliance

  	
  32

  
	
   

  	
  4.12

  	
  Contracts

  	
  33

  
	
   

  	
  4.13

  	
  Federal
  Reserve Regulations; Investment Company Act

  	
  33

  
	
   

  	
  4.14

  	
  Easements;
  Utilities and Public Access

  	
  33

  
	
   

  	
  4.15

  	
  Physical
  Condition

  	
  34

  
	
   

  	
  4.16

  	
  Leases

  	
  34

  
	
   

  	
  4.17

  	
  Fraudulent
  Transfer

  	
  34

  
	
   

  	
  4.18

  	
  Ownership of
  Borrower

  	
  34

  
	
   

  	
  4.19

  	
  Purchase
  Options

  	
  34

  
	
   

  	
  4.20

  	
  Management
  Agreement

  	
  34

  
	
   

  	
  4.21

  	
  Hazardous
  Substances

  	
  35

  
	
   

  	
  4.22

  	
  Name;
  Principal Place of Business

  	
  35

  
	
   

  	
  4.23

  	
  Other Debt

  	
  35

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS

  	
  36

  
	
   

  	
  5.1

  	
  Existence

  	
  36

  
	
   

  	
  5.2

  	
  Taxes and
  Other Charges

  	
  36

  
	
   

  	
  5.3

  	
  Access to
  the Property

  	
  36

  
	
   

  	
  5.4

  	
  Repairs;
  Maintenance and Compliance; Alterations

  	
  36

  
	
   

  	
   

  	
  5.4.1

  	
  Repairs;
  Maintenance and Compliance

  	
  36

  
	
   

  	
   

  	
  5.4.2

  	
  Alterations

  	
  37

  
	
   

  	
  5.5

  	
  Performance
  of Other Agreements

  	
  37

  
	
   

  	
  5.6

  	
  Cooperate in
  Legal Proceedings

  	
  37

  
	
   

  	
  5.7

  	
  Further
  Assurances

  	
  37

  
	
   

  	
  5.8

  	
  Environmental
  Matters

  	
  38

  
	
   

  	
   

  	
  5.8.1

  	
  Hazardous
  Substances

  	
  38

  
	
   

  	
   

  	
  5.8.2

  	
  Environmental
  Monitoring

  	
  38

  
	
   

  	
   

  	
  5.8.3

  	
  O & M
  Program

  	
  40

  
	
   

  	
  5.9

  	
  Title to the
  Property

  	
  40

  
	
   

  	
  5.10

  	
  Leases

  	
  40

  
	
   

  	
   

  	
  5.10.1

  	
  Generally

  	
  40

  
	
   

  	
   

  	
  5.10.2

  	
  Additional
  Covenants with respect to Leases

  	
  40

  
	
   

  	
  5.11

  	
  Estoppel
  Statement

  	
  41

  



 


ii

















 


	
   

  	
  5.12

  	
  Property
  Management

  	
  41

  
	
   

  	
   

  	
  5.12.1

  	
  Management
  Agreement

  	
  41

  
	
   

  	
   

  	
  5.12.2

  	
  Termination
  of Manager

  	
  41

  
	
   

  	
   

  	
  5.12.3

  	
  Cure by Lender

  	
  42

  
	
   

  	
  5.13

  	
  Special
  Purpose Bankruptcy Remote Entity

  	
  42

  
	
   

  	
  5.14

  	
  Assumption
  in Non-Consolidation Opinion

  	
  42

  
	
   

  	
  5.15

  	
  Change in
  Business or Operation of Property

  	
  42

  
	
   

  	
  5.16

  	
  Debt
  Cancellation

  	
  43

  
	
   

  	
  5.17

  	
  Affiliate
  Transactions

  	
  43

  
	
   

  	
  5.18

  	
  Zoning

  	
  43

  
	
   

  	
  5.19

  	
  No Joint
  Assessment

  	
  43

  
	
   

  	
  5.20

  	
  Principal
  Place of Business

  	
  43

  
	
   

  	
  5.21

  	
  Change of
  Name, Identity or Structure

  	
  43

  
	
   

  	
  5.22

  	
  Indebtedness

  	
  43

  
	
   

  	
  5.23

  	
  Licenses

  	
  44

  
	
   

  	
  5.24

  	
  Compliance
  with Restrictive Covenants, Etc.

  	
  44

  
	
   

  	
  5.25

  	
  ERISA

  	
  44

  
	
   

  	
  5.26

  	
  Prohibited
  Transfers

  	
  45

  
	
   

  	
  5.27

  	
  Liens

  	
  45

  
	
   

  	
  5.28

  	
  Dissolution

  	
  45

  
	
   

  	
  5.29

  	
  Expenses

  	
  45

  
	
   

  	
  5.30

  	
  Indemnity

  	
  45

  
	
   

  	
  5.31

  	
  Patriot Act
  Compliance

  	
  47

  
	
   

  	
  5.32

  	
  Hotel
  Operation

  	
  47

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NOTICES
  AND REPORTING

  	
  48

  
	
   

  	
  6.1

  	
  Notices

  	
  48

  
	
   

  	
  6.2

  	
  Borrower
  Notices and Deliveries

  	
  48

  
	
   

  	
  6.3

  	
  Financial
  Reporting

  	
  49

  
	
   

  	
   

  	
  6.3.1

  	
  Bookkeeping

  	
  49

  
	
   

  	
   

  	
  6.3.2

  	
  Annual
  Reports

  	
  49

  
	
   

  	
   

  	
  6.3.3

  	
  Monthly/Quarterly
  Reports

  	
  49

  
	
   

  	
   

  	
  6.3.4

  	
  Other
  Reports

  	
  50

  
	
   

  	
   

  	
  6.3.5

  	
  Annual
  Budget

  	
  50

  
	
   

  	
   

  	
  6.3.6

  	
  Breach

  	
  51

  
	
   

  	
   

  	
  6.3.7

  	
  Hotel
  Accounting

  	
  51

  
	
   

  	
   

  	
  6.3.8

  	
  Inspection

  	
  51

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  INSURANCE;
  CASUALTY; AND CONDEMNATION

  	
  52

  
	
   

  	
  7.1

  	
  Insurance

  	
  52

  
	
   

  	
   

  	
  7.1.1

  	
  Coverage

  	
  52

  
	
   

  	
   

  	
  7.1.2

  	
  Policies

  	
  54

  
	
   

  	
  7.2

  	
  Casualty

  	
  56

  
	
   

  	
   

  	
  7.2.1

  	
  Notice;
  Restoration

  	
  56

  
	
   

  	
   

  	
  7.2.2

  	
  Settlement
  of Proceeds

  	
  56

  
	
   

  	
  7.3

  	
  Condemnation

  	
  56

  
	
   

  	
   

  	
  7.3.1

  	
  Notice;
  Restoration

  	
  56

  



 


iii

















 


	
   

  	
   

  	
  7.3.2

  	
  Collection
  of Award

  	
  57

  
	
   

  	
  7.4

  	
  Application
  of Proceeds or Award

  	
  57

  
	
   

  	
   

  	
  7.4.1

  	
  Application
  to Restoration

  	
  57

  
	
   

  	
   

  	
  7.4.2

  	
  Application
  to Debt

  	
  58

  
	
   

  	
   

  	
  7.4.3

  	
  Procedure
  for Application to Restoration

  	
  58

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  DEFAULTS

  	
  59

  
	
   

  	
  8.1

  	
  Events of
  Default

  	
  59

  
	
   

  	
  8.2

  	
  Remedies

  	
  60

  
	
   

  	
   

  	
  8.2.1

  	
  Acceleration

  	
  60

  
	
   

  	
   

  	
  8.2.2

  	
  Remedies
  Cumulative

  	
  61

  
	
   

  	
   

  	
  8.2.3

  	
  Severance

  	
  61

  
	
   

  	
   

  	
  8.2.4

  	
  Delay

  	
  61

  
	
   

  	
   

  	
  8.2.5

  	
  Lender’s
  Right to Perform

  	
  62

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  SPECIAL
  PROVISIONS

  	
  62

  
	
   

  	
  9.1

  	
  Sale of Note
  and Secondary Market Transaction

  	
  62

  
	
   

  	
   

  	
  9.1.1

  	
  General;
  Borrower Cooperation

  	
  62

  
	
   

  	
   

  	
  9.1.2

  	
  Use of
  Information

  	
  63

  
	
   

  	
   

  	
  9.1.3

  	
  Borrower
  Obligations Regarding Disclosure Documents

  	
  63

  
	
   

  	
   

  	
  9.1.4

  	
  Borrower
  Indemnity Regarding Filings

  	
  64

  
	
   

  	
   

  	
  9.1.5

  	
  Indemnification
  Procedure

  	
  64

  
	
   

  	
   

  	
  9.1.6

  	
  Contribution

  	
  64

  
	
   

  	
   

  	
  9.1.7

  	
  Rating
  Surveillance

  	
  65

  
	
   

  	
   

  	
  9.1.8

  	
  Severance of
  Loan

  	
  65

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
  65

  
	
   

  	
  10.1

  	
  Exculpation

  	
  65

  
	
   

  	
  10.2

  	
  Brokers and
  Financial Advisors

  	
  67

  
	
   

  	
  10.3

  	
  Retention of
  Servicer

  	
  68

  
	
   

  	
  10.4

  	
  Survival

  	
  68

  
	
   

  	
  10.5

  	
  Lender’s
  Discretion

  	
  68

  
	
   

  	
  10.6

  	
  Governing
  Law

  	
  68

  
	
   

  	
  10.7

  	
  Modification,
  Waiver in Writing

  	
  69

  
	
   

  	
  10.8

  	
  Trial by
  Jury

  	
  70

  
	
   

  	
  10.9

  	
  Headings/Exhibits

  	
  70

  
	
   

  	
  10.10

  	
  Severability

  	
  70

  
	
   

  	
  10.11

  	
  Preferences

  	
  70

  
	
   

  	
  10.12

  	
  Waiver of
  Notice

  	
  70

  
	
   

  	
  10.13

  	
  Remedies of
  Borrower

  	
  71

  
	
   

  	
  10.14

  	
  Prior
  Agreements

  	
  71

  
	
   

  	
  10.15

  	
  Offsets,
  Counterclaims and Defenses

  	
  71

  
	
   

  	
  10.16

  	
  Publicity

  	
  71

  
	
   

  	
  10.17

  	
  No Usury

  	
  71

  
	
   

  	
  10.18

  	
  Conflict;
  Construction of Documents

  	
  72

  
	
   

  	
  10.19

  	
  No Third
  Party Beneficiaries

  	
  72

  
	
   

  	
  10.20

  	
  Spread
  Maintenance Premium /Prepayment Premium

  	
  72

  



 


iv

















 


	
   

  	
  10.21

  	
  Assignment

  	
  73

  
	
   

  	
  10.22

  	
  Certain
  Additional Rights of Lender

  	
  73

  
	
   

  	
  10.23

  	
  Set-Off

  	
  74

  
	
   

  	
  10.24

  	
  Counterparts

  	
  74

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1 -
  Required Repairs

  	
   

  
	
  Schedule 2 -
  Exceptions to Representations and Warranties

  	
   

  
	
  Schedule 3 -
  [Intentionally Reserved]

  	
   

  
	
  Schedule 4 -
  Organization of Borrower

  	
   

  
	
  Schedule 5 -
  Definition of Special Purpose Bankruptcy Remote Entity

  	
   

  
	
  Schedule
  6   Approved Operating Budget

  	
   

  
	
  Schedule
  7   Initial Renovation Work

  	
   

  
					



 


v

















 


LOAN AGREEMENT


 


LOAN AGREEMENT  dated as of May 19, 2006 (as the same may be
modified, supplemented, amended or otherwise changed, this “Agreement”) between MHG SCOTTSDALE HOLDINGS LLC, a Delaware limited
liability company (together with its permitted successors and assigns, “Borrower”), and GREENWICH CAPITAL FINANCIAL PRODUCTS, INC., a Delaware corporation (together with its
successors and assigns, “Lender”).


 


1.             DEFINITIONS;
PRINCIPLES OF CONSTRUCTION


 


1.1          Specific Definitions. The following terms have the
meanings set forth below:


 


Affiliate: 
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.


 


Approved CapEx/FF&E Expenses:  the cost of FF&E Expenses and Capital
Expenses incurred by Borrower, which FF&E Expenses and Capital Expenses
shall either be (a) included in the Approved Capital/FF&E Budget for
the current calendar year, (b) approved by Lender, (c) are within 110%
of the total amounts included in the Approved Capital/FF&E Budget for the
current calendar year or (d) of an emergency nature, and with respect to
which it would be impracticable, in Borrower’s reasonable judgment, under the
circumstances to obtain Lender’s prior written consent, provided Borrower
delivers notice to Lender as soon as practicable after an emergency expenditure.
The parties acknowledge that an Approved Capital/FF&E Budget has not been
delivered as of the date hereof. Accordingly, only items covered under clauses
(b) and (d) above shall constitute Approved CapEx/FF&E Expenses until such an Approved Capital/FF&E Budget
has been prepared, delivered and approved by Lender in accordance with Section
6.3.5 hereof. Approved CapEx/FF&E Expenses shall not include Approved Renovation/Re-Branding
Expenses.


 


Approved Mezzanine Lender:  (i) GCM or (ii) a “Qualified Transferee”
(as such term is defined in the Intercreditor Agreement dated as of the date
hereof between Lender and GCM), (iii) a successor holder of the Mezzanine
Loan that (A) has been approved by Lender acting reasonably and
(B) after the occurrence of a Secondary Market Transaction, has obtained a
Rating Comfort Letter with respect to the transfer of the Mezzanine Loan to
such holder or (iv) the lender under any other Approved Mezzanine Loan
that has been approved by Lender acting reasonably and the applicable Rating
Agencies.


 


Approved Mezzanine Loan:  (i) the Mezzanine Loan and (ii) a loan from
an Approved Mezzanine Lender to Mezzanine Loan Borrower, the proceeds of which
are used to refinance the Mezzanine Loan, provided that: (i) such loan shall be
secured by the same collateral as the Mezzanine Loan; (ii) the loan documents
evidencing and securing such loan shall have been approved by Lender in its
reasonable discretion; (iii) such loan shall be in an amount and have an
interest rate that does not exceed the original principal amount and the
interest rate of the Mezzanine Loan, and shall otherwise be on terms and
conditions that are not


 

















 


materially less favorable to the Mezzanine Loan Borrower than the terms
and conditions of the Mezzanine Loan; (iv) the term of such Approved Mezzanine
Loan shall expire on the Stated Maturity Date; (v) the Approved Mezzanine
Lender shall enter into an intercreditor agreement in form and content
substantially similar to the intercreditor agreement entered into between the
holder of the Loan and the holder of the Mezzanine Loan; and (vi) if such
refinancing of the Mezzanine Loan occurs after a Secondary Market Transaction,
no such refinancing shall be permitted which would result in a downgrade,
qualification or withdrawal of any of the ratings of any of the Securities
issued in such Secondary Market Transaction.


 


Approved Operating Expenses:  operating expenses incurred by Borrower which
(i) are included in the Approved Operating Budget for the current calendar
month (excluding such portion of the fees payable to Manager under the
Management Agreement which are in excess of four percent (4%) of Gross Revenues
actually received during the applicable period; provided, however, the
foregoing shall not be deemed to preclude Borrower from paying any such fees
pursuant to the terms of the Management Agreement from its own funds),
(ii) are for real estate taxes, insurance premiums, electric, gas, oil,
water, sewer or other utility service to the Property, or (iii) have been
approved by Lender in its reasonable discretion. Except for a management fee of
up to four percent (4%) of Gross Revenues as described above, no other
management, franchise or other similar fees payable to any Affiliate of
Borrower, Guarantor or Manager shall be an Approved Operating Expense hereunder
(although nothing shall be deemed to preclude Borrower from paying any such
fees pursuant from its own funds). The initial Approved Operating Budget is
attached hereto as Schedule 6.


 


Approved Renovation/Re-Branding Expenses:
Capital Expenses incurred by Borrower in connection with the renovation and
re-branding of the Property and the Improvements, which Capital Expenses are to
be advanced under the Mezzanine Loan to the Mezzanine Loan Borrower (which
amounts shall then be contributed to Borrower by Mezzanine Loan Borrower).


 


Available Cash:  as of each Payment Date during the
continuance of a Cash Trap Period, the amount of Rents, if any, remaining in
the Deposit Account after the application of all of the payments required under
clauses (i) through (vi) of Section 3.11(a) hereof.


 


Business Day:  any day other than a Saturday, Sunday or
any day on which commercial banks in New York, New York are authorized or
required to close.


 


Calculation Date:  the last day of each calendar quarter during
the Term.


 


Capital Expenses:  expenses that are capital in nature or
required under GAAP to be capitalized.


 


Cash Trap Period:  shall commence, if, (i) an Event of
Default has occurred and is continuing, and shall end if such Default or Event
of Default has been cured and no other Event of Default has occurred and is
continuing or (ii) as of any Calculation Date, the Property fails to
achieve the Minimum Debt Yield Requirement, and shall end upon Lender’s
determination that the Property has achieved the Minimum Debt Yield Requirement
for two (2)


 


2

















 


consecutive Calculation Dates (the Cash Trap Period described in this
clause (ii) is referred to as a “Coverage Cash Trap Period”).


 


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


 


Control: 
with respect to any Person, either (i) ownership directly or
indirectly of forty-nine percent (49%) or more of all equity interests in such
Person or (ii) the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
through the ownership of voting securities, by contract or otherwise.


 


Debt: 
the unpaid Principal, all interest accrued and unpaid thereon, any
Spread Maintenance Premium, any Prepayment Premium and all other sums due to
Lender in respect of the Loan or under any Loan Document.


 


Debt Yield:  as of any date, the ratio (expressed as a
percentage) of (i) Net Operating Income for the twelve (12) month period
ending with the most recently completed calendar month to (ii) the sum of
(A) the outstanding Principal as of such date plus (B) the
outstanding principal balance of any Approved Mezzanine Loan as of such date.


 


Default: 
the occurrence of any event under any Loan Document which, with the
giving of notice or passage of time, or both, would be an Event of Default.


 


Default Rate:  a rate per annum equal to the lesser of
(i) the maximum rate permitted by applicable law, or (ii) five
percent (5%) above the Interest Rate, compounded monthly.


 


Deposit Bank:  Wachovia Bank, National Association, or such
other bank or depository selected by Lender in its discretion.


 


Eligible Account:  a separate and identifiable account from all
other funds held by the holding institution that is either (i) an account
or accounts (A) maintained with a federal or state-chartered depository
institution or trust company which complies with the definition of Eligible
Institution or (B) as to which Lender has received a Rating Comfort Letter
from each of the applicable Rating Agencies with respect to holding funds in
such account, or (ii) a segregated trust account or accounts maintained
with the corporate trust department of a federal depository institution or
state chartered depository institution subject to regulations regarding
fiduciary funds on deposit similar to Title 12 of the Code of Federal
Regulations §9.10(b); having in either case of clause (i) or
clause (ii) above, corporate trust powers, acting in its fiduciary capacity,
and a combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by federal and state authorities. An Eligible
Account will not be evidenced by a certificate of deposit, passbook or other
instrument.


 


Eligible Institution:  a
depository institution insured by the Federal Deposit Insurance Corporation the
short term unsecured debt obligations or commercial paper of which are rated at
least A-1 by S&P, P-1 by Moody’s and F-1+ by Fitch. in the case of accounts
in which funds are held for thirty (30) days or less or, in the case of Letters
of Credit or accounts in


 


3

















 


which funds are held for more than thirty (30) days, the long term
unsecured debt obligations of which are rated at least “AA” by Fitch and
S&P and “Aa2” by Moody’s.


 


ERISA: 
the Employment Retirement Income Security Act of 1974, as amended from
time to time, and the rules and regulations promulgated thereunder.


 


ERISA Affiliate:  all members of a controlled group of
corporations and all trades and business (whether or not incorporated) under
common control and all other entities which, together with Borrower, are
treated as a single employer under any or all of Section 414(b), (c), (m)
or (o) of the Code.


 


FF&E:  all furniture, furnishings, fixtures and
equipment reasonably necessary for the operation of the hotel (including but
not limited to the guest rooms, restaurants, bars, mini-bars, meeting rooms,
banquet rooms and recreational facilities) located at the Property.


 


FF&E Expenses:  expenses that are for FF&E or are used in
connection with the use, occupancy, operation and maintenance of all or any
part of the hotel located on the Property, other than stocks of food and other
supplies held for consumption in normal operation but including, without
limitation, appliances, machinery, equipment, signs, artwork, office
furnishings and equipment, guest room furnishings, and specialized equipment
for kitchens, laundries, bars, restaurant, public rooms, health and
recreational facilities, linens, dishware, all partitions, screens, awnings,
shades, blinds, floor coverings, hall and lobby equipment, heating, lighting,
plumbing, ventilating, refrigerating, incinerating, elevators, escalators, air
conditioning and communication plants or systems with appurtenant fixtures,
vacuum cleaning systems, call or beeper systems, security systems, sprinkler
systems and other fire prevention and extinguishing apparatus and materials;
reservation system computer and related equipment; all equipment, manual,
mechanical or motorized, for the construction, maintenance, repair and cleaning
of, parking areas, walks, underground ways, truck ways, driveways, common
areas, roadways, highways and streets; and the Vehicles (as defined in the
USALI).


 


GAAP: 
generally accepted accounting principles in the United States of America
as of the date of the applicable financial report.


 


GCM:  Greenwich Capital Financial Products, Inc.


 


Governmental Authority:  any court, board, agency, commission, office
or authority of any nature whatsoever or any governmental unit (federal, state,
county, district, municipal, city or otherwise) now or hereafter in existence.


 


Gross Revenues:  shall mean, for the period of determination,
all Rents for such period; provided, however, that Gross Revenues shall not
include (i) gratuities or service charges or other similar receipts which
are to be paid over the Property employees or persons occupying similar
positions for performing similar duties or any other Third Party Disbursements;
(ii) proceeds of other insurance or other money or credits received in
settlement for loss, theft, or damage to property relating to or used in the
Property (other than the proceeds of any business interruption insurance
received with respect to the Property); (iii) excise taxes, sales taxes,
use taxes, bed taxes, admission taxes, tourist taxes, gross receipts taxes,
value added taxes, entertainment taxes, or other taxes or similar charges
payable to governmental authorities;


 


4

















 


(iv) any amounts otherwise included in Gross Revenues to the
extent such amounts are refunded to guests and patrons; (v) such other
exclusions requested by Borrower and approved by Lender in its sole and
absolute discretion; (vi) Lease Termination Payments and (vii) any
amounts recovered in any legal actions or proceedings, or settlements thereof,
arising out of the operation of the Property except to the extent such amounts
would otherwise have been included in Gross Revenues.


 


Guarantor:  Morgans Group LLC, a Delaware limited
liability company.


 


Hotel Transactions:  collectively, (i) occupancy arrangements for
customary hotel transactions in the ordinary course of Borrower’s business
conducted at the hotel located at the Property, including nightly rentals (or
licensing) of individual hotel rooms or suites, banquet room use and food and
beverage services and (ii) informational or guest services which are terminable
on one month’s notice or less without cause and without penalty or premium, including
co-marketing, promotional services and outsourced services.


 


Initial Renovation Work:
the renovation work to be performed at the Property by Borrower more
particularly described on Schedule 7 attached hereto.


 


Interest Period:  (i) the period from the date hereof
through the first day thereafter that is the last day of a calendar month (the “Initial Interest Period”) and
(ii) each period thereafter from the first (1st) day of each
calendar month through the last day of each such calendar month; except that
the Interest Period, if any, that would otherwise commence before and end after
the Maturity Date shall end on the Maturity Date. Notwithstanding the
foregoing, if Lender exercises its right to change the Payment Date to a New
Payment Date in accordance with Section 2.2.5 hereof, then from and
after such election, each Interest Period shall be the period from the New
Payment Date in each calendar month through the day in the next succeeding
calendar month immediately preceding the New Payment Date in such calendar
month.


 


Interest Rate:  for any Interest Period, the Spread (which
includes a servicing fee of five (5) basis points) plus LIBOR for such Interest
Period (or, when applicable pursuant to this Agreement or any other Loan
Document, the Default Rate).


 


Inventory: as
defined in the UCC, and including items which would be entered on a balance
sheet under the line items for “Inventories” or “china, glassware, silver,
linen and uniforms” under USALI.


 


Leases: 
all leases, subleases and other agreements or arrangements heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Property or the Improvements, including
any guarantees, extensions, renewals, modifications or amendments thereof and
all additional remainders, reversions and other rights and estates appurtenant
thereunder. As used herein, the term “Leases” shall include any consulting,
licensing or other similar agreements or arrangements with respect to the
Property, including without limitation with respect to any food and/or beverage
operations at the Property. As used herein, the term “Leases” shall not include
Hotel Transactions.


 


5

















 


Lease Termination Payments:  (i) all fees, penalties, commissions or
other payments made to Borrower in connection with or relating to the
rejection, buy-out, termination, surrender or cancellation of any Lease
(including in connection with any bankruptcy proceeding), (ii) any
security deposits or proceeds of letters of credit held by Borrower in lieu of
cash security deposits, which Borrower is permitted to retain pursuant to the
applicable provisions of any Lease and (iii) any payments made to Borrower
relating to unamortized tenant improvements and leasing commissions under any
Lease.


 


Legal Requirements:  statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting Borrower, any Loan Document or all or part of the Property or the
construction, ownership, use, alteration or operation 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 instrument, either of record or known to
Borrower, at any time in force affecting all or part of the Property.


 


LIBOR:  with respect to any Interest Period, a
floating interest rate per annum (rounded upwards to the next 1/100 of 1%) equal
to the rate for U.S. dollar deposits with one (1) month maturities which
appears on Telerate Page 3750 as of 11:00 am, London time on the
related Determination Date; provided, however, that if such rate
does not appear on Telerate Page 3750, “LIBOR” shall mean a rate per annum
equal to the rate at which U.S. dollar deposits in an amount approximately
equal to the Loan, and with one (1) month maturities, are offered in
immediately available funds in the London Interbank Market to the London office
of National Westminster Bank, Plc by leading banks in the Eurodollar market at
11:00 a.m., London time. “Telerate Page 3750” means the display designated as
“Page 3750” on the Associated Press-Dow Jones Telerate Service (or such
other page as may replace Page 3750 on the Associated Press-Dow Jones
Telerate Service or such other service as may be nominated by the British
Bankers’ Association as the information vendor for the purpose of displaying
British Banker’s Association interest settlement rates for U.S. Dollar
deposits). Any LIBOR determined on the basis of the rate displayed on Telerate
Page 3750 in accordance with the provisions hereof shall be subject to
corrections, if any, made in such rate and displayed by the Associated
Press-Dow Jones Telerate Service within one (1) hour of the time when such rate
is first displayed by such Service. For purposes hereof, (i) ”Determination Date”
shall mean, (A) with respect to the Initial Interest Period, the date
which is two (2) Eurodollar Business Days prior to the date hereof and
(B) with respect to any other Interest Period, the date which is two (2)
Eurodollar Business Days prior to the fifth (5th) day of the
calendar month occurring during such Interest Period; and (ii) ”Eurodollar Business Day”
shall mean any day other than a Saturday, Sunday or other day on which banks in
the City of London, England are closed for interbank or foreign exchange
transactions.


 


Lien: 
any mortgage, deed of trust, lien (statutory or otherwise), pledge,
hypothecation, easement, restrictive covenant, preference, assignment, security
interest or any other encumbrance, charge or transfer of, or any agreement to
enter into or create any of the foregoing, on or affecting all or any part of
the Property or any interest therein, or any direct or indirect interest in
Borrower or Sole Member, including any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of


 


6

















 


the foregoing, the filing of any financing statement, lis pendens
and mechanic’s, materialmen’s and other similar liens and encumbrances.


 


Loan Documents:  this Agreement and all other documents,
agreements and instruments now or hereafter evidencing, securing, guarantying
or providing other credit support or delivered to Lender in connection with the
Loan, including the following, each of which is dated as of the date
hereof:  (i) the Promissory Note
made by Borrower to Lender in the principal amount equal to the Loan (the “Note”), (ii) the Deed of Trust,
Assignment of Leases and Rents and Security Agreement made by Borrower to a
trustee in favor of Lender which covers the Property (the “Mortgage”),
(iii) Assignment of Leases and Rents from Borrower to Lender,
(iv) Assignment of Agreements, Licenses, Permits and Contracts from
Borrower to Lender, (v) the Clearing Account Agreement (the “Clearing Account Agreement”) among
Borrower, Lender, Manager and the Clearing Bank, (vi) the Deposit Account
Agreement (the “Deposit Account Agreement”) among
Borrower, Lender, Manager and the Deposit Bank and (vii) the Guaranty of
Recourse Obligations made by Guarantor (the “Recourse Guaranty”); as each of the
foregoing may be (and each of the foregoing defined terms shall refer to such documents
as they may be) amended, restated, replaced, severed, split, supplemented or
otherwise modified from time to time (including pursuant to Section 9.1.8
hereof).


