**Exhibit 10.2**

 

JUNIOR LOAN AGREEMENT

 

by and between

 

 

REST EASY LLC,

 

a Delaware limited liability company,

 

as Borrower,

 

 

and

 

 

BEHRINGER HARVARD PAL I, LLC,

 

a Delaware limited liability company,

 

as Lender,

 

 

with respect to a

 

$25,000,000 term Loan facility

 

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**TABLE OF CONTENTS**

 
| Article I    | General  Information                                                                      | 1  |
|-------------------|-------------------------------------------------------------------------------------------|----|
| Section 1.1  | Conditions  to Closing; Fees                                                              | 1  |
| Section 1.2  | Schedules                                                                                 | 2  |
| Section 1.3  | Defined  Terms                                                                            | 2  |
| Section 1.4  | Lock  Box Agreement                                                                       | 2  |
| Article II   | Advances  of the Junior Loan                                                              | 3  |
| Section 2.1  | Junior  Loan Advances, Requisitions and Drawings                                          | 3  |
| Section 2.2  | Direct  Costs Verification                                                                | 5  |
| Section 2.3  | Office  for Advances                                                                      | 6  |
| Section 2.4  | Advances  After Construction; Monthly Advances                                            | 6  |
| Section 2.5  | Notice  of Lender’s Rights to Make Advances                                          | 6  |
| Section 2.6  | Evidence  of and Security for Junior Loan                                                 | 6  |
| Section 2.7  | Junior  Loan Reallocation                                                                 | 7  |
| Section 2.8  | Construction  Agreements                                                                  | 7  |
| Section 2.9  | Advances  for Costs of Improvements                                                       | 7  |
| Section 2.10 | Additional  Terms Regarding Advances                                                      | 7  |
| Section 2.11 | Liability  of Lender                                                                      | 7  |
| Section 2.12 | Payments  to Lender                                                                       | 7  |
| Section 2.13 | Verified  Statement                                                                       | 8  |
| Article III  | Representations  and Warranties                                                           | 8  |
| Section 3.1  | Organization,  Power and Authority of Borrower and Managing Member; Junior Loan Documents | 8  |
| Section 3.2  | Other  Documents; Laws                                                                    | 9  |
| Section 3.3  | Taxes                                                                                     | 9  |
| Section 3.4  | Legal  Actions                                                                            | 9  |
| Section 3.5  | Nature  of Junior Loan                                                                    | 10 |
| Section 3.6  | [Reserved]                                                                                | 10 |
| Section 3.7  | Financial  Statements                                                                     | 10 |
| Section 3.8  | ERISA  and Prohibited Transactions                                                        | 10 |
| Section 3.9  | Compliance  with Zoning and Other Requirements                                            | 10 |
| Section 3.10 | Plans  and Specifications                                                                 | 10 |
|                   |                                                                                           |    |  |

 

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| Section 3.11 | Building  Permits; Other Permits                      | 11 |
|-------------------|-------------------------------------------------------|----|
| Section 3.12 | Utilities                                             | 11 |
| Section 3.13 | Access;  Roads                                        | 11 |
| Section 3.14 | Other  Liens                                          | 12 |
| Section 3.15 | No  Material Adverse Change                           | 12 |
| Section 3.16 | Defaults                                              | 12 |
| Section 3.17 | Affirmation  of Representations and Warranties        | 12 |
| Section 3.18 | Governmental  Authorities                             | 12 |
| Section 3.19 | Prior  Work                                           | 13 |
| Section 3.20 | Hazardous  Materials; Related Claims                  | 13 |
| Section 3.21 | Not an  Investment Company                            | 13 |
| Section 3.22 | Patriot  Act                                          | 13 |
| Section 3.23 | Compliance  with Laws and Project Documents           | 14 |
| Article IV   | Affirmative  Covenants and Agreements                 | 14 |
| Section 4.1  | Commencement  and Completion of Construction          | 14 |
| Section 4.2  | Approval  of Construction                             | 14 |
| Section 4.3  | Deposits                                              | 15 |
| Section 4.4  | Compliance  with Laws; Encroachments                  | 15 |
| Section 4.5  | Inspections;  Cooperation                             | 16 |
| Section 4.6  | Contracts,  Vouchers and Receipts                     | 16 |
| Section 4.7  | Payment  and Performance of Contractual Obligations   | 16 |
| Section 4.8  | Correction  of Construction Defects                   | 17 |
| Section 4.9  | Insurance                                             | 17 |
| Section 4.10 | Adjustment  of Condemnation and Insurance Claims      | 19 |
| Section 4.11 | Utilization  of Net Award                             | 20 |
| Section 4.12 | Management                                            | 20 |
| Section 4.13 | Books  and Records; Financial Statements; Tax Returns | 21 |
| Section 4.14 | Estoppel  Certificates                                | 22 |
| Section 4.15 | Taxes                                                 | 22 |
| Section 4.16 | Lender’s  Rights to Pay and Perform              | 23 |
| Section 4.17 | Reimbursement;  Interest                              | 23 |
| Section 4.18 | Notification  by Borrower                             | 23 |
| Section 4.19 | Indemnification  by Borrower                          | 24 |
|                   |                                                       |    |  |

 

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| Section 4.20 | Fees  and Expenses                                             | 24 |
|-------------------|----------------------------------------------------------------|----|
| Section 4.21 | Appraisals                                                     | 25 |
| Section 4.22 | Yearly  Budget Approvals                                       | 25 |
| Section 4.23 | [Reserved]                                                     | 25 |
| Section 4.24 | Permanent  Loan/Capital Markets Transaction                    | 25 |
| Section 4.25 | [Reserved]                                                     | 26 |
| Section 4.26 | [Reserved]                                                     | 26 |
| Section 4.27 | [Reserved]                                                     | 26 |
| Section 4.28 | Organizational  Documents                                      | 26 |
| Section 4.29 | Subordination                                                  | 26 |
| Section 4.30 | Patriot  Act                                                   | 26 |
| Section 4.31 | Single  Purpose Covenants                                      | 26 |
| Section 4.32 | Preservation  of Rights                                        | 27 |
| Section 4.33 | Income  from Project; Rents                                    | 27 |
| Section 4.34 | Notice  to Lender                                              | 27 |
| Section 4.35 | Site  Assessments and Information                              | 28 |
| Section 4.36 | Response  to Releases, Non-Compliance and Environmental Claims | 28 |
| Section 4.37 | Delivery  and Maintenance of Payment and Performance Bond      | 29 |
| Section 4.38 | Intercreditor  Agreement                                       | 29 |
| Article V    | Negative  Covenants                                            | 29 |
| Section 5.1  | Conditional  Sales                                             | 29 |
| Section 5.2  | Changes  to Plans and Specifications                           | 29 |
| Section 5.3  | Insurance  Policies and Bonds                                  | 29 |
| Section 5.4  | Commingling                                                    | 29 |
| Section 5.5  | Additional  Debt                                               | 29 |
| Section 5.6  | Compliance  with Environmental Requirements                    | 30 |
| Section 5.7  | Lease                                                          | 30 |
| Section 5.8  | Swap  Contracts                                                | 30 |
| Section 5.9  | Construction                                                   | 30 |
| Section 5.10 | Project  Document Modifications                                | 31 |
| Article VI   | Events  of Default                                             | 31 |
| Section 6.1  | Payment  Default                                               | 31 |
|                   |                                                                |    |  |

 

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| Section 6.2  | Default  Under Other Junior Loan Documents and Project Documents | 31 |
|-------------------|------------------------------------------------------------------|----|
| Section 6.3  | Accuracy  of Information; Representations and Warranties         | 31 |
| Section 6.4  | Deposits                                                         | 31 |
| Section 6.5  | Insurance  Obligations                                           | 32 |
| Section 6.6  | Other  Obligations                                               | 32 |
| Section 6.7  | Progress  of Construction                                        | 32 |
| Section 6.8  | Damage  to Improvements                                          | 32 |
| Section 6.9  | Lapse  of Permits or Approvals                                   | 32 |
| Section 6.10 | Completion  of Construction                                      | 32 |
| Section 6.11 | Mechanic’s  Lien                                            | 33 |
| Section 6.12 | Survey  Matters                                                  | 33 |
| Section 6.13 | Design/Build  Contractor Default                                 | 33 |
| Section 6.14 | Senior  and Subordinate Loan Default                             | 33 |
| Section 6.15 | Bankruptcy                                                       | 33 |
| Section 6.16 | Appointment  of Receiver, Trustee, Liquidator                    | 33 |
| Section 6.17 | Inability  to Pay Debts; Judgment                                | 34 |
| Section 6.18 | Dissolution;  Change in Business Status                          | 34 |
| Section 6.19 | Default  Under Other Indebtedness                                | 34 |
| Section 6.20 | Liens                                                            | 34 |
| Section 6.21 | Change  in Controlling Interest                                  | 34 |
| Section 6.22 | Material  Adverse Change                                         | 34 |
| Section 6.23 | Termination  of Lease or other Project Documents                 | 34 |
| Section 6.24 | Default  Under Guaranty                                          | 35 |
| Article VII  | Remedies  on Default                                             | 35 |
| Section 7.1  | Remedies  on Default                                             | 35 |
| Section 7.2  | No  Release or Waiver; Remedies Cumulative and Concurrent        | 37 |
| Article VIII | Miscellaneous                                                    | 37 |
| Section 8.1  | Further  Assurances; Authorization to File Documents             | 37 |
| Section 8.2  | No  Warranty by Lender                                           | 38 |
| Section 8.3  | Standard  of Conduct of Lender                                   | 38 |
| Section 8.4  | No  Partnership                                                  | 38 |
| Section 8.5  | Severability                                                     | 38 |
|                   |                                                                  |    |  |

 

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| Section 8.6  | Notices                                                      | 39 |
|-------------------|--------------------------------------------------------------|----|
| Section 8.7  | Permitted  Successors and Assigns; Disclosure of Information | 40 |
| Section 8.8  | Amendment;  Modification; Waiver                             | 41 |
| Section 8.9  | Third  Parties; Benefit                                      | 41 |
| Section 8.10 | Rules of  Construction                                  | 41 |
| Section 8.11 | Counterparts                                                 | 42 |
| Section 8.12 | Signs;  Publicity                                            | 42 |
| Section 8.13 | Governing  Law                                               | 42 |
| Section 8.14 | Time  of Essence                                             | 43 |
| Section 8.15 | Electronic  Transmission of Data                             | 43 |
| Section 8.16 | Dispute  Resolution                                          | 43 |
| Section 8.17 | Nature  of Obligations                                       | 45 |
| Section 8.18 | Waiver  of Jury Trial                                        | 46 |
| Section 8.19 | Additional  Waivers                                          | 46 |
| Section 8.20 | Limitation  on Liability                                     | 47 |
| Section 8.21 | Entire  Agreement                                            | 47 |
| Section 8.22 | Lost  Junior Note                                            | 47 |
| Section 8.23 | Method  of Payment                                           | 48 |
| Section 8.24 | Pledge  to the Federal Reserve                               | 48 |
| Section 8.25 | Right  of Setoff                                             | 48 |
| Section 8.26 | Usury                                                        | 48 |
| Section 8.27 | Application  of Payments                                     | 48 |
| Section 8.28 | Payment  Date Adjustment for Non-Business Days               | 49 |
| Section 8.29 | Payment  of Fees and Expenses                                | 49 |
| Section 8.30 | [Reserved]                                                   | 49 |
| Section 8.31 | Capital  Adequacy                                            | 49 |
| Section 8.32 | Right  to Sell Junior Loan to Participant                    | 50 |
| Section 8.33 | Junior  Loan Assignment                                      | 50 |
| Section 8.34 | [Reserved]                                                   | 51 |
| Section 8.35 | Integration                                                  | 51 |
| Section 8.36 | Use of  Proceeds                                             | 51 |
| Section 8.37 | [Reserved]                                                   | 51 |
| Section 8.38 | [Reserved]                                                   | 51 |

 

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| Section 8.39 | [Reserved]                                              | 51 |
|-------------------|---------------------------------------------------------|----|
| Section 8.40 | Administrative  Agent                                   | 51 |
| Section 8.41 | Appraisal                                               | 53 |
| Section 8.42 | USA  Patriot Act Notice                                 | 54 |
| Section 8.43 | [Reserved]                                              | 54 |
| Section 8.44 | Confidentiality                                         | 54 |
| Section 8.45 | Termination                                             | 55 |
| Section 8.46 | Documents,  etc. to be Satisfactory                     | 55 |
| Section 8.47 | Factual  Matters                                        | 56 |
| Section 8.48 | Modification  of Junior Loan in Accordance With Lease   | 56 |
| Section 8.49 | Not  Government Obligations                             | 56 |
| Section 8.50 | Refinancing  of Senior Loan                             | 56 |
| Section 8.51 | Guarantor  Controlled Person                            | 57 |
| Section 8.52 | New  York Contacts                                      | 57 |
| Section 8.53 | Payment  at Maturity                                    | 57 |
| Section 8.54 | Payment  in Full of Senior Loan/Purchase of Senior Loan | 57 |
| Section 8.55 | Refinance  of Subordinate Loan                          | 58 |

 

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**SCHEDULES TO JUNIORLOAN AGREEMENT**

 
| Schedule  1 | Definitions                          |   |
|-------------|--------------------------------------|--------|
| Schedule  2 | Form of  Draw Request           |   |
| Schedule  3 | Component  Budgets                   |   |
| Schedule  4 | Project  Schedule                    |   |
| Schedule  5 | Additional  Terms Regarding Advances |   |
| Schedule  6 | Form of  Guaranty and Indemnity |   |
| Schedule 7  | Lien Waivers                         |   |
| Schedule 8  | [Reserved]                           |   |
| Schedule 9  | [Reserved]                           |   |
| Schedule 10 | [Reserved]                           |   |
| Schedule 11 | Lien Waiver                          |   |
| Schedule 12 | Construction  Development Budget     |   |
| Schedule 13 | Litigation                           |   |
| Schedule 14 | Support Leases and  Licenses         |   |

 

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Junior Loan Agreement

 

This Junior Loan Agreement (as the same maybe amended or supplemented from time to time, this “**Agreement**”)is made as of the 14th day ofAugust, 2009, by and between Rest Easy LLC, a Delaware limited liabilitycompany (together with its successors and assigns, the “**Borrower**”),and Behringer Harvard PAL I, LLC, a Delaware limited liability company (together with its successors andassigns, the “**Lender**” or “**Junior Lender**”).

 

Recitals

 

Borrower has applied to Lender for a Loan(the “**Junior Loan**”) to finance certaincosts related to the construction, revitalization, renovation and developmentof improvements on real property located or to be located at variousUnited States Army (the “**Army**”)installations, specifically, Fort Hood, Texas, Fort Leavenworth, Kansas,Fort Myer, Virginia, Fort Polk, Louisiana, Fort Riley, Kansas,Fort Rucker, Alabama, Fort Sam Houston, Texas, Tripler Army MedicalCenter and Fort Shafter, Hawaii, Fort Sill, Oklahoma, and Yuma ProvingGround, Arizona, through the Privatization of Army Lodging (“**PAL**”) pursuant to Title 10,United States Code, Section 2871 *et. seq.* Inconnection with the implementation of the PAL, the Army has agreed, among otherthings, to transfer the use of a portion of the installations’ lands under along-term ground lease and several shorter term support leases and licenses andto convey the existing lodging and certain other improvements on the respectiveinstallations to the Borrower. The rentals, profits and income from suchimprovements will serve, together with the Mortgages and other Collateral, assecurity for the Junior Loan. Lender has agreed to make the Junior Loan on theterms and conditions set forth in this Agreement and in the other documentsevidencing and securing the Junior Loan.

 

Now, therefore, in consideration of the premises, and in furtherconsideration of the mutual covenants and agreements herein set forth, the receipt and sufficiency of which arehereby acknowledged, the parties covenant and agree as follows:

 

Agreements

 

Article I

General Information

 

Section 1.1             Conditions to Closing; Fees.

 

(a)           The conditions precedent to closing the Junior Loanand recording the Mortgages set forth in the Letter of Intent are satisfied,subject to Borrower’s payment of the commitment fee as provided in Section 1.1(c) belowand the delivery of the Guaranty as provided in Section 1.1(f) below.

 

(b)           On or prior to the Closing, Borrower shall (i) payto Lender an initial commitment fee for Lender’s commitment to fund the JuniorLoan equal to $500,000, payable in immediately available funds, and (ii) pay,or provide funds for payment of, all reasonable costs and expenses incurred inconnection with the Junior Loan, including, but 

 

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not limited to,Lender’s reasonable documentation fees, attorneys’ fees (exclusive of Lender’sin-house attorneys’ fees), travel expenses and all expenses directly associatedwith due diligence, including all expenses described in the Letter of Intent.Borrower shall separately be responsible for payment of all attorneys’ fees(other than Lender’s in-house counsel), including all local counsel fees andexpenses.

 

(c)           On or prior to the Closing, Lender shall havereceived: (i) executed copies of this Agreement, the Junior Note, theMortgages, the Environmental Agreement, the Design/Build Agreement, and thefinancing statements, (ii) insurance policies or certificates of insurersevidencing the insurance required by the Mortgages, (iii) paid titleinsurance policies in ALTA 1990 form or such other form acceptable to Lender,in the amount of the Junior Note, insuring the Mortgages to be valid liens onthe Property free and clear of all defects and encumbrances not previouslyapproved by Lender or its counsel, which shall contain no survey exceptionsother than those previously approved by Lender, full coverage against mechanics’and materialmen’s liens, subject to availability under applicable law orcommercial title insurance practices, an undertaking by the issuer thereof toprovide the notice of title continuation or endorsement above and a pendingdisbursements clause (or such other comparable clause or affirmative insuranceor endorsement to title policy as is available in such jurisdiction), (iv) opinionsof counsel for Borrower in form and substance reasonably satisfactory toLender, and (v) such other documents, instruments or assurances as Lenderor its counsel may reasonably request.

 

(d)           No fees payable hereunder, including in this Section 1.1,shall be deemed to be paid with respect to the acquisition of any interest inreal property located in the State of Hawaii.

 

(e)           As a condition precedent to Lender’s obligation tofund any portion of the Loan, Borrower must cause Guarantor to execute anddeliver the Guaranty at Closing.

 

Section 1.2             Schedules.

 

The Schedules attached to this Agreement areincorporated herein and made a part hereof.

 

Section 1.3             Defined Terms.

 

Capitalized terms in this Agreement shallhave the meanings ascribed to such terms in the Preamble hereto and in Schedule 1.

 

Section 1.4             Lock Box Agreement.