 


Lockout Date:  December 1, 2006.


 


Management Agreement:  the management agreement between Borrower and
Manager, pursuant to which Manager is to manage the Property, as same may be
amended, restated, replaced, supplemented or otherwise modified from time to
time in accordance with Section 5.12 hereof.


 


Manager: 
Morgans Hotel Group Management LLC, a Delaware limited liability
company, or any successor, assignee or replacement manager appointed by
Borrower in accordance with Section 5.12 hereof.


 


Material Alteration:  any alteration affecting structural elements
of the Property the cost of which exceeds $1,000,000; provided, however, that
in no event shall (i) any Required Repairs, (ii) any tenant
improvement work performed pursuant to any Lease existing on the date hereof or
entered into hereafter in accordance with the provisions of this Agreement,
(iii) alterations performed as part of a Restoration or (iv) the Initial
Renovation Work, constitute a Material Alteration.


 


Maturity Date:  the date on which the final payment of
principal of the Note becomes due and payable as therein provided, whether at
the Stated Maturity Date, by declaration of acceleration, or otherwise.


 


Mezzanine Loan:  that certain mezzanine loan in the principal
amount of $18,000,000 made on the date hereof by GCM to Mezzanine Loan
Borrower, and evidenced and secured by the Mezzanine Loan Documents.


 


Mezzanine Loan Borrower:  Mondrian Scottsdale Mezz Holding Company LLC,
a Delaware limited liability company.


 


7

















 


Mezzanine Loan Documents:  (i) that certain Mezzanine Loan Agreement
of even date herewith between GCM and Mezzanine Loan Borrower, (ii) that
certain Promissory Note of even date herewith in the original principal amount
of the Mezzanine Loan made by Mezzanine Loan Borrower and payable to GCM (and
any successor holder of the Mezzanine Loan), (iii) that certain Pledge and
Security Agreement of even date herewith made by Mezzanine Loan Borrower in
favor of GCM, (iv) the UCC Financing Statement delivered by Mezzanine Loan
Borrower in favor of GCM in connection with the foregoing and (v) any
other “Loan Document”, as defined in the Mezzanine Loan Agreement referred to
in clause (i) above, as each of the foregoing may be modified, amended and
restated from time to time in accordance with the terms and provisions of the
Intercreditor Agreement of even date herewith between Lender and GCM. Without
limiting the foregoing, the term Mezzanine Loan Documents shall also include
all documents, agreements or instruments evidencing, securing or delivered to
an Approved Mezzanine Lender in connection with any Approved Mezzanine Loan.


 


Mezzanine Loan Liens:  (i) the Liens in favor of the holder of the
Mezzanine Loan created pursuant to the Mezzanine Loan Documents and (ii) Liens
on the membership interests held by Mezzanine Loan Borrower in Borrower
pursuant to any other Approved Mezzanine Loan.


 


MG:  Morgans
Group LLC, a Delaware limited liability company.


 


MHGC:  Morgans Hotel Group Co., a Delaware
corporation.


 


Minimum Debt Yield Requirement:  a Debt Yield equal to:  (i) eight percent (8%), for the period
from the date hereof through (but excluding) July 1, 2007, (ii) nine
percent (9%), for the period from and including July 1, 2007 through (but
excluding) July 1, 2008, (iii) ten percent (10%), for the period from and
including July 1, 2008 through (but excluding) July 1, 2009, (iv) eleven
percent (11%), for the period from and including July 1, 2009 through (but
excluding) July 1, 2010 and (v) twelve percent (12%), for the period from
and including July 1, 2010 throughout the remainder of the Term.


 


Monthly Mezzanine Debt Service Payment:  as to each Payment Date, an amount equal to
the scheduled payment of principal and interest payable by Mezzanine Loan
Borrower pursuant to the terms of the Mezzanine Loan Documents.


 


Net Operating Income:  for any period, shall mean Gross Revenues
during the applicable period minus Operating Expenses during such period;
provided that, with respect to any periods of determination that include
periods prior to the date hereof, Net Operating Income for such prior periods
shall be based on financial statements, in form reasonably satisfactory to
Lender, provided by Borrower to Lender.


 


Officer’s Certificate:  a certificate delivered to Lender by
Borrower, or on behalf of Borrower by an Affiliate which Controls Borrower
which is signed by a senior executive officer of Borrower or an Affiliate which
Controls Borrower, as the case may be.


 


Operating Expenses:  means, during any period of determination,
without duplication, (i) any and all actual cash operating expenses
relating to the operation of the Property during such period, (ii) the
costs incurred for ordinary maintenance and repairs of, and


 


8

















 


necessary capital improvements to, the Property during such period (other
than replacements of FF&E), but, in the case of necessary capital
improvements, only to the extent that such costs are treated as current
expenses in accordance with the GAAP, (iii) reserves paid during such
period and (iv) the greater of (A) amounts actually expended during
such period for the replacement of FF&E or (B) four percent (4%) of
Gross Revenues for such period. Operating Expenses shall not include any
(w) expenses which are extraordinary in nature and which would, under
GAAP, be considered “non-recurring”, (x) pre-opening expenses and expenses
incurred in connection with the Initial Renovation Work, (y) amounts
distributed from the Deposit Account into the Debt Service Subaccount, the Tax
and Insurance Subaccount and the Security Deposit Subaccount and the pursuant
to the Deposit Account Agreement, or (z) payments made to any Person that
is an Affiliate of Borrower for materials or service to the Property to the
extent that such payment is greater than that which would be paid for such
materials or services pursuant to an arm’s length agreement with unaffiliated
entities.


 


Other Charges:  all ground rents, maintenance charges,
impositions other than Taxes, and any other charges, including vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Property, now or hereafter levied or assessed or imposed against the Property
or any part thereof.


 


Payment Date:  the first (1st) day of each
calendar month or, upon Lender’s exercise of its right to change the Payment
Date in accordance with Section 2.2.5 hereof, the New Payment Date (in
either case, if such day is not a Business Day, the Payment Date shall be the
first Business Day thereafter). The first Payment Date hereunder shall be
July 1, 2006.


 


Permitted Encumbrances:  (i) the Liens created by the Loan
Documents, (ii) all Liens and other matters disclosed in the Title
Insurance Policy, (iii) Liens, if any, for Taxes or Other Charges not yet
due and payable and not delinquent, (iv) any workers’, mechanics’ or other
similar Liens on the Property provided that any such Lien is bonded or
discharged within thirty (30) days after Borrower first receives notice of such
Lien, (v) such other title and survey exceptions as Lender approves in
writing in Lender’s discretion and (vi) the Mezzanine Loan Liens.


 


Permitted Transfers:


 


(i)            a
Lease entered into in accordance with the Loan Documents;


 


(ii)           a
Permitted Encumbrance;


 


(iii)          Hotel
Transactions;


 


(iv)          transfers
of publicly traded shares of capital stock in MHGC;


 


(v)           provided
that no Event of Default shall then exist, a Transfer of a direct or indirect
interest in Sole Member to any
Person provided that:


 


(A)          such
Transfer shall not (x) cause the transferee (other than MHGC and MG or an
Approved Mezzanine Lender), together with its Affiliates, to acquire Control of
Borrower or Sole Member or to increase its


 


9

















 


direct or
indirect interest in Borrower or in Sole Member to an amount which equals or
exceeds forty-nine percent (49%) or (y) result in Borrower or Sole Member no
longer being Controlled by both of MHGC and MG (or an Approved Mezzanine
Lender);


 


(B)           after
giving effect to such Transfer, MHGC and MG (or an Approved Mezzanine Lender)
shall each continue to own at least fifty-one percent (51%) of all equity
interests (direct or indirect) in Borrower;


 


(C)           if
such Transfer would cause the transferee to increase its direct or indirect
interest in Borrower or in Sole Member to an amount which equals or exceeds
thirty percent (30%), Lender shall have approved in its reasonable discretion
such proposed transferee, which approval shall be based upon Lender’s
satisfactory determination as to the reputable character and creditworthiness
of such proposed transferee, as evidenced by credit and background checks
performed by Lender and such other financial statements and other information
reasonably requested by Lender;


 


(D)          Borrower
shall give Lender notice of such Transfer together with copies of all
instruments effecting such Transfer not less than ten (10) days prior to the
date of such Transfer;


 


(E)           Such
Transfer shall not cause a breach by Borrower of the single purpose bankruptcy
remote provisions set forth in Section 5.13 hereof or;


 


(vi)          provided
that no Event of Default shall then exist, a Transfer of a direct or indirect
interest in Sole Member, which shall cause the transferee to increase its
direct or indirect interest in Borrower or in Sole Member to an amount which equals or exceeds forty-nine percent
(49%), provided that:


 


(A)          Such
Transfer is first approved by Lender in its reasonable discretion (Lender
hereby acknowledges that Sole Member (or the sole member of Sole Member)
intends to Transfer an interest in Sole Member (or the sole member of Sole
Member) to third party investors which may equal or exceed a forty-nine percent
(49%) interest in Sole Member (or the sole member of Sole Member). Accordingly,
Lender will act reasonably and in good faith in granting or withholding its
consent to any such Transfer);


 


(B)           After
giving effect to such Transfer, MHGC and MG shall each (or an Approved
Mezzanine Lender shall) continue to Control (in the sense of clause (ii) of the
defined term “Control”) Borrower and Sole Member;


 


(C)           Borrower,
at its sole cost and expense, shall have (1) delivered (or caused to be
delivered) to Lender and, if such Transfer occurs after a Secondary Market
Transaction, the applicable Rating Agencies, a substantive non-consolidation
opinion with respect to Borrower in form and substance satisfactory to


 


10

















 


Lender and the
applicable Rating Agencies and (2) reimbursed Lender for all reasonable
expenses incurred by it in connection with such Transfer; and


 


(D)          if
such Transfer occurs after a Secondary Market Transaction, Borrower, at its
sole cost and expense, shall have delivered (or caused to be delivered) to
Lender and the applicable Rating Agencies, a Rating Comfort Letter.


 


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


 


Plan: 
(i) an employee benefit or other plan established or maintained by
Borrower or any ERISA Affiliate or to which Borrower or any ERISA Affiliate
makes or is obligated to make contributions and (ii) which is subject to
Title IV of ERISA or Section 302 of ERISA or Section 412 of the Code.


 


Prepayment Premium:  (i) with respect to any repayment or
prepayment of Principal (or acceleration of the Loan or application by Lender
of any amounts in any Cash Management Account to Principal during an Event of Default)
on or after the Lockout Date through and including June 30, 2007, an
amount equal to one percent (1%) of the portion of the Principal being repaid
or prepaid (or the amount of Principal so accelerated or amounts applied to
Principal). No Prepayment Premium shall be payable with respect to any
repayment or prepayment of Principal (or acceleration of the Loan or amounts
applied to Principal) occurring on or after July 1, 2007.


 


Property: 
the parcel of real property and Improvements thereon owned by Borrower
and encumbered by the Mortgage; together with all rights pertaining to such
real property and Improvements, and all other collateral for the Loan as more
particularly described in the Granting Clauses of the Mortgage and referred to
therein as the Trust Property. The Property is located in Scottsdale, Arizona.


 


Rating Agency:  each of Standard & Poor’s, a division of
The McGraw-Hill Companies, Inc. (“S&P”), Moody’s
Investors Service, Inc. (“Moody’s”), and
Fitch, Inc., a division of Fitch Ratings Ltd. (“Fitch”) or any other
nationally-recognized statistical rating organization to the extent any of the
foregoing have been engaged by Lender or its designee in connection with or in
anticipation of any Secondary Market Transaction.


 


Rating Comfort Letter:  a letter issued by each of the applicable
Rating Agencies at Borrower’s sole cost and expense, which confirms that the
taking of the action referenced to therein will not result in any
qualification, withdrawal or downgrading of any existing ratings of Securities
created in a Secondary Market Transaction.


 


Rents: 
without duplication, all rents, rent equivalents, moneys payable as
damages (including payments by reason of the rejection of a Lease in a
Bankruptcy Proceeding) or in lieu of rent or rent equivalents, royalties
(including all oil and gas or other mineral royalties and bonuses), income,
fees, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, all Lease


 


11

















 


Termination Payments, and other payment and consideration of whatever
form or nature received by or paid to or for the account of or benefit of
Borrower or any of their agents or employees, including without limitation,
Manager, from any and all sources arising from or attributable to the Property
and the Improvements, including all revenues and credit card receipts collected
from or with respect to guest rooms, restaurants that are owned and operated by
Borrower or on behalf of Borrower, bars that are owned and operated by Borrower
or on behalf of Borrower, mini-bars, meeting rooms, banquet rooms and
recreational facilities, parking charges, all receivables, customer
obligations, installment payment obligations and other obligations now existing
or hereafter arising or created out of the sale, lease, sublease, license,
concession or other grant of the right of the use and occupancy of the Property
or rendering of services by Borrower or any of their agents or employees,
including, without limitation, Manager, of the hotel or the commercial space
located in the Improvements or acquired from others (including from the rental
of any office space, retail space, guest rooms or other space, halls, stores
and offices, and deposits securing reservations of such space to the extent
Borrower is entitled to retain such deposits), health club membership fees,
food and beverage wholesale and retail sales, service charges, vending machine
sales, and proceeds, if any, from business interruption or other loss of income
insurance.


 


Sales and Occupancy Taxes:  sales, use or occupancy or other taxes on
charges for the use of guest rooms required to be paid to any Governmental
Authority.


 


Servicer:  a servicer selected by Lender to service the
Loan, including any “master servicer” or “special servicer” appointed under the
terms of any pooling and servicing agreement or similar agreement entered into
as a result of a Secondary Market Transaction.


 


Sole Member:  Mezzanine Loan Borrower.


 


Spread:  2.30%.


 


Spread Maintenance Premium:  with respect to any payment or prepayment of
Principal (or acceleration of the Loan or application of any amounts in any
Cash Management Account to Principal during an Event of Default) prior to the
Lockout Date, an amount equal to the product of the following: (A) the
amount of such prepayment (or the amount of Principal so accelerated or amounts
in any Cash Management Account applied to Principal during an Event of
Default), multiplied by (B) the Spread, multiplied by (C) a fraction
(expressed as a percentage) having a numerator equal to the number of months
difference between the First Extended Maturity Date (whether or not the
extension option is exercised pursuant to Section 2.8 hereof) and the
date such prepayment occurs (or the next succeeding Payment Date through which
interest has been paid by Borrower) and a denominator equal to twelve (12).


 


State: 
the state in which the Property is located.


 


Stated Maturity Date:  June 1, 2008, as the same may be
extended pursuant to Section 2.8 hereof, and as such date may be
changed in accordance with Section 2.2.5 hereof.


 


Taxes: 
all real estate and personal property taxes, assessments, water rates or
sewer rents, maintenance charges, impositions, vault charges and license fees,
now or hereafter levied or assessed or imposed against all or part of the
Property.


 


12

















 


Term: 
the entire term of this Agreement, which shall expire upon repayment in
full of the Debt and full performance of each and every obligation to be
performed by Borrower pursuant to the Loan Documents.


 


Third Party Disbursements:  to the extent actually deposited in the
Clearing Account, (i) receivables, receipts, revenues, and/or deposits with
respect to gift shop, laundry and parking facilities and movie rentals or other
facilities at the Property operated through unaffiliated third party contracts,
which Borrower is contractually obligated to collect on behalf of third parties
that are not Affiliates of Borrower, Sole Member, Manager or Guarantor which
are to be, and actually have been, paid to such third parties, (ii) gratuities
or service charges or other similar receipts which are to be paid to any
employees of Manager or persons occupying similar positions for performing
similar duties and which are actually paid over to such persons and (iii) Sales
and Occupancy Taxes.


 


Title Insurance Policy:  the ALTA mortgagee title insurance policy in
the form acceptable to Lender issued with respect to the Property and insuring
the Lien of the Mortgage.


 


Transfer: 
(i) any sale, conveyance, transfer, Lease or assignment, or the
entry into any agreement to sell, convey, transfer, lease or assign, whether by
law or otherwise, of, on, in or affecting (x) all or part of the Property
(including any legal or beneficial direct or indirect interest therein),
(y) any direct or indirect interest in Borrower (including any profit
interest), or (z) any direct or indirect interest in Sole Member or
(ii) any change of Control of Borrower or Sole Member. For purposes
hereof, (i) a Transfer of an interest in Borrower or Sole Member shall be
deemed to include (A) if Borrower or Sole Member or controlling
shareholder of Borrower or Sole Member is a corporation, the voluntary or
involuntary sale, conveyance or transfer of such corporation’s stock (or the
stock of any corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new stock in one
or a series of transactions by which an aggregate of more than ten percent
(10%) of such corporation’s stock shall be vested in a party or parties who are
not now stockholders or any change in the control of such corporation and
(B) if Borrower or Sole Member or controlling shareholder of Borrower or
Sole Member is a limited or general partnership, joint venture or limited
liability company, the change, removal, resignation or addition of a general
partner, managing partner, limited partner, joint venturer or member or the
transfer of the partnership interest of any general partner, managing partner
or limited partner or the transfer of the interest of any joint venturer or
member and (ii) a change of Control of Borrower or Sole Member shall be
deemed to have occurred if (A) there is any change in the identity of any
individual or entity or any group of individuals or entities who have the
right, by virtue of any partnership agreement, articles of incorporation,
by-laws, articles of organization, operating agreement or any other agreement,
with or without taking any formative action, to cause Borrower or Sole Member
to take some action or to prevent, restrict or impede Borrower or Sole Member
from taking some action which, in either case, Borrower or Sole Member could
take or could refrain from taking were it not for the rights of such
individuals or (B) the individual or entity or group of individuals or
entities that Control Borrower or Sole Member as described in clause (A)
ever cease to own at least fifty-one percent (51%) of all equity interests
(direct or indirect) in Borrower and Sole Member.


 


13

















 


UCC:  the Uniform Commercial Code as
in effect in the State or the state in which any of the Cash Management
Accounts are located, as the case may be.


 


USALI:  Uniform System of Accounts for the Lodging
Industry, 9th edition (or most current edition adopted by Borrower).


 


Welfare Plan:  an employee welfare benefit plan, as defined
in Section 3(1) of ERISA.


 


1.2          Index of Other Definitions.
The following terms are defined in the sections or Loan Documents indicated
below:


 


“Acceptable Counterparty”
- 2.6.1

“Annual Budget” - 6.3.5

“Applicable Taxes” - 2.2.3

“Approved Annual Budget” - 6.3.5

“Approved Capital/FF&E Budget”
- 6.3.5

“Approved Operating Budget” -
6.3.5

“Assignment of Leases and Rents”
- 1.1 (Definition of Loan Documents)

“Award” - 7.3.2

“Bankruptcy Proceeding” - 4.7

“Borrower’s Recourse Liabilities”
- 10.1

“CapEx/FF&E Reserve Subaccount”
- 3.4

“Cash Collateral Subaccount” -
3.9

“Cash Management Accounts” - 3.10

“Casualty” - 7.2.1

“Casualty/Condemnation Prepayment”
- 2.3.2

“Casualty/Condemnation Subaccount”
- 3.7

“Clearing Account” - 3.1

“Clearing Account Agreement” -
1.1 (Definition of Loan Documents)

“Clearing Bank” - 3.1

“Condemnation” - 7.3.1

“Consumer Price Index” - 7.1.1


“Coverage Cash Trap Period”
- 1.1 (Definition of Cash Trap Period).

“Deposit Account” - 3.1
“Deposit
Account Agreement” - 1.1 (Definition of Loan Documents)

“Determination Date” - 1.1
(Definition of LIBOR)

“Disclosure Document” - 9.1.2


“Easements” - 4.14

“Eligible Account” - Deposit
Account Agreement

“Environmental Laws” - 4.21

“Equipment” - Mortgage

“Eurodollar Business Day” - 1.1
(Definition of LIBOR)

“Event of Default” - 8.1

“Exchange Act” - 9.1.2

“Fitch” - 1.1 (Definition of
Rating Agency)

“First Extended Maturity Date” -
2.8


 


14

















 


“GCM Group” - 9.1.3

“Government Lists” - 5.31

“Hazardous Substances” - 4.21

“Improvements” - Mortgage

“Indemnified Liabilities” - 5.30

“Indemnified Party” - 5.30

“Independent Director” - Schedule
5

“Initial Interest Period” - 1.1
(Definition of Interest Period)

“Insurance Premiums” - 7.1.2

“Insured Casualty” - 7.2.2

“Interest Rate Protection Agreement”
- 2.6.1

“Issuer” - 9.1.3

“Late Payment Charge” - 2.5.3

“Lender’s Consultant” - 5.8.1

“Liabilities” - 9.1.3

“Licenses” - 4.11

“Loan” - 2.1

“Moody’s” - 1.1 (Definition of Rating
Agency)

“Mortgage” - 1.1 (Definition of
Loan Documents)

“New Payment Date” - 2.2.5

“Note” - 1.1 (Definition of Loan
Documents)

“Notice” - 6.1

“O & M Program” - 5.8.3

“OFAC” - 5.31

“Operating Expense Subaccount” -
3.6

“Patriot Act” - 5.31

“Patriot Act Offense” - 5.31

“Permitted Equipment Financing” -
5.22

“Permitted Indebtedness” - 5.22

“Permitted Investments” - Deposit
Account Agreement

“Policies” - 7.1.2

“Principal” - 2.1

“Proceeds” - 7.2.2

“Provided Information” - 9.1.1

“Qualified Carrier” - 7.1.1

“Recourse Guaranty” - 1.1
(Definition of Loan Documents)

“Registration Statement” - 9.1.3

“Remedial Work” - 5.8.2

“Rent Roll” - 4.16

“Required Records” - 6.3.6

“Required Repairs” - 3.2.1

“Required Repairs Subaccount” -
3.2.2

“Restoration” - 7.4.1

“S&P” - 1.1 (Definition of
Rating Agency)

“Secondary Market Transaction” -
9.1.1

“Second Extended Maturity Date” -
2.8


 


15

















 


“Securities” - 9.1.1

“Securities Act” - 9.1.2

“Security Deposit Account” - 3.8

“Security Deposit Subaccount” -
3.8

“Significant Casualty” - 7.2.2

“Special Purpose Bankruptcy Remote Entity”
- 5.13

“Springing Recourse Event” - 10.1

“Subaccounts” - 3.1

“Tax and Insurance Subaccount” -
3.3

“Terrorism Premium Cap” - 7.1.1

“Third Extended Maturity Date” -
2.8

“Toxic Mold” - 4.21

“Underwriter Group” - 9.1.3

“Underwriters” - 9.1.3


 


1.3          Principles of Construction.  Unless otherwise specified, (i) all
references to sections and schedules are to those in this Agreement,
(ii) the words “hereof,” “herein” and “hereunder” and words of similar
import refer to this Agreement as a whole and not to any particular provision,
(iii) all definitions are equally applicable to the singular and plural
forms of the terms defined, (iv) the word “including” means “including but
not limited to,” and (v) accounting terms not specifically defined herein
shall be construed in accordance with GAAP.


 


2.             GENERAL
LOAN TERMS


 


2.1          The Loan.  Lender is making a loan (the “Loan”) to Borrower on
the date hereof, in the original principal amount (the “Principal”) of
$22,000,000, which shall mature on the Stated Maturity Date.  Borrower acknowledges receipt of the Loan,
the proceeds of which are being and shall be used to (i)  return capital
to direct and indirect owners of Borrower used to acquire the Property,
(ii) fund certain of the Subaccounts, and (iii) pay transaction costs.  Any excess proceeds may be used for any
lawful purpose.  No amount repaid in
respect of the Loan may be reborrowed.


 


2.2          Interest; Monthly Payments.


 


2.2.1       Generally.  From and after the date hereof, interest on
the unpaid Principal shall accrue at the Interest Rate and be payable as
hereinafter provided.  On the date
hereof, Borrower shall pay interest on the unpaid Principal from the date
hereof through and including May 31, 2006. 
On July 1, 2006 and each Payment Date thereafter through and
including the Maturity Date, Borrower shall pay interest on the unpaid
Principal which has accrued through the last day of the Interest Period
immediately preceding such Payment Date. 
The outstanding principal balance of the Loan and all accrued and unpaid
interest shall be due and payable on the Maturity Date.  If the Loan (or any portion thereof) is
repaid on any date other than on a Payment Date (whether prior to or after the
Stated Maturity Date), Borrower shall also pay interest that would have accrued
on such repaid Principal to but not including the next Payment Date.


 


16

















 


2.2.2       Default Rate.  After the occurrence and during the
continuance of an Event of Default, the entire unpaid Debt shall bear interest
at the Default Rate, and shall be payable upon demand from time to time, to the
extent permitted by applicable law.


 


2.2.3       Taxes.  Any and all payments by Borrower hereunder
and under the other Loan Documents shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding
taxes imposed on Lender’s income, and franchise taxes imposed on Lender by the
law or regulation of any Governmental Authority (all such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to in this Section 2.2.3 as “Applicable Taxes”).  If Borrower shall be required by law to
deduct any Applicable Taxes from or in respect of any sum payable hereunder to
Lender, the following shall apply: 
(i) the sum payable shall be increased as may be necessary so that
after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.2.3), Lender receives
an amount equal to the sum it would have received had no such deductions been
made, (ii) Borrower shall make such deductions and (iii) Borrower
shall pay the full amount deducted to the relevant taxation authority or other
authority in accordance with applicable law. 
Payments pursuant to this Section 2.2.3 shall be made within
twenty (20) days after the date Lender makes written demand therefor.


 


2.2.4       Breakage Indemnity.  Borrower shall indemnify Lender against any
loss or expense which Lender may actually sustain or incur in liquidating or
redeploying deposits from third parties acquired to effect or maintain the Loan
or any part thereof as a consequence of (i) any payment or prepayment of
the Loan or any portion thereof made on a date other than a Payment Date and
(ii) any default in payment or prepayment of the Principal or any part
thereof or interest accrued thereon, as and when due and payable (at the date
thereof or otherwise, and whether by acceleration or otherwise).  Lender shall deliver to Borrower a statement
for any such sums which it is entitled to receive pursuant to this Section 2.2.4,
which statement shall be binding and conclusive absent manifest error.  Borrower’s obligations under this Section 2.2.4
are in addition to Borrower’s obligations to pay any Spread Maintenance Premium
and Prepayment Premium applicable to a payment or prepayment of Principal.


 


2.2.5       New Payment Date.  Lender
shall have the right, to be exercised not more than once during the term of the
Loan, to change the Payment Date to a date other than the first (1st)
day of each month (a “New
Payment Date”), on thirty (30) days’ written notice to Borrower;
provided, however, that any such change in the Payment Date:  (i) shall not modify the amount of
regularly scheduled monthly interest payments, except that the first payment of
interest payable on the New Payment Date shall be accompanied by interest at
the interest rate herein provided for the period from the Payment Date in the
month in which the New Payment Date first occurs to the New Payment Date, and
(ii) shall extend the Stated Maturity Date to the New Payment Date
occurring in the month set forth in the definition of Stated Maturity Date.


 


2.3          Loan Repayment.


 


2.3.1       Repayment.  Borrower shall repay the entire outstanding
principal balance of the Note in full on the Maturity Date, together with
interest thereon to (but excluding) the date of repayment and any other amounts
due and owing under the Loan Documents. 
Except


 


17

















 


during the continuance of an Event of Default, all proceeds of any
repayment, including any prepayments of the Loan, shall be applied by Lender as
follows in the following order of priority: 
First, accrued and unpaid
interest at the Interest Rate; Second,
to Principal; and Third, to the Prepayment Premium, if any, and
any other amounts then due and owing under the Loan Documents, including the
Spread Maintenance Premium (if such repayment or prepayment occurs prior to the
Lockout Date).  If prior to the Stated
Maturity Date the Debt is accelerated by reason of an Event of Default or any
amounts in any Cash Management Account are applied by Lender to Principal by
reason of an Event of Default, then Lender shall be entitled to receive, in
addition to the unpaid Principal and accrued interest and other sums due under
the Loan Documents, an amount equal to the Spread Maintenance Premium, or
Prepayment Premium applicable to such Principal so accelerated.  During the continuance of an Event of
Default, all proceeds of repayment, including any payment or recovery on the
Property (whether through foreclosure, deed-in-lieu of foreclosure, or
otherwise) shall, unless otherwise provided in the Loan Documents, be applied
in such order and in such manner as Lender shall elect in Lender’s discretion.


 


2.3.2       Mandatory Prepayments.  The Loan is subject to mandatory prepayment
in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”),
in the manner and to the extent set forth in Section 7.4.2
hereof.  Each Casualty/Condemnation
Prepayment, after deducting Lender’s costs and expenses (including reasonable
attorneys’ fees and expenses) in connection with the settlement or collection
of the Proceeds or Award, shall be applied in the same manner as repayments
under Section 2.3.1 above, and if such Casualty/Condemnation
Payment is made on any date other than a Payment Date, then such
Casualty/Condemnation Payment shall include interest that would have accrued on
the Principal prepaid to but not including the next Payment Date.  Provided that no Event of Default is
continuing, any such mandatory prepayment under this Section 2.3.2
shall be without the payment of the Spread Maintenance Premium and any
Prepayment Premium.  Notwithstanding
anything to the contrary contained herein, each Casualty/Condemnation
Prepayment shall be applied in inverse order of maturity and shall not extend
or postpone the due dates of the monthly installments due under the Note or
this Agreement, or change the amounts of such installments.