 

At or prior to Closing, Borrower will enterinto the Lock Box Agreement and will establish, or will cause to beestablished, the Lock Box Account and each of the other accounts andsubaccounts contemplated by the Lock Box Agreement. All Project revenues willbe applied, held and disbursed in the order of priority, and in accordance withthe terms and conditions of the Lock Box Agreement. Except as otherwiseprovided in the Lock Box Agreement, Borrower will cause all Project revenues tobe deposited into one of the Collection Accounts in accordance with the LockBox Agreement. Funds deposited into the Collection Accounts shall be swept intothe Revenue Subaccount in accordance with the Lock Box Agreement.

 

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Article II

Advances of the JuniorLoan

 

Section 2.1             Junior Loan Advances, Requisitions andDrawings.

 

(a)           Borrower agrees to borrow the Junior Loan from Lender,and Lender agrees to lend the Junior Loan to Borrower, subject to the terms andconditions herein set forth, in incremental advances which will not exceed, inthe aggregate, the Junior Loan Amount. Interest shall accrue and be payable inarrears only on sums advanced hereunder for the period of time outstanding. TheJunior Loan is not a revolving loan; amounts repaid may not be re-borrowed.

 

(b)           Subject to the provisions of this Agreement, Lenderwill advance and Borrower will accept the Junior Loan installments as follows:

 

The Initial Advance will be made upon thesatisfaction of the applicable conditions and upon payment of the then-due feesset forth in Section 1.1 and this Article II hereof, and allsubsequent Advances shall be made periodically thereafter, upon thesatisfaction of the applicable conditions set forth herein, in amounts whichshall be equal to the aggregate of the unpaid and unreimbursed Direct Costs andIndirect Costs specified in the Draw Request, less any costs covered bythe Draw Request not approved, certified or verified as provided in Section 2.2hereof, any Indirect Costs covered by a previous Draw Request for which anyrequested proof of payment or payment receipts have not been received byLender, and/or any Direct Costs covered by a previous Draw Request for which anyrequested proof of payment or payment receipts or Lien Waivers have not beenreceived by Lender and the Construction Consultant.

 

(c)           Subsequent to the Initial Advance, Advances shall bemade not more frequently than monthly based on Draw Requests signed by anAuthorized Signer in the form attached hereto as Schedule 2 or inanother form reasonably approved by Lender, each of which Draw Request shallinclude the applicable Payment Certificate issued by the ConstructionConsultant. Unless otherwise agreed to between Borrower and Lender, inaccordance with the Lock Box Agreement, all Advances shall be deposited intothe Loan Proceeds Sub-subaccount of the Construction Escrow Reserve Subaccount(as defined in the Lock Box Agreement) for application by the Cash ManagementAgent in accordance with the terms of the Lock Box Agreement. Each Draw Requestfor Direct Costs shall be set forth on AIA Forms G702 and G703 or another formreasonably approved by Lender, and shall be approved by the ConstructionConsultant and signed by the Design/Build Contractor. Draw Requests for DirectCosts shall show the percentage of completion of construction and shall setforth on a Component basis and in such detail as may be reasonably required byConstruction Consultant or Lender the amounts expended and/or costs incurredfor work done and materials incorporated in the Improvements. Each Draw Requestshall be supported by such information and documentation (such as paidreceipts, invoices, statements of accounts, lien releases, etc.) as Lender mayreasonably require to assure that amounts requested are to be used to reimburseBorrower for costs previously paid by Borrower or to pay costs incurred byBorrower that are to be paid from proceeds of the Junior Loan, as set forth in theLock 

 

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Box Agreement, theDesign/Build Agreement and the applicable Component Budgets. If so required bythe Lender, a request for an Advance shall also be accompanied by (i) acertificate of Borrower, signed by an officer of Borrower, to the effect thatBorrower has paid or actually incurred costs in the amount of the requestedAdvance, that such costs have not been made the basis for any other request foran advance of Junior Loan proceeds under this Agreement or any other agreementbetween Borrower and Lender, that all representations and warranties ofBorrower herein are true as of the time of such request, and that no materialadverse change in Borrower’s financial condition has occurred since the immediatelypreceding Advance and (ii) a notice of title continuation or anendorsement to the title policy (or such other comparable clause or affirmativeinsurance or endorsement to title policy as is available in such jurisdiction)indicating that, since the date of the last preceding Advance, there has beenno change in the state of title not approved by Lender and no survey exceptionnot theretofore approved by Lender, which endorsement shall have the effect ofincreasing the coverage of the policy by the amount of the Advance then beingmade. Borrower shall only be entitled to payment in the amount and for suchitems as are approved in respect of each Draw Request.

 

(d)           The Junior Loan shall be advanced from time to time asprovided herein for the payment of costs described in Section 4.3 and Article Vof the Lock Box Agreement. Lender shall not be obligated to make any advanceunless all conditions to the making of an Advance under this Agreement havebeen and continue to be satisfied unless waived in writing by Lender.

 

(e)           No subsequent Advances of the Junior Loan shall beadvanced until the satisfaction of the following conditions:

 

(i)            There shall be (1) no default by Borrower beyondapplicable periods of notice and grace under this Agreement, the Junior Note,the Mortgages, or any other Junior Loan Document, (2) no Default (asdefined in the PAL Lease) under the PAL Lease that Lender determines cannot becured before the end of any applicable notice and cure period, (3) noTermination Default (as defined in the PAL Lease) under the PAL Lease, (4) nodefault that Lender determines cannot be cured before the end of any applicablenotice and cure period under any Project Document (other than the PAL Lease),and (5) no “Event of Default” (as defined therein) under any Senior LoanDocument or under any Subordinate Loan Document, unless in each instance waivedin writing by Lender; and

 

(ii)           Lender shall have received: (a) executed copiesof this Agreement, the Junior Note, the Mortgages and the Environmental Agreement,which must be satisfactory to Lender in all respects, and the financingstatements, (b) insurance policies or certificates of insurers evidencingthe insurance required by the Mortgages, (c) paid title insurance policiesin ALTA 1990 form or such other form acceptable to Lender, in the amount of theJunior Note, insuring the Mortgages to be valid liens on the Property free andclear of all defects and encumbrances not previously approved by Lender or itscounsel, which shall contain no survey exceptions other than those previouslyapproved by Lender, full coverage against 

 

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mechanics’ andmaterialmen’s liens, an undertaking by the issuer thereof to provide the noticeof title continuation or endorsement above and a pending disbursements clause, (d) anopinion of counsel for Borrower in form and substance satisfactory to Lender, (e) allother conditions to receiving an Advance under this Agreement have been met,and (f) such other standard and customary documents, instruments, opinionsor assurances as Lender or its counsel may reasonably request.

 

(f)            If at the time of an Advance following the InitialAdvance there are incurred costs which shall be paid by Borrower from suchAdvance and which have not been paid by Borrower, then prior to and as acondition to the next advance, Borrower shall submit to Lender proof reasonablysatisfactory to Lender that such incurred costs have been paid in full.

 

(g)           The Lender shall have the right to approve all materialamendments to the Design/Build Agreement (except for Change Orders notrequiring the consent of the Lender pursuant to the Design/Build Agreement).

 

(h)           Borrower shall comply with the Project Schedule setforth in Schedule 4, unless the Lender approves a modification ofsuch Schedule 4 in writing (such approval not to be unreasonablywithheld, conditioned or delayed). The Lender shall not be obligated to fundany Advance after the Final Project Completion Date.

 

(i)            Notwithstanding the foregoing, other than the InitialAdvance made on the date hereof, no subsequent Advance shall be made hereunderunless and until (i) all amounts have been advanced by the SubordinateLender pursuant to the Subordinate Loan; (ii) the amount to be funded byLender in connection with such Draw Request shall not be greater than theamount necessary to satisfy the Draw Request taking into account the amount ofthe balance in the Excess NOI Sub-subaccount (as such capitalized term isdefined in the Lock Box Agreement) as of the date of such Draw Request (exceptfor any amount less than $10,000 retained in the Excess NOI subaccount); and (iii) theControl Agreements have been fully executed and delivered and are in full forceand effect; provided, however, that the Borrower shall have three months fromthe date hereof to have all Control Agreements in place.

 

(j)            Other than the Initial Advance made on the datehereof, subsequent Advances made by the Lender hereunder are subject to theconditions in Schedule 5 hereto.

 

(k)           All disbursements from the Construction Escrow ReserveSubaccount shall be made in accordance with the terms and conditions of theLock Box Agreement.

 

Section 2.2             Direct Costs Verification.

 

All Direct Costs shall be certified by theDesign/Build Contractor and must be in accordance with the Direct CostStatement (as the same may be updated and amended by the Borrower asnecessary). Verification of the monthly progress and Direct Costs which havebeen 

 

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incurred by Borrower fromtime to time, and the estimated total Direct Costs, shall be conclusivelydetermined by the Construction Consultant (absent manifest error).

 

Section 2.3             Office for Advances.

 

All advances to Borrower are to be made atsuch place as Lender may designate. Draw Requests together with all attachmentsthereto shall be received by Lender at least seven (7) Business Days priorto the date of the requested Advance and Borrower shall schedule a siteinspection with Construction Consultant with respect to each such Advance on orbefore the date of the submission to the Lender of such Draw Request.

 

Section 2.4             Advances After Construction; MonthlyAdvances.

 

Amounts of the Direct Costs not advancedpursuant to this Section 2.4 or Section 2.1 hereof during the courseof construction of the Improvements may be advanced by Lender in its solediscretion upon the satisfaction of the conditions set forth herein. Advancesfor Indirect Costs not advanced prior to completion of construction of theImprovements shall be advanced until exhausted, not more frequently than once amonth, for Indirect Costs as incurred after such completion, upon satisfactionof the conditions set forth herein.

 

Section 2.5             Notice of Lender’s Rights to MakeAdvances.

 

(a)           Lender may, in its absolute discretion, accelerate allor any portion of the amounts requested by Borrower to be advanced hereunderwithout regard to Borrower’s satisfaction of the conditions to its entitlementto Junior Loan proceeds and no person dealing with Borrower or the Design/BuildContractor and any Subcontractor or any other person shall have standing todemand any different performance from Lender.

 

(b)           CONTRACTORS, SUBCONTRACTORS, LABORERS, and SUPPLIERSare cautioned that if Junior Loan advances are made under the alternative setforth in paragraph (a) above, proceeds of the Junior Loan remaining to beadvanced at the time of the actual completion date, or at any time priorthereto, may be inadequate to pay all lienable claims incurred by Borrower andunpaid at that time. All potential lienors are therefore cautioned to exercisesound business judgment in the extension of credit to Borrower and should notexpect Lender to make Junior Loan advances in such amounts and to exercise suchjudgment for themselves.

 

Section 2.6             Evidence of and Security for Junior Loan.

 

Advances under the Junior Loan shall beevidenced by the Junior Note and secured by the Mortgages, the Junior LoanDocuments and the other Collateral. Borrower’s obligation to repay theObligations (including (without limitation) as evidenced by the Junior Note) iswith full recourse as to the Collateral (including all assets of the Borrower)but shall not be recourse to the Borrower’s members, shareholders, officers,affiliates, directors, partners, agents, employees or consultants, or anyaffiliate of any such person, or to the property or assets of any such person.

 

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Section 2.7             Junior Loan Reallocation.

 

The Lender shall have the right to approve ChangeOrders in accordance with Section 8.6.2 of the Design/Build Agreement.Unless authorized by Change Order, the Guaranteed Maximum Price shall not beincreased and the Guaranteed Scope of Work shall not be reduced and/or modifiedwithout the consent of the Lender.

 

Section 2.8             Construction Agreements.

 

Notwithstanding anything in this Agreement tothe contrary, no advances of the Junior Loan for Direct Costs with respect toany particular category of expenses shall be made until such time as the Lenderhas received from the Borrower copies of the Design/Build Agreement and eachSubcontract in Proper Form in excess of $100,000 with respect to suchcategory certified by the Borrower to be true, complete and correct.

 

Section 2.9             Advances for Costs of Improvements.

 

Lender shall not be required to make anyadvances for Stored Materials, except as permitted by Schedule 5 hereto.

 

Section 2.10           Additional Terms Regarding Advances.

 

Other than the Initial Advance made on thedate hereof, subsequent Advances of the Junior Loan shall also be subject tothe terms and conditions set forth in Schedule 5.

 

Section 2.11           Liability of Lender.

 

Lender shall in no event be responsible orliable to any Person other than Borrower for the disbursement of or failure todisburse the Junior Loan proceeds or any part thereof and neither theDesign/Build Contractor, Construction Consultant nor any subcontractor, laboreror material supplier shall have any right or claim against Lender under thisAgreement or the other Junior Loan Documents.

 

Section 2.12           Payments to Lender.

 

(a)           The Junior Loan shall bear interest on the outstandingprincipal amount thereof as provided in the Junior Note, which interest shallbe payable by the Borrower at the times and in the manner provided in the JuniorNote. The principal of the Junior Loan shall be repaid by the Borrower at thetimes, in the amounts and in the manner provided in the Junior Note. TheBorrower may prepay the Junior Loan at the times, in the amounts and in themanner provided in the Junior Note, subject to payment of the PrepaymentPremium, if same is due. All payments to Lender shall be made in accordancewith the provisions of the Lock Box Agreement, the Junior Note and thisAgreement.

 

(b)           Lender shall be entitled, but not obligated, and ishereby irrevocably authorized to request payment from the Lock Box Agreementwithout any notice to Borrower in such sums as are necessary to pay accrued andunpaid interest on the Junior 

 

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Note and all feesand expenses payable hereunder or thereunder, to the extent the same are dueand payable.

 

Section 2.13           Verified Statement.

 

At Lender’s written request, Borrower shallprovide Lender with a verified written statement, in such form and detail asLender may reasonably require, setting forth: (i) the names and addressesof all contractors, subcontractors and suppliers furnishing labor or materialsin the development of the Land or the Construction of the Improvements valuedin excess of $100,000 and (ii) such reasonable evidence confirming thatthat the Improvements have not been materially damaged by fire or otherCasualty unless Lender shall have received Insurance Proceeds, or satisfactoryassurance that it will receive such proceeds in a timely manner pursuant to Section 4.10,sufficient in the judgment of Lender to effect a satisfactory restoration andcompletion of the Improvements in accordance with the terms of the Mortgagesand this Agreement and (iii) such reasonable evidence confirming that theImprovements have not been materially damaged by fire or other Casualty unlessLender shall have received Insurance Proceeds, or satisfactory assurance thatit will receive such proceeds in a timely manner pursuant to Section 4.10,sufficient in the judgment of Lender to effect a satisfactory restoration andcompletion of the Improvements in accordance with the terms of the Mortgagesand this Agreement.

 

Article III

Representationsand Warranties

 

Borrower represents and warrants to Lenderthat:

 

Section 3.1             Organization, Power and Authority ofBorrower and Managing Member; Junior Loan Documents.

 

(a)           Borrower (a) is a limited liability company dulyorganized, existing and in good standing under the laws of the state in whichit is organized and is duly qualified to do business and in good standing ineach state in which the Land or any portion thereof is located (if differentfrom the state of its formation) and in any other state where the nature ofBorrower’s business or property requires it to be qualified to do business, and(b) has the power, authority and legal right to own its property and carryon the business now being conducted by it and to engage in the transactionscontemplated by the Junior Loan Documents and the Project Documents. The JuniorLoan Documents and the Project Documents to which Borrower is a party have beenduly executed and delivered by Borrower, and the execution and delivery of, andthe carrying out of the transactions contemplated by, such Junior LoanDocuments and Project Documents, and the performance and observance of theterms and conditions thereof, have been duly authorized by all necessaryorganizational action by and on behalf of Borrower. The Junior Loan Documentsand the Project Documents to which Borrower is a party constitute the valid andlegally binding obligations of Borrower and are fully enforceable againstBorrower in accordance with their respective terms, except to the extent thatsuch enforceability may be limited by laws generally affecting the enforcementof creditors’ rights or principles of equity.

 

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(b)           Borrower represents and warrants that RE-MM (i) isa limited liability company duly organized, existing and in good standing underthe laws of the State of Delaware and is duly qualified to do business and inany state where the nature of RE-MM’s business or property requires it to bequalified to do business, except where the failure to be so qualified would notreasonably be expected to have a Material Adverse Effect on the ability ofRE-MM to perform its obligations under the Operating Agreement, and (ii) hasthe power, authority and legal right to carry on the business now beingconducted by it and to engage in the transactions contemplated by the OperatingAgreement. The Borrower represents and warrants that the Operating Agreementhas been duly executed and delivered by RE-MM, and the execution and deliveryby RE-MM of, and the carrying out by RE-MM of the transactions contemplated by,the Operating Agreement, and the performance and observance by RE-MM of theterms and conditions thereof, have been duly authorized by all necessaryorganizational action by and on behalf of RE-MM. The Borrower represents andwarrants that the Operating Agreement constitutes the valid and legally bindingobligation of RE-MM and is fully enforceable against RE-MM in accordance withits terms, except to the extent that such enforceability may be limited by lawsgenerally affecting the enforcement of creditors’ rights or principles ofequity.

 

Section 3.2             Other Documents; Laws.

 

The execution and performance of the JuniorLoan Documents and the Project Documents to which Borrower is a party and theconsummation of the transactions contemplated thereby will not conflict with,result in any breach of, or constitute a default under, the organizationaldocuments of Borrower, or any contract, agreement, document or other instrumentto which Borrower is a party or by which Borrower, or any of its respectiveproperties may be bound or affected, and such actions do not and will notviolate or contravene any Law to which Borrower is subject.

 

Section 3.3             Taxes.

 

Borrower has filed all federal, state, countyand municipal Tax returns required to have been filed by Borrower and has paid (orwill pay prior to the due date therefor) all Taxes which have become duepursuant to such returns or pursuant to any Tax assessments received byBorrower unless Borrower is contesting such Taxes in good faith as provided in Section 46of the PAL Lease.

 

Section 3.4             Legal Actions.

 

Except as set forth in Schedule 13hereto, there are no Claims or investigations by or before any court orGovernmental Authority, pending, or to the best of Borrower’s knowledge andbelief, threatened against or affecting Borrower, Borrower’s business or theProperty which could reasonably be expected to have a Material Adverse Effect.Borrower is not in default with respect to any order, writ, injunction, decreeor demand of any court or any Governmental Authority affecting Borrower or theProperty which could reasonably be expected to have a Material Adverse Effect.

 

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Section 3.5             Nature of Junior Loan.

 

Borrower is a business or commercialorganization. The Junior Loan is being obtained solely for business orinvestment purposes, and will not be used for personal, family, household oragricultural purposes.