 


2.3.3       Optional Prepayments.  Notwithstanding anything herein or in any
other Loan Documents to the contrary, except as the result of an acceleration
of the Stated Maturity Date or if expressly provided under Section 2.3.2
hereof, Borrower may not voluntarily prepay the Loan, in whole or in part,
prior to the Lockout Date.  At any time
on or subsequent to the Lockout Date, Borrower shall have the right to prepay
all or, provided no Event of Default has occurred and is continuing, any
portion of the Principal on any Payment Date provided that Borrower gives
Lender at least thirty (30) days prior written notice thereof and such
prepayment is accompanied by the Prepayment Premium applicable thereto.  If any such prepayment is not made on a
Payment Date, Borrower shall also pay interest that would have accrued on such
prepaid Principal to but not including the next Payment Date.


 


2.4          Release of Property.  Lender shall, upon the written request and at
the expense of Borrower, upon payment in full of the Debt in accordance
herewith, release or, if requested by Borrower, assign to Borrower’s designee
(without any representation or warranty by and without


 


18

















 


any recourse against Lender
whatsoever) the Lien of the Loan Documents if not theretofore released.


 


2.5          Payments and Computations.


 


2.5.1       Making of Payments.  Each payment by Borrower shall be made in
funds settled through the New York Clearing House Interbank Payments System or
other funds immediately available to Lender by 2:00 p.m., New York City
time, on the date such payment is due, to Lender by deposit to such account as
Lender may designate by written notice to Borrower.  Whenever any such payment shall be stated to
be due on a day that is not a Business Day, such payment shall be made on the
first Business Day thereafter.  All such
payments shall be made irrespective of, and without any deduction, set-off or
counterclaim whatsoever and are payable without relief from valuation and
appraisement laws and with all costs and charges incurred in the collection or
enforcement thereof, including attorneys’ fees and court costs.


 


2.5.2       Computations.  Interest payable under the Loan Documents
shall be computed on the basis of the actual number of days elapsed over a
360-day year.


 


2.5.3       Late Payment Charge.  If any Principal, interest or other sum due
under any Loan Document is not paid by Borrower on the date on which it is due,
Borrower shall pay to Lender upon demand an amount equal to the lesser of five
percent (5%) of such unpaid sum or the maximum amount permitted by applicable
law (the “Late Payment
Charge”), in order to defray the expense incurred by Lender in
handling and processing such delinquent payment and to compensate Lender for
the loss of the use of such delinquent payment. 
Such amount shall be secured by the Loan Documents.


 


2.6          Interest Rate Protection Agreements.


 


2.6.1       Interest Rate Protection Agreement.  As of the date hereof, Borrower has entered
into, made all payments required under, and satisfied all conditions precedent
to the effectiveness of, an interest rate protection agreement that satisfies
all of the following conditions.  (such
interest rate protection agreement together with (i) any extension thereof
or (ii) any other interest rate protection agreement entered into pursuant
to Section 2.8 hereof, being referred to herein as the “Interest Rate Protection Agreement”):


 


(1)           the
Interest Rate Protection Agreement is with a financial institution having a
long term, unsecured and unsubordinated debt rating of at least “AA-” by
S&P and “Aa2” by Moody’s (an “Acceptable Counterparty”); has a term ending
no earlier than the Stated Maturity Date; is an interest rate cap in respect of
a notional amount not less than the maximum principal amount of the Loan that
shall have the effect of capping LIBOR at six percent (6%) per annum; and
provides that the only obligation of Borrower thereunder is the making of a
single payment upon the execution and delivery thereof.


 


(2)           Borrower’s
interest in such Interest Rate Protection Agreement has been assigned to Lender
pursuant to documentation satisfactory to Lender in form and substance, and the
counterparty to such Interest Rate Protection Agreement has executed and
delivered to Lender an acknowledgment of such assignment, which acknowledgment
includes such counterparty’s agreement to pay directly into the Clearing
Account all sums payable by such


 


19

















 


counterparty pursuant
to the Interest Rate Protection Agreement and shall otherwise be satisfactory
to Lender in form and substance.


 


(3)           In
connection with an Interest Rate Protection Agreement, Borrower shall obtain
and deliver to Lender an opinion of counsel from counsel (in-house or
independent) for the issuer of the Interest Rate Protection Agreement (upon
which Lender and its successors and assigns may rely) which shall provide in
relevant part, that:  (a) the issuer
is duly organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation and has the organizational power and authority to
execute and deliver, and to perform its obligations under, the Interest Rate
Protection Agreement; (b) the execution and delivery of the Interest Rate
Protection Agreement by the issuer, and any other agreement which the issuer
has executed and delivered pursuant thereto, and the performance of its
obligations thereunder have been and remain duly authorized by all necessary
action and do not contravene any provision of its certificate of incorporation
or by-laws (or equivalent organizational documents) or any law, regulation or
contractual restriction binding on or affecting it or its property;
(c) all consents, authorizations and approvals required for the execution
and delivery by the issuer of the Interest Rate Protection Agreement, and any
other agreement which the issuer has executed and delivered pursuant thereto,
and the performance of its obligations thereunder have been obtained and remain
in full force and effect, all conditions thereof have been duly complied with,
and no other action by, and no notice to or filing with any governmental
authority or regulatory body is required for such execution, delivery or
performance; and (d) the Interest Rate Protection Agreement, and any other
agreement which the issuer has executed and delivered pursuant thereto, has
been duly executed and delivered by the issuer and constitutes the legal, valid
and binding obligation of the issuer, enforceable against the issuer in
accordance with its terms, subject to applicable bankruptcy, insolvency and
similar laws affecting creditors’ rights generally, and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).


 


(4)           In
the event of any downgrade, withdrawal or qualification of the rating of the
issuer of the Interest Rate Protection Agreement below “A+” by S&P and
“Aa3” by Moody’s, Borrower shall replace the Interest Rate Protection Agreement
with a replacement Interest Rate Protection Agreement from an Acceptable
Counterparty (with terms identical to the Interest Rate Protection Agreement
being replaced, or otherwise approved by Lender in its reasonable discretion
and the Rating Agencies) not later than twenty (20) days following receipt of
notice from Lender or the Servicer of such downgrade, withdrawal or
qualification.


 


2.6.2       Execution of Documents.  Borrower shall promptly execute and deliver
to the counterparty of the Interest Rate Protection Agreement such
confirmations and agreements as may be requested by such counterparty in
connection with such Interest Rate Protection Agreement.


 


2.6.3       No Obligation of Lender.  Borrower agrees that Lender shall not have
any obligation, duty or responsibility to Borrower or any other Person by
reason of, or in connection with, any Interest Rate Protection Agreement
(including any duty to provide or arrange any Interest Rate Protection
Agreement, to consent to any mortgage or pledge of the Property or any portion
thereof as security for Borrower’s performance of its obligations under any
Interest Rate Protection Agreement, or to provide any credit or financial
support for the


 


20

















 


obligations of Borrower or any
other Person thereunder or with respect thereto).  No Interest Rate Protection Agreement shall
alter, impair, restrict, limit or modify in any respect the obligation of
Borrower to pay interest on the Loan as and when the same becomes due and
payable in accordance with the provisions of the Loan Documents.


 


2.6.4       Receipts from Interest Rate Protection
Agreements.  All payments made by
the counterparty to the Interest Rate Protection Agreement shall be deposited
into the Deposit Account and applied in the same manner as Rents are applied
under Section 3.11.


 


2.7          Fees; Spread Maintenance Premium.


 


2.7.1       Origination Fee.  On the date hereof, Borrower shall pay to
Lender an origination fee of $220,000.


 


2.7.2       Spread Maintenance Premium /Prepayment
Premium.  Upon any repayment or
prepayment of Principal (including in connection with an acceleration of the
Loan or the application by Lender of any amounts in any Cash Management Account
to Principal by reason of an Event of Default) made prior to the Lockout Date,
Borrower shall pay to Lender on the date of such repayment or prepayment (or
acceleration of the Loan or application by Lender) the Spread Maintenance
Premium applicable thereto.  Upon any
repayment or prepayment of Principal (including in connection with an
acceleration of the Loan or the application by Lender of any amounts in any
Cash Management Account to Principal by reason of an Event of Default) made on
or subsequent to Lockout Date, Borrower shall pay to Lender on the date of such
repayment or prepayment the Prepayment Premium applicable thereto.  All Spread Maintenance Premium and Prepayment
Premium payments hereunder shall be deemed to be earned by Lender upon the
funding of the Loan.


 


2.8          Extension Options.  Borrower shall have the right, at its option,
to extend the Term until (i) June 1, 2009 (the “First Extended Maturity Date”),
(ii) June 1, 2010 (the “Second Extended Maturity Date”) and
(iii) June 1, 2011 (the “Third Extended Maturity Date”) by giving
notice of such extension to Lender at least fifteen (15) days prior to
(i) the originally scheduled Stated Maturity Date, in the case of
extending the Term until the First Extended Maturity Date, (ii) the First
Extended Maturity Date, in the case of extending the Term until the Second
Extended Maturity Date and (iii) the Second Extended Maturity Date, in the
case of extending the Term until the Third Extended Maturity Date.  Upon receipt of such request to extend the
Term until the First Extended Maturity Date, the Second Extended Maturity Date
or the Third Extended Maturity Date, as the case may be, Lender will promptly
confirm to Borrower in writing whether or not the Stated Maturity Date will be
so extended, which extension will be granted upon the satisfaction of each of
the following conditions (as applicable):


 


(a)           no
Event of Default exists at the time such request is made and on the originally
scheduled Stated Maturity Date, the First Extended Maturity Date or the Second
Extended Maturity Date, as applicable;


 


(b)           Borrower
delivers to Lender an Officer’s Certificate confirming the accuracy of the
information contained in clause (a) above;


 


21

















 


(c)           on
or prior to the originally scheduled Stated Maturity Date, the First Extended
Maturity Date or the Second Extended Maturity Date, as the case may be,
Borrower either (i) extends the term of the Interest Rate Protection
Agreement to a date not earlier than the First Extended Maturity Date, the
Second Extended Maturity Date or the Third Extended Maturity Date, as
applicable, or (ii) enters into a new interest rate protection agreement
which expires no earlier than the First Extended Maturity Date, the Second
Extended Maturity Date or the Third Extended Maturity Date, as applicable, and
which extension or new agreement is in respect of a notional amount of the then
outstanding Principal and is otherwise on the same terms set forth in Section 2.6.1
hereof and has the effect of capping LIBOR at six percent (6%) per annum;


 


(d)           in
the case of extending the Term until the Second Extended Maturity Date, the
Debt Yield for the twelve (12)-month period ending May 31, 2009 (or the
most recently completed twelve (12)-month period for which information is
available) is at least twelve percent (12%);


 


(e)           in
the case of extending the Term until the Third Extended Maturity Date, the Debt
Yield for the twelve (12)-month period ending May 31, 2010 (or the most
recently completed twelve (12)-month period for which information is available)
is at least thirteen percent (13%);


 


(f)            if
the option to extend the Term until the Second Extended Maturity Date is
exercised, Borrower shall pay to Lender on the First Extended Maturity Date, an
extension fee in an amount equal to one quarter of one percent (0.25%) of the
then-outstanding Principal;


 


(g)           if
the option to extend the Term until the Third Extended Maturity Date is
exercised, Borrower shall pay to Lender on the Second Extended Maturity Date,
an extension fee in an amount equal to one quarter of one percent (0.25%) of
the then-outstanding Principal;


 


(h)           Either
(x) any Approved Mezzanine Loan has been paid in full or (y) the term of
such Approved Mezzanine Loan has been extended, such that the term of such
Approved Mezzanine Loan shall expire on the First Extended Maturity Date, the
Second Extended Maturity Date or the Third Extended Maturity Date, as
applicable;


 


(i)            Borrower
shall have paid to Lender all reasonable costs and expenses (including
reasonable attorneys’ fees) incurred by Lender in connection with any such
extension; and


 


(j)            If
requested by Lender, Borrower and Guarantor shall execute and deliver such
documents as Lender may reasonably request to confirm the continued validity of
the Loan Documents and the continued validity, perfection and priority of the
Liens thereof as so extended.


 


If Borrower is unable to satisfy all of the foregoing conditions within
the applicable time frames for each, Lender shall have no obligation to extend
the Stated Maturity Date hereunder.


 


22

















 


3.             CASH MANAGEMENT
AND RESERVES


 


3.1          Cash Management Arrangements.  Borrower shall cause all Rents to be
transmitted directly by non-residential tenants of the Property, and all Rents
in the nature of sums payable by issuers of credit cards accepted at the
Property to be transmitted directly by such issuers, in each case, into an
Eligible Account (the “Clearing
Account”) maintained by Borrower at a bank selected by Borrower,
which shall at all times be an Eligible Institution (the “Clearing Bank”) as
more fully described in the Clearing Account Agreement.  Without in any way limiting the foregoing,
all Rents received by Borrower or Manager shall be deposited into the Clearing
Account within one (1) Business Day of receipt. 
Funds deposited into the Clearing Account shall be swept by the Clearing
Bank on a daily basis into an Eligible Account at the Deposit Bank controlled
by Lender (the “Deposit
Account”) and applied and disbursed in accordance with this
Agreement.  Funds in the Deposit Account
shall be invested at Lender’s discretion only in Permitted Investments.  Lender will also establish subaccounts of the
Deposit Account which shall at all times be Eligible Accounts (and may be
ledger or book entry accounts and not actual accounts) (such subaccounts are
referred to herein as “Subaccounts”).  The Deposit Account and any Subaccount will
be under the sole control and dominion of Lender, and neither Borrower nor
Manager nor any person claiming by or through Borrower or Manager shall have
any right of withdrawal therefrom. 
Borrower shall pay for all expenses of opening and maintaining all of
the above accounts.


 


3.2          Required Repairs.


 


3.2.1       Completion of Required Repairs.  Borrower shall perform and complete each item
of the repairs and environmental remedial work at the Property described on Schedule 1
hereto (the “Required
Repairs”) within six (6) months of the date hereof or such
shorter period of time for such item set forth on Schedule 1
hereto.


 


3.2.2       Required Repairs Reserves.  On the date hereof, Borrower shall deposit
with Lender the aggregate amount set forth on Schedule 1 hereto as
being required to complete the Required Repairs and Lender shall cause such
amount to be transferred to a Subaccount (the “Required Repairs Subaccount”).  Provided no Event of Default shall have
occurred and is continuing, Lender shall disburse funds held in the Required
Repairs Subaccount to Borrower, within ten (10) days after the delivery by
Borrower to Lender of a request therefor (but not more often than once per
month), in increments of at least $5,000, accompanied by the following items
(which items shall be in form and substance satisfactory to Lender):  (i) an Officer’s Certificate
(A) certifying that the Required Repairs or any portion thereof which are
the subject of the requested disbursement have been completed in a good and
workmanlike manner and in accordance with all applicable Legal Requirements,
(B) identifying each Person that supplied materials or labor in connection
with such Required Repairs or any portion thereof and (C) stating that
each such Person has been or, upon receipt of the requested disbursement, will
be paid in full with respect to the portion of the Required Repairs which is
the subject of the requested disbursement; (ii) copies of appropriate Lien
waivers or other evidence of payment satisfactory to Lender; (iii) at
Lender’s option, a title search for the Property indicating that it is free
from all Liens not previously approved by Lender; (iv) a copy of each
License required to be obtained with respect to the portion of the Required
Repairs which is the subject of the requested disbursement; and (v) such
other evidence as Lender shall reasonably request that the Required


 


23

















 


Repairs which are the subject
of the requested disbursement have been completed and paid for.  Provided no Event of Default shall have
occurred and is continuing, upon Borrower’s completion of all Required Repairs
in accordance with this Section 3.2, any funds remaining in the
Required Repairs Subaccount, if any, shall be deposited by Lender into the
Deposit Account (i.e. at the “top of the waterfall”) and applied by Lender in
accordance with Section 3.11(a) hereof.


 


3.3          Taxes and Insurance.  Borrower shall pay to Lender on each Payment
Date (i) one-twelfth (1/12th) of the Taxes that Lender
estimates will be payable during the next twelve (12) months in order to
accumulate with Lender sufficient funds to pay all such Taxes at least thirty
(30) days prior to their respective due dates and (ii) one-twelfth (1/12th)
of the Insurance Premiums that Lender estimates will be payable for the renewal
of the coverage afforded by the Policies upon the expiration thereof in order
to accumulate with Lender sufficient funds to pay all such Insurance Premiums
at least thirty (30) days prior to the expiration of the Policies.  Such amounts will be transferred by Lender to
a Subaccount (the “Tax
and Insurance Subaccount”). 
Lender will (a) apply funds in the Tax and Insurance Subaccount to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to Section 5.2 hereof and Section 7.1 hereof,
provided that Borrower has promptly supplied Lender with notices of all Taxes
and Insurance Premiums due, or (b) reimburse Borrower for such amounts
upon presentation of evidence of payment; subject, however, to Borrower’s right
to contest Taxes in accordance with Section 5.2 hereof.  In making any payment relating to Taxes and
Insurance Premiums, Lender may do so according to any bill, statement or
estimate procured from the appropriate public office (with respect to Taxes) or
insurer or agent (with respect to Insurance Premiums), without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax,
assessment, sale, forfeiture, tax lien or title or claim thereof.  If Lender determines in its reasonable
judgment that the funds in the Tax and Insurance Subaccount will be
insufficient to pay (or in excess of) the Taxes or Insurance Premiums next
coming due, Lender may increase (or decrease) the monthly contribution required
to be made by Borrower to the Tax and Insurance Subaccount.  Amounts applied by Lender from Rents that
have been deposited into the Deposit Account during the immediately preceding
Interest Period, if any, into the Tax and Insurance Subaccount in accordance
with Section 3.11 below, shall be credited towards Borrower’s
obligation, to make payments into the Tax and Insurance Subaccount.


 


3.4          Capital Expense Reserves.  (a) On each Payment Date through and
including December 1, 2006, Borrower shall pay to Lender on each such Payment
Date an amount equal to $54,827. 
Thereafter on each Payment Date, Borrower shall pay to Lender an amount
initially equal to one-twelfth (1/12th) of four percent (4%) of the
annual gross operating income of the Property (based on the prior year).  Lender will transfer such amounts into a
Subaccount (the “CapEx/FF&E
Reserve Subaccount”). 
Provided that no Event of Default has occurred and is continuing, Lender
shall disburse funds held in the CapEx/FF&E Reserve Subaccount to Borrower,
within ten (10) days after the delivery by Borrower to Lender of a request
therefor (but not more often than once per month), in increments of at least $5,000
provided that (i) such disbursement is for an Approved CapEx/FF&E
Expense; (ii) Lender shall (if it desires in connection with a requested
disbursement in excess of $50,000) have (if it desires) verified (by an
inspection conducted at Borrower’s expense) performance of the work associated
with such Approved CapEx/FF&E Expense; and (iii) the request for
disbursement is accompanied by (A) an Officer’s Certificate certifying
(1) that such funds will be used to pay or reimburse Borrower for Approved
CapEx/FF&E Expenses (or any portion thereof) and a description


 


24

















 


thereof, (2) that all
outstanding trade payables (other than those to be paid from the requested
disbursement or those constituting Permitted Indebtedness) have been paid or
will be paid in full, (3) that the same has not been the subject of a
previous disbursement, and (4) that all previous disbursements have been
used to pay the previously identified Approved CapEx/FF&E Expenses, and (B) lien
waivers or other evidence of payment reasonably satisfactory to Lender,
(C) at Lender’s option reasonably exercised, a title search for the
Property indicating that the Property is free from all Liens, claims and other
encumbrances not previously approved by Lender and (D) such other evidence
as Lender shall reasonably request that the Approved CapEx/FF&E Expenses
(or any portion thereof) at the Property to be funded by the requested
disbursement have been completed and are paid for or will be paid upon such
disbursement to Borrower.  Any such
disbursement of more than $50,000 to pay (rather than reimburse) Approved
CapEx/FF&E Expenses may, at Lender’s option, be made by joint check payable
to Borrower and the payee on such Approved CapEx/FF&E Expenses.  Amounts applied by Lender from Rents that
have been deposited into the Deposit Account during the immediately preceding
Interest Period, if any, into the CapEx/FF&E Reserve Subaccount in
accordance with Section 3.11 below, shall be credited towards Borrower’s
obligation, to make payments into the CapEx/FF&E Reserve Subaccount.


 


(b)           Borrower
shall permit Lender and Lender’s agents and representatives (including, without
limitation, Lender’s engineer, architect, or inspector) or third parties upon
reasonable advance notice to enter onto the Property during normal business
hours (subject to the rights of tenants under their Leases and hotel guests) to
inspect the progress of any performance of the work associated with such
Approved CapEx/FF&E Expense and all materials being used in connection
therewith.  Borrower shall pay the
expense of such inspections, whether such inspections are conducted by Lender
or by an independent qualified professional architect.


 


3.5          [Intentionally Deleted].


 


3.6          Operating Expense Subaccount/Third Party
Disbursements.


 


(a)           Operating Expense Subaccount; Generally.  On each Payment Date, a portion of the Rents
that have been deposited into the Deposit Account during the immediately
preceding Interest Period in an amount equal to (i) the monthly amount set
forth in the Approved Operating Budget for the following month as being
necessary for payment of Approved Operating Expenses at the Property for such
month which have been substantiated in a manner reasonably acceptable to Lender
plus (ii) Third Party Disbursements which have been substantiated in a manner
reasonably acceptable to Lender, shall be transferred into a Subaccount for the
payment of such Approved Operating Expenses (the “Operating Expense Subaccount”).


 


(b)           Disbursement of Approved Operating Expenses and Third
Party Disbursements; Generally. 
Provided no Cash Trap Period has occurred and is continuing, either
(1) Lender shall disburse to Borrower from the Operating Expense
Subaccount on each Payment Date an amount equal to (i) the Approved Operating
Expenses for such month provided for in the Approved Annual Budget which have
been substantiated in a manner reasonably acceptable to Lender plus (ii) the
Third Party Disbursements which have been substantiated in a manner reasonably
acceptable to Lender or (2) if sufficient funds have been collected in the
Deposit Account to make the payments required under clauses (i) through
(iii) of Section 3.11(a)


 


25

















 


hereof on the
next succeeding Payment Date, then Borrower shall be entitled to request
disbursements from the Operating Expense Subaccount on a weekly basis, for
payment of (i) Approved Operating Expenses incurred or to be incurred during
the then-current Interest Period or during any prior Interest Period or from
the date hereof through and including the first (1st) Payment Date which have
been substantiated in a manner reasonably acceptable to Lender and (ii) those
Third Party Disbursements which have been substantiated in a manner reasonably acceptable
to Lender.


 


(c)           Disbursement of Third Party Disbursements During any
Cash Trap Period. 
Notwithstanding anything contained in Section 3.6(b) above to the
contrary, during the continuance of any Cash Trap Period, Lender shall disburse
funds held in the Operating Expense Subaccount to Borrower, within ten (10)
days after delivery by Borrower to Lender of a request therefor, in increments
of at least $1,000, provided (i) such disbursement is for a Third Party
Disbursement; and (ii) such disbursement is accompanied by (A) an
Officer’s Certificate certifying (1) that such funds will be used to pay
Third Party Disbursements and a description thereof, (2) that the same has not
been the subject of a previous disbursement, and (3) that all previous
disbursements have been or will be used to pay the previously identified Third
Party Disbursements, and (B) reasonably detailed documentation reasonably
satisfactory to Lender as to the amount, necessity and purpose therefor.


 


(d)           Disbursement of Approved Operating Expenses During a
Coverage Cash Trap Period.  Provided
no Event of Default has occurred and is continuing, during the continuance of a
Coverage Cash Trap Period, Lender shall disburse funds held in the Operating
Expense Subaccount to Borrower, within ten (10) days after delivery by Borrower
to Lender of a request therefor, in increments of at least $1,000, provided
(i) such disbursement is for an Approved Operating Expense; and
(ii) such disbursement is accompanied by (A) an Officer’s Certificate
certifying (1) that such funds will be used to pay Approved Operating
Expenses and a description thereof, (2) that all outstanding trade
payables (other than those to be paid from the requested disbursement or those
constituting Permitted Indebtedness) have been paid in full, (3) that the
same has not been the subject of a previous disbursement, and (4) that all
previous disbursements have been or will be used to pay the previously
identified Approved Operating Expenses, and (B) reasonably detailed documentation
satisfactory to Lender as to the amount, necessity and purpose therefor.  Notwithstanding the foregoing, during any
such Coverage Cash Trap Period (and provided no Event of Default has occurred
and is continuing), if sufficient funds have been collected in the Deposit
Account to make the payments required under clauses (i) through (iii) of Section 3.11(a)
hereof on the next succeeding Payment Date, then Borrower shall be entitled to
request disbursements from the Operating Expense Subaccount on a weekly basis,
for payment of Approved Operating Expenses incurred or to be incurred during
the then-current Interest Period or during any prior Interest Period.


 


3.7          Casualty/Condemnation Subaccount.  Borrower shall pay, or cause to be paid, to
Lender all Proceeds or Awards due to any Casualty or Condemnation to be
transferred to a Subaccount (the “Casualty/Condemnation Subaccount”) in
accordance with the provisions of Article 7 hereof.  All amounts in the Casualty/Condemnation
Subaccount shall disbursed in accordance with the provisions of Article 7
hereof.


 


26

















 


3.8          Security Deposits.  Borrower shall keep and hold all security and
hold deposits under Leases in accordance with applicable Legal Requirements and
at a separately designated account under Borrower’s control at the Clearing
Bank (and in the case of a letter of credit, assigned with full power of
attorney and executed sight drafts to Lender) so that the security deposits
shall not be commingled with any other funds of Borrower (such account, the “Security Deposit Account”).  Following the occurrence and during the
continuance of an Event of Default, Borrower shall, upon Lender’s request, if
permitted by applicable Legal Requirements, turn over to Lender the security
deposits (and any interest theretofore earned thereon) under Leases, to be held
by Lender in a Subaccount (the “Security Deposit Subaccount”) subject to the terms of
the Leases.  Security deposits held in
the Security Deposit Subaccount will be released by Lender upon notice from
Borrower together with such evidence as Lender may reasonably request that such
security deposit is required to be returned to a tenant pursuant to the terms
of a Lease or may be applied as Rent pursuant to the rights of Borrower under
the applicable Lease.  Any letter of
credit or other instrument that Borrower receives in lieu of a cash security
deposit under any Lease shall (i) be maintained in full force and effect
in the full amount unless replaced by a cash deposit as hereinabove described
and (ii) if permitted pursuant to any Legal Requirements, name Lender as
payee or mortgagee thereunder (or at Lender’s option, be fully assignable to
Lender).


 


3.9          Cash Collateral Subaccount.


 


(a)           Cash Collateral Subaccount; Generally.  If a Cash Trap Period shall have commenced,
then on the immediately succeeding Payment Date and on each Payment Date
thereafter during the continuance of such Cash Trap Period, all Available Cash
shall be paid to Lender, which amounts shall be transferred by Lender into a
Subaccount (the “Cash
Collateral Subaccount”) as cash collateral for the Debt.  Upon the termination of such Cash Trap any
funds in the Cash Collateral Subaccount and not previously disbursed or applied
shall be deposited by Lender into the Deposit Account (i.e. at the “top of the
waterfall”) and applied by Lender in accordance with Section 3.11(a)
hereof.


 


(b)           Application During an Event of Default.  Lender shall have the right, but not the
obligation, at any time during the continuance of an Event of Default, in its
sole and absolute discretion to apply all sums then on deposit in the Cash
Collateral Subaccount to the Debt, in such order and in such manner as Lender
shall elect in its sole and absolute discretion, including to make a prepayment
of Principal (together with (a) the Spread Maintenance Premium applicable
thereto (if such prepayment occurs prior to the Lockout Date) and (b) the
Prepayment Premium applicable thereto (if such prepayment occurs on or after
the Lockout Date but prior to July 1, 2007)).


 


(c)           Application During a Coverage Cash Trap Period.  Lender shall have the right, but not the
obligation, at any time subsequent to the second (2nd) Calculation
Date following the commencement of a Coverage Cash Trap Period, in its sole and
absolute discretion to apply all sums then on deposit in the Cash Collateral
Subaccount to the Debt, in such order and in such manner as Lender shall elect
in its sole and absolute discretion, including to make a prepayment of
Principal.  Provided no Event of Default
is then continuing, any such application by Lender of sums then on deposit in
the Cash Collateral Subaccount during a Coverage Cash


 


27

















 


Trap Period
pursuant to this Section 3.9(c) shall be without the payment of the
Spread Maintenance Premium or any Prepayment Premium.


 


3.10        Grant of Security Interest; Application of
Funds.  As security for payment
of the Debt and the performance by Borrower of all other terms, conditions and
provisions of the Loan Documents, Borrower hereby pledges and assigns to
Lender, and grants to Lender a security interest in, all Borrower’s right,
title and interest in and to all Rents, in and to all payments to or monies
held in or credited to the Clearing Account, the Deposit Account, and all
Subaccounts created pursuant to this Agreement (collectively, the “Cash Management Accounts”)
and in and to all payments or monies held in the Cash Management Accounts.  Borrower hereby grants to Lender a continuing
security interest in, and agrees to hold in trust for the benefit of Lender,
all Rents in its possession prior to the (i) payment of such Rents to
Lender or (ii) deposit of such Rents into the Deposit Account.  Borrower shall not, without obtaining the
prior written consent of Lender, further pledge, assign or grant any security
interest in any Cash Management Account, or permit any Lien to attach thereto,
or any levy to be made thereon, or any UCC Financing Statements, except those
naming Lender as the secured party, to be filed with respect thereto.  This Agreement is, among other things,
intended by the parties to be a security agreement for purposes of the
UCC.  Notwithstanding the foregoing, Lender
acknowledges that the security interest granted to Lender hereunder and
pursuant to the other Loan Documents with respect to Third Party Disbursements
is granted subject to the right, title and interest of any third party that is
not an Affiliate of Borrower, Sole Member or Guarantor in and to such Third
Party Disbursements.  Upon the occurrence
and during the continuance of an Event of Default, Lender may apply any sums in
any Cash Management Account in any order and in any manner as Lender shall
elect in Lender’s discretion without seeking the appointment of a receiver and
without adversely affecting the rights of Lender to foreclose the Lien of the
Mortgage or exercise its other rights under the Loan Documents.  Cash Management Accounts shall not constitute
trust funds and may be commingled with other monies held by Lender.  All interest which accrues on the funds in any
Cash Management Account shall accrue for the benefit of Borrower and shall be
taxable to Borrower and shall be added to and disbursed in the same manner and
under the same conditions as the principal sum on which said interest
accrued.  Upon repayment in full of the
Debt, all remaining funds in the Subaccounts, if any, shall, (A) if the
Mezzanine Loan (or any portion thereof) is outstanding, be deposited into the
subordinate deposit account established under the Mezzanine Loan; and
(B) if the Mezzanine Loan has been paid in full, be promptly disbursed to
Borrower.


 


3.11        Property Cash Flow Allocation.


 


(a)           All
Rents deposited into the Deposit Account during the immediately preceding
Interest Period shall be applied on each Payment Date as follows in the
following order of priority:


 


(i)            First,
to make payments into the Tax and Insurance Subaccount as required under Section 3.3
hereof;


 


(ii)           Second,
to pay the monthly portion of the fees charged by the Deposit Bank in
accordance with the Deposit Account Agreement;


 


28

















 


(iii)          Third,
to Lender to pay the interest due on such Payment Date (plus, if applicable,
interest at the Default Rate and all other amounts, other than those described
under other clauses of this Section 3.11(a), then due to Lender
under the Loan Documents);


 


(iv)          Fourth,
to make payments for Approved Operating Expenses and Third Party Disbursements
as required under Section 3.6 hereof


 


(v)           Fifth,
to make payments into the CapEx/FF&E Reserve Subaccount as required under Section 3.4
hereof;


 


(vi)          Sixth,
provided no Event of Default is then continuing and if the Mezzanine Loan (or
any portion thereof) is outstanding, to make payments in the amount of the
Monthly Mezzanine Debt Service Payment into the subordinate deposit account
established under the Mezzanine Loan;


 


(vii)         Seventh,
during the continuance of a Cash Trap Period, to make payments in an amount
equal to all remaining Available Cash on such Payment Date into the Cash
Collateral Subaccount in accordance with Section 3.9 hereof; and


 


(viii)        Lastly,
(A) if the Mezzanine Loan (or any portion thereof) is outstanding, all
remaining amounts shall be deposited into the subordinate deposit account
established under the Mezzanine Loan and (B) if the Mezzanine Loan has
been paid in full, payments to Borrower of any remaining amounts.


 


(b)           The
failure of Borrower to make all of the payments required under clauses (i)
through (v) and (vii) of Section 3.11(a) above in full on each
Payment Date shall constitute an Event of Default under this Agreement.  Nothing herein, however, shall be construed
to restrict Borrower from depositing its own funds (other than Rents) into the
Deposit Account in order to fund any of the amounts required under Section 3.11(a)
(to the extent that the Rents previously deposited into the Deposit Account are
insufficient for the same).


 


(c)           Notwithstanding
anything to the contrary contained in this Section 3.11, after the
occurrence of an Event of Default, Lender may apply all Rents deposited into
the Deposit Account and other proceeds of repayment in such order and in such
manner as Lender shall elect.


 


4.             REPRESENTATIONS
AND WARRANTIES


 


Borrower represents and warrants to Lender as of the date hereof that,
except to the extent (if any) disclosed on Schedule 2 hereto with
reference to a specific Section of this Article 4:


 


4.1          Organization;
Special Purpose.  Each of
Borrower and Sole Member has been duly formed or organized and is validly
existing and in good standing under the laws of the state of its formation or
organization, with requisite power and authority, and all rights, licenses,
permits and authorizations, governmental or otherwise, necessary to own its
properties and to transact the business in which it is now engaged.  Each of Borrower and Sole Member is duly


 


29

















 


qualified to do business and is
in good standing in each jurisdiction where it is required to be so qualified
in connection with its properties, business and operations.  Borrower is a Special Purpose Bankruptcy Remote
Entity.


 


4.2          Proceedings;
Enforceability.  Borrower has
taken all necessary action to authorize the execution, delivery and performance
of the Loan Documents.  The Loan
Documents have been duly executed and delivered by Borrower and constitute
legal, valid and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and
general principles of equity.  The Loan Documents
are not subject to, and Borrower has not asserted, any right of rescission,
set-off, counterclaim or defense, including the defense of usury.


 


4.3          No
Conflicts.  The execution,
delivery and performance of the Loan Documents by Borrower and the transactions
contemplated hereby (x) do 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 (other than pursuant to the Loan Documents)
upon any of the property of Borrower pursuant to the terms of, any agreement or
instrument to which Borrower is a party or by which its property is subject,
and (y) do not result in any violation of the provisions of any statute or
any order, rule or regulation of any Governmental Authority having jurisdiction
over Borrower or any of its properties. 
Neither Borrower’s nor Sole Member’s rights under the Licenses and the
Management Agreement will be adversely affected by the execution and delivery
of the Loan Documents, Borrower’s performance thereunder, the recordation of
the Mortgage, or the exercise of any remedies by Lender.  Any consent, approval, authorization, order,
registration or qualification of or with any Governmental Authority required
for the execution, delivery and performance by Borrower of the Loan Documents
has been obtained and is in full force and effect.


 


4.4          Litigation.  There are no actions, suits or other
proceedings at law or in equity by or before any Governmental Authority now
pending or, to Borrower’s best knowledge, threatened against or affecting
Borrower, Sole Member or the Property, which, if adversely determined, could
reasonably be expected to materially adversely affect the condition (financial
or otherwise) or business of Borrower (including the ability of Borrower to
carry out its obligations under the Loan Documents), Sole Member or the use,
value, condition or ownership of the Property.


 


4.5          Agreements.  Borrower is not a party to any agreement or
instrument or subject to any restriction which could reasonably be expected to
adversely affect Borrower or the Property, or Borrower’s business, properties,
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 Permitted Encumbrance or
any other agreement or instrument to which it is a party or by which it or the
Property is bound.


 


4.6          Title.  Borrower has good, marketable and indefeasible
title in fee to the real property and good title to the balance of the
Property, free and clear of all Liens except the Permitted Encumbrances.  All transfer taxes, deed stamps, intangible
taxes or other amounts in the nature of transfer taxes required to be paid by
any Person under applicable Legal


 


30

















 


Requirements in connection with
the transfer of the Property to Borrower have been paid.  The Mortgage when properly recorded in the
appropriate records, together with any UCC Financing Statements required to be
filed in connection therewith, will create (i) valid, perfected first
priority liens on the Borrower’s interest in the Property and (ii) valid
and perfected first priority security interests in and to, and perfected
collateral assignments of, all personalty (including the Leases), all in
accordance with the terms thereof, in each case subject only to any applicable
Permitted Encumbrances.  All mortgage,
recording, stamp, intangible or other similar taxes required to be paid by any
Person under applicable Legal Requirements in connection with the execution,
delivery, recordation, filing, registration, perfection or enforcement of any
of the Loan Documents have been paid. 
The Permitted Encumbrances do not materially adversely affect the value,
operation or use of the Property or Borrower’s ability to repay the Loan.  No Condemnation or other proceeding has been
commenced or, to Borrower’s best knowledge, is contemplated with respect to all
or part of the Property or for the relocation of roadways providing access to
the Property.  To Borrower’s best
knowledge, there are no claims for payment for work, labor or materials
affecting the Property which are or may become a Lien prior to, or of equal
priority with, the Liens created by the Loan Documents.  There are no outstanding options to purchase
or rights of first refusal affecting all or any portion of the Property.  The survey for the Property delivered to
Lender does not fail to reflect any material matter affecting the Property or
the title thereto.  All of the
Improvements included in determining the appraised value of the Property lie
wholly within the boundaries and building restriction lines of the Property, and
no improvement on an adjoining property encroaches upon the Property, and no
easement or other encumbrance upon the Property encroaches upon any of the
Improvements, except those insured against by the Title Insurance Policy.  Each parcel comprising the Property is a
separate tax lot and is not a portion of any other tax lot that is not a part
of the Property.  There are no pending or
proposed special or other assessments for public improvements or otherwise
affecting the Property, or any contemplated improvements to the Property that
may result in such special or other assessments.  With respect to the Title Insurance Policy,
to Borrower’s knowledge, (i) the Title Insurance Policy is in full force
and effect, (ii) the Title Insurance Policy is freely assignable by Lender
to and will inure to the benefit of the transferee (subject to recordation of
an assignment of mortgage) without the consent or any notification to the
insurer, (iii) the premium with respect thereto has been paid in full (or
will be paid in full with a portion of the proceeds of the Loan), (iv) the
Title Insurance Policy is issued by a title insurance company licensed to issue
policies in the State, (v) no claims have been made under the Title
Insurance Policy and no other action has been taken that would materially
impair the Title Insurance Policy and (vi) the Title Insurance Policy
contains no exclusions for any of the following circumstances, or it
affirmatively insures Lender against losses relating to any of the following
circumstances (unless the Property is located in a jurisdiction where such
affirmative insurance is not available): 
(a) that the Property has access to a public road and (b) that
the area shown on the survey delivered to Lender in connection with the Loan is
the same as the property legally described in the Mortgage.


 


4.7          No
Bankruptcy Filing.  Borrower is
not contemplating either the filing of a petition by it under any state or
federal bankruptcy or insolvency law or the liquidation of all or a major
portion of its property (a “Bankruptcy Proceeding”), and Borrower has no knowledge
of any Person contemplating the filing of any such petition against
Borrower.  In addition, neither Borrower
nor Sole Member nor any principal
nor Affiliate of Borrower or Sole Member has been a party to, or the subject of
a Bankruptcy Proceeding for the past ten (10) years.


 


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4.8          Full
and Accurate Disclosure.  No
statement of fact made by Borrower in any Loan Documents contains any untrue
statement of a material fact or omits to state any material fact necessary to
make statements contained therein not misleading.  There is no material fact presently known to
Borrower that has not been disclosed to Lender which adversely affects, or,
could reasonably be expected to adversely affect, the Property or the business,
operations or condition (financial or otherwise) of Borrower.  All financial data, including the statements
of cash flow and income and operating expense, that have been delivered to
Lender in respect of Borrower and the Property (i) are true, complete and
correct in all material respects, (ii) accurately represent the financial
condition of Borrower and the Property as of the date of such reports, and
(iii) to the extent audited, reported on, reviewed or prepared by an independent
certified public accounting firm, have been prepared in accordance with GAAP
consistently applied throughout the periods covered, except as disclosed
therein.  Borrower has no known and
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments, unrealized or anticipated losses from any unfavorable
commitments or any liabilities or obligations not expressly permitted by this
Agreement.  Since the date of such
financial statements, there has been no materially adverse change in the
financial condition, operations or business of Borrower or the Property from
that set forth in said financial statements. 
All representations under this Section 4.8 which are solely based
on financial data prepared by the seller of the Property which cover a period
of time prior to Borrower’s acquisition of the Property on May 3, 2006 shall be
limited to the best knowledge of Borrower.


 


4.9          Tax
Filings.  To the extent required,
Borrower has filed (or has obtained effective extensions for filing) all
federal, state and local tax returns required to be filed and have paid or made
adequate provision for the payment of all federal, state and local taxes,
charges and assessments payable by Borrower. 
Borrower believes that its tax returns (if any) properly reflect the
income and taxes of Borrower for the periods covered thereby, subject only to
reasonable adjustments required by the Internal Revenue Service or other
applicable tax authority upon audit.


 


4.10        ERISA;
No Plan Assets.  As of the date
hereof and throughout the Term (i) Borrower is not and will not be an “employee
benefit plan,” as defined in Section 3(3) of ERISA, (ii) none of the
assets of Borrower constitutes or will constitute “plan assets” of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101,
(iii) Borrower is not and will not be a “governmental plan” within the
meaning of Section 3(32) of ERISA, and (iv) transactions by or with
Borrower are not and will not be subject to state statutes regulating investment
of, and fiduciary obligations with respect to, governmental plans.  As of the date hereof, neither Borrower, nor
any member of a “controlled group of corporations” (within the meaning of
Section 414 of the Code) maintains, sponsors or contributes to a “defined
benefit plan” (within the meaning of Section 3(35) of ERISA) or a
“multiemployer pension plan” (within the meaning of Section 3(37)(A) of ERISA).


 


4.11        Compliance.  Except as otherwise set forth in the PZR
Report delivered to Lender in connection with Loan, Borrower and the Property
and the use thereof comply in all material respects with all applicable Legal
Requirements (including with respect to parking and applicable zoning and land
use laws, regulations and ordinances). 
Borrower is not in default or violation of any order, writ, injunction,
decree or demand of any Governmental Authority, the violation of which could
reasonably be expected to materially adversely affect the condition


 


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(financial or otherwise) or
business of Borrower.  The Property is
used exclusively for hotel use and other appurtenant and related uses
(including appurtenant health club, spa, restaurant, bar, recreational,
entertainment and parking uses).  In the
event that all or any part of the Improvements are destroyed or damaged, said
Improvements can be legally reconstructed to their condition prior to such
damage or destruction, and to Borrower’s best knowledge, thereafter exist for
the same use without violating any zoning or other ordinances applicable
thereto as of the date hereof and without the necessity of obtaining any
variances or special permits.  No legal
proceedings are pending or, to the knowledge of Borrower, threatened with
respect to the zoning of the Property. 
Neither the zoning nor any other right to construct, use or operate the
Property is in any way dependent upon or related to any property other than the
Property. All certifications, permits, licenses and approvals, including
certificates of completion and occupancy permits required for the legal use,
occupancy and operation of the Property (collectively, the “Licenses”), have been
obtained and are in full force and effect. 
The use being made of the Property is in conformity with the certificate
of occupancy issued for the Property and all other restrictions, covenants and
conditions affecting the Property.


 


4.12        Contracts.  Except as set forth on Schedule 2 attached
hereto, there are no service, maintenance or repair contracts affecting the
Property that are not terminable on one (1) month’s notice or less without
cause and without penalty or premium. 
All service, maintenance or repair contracts affecting the Property have
been entered into at arms-length in the ordinary course of Borrower’s business
and provide for the payment of fees in amounts and upon terms comparable to
existing market rates.


 


4.13        Federal
Reserve Regulations; Investment Company Act.  No part of the proceeds of the Loan will be
used for the purpose of purchasing or acquiring any “margin stock” within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or for any other purpose that would be inconsistent with such Regulation U or
any other regulation of such Board of Governors, or for any purpose prohibited
by Legal Requirements or any Loan Document. 
Borrower is not (i) an “investment company” or a company
“controlled” by an “investment company,” within the meaning of the Investment
Company Act of 1940, as amended; (ii) a “holding company” or a “subsidiary
company” of a “holding company” or an “affiliate” of either a “holding company”
or a “subsidiary company” within the meaning of the Public Utility Holding
Company Act of 1935, as amended; or (iii) subject to any other federal or
state law or regulation which purports to restrict or regulate its ability to
borrow money.


 


4.14        Easements;
Utilities and Public Access.  All
easements, cross easements, licenses, air rights and rights-of-way or other
similar property interests (collectively, “Easements”), if any, necessary for the full
utilization of the Improvements for their intended purposes have been obtained,
are described in the Title Insurance Policy and are in full force and effect
without default thereunder.  The Property
has rights of access to public ways and is served by water, sewer, sanitary
sewer and storm drain facilities adequate to service it for its intended
uses.  All public utilities necessary or
convenient to the full use and enjoyment of the Property are located in the
public right-of-way abutting the Property, and all such utilities are connected
so as to serve the Property without passing over other property absent a valid
easement.  All roads necessary for the
use of the Property for its current purpose have been completed and dedicated
to public use and accepted by all Governmental Authorities.


 


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4.15        Physical
Condition.  The Property,
including all Improvements, parking facilities, systems, Equipment and
landscaping, are in good condition, order and repair in all material respects;
there exists no structural or other material defect or damages to the
Property.  Borrower has not received
notice from any insurance company or bonding company of any defect or
inadequacy in the Property, or any part thereof, which would adversely affect
its insurability or cause the imposition of extraordinary premiums or charges
thereon or any termination of any policy of insurance or bond.  No portion of the Property is located in an
area as identified by the Federal Emergency Management Agency as an area having
special flood hazards.  The Improvements
have suffered no material casualty or damage which has not been fully repaired
and the cost thereof fully paid.


 


4.16        Leases.  The Property is not subject to any Leases.


 


4.17        Fraudulent
Transfer.  Borrower has not
entered into the Loan or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor, and Borrower has received reasonably equivalent
value in exchange for its obligations under the Loan Documents.  Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of Borrower’s
assets exceeds and will, immediately following the execution and delivery of
the Loan Documents, exceed Borrower’s total probable liabilities, including
subordinated, unliquidated, disputed or contingent liabilities, including the
maximum amount of its contingent liabilities or its debts as such debts become
absolute and matured.  Borrower’s assets
do not and, immediately following the execution and delivery of the Loan
Documents will not, constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe
that it will, incur debts and liabilities (including contingent liabilities and
other commitments) beyond its ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of Borrower).


 


4.18        Ownership
of Borrower.


 


(a)           The
sole member of Borrower is Sole Member. 
All of the membership interests in Borrower and Sole Member are owned
free and clear of all Liens, warrants, options and rights to purchase, other
than the Permitted Encumbrances. 
Borrower has no obligation to any Person to purchase, repurchase or
issue any ownership interest in it.  The
organizational chart attached hereto as Schedule 4 is complete and
accurate and illustrates all Persons who have a direct or indirect ownership
interest in Borrower and Sole Member, except for any additional economic
benefits, promotes or other incidents of ownership which may not be reflected
on such chart but are set forth in the relevant organizational documents.


 


4.19        Purchase
Options.  Neither the Property
nor any part thereof is subject to any purchase options or other similar rights
in favor of third parties.


 


4.20        Management
Agreement.  The Management
Agreement is in full force and effect. 
With respect to the Management Agreement, there is no default, breach or
violation existing thereunder, and no event has occurred (other than payments
due but not yet delinquent) that, with the passage of time or the giving of
notice, or both, would constitute a default, breach or violation thereunder, by
either party thereto.


 


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4.21        Hazardous
Substances.  (i)  The
Property is not in violation of any Legal Requirement pertaining to or imposing
liability or standards of conduct concerning environmental regulation,
contamination or clean-up, including the Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Emergency Planning and Community Right-to-Know Act of 1986, the Hazardous
Substances Transportation Act, the Solid Waste Disposal Act, the Clean Water
Act, the Clean Air Act, the Toxic Substance Control Act, the Safe Drinking
Water Act, the Occupational Safety and Health Act, any state super-lien and
environmental clean-up statutes (including with respect to Toxic Mold), any
local law requiring related permits and licenses and all amendments to and
regulations in respect of the foregoing laws (collectively, “Environmental Laws”);
(ii) the Property is not subject to any private or governmental Lien or
judicial or administrative notice or action or inquiry, investigation or claim
relating to hazardous, toxic and/or dangerous substances, toxic mold or fungus
of a type that may pose a risk to human health or the environment or would
negatively impact the value of the Property (“Toxic Mold”) or any other substances or
materials which are included under or regulated by Environmental Laws
(collectively, “Hazardous
Substances”); (iii) except as set forth in the Phase I
report delivered to Lender in connection with the Loan and to the best of
Borrower’s knowledge, after due inquiry, no Hazardous Substances are or have
been discharged, generated, treated, disposed of or stored on, incorporated in,
or removed or transported from the Property other than in compliance with all
Environmental Laws; (iv) except as set forth in the Phase I report
delivered to Lender in connection with the Loan and to the best of Borrower’s
knowledge, after due inquiry, no Hazardous Substances are present in, on or
under any nearby real property which could migrate to or otherwise affect the
Property; (v) to the best of Borrower’s knowledge, after due inquiry, no
Toxic Mold is on or about the Property which requires remediation; (vi) to
the best of Borrower’s knowledge, after due inquiry, no underground storage tanks
exist on the Property and the Property has never been used as a landfill; and
(vii) there have been no environmental investigations, studies, audits,
reviews or other analyses conducted by or on behalf of Borrower which have not
been provided to Lender.


 


4.22        Name;
Principal Place of Business. 
Except as set forth on Schedule 2 attached hereto, Borrower does not use
and will not use any trade name and has not done and will not do business under
any name other than its actual name set forth herein.  The principal place of business of Borrower
is the Property and Borrower has no other place of business.


 


4.23        Other
Debt.  There is no indebtedness
with respect to the Property or any excess cash flow or any residual interest
therein, whether secured or unsecured, other than Permitted Encumbrances and
Permitted Indebtedness.


 


All of the representations and warranties in this Article 4
and elsewhere in the Loan Documents (i) shall survive for so long as any
portion of the Debt remains owing to Lender and (ii) shall be deemed to
have been relied upon by Lender notwithstanding any investigation heretofore or
hereafter made by Lender or on its behalf, provided, however, that the
representations, warranties and covenants set forth in Section 4.21
above shall survive in perpetuity.


 


35

















 


5.             COVENANTS


 


Until the end of the Term, Borrower hereby covenants and agrees with
Lender that:


 


5.1          Existence.  Borrower shall (i) do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its existence, rights, and franchises, (ii) continue to engage in the
business presently conducted by it, (iii) obtain and maintain all
Licenses, and (iv) qualify to do business and remain in good standing
under the laws of each jurisdiction, in each case as and to the extent required
for the ownership, maintenance, management and operation of the Property.


 


5.2          Taxes
and Other Charges.  Borrower
shall pay all Taxes and Other Charges as the same become due and payable, and
deliver to Lender receipts for payment or other evidence satisfactory to Lender
that the Taxes and Other Charges have been so paid no later than thirty (30)
days before they would be delinquent if not paid (provided, however, that
Borrower need not pay such Taxes nor furnish such receipts for payment of Taxes
paid by Lender pursuant to Section 3.3 hereof).  Borrower shall not suffer and shall promptly
cause to be paid and discharged any Lien against the Property, and shall
promptly pay for all utility services provided to the Property.  After prior 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 amount or
validity or application of any Taxes or Other Charges, provided that
(i) no Event of Default has occurred and is continuing, (ii) such
proceeding shall suspend the collection of the Taxes or such Other Charges,
(iii) such proceeding shall be permitted under and be conducted in accordance
with the provisions of any other instrument to which Borrower is subject and
shall not constitute a default thereunder, (iv) no part of or interest in
the Property will be in danger of being sold, forfeited, terminated, canceled
or lost, (v) Borrower shall have furnished such security as may be
required in the proceeding, or as may be requested by Lender, to insure the
payment of any such Taxes or Other Charges, together with all interest and
penalties thereon, which shall not be less than 100% of the Taxes and Other
Charges being contested and (vi) Borrower shall promptly upon final
determination thereof pay the amount of such Taxes or Other Charges, together
with all costs, interest and penalties. 
Lender may pay over any such security or part thereof held by Lender to
the claimant entitled thereto at any time when, in the reasonable judgment of
Lender, the failure to so pay may adversely affect the rights of Lender under
any Loan Document and/or the failure to so pay may result in the Property (or any
portion thereof) being sold, lost or forfeited.


 


5.3          Access
to the Property.  Borrower shall
permit agents, representatives, consultants and employees of Lender to inspect
the Property or any part thereof at reasonable hours upon reasonable advance
notice.


 


5.4          Repairs;
Maintenance and Compliance; Alterations.


 


5.4.1       Repairs; Maintenance and Compliance.  Borrower shall at all times maintain,
preserve and protect all franchises and trade names, and Borrower shall cause
the Property to be maintained in a good and safe condition and repair and shall
not remove, demolish or alter the Improvements or Equipment or FF&E (except
for alterations performed in accordance with Section 5.4.2 below
and, subject to ordinary wear and tear, normal replacement


 


36

















 


of Equipment and FF&E with Equipment and FF&E of equivalent
value and functionality).  Borrower shall
promptly comply with all Legal Requirements and immediately cure properly any
violation of a Legal Requirement.  Borrower
shall notify Lender in writing within one (1) Business Day after Borrower first
receives notice of any such non-compliance. 
Borrower shall repair, replace or rebuild any part of the Property that
becomes damaged, worn or dilapidated and shall complete and pay for any
Improvements in the process of construction or repair as and when payment
becomes due.


 


5.4.2       Alterations.  Borrower may, without Lender’s consent,
perform alterations to the Improvements, Equipment and FF&E which
(i) do not constitute a Material Alteration, (ii) do not adversely
affect Borrower’s financial condition or the value or Net Operating Income of
the Property and (iii) are in the ordinary course of Borrower’s
business.  Borrower shall not perform any
Material Alteration without Lender’s prior written consent, which consent shall
not be unreasonably withheld or delayed; provided, however, that Lender may, in
its sole and absolute discretion, withhold consent to any Material Alteration
the cost of which is reasonably estimated to exceed $1,500,000 or which is
likely to result in a decrease of Net Operating Income by two and one-half
percent (2.5%) or more for a period of sixty (60) days or longer.  Lender may, as a condition to giving its consent
to a Material Alteration, require that Borrower deliver to Lender security for
payment of the cost of such Material Alteration in an amount equal to 125% of
the cost of the Material Alteration as reasonably estimated by Lender.  Upon substantial completion of the Material
Alteration, Borrower shall provide evidence satisfactory to Lender that
(i) the Material Alteration was constructed in accordance with applicable
Legal Requirements and substantially in accordance with plans and
specifications approved by Lender (which approval shall not be unreasonably
withheld or delayed), (ii) all contractors, subcontractors, materialmen
and professionals who provided work, materials or services in connection with
the Material Alteration have been paid in full and have delivered unconditional
releases of lien and (iii) all material Licenses necessary for the use,
operation and occupancy of the Material Alteration (other than those which
depend on the performance of tenant improvement work) have been issued.  Borrower shall reimburse Lender upon demand
for all out-of-pocket costs and expenses (including the reasonable fees of any
architect, engineer or other professional engaged by Lender) incurred by Lender
in reviewing plans and specifications or in making any determinations necessary
to implement the provisions of this Section 5.4.2.


 


5.5          Performance
of Other Agreements.  Borrower
shall observe and perform each and every term to be observed or performed by
Borrower pursuant to the terms of any agreement or instrument affecting or
pertaining to the Property, including without limitation, the Loan Documents
and the Management Agreement.


 


5.6          Cooperate
in Legal Proceedings.  Borrower
shall cooperate fully with Lender with respect to, and permit Lender, at its
option, to participate in, any proceedings before any Governmental Authority
which may adversely affect the rights of Lender under any Loan Document.


 


5.7          Further
Assurances.  Borrower shall, at
Borrower’s sole cost and expense, (i) 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 at any time securing or intended to secure the Debt, as Lender
may reasonably


 


37

















 


require from time to time; and
(ii) upon Lender’s request therefor given from time to time after the
occurrence of any Event of Default pay for (a) reports of UCC, federal tax
lien, state tax lien, judgment and pending litigation searches with respect to
Borrower and Sole Member and (b) searches of title to the Property, each
such search to be conducted by search firms reasonably designated by Lender in
each of the locations reasonably designated by Lender.