 

Section 3.6             [Reserved].

 

Section 3.7             Financial Statements.

 

Borrower’s financial statements heretoforedelivered by Borrower to Lender are true and correct in all material respects,have been prepared in accordance with sound accounting principles consistentlyapplied, and fairly present the respective financial conditions of the subjectsthereof in all material respects as of the respective dates thereof.

 

Section 3.8             ERISA and Prohibited Transactions.

 

As of the date hereof and throughout the termof the Junior Loan: (a) Borrower is not and will not be (i) an “employeebenefit plan,” as defined in Section 3(3) of ERISA, (ii) a “governmentalplan” within the meaning of Section 3(32) of ERISA, or (iii) a “plan”within the meaning of Section 4975(e) of the Code; (b) theassets of Borrower do not and will not constitute “plan assets” within themeaning of the United States Department of Labor Regulations set forth in Section 2510.3-101of Title 29 of the Code of Federal Regulations; (c) transactions by orwith Borrower are not and will not be subject to state statutes applicable toBorrower regulating investments of fiduciaries with respect to governmentalplans; and (d) Borrower will not engage in any transaction that wouldcause any Obligation or any action taken or to be taken hereunder (or theexercise by Lender of any of its rights under the Mortgages) or under any ofthe other Senior Loan Documents, Junior Loan Documents or Subordinate LoanDocuments to be a non-exempt (under a statutory or administrative classexemption) prohibited transaction under ERISA or Section 4975 of the Code.Borrower agrees to deliver to Lender such reasonable certifications or otherevidence of compliance with the provisions of this Section as Lender mayfrom time to time request.

 

Section 3.9             Compliance with Zoning and OtherRequirements.

 

The anticipated use of the Property andproposed Improvements comply with applicable zoning ordinances, regulations andrestrictive covenants affecting the Land. All use and other requirements of anyGovernmental Authority having jurisdiction over the Property have been or will,prior to completion of the Improvements, be satisfied. No material violation ofany Law will, upon completion of the Improvements, exist with respect to theProperty.

 

Section 3.10           Plans and Specifications.

 

The Plans and Specifications shall becomplete and adequate for the Construction of the Improvements. The Plans andSpecifications shall be approved by all Governmental Authorities having orclaiming jurisdiction over the Property and by the beneficiary of eachrestrictive covenant affecting the Property whose approval is required. The Plansand Specifications shall also be approved by the Design/Build Contractor. Tothe best of Borrower’s knowledge, the 

 

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Improvements to beconstructed pursuant to the Plans and Specifications, if constructedsubstantially in accordance with the Plans and Specifications, will fullycomply with all applicable Laws (other than as set forth in the InstallationSpecific Development Plans approved by the Army), including those Laws relatingto access and facilities for disabled persons. All construction, if any,already performed by or on behalf of Borrower on the Improvements has beenperformed on the Land in accordance with the Plans and Specifications approvedby the persons named above and with any restrictive covenants applicablethereto and, to the knowledge of Borrower, there are no structural defects insuch existing portions of the Improvements to be constructed pursuant to thePlans and Specifications or violations of any requirement of any GovernmentalAuthorities with respect thereto; the planned use of the Improvements complieswith applicable zoning ordinances, regulations and restrictive covenantsaffecting the Land as well as all environmental, ecological, landmark, andother applicable laws and regulations; and all requirements for such use havebeen satisfied.

 

Section 3.11           Building Permits; Other Permits.

 

All building, construction and other permitsnecessary or required in connection with the Construction of the Improvementshave been validly issued or will be issued in a timely manner by a datesufficient to ensure commencement of construction and Completion ofConstruction in a timely manner. All required fees have been or will be paidand bonds and/or other security have been or will be posted in connection withall permits that have been issued, and adequate amounts have been budgeted byBorrower to pay all fees and the cost of all bonds and other security inconnection with permits to be issued in the future. Borrower will promptlyobtain all permits required from Governmental Authorities to construct theImprovements to be constructed pursuant to the Plans and Specifications and,upon written request from Lender, Borrower shall send copies thereof to Lender.Following the issuance thereof, all permits will remain in full force andeffect as necessary to complete the Improvements to be constructed pursuant tothe Plans and Specifications.

 

Section 3.12           Utilities.

 

Subject to the terms and conditions of theMunicipal Agreement, all utility services necessary for the Construction of theImprovements and the operation thereof for their intended purposes areavailable at the boundaries of the Land (or will be available upon thecompletion of work shown in the Plans and Specifications), including, asapplicable, telephone service, cable television, water supply, storm andsanitary sewer facilities, natural gas and electric facilities, includingcabling for telephonic and data communication.

 

Section 3.13           Access; Roads.

 

All roads and other accesses necessary forthe Construction of the Improvements and utilization thereof for their intendedpurposes have been or shall be completed or the necessary rights of waytherefor have either been or shall be provided by the Army or appropriateGovernmental Authority, or have been or shall be dedicated to public use andaccepted by the Army or such Governmental Authority.

 

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Section 3.14           Other Liens.

 

Except for (a) contracts withcontractors for labor, materials and services furnished or to be furnished inconnection with the Construction of the Improvements, which contractorsBorrower shall pay or cause to be paid in accordance with the applicableSubcontracts from the proceeds of the Junior Loan advanced hereunder, and (b) theSenior Loan Documents, the Junior Loan Documents, the Subordinate LoanDocuments, the Debt Documents (as defined in the Lock Box Agreement), the LockBox Agreement and the Project Documents, Borrower has made no contract orarrangement of any kind the performance of which by the other party theretowould give rise to a lien on the Property, except with respect to encumbrancesof record existing as of the Closing and other encumbrances created by the Armyin accordance with the terms of the Lease.

 

Section 3.15           No Material Adverse Change.

 

No material adverse change which would resultin a Material Adverse Effect has occurred in the financial conditions reflectedin the financial statements of Borrower referred to in Section 3.7 sincethe respective dates of such statements, and no material additional liabilitieshave been incurred by Borrower since the dates of such statements other thanthe borrowings contemplated herein, in the other Senior Loan Documents, in theJunior Loan Documents, in the Subordinate Loan Documents or the ProjectDocuments or as approved in writing by Lender.

 

Section 3.16           Defaults.

 

There is (a) no default by Borrowerunder any of the Junior Loan Documents, (b) no Default (as defined in thePAL Lease) under the PAL Lease that cannot be cured before the end of anyapplicable notice and cure period, (c) no Termination Default (as definedin the PAL Lease) under the PAL Lease, (d) no default that cannot be curedbefore the end of any applicable notice and cure period under any ProjectDocument (other than the PAL Lease), and (e) no “Event of Default” (asdefined therein) under any Senior Loan Document or under any Subordinate LoanDocument, unless in each instance waived in writing by Lender.

 

Section 3.17           Affirmation of Representations andWarranties.

 

Each Draw Request and each receipt of thefunds requested thereby shall constitute an affirmation that (a) therepresentations and warranties of Borrower contained in this Article IIIare true and correct in all material respects as of the date of the DrawRequest (except for exclusions listed therein) and, unless Lender is notifiedto the contrary prior to the disbursement of the Advance requested, will be soon the date of the disbursement, (b) the work completed to the date of theDraw Request is of quality and in all other respects consistent with the Plansand Specifications, and (c) if applicable, construction of theImprovements is proceeding in accordance with the Project Schedule.

 

Section 3.18           Governmental Authorities.

 

There are no actions, suits or proceedingspending, or, to the knowledge of the Borrower, threatened, against or affectingBorrower or the Property, the validity or enforceability of the Mortgages orthe priority of the lien thereof at law, in equity or before or by anyGovernmental 

 

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Authorities which, ifadversely determined, would result in a Material Adverse Effect; to Borrower’sknowledge, it is not in default beyond any applicable notice and cure periodwith respect to any material order, writ, injunction, decree or demand of anycourt or Governmental Authorities.

 

Section 3.19           Prior Work.

 

Borrower has advised the title insurer inwriting prior to the issuance of the title policy insuring Lender whether anysurvey, soils-testing, site-development, excavation or other work related toconstruction of the Improvements was begun or done by or on behalf of Borrowerbefore each related Mortgage was recorded.

 

Section 3.20           Hazardous Materials; Related Claims.

 

To the best of Borrower’s knowledge, exceptfor those conditions listed in the Phase 1, Phase 2 and otherenvironmental reports, the Focused Feasibility Study for Fort Rucker and theArmy’s Environmental Condition of Property reports and the environmentalreports prepared and/or provided for Lender with respect to the Property, (i) theProperty and the Improvements thereon, if any, and the contiguous areas, arenot currently and have not been impacted by the presence of Hazardous Materialsor their effects; and (ii) there are no claims, litigation, administrativeor other proceedings, whether actual or threatened, or judgments or orders,relating to any hazardous or toxic substances or wastes, discharges, emissionsor other forms of pollution relating in any way to the Land or theImprovements, if any, thereon.

 

Section 3.21           Not an Investment Company.

 

Borrower is not an “investment company” or anentity controlled by an “investment company” as such term is defined in theInvestment Company Act of 1940, as amended.

 

Section 3.22           Patriot Act.

 

Borrower is not now, nor has ever been (i) listedon any Government Lists (as hereinafter defined), (ii) a Person who has beendetermined by competent authority to be subject to the prohibitions containedin Presidential Executive Order No. 13224 (September 23, 2001) or anyother similar prohibitions contained in the rules and regulations of OFAC(as hereinafter defined) or in any enabling legislation or other PresidentialExecutive Orders in respect thereof, (iii) indicted for or convicted ofany felony for any Patriot Act Offense, or (iv) under investigation by anyGovernmental Authorities 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 ofany of the several states relating to terrorism or the laundering of monetaryinstruments, including any offense under (A) the criminal laws againstterrorism; (B) the criminal laws against money laundering, (C) theBank Secrecy Act, as amended, (D) the Money Laundering Control Act of1986, as amended, or (E) the Patriot Act. “Patriot Act Offense” alsoincludes the crimes of conspiracy to commit, or aiding and abetting another tocommit, a Patriot Act Offense. For purposes hereof, the term “**Government Lists**” means (1) thespecially designated nationals and blocked persons lists maintained by theOffice of Foreign Assets Control (“**OFAC**”),(2) any other list of terrorists, terrorist organizations or narcoticstraffickers maintained pursuant to any of the rules and regulations ofOFAC that Lender notified Borrower 

 

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in writing is now includedin “Government Lists,” or (3) any similar lists maintained by the UnitedStates Department of State, the United States Department of Commerce or anyother Governmental Authorities or pursuant to any executive order of thePresident of the United States of America that Lender notified Borrower inwriting is now included in “Government Lists.”

 

Section 3.23           Compliance with Laws and ProjectDocuments.

 

Borrower is in material compliance with (a) therequirements of all Project Documents and all other agreements entered into byBorrower as of the date hereof and (b) in all material respects, with therequirements of all applicable Laws; provided, however in certain instancesBorrower may not be in compliance with all Project Documents or with allapplicable laws as of the date hereof; however, Borrower shall implement a cureof any such non-compliance as required pursuant to Condition 9.h. of thePAL Lease.

 

Article IV

Affirmative Covenants andAgreements

 

Section 4.1             Commencement and Completion of Construction.

 

Borrower shall cause the initial Constructionof the Improvements (which are contemplated to be commenced on or before theCommencement Date pursuant to the Design/Build Agreement) to be commenced andprosecuted in a good and workmanlike manner on or before the Commencement Dateand shall cause the Construction of the Improvements to be completed inaccordance with the Design/Build Agreement and PAL Lease and substantially inaccordance with the Plans and Specifications in full on or before the FinalProject Completion Date.

 

Section 4.2             Approval of Construction.

 

(a)           No work associated with the Construction of anycomponent of the Improvements to be constructed by Borrower pursuant to thePlans and Specifications shall be commenced or continued by Borrower unless anduntil the applicable Plans and Specifications for such component (and anychanges thereto) have been approved by Lender to the extent Lender’s approvalis required in accordance with the terms of the Design/Build Agreement and thisAgreement. Lender agrees that, where Lender’s approval is required under theDesign/Build Agreement and this Agreement, such approval shall not beunreasonably withheld, conditioned or delayed and shall be granted or denied inno event later than ten (10) Business Days after the receipt of alldocumentation by the Lender in connection with the request for approval. Inaddition, no work associated with the Construction of any component of theImprovements to be constructed by Borrower pursuant to the Plans and Specificationsshall be commenced or continued by Borrower unless and until the applicablePlans and Specifications for such component (and any changes thereto) have beenapproved by all Governmental Authorities having or claiming jurisdiction overthe Land and Improvements, by the beneficiary of any applicable restrictivecovenant whose approval is required, and by any other party whose approval isrequired under applicable agreements, and unless and until 

 

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all building,construction and other permits necessary or required in connection with theConstruction of such component of the Improvements to be constructed byBorrower pursuant to the Plans and Specifications have been validly issued andall fees, bonds and any other security required in connection therewith havebeen paid or posted.

 

(b)           The Construction Consultant shall receive copies ofall Change Orders in accordance with the Design/Build Agreement.

 

(c)           Except for Change Orders which do notrequire Lender’s approval in accordance with the Design/Build Agreement,Borrower will not amend or supplement the Design/Build Agreement without theprior written consent of Lender (not to be unreasonably withheld conditioned ordelayed). Borrower will not enter into, authorize or permit any Change Orderunder the Design/Build Agreement except in compliance with Section 8.6.2thereof.

 

Section 4.3             Deposits.

 

Any amounts required under the Lock BoxAgreement to be deposited by the Borrower shall be deposited by Borrower inaccordance with the terms of the Lock Box Agreement.

 

Section 4.4             Compliance with Laws; Encroachments.

 

Subject to the provisions of Section 9 of the PAL Lease, theImprovements shall be constructed, maintained and operated in accordance withall applicable (whether present or future) Laws. The Improvements shall beconstructed entirely on the Land, including the land described in the supportleases and licenses in Schedule 14, and shall not encroach upon anyeasement or right-of-way in a manner which would violate such easement orright-of-way, or upon the land of others. Construction of the Improvementsshall occur wholly within all applicable building restriction lines andset-backs, however established, and shall be in strict compliance with allapplicable use or other restrictions and the provisions of any prioragreements, declarations, covenants, restrictions, easements and all applicablezoning and subdivision ordinances and regulations. Borrower covenants andagrees with Lender that it will at its expense use good faith efforts tocomply, subject to the provisions of Section 9 of the PAL Lease, promptlywith all laws, ordinances, orders, rules, statutes and regulations of any courtor any Governmental Authorities or it will timely and at its own expensecontest the validity of any such laws, ordinances, orders, rules, statutes andregulations by appropriate legal proceedings and post a sufficient bond orother security reasonably satisfactory to Lender in connection with suchcontest in order to avoid the filing of a lien against the Property or any partthereof, and upon written request (i) provide Lender with copies of allfilings and correspondence related thereto, (ii) promptly furnish Lenderwith reports of any official searches made by Governmental Authorities and anyclaims of violations thereof, (iii) promptly obtain all permits requiredfrom Governmental Authorities and, within ten (10) days of receipt of suchpermits, send copies thereof to Lender. Notwithstanding the foregoing, if anydelay in compliance with any Laws shall, in the reasonable judgment of Lender,place all or any part of the Property in imminent danger of being forfeited orlost, or if penalties, fines and/or interest shall accrue as a result thereof,Borrower, shall upon notice from Lender, use best efforts to endeavor to complywith such Law as soon as is reasonably practical. Borrower shall comply in allmaterial respects with 

 

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all Laws and all orders, writs, injunctions, decreesand demands of any court or any Governmental Authority affecting Borrower orthe Project, except as otherwise provided in accordance with Section 3.23hereof. Borrower shall use all proceeds of the Junior Loan for business purposeswhich are not in direct contravention of any Law, any Project Document, any Senior Loan Document, any JuniorLoan Document or any Subordinate Loan Document.

 

Section 4.5             Inspections; Cooperation.

 

Borrower shall permit representatives ofLender and the Construction Consultant to enter upon the Land, to inspect theImprovements and any and all materials to be used in connection with thedevelopment of the Land and the construction of the Improvements, to examineall detailed plans and shop drawings and similar materials as well as all ofBorrower’s records and books of account maintained by or on behalf of Borrowerrelating thereto and to discuss the affairs, finances and accounts pertainingto the Junior Loan and the Improvements with representatives of Borrower, subjectto Borrower’s security and the Army’s other rules and regulations.Borrower shall at all times reasonably cooperate and cause the Design/BuildContractor and each and every one of its subcontractors and material suppliersto reasonably cooperate with the representatives of Lender and the ConstructionConsultant in connection with, or in aid of, the performance of Lender’sfunctions under this Agreement (it being acknowledged by Lender that this Section 4.5.shall in no way be deemed to require Borrower to disclose or cause to bedisclosed financial documents relating to the Design/Build Contractor and anysubcontractor or material supplier). Except in the event of an emergency,Lender shall give Borrower at least twenty-four (24) hours’ advance notice inwriting or by telephone in each instance before entering upon the Land and/orexercising any other rights granted in this Section and shall usereasonable efforts not to interfere with the Project and/or the operation ofBorrower’s and its agents’ and representatives’ business during any suchinspection.

 

Section 4.6             Contracts, Vouchers and Receipts.

 

Borrower shall furnish to Lender, promptly onwritten demand, any contracts, subcontracts, bills of sale, statements,receipted vouchers or other agreements of Borrower relating to the developmentof the Land or the Construction of the Improvements, including any such itemspursuant to which Borrower has any claim of title to any materials, fixtures orother articles delivered or to be delivered to the Land or incorporated or tobe incorporated into the Improvements.

 

Section 4.7             Payment and Performance of ContractualObligations.

 

Borrower shall perform in a timely manner allof its obligations under the Design/Build Agreement and any and all otherProject Documents and Borrower will pay when due in accordance with applicableagreements all bills for services or labor performed and materials supplied inconnection with the development of the Land and the construction of theImprovements. Within thirty (30) days after the filing of any mechanic’s lienor other lien or encumbrance against the Property, Borrower will promptlydischarge the same by payment or filing a bond or otherwise as permitted byLaw. So long as Lender’s security has been protected by the filing of a bond orotherwise in a manner satisfactory to Lender in its reasonable discretion (i) Borrowershall have the right to contest in good faith any claim, lien or 

 

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encumbrance, provided thatBorrower does so diligently and without prejudice to Lender, and (ii) thefiling of such lien or encumbrance shall not be grounds for Lender todisapprove any request for a subsequent advance.