 


5.8          Environmental
Matters.


 


5.8.1       Hazardous Substances.  So long as Borrower owns or is in possession
of the Property, Borrower shall (i) keep the Property owned, leased or
possessed by it free from Hazardous Substances and in compliance with all
Environmental Laws, (ii) promptly notify Lender if Borrower shall become
aware that (A) any Hazardous Substance is on or near the Property,
(B) the Property is in violation of any Environmental Laws or (C) any
condition on or near the Property shall pose a threat to the health, safety or
welfare of humans and (iii) remove such Hazardous Substances and/or cure
such violations and/or remove such threats, as applicable, as required by law
(or as shall be required by Lender in the case of removal which is not required
by law, but in response to the opinion of a licensed hydrogeologist, licensed
environmental engineer or other qualified environmental consulting firm engaged
by Lender (“Lender’s
Consultant”)), promptly after Borrower becomes aware of same, at
Borrower’s sole expense.  Nothing herein
shall prevent Borrower from recovering such expenses from any other party that
may be liable for such removal or cure.


 


5.8.2       Environmental Monitoring.


 


(a)           Borrower
shall give prompt written notice to Lender of (i) any proceeding or
inquiry by any party (including any Governmental Authority) with respect to the
presence of any Hazardous Substance on, under, from or about the Property,
(ii) all claims made or, to Borrower’s best knowledge, threatened by any
third party (including any Governmental Authority) against Borrower or the
Property or any party occupying the Property relating to any loss or injury
resulting from any Hazardous Substance, and (iii) Borrower’s discovery of
any occurrence or condition on any real property adjoining or in the vicinity
of the Property that could cause the Property to be subject to any
investigation or cleanup pursuant to any Environmental Law.  Upon becoming aware of the presence of mold
or fungus at the Property, Borrower shall (i) undertake an investigation
to identify the source(s) of such mold or fungus and shall develop and
implement an appropriate remediation plan to eliminate the presence of any
Toxic Mold, (ii) perform or cause to be performed all acts reasonably
necessary for the remediation of any Toxic Mold (including taking any action
necessary to clean and disinfect any portions of the Property affected by Toxic
Mold, including providing any necessary moisture control systems at the
Property), and (iii) provide evidence reasonably satisfactory to Lender of the
foregoing.  Borrower shall permit Lender
to join and participate in, as a party if it so elects, any legal or
administrative proceedings or other actions initiated with respect to the
Property in connection with any Environmental Law or Hazardous Substance to the
extent such action could reasonably be expected to affect the rights of Lender
under any Loan Document, and Borrower shall pay all reasonable attorneys’ fees
and disbursements incurred by Lender in connection therewith.


 


38

















 


(b)           Upon
Lender’s reasonable request, at any time and from time to time (but not more
than once in any twelve (12) month period, unless Lender has a good faith
belief that there is a violation of Environmental Laws or a release of
Hazardous Substances at or near the Property), Borrower shall provide an
inspection or audit of the Property prepared by a licensed hydrogeologist,
licensed environmental engineer or qualified environmental consulting firm
approved by Lender assessing the presence or absence of Hazardous Substances
on, in or near the Property, and if Lender in its good faith judgment
determines that reasonable cause exists for the performance of such
environmental inspection or audit, then the cost and expense of such audit or
inspection shall be paid by Borrower. 
Such inspections and audit may include soil borings and ground water
monitoring.  If Borrower fails to provide
any such inspection or audit within thirty (30) days after such request, Lender
may order same, and Borrower hereby grants to Lender and its employees and
agents access to the Property and a license to undertake such inspection or
audit.


 


(c)           If
any environmental site assessment report prepared in connection with such
inspection or audit recommends that an operations and maintenance plan be
implemented for any Hazardous Substance, whether such Hazardous Substance
existed prior to the ownership of the Property by Borrower, or presently exists
or is reasonably suspected of existing, Borrower shall cause such operations
and maintenance plan to be prepared and implemented at its expense upon request
of Lender, and with respect to any Toxic Mold, Borrower shall take all action
necessary to clean and disinfect any portions of the Improvements affected by
Toxic Mold in or about the Improvements, including providing any necessary
moisture control systems at the Property. 
If any investigation, site monitoring, containment, cleanup, removal,
restoration or other work of any kind is reasonably necessary under an
applicable Environmental Law (“Remedial Work”), Borrower shall commence all such
Remedial Work within thirty (30) days after written demand by Lender and
thereafter diligently prosecute to completion all such Remedial Work within
such period of time as may be required under applicable law.  All Remedial Work shall be performed by
licensed contractors reasonably approved in advance by Lender and under the
supervision of a consulting engineer approved by Lender.  All costs of such Remedial Work shall be paid
by Borrower, including Lender’s reasonable attorneys’ fees and disbursements
incurred in connection with the monitoring or review of such Remedial
Work.  If Borrower does not timely
commence and diligently prosecute to completion the Remedial Work, Lender may
(but shall not be obligated to) cause such Remedial Work to be performed at
Borrower’s expense.  Notwithstanding the
foregoing, Borrower shall not be required to commence such Remedial Work within
the above specified time period: 
(x) if prevented from doing so by any Governmental Authority,
(y) if commencing such Remedial Work within such time period would result
in Borrower or such Remedial Work violating any Environmental Law, or
(z) if Borrower, at its expense and after prior written notice to Lender,
is contesting by appropriate legal, administrative or other proceedings,
conducted in good faith and with due diligence, the need to perform Remedial
Work.  Borrower shall have the right to
contest the need to perform such Remedial Work, provided that,
(1) Borrower is permitted by the applicable Environmental Laws to delay
performance of the Remedial Work pending such proceedings, (2) neither the
Property nor any part thereof or interest therein will be sold, forfeited or
lost if Borrower fails to promptly perform the Remedial Work being contested,
and if Borrower fails to prevail in contest, Borrower would thereafter have the
opportunity to perform such Remedial Work, (3) Lender would not, by virtue
of such permitted contest, be exposed to any risk of any civil liability for which
Borrower has not furnished additional security as provided in clause


 


39

















 


(4) below,
or to any risk of criminal liability, and neither the Property nor any interest
therein would be subject to the imposition of any Lien for which Borrower has
not furnished additional security as provided in clause (4) below, as a
result of the failure to perform such Remedial Work and (4) Borrower shall
have furnished to Lender additional security in respect of the Remedial Work
being contested and the loss or damage that may result from Borrower’s failure
to prevail in such contest in such amount as may be reasonably requested by
Lender but in no event less than 125% of the cost of such Remedial Work as
estimated by Lender or Lender’s Consultant and any loss or damage that may
result from Borrower’s failure to prevail in such contest.


 


(d)           Borrower
shall not install or permit to be installed on the Property any underground
storage tank.


 


5.8.3       O & M Program. The environmental
report delivered to Lender in connection with the Loan recommends the
development of or continued compliance with an operation and maintenance
program for the Property (including, without limitation, with respect to the
presence of asbestos and/or lead-based paint) (“O & M Program”), Borrower shall
develop (or continue to comply with, as the case may be) such O & M Program
and shall, during the term of the Loan, including any extension or renewal
thereof, comply in all material respects with the terms and conditions of the O
& M Program.


 


5.9          Title
to the Property.  Borrower will
warrant and defend its fee title to the Property, and the validity and priority
of all Liens granted or otherwise given to Lender under the Loan Documents,
subject only to Permitted Encumbrances, against the claims of all Persons.


 


5.10        Leases.


 


5.10.1     Generally.  Upon request, Borrower shall furnish Lender
with executed copies of all Leases then in effect.  Borrower shall not enter into any Lease or a
proposed renewal, extension or modification of an existing Lease without the
prior written consent of Lender, such consent not to be unreasonably withheld,
conditioned or delayed.


 


5.10.2     Additional Covenants with respect to Leases.  Borrower (i) shall observe and perform
the material obligations imposed upon the lessor under the Leases and shall not
do or permit anything to impair the value of the Leases as security for the
Debt; (ii) shall promptly send copies to Lender of all notices of default
that Borrower shall send or receive under any Lease; (iii) shall enforce,
in accordance with commercially reasonable practices for properties similar to
the Property, the terms, covenants and conditions in the Leases to be observed
or performed by the lessees, short of termination thereof; (iv) shall not
collect any of the Rents more than one (1) month in advance (other than
security deposits); (v) shall not execute any other assignment of lessor’s
interest in the Leases or the Rents (except as contemplated by the Loan
Documents); (vi) shall not modify any Lease in a manner inconsistent with
the Loan Documents; (vii) shall not convey or transfer or suffer or permit
a conveyance or transfer of the Property so as to effect a merger of the
estates and rights of, or a termination or diminution of the obligations of,
lessees under Leases; (viii) shall not consent to any assignment of or
subletting under any Lease unless required in accordance with its terms without
the prior consent of Lender, which, so long as no Event of Default is continuing,
be unreasonably


 


40

















 


withheld or delayed; and (ix) shall not cancel or terminate any
Lease or accept a surrender thereof without the prior consent of Lender, which
consent shall not, so long as no Event of Default is continuing, be
unreasonably withheld or delayed.


 


5.11        Estoppel
Statement.  After request by
Lender, Borrower shall within twenty (20) days furnish Lender with a statement
addressed to Lender, its successors and assigns, duly acknowledged and certified,
setting forth (i) the unpaid Principal, (ii) the Interest Rate,
(iii) the date installments of interest and/or Principal were last paid,
(iv) any offsets or defenses to the payment of the Debt, and (v) that
the Loan Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.


 


5.12        Property
Management.


 


5.12.1     Management Agreement.  Borrower shall (i) cause the Property to
be managed pursuant to the Management Agreement; (ii) promptly perform and
observe all of the covenants required to be performed and observed by it under
the Management Agreement and do all things necessary to preserve and to keep
unimpaired its rights thereunder; (iii) promptly notify Lender of any
material default under the Management Agreement of which it is aware;
(iv) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditure plan, and property improvement plan and any
other notice, report and estimate received by Borrower under the Management
Agreement; and (v) promptly enforce the performance and observance of all
of the covenants required to be performed and observed by Manager under the
Management Agreement.  Without Lender’s
prior written consent, Borrower shall not (a) surrender, terminate,
cancel, extend or renew the Management Agreement or otherwise replace the
Manager or enter into any other management agreement (except pursuant to Section 5.12.2
below); (b) reduce or consent to the reduction of the term of the Management
Agreement; (c) increase or consent to the increase of the amount of any
charges under the Management Agreement; (d) otherwise materially modify,
change, supplement, alter or amend in any material respect, or waive or release
any of its material rights and material remedies under, the Management
Agreement; (e) suffer or permit the occurrence and continuance of a
material default beyond any applicable cure period under the Management
Agreement (or any successor management agreement) if such material default
permits the Manager to terminate the Management Agreement (or such successor
management agreement); or (f) suffer or permit the ownership, management
or control of the Manager to be transferred to a Person other than an Affiliate
of Borrower.  Lender hereby acknowledges
that Sole Member (or the sole member of Sole Member) intends to Transfer an
interest in Sole Member (or the sole member of Sole Member) to third party
investors which may equal or exceed a forty-nine percent (49%) interest in Sole
Member (or the sole member of Sole Member). 
Accordingly, if, in connection with such a Transfer, modifications to
the Management Agreement are required, Lender will act reasonably and in good
faith in granting or withholding its consent to any such modifications to the
Management Agreement.


 


5.12.2     Termination of Manager.  If (i) an Event of Default shall be
continuing, or (ii) Manager is in default under the Management Agreement,
or (iii) upon the gross negligence, malfeasance or willful misconduct of
the Manager, Borrower shall, at the request of Lender, terminate the Management
Agreement and replace Manager with a replacement manager acceptable to Lender
in Lender’s reasonable discretion and the applicable Rating Agencies on


 


41

















 


terms and conditions satisfactory to Lender and the applicable Rating
Agencies.  Borrower’s failure to appoint
an acceptable manager within sixty (60) days after Lender’s request of Borrower
to terminate the Management Agreement shall constitute an immediate Event of
Default.  Borrower may from time to time
appoint a successor manager to manage the Property, provided that such
successor manager and Management Agreement shall be approved in writing by
Lender in Lender’s discretion and the applicable Rating Agencies (and Lender’s
approval may be conditioned upon Borrower delivering a Rating Comfort Letter as
to such successor manager and Management Agreement).  If at any time Lender consents to the appointment
of a new manager, such new manager and Borrower shall, as a condition of
Lender’s consent, execute a consent and subordination of management agreement
substantially in the form of the Consent and Subordination of Manager of even
date herewith executed and delivered by Manager to Lender.


 


5.12.3     Cure by Lender.  If Borrower shall default in the
performance or observance of any term, covenant or condition of the Management
Agreement on its part to be performed or observed beyond any applicable grace
or cure period, then, without limiting Lender’s other rights or remedies under
this Agreement or the other Loan Documents, and without waiving or releasing
Borrower from any of its obligations hereunder and without releasing Borrower
under the Management Agreement, Lender shall have the right, but shall be under
no obligation, to pay any sums and to perform any act as may be appropriate to
cause all the terms, covenants and conditions of the Management Agreement on
the part of Borrower to be performed or observed, but such performance by Lender
shall not be deemed a cure of any Default or Event of Default arising by reason
of Borrower’s breach of the Management Agreement.


 


5.13        Special
Purpose Bankruptcy Remote Entity.  Borrower shall at all times be a
Special Purpose Bankruptcy Remote Entity. 
Borrower shall not directly or indirectly make any change, amendment or
modification to its organizational documents, or otherwise take any action
which could result in Borrower not being a Special Purpose Bankruptcy Remote
Entity.  A “Special Purpose Bankruptcy Remote Entity”
shall have the meaning set forth on Schedule 5 hereto.


 


5.14        Assumption
in Non-Consolidation Opinion.  Borrower and Sole Member shall
each conduct its business so that the assumptions (with respect to each Person)
made in that certain substantive non-consolidation opinion letter dated the
date hereof delivered by Borrower’s counsel in connection with the Loan, shall
be true and correct in all respects.


 


5.15        Change
in Business or Operation of Property.  Borrower shall not purchase or own
any real property other than the Property and shall not enter into any line of
business other than the ownership and operation of the Property, or make any
material change in the scope or nature of its business objectives, purposes or
operations, or undertake or participate in activities other than the
continuance of its present business or otherwise cease to operate the Property
as a hotel property or terminate such business for any reason whatsoever (other
than temporary cessation in connection with renovations to the Property).


 


42

















 


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


 


5.17        Affiliate
Transactions.  Borrower shall not
enter into, or be a party to, any transaction with an Affiliate of Borrower or
any of the members of Borrower except in the ordinary course of business and on
terms which are fully disclosed to Lender in advance and are no less favorable
to Borrower or such Affiliate than would be obtained in a comparable arm’s-length
transaction with an unrelated third party.


 


5.18        Zoning.  Borrower shall not initiate or consent to any
zoning reclassification of any portion of the Property or seek any variance
under any existing zoning ordinance or use or permit the use of any portion of
the Property in any manner that could result in such use becoming a non-conforming
use under any zoning ordinance or any other applicable land use law, rule or
regulation, without the prior consent of Lender.


 


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


 


5.20        Principal
Place of Business.  Borrower
shall not change its principal place of business or chief executive office
without first giving Lender thirty (30) days’ prior notice.


 


5.21        Change
of Name, Identity or Structure.  Borrower shall not change its name, identity
(including its trade name or names) or, if not an individual, Borrower’s
corporate, partnership or other structure without notifying Lender of such
change in writing at least thirty (30) days prior to the effective date of such
change and, in the case of a change in Borrower’s structure, without first
obtaining the prior written consent of Lender. 
Borrower shall execute and deliver to Lender, prior to or
contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein or any other Loan Document.  At
the request of Lender, Borrower shall execute a certificate in form
satisfactory to Lender listing the trade names under which Borrower intends to
operate the Property, and representing and warranting that Borrower does business
under no other trade name with respect to the Property.


 


5.22        Indebtedness.  Borrower shall not directly or indirectly
create, incur or assume any indebtedness other than (a) the Debt,
(b) unsecured trade payables incurred in the ordinary course of business
relating to the ownership and operation of the Property and (c) Permitted
Equipment Financing (hereinafter defined) which in the case of such unsecured
trade payables and, the aggregate amount of payment installments then due, in
the case of Permitted Equipment Financing, do not exceed, at any time, a
maximum aggregate amount of the greater of (x) four percent (4%) of the
original amount of the Principal and (y) $880,000 and, which in the case of
unsecured trade payables, are paid within sixty (60) days of the date incurred
and which in the case of Permitted Equipment Financing, each payment
installment in connection therewith is


 


43

















 


paid within sixty (60) days of
the date of the applicable invoice for such installment (collectively, “Permitted Indebtedness”).  Notwithstanding the foregoing, with respect
to the sixty (60)-day period set forth above, Borrower may, at its own expense,
contest the amount or validity of any such Permitted Indebtedness (during which
time such sixty (60)-day period shall be tolled), provided that if Borrower
desires to withhold payment of such Permitted Indebtedness during the pendency
of the contest, (i) no part of or interest in the Property will be in
danger of being sold, forfeited, terminated, canceled or lost,
(ii) Borrower shall have furnished such security as may be requested by
Lender, to insure the payment of any such Permitted Indebtedness, together with
all interest and penalties thereon, which shall not be greater than 125% of the
Permitted Indebtedness being contested, and (iii) Borrower shall promptly
upon final determination thereof pay the amount of such Permitted Indebtedness,
together with all costs, interest and penalties and Borrower shall be permitted
to use such security to make such payment. 
As used herein, “Permitted
Equipment Financing” means equipment financing that (A) exists
as of the date hereof and has been disclosed to Lender or (B) is
(i) entered into in the ordinary course of Borrower’s business,
(ii) for equipment related to the ownership and operation of the Property
whose removal would not materially damage or impair the value of the Property,
and (iii) secured only by the financed equipment.


 


5.23        Licenses.  Borrower shall not Transfer any License
required for the operation of the Property.


 


5.24        Compliance
with Restrictive Covenants, Etc. 
Borrower will not enter into, modify, waive in any material respect or
release any Easements, restrictive covenants or other Permitted Encumbrances,
or suffer, consent to or permit the foregoing, without Lender’s prior written
consent, which consent may be granted or denied in Lender’s sole discretion.


 


5.25        ERISA.


 


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


 


(2)           Borrower
shall not maintain, sponsor, contribute to or become obligated to contribute
to, or suffer or permit any ERISA Affiliate of Borrower to, maintain, sponsor,
contribute to or become obligated to contribute to, any Plan or any Welfare
Plan or permit the assets of Borrower to become “plan assets,” whether by
operation of law or under regulations promulgated under ERISA.


 


(3)           Borrower
shall deliver to Lender such certifications or other evidence from time to time
throughout the Term, as requested by Lender in its sole discretion, that
(A) Borrower is not and does not maintain an “employee benefit plan” as
defined in Section 3(3) of ERISA, which is subject to Title I of
ERISA, or a “governmental plan” within the meaning of Section 3(32) of
ERISA; (B) Borrower is not subject to state statutes regulating
investments and fiduciary obligations with respect to governmental plans; and
(C) the assets of Borrower do not constitute “plan assets” within the
meaning of 29 C.F.R. Section 2510.3-101.


 


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5.26        Prohibited
Transfers.  Borrower shall not
directly or indirectly make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer.


 


5.27        Liens.  Without Lender’s prior written consent,
Borrower shall not create, incur, assume, permit or suffer to exist any Lien on
all or any portion of the Property or any direct or indirect legal or
beneficial ownership interest in Borrower or Sole Member, except Liens in favor
of Lender, Permitted Encumbrances and Permitted Equipment Financing, unless
such Lien is bonded or discharged within thirty (30) days after Borrower first
receives notice of such Lien.


 


5.28        Dissolution.  Borrower shall not (i) engage in any
dissolution, liquidation or consolidation or merger with or into any other
business entity, (ii) engage in any business activity not related to the
ownership and operation of the Property or (iii) transfer, lease or sell,
in one transaction or any combination of transactions, all or substantially all
of the property or assets of Borrower except to the extent expressly permitted
by the Loan Documents.


 


5.29        Expenses.  Borrower shall reimburse Lender upon
receipt of notice for all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees and disbursements) incurred by Lender in
connection with the Loan, including (i) prior to closing, the preparation,
negotiation, execution and delivery of the Loan Documents and the consummation
of the transactions contemplated thereby and all the costs of furnishing all
opinions by counsel for Borrower; (ii) Borrower’s and Lender’s ongoing
performance under and compliance with the Loan Documents, including confirming
compliance with environmental and insurance requirements; (iii) the negotiation,
preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications of or under any Loan Document and
any other documents or matters requested by Lender; (iv) filing and
recording of any Loan Documents; (v) title insurance, surveys, inspections
and appraisals; (vi) the creation, perfection or protection of Lender’s
Liens in the Property and the Cash Management Accounts (including fees and
expenses for title and lien searches, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of appraisals, environmental reports and Lender’s
Consultant, surveys and engineering reports); (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, the Loan Documents, the Property or any
other security given for the Loan; (viii) fees charged by the Rating Agencies
and/or additional fees charged by the Servicer in connection with any
modification of the Loan requested by Borrower and (ix) enforcing any
obligations of or collecting any payments due from Borrower under any Loan
Document or with respect to the Property or in connection with any refinancing
or restructuring of the Loan in the nature of a “work-out”, or any insolvency
or bankruptcy proceedings.  Any costs and
expenses due and payable by Borrower hereunder which are not paid by Borrower
within ten (10) days after demand may be paid from any amounts in the Deposit
Account, with notice thereof to Borrower. 
The obligations and liabilities of Borrower under this Section 5.29
shall survive the Term and the exercise by Lender of any of its rights or
remedies under the Loan Documents, including the acquisition of the Property by
foreclosure or a conveyance in lieu of foreclosure.


 


5.30        Indemnity.  Borrower
shall defend, indemnify and hold harmless Lender and each of its Affiliates and
their respective successors and assigns, including the directors, officers,
partners, members, shareholders, participants, employees, professionals and
agents of any of the


 


45

















 


foregoing (including any
Servicer) and each other Person, if any, who Controls Lender, its Affiliates or
any of the foregoing (each, an “Indemnified Party”), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs, expenses and disbursements of any kind or nature
whatsoever (including the reasonable fees and disbursements of counsel for an
Indemnified Party in connection with any investigative, administrative or
judicial proceeding commenced or threatened, whether or not Lender shall be
designated a party thereto, court costs and costs of appeal at all appellate
levels, investigation and laboratory fees, consultant fees and litigation
expenses), that may be imposed on, incurred by, or asserted against any
Indemnified Party (collectively, the “Indemnified Liabilities”) in any manner,
relating to or arising out of or by reason of the Loan, (other than in
connection with a Secondary Market Transaction, which is covered under Section 9.1.5
hereof), including: (i) any breach by Borrower of its obligations under,
or any intentional misrepresentation by Borrower contained in, any Loan
Document; (ii) the use or intended use of the proceeds of the Loan;
(iii) any information provided by or on behalf of Borrower, or contained
in any documentation approved by Borrower; (iv) ownership of the Mortgage,
the Property or any interest therein or receipt of any Rents; (v) any
accident, injury to or death of persons or loss of or damage the Property
occurring in, on or about the Property or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (vi) any
use, nonuse or condition in, on or about the Property or on adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(vii) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property; (viii) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
the Property; (ix) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to such Hazardous
Substance; (x) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substance; (xi) any violation
of the Environmental Laws which is based upon or in any way related to such
Hazardous Substance, including the costs and expenses of any Remedial Work;
(xii) any failure of the Property to comply with any Legal Requirement;
(xiii) any claim by brokers, finders or similar persons claiming to be
entitled to a commission in connection with any Lease or other transaction
involving the Property or any part thereof, or any liability asserted against
Lender with respect thereto; and (xiv) the claims of any lessee of any
portion of the Property or any Person acting through or under any lessee or
otherwise arising under or as a consequence of any Lease; provided, however,
that Borrower shall not have any obligation to any Indemnified Party hereunder
to the extent that it is finally judicially determined that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of such Indemnified Party. 
Notwithstanding anything to the contrary contained in this Section 5.30,
it is expressly understood and agreed that the indemnification procedures set
forth in Section 9.1.5 and all of Borrower’s rights set forth
therein shall apply to this Section 5.30 and the provisions of such
Section 9.1.5 in their entirety are incorporated herein by
reference.  Any amounts payable to any
Indemnified Party by reason of the application of this paragraph shall be
payable on demand and shall bear interest at the Default Rate from the date
loss or damage is sustained by any Indemnified Party until paid.  The obligations and liabilities of Borrower
under this Section 5.30 shall survive the Term and the exercise by
Lender of any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.


 


46

















 


5.31        Patriot
Act Compliance.


 


(a)           Borrower
will use its good faith and commercially reasonable efforts to comply with the
Patriot Act (as defined below) and all applicable requirements of governmental
authorities having jurisdiction over Borrower and the Property, including those
relating to money laundering and terrorism. 
Lender shall have the right to audit Borrower’s compliance with the
Patriot Act and all applicable requirements of governmental authorities having
jurisdiction over Borrower and the Property, including those relating to money
laundering and terrorism.  In the event
that Borrower fails to comply with the Patriot Act or any such requirements of
governmental authorities, then Lender may, at its option, cause Borrower to
comply therewith and any and all reasonable costs and expenses incurred by
Lender in connection therewith shall be secured by the Mortgage and the other Loan
Documents and shall be immediately due and payable.  For purposes hereof, the term “Patriot Act” means
the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same
may be amended from time to time, and corresponding provisions of future laws.


 


(b)           Neither
Borrower nor any partner or member in Borrower or member of such partner nor
any owner of a direct or indirect interest in Borrower (excluding any
shareholders having less than a 25% economic interest in MHGC) (a) is
listed on any Government Lists (as defined below), (b) is a person who has
been determined by competent authority to be subject to the prohibitions
contained in Presidential Executive Order No. 13224 (Sept. 23, 2001)
or any other similar prohibitions contained in the rules and regulations of
OFAC (as defined below) or in any enabling legislation or other Presidential
Executive Orders in respect thereof, (c) has been previously indicted for
or convicted of any felony involving a crime or crimes of moral turpitude or
for any Patriot Act Offense (as defined below), or (d) is currently under
investigation by any governmental authority for alleged criminal activity.  For purposes hereof, the term “Patriot Act Offense”
means any violation of the criminal laws of the United States of America or of
any of the several states, or that would be a criminal violation if committed
within the jurisdiction of the United States of America or any of the several
states, relating to terrorism or the laundering of monetary instruments,
including any offense under (a) the criminal laws against terrorism;
(b) the criminal laws against money laundering, (c) the Bank Secrecy
Act, as amended, (d) the Money Laundering Control Act of 1986, as amended,
or the (e) Patriot Act.  “Patriot
Act Offense” also includes the crimes of conspiracy to commit, or aiding and
abetting another to commit, a Patriot Act Offense.  For purposes hereof, the term “Government Lists”
means (i) the Specially Designated Nationals and Blocked Persons Lists
maintained by Office of Foreign Assets Control (“OFAC”), (ii) any other list of
terrorists, terrorist organizations or narcotics traffickers maintained
pursuant to any of the Rules and Regulations of OFAC that Lender notified
Borrower in writing is now included in “Governmental Lists”, or (iii) any
similar lists maintained by the United States Department of State, the United
States Department of Commerce or any other government authority or pursuant to
any Executive Order of the President of the United States of America that
Lender notified Borrower in writing is now included in “Governmental Lists”.


 


5.32        Hotel
Operation.  Without in any way
limiting the covenants set forth in Section 5.8 or elsewhere in the Loan
Documents, Borrower shall:  (i) cause the
hotel located on the Property to be operated, repaired and maintained as a
well-maintained “first-class hotel” which


 


47

















 


shall mean a hotel providing
amenities, services and facilities substantially equivalent or superior to
hotels of similar average room rate and targeted market segment from time to
time operating in the same or comparable geographic area of the Property,
taking into consideration the age and location of the hotel located on the
Property and (ii) maintain Inventory in amounts sufficient to meet the hotel
industry standard for hotels comparable to the hotel located on the Property
and at levels sufficient for the operation of the hotel located on the Property
at full occupancy levels.


 


6.             NOTICES
AND REPORTING


 


6.1          Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document (a “Notice”) shall be
given in writing and shall be effective for all purposes if either hand
delivered with receipt acknowledged, or by a nationally recognized overnight
delivery service (such as Federal Express), or by certified or registered
United States mail, return receipt requested, postage prepaid, or by facsimile
and confirmed by facsimile answer back, in each case addressed as follows (or
to such other address or Person as a party shall designate from time to time by
notice to the other party):  If to
Lender: Greenwich Capital Financial Products, Inc., 600 Steamboat Road,
Greenwich, Connecticut 06830, Attention: Mortgage Loan Department, Telecopier:
(203) 618-2052, with a copy to: Kaye Scholer LLP, 425 Park Avenue, New
York, New York 10022, Attention: Stephen Gliatta, Esq., Telecopier: (212)
836-8689; if to Borrower: c/o Morgans Hotel Group Co., 475 Tenth Avenue, 11th
Floor, New York, New York 10018, Attention: Marc S. Gordon, Telecopier: (212)
277-4270, with a copy to: Morgans Hotel Group Co., 475 Tenth Avenue, 11th
Floor, New York, New York 10018, Attention: Jennifer Nellany, Esq., Telecopier:
(212) 277-4290, and with a copy to: McDermott Will & Emery LLP, 340 Madison
Avenue, New York, New York 10017, Attention: Keith M. Pattiz, Esq., Telecopier:
(212) 547-5444.  A notice shall be deemed
to have been given:  in the case of hand
delivery, at the time of delivery; in the case of registered or certified mail,
when delivered or the first attempted delivery on a Business Day; or in the
case of overnight delivery, upon the first attempted delivery on a Business Day;
or in the case of facsimile, upon the confirmation of such facsimile
transmission.


 


6.2          Borrower
Notices and Deliveries.  Borrower
shall (a) give prompt written notice to Lender of:  (i) any litigation, governmental
proceedings or claims or investigations pending or threatened against Borrower
or Sole Member which might materially adversely affect Borrower’s or Sole
Member’s condition (financial or otherwise) or business or the Property;
(ii) any material adverse change in Borrower’s or Sole Member’s condition
financial or otherwise, or of the occurrence of any Default or Event of Default
of which Borrower has knowledge; and (b) furnish and provide to Lender:
(i) any Securities and Exchange Commission or other public filings, if
any, of Borrower, Sole Member, Manager, or any Affiliate of any of the
foregoing within two (2) Business Days of such filing and (ii) all
existing instruments, documents, boundary surveys, footing or foundation
surveys, certificates, plans and specifications, appraisals, title and other
insurance reports and agreements, reasonably requested, from time to time, by
Lender.  In addition, after request by
Lender (but no more frequently than once in any twelve (12) month period),
Borrower shall furnish to Lender (x) within ten (10) days, a certificate
addressed to Lender, its successors and assigns reaffirming all representations
and warranties of Borrower set forth in the Loan Documents as of the date
requested by Lender or, to the extent of any changes to any such
representations and warranties, so stating such changes, and (y) Borrower
shall use commercially reasonable efforts to obtain and deliver within thirty


 


48

















 


(30) days after request by
Lender (but no more than twice in any twelve (12) month period with respect to
any one tenant (unless an Event of Default has occurred and is continuing)),
tenant estoppel certificates addressed to Lender, its successors and assigns
from each tenant at the Property in form and substance reasonably satisfactory
to Lender.


 


6.3          Financial
Reporting.


 


6.3.1       Bookkeeping.  Borrower shall keep on a calendar year basis,
in accordance with GAAP, proper and accurate books, records and accounts
reflecting all of the financial affairs of Borrower and all items of income and
expense and any services, Equipment or furnishings provided in connection with
the operation of the Property whether such income or expense is realized by
Borrower, Manager or any Affiliate of Borrower. 
Lender shall have the right from time to time during normal business
hours upon reasonable notice to examine such books, records and accounts at the
office of Borrower or other Person maintaining them, and to make such copies or
extracts thereof as Lender shall desire. 
After an Event of Default, Borrower shall pay any third party costs
incurred by Lender to examine such books, records and accounts, as Lender shall
determine to be necessary or appropriate in the protection of Lender’s
interest.


 


6.3.2       Annual Reports.  Borrower shall furnish to Lender annually,
within 120 days after each calendar year, a complete copy of Borrower’s
annual financial statements (which may be consolidated financial statements)
audited by a “big four” accounting firm or another independent certified public
accountant reasonably acceptable to Lender (accompanied by an unqualified
opinion from such accounting firm or other independent certified public
accountant), each in accordance with GAAP and containing balance sheets and
statements of profit and loss for Borrower and the Property in such detail as
Lender may reasonably request.  Each such
statement (x) shall be in form and substance reasonably satisfactory to
Lender, and if reasonably requested by Lender, shall be prepared in accordance
with Regulation S-X of the Securities Act, (y) shall set forth the
financial condition and the income and expenses for the Property, for the
immediately preceding calendar year, including statements of annual Net
Operating Income and (z) shall be accompanied by an Officer’s Certificate
certifying (1) that such statement is true, complete and presents fairly
the financial condition of the Property and has been prepared in accordance
with GAAP and (2) whether there exists a Default or Event of Default, and
if so, the nature thereof, the period of time it has existed and the action
then being taken to remedy it.


 


6.3.3       Monthly/Quarterly Reports.  Borrower shall furnish to Lender within
thirty (30) days after the end of each calendar month or calendar quarter (as
indicated below) the following items: 
(i) monthly and year-to-date operating statements, noting Net
Operating Income and other information necessary and sufficient under GAAP to
fairly represent the financial position and results of operation of the
Property during such calendar month, all in form reasonably satisfactory to
Lender; (ii) a balance sheet for such calendar month; (iii) a
comparison of the budgeted income and expenses and the actual income and
expenses for each month and year-to-date for the Property together with a
detailed explanation of any variances of ten percent (10%) or more between
budgeted and actual amounts for such period and year-to-date on a departmental
basis; (iv) on a quarterly basis only, a statement of the actual Capital
Expenses made by Borrower during each calendar quarter as of the last day of
such calendar quarter; (v) a statement that Borrower has not incurred any
indebtedness other than Permitted Indebtedness;


 


49

















 


(vi) an aged receivables report, (vii) occupancy rates
(including the average daily rate), (viii) on a quarterly basis only, rent
rolls identifying the leased premises, names of all tenants, units leased,
monthly rental and all other charges payable under each Lease, date to which
paid, term of Lease, date of occupancy, date of expiration, material special
provisions, concessions or inducements granted to tenants, and a year-by-year
schedule showing by percentage the rentable area of the Improvements and the
total base rent attributable to Leases expiring each year) and a delinquency
report for the Property and (ix) on a quarterly basis only, a
reconciliation of operating expenses identifying those funds which were
disbursed to Borrower from the Operating Expense Subaccount during the prior month
which have not been used to pay Approved Operating Expenses or Third Party
Disbursements.  Each such statement shall
be accompanied by an Officer’s Certificate certifying (1) that such items
are true and complete and fairly present the financial condition and results of
the operations of Borrower and the Property in accordance with GAAP (subject to
normal year-end adjustments) and (2) whether there exists a Default or
Event of Default, and if so, the nature thereof, the period of time it has
existed and the action then being taken to remedy it.


 


6.3.4       Other Reports.  Borrower shall furnish to Lender, within
thirty (30) days after request, such further detailed information with respect
to the operation of the Property and the financial affairs of Borrower, Manager
or Sole Member as may be reasonably requested by Lender or any applicable
Rating Agency.


 


6.3.5       Annual Budget.  Borrower shall prepare and submit (or shall
cause Manager to prepare and submit) to Lender by December 15th of each year
during the Term, for approval by Lender, which approval shall not be
unreasonably withheld or delayed, a proposed pro forma budget for the Property
for the succeeding calendar year (the “Annual Budget”, and each Annual Budget
approved (or deemed approved pursuant to the terms of this Section 6.3.5)
by Lender is referred to herein as the “Approved Annual Budget”)), and, promptly
after preparation thereof, any revisions to such Annual Budget.  Lender’s failure to approve or disapprove any
Annual Budget or revision within thirty (30) days after Lender’s receipt
thereof shall be deemed to constitute Lender’s approval thereof.  The Annual Budget shall consist of
(i) an operating expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of Borrower’s anticipated operating income
and operating expenses (on an accrual basis), including amounts required to
establish, maintain and/or increase any monthly payments required hereunder
(and once such Annual Budget has been approved (or deemed approved pursuant to
the terms of this Section 6.3.5) by Lender, such operating expense
budget shall be referred to herein as the “Approved Operating Budget”), and (ii) a
Capital Expense/FF&E Expense budget showing, on a month-by-month basis, in
reasonable detail, each line item of anticipated Capital Expenses and FF&E
Expenses (and once such Annual Budget has been approved (or deemed approved
pursuant to the terms of this Section 6.3.5) by Lender, such
Capital Expense/FF&E Expense budget shall be referred to herein as the “Approved Capital/FF&E Budget”).  Until such time that any Annual Budget has
been approved (or deemed to have been approved) by Lender, the prior Approved
Annual Budget shall apply for all purposes hereunder (with such adjustments as
reasonably determined by Lender (including increases for any Taxes, Insurance
Premiums or utilities)).  Borrower shall
be permitted to submit revisions to any Approved Operating Budget or any
Approved Capital/FF&E Budget for approval by Lender, which approval shall
not be unreasonably withheld or delayed. 
On the date


 


50

















 


hereof Borrower has delivered to Lender, an Approved Operating Budget,
which Approved Operating Budget is attached hereto as Schedule 6.


 


6.3.6       Breach.  If Borrower fails to provide to Lender or its
designee any of the financial statements, certificates, reports or information
(the “Required Records”)
required by this Article 6 within thirty (30) days after the date
upon which such Required Record is due, Lender shall have the option, upon
fifteen (15) days notice to Borrower to gain access to Borrower’s books and
records and prepare or have prepared at Borrower’s expense, any Required
Records not delivered by Borrower.


 


6.3.7       Hotel Accounting.  All monthly and other operating statements to
be delivered by Borrower hereunder shall be (and all accompanying Officer’s
Certificates shall state that they have been) prepared based upon the USALI.


 


6.3.8       Inspection.  Borrower shall permit any authorized
representatives designated by Lender to visit, examine, audit, and inspect,
upon reasonable notice and during normal business hours, the Property including
Borrower’s, financial and accounting records, and to make copies and take
extracts therefrom, and to discuss its and their affairs, finances and business
with its and their officers and independent public accountants (with Borrower’s
representative(s) present in all instances), at such reasonable times during
normal business hours and as often as may be reasonably requested.  Borrower shall cause its Affiliates to make
all books of account and records so available at the office where the same are
regularly maintained.  Lender shall have
the right to copy, duplicate and make abstracts from such books and records as
Lender may require.  During the
continuance of an Event of Default, Borrower shall pay any costs incurred by
Lender to examine such books, records and accounts.  Borrower acknowledges and agrees that
(i) all of such audits, inspections and reports shall be made for the sole
benefit of Lender, and not for the benefit of Borrower or any third party, and
neither Lender nor Lender’s auditors or inspectors or any of Lender’s
representatives, agents or contractors assumes any responsibility or liability
(except to Lender) by reason of such audits, inspections or reports,
(ii) Borrower will not rely upon any of such audits, inspections or
reports for any purpose whatsoever, and (iii) the performance of such
audits, inspections and reports will not constitute a waiver of any of the
provisions of this Agreement or any other Loan Document or any of the
obligations of Borrower hereunder or thereunder.  Borrower further acknowledges and agrees that
neither Lender nor Lender’s inspector, representatives, agents or contractors
shall be deemed to be in any way responsible for any matters related to design
or construction of the Improvements or any construction work.  At any time during the term of the Loan (but
not more than once in any twelve (12) month period), Borrower shall cooperate
with Lender and use reasonable efforts to assist Lender in obtaining an
appraisal of the Property.  Such
cooperation and assistance from Borrower shall include but not be limited to
the obligation to provide Lender or Lender’s appraiser with the following:
(i) reasonable access to the Property, (ii) a current certified rent
roll for the Property in form and substance satisfactory to Lender, including
current asking rents and a history of change in asking rents and historical
vacancy for the past three years, (iii) current and budgeted income and
expense statements for the prior three years, (iv) the then existing site
plan and survey of the Property, (v) the building plans and
specifications, including typical elevation and floor plans, to the extent in Borrower’s
possession or reasonably available to Borrower; (vi) the current and prior
year real estate tax bills, (vii) a detailed list of past and scheduled
capital improvements and the costs thereof, (viii) all environmental
reports


 


51

















 


and other applicable information relating to the Property, and
(ix) copies of all recent appraisals/property description information or
brochures, including descriptions of amenities and services relating to the
Property to the extent in Borrower’s possession or reasonably available to
Borrower.  The appraiser performing any
such appraisal shall be engaged by Lender and Borrower shall be responsible for
any fees payable to said appraiser in connection with an appraisal of the Property.


 


7.             INSURANCE;
CASUALTY; AND CONDEMNATION


 


7.1          Insurance.


 


7.1.1       Coverage.  Borrower, at its sole cost, for the mutual
benefit of Borrower and Lender, shall obtain and maintain during the Term the
following policies of insurance:


 


(a)           Property
insurance insuring against loss or damage customarily included under so called
“all risk” or “special form” policies including fire, lightning, vandalism, and
malicious mischief, boiler and machinery and, if required by Lender, flood
and/or earthquake coverage and subject to subsection (j) below, coverage for
damage or destruction caused by the acts of “Terrorists” (or such policies
shall have no exclusion from coverage with respect thereto) and such other
insurable hazards as, under good insurance practices, from time to time are
insured against for other property and buildings similar to the premises in
nature, use, location, height, and type of construction.  Such insurance policy shall also insure for
ordinance of law coverage, costs of demolition and increased cost of
construction in amounts satisfactory to Lender. 
Each such insurance policy shall (i) be in an amount equal to 100%
of the then replacement cost of the Improvements without deduction for physical
depreciation and (ii) have deductibles no greater than $250,000 per
occurrence and (iii) be on a replacement cost basis and contain either no
coinsurance or, if coinsurance, an agreed amount endorsement, and shall cover,
without limitation, all tenant improvements and betterments that Borrower is
required to insure on a replacement cost basis. 
Lender shall be named Mortgagee and Loss Payee on a Standard Mortgagee
Endorsement.


 


(b)           Flood
insurance if any part of the Property is located in an area now or hereafter
designated by the Federal Emergency Management Agency as a Zone “A” & “V”
Special Hazard Area, or such other Special Hazard Area if Lender so requires in
its sole discretion.  Such policy shall
(i) be in an amount equal to (A) 100% of the full replacement cost of the
Improvements on the Property (without any deduction for depreciation) or (B)
such other amount as agreed to by Lender and (ii) have a maximum
permissible deductible of $3,000.


 


(c)           Public
liability insurance, including (i) ”Commercial General Liability
Insurance”, (ii) ”Owned”, “Hired” and “Non Owned Auto Liability”;
(iii) so called “dram shop” insurance or other liquor liability insurance
required in connection with the sale of alcoholic beverages; and
(iv) umbrella liability coverage for personal injury, bodily injury, death,
accident and property damage, such insurance providing in combination no less
than containing minimum limits per occurrence of $1,000,000 and $2,000,000 in
the aggregate for any policy year with no deductible or self insured retention;
together with at least $25,000,000 excess and/or umbrella liability insurance
for any and all claims.  The policies
described in this subsection shall also include coverage for elevators,
escalators, independent contractors, “Contractual Liability”


 


52

















 


(covering, to
the maximum extent permitted by law, Borrower’s obligation to indemnify Lender
as required under this Agreement and the other Loan Documents), “Products” and
“Completed Operations Liability” coverage.


 


(d)           Rental
loss and/or business interruption insurance (i) with Lender being named as
“Lender Loss Payee”, (ii) in an amount equal to 100% of the projected
Rents from the Property for a period of not less than twenty-four (24) months;
and (iii) containing an extended period of indemnity endorsement which
provides that after the physical loss to the Property has been repaired, the
continued loss of income will be insured until such income either returns to
the same level it was at prior to the loss, or the expiration of twelve (12)
months from the date that the Property is repaired or replaced and operations
are resumed, whichever first occurs, and notwithstanding that the policy may
expire prior to the end of such period. 
The amount of such insurance shall be increased from time to time during
the Term as and when the estimated or actual Rents increase.


 


(e)           Comprehensive
boiler and machinery insurance covering all mechanical and electrical equipment
against physical damage, rent loss and improvements loss and covering, without
limitation, all tenant improvements and betterments that Borrower is required
to insure pursuant to the lease on a replacement cost basis and in an amount
equal to the lesser of (i) $2,000,000 and (ii) 100% of the full
replacement cost of the Improvements on the Property (without any deduction for
depreciation).


 


(f)            Worker’s
compensation and disability insurance with respect to any employees of
Borrower, as required by any Legal Requirement.


 


(g)           During
any period of repair or restoration, builder’s “all-risk” insurance on the so
called completed value basis in an amount equal to not less than the full
insurable value of the Property, against such risks (including fire and
extended coverage and collapse of the Improvements to agreed limits) as Lender
may request, in form and substance acceptable to Lender.


 


(h)           Coverage
to compensate for ordinance of law, the cost of demolition and the increased
cost of construction in an amount satisfactory to Lender, provided that if the
Property is a legal conforming use and Borrower is permitted as of right to
rebuild the Property to be of at least equal value and of substantially the
same character, height, and density, ordinance of law coverage shall not be
required hereunder.


 


(i)            Such
other insurance (including environmental liability insurance, earthquake
insurance, mine subsidence insurance and windstorm insurance) as may from time
to time be reasonably required by Lender in order to protect its interests.


 


(j)            Notwithstanding
anything in subsection (a) above to the contrary, Borrower shall be required to
obtain and maintain coverage in its property insurance Policy (or by a separate
Policy) against loss or damage by terrorist acts in an amount equal to 100% of
the “Full Replacement Cost” of the Property; provided that such coverage is
available.  In the event that such
coverage with respect to terrorist acts is not included as part of the “all
risk” property policy required by subsection (a) above, Borrower shall,
nevertheless be required to obtain


 


53

















 


coverage for
terrorism (as stand alone coverage) in an amount equal to 100% of the “Full
Replacement Cost” of the Property; provided that such coverage is
available.  Notwithstanding the
foregoing, with respect to any such stand-alone policy covering terrorist acts,
Borrower shall not be required to pay any Insurance Premiums solely with
respect to such terrorism coverage in excess of the Terrorism Premium Cap
(hereinafter defined); provided that if the Insurance Premiums payable with
respect to such terrorism coverage exceeds the Terrorism Premium Cap, Lender
may, at its option (1) purchase such stand-alone terrorism Policy, with
Borrower paying such portion of the Insurance Premiums with respect thereto
equal to the Terrorism Premium Cap and the Lender paying such portion of the
Insurance Premiums in excess of the Terrorism Premium Cap or (2) modify the
deductible amounts, policy limits and other required policy terms to reduce the
Insurance Premiums payable with respect to such stand-alone terrorism Policy to
the Terrorism Premium Cap.  As used
herein, (i) ”Terrorism
Premium Cap” means an amount equal to 150% of the aggregate
Insurance Premiums payable with respect to all the insurance coverage under Section
7.1.1(a) above for the last policy year in which coverage for terrorism was
included as part of the “all risk” property policy required by
subsection (a) above, adjusted annually by a percentage equal to the
increase in the Consumer Price Index (hereinafter defined) and (ii) ”Consumer Price Index”
means the Consumer Price Index for All Urban Consumers published by the Bureau
of Labor Statistics of the United States Department of Labor, New York
Metropolitan Statistical Area, All Items (1982-84 = 100), or any successor index
thereto, approximately adjusted, and in the event that the Consumer Price Index
is converted to a different standard reference base or otherwise revised, the
determination of adjustments provided for herein shall be made with the use of
such conversion factor, formula or table for converting the Consumer Price
Index as may be published by the Bureau of Labor Statistics or, if said Bureau
shall not publish the same, then with the use of such conversion factor,
formula or table as may be published by Prentice-Hall, Inc., or any other
nationally recognized publisher of similar statistical information; and if the
Consumer Price Index ceases to be published, and there is no successor thereto
(i) such other index as Lender and Borrower shall agree upon in writing or
(ii) if Lender and Borrower cannot agree on a substitute index, such other
index, as reasonably selected by Lender.(1)  Borrower shall obtain the coverage
required under this subsection (j) from a carrier which otherwise
satisfies the rating criteria specified in Section 7.1.2 below (a “Qualified Carrier”)
or in the event that such coverage is not available from a Qualified Carrier,
Borrower shall obtain such coverage from the highest rated insurance company
providing such coverage.


 


7.1.2       Policies.  All policies of insurance (the “Policies”) required
pursuant to Section 7.1.1 above shall (i) be issued by
companies approved by Lender and licensed to do business in the State, with a
claims paying ability rating of “A” or better by S&P (and the equivalent by
any other Rating Agency) (provided, however for multi-layered policies,
(A) if four (4) or less insurance companies issue the Policies, then at
least 75% of the insurance coverage represented by the Policies must be
provided by insurance companies with a claims paying ability rating of “A” or
better by S&P (and the equivalent by any other Rating Agency), with no
carrier below “BBB” (and the equivalent by any other Rating Agency) or
(B) if five (5) or more insurance companies issue the Policies, then at
least sixty percent (60%) of the insurance


 






(1)           Terrorism
Premium Cap provision is not to be used unless discussed with GCM.


 


54

















 


coverage represented by the Policies must be provided by insurance
companies with a claims paying ability rating of “A” or better by S&P (and
the equivalent by any other Rating Agency), with no carrier below “BBB” (and
the equivalent by any other Rating Agency), and
a rating of A:X or better in the current Best’s Insurance Reports;
(ii) name Lender and its successors and/or assigns as their interest may
appear as the mortgagee (in the case of property insurance), loss payee (in the
case of business interruption/loss of rents coverage) and an additional insured
(in the case of liability insurance); (iii) contain (in the case of
property insurance) a Non-Contributory Standard Mortgagee Clause and a Lender’s
Loss Payable Endorsement, or their equivalents, naming Lender as the person to
which all payments made by such insurance company shall be paid;
(iv) contain a waiver of subrogation against Lender; (v) be assigned
and certified copies thereof delivered to Lender; (vi) contain such
provisions as Lender deems reasonably necessary or desirable to protect its
interest, including (A) endorsements providing that neither Borrower,
Lender nor any other party shall be a co-insurer under the Policies,
(B) that Lender shall receive at least thirty (30) days’ prior written
notice of any modification, reduction or cancellation of any of the Policies,
(C) any foreclosure or other action or proceeding taken by Lender pursuant
to any provision of the Loan Documents; and (viii) be reasonably
satisfactory in form and substance to Lender and approved by Lender as to
amounts, form, risk coverage, deductibles, loss payees and insureds.  Borrower shall pay the premiums for such
Policies (the “Insurance
Premiums”) as the same become due and payable (which payments,
provided no Event of Default has occurred and is continuing, may be made from
funds available, if any, in the Tax and Insurance Subaccount) and furnish to
Lender evidence of the renewal of each of the Policies together with (unless
such Insurance Premiums have been paid by Lender pursuant to Section 3.3)
receipts for or other evidence of the payment of the Insurance Premiums
reasonably satisfactory to Lender.  If
Borrower does not furnish such evidence and receipts at least ten (10) days
prior to the expiration of any expiring Policy, then Lender may, but shall not
be obligated to, procure such insurance and pay the Insurance Premiums
therefor, and Borrower shall reimburse Lender for the cost of such Insurance
Premiums promptly on demand, with interest accruing at the Default Rate.  Borrower shall deliver to Lender a certified
copy of each Policy within thirty (30) days after its effective date or, if
certified copies are not then available, certified certificates evidencing such
Policies (and Borrower shall thereafter deliver to Lender a certified copy of
each Policy as soon as available). 
Within thirty (30) days after request by Lender, Borrower shall obtain
such increases in the amounts of coverage required hereunder as may be
reasonably requested by Lender, taking into consideration changes in the value
of money over time, changes in liability laws, changes in prudent customs and
practices, and the like.  The insurance
coverages required under Section 7.1.1 above may be effected under a
blanket policy or policies covering the Property and other property and assets
not constituting a part of the security for the Loan; provided that Borrower
shall provide evidence reasonably satisfactory to Lender that the insurance
premiums for the Property are separately allocated to the Property and that
unless otherwise agreed to by Lender, the limit of such policy shall be a “true
blanket limit” and not limited by a schedule of values for the properties
covered thereby.  Notwithstanding
anything in Section 7.1.1 above or this Section 7.1.2 to the
contrary, it is specifically understood and agreed that no other property may
be added to any such blanket policies other than the Property and those other
properties covered by such blanket policies as of the date hereof, unless the
aggregate coverage afforded under the Policies is increased such that after
giving effect to such addition of any other properties, the Policies continue
to meet the requirements, and otherwise comply with the terms and provisions,
of Section 7.1.1 above and this Section 7.1.2.


 


55

















 


7.2          Casualty.


 


7.2.1       Notice; Restoration.  If the Property is damaged or destroyed, in
whole or in part, by fire or other casualty (a “Casualty”), Borrower shall give prompt
notice thereof to Lender.  Following the
occurrence of a Casualty, Borrower, regardless of whether insurance proceeds
are available (unless Lender has breached its obligation (if any) to make such
insurance proceeds available pursuant to Section 7.4.1 hereof),
shall promptly proceed to restore, repair, replace or rebuild the Property in
accordance with Legal Requirements to be of at least equal value and of
substantially the same character as prior to such damage or destruction.


 


7.2.2       Settlement of Proceeds.  If a Casualty covered by any of the Policies
(an “Insured Casualty”)
occurs where the loss does not exceed $1,000,000, provided no Event of Default
has occurred and is continuing, Borrower may settle and adjust any claim
without the prior consent of Lender; provided such adjustment is carried out in
a competent and timely manner, and Borrower is hereby authorized to collect and
receive the insurance proceeds (the “Proceeds”). 
In the event of an Insured Casualty where the loss equals or exceeds
$1,000,000 (a “Significant
Casualty”),  Borrower may
settle and adjust any claim with the prior consent of Lender (which consent
shall not be unreasonably withheld or delayed) unless an Event of Default has
occurred and is continuing, in which case Lender may, in its sole discretion,
settle and adjust any claim without the consent of Borrower and agree with the
insurer(s) on the amount to be paid on the loss, and the Proceeds shall be due
and payable solely to Lender and held by Lender in the Casualty/Condemnation
Subaccount and disbursed in accordance herewith.  If Borrower or any party other than Lender is
a payee on any check representing Proceeds with respect to a Significant
Casualty, Borrower shall immediately endorse, and cause all such third parties
to endorse, such check payable to the order of Lender.  During the continuance of an Event of
Default, Borrower hereby irrevocably appoints Lender as its attorney-in-fact,
coupled with an interest, to endorse such check payable to the order of
Lender.  The expenses incurred by Lender
in the settlement, adjustment and collection of the Proceeds shall become part
of the Debt and shall be reimbursed by Borrower to Lender within ten (10) days
of demand.  Notwithstanding anything to
the contrary contained herein, if in connection with a Casualty any insurance
carrier makes a payment under a property insurance Policy that Borrower
proposes be treated as business or rental interruption insurance, then,
notwithstanding any designation (or lack of designation) by the insurance
carrier as to the purpose of such payment, as between Lender and Borrower, such
payment shall not be treated as business or rental interruption insurance
proceeds unless Borrower has demonstrated to Lender’s satisfaction that the
remaining net Proceeds that will be received from the property insurance
carriers are sufficient to pay 100% of the cost of fully restoring the
Improvements or, if such net Proceeds are to be applied to repay the Debt in
accordance with the terms hereof, that such remaining Net Proceeds will be
sufficient to pay the Debt in full.


 


7.3          Condemnation.


 


7.3.1       Notice; Restoration.  Borrower shall promptly give Lender notice of
the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting the Property (a “Condemnation”) and shall deliver to Lender
copies of any and all papers served in connection with such Condemnation.  Following the occurrence of a Condemnation,
Borrower, regardless of whether an Award is available (unless Lender has


 


56

















 


breached its obligation (if any) to make such Award available pursuant
to Section 7.4.1 hereof), shall promptly proceed to restore, repair,
replace or rebuild the Property in accordance with Legal Requirements to the
extent practicable to be of at least equal value and of substantially the same
character (and to have the same utility) as prior to such Condemnation.


 


7.3.2       Collection of Award.  If a Condemnation occurs where the award or
payment in respect thereof (an “Award”) does not exceed $1,000,000, provided no Event of
Default has occurred and is continuing, Borrower may make any compromise,
adjustment or settlement in connection with such Condemnation with the prior
consent of Lender, not to be unreasonably withheld, provided such adjustment is
carried out in a competent and timely manner, and Borrower is hereby authorized
to collect and receive such Award.  In
the event of a Condemnation where the Award is in excess of $1,000,000, Lender
may collect, receive and retain such Award and make any compromise, adjustment
or settlement in connection with such Condemnation with the prior consent of
Borrower (unless an Event of Default is continuing, in which case, Borrower’s
prior consent shall not be required, and Lender is hereby irrevocably appointed
as Borrower’s attorney-in-fact, coupled with an interest, with exclusive power
to take such actions during the continuance of an Event of Default), not to be
unreasonably withheld (which shall be deemed consented to if Borrower fails to
respond to any request for consent therefor within ten (10) days of request).  Notwithstanding any Condemnation (or any
transfer made in lieu of or in anticipation of such Condemnation), Borrower
shall continue to pay the Debt at the time and in the manner provided for in
the Loan Documents, and the Debt shall not be reduced unless and until any
Award shall have been actually received and applied by Lender to expenses of
collecting the Award and to discharge of the Debt.  Lender shall not be limited to the interest
paid on the Award by the condemning authority but shall be entitled to receive
out of the Award interest at the rate or rates provided in the Note.  If the Property is sold, through foreclosure
or otherwise, prior to the receipt by Lender of such Award, Lender shall have
the right, whether or not a deficiency judgment on the Note shall be
recoverable or shall have been sought, recovered or denied, to receive all or a
portion of the Award sufficient to pay the Debt.  Borrower shall cause any Award that is
payable to Borrower to be paid directly to Lender.  Lender shall hold such Award in the
Casualty/Condemnation Subaccount and disburse such Award in accordance with the
terms hereof.