 

(a)           Before entering into or terminating any ProjectDocuments (other than a termination, except for the Lease, upon an uncureddefault thereunder), Borrower shall obtain the written consent of Lender (whichconsent is deemed granted with respect to any such contract or agreementreceived by Lender and effective at the Closing) and shall, if required byLender, provide Lender a consent, assignment, subordination and/or attornmentagreement executed by such persons as required by Lender in form and substancesatisfactory to Lender. Before entering into any amendment or supplement to aProject Document, Borrower shall obtain the written consent of Lender (whichconsent shall not be unreasonably withheld, conditioned or delayed).

 

Section 4.8             Correction of Construction Defects.

 

Promptly following any written demand byLender, Borrower shall correct or cause the correction of any structuraldefects in the Improvements to be constructed in accordance with the Plans andSpecifications, any work that fails to comply with the requirements of Section 4.4and any material departures or deviations from the Plans and Specifications.

 

Section 4.9             Insurance.

 

(a)           Borrower shall maintain the following insurance (inaddition to any insurance required by the Project Documents) at its sole costand expense:

 

(i)            Insurance against Casualty to the Property under apolicy or policies covering such risks as are presently included in “specialform” (also known as “all risk”) coverage, including such risks as areordinarily insured against by similar businesses, but in any event, includingwind, fire, lightning, windstorm, hail, explosion, riot, riot attending astrike, civil commotion, damage from aircraft, smoke, vandalism, and maliciousmischief and acts of terrorism. Such insurance shall name Lender as mortgageeand loss payee. Unless otherwise agreed in writing by Lender, such insuranceshall be for the full insurable value of the Property, except for NamedWindstorm, Earthquake and Flood. The insurance policy shall be written withoutany co-insurance. Deductible amounts are to be commercially reasonable withstandard and customary catastrophe peril deductibles for property damage andbusiness interruption combined which shall be satisfactory to Lender. No suchproperty insurance as set forth in this Section shall be required withrespect to lodging units that are scheduled for demolition. No policy ofinsurance shall be written such that the proceeds thereof will produce lessthan the minimum coverage required by this Section by reason ofco-insurance provisions or otherwise. The term “full insurable value” means onehundred percent (100%) of the actual replacement cost of the Property(excluding foundation and excavation costs and costs of underground flues,pipes, drains and other underground items). Notwithstanding the foregoing,Named Windstorm and Earthquake Insurance limits will only be required in anamount not less than the 

 

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PML (ProbableMaximum Loss) on a blanket basis except full replacement coverage for NamedWindstorm will be provided if specific coverage is purchased unless full limitsare not commercially available at reasonable premiums). Such policies shallname Lender as additional insured and loss payee.

 

(ii)           Commercial general liability insurance on an “occurrence”basis against claims for “personal injury” liability and liability for death,bodily injury and damage to property, products and completed operations, inlimits of $35,000,000 with respect to any one occurrence and the aggregate ofall occurrences during any given annual policy period. Such insurance shallname Lender as an additional insured.

 

(iii)          During any period of construction upon the Property,Borrower shall maintain, or cause others to maintain, builder’s risk insurance(non-reporting form) of the type customarily carried in the case of similarconstruction for one hundred percent (100%) of the full replacement cost ofwork in place and materials stored at or upon the Property. Such insurance maycontain sub limits for transit, materials stored off site, flood, earthquake,named wind and debris removal.

 

(iv)          Workers’ compensation insurance for all employees ofBorrower in such amount as is required by Law and including employer’sliability insurance, if required by Lender.

 

(v)           If at any time any portion of any structure on theProperty is insurable against Casualty by flood and is located in a SpecialFlood Hazard Area under the Flood Disaster Protection Act of 1973, as amended,a flood insurance policy in form and amount acceptable to Lender but in noevent less than the amount sufficient to meet the requirements of applicableLaw as such requirements may from time to time be in effect..

 

(vi)          Loss of rental value insurance or businessinterruption insurance in an amount acceptable to Lender but in no event shallthe rental value or business interruption loss provision be in an amount lessthan the semiannual rental income of the Project. Lender will be added as aloss payee.

 

(vii)         Environmental Impairment Liability Insurance in suchamounts as required by Lender at or prior to the Closing.

 

(viii)        Such other and further insurance as may be requiredfrom time to time by Lender in order to comply with regular requirements andpractices of Lender in similar transactions, so long as any such insurance isgenerally available at commercially reasonable premiums as mutually agreed uponby Lender and Borrower from time to time.

 

(b)           In addition to the foregoing, Borrower shall cause theDesign/Build Contractor to provide and maintain commercial general liability insurance and workers’ 

 

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compensationinsurance for all employees of the Design/Build Contractor meeting,respectively, the requirements of Subsections (a)(ii) and (iv),above.

 

(c)           Each policy of insurance (i) shallbe issued by one or more insurance companies each of which must have an A.M.Best Company financial and performance rating of A-IX or better or a minimumS&P rating of “A-” and are qualified or authorized by the respective Lawsof the State in which the Property is located to assume the risks covered bysuch policy, (ii) with respect to the insurance described under thepreceding Subsections (a)(i), (a)(iii), (a)(v) and (a)(vi), shallhave attached thereto standard non-contributing, non-reporting mortgageeclauses in favor of and entitling Lender without contribution to collect anyand all proceeds payable under such insurance, either as sole payee or as jointpayee with Borrower and the Senior Lender and Subordinate Lender, (iii) shallprovide that such policy shall not be canceled or materially modified withoutat least thirty (30) days prior written notice to Lender, but only ten (10) daysif such cancellation is due to non-payment of premiums, and (iv) shallprovide that any loss otherwise payable thereunder shall be payablenotwithstanding any act or negligence of Borrower which might, absent suchagreement, result in a forfeiture of all or a part of such insurance payment.Borrower shall promptly pay all premiums when due on such insurance and, notless than fifteen (15)**days prior to the expiration datesof each such policy, Borrower will deliver to Lender acceptable evidence ofinsurance, such as a certificate of insurance, a renewal policy or policiesmarked “premium paid” or other evidence satisfactory to Lender reflecting thatall required insurance is current and in force. Borrower will promptly giveNotice to Lender of any cancellation of, or material change in, any insurancepolicy. Lender shall not, because of accepting, rejecting, approving orobtaining insurance, incur any liability for (x) the existence,nonexistence, form or legal sufficiency thereof, (y) the solvency of anyinsurer, or (z) the payment of losses. Borrower may satisfy any insurancerequirement hereunder by providing one or more “blanket” insurance policiescovering other projects, subject to Lender’s approval in each instance as tolimits, coverages, forms, deductibles, inception and expiration dates, andcancellation provisions. During any period of construction, the Borrower mayprovide the commercial general liability and workers’ compensation required inSubsections (a)(ii) and (a)(iv) of this Section 4.9 throughthe purchase of a wrap up contractor controlled insurance program sponsored bythe Design/Builder. This program shall provide coverage for the Borrower andall parties engaged in construction or operations of the Project, subject toLender’s review and approval.

 

Section 4.10           Adjustment of Condemnation and InsuranceClaims.

 

Borrower shall give prompt Notice to Lenderof any Casualty or any Condemnation or threatened Condemnation which isthreatened in writing. Lender is authorized, at its sole and absolute option,to commence, appear in and prosecute, in its own or Borrower’s name, any actionor proceeding relating to any Condemnation or Casualty, and to make proof ofloss for and to settle or compromise any Claim in connection therewith. In suchcase, Lender shall, subject to the provisions of the Lease, have the right toreceive all Condemnation Awards and Insurance Proceeds, and may deducttherefrom any or all of its Expenses. However, so long as no Event of Defaulthas occurred and is continuing and Borrower is diligently pursuing its rightsand remedies with respect to a Claim, Borrower will obtain Lender’s writtenconsent (which consent 

 

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shall not be unreasonablywithheld, conditioned or delayed) before making proof of loss for or settlingor compromising each Claim if Lender is not exercising any of its rightspursuant to this Section, except Borrower shall have the right to make proof ofloss for all covered property insurance claims without Lender’s written consentif less than $2,000,000. Borrower agrees to diligently assert its rights andremedies with respect to each Claim and to promptly pursue the settlement andcompromise of each Claim subject to Lender’s approval, which approval shall notbe unreasonably withheld, conditioned or delayed, except approval is grantedherein for covered property insurance claims less than $2,000,000. If, prior tothe receipt by Lender of any Condemnation Award or Insurance Proceeds, theProperty shall have been sold pursuant to the provisions of the applicableMortgage, Lender shall have the right to receive such funds (a) to theextent of any deficiency found to be due upon such sale with interest thereon(whether or not a deficiency judgment on the applicable Mortgage shall havebeen sought or recovered or denied), and (b) to the extent necessary toreimburse Lender for its Expenses. Notwithstanding anything herein to thecontrary, all Condemnation Awards and Casualty Proceeds shall be applied inaccordance with the Lease and the Lock Box Agreement. If any CondemnationAwards or Casualty Proceeds are paid to Borrower, Borrower shall immediately(and no later than ten (10) days after Borrower’s receipt thereof) depositthe same in accordance with the Lock Box Agreement, except to the extentalready distributed to Borrower in accordance with the preceding sentence.Notwithstanding anything contained in this Section to the contrary, solong as any Obligations remain outstanding, no Condemnation Awards or CasualtyProceeds shall be distributed to Borrower or on behalf of Borrower other thanpursuant to the provisions of the Lock Box Agreement if Borrower elects not torepair, rebuild or restore the portion of the Project subject to any suchCasualty or Condemnation. Borrower agrees to execute and deliver from time totime, upon the request of Lender, such further instruments or documents as maybe reasonably requested by Lender to confirm the grant and assignment to Lenderof any Condemnation Awards or Insurance Proceeds.

 

Section 4.11           Utilization of Net Award.

 

Net Award must be applied in accordance withthe Lock Box Agreement.

 

Section 4.12           Management.

 

(a)           Borrower at all times shall provide for the competentand responsible maintenance, management and operation of the Property inaccordance with the requirements of the Lease. Borrower shall maintainmanagerial and operational control of the Project at all times while the JuniorLoan is outstanding; provided, however, that Borrower may assign management,maintenance and/or operation of the Project to affiliates of Actus and maycontract with InterContinental Hotel Group, Inc., or an affiliate thereof,or another hotel manager reasonably acceptable to Lender to manage and operatethe Project hotels. Any management contract or contracts affecting the Propertymust be approved in writing by Lender (not to be unreasonably withheld conditionedor delayed) prior to the execution of the same and must be subordinate to theMortgages (provided that Lender provides such contractor with customarynon-disturbance rights which are in no event less expansive than thenon-disturbance rights offered to InterContinental Hotel Group, Inc., orits affiliate, at the Closing). Any such management 

 

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contract must becollaterally assigned, by an instrument or instruments in form and substancereasonably satisfactory to Lender, to Lender as security for the Junior Loan.

 

(b)           Borrower may assign the duties of management,maintenance and/or operation of the Project upon prior written consent ofLender, which consent shall not be unreasonably withheld, conditioned ordelayed. All management, maintenance and/or operation contracts with suchassignees must be approved in writing by Lender prior to the execution of thesame, which approval shall not be unreasonably withheld, conditioned ordelayed. All such contracts must be collaterally assigned by Borrower toLender. Notwithstanding the foregoing, Lender acknowledges that Borrower willengage the Asset Manager, Hotel Operator and Development Manager to providecertain asset management, business management, property management, hotelmanagement, development management and property maintenance services withrespect to the Project and hereby consents to Borrower’s agreements with suchPersons dated as of the date hereof.

 

(c)           No contract approved by Lender pursuant to this Section 4.12may be amended in any material respect without the prior written consent ofLender (not to be unreasonably withheld, conditioned or delayed).

 

Section 4.13           Books and Records; Financial Statements;Tax Returns.

 

(a)           Borrower will keep and maintain (or cause to bemaintained) full and accurate books and records administered in accordance withsound accounting principles, consistently applied, showing in detail theearnings and expenses of the Property and the operation thereof. Borrower willkeep and maintain its books and records, including recorded data of any kindand regardless of the medium of recording, at the place or places requiredunder the Lease. Borrower shall permit Lender, or any Person authorized byLender, to inspect and examine such books and records (regardless of wheremaintained) and all supporting vouchers and data and to make copies andextracts therefrom at all reasonable times and as often as may be reasonablyrequested by Lender. Borrower will furnish or cause to be furnished to Lenderannual financial statements, including balance sheets and income statements,for Borrower, and the Property, within one hundred twenty (120) days after eachfiscal year end of Borrower. In addition, Borrower will furnish or cause to befurnished to Lender, with reasonable promptness, such interim financialstatements of Borrower and the Property, together with such additionalinformation, reports or statements in connection therewith, as Borrower isrequired to provide to the Army under Condition 32.c of the PAL Lease. All financialstatements must be in form and detail acceptable to Lender and must becertified as to accuracy by Borrower, and the annual financial statements mustbe audited with an opinion satisfactory to Lender by an independent certifiedpublic accountant satisfactory to Lender. Borrower shall provide, uponLender’s reasonable request, convenient facilities for the audit andverification of any such statement.

 

(b)           Borrower shall provide Lender with certified quarterlyprofit and loss statements related to Project operations (including, withoutlimitation, property operating statements of revenue and expenses and a balancesheet prepared in accordance with 

 

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GAAP and astatement of liabilities), within sixty (60) days following the end of eachfiscal quarter of Borrower, in form and detail reasonably acceptable to Lender.Borrower shall provide the monthly Project dashboard report that Borrower isrequired to provide to the Army under Condition 32.a of the PAL Lease withintwenty-five (25) days following the end of each calendar month.

 

(c)           Within sixty (60) days of the end of each fiscalquarter of Borrower, Borrower shall furnish to Lender with: (i) acertification of compliance with Senior Lender’s loan covenants under theSenior Loan Documents and the Subordinate Lender’s loan covenants under theSubordinate Loan Documents with no existing or ongoing “Default” or “Event ofDefault,” and (ii) to the extent available and subject to cancellation,group reservations for next twelve-months.

 

(d)           All financial statements shall be prepared inaccordance with the Accounting Principles (as defined in the PAL Lease)consistently applied and shall fairly present the financial condition ofBorrower as of the respective dates thereof. The Borrower shall provide, uponthe Lender’s reasonable request, facilities for the audit and verification ofany such statement. All certifications and signatures on behalf ofcorporations, partnerships, limited liability companies and other entitiesshall be by a representative of the reporting party satisfactory to Lender.

 

(e)           Upon request of Lender, Borrower will deliver, orcaused to be delivered, to Lender all reports and other information thatBorrower delivers, or causes to be delivered, to Senior Lender.

 

(f)            The information described in this Section to beprovided to Lender may be transmitted electronically, unless hard copies areotherwise requested by Lender.

 

Section 4.14           Estoppel Certificates.

 

Within ten (10) days after anyreasonable request by Lender or a proposed assignee or purchaser of the JuniorLoan or any interest therein, Borrower shall certify in writing to Lender, orto such proposed assignee or purchaser, the then unpaid balance of the JuniorLoan and whether Borrower claims any right of defense or setoff to the paymentor performance of any of the Obligations, and if Borrower claims any such rightof defense or setoff, Borrower shall give a detailed written description of suchclaimed right.

 

Section 4.15           Taxes.

 

Borrower shall pay and discharge (or cause tobe paid and discharged) all Taxes prior to the date on which penalties areattached thereto unless and to the extent only that such Taxes are contested inaccordance with the terms of the Mortgages. Borrower shall, at its sole costand expense, do, execute, acknowledge and deliver (or cause to be done,executed, acknowledged and delivered) all and every such acts, informationreports, returns and withholding of monies as shall be necessary or appropriateto comply fully, or to cause full compliance, with all applicable informationreporting and back-up withholding requirements of the Internal Revenue Code of1986, as amended (including all regulations promulgated thereunder) in respectof the Property, and all transactions related to the Property and shall at alltimes provide Lender with reasonably 

 

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satisfactory evidence ofsuch compliance and notify Lender of the information reported in connectionwith such compliance.

 

Section 4.16           Lender’s Rights to Pay and Perform.

 

If, after any required notice, Borrower failsto promptly pay or perform any of the Obligations within any applicable graceor cure periods, Lender, without Notice to or demand upon Borrower, and withoutwaiving or releasing any Obligation or Default, may (but shall be under noobligation to) at any time thereafter make such payment or perform such act forthe account and at the expense of Borrower. Upon the occurrence and during thecontinuance of an Event of Default, Lender may enter upon the Property for thatpurpose and take all action thereon as Lender reasonably considers necessary orappropriate. At the option of Lender, following the occurrence and during thecontinuance of an Event of Default, Lender may apply any undisbursed JuniorLoan proceeds to the satisfaction of such Event of Default. Without limitingthe generality of the foregoing, following the occurrence and during thecontinuance of an Event of Default, Lender may pay directly from theundisbursed proceeds of the Junior Loan all interest bills rendered by Lenderin connection with the Junior Loan, and make advances directly to theDesign/Build Contractor, the title insurance company, any subcontractor ormaterial supplier, the lessor under the Lease, any manager or supplier of theProject, any provider of utility services, or to any of them jointly. Theexecution hereof by Borrower shall, and hereby does, constitute an irrevocableauthorization so to advance the undisbursed proceeds of the Junior Loanfollowing the occurrence and during the continuance of an Event of Default. Nofurther direction or authorization from Borrower shall be necessary to warrantsuch direct advances. Each Advance shall be secured by the Mortgages and shallsatisfy the obligations of Lender hereunder to the extent of the amount of theadvance.

 

Section 4.17           Reimbursement; Interest.

 

If Lender shall incur any Expenses or pay anyClaims by reason of the Junior Loan or the rights and remedies provided underthe Junior Loan Documents (regardless of whether or not any of the Junior LoanDocuments expressly provide for an indemnification by Borrower against suchClaims), Lender’s payment of such Expenses and Claims shall constitute advancesto Borrower which shall be paid by Borrower to Lender on demand, together withinterest thereon from the date incurred until paid in full at the rate ofinterest then applicable to the Junior Loan under the terms of the Junior Note.Each Advance shall be secured by the Mortgages and the other Junior LoanDocuments as fully as if made to Borrower, regardless of the dispositionthereof by the party or parties to whom such Advance is made. Notwithstandingthe foregoing, however, in any action or proceeding to foreclose the Mortgagesor to recover or collect the Obligations, the provisions of Law governing therecovery of costs, disbursements and allowances shall prevail unaffected bythis Section.

 

Section 4.18           Notification by Borrower.

 

Borrower will promptly give Notice to Lenderof the occurrence of any Default or Event of Default hereunder or under any ofthe other Junior Loan Documents or any event of default by Borrower afterapplicable notice and cure periods under the Project Documents or any materialdefault under the Project Documents (except for the PAL Lease) and any Defaultor Termination 

 

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Default (as such capitalizedterms are defined in the PAL Lease) under the PAL Lease. Borrower shallpromptly provide notice to Lender of a “Default” and/or “Event of Default” (assuch terms are defined in the Subordinate Loan Documents and the Senior LoanDocuments) under the Subordinate Loan Documents or the Junior Loan Documents.

 

Section 4.19           Indemnification by Borrower.

 

Borrower agrees to release and to indemnifythe Indemnified Parties and to hold the Indemnified Parties harmless from andagainst, and to defend Lender by counsel reasonably approved by Lender against,any and all Claims directly or indirectly arising out of or resulting from anytransaction, act, omission, event or circumstance in any way connected with theProperty or the Junior Loan, including any Claim arising out of or resultingfrom (a) construction of any Improvements, including any defectiveworkmanship or materials; (b) any failure by Borrower to comply with therequirements of any Laws or to comply with any agreement that applies orpertains to the Property, including any agreement with a broker or “finder” inconnection with the Junior Loan or other financing of the Property; (c) anyfailure by Borrower to observe and perform any of the obligations imposed uponthe lessee under the Lease or Project Documents; (d) any other Default orEvent of Default hereunder or under any of the other Junior Loan Documents; (e) anyassertion or allegation that an Indemnified Party is liable for any act oromission of Borrower or any other Person in connection with the ownership,development, financing, leasing, operation or sale of the Property; (f) theClaims of any broker or finder arising by reason of the execution hereof or themaking of the Junior Loan; (g) Environmental Matters; or (h) anyfraud or material misrepresentation by Borrower. The agreements andindemnifications contained in this Section shall apply to Claims arisingboth before and after the repayment of the Junior Loan and shall survive therepayment of the Junior Loan, any foreclosure or deed, assignment or conveyancein lieu thereof and any other action by Lender to enforce the rights andremedies of Lender hereunder or under the other Junior Loan Documents. Borrowershall employ suitable means to protect from theft or vandalism all portions ofthe Improvements and all tools and building materials stored on the Land. Upondemand by an Indemnified Party, Borrower shall diligently defend anyEnvironmental Claim which relates to the Project or is threatened or commencedagainst such Indemnified Party, all at Borrower’s own cost and expense and bycounsel to be approved by Lender in the exercise of its reasonable judgment. Inthe alternative, Lender may elect, at any time and for any reason, to conductits own defense through counsel selected by Lender and at the reasonable costand expense of Borrower. Notwithstanding the foregoing, in no event shallBorrower be required to release, indemnify or hold harmless an IndemnifiedParty for any Claims to the extent resulting from such Indemnified Party’sgross negligence or willful misconduct.

 

Section 4.20           Fees and Expenses.

 

Borrower shall pay all reasonable anddocumented fees, charges, costs and Expenses required to satisfy the conditionsof the Junior Loan Documents. Without limitation of the foregoing, (a) Borrowerwill pay, when due, and if paid by Lender will reimburse Lender on demand for,all reasonable and documented fees and expenses of the Construction Consultant,the title insurer, environmental engineers, appraisers, surveyors and Lender’soutside counsel in connection with the Closing and the administration, modificationor any “workout” of the Junior Loan, or the enforcement of Lender’s rights andremedies under any of the Junior Loan 

 

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Documents; and (b) Borrowershall pay all filing, registration or recording fees, and all reasonable anddocumented expenses incident to the execution, delivery, acknowledgment andrecording or filing, as applicable, of the Mortgages, any mortgage supplementalthereto, any security instrument with respect to the Personalty, and any instrumentof further assurance, and any Expenses (including reasonable attorneys’ feesand disbursements) and all federal, state, county and municipal stamp, mortgageor recording taxes and other taxes, duties, impositions, imposes, fees, costs,expenses, assessments and charges arising out of or in connection with theexecution and delivery of the Junior Note, the Mortgages or any mortgagesupplemental thereto, any security instrument with respect to the Personalty orany instrument of further assurance.

 

Section 4.21           Appraisals.

 

Lender may obtain from time to time anappraisal of all or any part of the Property, prepared in accordance withwritten instructions from Lender, from a third-party appraiser satisfactory to,and engaged directly by, Lender. Notwithstanding the foregoing, the cost ofeach such appraisal obtained by Lender shall be at Lender’s sole cost andexpense, except that, following the occurrence and during the continuance of anEvent of Default, or in the event of a request by Borrower for a renewal,extension or modification of the Junior Loan, such cost of one such appraisalper calendar year shall be borne by Borrower and shall be paid by Borrower ondemand. Borrower shall provide reasonable access to the Property to any suchappraiser as reasonably necessary to complete the appraisal; provided, however,that in connection with any such access, such third-party appraiser shall usereasonable efforts not to interfere with the Project and/or the operation ofBorrower’s and its agents’ and representatives’ business during any suchinspection.

 

Section 4.22           Yearly Budget Approvals.

 

Lender shall have the same right to reviewand approve the Yearly Budget and each of its components as the Hotel Operatorhas under the Hotel Operating Agreement. Borrower shall promptly provide toLender copies of the draft Yearly Budget that it receives from Hotel Operator.Lender acknowledges that such review and approval shall be subject to the timeperiods and dispute resolutions provisions set forth in the Hotel OperatingAgreement.

 

Section 4.23           [Reserved].

 

Section 4.24           Permanent Loan/Capital MarketsTransaction.

 

Borrower covenants that the proceeds of anypermanent loan or capital markets transaction entered into following theClosing will be used first to repay the Senior Loan and then the Junior Loan,net of financing costs.

 

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Section 4.25           [Reserved].

 

Section 4.26           [Reserved].

 

Section 4.27           [Reserved].

 

Section 4.28           Organizational Documents.

 

Without limiting any other provisions hereofthat restrict the ability of Borrower to incur or extend any indebtedness,Borrower shall comply with all of the provisions of its articles of organization and operating agreement and shall notmodify any of the provisions in Section 25, 26 or 27 of the OperatingAgreement (collectively, the “**SPE Provisions**”)without Lender’s written consent (not to be unreasonably withheld, conditionedor delayed.)

 

Section 4.29           Subordination.

 

Without limiting any other provisions hereofthat restrict the ability of Borrower to incur or extend any indebtedness,Borrower covenants and agrees with Lender that it will subordinate to the lienof the Mortgages any Loans made (a) by Borrower to any other entity ownedor controlled by the principals of Borrower or (b) by any entity owned orcontrolled by the principals of Borrower to Borrower and to deliver to Lenderany and all agreements and or other documents reasonably requested by Lenderand Lender’s legal counsel in connection with such subordination whichdocuments and agreements shall be reasonably satisfactory in all materialrespects to Lender and Lender’s legal counsel.

 

Section 4.30           Patriot Act.

 

Borrower shall comply in all respects withthe Patriot Act.

 

Section 4.31           Single Purpose Covenants.

 

Until the Obligations have been indefeasiblypaid to the Lender in cash and all obligations of the Borrower under thisAgreement and the other Junior Loan Documents have terminated, Borrower shallobserve and comply with the following covenants:

 

(a)           Borrower shall limit the nature, purpose and conductof its business to engage solely in the following activities:

 

(i)            To construct, own, hold, sell, assign, transfer,operate, lease, mortgage, pledge and otherwise deal with the Property and theImprovements as contemplated hereby; and

 

(ii)           To exercise all powers enumerated in the LimitedLiability Company Act or Business Corporation Law of the State of Delawarenecessary or convenient to the conduct, promotion or attainment of the businessor purposes otherwise set forth herein and for no other purpose.

 

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(b)           The Borrower shall only incur indebtedness in anamount necessary to (i) acquire, hold, own, manage, finance, re-finance,operate, lease, maintain, design, develop, improve, demolish, rehabilitate,renovate, alter and/or dispose of the Project (including additions thereto) inaccordance with the terms of the PAL Lease and the other Operative Documents, (ii) asapplicable, to acquire, hold, own, manage, finance, re-finance, operate, lease,maintain, design, develop, improve, demolish, rehabilitate, renovate, alter and/ordispose of additional property reasonably related to the purposes specified inthe preceding clause (i) at or in the vicinity of any Installation inaccordance with the terms of the PAL Lease and the other Operative Documentsand (iii) to engage in any or all lawful activities incidental to theforegoing. For so long as the Obligations remain unpaid and the liens andsecurity interests of the Mortgages exist on any portion of the Property, theBorrower shall not (i) incur, assume, or guaranty any other indebtedness,other than (x) the Senior Loan, the Junior Loan, the Subordinate Loan andthe Swap Obligations, (y) trade payables or accrued expenses incurred inthe ordinary course of business of owning and operating the Property and dueand payable within thirty (30) days, and (z) financing for furniture,fixture and equipment that has been approved by the Lender in advance, suchapproval not to be unreasonably conditioned, withheld or delayed, (ii) grantany lien(s) or security interest(s) in the Property other than to theLender or as specifically approved by Lender, (iii) dissolve or liquidate,or consolidate or merge with or into any other entity, or convey or transferits properties and assets substantially as an entirety or transfer any of itsbeneficial interests to any entity, (iv) voluntarily commence a case withrespect to itself, as debtor, under the Federal Bankruptcy Code or any similarfederal or state statute without the unanimous consent of all of the members ofthe limited liability company, or (v) except with respect to suchamendments which are required to effectuate any action by Borrower which isexpressly permitted herein, make any material amendment to its articles oforganization or operating agreement without first notifying the Lender of suchamendment and obtaining the prior written approval of the Lender (whichapproval will not be unreasonably withheld, conditioned or delayed).

 

(c)           Borrower shall observe and comply with the SPEProvisions.

 

Section 4.32           Preservation of Rights.

 

Borrower shall obtain, preserve and maintain(or cause to be obtained, preserved and maintained) in good standing, asapplicable, all rights, privileges and franchises necessary for the operationof the Project and the conduct of Borrower’s business thereon or therefrom.

 

Section 4.33           Income from Project; Rents.

 

Rents and all other income derived from or inrelation to the Project shall be deposited and applied in accordance with theLock Box Agreement.

 

Section 4.34           Notice to Lender.

 

If, at any time, Borrower becomes aware, orhas reasonable cause to believe, that any Release or threatened Release of anyHazardous Material has occurred after the date hereof or 

 

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will occur at the Project,or if Borrower identifies or otherwise becomes aware of any noncompliance oralleged non-compliance with any Environmental Requirement by Borrower or at theProject, any threatened or pending Environmental Claim related to the Projector any event or condition which would reasonably be expected to result in anEnvironmental Claim, Borrower shall notify Lender promptly in writing of suchcircumstance and shall include a full description of all relevant information.Borrower shall, upon receipt, promptly deliver to Lender a copy of any report,audit, summary or investigation, of any kind or character, whether prepared byor on behalf of Borrower or by any other Person, related to environmentalconditions at the Project or the compliance status of the Project with respectto any Environmental Requirement.

 

Section 4.35           Site Assessments and Information.

 

If Lender shall ever havereasonable cause to believe that any Release or threatened Release of aHazardous Material or any non-compliance with any Environmental Requirement hasoccurred after the date hereof with respect to the Project, which Release wouldreasonably be expected to result in an Environmental Claim related to theProperty which materially adversely affects the ability of Borrower to performthe Obligations, then Borrower shall, within ninety (90) days of writtenrequest by Lender and at Borrower’s expense, provide to Lender an environmentalsite assessment or compliance audit of the Project which addresses suchconditions. Such environmental site assessment or compliance audit (or both)shall be performed to the reasonable satisfaction of Lender, in accordance withgood environmental engineering practices and by a consulting firm reasonablyacceptable to Lender. Each report shall be addressed to Lender. A copy of eachreport and all supporting documents (including, without limitation, anyreliance letters required by Lender) shall be promptly furnished toLender.  Simultaneously with the deliveryof such supplemental environmental reports, Borrower will provide an updatedreliance letter from Tetra Tech to the effect that Lender may rely upon thesupplemental environmental reports delivered to Lender after delivery of theinitial Phase I and Phase II environmental reports to at least the same extentthat Lender was entitled to rely on the initial Phase I and Phase IIenvironmental reports.

 

Section 4.36           Response to Releases, Non-Compliance andEnvironmental Claims.

 

Except to the extent the responsibility forsuch matters is retained by the Army pursuant the Lease, Borrower shall, incompliance with all Environmental Requirements, promptly undertake and completeany and all investigations, testing, or abatement, clean up, remediation,response or other corrective action necessary to: (a) remove, remediate,clean up or abate any Release or threatened Release of any Hazardous Materialat or from the Project; (b) correct any non-compliance with anyEnvironmental Requirement by Borrower or at the Project; (c) address anyunsafe or hazardous condition at the Project resulting from or related to anyHazardous Material; or (d) make an appropriate response to any threatenedor pending Environmental Claim related to Borrower or the Project, in all casesto the extent required by Environmental Laws. A copy of any such report or otherdocument (and all supporting documents) shall be promptly furnished to Lender.Borrower shall use commercially reasonable efforts to enforce the obligationsof the Army under the Lease with respect to any Environmental Requirements.

 

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Section 4.37           Delivery and Maintenance of Payment andPerformance Bond.

 

Borrower shall cause to be delivered prior tothe commencement of construction and maintained throughout the period requiredin the Design/Build Agreement, payment and performance bonds or such otherinstruments satisfying the requirements of Section 3.24.1 of theDesign/Build Agreement, including a dual oblige rider in favor of Lender.

 

Section 4.38           Intercreditor Agreement.

 

Borrower has read and consents to theprovisions of the Intercreditor Agreement (including, without limitation, Section 12(g) andExhibit E thereto).

 

Article V

Negative Covenants

 

Section 5.1             Conditional Sales.

 

Borrower shall not incorporate in theImprovements any property acquired under a conditional sales contract or leaseor as to which the vendor retains title or a security interest, without theprior written consent of Lender.

 

Section 5.2             Changes to Plans and Specifications.

 

Borrower shall not make or permit any changesin the Plans and Specifications, including any such changes that alter,diminish or add to the work to be performed or change the design of theImprovements, without the prior written consent of Lender to the extent thatLender’s consent is required under the Design/Build Agreement, including Section 8.6.2thereof.

 

Section 5.3             Insurance Policies and Bonds.

 

Borrower shall not do or permit to be doneanything that would affect the coverage or indemnities provided for pursuant tothe provisions of any insurance policy, performance bond, labor and materialpayment bond or any other bond, or the Construction Guaranty given inconnection with the development of the Land or the construction of theImprovements.

 

Section 5.4             Commingling.

 

Borrower shall not commingle the funds andother assets of Borrower with those of any affiliate or any other Person exceptas otherwise permitted by the Lock Box Agreement.

 

Section 5.5             Additional Debt.

 

Borrower shall not incur any debt, secured orunsecured, direct or contingent (including guaranteeing any obligation), otherthan (a) the Senior Loan, (b) any Swap Obligations of Borrower underany Swap Transaction permitted under the Senior Loan Agreement, (c) theJunior Loan, (d) the Subordinate Loan and any other subordinated debt approvedby Lender in connection with the Closing, (e) its obligations under theProject Documents, and (f) advances, leases or trade debt or accruedexpenses incurred in the ordinary course of business of operating, 

 

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using, maintaining, managingor leasing the Project. No debt other than the Junior Loan may be secured bythe Project, whether senior, subordinate or *pari passu* solong as any Obligations remain outstanding, except for the Senior Loan, the SubordinateLoan, any Swap Obligations of Borrower under any Swap Transaction permittedunder the Senior Loan Agreement, and any other secured subordinated debtapproved by Lender in connection with the Closing.

 

Section 5.6             Compliance with Environmental Requirements.

 

Borrower will not cause or commit, and willnot permit or allow any employee, contractor, or other agent of Borrower tocontinue to cause or commit: (a) any non-compliance with any EnvironmentalRequirement by Borrower, by or with respect to the Project or any use of orcondition or activity at the Project; (b) the generation, storage or useof any Hazardous Material at the Project, except for Hazardous Materials thatare legally used, stored or generated as a consequence of using the Project forits permitted business purposes, but only so long as the use, storage orgeneration of such Hazardous Materials is in compliance with all EnvironmentalRequirements; (c) the treatment, disposal or Release of any HazardousMaterial at the Project in any manner that violates an Environmental Law orcould reasonably be expected to result in a Environmental Claim; (d) exceptas permitted by subsection (b) of this Section, the installation ofany below-ground storage tanks containing Hazardous Materials at the Project; (e) exceptas permitted by subsection (b) of this Section, any other activitywhich could create any unsafe or hazardous condition resulting from or relatedto Hazardous Materials at the Project; or (f) the attachment of anyenvironmental lien to the Project. Borrower shall perform all reasonableactions necessary to protect the fair market value of the Project fromimpairment as a result of Hazardous Materials.

 

Section 5.7             Lease.

 

So long as any Obligations remainoutstanding, Borrower will not terminate the Lease, Borrower will comply withall requirements of the Lease and Borrower will not amend or supplement theLease without the written consent of Lender (not to be unreasonably withheld,conditioned or delayed).

 

Section 5.8             Swap Contracts.

 

Except as provided in the Senior LoanAgreement and in accordance with the terms thereof, Borrower shall not incurany Swap Obligations or enter into any Swap Contract without the prior writtenconsent of Lender (such consent to be not unreasonably withheld, provided thatsuch consent may be conditioned on intercreditor, security or lien issues).

 

Section 5.9             Construction.

 

Borrower covenants that no construction,other than (i) such work as is necessary for Borrower to be in compliancewith the terms and conditions of the Lease (including, without limitation,Conditions 21 and 22 of the PAL Lease), and (ii) the work which isotherwise contemplated in the Closing documents (including, without limitation,the Design/Build Agreement and Change Orders thereto), as the same may beamended, will take place during the term of the Loan without Lender’s consent(such consent not to be unreasonably withheld 

 

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conditioned or delayed). Theparties agree and acknowledge that such work consists of the LSCR Phase of theProject, as described in the Lease.

 

Section 5.10           Project Document Modifications.

 

Before entering into any amendment orsupplement to a Project Document, Borrower shall obtain the written consent ofLender (which consent shall not be unreasonably withheld, conditioned ordelayed).

 

Article VI

Events of Default.

 

The occurrence or happening, from time totime, of any one or more of the following shall constitute an Event of Defaultunder this Agreement:

 

Section 6.1             Payment Default.