 


7.4          Application
of Proceeds or Award.


 


7.4.1       Application to Restoration.  If an Insured Casualty or Condemnation occurs
where (i) the loss is in an aggregate amount less than twenty-five percent
(25%) of the unpaid Principal, (ii) in the reasonable judgment of Lender,
the Property can be restored within nine (9) months, and prior to six (6)
months before the Stated Maturity Date and prior to the expiration of the
rental or business interruption insurance with respect thereto, to the
Property’s pre-existing condition and utility as existed immediately prior to
such Insured Casualty or Condemnation and to an economic unit not less valuable
and not less useful than the same was immediately prior to the Insured Casualty
or Condemnation, and after such restoration will adequately secure the Debt,
(iii) less than (x) thirty percent (30%) in the case of an Insured Casualty or
(y) fifteen percent (15%), in the case of a Condemnation, of the rentable area
of the Improvements has been damaged, destroyed or rendered unusable as a
result of such Insured Casualty or Condemnation and (iv) no Event of
Default shall have occurred and be then continuing, then the Proceeds or the
Award, as the case may be (after reimbursement of any


 


57

















 


reasonable expenses incurred by Lender), shall be applied to reimburse
Borrower for the cost of restoring, repairing, replacing or rebuilding the
Property (the “Restoration”),
in the manner set forth herein.  Borrower
shall commence and diligently prosecute such Restoration.  Notwithstanding the foregoing, in no event
shall Lender be obligated to apply the Proceeds or Award to reimburse Borrower
for the cost of Restoration unless, in addition to satisfaction of the
foregoing conditions, both (x) Borrower shall pay (and if required by
Lender, Borrower shall deposit with Lender in advance) all costs of such
Restoration in excess of the net amount of the Proceeds or the Award made
available pursuant to the terms hereof; and (y) Lender shall have received
evidence reasonably satisfactory to it that during the period of the
Restoration, the Rents (as supplemented by capital contributions by its direct
or indirect members) for Property will be at least equal to the sum of the
estimated operating expenses and the portion of scheduled Principal and
interest payments due under the Note in such period allocated the Property, as
reasonably determined by Lender.


 


7.4.2       Application to Debt.  Except as provided in Section 7.4.1
above, any Proceeds and/or Award may, at the option of Lender in its
discretion, be applied to the payment of (i) accrued but unpaid interest
on the Note, (ii) the unpaid Principal and (iii) other charges due
under the Note and/or any of the other Loan Documents, or applied to reimburse
Borrower for the cost of any Restoration, in the manner set forth in Section 7.4.3
below.  Any such prepayment of the Loan
shall be without any Spread Maintenance Premium or Prepayment Premium, unless
an Event of Default has occurred and is continuing at the time the Proceeds are
received from the insurance company or the Award is received from the
condemning authority, as the case may be, in which event Borrower shall pay to
Lender an additional amount equal to the Spread Maintenance Premium or the
applicable Prepayment Premium, if any, that may be required with respect to the
amount of the Proceeds or Award applied to the unpaid Principal.


 


7.4.3       Procedure for Application to Restoration.  If Borrower is entitled to reimbursement out
of the Proceeds or an Award held by Lender, such Proceeds or Award shall be
disbursed from time to time from the Casualty/Condemnation Subaccount upon
Lender being furnished with (i) evidence satisfactory to Lender of the
estimated cost of completion of the Restoration, (ii) a fixed price or
guaranteed maximum cost construction contract for Restoration satisfactory to
Lender, (iii) prior to the commencement of Restoration, all immediately
available funds in addition to the Proceeds or Award that in Lender’s judgment
are required to complete the proposed Restoration, (iv) such architect’s
certificates, waivers of lien, contractor’s sworn statements, title insurance
endorsements, bonds, plats of survey, permits, approvals, licenses and such
other documents and items as Lender may reasonably require and approve in
Lender’s discretion, and (v) all plans and specifications for such
Restoration, such plans and specifications to be approved by Lender prior to
commencement of any work.  Lender may, at
Borrower’s expense, retain a consultant to review and approve all requests for
disbursements, which approval shall also be a condition precedent to any disbursement.  No payment made prior to the final completion
of the Restoration shall exceed ninety percent (90%) of the value of the work
performed from time to time; funds other than the Proceeds or Award shall be
disbursed prior to disbursement of such Proceeds or Award; and at all times, the
undisbursed balance of such Proceeds or Award remaining in the hands of Lender,
together with funds deposited for that purpose or irrevocably committed to the
satisfaction of Lender by or on behalf of Borrower for that purpose, shall be
at least sufficient in the reasonable judgment of Lender to pay for the cost of
completion of the Restoration, free and clear of all Liens or claims for
Lien.  Provided no


 


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Event of Default then exists, any surplus that remains out of the
Proceeds held by Lender after payment of such costs of Restoration shall be
deposited by Lender into the Deposit Account (i.e. at the “top of the
waterfall”) and applied by Lender in accordance with Section 3.11(a)
hereof.  Any surplus that remains out of
the Award received by Lender after payment of such costs of Restoration shall,
in the discretion of Lender, be retained by Lender and applied to payment of
the Debt or returned to Borrower.


 


8.             DEFAULTS


 


8.1          Events
of Default.  An “Event of
Default” shall exist with respect to the Loan if any of the following shall
occur:


 


(a)           any
portion of the Debt is not paid when due or any other amount under Section 3.11(a)(i)
through (v) and (vii) hereof is not paid in full on each Payment Date
(provided, however, if adequate funds are available in the Deposit Account for
such payments, the failure by the Deposit Bank to allocate such funds into the
appropriate Subaccounts shall not constitute an Event of Default);


 


(b)           any
of the Taxes are not paid when due (unless Lender is paying such Taxes pursuant
to Section 3.3 hereof), subject to Borrower’s right to contest
Taxes in accordance with Section 5.2 hereof;


 


(c)           the
Policies are not kept in full force and effect, or are not delivered to Lender
within 10 days after request;


 


(d)           a
Transfer other than a Permitted Transfer occurs;


 


(e)           any
representation or warranty made by Borrower or Guarantor or in any Loan
Document, or in any report, certificate, financial statement or other
instrument, agreement or document furnished by Borrower or Guarantor in
connection with any Loan Document, shall be false or misleading in any material
respect as of the date the representation or warranty was made; provided that
if such breach is reasonably susceptible to cure, then no Event of Default
shall exist so long as Borrower shall cause such breach to be cured within
thirty (30) days after notice from Lender;


 


(f)            Borrower,
Sole Member or Guarantor shall (i) make an assignment for the benefit of
creditors or (ii) shall generally not be paying its debts as they become
due;


 


(g)           a
receiver, liquidator or trustee shall be appointed for Borrower, Sole Member or
Guarantor; or Borrower, Sole Member or Guarantor shall be adjudicated a
bankrupt or insolvent; or any petition for bankruptcy, reorganization or
arrangement pursuant to federal bankruptcy law, or any similar federal or state
law, shall be filed by or against, consented to, or acquiesced in by, Borrower,
Sole Member or Guarantor, as the case may be; or any proceeding for the
dissolution or liquidation of Borrower, Sole Member or Guarantor shall be
instituted; provided, however, if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower, Sole Member or
Guarantor, as the case may be, only upon the same not being discharged, stayed
or dismissed within ninety (90) days;


 


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(h)           Borrower
breaches any covenant contained in Sections 5.12.1 (a) - (f), 5.13,
5.15, 5.22, or 5.28 hereof.


 


(i)            except
as expressly permitted hereunder, the actual or threatened alteration,
improvement, demolition or removal of all or any portion of any of the
Improvements without the prior written consent of Lender;


 


(j)            an
Event of Default as defined or described elsewhere in this Agreement or in any
other Loan Document occurs; or any other event shall occur or condition shall
exist, if the effect of such event or condition is to accelerate or to permit
Lender to accelerate the maturity of any portion of the Debt;


 


(k)           a
default occurs under any term, covenant or provision set forth herein or in any
other Loan Document which specifically contains a notice requirement or grace
period and such notice has been given and such grace period has expired;


 


(l)            any
of the assumptions contained in any substantive non-consolidation opinion,
delivered to Lender by Borrower’s counsel in connection with the Loan or otherwise
hereunder, were not true and correct in all material respects as of the date of
such opinion or thereafter became untrue or incorrect, provided that in either
case, no Event of Default shall be deemed to have occurred if such counsel
reaffirms its substantive non-consolidation opinion; or


 


(m)          a
default shall be continuing under any of the other terms, covenants or
conditions of this Agreement or any other Loan Document not otherwise specified
in this Section 8.1, for ten (10) days after notice to Borrower
(and Guarantor, if applicable) 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 Borrower (or Guarantor, if applicable)
shall have commenced to cure such default within such thirty (30)-day period
and thereafter diligently and expeditiously proceeds to cure the same, such
thirty (30)-day period shall be extended for an additional period of time as is
reasonably necessary for Borrower (or Guarantor, if applicable) in the exercise
of due diligence to cure such default, such additional period not to exceed
sixty (60) days.


 


8.2          Remedies.


 


8.2.1       Acceleration.  Upon the occurrence of an Event of Default
(other than an Event of Default described in paragraph (f) or (g) of Section 8.1
above) and at any time and from time to time thereafter, in addition to any
other rights or remedies available to it pursuant to the 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 and in
and to the Property; including declaring the Debt to be immediately due and
payable (including unpaid interest, Default Rate interest, Late Payment
Charges, Spread Maintenance Premium, Prepayment Premium, and any other amounts
owing by Borrower), without notice or demand; and upon any Event of Default
described in paragraph (f) or (g) of Section 8.1 above, the
Debt (including unpaid interest, Default Rate interest, Late Payment Charges,
Spread Maintenance Premium, any Prepayment Premium, and any other amounts owing
by Borrower) shall


 


60

















 


immediately and automatically become due and payable, without notice or
demand, and Borrower hereby expressly waives any such notice or demand,
anything contained in any Loan Document to the contrary notwithstanding.


 


8.2.2       Remedies Cumulative.  Upon the occurrence of an Event of Default,
all or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower under the Loan Documents 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, or be automatically, 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.  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 discretion, to the fullest extent
permitted by law, without impairing or otherwise affecting the other rights and
remedies of Lender permitted by law, equity or contract or as set forth in the
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 law, 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 Property, the Mortgage has been foreclosed, the Property
has been sold and/or otherwise realized upon in satisfaction of the Debt or the
Debt has been paid in full.  To the
extent permitted by applicable law, nothing contained in any Loan Document
shall be construed as requiring Lender to resort to any portion of the Property
for the satisfaction of any of the Debt in preference or priority to any other
portion, and Lender may seek satisfaction out of all or less than all of the
entire Property or any part thereof, in its discretion.


 


8.2.3       Severance.  Lender shall have the right from time to time
to sever the Note and the other Loan Documents into one or more separate notes,
mortgages and other security documents in such denominations and priorities of
payment and liens as Lender shall determine in its discretion for purposes of
evidencing and enforcing its rights and remedies.  Borrower shall execute and deliver to Lender
from time to time, promptly after the request of Lender, a severance agreement
and such other documents as Lender shall request in order to effect the
severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Lender. 
Borrower hereby absolutely and irrevocably appoints Lender as its true
and lawful attorney, coupled with an interest, in its name and stead to make
and execute all documents necessary or desirable to effect such severance,
Borrower ratifying all that such attorney shall do by virtue thereof.


 


8.2.4       Delay.  No delay or omission to exercise any remedy,
right or power accruing upon an Event of Default, or the granting of any
indulgence or compromise by Lender shall impair any such remedy, right or power
hereunder or be construed as a waiver thereof, but any such remedy, right or
power may be exercised from time to time and as often as may be deemed
expedient.  A waiver of one Default or
Event of Default shall not be construed to be a waiver of any subsequent
Default or Event of Default or to impair any remedy, right or power consequent
thereon.  Notwithstanding any other
provision of this Agreement, Lender reserves the right to seek a deficiency
judgment or preserve a deficiency claim in connection with the


 


61

















 


foreclosure of the Mortgage to the extent necessary to foreclose on all
or any portion of the Property, the Rents, the Cash Management Accounts or any
other collateral.


 


8.2.5       Lender’s Right to Perform.  If Borrower fails to perform any covenant or
obligation contained herein and such failure shall continue for a period of
five (5) Business Days after Borrower’s receipt of written notice thereof from
Lender, without in any way limiting Lender’s right to exercise any of its
rights, powers or remedies as provided hereunder, or under any of the other
Loan Documents, Lender may, but shall have no obligation to, perform, or cause
performance of, such covenant or obligation, and all costs, expenses,
liabilities, penalties and fines of Lender incurred or paid in connection
therewith shall be payable by Borrower to Lender upon demand and if not paid
shall be added to the Debt ( and to the extent permitted under applicable laws,
secured by the Mortgage and other Loan Documents) and shall bear interest
thereafter at the Default Rate. 
Notwithstanding the foregoing, Lender shall have no obligation to send notice
to Borrower of any such failure.


 


9.             SPECIAL
PROVISIONS


 


9.1          Sale
of Note and Secondary Market Transaction.


 


9.1.1       General; Borrower Cooperation.  Lender shall have the right at any time and
from time to time (i) to sell or otherwise transfer the Loan or any
portion thereof or the Loan Documents or any interest therein to one or more
investors, (ii) to sell participation interests in the Loan to one or more
investors or (iii) to securitize the Loan or any portion thereof in a
single asset securitization or a pooled loan securitization of rated single or
multi-class securities (the “Securities”) secured by or evidencing ownership
interests in the Note and the Mortgage (each such sale, assignment,
participation and/or securitization is referred to herein as a “Secondary Market Transaction”).
 In connection with any Secondary Market
Transaction, Borrower shall, at no out-of-pocket cost to Borrower (other than
the fees and expenses of Borrower’s attorneys, accountants and consultants),
use all reasonable efforts and cooperate fully and in good faith with Lender
and otherwise assist Lender in satisfying the market standards to which Lender
customarily adheres or which may be reasonably required in the marketplace or
by the Rating Agencies in connection with any such Secondary Market
Transactions, including: (a) to (i) provide such financial and other
information with respect to the Property, Borrower and its Affiliates, Manager
and any tenants of the Property, (ii) provide business plans and budgets
relating to the Property and (iii) perform or permit or cause to be
performed or permitted such site inspection, appraisals, surveys, market
studies, environmental reviews and reports, engineering reports and other due
diligence investigations of the Property, as may be reasonably requested from
time to time by Lender, prospective investors or the Rating Agencies or as may
be necessary or appropriate in connection with a Secondary Market Transaction
or Exchange Act requirements (the items provided to Lender pursuant to this
paragraph (a) being called the “Provided Information”), together, if
customary, with appropriate verification of and/or consents to the Provided
Information through letters of auditors or opinions of counsel of independent
attorneys acceptable to Lender and the Rating Agencies; (b) at Borrower’s
expense, cause counsel to render updates to opinions as to non-consolidation
and any other opinions delivered in connection with the Loan with respect to
the Property, Borrower, Guarantor and their Affiliates, which updates to
opinions shall be reasonably satisfactory to Lender and the Rating Agencies;
(c) make such representations and warranties as of the closing date of any


 


62

















 


Secondary Market Transaction with respect to the Property, Borrower, Guarantor
and the Loan Documents as are customarily provided in such transactions and as
may be reasonably requested by Lender or prospective investors or the Rating
Agencies and consistent with the facts covered by such representations and
warranties as they exist on the date thereof, including the representations and
warranties made in the Loan Documents; (d) provide current certificates of
good standing and qualification with respect to Borrower and Sole Member from
appropriate Governmental Authorities; and (e) execute such amendments to
the Loan Documents and Borrower’s organizational documents, as may be requested
by Lender or the Rating Agencies or otherwise to effect a Secondary Market
Transaction, provided that nothing contained in this subsection (e) shall
result in any economic change in the transaction or increase Borrower’s
obligations under the Loan Documents. 
Borrower’s cooperation obligations set forth herein shall continue until
the Loan has been paid in full.


 


9.1.2       Use of Information.  Borrower understands that all or any portion
of the Provided Information and the Required Records may be included in
disclosure documents in connection with a Secondary Market Transaction,
including a prospectus or private placement memorandum (each, a “Disclosure Document”)
and may also be included in filings with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the “Securities Act”), or
the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), or
provided or made available to investors or prospective investors in the
Securities, the Rating Agencies, and service providers or other parties
relating to the Secondary Market Transaction. 
If the Disclosure Document is required to be revised, Borrower shall cooperate
with Lender in updating the Provided Information or Required Records for
inclusion or summary in the Disclosure Document or for other use reasonably
required in connection with a Secondary Market Transaction by providing all
current information pertaining to Borrower, Manager, Guarantor and the Property
necessary to keep the Disclosure Document accurate and complete in all material
respects with respect to such matters.


 


9.1.3       Borrower Obligations Regarding Disclosure
Documents.  In connection with a
Disclosure Document, Borrower shall: 
(a) if requested by Lender, certify in writing that Borrower has
carefully examined those portions of such Disclosure Document, pertaining to
Borrower, the Property, Manager, Guarantor and the Loan, and that such portions
do not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading; and
(b) indemnify (in a separate instrument of indemnity, if so requested by
Lender) (i) any underwriter, syndicate member or placement agent
(collectively, the “Underwriters”)
retained by Lender or its issuing company affiliate (the “Issuer”) in
connection with a Secondary Market Transaction, (ii) Lender and
(iii) the Issuer that is named in the Disclosure Document or registration
statement relating to a Secondary Market Transaction (the “Registration Statement”),
and each of the Issuer’s directors, each of its officers who have signed the Registration
Statement and each person or entity who controls the Issuer or the Lender
within the meaning of Section 15 of the Securities Act or Section 30
of the Exchange Act (collectively within (iii), the “GCM Group”), and each
of its directors and each person who controls each of the Underwriters, within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act (collectively, the “Underwriter Group”) for any losses, claims,
damages or liabilities (the “Liabilities”) to which Lender, the GCM Group or the
Underwriter Group may become subject (including reimbursing all of them for any
legal or other expenses


 


63

















 


actually incurred in connection with investigating or defending the
Liabilities) insofar as the Liabilities arise out of or are based upon any
untrue statement of any material fact contained in any of the Provided
Information or in any of the applicable portions of such sections of the
Disclosure Document applicable to Borrower, Manager, the Guarantor, the
Property or the Loan, or arise out of or are based upon the omission to state
therein a material fact required to be stated in the applicable portions of
such sections or necessary in order to make the statements in the applicable
portions of such sections in light of the circumstances under which they were
made, not misleading; provided, however, that Borrower shall not be required to
indemnify Lender for any Liabilities relating to untrue statements or omissions
which Borrower identified to Lender in writing at the time of Borrower’s
examination of such Disclosure Document.


 


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


 


9.1.5       Indemnification Procedure.  Promptly after receipt by an indemnified
party under Section 9.1.3 hereof or Section 9.1.4
hereof of notice of the commencement of any action for which a claim for
indemnification is to be made against Borrower, such indemnified party shall
notify Borrower in writing of such commencement, but the omission to so notify
Borrower will not relieve Borrower from any liability that it may have to any
indemnified party hereunder except to the extent that failure to notify causes
prejudice to Borrower.  If any action is
brought against any indemnified party, and it notifies Borrower of the
commencement thereof, Borrower will be entitled, jointly with any other
indemnifying party, to participate therein and, to the extent that it (or they)
may elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice of commencement, to assume the defense thereof
with counsel satisfactory to such indemnified party in its discretion.  After notice from Borrower to such
indemnified party under this Section 9.1.5, Borrower shall not be
responsible for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation; provided, however, if the defendants in any such action
include both Borrower and an indemnified party, and any indemnified party shall
have reasonably concluded that there are any legal defenses available to it
and/or other indemnified parties that are different from or additional to those
available to Borrower, then the indemnified party or parties shall have the
right to select separate counsel to assert such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party
or parties.  Borrower shall not be liable
for the expenses of more than one separate counsel unless there are legal
defenses available to it that are different from or additional to those
available to another indemnified party.


 


9.1.6       Contribution.  In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in Section 9.1.3
hereof or Section


 


64

















 


9.1.4 hereof is for any reason held to be
unenforceable by an indemnified party in respect of any Liabilities (or action
in respect thereof) referred to therein which would otherwise be indemnifiable
under Section 9.1.3 hereof or Section 9.1.4 hereof, Borrower
shall contribute to the amount paid or payable by the indemnified party as a
result of such Liabilities (or action in respect thereof); provided, however,
that no Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person not guilty of such fraudulent misrepresentation.  In determining the amount of contribution to
which the respective parties are entitled, the following factors shall be
considered:  (i) the GCM Group’s and
Borrower’s relative knowledge and access to information concerning the matter
with respect to which the claim was asserted; (ii) the opportunity to
correct and prevent any statement or omission; and (iii) any other
equitable considerations appropriate in the circumstances.  Lender and Borrower hereby agree that it may
not be equitable if the amount of such contribution were determined by pro rata
or per capita allocation.


 


9.1.7       Rating Surveillance.  Lender will retain the Rating Agencies to
provide rating surveillance services on Securities.  The expenses of such surveillance will be
paid for by Lender.


 


9.1.8       Severance of Loan.  Lender shall have the right, at no
out-of-pocket cost to Borrower (other than the fees and expenses of Borrower’s
attorneys, accountants and consultants), at any time (whether prior to, in
connection with, or after any Secondary Market Transaction), with respect to
all or any portion of the Loan, to modify, split and/or sever all or any
portion of the Loan as hereinafter provided. 
Without limiting the foregoing, Lender may (i) cause the Note and
the Mortgage to be split into a first and second mortgage loan,
(ii) create one or more senior and subordinate notes (i.e., an A/B or A/B/C structure),
(iii) create multiple components of the Note or Notes (and allocate or
reallocate the principal balance of the Loan among such components) or
(iv) otherwise sever the Loan into two (2) or more loans secured by
mortgages and by a pledge of partnership or membership interests (directly or
indirectly) in Borrower (i.e., a
senior loan/mezzanine loan structure), in each such case, in whatever
proportion and whatever priority Lender determines; provided, however, in each
such instance the outstanding principal balance of all the Notes evidencing the
Loan (or components of such Notes) immediately after the effective date of such
modification equals the outstanding principal balance of the Loan immediately
prior to such modification and the weighted average of the interest rates for
all such Notes (or components of such Notes) immediately after the effective
date of such modification equals the interest rate of the original Note
immediately prior to such modification. 
If requested by Lender, Borrower (and Borrower’s constituent members, if
applicable, and Guarantor) shall execute within five (5) Business Days after
such request, such documentation as Lender may reasonably request to evidence
and/or effectuate any such modification or severance, provided that no such
severance shall result in any economic change in the transaction or increase
Borrower’s obligations under the Loan Documents.


 


10.          MISCELLANEOUS


 


10.1        Exculpation.  Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Loan Documents by any action or
proceeding wherein a money judgment shall be sought against Borrower, except
that Lender may bring a foreclosure action, an action for specific performance


 


65

















 


or any other appropriate action
or proceeding to enable Lender to enforce and realize upon its interest and
rights under the Loan Documents, or in the Property, the Rents or any other
collateral given to Lender pursuant to the Loan Documents; provided, however,
that, except as specifically provided herein, any judgment in any such action
or proceeding shall be enforceable against Borrower only to the extent of
Borrower’s interest in the Property, in the Rents and in any other collateral
given to Lender, and Lender shall not sue for, seek or demand any deficiency
judgment against Borrower in any such action or proceeding under or by reason
of or under or in connection with any Loan Document.  The provisions of this Section 10.1
shall not, however, (i) constitute a waiver, release or impairment of any
obligation evidenced or secured by any Loan Document; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit for
foreclosure and sale under the Mortgage; (iii) affect the validity or
enforceability of any of the Loan Documents or any guaranty made in connection
with the Loan or any of the rights and remedies of Lender thereunder;
(iv) impair the right of Lender to obtain the appointment of a receiver;
(v) impair the enforcement of the Assignment of Leases and Rents;
(vi) constitute a prohibition against Lender to commence any other appropriate
action or proceeding in order for Lender to fully realize the security granted
by the Mortgage or to exercise its remedies against the Property; or
(vii) constitute a waiver of the right of Lender to enforce the liability
and obligation of Borrower, by money judgment or otherwise, to the extent of
any loss, damage, cost, expense, liability, claim or other obligation incurred
by Lender (including attorneys’ fees and costs reasonably incurred) arising out
of or in connection with the following (all such liability and obligation of
Borrower for any or all of the following being referred to herein as “Borrower’s Recourse Liabilities”):


 


(a)           fraud
or intentional misrepresentation by Borrower, Sole Member or Guarantor in
connection with obtaining the Loan;


 


(b)           physical
waste of the Property or any portion thereof, or after an Event of Default the
removal or disposal of any portion of the Property;


 


(c)           any
Proceeds paid by reason of any Insured Casualty or any Award received in
connection with a Condemnation or other sums or payments attributable to the
Property not applied in accordance with the provisions of the Loan Documents
(except to the extent that Borrower did not have the legal right, because of a
bankruptcy, receivership or similar judicial proceeding, to direct disbursement
of such sums or payments);


 


(d)           all
Rents of the Property received or collected by or on behalf of the Borrower
after an Event of Default and not applied to payment of Principal and interest
due under the Note, and to the payment of actual and reasonable operating
expenses of the Property, as they become due or payable (except to the extent
that such application of such funds is prevented by bankruptcy, receivership,
or similar judicial proceeding in which Borrower is legally prevented from directing
the disbursement of such sums);


 


(e)           misappropriation
(including failure to turn over to Lender on demand following an Event of
Default) of tenant security deposits and rents collected in advance, or of
funds held by Borrower for the benefit of another party;


 


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(f)            the
failure to pay Taxes, provided Borrower shall not be liable to the extent funds
to pay such amounts are (1) available in the Tax and Insurance Subaccount
and Lender failed to pay same or (2) were, during the continuance of an
Event of Default, available in the Tax and Insurance Subaccount and Lender
applied such funds to make payments other than to the payment of Taxes; or


 


(g)           the
breach of any representation, warranty, covenant or indemnification in any Loan
Document concerning Environmental Laws or Hazardous Substances, including Section 4.21
hereof and Section 5.8 hereof, and clauses (viii) through (xi)
of Section 5.30 hereof.


 


Notwithstanding anything to the contrary in this Agreement or any of
the Loan Documents, (A) Lender shall not be deemed to have waived any
right which Lender may have under Section 506(a), 506(b), 1111(b) or any
other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt or to require that all collateral shall continue to secure
all of the Debt in accordance with the Loan Documents, and (B) Lender’s
agreement not to pursue personal liability of Borrower as set forth above SHALL
BECOME NULL AND VOID and shall be of no further force and effect, and the Debt
shall be fully recourse to Borrower in the event that one or more of the
following occurs (each, a “Springing
Recourse Event”):


 


(i)            an
Event of Default described in Section 8.1(d) hereof shall have occurred
or


 


(ii)           a
breach of the covenants set forth in Section 5.13 hereof, or


 


(iii)          the
occurrence of any condition or event described in either Section 8.1(f)(i)
or Section 8.1(g) and, with respect to such condition or event described
in Section 8.1(g), either (A) Borrower, Sole Member or Guarantor or any
Person owning a Controlling interest (directly or indirectly) in Borrower,
Sole Member or Guarantor consents to, aids, solicits, supports, or otherwise
cooperates or colludes to cause such condition or (B) the entity against which
the condition or event described in Section 8.1(g) has been filed or any
Person which Controls (in the sense of clause (ii) of the defined term
“Control”) such entity fails to contest such condition or event.


 


10.2        Brokers
and Financial Advisors. 
(a)  Borrower hereby represents that it has dealt with no
financial advisors, brokers, underwriters, placement agents, agents or finders
in connection with the Loan.  Borrower
shall indemnify and hold Lender harmless from and against any and all claims,
liabilities, costs and expenses (including attorneys’ fees, whether incurred in
connection with enforcing this indemnity or defending claims of third parties)
of any kind in any way relating to or arising from a claim by any Person
(including any broker) that such Person acted on behalf of Borrower in
connection with the transactions contemplated herein.  The provisions of this Section 10.2
shall survive the expiration and termination of this Agreement and the
repayment of the Debt.


 


(b)           Notwithstanding
anything in Section 10.2(a) above to the contrary, Borrower hereby
acknowledges that (i) at Lender’s sole discretion, a broker may receive
consideration from Lender relating to the Loan or any other matter for which
Lender may elect to


 


67

















 


compensate a
broker pursuant to a separate agreement between Lender and such broker and
(ii) Lender shall have no obligation to disclose to Borrower the existence
of any such agreement or the amount of any such additional consideration paid
or to be paid to any broker whether in connection with the Loan or otherwise.