 

Borrower fails to pay principal or interestwhen due and payable under the Junior Note (without any notice or cure period),or Borrower fails to pay any other Obligation due and payable under thisAgreement within thirty (30) days after its receipt of written notice fromLender that such Obligation is then due and payable.

 

Section 6.2             Default Under Other Junior Loan Documentsand Project Documents.

 

An “event of default” (as defined therein) byBorrower following all notice and cure periods occurs under the Junior Note,any of the Mortgages or any of the other Junior Loan Documents or the ProjectDocuments, or Borrower fails to promptly pay, perform, observe or comply withany term, obligation or agreement contained in any of the other Junior LoanDocuments or Project Documents (within any applicable grace or cure period).

 

Section 6.3             Accuracy of Information; Representationsand Warranties.

 

Any information contained in any financialstatement, schedule, report or any other document prepared by or on behalf ofthe Borrower, Guarantor or an Affiliate and delivered to Lender in connectionwith the Junior Loan proves at any time not to be in all material respects trueand accurate, or Borrower shall have failed to state any material fact or anyfact necessary to make such information not misleading, or any representationor warranty contained in this Agreement or in any other Junior Loan Document orother document, certificate or opinion delivered by Borrower or Guarantor toLender in connection with the Junior Loan, proves at any time to be incorrector misleading in any material respect either on the date when made or on thedate when reaffirmed pursuant to the terms of this Agreement.

 

Section 6.4             Deposits.

 

Borrower fails to deposit funds with Lender,in the amount requested by Lender, pursuant to the provisions of Section 4.3or Section 4.11, within ten (10) days from the effective date of aNotice from Lender requesting such deposit and in accordance with the Lock BoxAgreement, or Borrower fails to deliver to Lender any Condemnation Awards orInsurance Proceeds within the 

 

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earlier of ten (10) daysafter Borrower’s receipt thereof or five (5) days after notice from theLender requesting such deposit and in accordance with the Lock Box Agreement orBorrower fails to deposit any other funds in accordance with the Lock BoxAgreement.

 

Section 6.5             Insurance Obligations.

 

Borrower fails to promptly perform or complywith any of the covenants contained in the Junior Loan Documents with respectto maintaining insurance, including the covenants contained in Section 4.9,and such failure, other than a failure resulting from the termination of aninsurance policy (where written notice of such termination has been provided toBorrower at least thirty (30) days prior to such termination), continues for aperiod of fifteen (15) days after Notice thereof from Lender to Borrower.

 

Section 6.6             Other Obligations.

 

Borrower fails to promptly perform or complywith any of the Obligations set forth in this Agreement (other than thoseexpressly described in other Sections of this Article VI), and suchfailure continues uncured for a period of thirty (30) days after Notice fromLender to Borrower, unless (a) such failure, by its nature, is not capableof being cured within such period, and (b) within such period, Borrowercommences to cure such failure and thereafter diligently prosecutes the curethereof, and (c) Borrower causes such failure to be cured no later thanninety (90) days after the date of such Notice from Lender (or such longerperiod as the Lender approves in writing).

 

Section 6.7             Progress of Construction.

 

Construction of all or substantially all ofthe Improvements is abandoned or is discontinued for a period of more thantwenty (20) consecutive days and such event impairs the amount of Revenues, asdefined in the Lock Box Agreement, to be paid into the Lock Box Account.

 

Section 6.8             Damage to Improvements.

 

All or substantially all of the Improvementsare damaged or destroyed by fire or other casualty and Lender determines thatthe Improvements cannot be restored and completed in accordance with the termsand provisions of this Agreement, the Lock Box Agreement and the Mortgages.

 

Section 6.9             Lapse of Permits or Approvals.

 

Any permit, license, certificate or approvalthat Borrower is required to obtain with respect to the construction,operation, development, leasing or maintenance of the Improvements or theProperty lapses or ceases to be in full force and effect.

 

Section 6.10           Completion of Construction.

 

Completion of Construction does not occur inaccordance with the Project Schedule or by Final Completion Date.

 

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Section 6.11           Mechanic’s Lien.

 

A lien for the performance of work or thesupply of materials filed against the Property, or any stop notice served onBorrower, the Design/Build Contractor or Lender, remains unsatisfied orunbonded for a period of sixty (60) days after the date of filing or service.

 

Section 6.12           Survey Matters.

 

Any Survey required by Lender pursuant to Schedule 5during the period of construction shows any matter which in Lender’s reasonablejudgment would interfere with the Construction of the Improvements or theoperation or use of the Property or would create an exception to the titleinsurance policies insuring the Mortgages which is not acceptable to Lender,and such matter is not removed within a period of sixty (60) days after Noticethereof by Lender to Borrower, unless (a) such matter, by its nature, isnot capable of being cured within such period, and (b) within such period,Borrower commences to cure such failure and thereafter diligently prosecutesthe cure thereof, and (c) Borrower causes such failure to be cured nolater than ninety (90) days after the date of such Notice from Lender (or suchlonger period as the Lender approves in writing).

 

Section 6.13           Design/Build Contractor Default.

 

The Design/Build Contractor defaults underthe Design/Build Agreement in a manner which Lender reasonably deems to bematerial, and, unless otherwise agreed in writing by Lender, Borrower failspromptly to exercise its rights and remedies under the Design/Build Agreementwith respect to such default, or Borrower defaults under the Design/BuildAgreement.

 

Section 6.14           Senior Loan Default.

 

An Event of Default (as defined in the SeniorLoan Agreement) occurs and such Event of Default is not cured by Borrower priorto any cure thereof by Lender (it being agreed that Lender shall be under noobligation to undertake such cure).

 

Section 6.15           Bankruptcy.

 

Borrower or Guarantor files a bankruptcypetition or makes a general assignment for the benefit of creditors or abankruptcy petition is filed against Borrower or Guarantor and such involuntarybankruptcy petition continues undismissed for a period of sixty (60) days afterthe filing thereof.

 

Section 6.16           Appointment of Receiver, Trustee,Liquidator.

 

Borrower or Guarantor applies for or consentsin writing to the appointment of a receiver, trustee or liquidator of Borrower,Guarantor, the Property or all or substantially all of the other assets ofBorrower, or Guarantor, or any member of the Borrower or an order, judgment ordecree is entered by any court of competent jurisdiction on the application ofa creditor appointing a receiver, trustee or liquidator of Borrower, Guarantor,the Property or all or substantially all of the other assets of Borrower,Guarantor, or any member of the Borrower.

 

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Section 6.17           Inability to Pay Debts; Judgment.

 

Borrower or Guarantor becomes unable oradmits in writing its inability or fails generally to pay its debts as theybecome due, or a final non-appealable judgment for the payment of moneyincluding more than $100,000 is entered against Borrower or Guarantor, and Borrower or Guarantor fails todischarge the same, or causes it to be discharged or bonded off to Lender’ssatisfaction, within sixty (60) days from the date of the entry of suchjudgment.

 

Section 6.18           Dissolution; Change in Business Status.

 

Unless the written consent of Lender ispreviously obtained, all or substantially all of the business assets ofBorrower or Guarantor are sold, Borrower or Guarantor is dissolved, or there occursany change in the form of business entity through which Borrower or Guarantorpresently conducts its business or any merger or consolidation involvingBorrower or Guarantor.

 

Section 6.19           Default Under Other Indebtedness.

 

Borrower fails to pay any indebtedness (otherthan the Junior Loan) owed by Borrower to Lender when and as due and payable(whether by acceleration or otherwise).

 

Section 6.20           Liens.

 

Any lien granted under the Lock Box Agreementin favor of Lender on any Collateral is not perfected or is released or becomesunperfected and, after Notice thereof from Lender, Borrower does not takereasonable action directed by Lender which is necessary to cause such liens tobecome perfected within thirty (30) days after such lien becomes unperfectedor is released.

 

Section 6.21           Change in Controlling Interest.

 

Without the prior written consent of Lender,at any time (a) less than 51% of the membership interests of Borrower areowned by RE-MM and/or the Army or (b) RE-MM and/or the Army ceases to bethe managing member of Borrower.

 

Section 6.22           Material Adverse Change.

 

In the reasonable opinion of Lender, theprospect of payment or performance of all or any part of the Obligations hasbeen impaired because of a material adverse change in the financial condition,results of operations, business or properties of Borrower, Guarantor, any otherPerson liable for the payment or performance of any of the Obligations and suchchange has a Material Adverse Effect.

 

Section 6.23           Termination of Lease or other ProjectDocuments.

 

The Lease is terminated for any reasonwhatsoever or the other Project Documents are terminated (without the writtenconsent of the Lender) for any reason whatsoever.

 

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Section 6.24           Default Under Guaranty.

 

Guarantor defaults in any of its obligationsunder the Guaranty, after the expiration of any applicable notice and cureperiod.

 

Article VII

Remedies on Default

 

Section 7.1             Remedies on Default.

 

If an Event of Default shall occur and becontinuing, Lender shall have the right, in addition to any other rights orremedies available to Lender under the Mortgages or any of the other JuniorLoan Documents or under applicable Law, to exercise any one or more of thefollowing rights and remedies:

 

(a)           Lender may terminate its obligation to advance anyfurther principal of the Junior Loan pursuant to this Agreement by Notice toBorrower.

 

(b)           Lender may accelerate all of Borrower’s Obligationsunder the Junior Loan Documents, whether or not matured and regardless of theadequacy of any other collateral securing the Junior Loan, whereupon suchObligations shall become immediately due and payable, without notice ofdefault, acceleration or intention to accelerate, presentment or demand for payment,protest or notice of nonpayment or dishonor, or notices or demands of any kindor character (all of which are hereby waived by Borrower); it beingacknowledged and agreed by Lender that any such acceleration shall be withoutthe imposition of any prepayment fee or prepayment penalty of any kind.

 

(c)           Lender may apply to any court of competentjurisdiction for, and obtain appointment of, a receiver for the Property.

 

(d)           Subject to the terms of the Lock Box Agreement, Lendermay set off the amounts due Lender under the Junior Loan Documents against anyand all accounts, credits, money, securities or other property of Borrower nowor hereafter on deposit with, held by or in the possession of Lender to thecredit or for the account of Borrower, without notice to or the consent ofBorrower, and any and all funds in the funds and accounts established under theLock Box Agreement will be applied to the payment of the Junior Loan pursuantto the terms and conditions of the Lock Box Agreement.

 

(e)           Lender may make Protective Advances and any suchProtective Advances shall bear interest at the Past Due Rate under the JuniorNote.

 

(f)            Lender may enter into possession of the Property andperform any and all work and labor necessary to complete the development of theLand and the Construction of the Improvements (whether or not in accordancewith the Plans and Specifications) and to employ watchmen to protect theProperty and the Improvements. All sums expended by Lender for such purposesshall be deemed to have been advanced to Borrower under the Junior Note andshall be secured by the Mortgages. For this purpose, Borrower herebyconstitutes and appoints Lender its true and lawful attorney-in-fact with 

 

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full power ofsubstitution, which power is coupled with an interest, to complete the work inthe name of Borrower, and hereby empowers said attorney or attorneys, in thename of Borrower or Lender:

 

(i)            To use any funds of Borrower including any balancewhich may be held by Lender and any funds which may remain unadvanced hereunderfor the purpose of completing the development of the Land and the constructionof the Improvements, whether or not in the manner called for in the Plans andSpecifications;

 

(ii)           To make such additions and changes and corrections tothe Plans and Specifications as shall be necessary or desirable in the judgmentof Lender to complete the development of the Land and the construction of theImprovements;

 

(iii)          To employ such contractors, subcontractors, agents,architects and inspectors as shall be necessary or desirable for said purpose;

 

(iv)          To pay, settle or compromise all existing bills andclaims which are or may be liens against the Property, or may be necessary ordesirable for the completion of the work or the clearance of title to theProperty;

 

(v)           To execute all applications and certificates which maybe required in the name of Borrower;

 

(vi)          To enter into, enforce, modify or cancel the Lease andto fix or modify Rents on such terms as Lender may consider proper;

 

(vii)         To file for record, at Borrower’s cost and expense andin Borrower’s name, any notices of completion, notices of cessation of labor,or any other notices that Lender in its sole and absolute discretion mayconsider necessary or desirable to protect its security; and

 

(viii)        To do any and every act with respect to thedevelopment of the Land and the construction of the Improvements which Borrowermay do in its own behalf.

 

(g)           It is understood and agreed that this power ofattorney shall be deemed to be a power coupled with an interest which cannot berevoked. Said attorney-in-fact shall also have the power to prosecute anddefend all actions or proceedings in connection with the development of theLand and the construction of the Improvements and to take such actions and torequire such performance as Lender may deem reasonably necessary.

 

(h)           Borrower hereby constitutes and appoints Lender itstrue and lawful attorney-in-fact with full power of substitution, which poweris coupled with an interest, and hereby empowers said attorney or attorneys, inthe name of Borrower or Lender, to exercise any remedies available to Lenderunder the Collateral Assignment; provided, however, such power of attorneyshall be exercisable only during the continuation of an Event of Default.

 

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Section 7.2             No Release or Waiver; Remedies Cumulativeand Concurrent.

 

Borrower shall not be relieved of anyObligation by reason of the failure of Lender to comply with any request ofBorrower or of any other Person to take action to foreclose on the Propertyunder the Mortgages or otherwise to enforce any provision of the Junior LoanDocuments, or by reason of the release, regardless of consideration, of all orany part of the Property. No delay or omission of Lender to exercise any right,power or remedy accruing upon the happening of an Event of Default shall impairany such right, power or remedy or shall be construed to be a waiver of anysuch Event of Default or any acquiescence therein. No delay or omission on thepart of Lender to exercise any option for acceleration of the maturity of theObligations, or for foreclosure of any of the Mortgages following any Event ofDefault as aforesaid, or any other option granted to Lender hereunder in anyone or more instances, or the acceptance by Lender of any partial payment onaccount of the Obligations shall constitute a waiver of any such Event ofDefault and each such option shall remain continuously in full force andeffect. No remedy herein conferred upon or reserved to Lender is intended to beexclusive of any other remedies provided for in the Junior Loan Documents, andeach and every such remedy shall be cumulative, and shall be in addition toevery other remedy given hereunder, or under the Junior Loan Documents, or nowor hereafter existing at Law or in equity or by statute. Every right, power andremedy given by the Junior Loan Documents to Lender shall be concurrent and maybe pursued separately, successively or together against Borrower or theProperty or any part thereof, and every right, power and remedy given by theJunior Loan Documents may be exercised from time to time as often as may bedeemed expedient by Lender.

 

Article VIII

Miscellaneous

 

Section 8.1             Further Assurances; Authorization to FileDocuments.

 

At any time, and from time to time, uponrequest by Lender, Borrower will, at Borrower’s expense, (a) correct anydefect, error or omission which may be discovered in the form or content of anyof the Junior Loan Documents, and (b) make, execute, deliver and record,or cause to be made, executed, delivered and recorded, any and all furtherinstruments, certificates and other documents as may, in the opinion of Lender,be reasonably necessary or desirable in order to complete, perfect or continueand preserve the lien of the Mortgages; provided, however, that the foregoingshall in no event be deemed to require Borrower to take any action that wouldincrease its obligations or decrease its rights under this Agreement and theJunior Loan Documents. Upon any failure by Borrower to do so, Lender may make,execute and record any and all such instruments, certificates and otherdocuments for and in the name of Borrower, all at the sole expense of Borrower,and Borrower hereby appoints Lender the agent and attorney-in-fact of Borrowerto do so, this appointment being coupled with an interest and beingirrevocable. Without limitation of the foregoing, Borrower irrevocablyauthorizes Lender at any time and from time to time to file any initialfinancing statements, amendments thereto and continuation statements reasonablydeemed necessary or desirable by Lender to establish or maintain the validity,perfection and priority of the security interests granted in the Mortgages, andBorrower ratifies any such filings made by Lender prior to the date hereof. Inaddition, at any time, and from time to time, upon reasonable request byLender, Borrower will, at Borrower’s expense, provide any and all further instruments,certificates and other documents as 

 

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may, in the reasonableopinion of Lender, be necessary or desirable in order to verify the Borrower’sidentity and background in a manner satisfactory to Lender.

 

Section 8.2             No Warranty by Lender.

 

By accepting or approving anything requiredto be observed, performed or fulfilled by Borrower or to be given to Lenderpursuant to this Agreement, including any certificate, Survey, receipt,appraisal or insurance policy, Lender shall not be deemed to have warranted orrepresented the sufficiency, legality, effectiveness or legal effect of thesame, or of any term, provision or condition thereof and any such acceptance orapproval thereof shall not be or constitute any warranty or representation withrespect thereto by Lender.

 

Section 8.3             Standard of Conduct of Lender.

 

Unless otherwise set forth in this Agreementor any other Junior Loan Document or Project Document, nothing contained inthis Agreement or any other Junior Loan Document shall limit the right ofLender to exercise its business judgment or to act, in the context of thegranting or withholding of any Advance or consent under this Agreement or anyother Junior Loan Document or Project Document, in a subjective manner, whetheror not objectively reasonable under the circumstances, so long as Lender’sexercise of its business judgment or action is made or undertaken reasonablyand in good faith. Borrower and Lender intend by the foregoing to set forth andaffirm their entire understanding with respect to the standard pursuant towhich Lender’s duties and obligations are to be judged and the parameterswithin which Lender’s discretion may be exercised hereunder and under the otherJunior Loan Documents and Project Documents, except as otherwise set forththerein. As used herein, “good faith” means honesty in fact in the conduct andtransaction concerned.

 

Section 8.4             No Partnership.

 

Nothing contained in this Agreement shall beconstrued in a manner to create any relationship between Borrower and Lenderother than the relationship of borrower and lender and Borrower and Lendershall not be considered partners or co-venturers for any purpose on account ofthis Agreement.

 

Section 8.5             Severability.

 

In the event any one or more of theprovisions of this Agreement or any of the other Junior Loan Documents shallfor any reason be held to be invalid, illegal or unenforceable, in whole or inpart or in any other respect, or in the event any one or more of the provisionsof any of the Junior Loan Documents operates or would prospectively operate toinvalidate this Agreement or any of the other Junior Loan Documents, then andin either of those events, at the option of Lender, such provision orprovisions only shall be deemed null and void and shall not affect the validityof the remaining Obligations, and the remaining provisions of the Junior LoanDocuments shall remain operative and in full force and effect and shall in noway be affected, prejudiced or disturbed thereby.

 

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Section 8.6             Notices.

 

All Notices required or which any partydesires to give hereunder or under any other Junior Loan Document shall be inwriting and, unless otherwise specifically provided in such other Junior LoanDocument, shall be deemed sufficiently given or furnished if delivered bypersonal delivery, by nationally recognized overnight courier service or bycertified United States mail, postage prepaid, return receipt requested,addressed to the party to whom directed at the applicable address set forthbelow (unless changed by similar notice in writing given by the particularparty whose address is to be changed) or by facsimile. Any Notice shall bedeemed to have been given either at the time of personal delivery or, in thecase of courier or mail, as of the date of first attempted delivery at theaddress and in the manner provided herein, or, in the case of facsimile, uponreceipt; provided that service of a Notice required by any applicable statuteshall be considered complete when the requirements of that statute are met.Notwithstanding the foregoing, no notice of change of address shall beeffective except upon actual receipt. This Section shall not be construedin any way to affect or impair any waiver of notice or demand provided in thisAgreement or in any other Junior Loan Document or to require giving of noticeor demand to or upon any Person in any situation or for any reason.

 

The address and fax numberof Borrower are:

 

Rest Easy LLCc/o Actus Lend Lease LLC1801 West End AvenueSuite 1700Nashville, TN 37203Attention: Dale Connor, Managing DirectorFax: (615) 324-5220

 

With copies to:

 

Rest Easy LLCc/o Actus Lend Lease LLC700 Lanidex PlazaParsippany, NJ 07054Attention: General CounselFax: (973) 503-5730

 

Lowenstein Sandler PC65 Livingston AvenueRoseland, NJ 07068Attention: Edward J. Hunter, Esq.Fax: (973) 597-2591

 

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The address and fax numberof Lender are:

 

Behringer Harvard PAL I, LLC15601 Dallas Parkway, Suite 600Addison, TX 75001Attn: Mr. Andrew BruceFax: (214) 655-1610

 

With copies to:

 

Behringer Harvard PAL I, LLC15601 Dallas Parkway, Suite 600Addison, TX 75001Attention: Chief Legal OfficerFax: (214) 655-1610

 

and

 

Powell Coleman &Arnold LLP8080 North Central Expressway, Suite 1380Dallas, Texas 75206Attention: Pat Arnold, Esq.Fax: (214) 373-8768

 

Section 8.7             Permitted Successors and Assigns;Disclosure of Information.

 

(a)           Each and every one of the covenants, terms, provisionsand conditions of this Agreement and the Junior Loan Documents shall apply to,bind and inure to the benefit of Borrower, its successors and those assigns ofBorrower consented to in writing by Lender, and shall apply to, bind and inureto the benefit of Lender and the endorsees, transferees, successors and assignsof Lender, and all Persons claiming under or through any of them.

 

(b)           Borrower agrees not to transfer, assign, pledge orhypothecate any right or interest in any payment or advance due pursuant tothis Agreement, or any of the other benefits of this Agreement, without theprior written consent of Lender, which consent may be withheld by Lender in itssole and absolute discretion. Any such transfer, assignment, pledge orhypothecation made or attempted by Borrower without the prior written consentof Lender shall be void and of no effect. No consent by Lender to an assignmentshall be deemed to be a waiver of the requirement of prior written consent byLender with respect to each and every further assignment and as a condition precedentto the effectiveness of such assignment.

 

(c)           Lender may sell or offer to sell the Junior Loan orinterests therein to one or more assignees or participants. Borrower shallexecute, acknowledge and deliver any and all instruments reasonably requestedby Lender in connection therewith, and to the 

 

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extent, if any,specified in any such assignment or participation, such assignee(s) orparticipant(s) shall have the same rights and benefits with respect to theJunior Loan Documents as such Person(s) would have if such Person(s) wereLender hereunder. Lender may disseminate any information it now has orhereafter obtains pertaining to the Junior Loan, including any security for theJunior Loan, any credit or other information on the Property (includingenvironmental reports and assessments), Borrower or any of Borrower’sprincipals, to any actual or prospective assignee or participant, to Lender’sAffiliates, to any regulatory body having jurisdiction over Lender, to anyactual or prospective counterparty (or its advisors) to any swap or derivativetransaction relating to Borrower and the Junior Loan, or to any other party as necessary or appropriate in Lender’s reasonablejudgment, provided all such parties (other than regulatory bodies) agree to usebest efforts to keep any such information so provided confidential (subject toany requirements to disclose such information to governmental or regulatoryauthorities and subject to the ability to provide such information to theirrespective legal counsel or accountants).

 

Section 8.8             Amendment; Modification; Waiver.

 

None of the terms or provisions of thisAgreement may be amended, changed, waived, modified, discharged or terminatedexcept by instrument in writing executed by the party or parties against whomenforcement of the amendment, change, waiver, modification, discharge ortermination is asserted. None of the terms or provisions of this Agreementshall be deemed to have been abrogated or waived by reason of any failure orfailures to enforce the same. No failure or delay by Lender in exercising anyright or privilege hereunder or under any other instrument contemplated herebyshall operate as a waiver thereof, nor shall any single or partial exercise thereofpreclude any other or further exercise thereof or the exercise of any otherright, power or privilege.

 

Section 8.9             Third Parties; Benefit.

 

All conditions to the obligation of Lender tomake advances hereunder are imposed solely and exclusively for the benefit ofLender and its assigns and no other Persons shall have standing to requiresatisfaction of such conditions in accordance with their terms or be entitledto assume that Lender will refuse to make advances in the absence of strictcompliance with any or all thereof and no other Person shall, under anycircumstances, be deemed to be the beneficiary of such conditions, any or allof which may be freely waived in whole or in part by Lender at any time in thesole and absolute exercise of its discretion. The terms and provisions of thisAgreement are for the benefit of the parties hereto and, except as hereinspecifically provided, no other Person shall have any right or cause of actionon account thereof.

 

Section 8.10           Rules of Construction.

 

The words “hereof,” “herein,” “hereunder,” “hereto,”and other words of similar import refer to this Agreement in its entirety. Theterms “agree” and “agreements” mean and include “covenant” and “covenants.” Thewords “include” and “including” shall be interpreted as if followed by thewords “without limitation.” The captions and headings contained in thisAgreement are included herein for convenience of reference only and shall notbe considered a 

 

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part hereof and are not inany way intended to define, limit or enlarge the terms hereof. All references (a) madein the neuter, masculine or feminine gender shall be deemed to have been madein all such genders, (b) made in the singular or plural number shall be deemedto have been made, respectively, in the plural or singular number as well, (c) tothe Junior Loan Documents are to the same as extended, amended, restated,supplemented or otherwise modified from time to time unless expressly indicatedotherwise, (d) to the Land, the Improvements or the Property shall meanall or any portion of each of the foregoing, respectively, and (e) toArticles, Sections and Schedules are to the respective Articles, Sections andSchedules contained in this Agreement unless expressly indicated otherwise.

 

Section 8.11           Counterparts.

 

This Agreement may be executed in any numberof counterparts, each of which shall be considered an original for allpurposes; provided, however, that all such counterparts shall togetherconstitute one and the same instrument.

 

Section 8.12           Signs; Publicity.

 

Subject to the terms and provisions of theLease, at Lender’s request and sole cost and expense, Borrower shall place a sign at alocation on the Property satisfactory to Lender, which sign shall recite, amongother things, that Lender is financing the development of the Land and theconstruction of the Improvements. Borrower expressly authorizes Lender toprepare and to furnish to the news media for publication from time to time newsreleases with respect to the Property which are approved by Borrower and theArmy in their sole and absolute discretion, specifically to include releasesdetailing Lender’s involvement with the financing of the Property.

 

Section 8.13           Governing Law.

 

This Agreement shall be governed by andconstrued and enforced in accordance with the laws of the State of New York,without giving effect to the principles of conflicts of law. It is the intentand purpose of the parties hereto that the provisions of Section 5-1401 ofthe General Obligations Law of the State of New York shall apply to thisAgreement. Notwithstanding anything to the contrary provided in the foregoing,it is acknowledged and agreed that as to matters which relate to the creation,perfection and enforcement of security interests created under the Junior LoanDocuments, the same shall be construed in accordance with the laws of the Statein which the applicable Collateral shall be located.

 

In addition, it is hereby furtheracknowledged and agreed that ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTIONWITH THIS AGREEMENT SHALL BE TRIED AND LITIGATED IN STATE OR FEDERAL COURTSLOCATED IN THE STATE AND COUNTY OF NEW YORK AND EACH PARTY TO THIS AGREEMENTHEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY ANDUNCONDITIONALLY, THE EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS ANDIRREVOCABLY CONSENTS TO THE JURISDICTION OF ANY OF THE AFOREMENTIONED COURTS INANY SUCH ACTION OR PROCEEDING. THE PARTIES HERETO EACH HEREBY IRREVOCABLY WAIVEANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUEOF ANY OF THE 

 

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AFORESAID ACTIONS ORPROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT BROUGHT IN THECOURTS REFERRED TO ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOTTO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHTIN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM OR LACKSJURISDICTION OVER SUCH PARTY. IT IS THE INTENT AND PURPOSE OF THE PARTIESHERETO THAT THE PROVISIONS OF SECTION 5-1402 OF THE GENERAL OBLIGATIONSLAW OF THE STATE OF NEW YORK SHALL APPLY TO THIS AGREEMENT.

 

Section 8.14           Time of Essence.

 

Time shall be of the essence for each andevery provision of this Agreement of which time is an element.

 

Section 8.15           Electronic Transmission of Data.

 

Lender and Borrower agree that certain datarelated to the Junior Loan (including confidential information, documents,applications and reports) may be transmitted electronically, includingtransmission over the Internet. This data may be transmitted to, received fromor circulated among agents and representatives of Borrower and/or Lender andtheir Affiliates and other Persons involved with the subject matter of thisAgreement, including any servicer of the Junior Loan. Borrower and Lenderacknowledge and agree that (a) there are risks associated with the use ofelectronic transmission and that neither Borrower nor Lender controls themethod of transmittal or service providers, (b) Borrower and Lender haveno obligation or responsibility whatsoever and assume no duty or obligation forthe security, receipt or third-party interception of any such transmission, and(c) Borrower and Lender will release, hold harmless and indemnify each otherfrom any claim, damage or loss, including that arising in whole or part fromstrict liability or sole, comparative or contributory negligence, which isrelated to the electronic transmission of data.

 

Section 8.16           Dispute Resolution.

 

(a)           Arbitration. Except to the extent expressly provided below, anyDispute shall, upon the request of either party, be determined by bindingarbitration in accordance with the Federal Arbitration Act, Title 9, UnitedStates Code (or if not applicable, the applicable state law), the then-current rules forarbitration of financial services disputes of AAA and the “Special Rules” setforth below. In the event of any inconsistency, the Special Rules shallcontrol. The filing of a court action is not intended to constitute a waiver ofthe right of Borrower or Lender, including the suing party, thereafter torequire submittal of the Dispute to arbitration. Any party to this Agreementmay bring an action, including a summary or expedited proceeding, to compelarbitration of any Dispute in any court having jurisdiction over such action.For the purposes of this Dispute Resolution Section only, the terms “party”and “parties” shall include anyparent corporation, subsidiary or Affiliate of Lender involved in theservicing, management or administration of any obligation described in orevidenced by this Agreement, together with the officers, employees, successorsand assigns of each of the foregoing.

 

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(b)           Special Rules.

 

(i)            If the arbitration relates to collateral, thearbitration shall be conducted in any U.S. state where real or tangiblepersonal property collateral is located or, if it does not relate tocollateral, in the State of New York.

 

(ii)           The arbitration shall be administered by AAA, who willappoint an arbitrator; if AAA is unwilling or unable to administer thearbitration, or if AAA is unwilling or unable to enforce or legally precludedfrom enforcing any and all provisions of this Dispute Resolution Section, thenany party to this Agreement may substitute another arbitration organizationthat has similar procedures to AAA and that will observe and enforce any andall provisions of this Dispute Resolution Section. All Disputes shall bedetermined by one arbitrator; however, if the amount in controversy in aDispute exceeds Five Million Dollars ($5,000,000), upon the request of anyparty, the Dispute shall be decided by three arbitrators (for purposes of thisAgreement, referred to collectively as the “arbitrator”).

 

(iii)          All arbitration hearings will be commenced withinninety (90) days of the demand for arbitration and completed within ninety (90)days from the date of commencement; provided, however, that upon a showing ofgood cause, the arbitrator shall be permitted to extend the commencement ofsuch hearing for up to an additional sixty (60) days.

 

(iv)          The judgment and the award, if any, of the arbitratorshall be issued within thirty (30) days of the close of the hearing. Thearbitrator shall provide a concise written statement setting forth the reasonsfor the judgment and for the award, if any. The arbitration award, if any, maybe submitted to any court having jurisdiction to be confirmed and enforced, andsuch confirmation and enforcement shall not be subject to arbitration.

 

(v)           The arbitrator will give effect to statutes oflimitations and any waivers thereof in determining the disposition of anyDispute and may dismiss one or more claims in the arbitration on the basis thatsuch claim or claims is or are barred. For purposes of the application of thestatute of limitations, the service on AAA under applicable AAA rules of anotice of Dispute is the equivalent of the filing of a lawsuit.

 

(vi)          Any dispute concerning this arbitration provision,including any such dispute as to the validity or enforceability of thisprovision, or whether a Dispute is arbitrable, shall be determined by thearbitrator; provided, however, that the arbitrator shall not be permitted tovary the express provisions of these Special Rules or the Reservations ofRights in subsection (c) below.

 

(vii)         The arbitrator shall have the power to award legalfees and costs pursuant to the terms of this Agreement.

 

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(viii)        The arbitration will take place on an individual basiswith reference to, resort to, or consideration of any form of class or classaction.

 

(c)           Reservations of Rights. Nothing in this Agreement shall be deemed to (i) limitthe applicability of any otherwise applicable statutes of limitation and anywaivers contained in this Agreement, or (ii) apply to or limit the rightof Lender upon the occurrence and during the continuation of an Event ofDefault (A) to exercise self help remedies such as (but not limited to)setoff, or (B) to foreclose judicially or nonjudicially against any realor personal property collateral, or to exercise judicial or nonjudicial powerof sale rights in any jurisdiction in which the Collateral, or any partthereof, is located, (C) to obtain from a court provisional or ancillaryremedies such as (but not limited to) injunctive relief, writ of possession,prejudgment attachment, or the appointment of a receiver, or (D) to pursuerights against a party to this Agreement in a third-party proceeding in anyaction brought against Lender in a state, federal or international court,tribunal or hearing body (including actions in specialty courts, such asbankruptcy and patent courts). Lender may exercise the rights set forth inclauses (A) through (D), inclusive, before, during or after the pendencyof any arbitration proceeding brought pursuant to this Agreement. Neither theexercise of self help remedies nor the institution or maintenance of an actionfor foreclosure or provisional or ancillary remedies shall constitute a waiverof the right of any party, including the claimant in any such action, toarbitrate the merits of the Dispute occasioning resort to such remedies. Noprovision in the Junior Loan Documents regarding submission to jurisdictionand/or venue in any court is intended or shall be construed to be in derogationof the provisions in any Junior Loan Document for arbitration of any Dispute.

 

(d)           Conflicting Provisions for Dispute Resolution. If there is any conflict between theterms, conditions and provisions of this Section and those of any otherprovision or agreement for arbitration or dispute resolution, the terms,conditions and provisions of this Section shall prevail as to any Disputearising out of or relating to (i) this Agreement, (ii) any other JuniorLoan Document, (iii) any related agreements or instruments, or (iv) thetransaction contemplated herein or therein (including any claim based on orarising from an alleged personal injury or business tort). In any othersituation, if the resolution of a given Dispute is specifically governed byanother provision or agreement for arbitration or dispute resolution, the otherprovision or agreement shall prevail with respect to said Dispute.

 

(e)           Jury Trial Waiver in Arbitration. By agreeing to this Section, theparties irrevocably and voluntarily waive any right they may have to a trial byjury in respect of any Dispute.

 

Section 8.17           Nature of Obligations.

 

Except as provided in that the Guaranty ofeven date herewith executed by Guarantor, the obligations of Borrower hereunderto pay and perform the Obligations (including, without limitation, suchObligations as are evidenced by the Junior Note) shall be without recourse toBorrower’ members, shareholders, officers, affiliates, directors, partners,agents, employees or consultants, or any affiliate of any such person, or tothe property or assets of any such person. 

 

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Notwithstandinganything to the contrary herein, nothing herein shall be deemed to be a waiverof any right which Lender may have under Sections 506(a), 506(b), 1111(b) orany other provision of the Federal Bankruptcy Code or any similar federal orstate statute to file a claim for the full amount of the Obligations securedhereby or to require that all Collateral shall continue to secure allObligations owing to Lender in accordance with the Junior Note, this Agreementand the other Junior Loan Documents. The foregoing will in no way limit Lender’srecourse to the Collateral following an Event of Default or limit the liabilityunder any Contract to which any Affiliate of Borrower is a party and which hasbeen assigned to Junior Lender as Collateral for the Junior Loan, including butnot limited to the Construction Guaranty of even date herewith and any Contractassigned as Collateral under the Assignment of Contracts, Permits and Approvalsof even date herewith executed by Borrower and the other parties thereto andthe Collateral Assignment of Lodging Management Agreement also of even date herewithexecuted by Borrower and the other parties thereto.

 

Section 8.18           Waiver of Jury Trial.

 

**WITHOUT INTENDING IN ANY WAY TOLIMIT THE PARTIES’ AGREEMENT TO ARBITRATE ANY “DISPUTE” (FOR PURPOSES OF THISSECTION, AS DEFINED IN SCHEDULE 1) AS SET FORTH IN THIS AGREEMENT, TOTHE EXTENT ANY “DISPUTE” IS NOT SUBMITTED TO ARBITRATION OR IS DEEMED BY THEARBITRATOR OR BY ANY COURT WITH JURISDICTION TO BE NOT ARBITRABLE OR NOTREQUIRED TO BE ARBITRATED, BORROWER AND LENDER WAIVE TRIAL BY JURY IN RESPECTOF ANY SUCH “DISPUTE” AND ANY ACTION ON SUCH “DISPUTE.” THIS WAIVER ISKNOWINGLY, WILLINGLY AND VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWERAND LENDER HEREBY REPRESENT THAT NO REPRESENTATIONS OF FACT OR OPINION HAVEBEEN MADE BY ANY PERSON OR ENTITY TO INDUCE THIS WAIVER OF TRIAL BY JURY OR TOIN ANY WAY MODIFY OR NULLIFY ITS EFFECT. THIS PROVISION IS A MATERIALINDUCEMENT FOR THE PARTIES ENTERING INTO THE JUNIOR LOAN DOCUMENTS. BORROWERAND LENDER ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION INANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER OF JURY TRIAL. BORROWERFURTHER REPRESENTS AND WARRANTS THAT IT HAS BEEN REPRESENTED IN THE SIGNING OFTHIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL,OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED BY INDEPENDENT LEGAL COUNSELSELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSSTHIS WAIVER WITH COUNSEL.**

 

Section 8.19           Additional Waivers.