 


10.3        Retention
of Servicer.  Lender reserves the
right to retain the Servicer to act as its agent hereunder with such powers as
are specifically delegated to the Servicer by Lender, whether pursuant to the
terms of this Agreement, any pooling and servicing agreement or similar
agreement entered into as a result of a Secondary Market Transaction, the
Deposit Account Agreement or otherwise, together with such other powers as are
reasonably incidental thereto.  Borrower
shall pay any reasonable fees and expenses of the Servicer (i) in
connection with a release of the Property (or any portion thereof),
(ii) from and after a transfer of the Loan to any “master servicer” or
“special servicer” for any reason, including without limitation, as a result of
a decline in the occupancy level of the Property, (iii) in connection with
an assumption or modification of the Loan, (iv) in connection with the
enforcement of the Loan Documents or (v) in connection with any other
action or approval taken by Servicer hereunder on behalf of Lender.


 


10.4        Survival.  This Agreement and all covenants, agreements,
representations and warranties made herein and in the certificates delivered
pursuant hereto shall, unless otherwise expressly stated herein, survive the
making by Lender of the Loan and the execution and delivery to Lender of the
Note, and shall continue in full force and effect so long as any of the Debt is
unpaid or such longer period if expressly set forth in this Agreement.  All Borrower’s covenants and agreements in
this Agreement shall inure to the benefit of the respective legal
representatives, successors and assigns of Lender.


 


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


 


10.6        Governing
Law.


 


(a)           THIS
AGREEMENT WAS NEGOTIATED IN THE STATE OF NEW YORK AND THE PROCEEDS OF THE NOTE
DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO
THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT


 


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OF THE LIENS
CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED
ACCORDING TO THE LAW OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IT BEING
UNDERSTOOD THAT, TO THE FULLEST EXTENT PERMITTED BY THE LAW OF SUCH STATE, THE
LAW OF THE STATE OF NEW YORK SHALL GOVERN THE VALIDITY AND THE ENFORCEABILITY
OF ALL LOAN DOCUMENTS AND THE DEBT.  TO
THE FULLEST EXTENT PERMITTED BY LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY
WAIVES ANY CLAIM TO ASSERT THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS
AGREEMENT AND THE NOTE, AND THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO
§ 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.


 


(b)           ANY
LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN
NEW YORK COUNTY, NEW YORK AND BORROWER WAIVES ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING,
AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY SUCH COURT
IN ANY SUIT, ACTION OR PROCEEDING. 
BORROWER DOES HEREBY DESIGNATE AND APPOINT MORGANS HOTEL GROUP CO., 475
TENTH AVENUE, 11TH FLOOR, NEW YORK, NEW YORK 10018, AS ITS AUTHORIZED AGENT TO
ACCEPT AND ACKNOWLEDGE ON ITS BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY
BE SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT
IN NEW YORK, NEW YORK, AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT
SAID ADDRESS AND WRITTEN NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED
TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE DEEMED IN EVERY RESPECT
EFFECTIVE SERVICE OF PROCESS UPON BORROWER (UNLESS LOCAL LAW REQUIRES ANOTHER
METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR PROCEEDING IN THE STATE OF NEW
YORK.  BORROWER (i) SHALL GIVE
PROMPT NOTICE TO LENDER OF ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER,
(ii) MAY AT ANY TIME AND FROM TIME TO TIME DESIGNATE A SUBSTITUTE
AUTHORIZED AGENT WITH AN OFFICE IN NEW YORK, NEW YORK (WHICH OFFICE SHALL BE
DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (iii) SHALL
PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN
OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.


 


10.7        Modification,
Waiver in Writing.  No
modification, amendment, extension, discharge, termination or waiver of any
provision of this Agreement or of 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. 
Neither any failure nor any delay on the part of Lender in


 


69

















 


insisting upon strict
performance of any term, condition, covenant or agreement, or exercising any
right, power, remedy or privilege hereunder, or under any other Loan Document,
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 any 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 the Loan Documents, or to declare an Event of
Default for failure to effect prompt payment of any such other amount.


 


10.8        Trial
by Jury.  BORROWER AND LENDER
HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY
CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
GIVEN KNOWINGLY AND VOLUNTARILY BY 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. 
EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER.


 


10.9        Headings/Exhibits.  The Section headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose. 
The Exhibits attached hereto, are hereby incorporated by reference as a
part of the Agreement with the same force and effect as if set forth in the
body hereof.


 


10.10      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.


 


10.11      Preferences.  Upon the occurrence and continuance of an
Event of Default, 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
Debt.  To the extent Borrower makes a
payment to Lender, or Lender receives proceeds of any collateral, which is in
whole or part 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
Debt 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.  This provision shall survive the
expiration or termination of this Agreement and the repayment of the Debt.


 


10.12      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 any other Loan Document specifically and expressly requires
the giving of notice by Lender to Borrower and except with respect to matters
for which Borrower is not, pursuant to applicable Legal


 


70

















 


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 no Loan Document specifically and expressly
requires the giving of notice by Lender to Borrower.


 


10.13      Remedies of Borrower.  If a claim or adjudication is made that
Lender or any of its agents, including Servicer, has acted unreasonably or
unreasonably delayed acting in any case where by law or under any Loan
Document, Lender or any such agent, as the case may be, has an obligation to
act reasonably or promptly, Borrower agrees that neither Lender nor its agents,
including Servicer, shall be liable for any monetary damages, and Borrower’s
sole remedy shall be to commence an action seeking injunctive relief or
declaratory judgment.  Any action or
proceeding to determine whether Lender has acted reasonably shall be determined
by an action seeking declaratory judgment. 
Borrower specifically waives any claim against Lender and its agents,
including Servicer, with respect to actions taken by Lender or its agents on
Borrower’s behalf.


 


10.14      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,
understandings and negotiations among or between such parties, whether oral or
written, are superseded by the terms of this Agreement and the other Loan
Documents.


 


10.15      Offsets, Counterclaims and Defenses.  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, including Servicer, or otherwise
offset any obligations to make payments required under the Loan Documents.  Any assignee of Lender’s interest in and to
the Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which Borrower may otherwise have against any
assignor of such documents, and no such offset, 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 offset, counterclaim or defense in any such action or
proceeding is hereby expressly waived by Borrower.


 


10.16      Publicity.  All news releases, publicity or advertising
by Borrower or its Affiliates through any media intended to reach the general
public, which refers to the Loan Documents, the Loan, Lender or any member of
the GCM Group, a Loan purchaser, the Servicer or the trustee in a Secondary
Market Transaction, shall be subject to the prior written approval of Lender,
provided Borrower shall not be restricted from the same to the extent a
disclosure or announcement is required by law. 
Lender shall have the right to issue any of the foregoing without
Borrower’s approval.


 


10.17      No Usury.  Borrower and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to
the extent that it permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under state law) and that this Section 10.17
shall control every other agreement in the Loan Documents.  If the applicable law (state or federal) is
ever judicially interpreted so as to render usurious any amount called for
under the Note or any other Loan Document, or contracted for, charged, taken,
reserved or received with respect to the Debt, or if Lender’s exercise of the
option to accelerate the maturity


 


71

















 


of the Loan or any prepayment
by Borrower results in Borrower having paid any interest in excess of that
permitted by applicable law, then it is Borrower’s and Lender’s express intent
that all excess amounts theretofore collected by Lender shall be credited
against the unpaid Principal and all other Debt (or, if the Debt has been or
would thereby be paid in full, refunded to Borrower), and the provisions of the
Loan Documents immediately be deemed reformed and the amounts thereafter
collectible thereunder reduced, without the necessity of the execution of any
new document, so as to comply with applicable law, but so as to permit the
recovery of the fullest amount otherwise called for thereunder.  All sums paid or agreed to be paid to Lender
for the use, forbearance or detention of 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 Debt does not exceed the maximum
lawful rate from time to time in effect and applicable to the Debt for so long
as the Debt is outstanding. 
Notwithstanding anything to the contrary contained in any Loan Document,
it is not the intention of Lender to accelerate the maturity of any interest
that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration.


 


10.18      Conflict; Construction of Documents.  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 each is represented by separate counsel in
connection with the negotiation and drafting of the Loan Documents and that the
Loan Documents shall not be subject to the principle of construing their
meaning against the party that drafted them.


 


10.19      No Third Party Beneficiaries.  The Loan Documents are solely for the benefit
of Lender and Borrower and nothing contained in any Loan Document shall be
deemed to confer upon anyone other than the Lender and Borrower any right to
insist upon or to enforce the performance or observance of any of the
obligations contained therein.


 


10.20      Spread Maintenance Premium /Prepayment Premium.  Borrower acknowledges that (a) Lender is
making the Loan in consideration of the receipt by Lender of all interest and
other benefits intended to be conferred by the Loan Documents and (b) if
payments of Principal are made to Lender prior to the Stated Maturity Date, for
any reason whatsoever, whether voluntary, as a result of Lender’s acceleration
of the Loan after an Event of Default (or as a result of the application by
Lender of any amounts in any Cash Management Account are applied to Principal
by reason of an Event of Default), by operation of law or otherwise, Lender
will not receive all such interest and other benefits and may, in addition,
incur costs.  For these reasons, and to
induce Lender to make the Loan, Borrower agrees that, except as expressly
provided in Articles 2 and 7 hereof, all such prepayments, if any,
whether voluntary or involuntary, will be accompanied by the Spread Maintenance
Premium or the applicable Prepayment Premium, as applicable.  Such Spread Maintenance Premium or Prepayment
Premium, as applicable, shall be required whether payment is made by Borrower,
by a Person on behalf of Borrower, or by the purchaser at any foreclosure sale,
and may be included in any bid by Lender at such sale.  Borrower further acknowledges that
(A) it is a knowledgeable real estate developer and/or investor;
(B) it fully understands the effect of the provisions of this Section 10.20,
as well as the other provisions of the Loan Documents; (C) the making of
the Loan by Lender at the Interest Rate and other terms set forth in the Loan
Documents are sufficient consideration for Borrower’s obligation to pay a
Spread Maintenance Premium or


 


72

















 


Prepayment
Premium, as applicable (if required); and (D) Lender would not make the
Loan on the terms set forth herein without the inclusion of such
provisions.  Borrower also acknowledges
that the provisions of this Agreement limiting the right of prepayment and
providing for the payment of the Spread Maintenance Premium or Prepayment
Premium, as applicable and other charges specified herein were independently
negotiated and bargained for, and constitute a specific material part of the
consideration given by Borrower to Lender for the making of the Loan except as
expressly permitted hereunder.


 


10.21      Assignment.  The Loan, the Note, the Loan Documents and/or
Lender’s rights, title, obligations and interests therein may be assigned by
Lender and any of its successors and assigns to any Person at any time in its
discretion, in whole or in part, whether by operation of law (pursuant to a
merger or other successor in interest) or otherwise.  Upon such assignment, all references to
Lender in this Loan Agreement and in any Loan Document shall be deemed to refer
to such assignee or successor in interest and such assignee or successor in
interest shall thereafter stand in the place of Lender.  Borrower may not assign its rights, title,
interests or obligations under this Loan Agreement or under any of the Loan
Documents.  Lender shall provide Borrower
with a notice of any assignment pursuant to this Section 10.21,
provided the failure to do so shall not subject Lender to any liability to
Borrower or any other Person and shall not otherwise affect Borrower’s
obligations or liabilities under the Loan Documents, or give rise to any claim defense
or right of offset with respect to the Loan.


 


10.22      Certain Additional Rights of Lender.  Notwithstanding anything to the contrary
which may be contained in this Agreement, Lender shall have:


 


(i)            the right to routinely
consult with Borrower’s management regarding the significant business
activities and business and financial developments of Borrower, provided,
however, that such consultations shall not include discussions of environmental
compliance programs or disposal of hazardous substances.  Consultation meetings should occur on a
regular basis (no less frequently than quarterly) with Lender having the right
to call special meetings at any reasonable times;


 


(ii)           the right, in
accordance with the terms of this Agreement, to examine the books and records
of Borrower at any time upon reasonable notice;


 


(iii)          the right, in accordance
with Article 6 hereof, to receive monthly, quarterly and year-end
financial reports, including balance sheets, statements of income,
shareholder’s equity and cash flow, a management report and schedules of
outstanding indebtedness;


 


(iv)          the right, in accordance
with the terms of this Agreement, to restrict financing to be obtained with
respect to the Property so long as any portion of the Debt remains outstanding;


 


(v)           the right, in
accordance with the terms of this Agreement and the other Loan Documents
(including any similar right), to restrict, upon the occurrence of an Event of
Default, Borrower’s payments of management, consulting, director or similar
fees to Affiliates of Borrower;


 


73

















 


(vi)          the right, in accordance
with Article 6 hereof (including any similar right), to approve any
operating budget and/or capital budget of Borrower;


 


(vii)         in accordance with the
terms of this Agreement, to approve any acquisition by Borrower of any other
significant property (other than personal property required for the day to day
operation of the Property); and


 


(viii)        the right, in accordance
with the terms of Lender under this Agreement, to restrict the transfer of
interests in Borrower held by its members, and the right to restrict the
transfer of interests in such member, except for any transfer that is a
Permitted Transfer.


 


The rights described above may be exercised directly or indirectly by
any Person who has the authority to act on behalf of Lender.


 


10.23      Set-Off. 
In addition to any rights and remedies of Lender provided by this Loan
Agreement and by law, Lender shall have the right, without prior notice to
Borrower, any such notice being expressly waived by Borrower to the extent
permitted by applicable law, upon any amount becoming due and payable by
Borrower hereunder (whether at the stated maturity, by acceleration or
otherwise) to set-off and appropriate and apply against such amount any and all
deposits (general or special, time or demand, provisional or final), in any
currency, and any other credits, indebtedness or claims, in any currency, in
each case whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by Lender or any Affiliate thereof to or for the
credit or the account of Borrower. 
Lender agrees promptly to notify Borrower after any such set-off and
application made by Lender; provided that the failure to give such notice
shall not affect the validity of such set-off and application.


 


10.24      Counterparts.  This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
an original, but all of which shall together constitute one and the same
instrument.


 


[Remainder of Page Intentionally Left Blank;
Signature Page Follows]


 


74

















 


IN WITNESS WHEREOF,
the parties hereto have caused this Loan Agreement to be duly executed by their
duly authorized representatives, all as of the day and year first above
written.


 


	
   

  	
  MHG SCOTTSDALE HOLDINGS LLC,
  a Delaware

  limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Mondrian Scottsdale Mezz Holding Company LLC,

  a Delaware limited liability company, its sole

  member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Morgans Group LLC, a Delaware limited

  liability company, its sole member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  Morgans Hotel Group Co., a

  Delaware corporation, its managing

  member

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name: Marc Gordon

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title: Chief Investment Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  GREENWICH CAPITAL FINANCIAL PRODUCTS,

  INC., a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
								



 

















 


Schedule 1


 


Required Repairs


 


NONE.


 

















 


Schedule 2


 


Exceptions to Representations and Warranties


 


Section 4.12: The following are the only service, maintenance or repair
contracts affecting the Property that are not terminable on one (1) month’s
notice or less without cause and without penalty or premium:


 


Arcadia
Self Storage


Compax


Fleetwood
Financial Services


NXTV


Hoover’s


Moss
Creative Advertising Agency


Proclean
Pest Elimination


Littleton
Marketing Group LLC d/b/a Returnity


Safeguard
Security Communications


Thyssenkrupp
Elevator Co.


Travel
Click


Waste
Management


World
Cinema


 

















 


Schedule 3


 


[Intentionally Reserved]


 

















 


Schedule 4


 


Organization of Borrower


 


[see attached]


 

















 


Schedule 5


 


Definition of Special Purpose Bankruptcy
Remote Entity


 


A “Special
Purpose Bankruptcy Remote Entity” means (x) a limited
liability company that is a Single Member Bankruptcy Remote LLC or (y) a
corporation, limited partnership or limited liability company which at all
times since its formation and at all times thereafter


 


(i)            was
and will be organized solely for the purpose of (A) owning the Property or
(B) acting as a general partner of the limited partnership that owns the
Property or member of the limited liability company that owns the Property;


 


(ii)           has
not engaged and will not engage in any business unrelated to (A) the
ownership of the Property, (B) acting as general partner of the limited
partnership that owns the Property or (C) acting as a member of the
limited liability company that owns the Property, as applicable;


 


(iii)          has
not had and will not have any assets other than those related to the Property
or its partnership or member interest in the limited partnership or limited
liability company that owns the Property, as applicable;


 


(iv)          has
not engaged, sought or consented to and will not engage in, seek or consent to
any dissolution, winding up, liquidation, consolidation, merger, asset sale
(except as expressly permitted by this Agreement), transfer of partnership or
membership interests or the like, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable);


 


(v)           if
such entity is a limited partnership, has and will have, as its only general
partners, Special Purpose Bankruptcy Remote Entities that are corporations;


 


(vi)          if
such entity is a corporation, has and will have at least one (1) Independent
Director, and has not caused or allowed and will not cause or allow the board
of directors of such entity to take any action requiring the unanimous
affirmative vote of 100% of the members of its board of directors unless all of
the directors and all Independent Directors shall have participated in such
vote;


 


(vii)         if
such entity is a limited liability company, has and will have at least one (1)
member that has been and will be a Special Purpose Bankruptcy Remote Entity
that has been and will be a corporation and such corporation is the managing
member of such limited liability company;


 


(viii)        if
such entity is a limited liability company, has and will have articles of
organization, a certificate of formation and/or an operating agreement, as
applicable, providing that (A) such entity will dissolve only upon the
bankruptcy of the managing member, (B) the vote of a majority-in-interest
of the remaining members is sufficient to continue the life of the limited
liability company in the event of such bankruptcy of the managing member and
(C) if the vote of a majority-in-interest of the


 

















 


remaining
members to continue the life of the limited liability company following the
bankruptcy of the managing member is not obtained, the limited liability
company may not liquidate the Property without the consent of the applicable
Rating Agencies for as long as the Loan is outstanding;


 


(ix)           has
not, and without the unanimous consent of all of its partners, directors or
members (including all Independent Directors), as applicable, will not, with
respect to itself or to any other entity in which it has a direct or indirect
legal or beneficial ownership interest (A) file a bankruptcy, insolvency
or reorganization petition or otherwise institute insolvency proceedings or
otherwise seek any relief under any laws relating to the relief from debts or
the protection of debtors generally, (B) seek or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such entity or for all or any portion of
such entity’s properties, (C) make any assignment for the benefit of such
entity’s creditors or (D) take any action that might cause such entity to
become insolvent;


 


(x)            has
remained and will remain solvent and has maintained and will maintain adequate
capital in light of its contemplated business operations;


 


(xi)           has
not failed and will not fail to correct any known misunderstanding regarding
the separate identity of such entity;


 


(xii)          has
maintained and will maintain its accounts, books and records separate from any
other Person and will file its own tax returns;


 


(xiii)         has
maintained and will maintain its books, records, resolutions and agreements as
official records;


 


(xiv)        has
not commingled and will not commingle its funds or assets with those of any
other Person;


 


(xv)         has
held and will hold its assets in its own name;


 


(xvi)        has
conducted and will conduct its business in its name;


 


(xvii)       has
maintained and will maintain its financial statements, accounting records and
other entity documents separate from any other Person;


 


(xviii)      has
paid and will pay its own liabilities, including the salaries of its own
employees, out of its own funds and assets;


 


(xix)         has
observed and will observe all partnership, corporate or limited liability
company formalities, as applicable;


 


(xx)          has
maintained and will maintain an arm’s-length relationship with its Affiliates;


 


2

















 


(xxi)         (a) if
such entity owns the Property, has and will have no indebtedness other than
Permitted Indebtedness, or (b) if such entity acts as the general partner
of a limited partnership which owns the Property, has and will have no
indebtedness other than unsecured trade payables in the ordinary course of
business relating to acting as general partner of the limited partnership which
owns the Property which (1) do not exceed, at any time, $10,000 and
(2) are paid within thirty (30) days of the date incurred, or (c) if
such entity acts as a managing member of a limited liability company which owns
the Property, has and will have no indebtedness other than unsecured trade
payables in the ordinary course of business relating to acting as a member of
the limited liability company which owns the Property which (1) do not
exceed, at any time, $10,000 and (2) are paid within thirty (30) days of
the date incurred;


 


(xxii)        has
not and will not assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person except for the Loan;


 


(xxiii)       has
not and will not acquire obligations or securities of its partners, members or
shareholders;


 


(xxiv)       has
allocated and will allocate fairly and reasonably shared expenses, including
shared office space, and uses separate stationery, invoices and checks;


 


(xxv)        except
in connection with the Loan, has not pledged and will not pledge its assets for
the benefit of any other Person;


 


(xxvi)       has
held itself out and identified itself and will hold itself out and identify
itself as a separate and distinct entity under its own name and not as a
division or part of any other Person;


 


(xxvii)      has
maintained and will maintain its assets in such a manner that it will not be
costly or difficult to segregate, ascertain or identify its individual assets
from those of any other Person;


 


(xxviii)     has
not made and will not make loans to any Person;


 


(xxix)       has
not identified and will not identify its partners, members or shareholders, or
any Affiliate of any of them, as a division or part of it;


 


(xxx)        has
not entered into or been a party to, and will not enter into or be a party to,
any transaction with its partners, members, shareholders or Affiliates except
in the ordinary course of its business and on terms which are intrinsically
fair and are no less favorable to it than would be obtained in a comparable
arm’s-length transaction with an unrelated third party;


 


(xxxi)       has
and will have no obligation to indemnify its partners, officers, directors,
members or Special Members, as the case may be, or has such an obligation that
is fully subordinated to the Debt and will not constitute a claim against it if
cash flow


 


3

















 


in excess of
the amount required to pay the Debt is insufficient to pay such obligation; and


 


(xxxii)      will
consider the interests of its creditors in connection with all corporate,
partnership or limited liability actions, as applicable.


 


“Independent
Director” means (x) in the case of a Single Member
Bankruptcy Remote LLC:  a natural person
selected by Borrower and reasonably satisfactory to Lender who shall not have
been at the time of such individual’s appointment as an Independent Director of
the Single Member Bankruptcy Remote LLC, does not thereafter become while
serving as an Independent Director (except pursuant to an express provision in
the Single Member Bankruptcy Remote LLC’s limited liability company agreement
providing for the Independent Director to become a Special Member (defined
below) upon the sole member of such Single Member Bankruptcy Remote LLC ceasing
to be a member in such Single Member Bankruptcy Remote LLC) and shall not have
been at any time during the preceding five (5) years (i) a
shareholder/partner/member of, or an officer or employee of, Borrower or any of
its shareholders, subsidiaries or Affiliates, (ii) a director (other than
as an Independent Director or similar capacity of any Person that does not own
any direct or indirect equity interest in Borrower) of any shareholder,
subsidiary or Affiliate of Borrower, (iii) a customer of, or supplier to,
Borrower or any of its shareholders, subsidiaries or Affiliates, (iv) a
Person who Controls any such shareholder, supplier or customer, or (v) a member
of the immediate family of any such shareholder/ director/partner/member,
officer, employee, supplier or customer or of any director of Borrower (other
than as an Independent Director or similar capacity of any Person that does not
own any direct or indirect equity interest in Borrower); and (y) in the
case of a corporation, an individual selected by Borrower and reasonably
satisfactory to Lender who shall not have been at the time of such individual’s
appointment as a director, does not thereafter become while serving as an
Independent Director and shall not have been at any time during the preceding
five (5) years (i) a shareholder/partner/member of, or an officer,
employee, consultant, agent or advisor of, Borrower or any of its shareholders,
subsidiaries, members or Affiliates, (ii) a director (other than as an
Independent Director or similar capacity of any Person that does not own any
direct or indirect interest in Borrower or Borrower’s general partner or
managing member) of any shareholder, subsidiary, member, or Affiliate of
Borrower other than Borrower’s general partner or managing member, (iii) a
customer of, or supplier to, Borrower or any of its shareholders, subsidiaries
or Affiliates that derives more than ten percent (10%) of its purchases or income
from its activities with Borrower or any Affiliate of Borrower, (iv) a
Person who Controls any such shareholder, supplier or customer, or (v) a
member of the immediate family (including a grandchild or sibling) of any such
shareholder/director/partner/member, officer, employee, supplier or customer or
of any other director of Borrower’s general partner or managing member (other
than as an Independent Director or similar capacity of any Person that does not
own any direct or indirect interest in Borrower or Borrower’s general partner
or managing member).


 


“Single Member
Bankruptcy Remote LLC” means a limited liability company
organized under the laws of the State of Delaware which at all times since its
formation and at all times thereafter (i) complies with the following
clauses of the definition of Special Purpose Bankruptcy Remote Entity
above:  (i)(A), (ii)(A), (iii), (iv),
(ix), (x), (xi) and (xiii) through (xxxii); (ii) has maintained and will
maintain its accounts, books and records separate from any other person;


 


4

















 


(iii) has and will have an operating agreement which provides that
the business and affairs of Borrower shall be managed by or under the direction
of a board of one or more directors designated by Sole Member, and at all times
there shall be at least two (2) duly appointed Independent Directors on the
board of directors, and the board of directors will not take any action
requiring the unanimous affirmative vote of 100% of the members of its board of
directors unless, at the time of such action there are at least two (2) members
of the board of directors who are Independent Directors, and all of the
directors and all Independent Directors shall have participated in such vote;
(iv) has and will have an operating agreement which provides that, as long
as any portion of the Debt remains outstanding, (A) upon the occurrence of
any event that causes Sole Member to cease to be a member of Borrower (other
than (x) upon an assignment by Sole Member of all of its limited liability
company interest in Borrower and the admission of the transferee, if permitted
pursuant to the organizational documents of Borrower and the Loan Documents, or
(y) the resignation of Sole Member and the admission of an additional member
of Borrower, if permitted pursuant to the organizational documents of Borrower
and the Loan Documents), the person acting as an Independent Director of
Borrower shall, without any action of any Person and simultaneously with Sole
Member ceasing to be a member of Borrower, automatically be admitted as the
sole member of Borrower (the “Special Member”) and shall preserve and continue the
existence of Borrower without dissolution, (B) no Special Member may
resign or transfer its rights as Special Member unless (x) a successor
Special Member has been admitted to Borrower as a Special Member, and
(y) such successor Special Member has also accepted its appointment as an
Independent Director and (C) except as expressly permitted pursuant to the
terms of this Agreement, Sole Member may not resign and no additional member
shall be admitted to Borrower; (v) has and will have an operating
agreement which provides that, as long as any portion of the Debt remains
outstanding, (A) Borrower shall be dissolved, and its affairs shall be
would up only upon the first to occur of the following:  (x) the termination of the legal
existence of the last remaining member of Borrower or the occurrence of any
other event which terminates the continued membership of the last remaining
member of Borrower in Borrower unless the business of Borrower is continued in
a manner permitted by its operating agreement or the Delaware Limited Liability
Company Act (the “Act”)
or (y) the entry of a decree of judicial dissolution under Section 18-802
of the Act; (B) upon the occurrence of any event that causes the last
remaining member of Borrower to cease to be a member of Borrower or that causes
Sole Member to cease to be a member of Borrower (other than (x) upon an
assignment by Sole Member of all of its limited liability company interest in
Borrower and the admission of the transferee, if permitted pursuant to the
organizational documents of Borrower and the Loan Documents, or (y) the
resignation of Sole Member and the admission of an additional member of
Borrower, if permitted pursuant to the organizational documents of Borrower and
the Loan Documents), to the fullest extent permitted by law, the personal
representative of such member shall be authorized to, and shall, within ninety
(90) days after the occurrence of the event that terminated the continued
membership of such member in Borrower, agree in writing to continue the
existence of Borrower and to the admission of the personal representative or
its nominee or designee, as the case may be, as a substitute member of
Borrower, effective as of the occurrence of the event that terminated the
continued membership of such member in Borrower; (C) the bankruptcy of
Sole Member or a Special Member shall not cause such member or Special Member,
respectively, to cease to be a member of Borrower and upon the occurrence of
such an event, the business of Borrower shall continue without dissolution;
(D) in the event of dissolution of Borrower, Borrower shall conduct only
such


 


5

















 


activities as are necessary to wind up its affairs (including the sale
of the assets of Borrower in an orderly manner), and the assets of Borrower
shall be applied in the manner, and in the order of priority, set forth in
Section 18-804 of the Act; and (E) to the fullest extent
permitted by law, each of Sole Member and the Special Members shall irrevocably
waive any right or power that they might have to cause Borrower or any of its
assets to be partitioned, to cause the appointment of a receiver for all or any
portion of the assets of Borrower, to compel any sale of all or any portion of
the assets of Borrower pursuant to any applicable law or to file a complaint or
to institute any proceeding at law or in equity to cause the dissolution,
liquidation, winding up or termination of Borrower.


 


6

















 


Schedule 6


 


Approved Operating Budget


 

















 


Schedule 7


 


Initial Renovation Work


 


[see attached]