 

**BORROWER FURTHER HEREBYIRREVOCABLY AND UNCONDITIONALLY WAIVES, IN CONNECTION WITH ANY SUIT, ACTION ORPROCEEDING BROUGHT BY OR ON BEHALF OF LENDER WITH RESPECT TO THIS AGREEMENT,THE JUNIOR NOTE OR OTHERWISE IN RESPECT OF THE JUNIOR LOAN, ANY AND EVERY RIGHTBORROWER MAY HAVE TO (X) INJUNCTIVE RELIEF, (Y) INTERPOSE ANYCOUNTERCLAIM THEREIN, OTHER THAN A**

 

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**COMPULSORY COUNTERCLAIM,AND (Z) HAVE THE SAME CONSOLIDATED WITH ANY OTHER OR SEPARATE SUIT, ACTIONOR PROCEEDING. NOTHING CONTAINED IN THE IMMEDIATELY PRECEDING SENTENCE SHALLPREVENT OR PROHIBIT BORROWER FROM INSTITUTING OR MAINTAINING A SEPARATE ACTIONAGAINST LENDER WITH RESPECT TO ANY ASSERTED CLAIM. NOTWITHSTANDING ANYPROVISION TO THE CONTRARY IN ANY JUNIOR LOAN DOCUMENT, TO THE EXTENT PERMITTEDBY APPLICABLE LAW, BORROWER AND LENDER SHALL NOT ASSERT, AND EACH HEREBYWAIVES, ANY CLAIM AGAINST THE OTHER ON ANY THEORY OF LIABILITY FOR SPECIAL,INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUALDAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, ANY JUNIOR LOANDOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED THEREBY, THE JUNIOR LOANOR THE USE OF THE PROCEEDS THEREOF.**

 

Section 8.20           Limitation on Liability.

 

Borrower waives any right to assert or makeany claim against Lender (or to sue Lender upon any claim for) any special,indirect, incidental, punitive or consequential damages in respect of anybreach or wrongful conduct (whether the claim is based on contract, tort orduty imposed by law) in connection with, arising out of or in any way relatedto this Agreement, the other Junior Loan Documents or the transactionscontemplated hereby and/or thereby, or any act, omission or event in connectiontherewith.

 

Section 8.21           Entire Agreement.

 

The Junior Loan Documents constitute theentire understanding and agreement between Borrower and Lender with respect tothe transactions arising in connection with the Junior Loan, and supersede allprior written or oral understandings and agreements between Borrower and Lenderwith respect to the matters addressed in the Junior Loan Documents. Inparticular, and without limitation, the terms of the Letter of Intent and anycommitment by Lender to make the Junior Loan are merged into the Junior LoanDocuments. Except as incorporated in writing into the Junior Loan Documents,there are no representations, understandings, stipulations, agreements orpromises, oral or written, with respect to the matters addressed in the JuniorLoan Documents.

 

Section 8.22           Lost Junior Note.

 

Upon receipt of an affidavit of an officer ofLender as to the loss, theft, destruction or mutilation of the Junior Note orany other security document which is not of public record, and, in the case ofany such loss, theft, destruction or mutilation, upon cancellation of the JuniorNote or other security document, Borrower will, at Lender’s sole cost andexpense, issue, in lieu thereof, a replacement note or other security documentin the same principal amount thereof and otherwise of like tenor.

 

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Section 8.23           Method of Payment.

 

All payments due hereunder and/or under theJunior Note shall be made by Borrower to Lender at the address and in themanner provided in the Junior Note or such other place as Lender may from timeto time specify in writing in lawful currency of the United States of Americain immediately available funds, without counterclaim or setoff and free andclear of, and without any deduction or withholding for, any taxes or otherpayments.

 

Section 8.24           Pledge to the Federal Reserve.

 

Lender may at any time pledge or assign allor any portion of its rights under the Junior Loan Documents which evidenceand/or secure the Junior Loan to any of the twelve (12) Federal Reserve Banksorganized under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341.No such pledge or assignment or enforcement thereof shall release Lender fromits obligations under any of the Junior Loan Documents (including, withoutlimitation, the obligation to fund future advances of the Junior Loan) whichevidence and/or secure the Junior Loan.

 

Section 8.25           Right of Setoff.

 

Borrower hereby grants to Lender, a continuing lien, security interestand right of setoff as security for all liabilities and obligations to Lenderwhether now existing or hereafter arising, upon and against all deposits,credits, collateral and property, now or hereafter in the possession, custody,safekeeping or control of Lender or any entity under the control of Bank ofAmerica Corporation and its successors and/or assigns or in transit to any ofthem. At any time, without demand or notice (any such notice being expresslywaived by Borrower), Lender may setoff the same or any part thereof and applythe same to any liability or obligation of Borrower even though unmatured andregardless of the adequacy of any other collateral security for the JuniorLoan. **ANY AND ALL RIGHTS TO REQUIRE LENDER TO EXERCISEITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THEJUNIOR LOAN, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCHDEPOSITS, CREDITS OR OTHER PROPERTY OF THE BORROWER, ARE HEREBY KNOWINGLY,VOLUNTARILY AND IRREVOCABLY WAIVED**.

 

Section 8.26           Usury.

 

All agreements between Borrower and Lenderare hereby expressly limited so that in no contingency or event whatsoever,whether by reason of acceleration of maturity of the indebtedness to beadvanced hereby or otherwise, shall the amount paid or agreed to be paid toLender for the use or the forbearance of the indebtedness evidenced herebyexceed the maximum permissible under applicable law and shall be subject to Section 18of the Junior Note. The provisions of Section 18 of the Junior Note shallcontrol every other provision of all agreements between Borrower and Lender.

 

Section 8.27           Application of Payments.

 

All payments received by Lender hereundershall be applied first to the payment of all fees, expenses and other amountsdue to Lender (excluding principal and interest), then to 

 

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accrued interest, and thebalance on account of outstanding principal; provided, however, that after anEvent of Default hereunder, payments will be applied to the obligations ofBorrower to Lender as Lender determines in its sole discretion.

 

Section 8.28           Payment Date Adjustment for Non-BusinessDays.

 

If any payment under the Junior Note becomesdue on a day which is not a Business Day (as defined below), the due date ofthe Junior Note or payment shall be extended to the next succeeding BusinessDay, and such extension of time shall be included in computing interest andfees in connection with such payment. As used herein, “Business Day” shall meanany day other than (i) a Saturday or a Sunday, [(ii) a day on whichcommercial banks in the city in which the Lock Box Account (as such capitalizedterm is defined in the Lock Box Agreement) are located, are authorized orobligated by law, government decree or executive order to be closed,] (iii) aday observed as a holiday by the federal government, or (iv) a day onwhich the New York Stock Exchange is closed.

 

Section 8.29           Payment of Fees and Expenses.

 

Borrower shall pay within thirty (30) daysfollowing receipt of written demand therefor (together with reasonable evidencesubstantiating such expenditures by Lender), all Expenses of Lender inconnection with the preparation, administration, default, collection, waiver oramendment of Loan terms, or in connection with Lender’s exercise, preservationor enforcement of any of its rights, remedies or options hereunder, including,without limitation, reasonable fees of outside legal counsel, accounting,consulting, brokerage or other similar professional fees or expenses, and anyreasonable fees or expenses associated with travel or other reasonable costsrelating to any appraisals (subject to the terms and conditions set forth inthis Agreement) or examinations conducted in connection with the Loan or anycollateral therefor, and the amount of all such expenses shall, until paid,bear interest at the rate applicable to principal hereunder (including anydefault rate) and be an obligation secured by any collateral.

 

Section 8.30           [Reserved].

 

Section 8.31           Capital Adequacy.

 

If at any time Lender is a regulatedfinancial institution such that the applicable regulatory authority may impose capitaladequacy requirements, in the event the Lender shall have determined that anyrequirement of any law of the United States of America, any regulation, order,interpretation, ruling, official directive or guideline (whether or not havingthe force of law) of the Board of Governors of the Federal Reserve System, theComptroller of the Currency, the Federal Deposit Insurance Corporation or anyother board or governmental or administrative agency of the United States ofAmerica which shall impose, increase, modify or make applicable to the JuniorNote or this Agreement or cause the Junior Note or this Agreement to beincluded in any reserve, special deposit, calculation used in the computationof regulatory capital standards, assessment or other requirement which imposeson the Lender any cost that is attributable to the maintenance thereof, then,and in each such event, the Borrower shall promptly pay the Lender, upon itsdemand, such amount as will compensate the Lender for any such cost, whichdetermination may be based upon the Lender’s reasonable allocation of theaggregate of such 

 

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costs resulting from suchevents. In the event any such cost is a continuing cost, a fee payable to theLender may be imposed upon the Borrower periodically for so long as any suchcost is deemed applicable by the Lender, in an amount determined by the Lenderto be necessary to compensate the Lender for any such cost, which determinationmay be based upon the Lender’s reasonable allocation of the aggregate of suchcosts resulting from such events. The determination by the Lender of theexistence and amount of any such costs shall, in the absence of manifest error,be conclusive. This section shall be available to Lender regardless of anypossible contention of invalidity or inapplicability of the law, regulation orcondition which shall have been imposed.

 

Section 8.32           Right to Sell Junior Loan to Participant.

 

Lender shall have the unrestricted right atany time and from time to time, and without the consent of or notice toBorrower, to grant to one or more banks or other financial institutions (each,a “**Participant**”) participatinginterests in Lender’s obligation to lend hereunder and/or any or all of theJunior Loan, provided that no such participation shall increase the obligationsor decrease the rights of Borrower under any of the Junior Loan Documents. Inthe event of any such grant by Lender of a participating interest to aParticipant, whether or not upon notice to Borrower, Lender shall remainresponsible for the performance of its obligations hereunder (including,without limitation, the obligation to make future advances) and Borrower shallcontinue to deal solely and directly with Lender in connection with Lender’srights and obligations hereunder. Lender may furnish any information concerningBorrower in its possession from time to time to prospective Participants,provided such Participants agree to keep such information confidential.

 

Section 8.33           Junior Loan Assignment.

 

Lender shall have the unrestricted right fromtime to time, and without Borrower’s or anyone else’s consent, to assign all orany portion of its rights and obligations hereunder to one or more banks orother financial institutions (each, an “**Assignee**”),which is an Eligible Assignee, and Borrower agrees that it shall, at Lender’ssole cost and expense, execute or cause to be executed, such documents,including without limitation, amendments to this Agreement and to any otherdocuments, instruments and agreements executed in connection herewith as Lendershall reasonably deem necessary to effect the foregoing. In addition, at therequest of Lender and any such Assignee, Borrower shall, at Lender’s sole costand expense, issue one or more new promissory notes, as applicable, to any suchAssignee, and if Lender has retained any of its rights and obligationshereunder following such assignment, to Lender, which new promissory notesshall be issued in replacement of, but not in discharge of, the liabilityevidenced by the promissory note held by Lender prior to such assignment andshall reflect the amount of the respective commitments and Loans held by suchAssignee and Lender after giving effect to such assignment. Upon the executionand delivery of appropriate assignment documentation, amendments and any otherdocumentation required by Lender in connection with such assignment, and thepayment by Assignee of the purchase price agreed to by Lender and suchAssignee, such Assignee shall be a party to this Agreement and shall have allof the rights and obligations of Lender hereunder (and under any and all otherguaranties, documents, instruments and agreements executed in connectionherewith) to the extent that such rights and obligations have been assigned byLender pursuant to the assignment documentation between 

 

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Lender and such Assignee,and Lender shall be released from its obligations hereunder and thereunder to acorresponding extent. Borrower may furnish any information concerning Borrowerin its possession from time to time to prospective Assignees, provided thatLender shall require any such prospective Assignees to agree in writing tomaintain the confidentiality of such information.

 

Section 8.34           [Reserved].

 

Section 8.35           Integration.

 

This Agreement is intended by the parties asthe final, complete and exclusive statement of the transactions evidenced bythis Agreement. All prior or contemporaneous promises, agreements andunderstandings, whether oral or written, are deemed to be superseded by thisAgreement, and no party is relying on any promise, agreement or understandingnot set forth in this Agreement. This Agreement may not be amended or modifiedexcept by a written instrument describing such amendment or modificationexecuted by Borrower and Lender.

 

Section 8.36           Use of Proceeds.

 

No portion of the proceeds of the Junior Loanshall be used, in whole or in part, for the purpose of purchasing or carryingany “margin stock” as such term is defined in Regulation U of the Board ofGovernors of the Federal Reserve System.

 

Section 8.37           [Reserved].

 

Section 8.38           [Reserved].

 

Section 8.39           [Reserved].

 

Section 8.40           Administrative Agent.

 

(a)           In connection with any assignment pursuant to Section 8.33hereof, the Lender shall have the right to appoint, designate and authorize, oract as, an administrative agent (“Administrative Agent”) to take such action onits behalf and on behalf of any Assignees under the provisions of thisAgreement and each other Junior Loan Document and to exercise such powers andperform such duties as are expressly delegated to it by the terms of thisAgreement, any other Junior Loan Document or any agreement with respect to suchassignment, together with such powers as are reasonably incidental thereto.Notwithstanding any provision to the contrary contained elsewhere herein or inany other Junior Loan Document, Administrative Agent shall not have any dutiesor responsibilities, except those expressly set forth in writing by the Lender,nor shall Administrative Agent have or be deemed to have any fiduciaryrelationship with the Lender or any Assignee, and no implied covenants,functions, responsibilities, duties, obligations or liabilities shall be readinto this Agreement or any other Junior Loan Document or otherwise existagainst Administrative Agent. Without limiting the generality of the foregoingsentence, the use of the term “agent” herein and in the other Junior LoanDocuments with reference to Administrative Agent is not intended to connote anyfiduciary or other implied (or express) obligations arising under agency 

 

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doctrine of anyapplicable Law. Instead, such term is used merely as a matter of market custom,and is intended to create or reflect only an administrative relationshipbetween independent contracting parties.

 

(b)           Lender shall be the initial Administrative Agent, ifan Administrative Agent is deemed necessary or desirable by the Lenderhereunder. Lender or any subsequent Administrative Agent may resign asAdministrative Agent upon 30 days’ notice to Assignees and Borrower subject tothe prior written consent of the Borrower (unless Borrower is in Default, inwhich case consent of the Borrower is not required), which consent shall not beunreasonably withheld, conditioned or delayed (unless the Lender shall retain25% or less of the Junior Loan or during the existence and continuation of aDefault, in which case Borrower consent shall not be required). If AdministrativeAgent resigns under this Agreement, the Lender shall appoint from among Lenderand Assignees a successor administrative agent, which successor administrativeagent shall be consented to by Borrower at all times other than during theexistence of a Default (which consent of Borrower shall not be unreasonablywithheld, conditioned or delayed). If no successor administrative agent isappointed prior to the effective date of the resignation of AdministrativeAgent, subject to Borrower’s prior written consent (such consent not to berequired if a Default is in existence and continuing), which consent shall notbe unreasonably withheld, delayed or conditioned, Administrative Agent mayappoint, after consulting with Lender, Assignees and Borrower, a successoradministrative agent from among Assignees and the Lender. Upon the acceptanceof its appointment as successor administrative agent hereunder, such successoradministrative agent shall succeed to all the rights, powers and duties of theretiring Administrative Agent and the respectiveterm “Administrative Agent” shall mean such successor administrative agent, andthe retiring Administrative Agent’s appointment, powers and duties asAdministrative Agent shall be terminated. After any retiring AdministrativeAgent’s resignation hereunder as Administrative Agent, the provisions of thisAgreement shall inure to its benefit as to any actions taken or omitted to betaken by it while it was Administrative Agent Issuer under this Agreement. If no successor administrative agenthas accepted appointment as Administrative Agent by the date which is 30 daysfollowing a retiring Administrative Agent’s notice of resignation, the retiringAdministrative Agent’s resignation shall nevertheless thereupon becomeeffective and Lender shall perform all of the duties of Administrative Agenthereunder until such time, if any, as the Lender or the Assignees appoint asuccessor agent acceptable to Borrower as provided for above.

 

(c)           No Administrative Agent shall (i) be liable forany action taken or omitted to be taken by it under or in connection with thisAgreement or any other Junior Loan Document or the transactions contemplatedhereby (except for its own gross negligence or willful misconduct), or (ii) beresponsible in any manner to any of Lender, Assignees or Borrower for anyrecital, statement, representation or warranty made by Borrower or anysubsidiary or Affiliate of Borrower, or any officer thereof, contained hereinor in any other Junior Loan Document, or in any certificate, report, statementor other document referred to or provided for in, or received by AdministrativeAgent under or in connection with, this Agreement or any other Junior LoanDocument, or the validity, effectiveness, genuineness, enforceability or sufficiencyof this Agreement or any other Junior Loan 

 

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Document, or forany failure of Borrower or any other party to any Junior Loan Document toperform its obligations hereunder or thereunder. No Administrative Agent shallbe under any obligation to the Lender, any Assignee or Borrower to ascertain orto inquire as to the observance or performance of any of the agreementscontained in, or conditions of, this Agreement or any other Junior LoanDocument, or to inspect the properties, books or records of Borrower or any ofits Affiliates.

 

(d)           Without limiting the Junior Loan Documents and to theextent not prohibited by applicable Laws, Borrower shall pay when due, shallreimburse to Administrative Agent for the benefit of itself, the Lender and anyAssignee on demand and shall indemnify (i) Administrative Agent, theLender and any Assignee from, all reasonable and documented out-of-pocket fees,costs, and expenses paid or incurred by Administrative Agent in connection withthe negotiation, preparation and execution of this Agreement and the otherJunior Loan Documents (and any amendments, approvals, consents, waivers andreleases requested, required, proposed or done from time to time), and (ii) AdministrativeAgent, the Lender and any Assignee in connection with the disbursement,administration or collection of the Junior Loan or the enforcement of theobligations of Borrower or the exercise of any right or remedy ofAdministrative Agent, including (a) all fees and expenses ofAdministrative Agent’s legal counsel; (b) fees and charges of eachConstruction Consultant, inspector and engineer; (c) appraisal,re-appraisal obtained in accordance with Section 8.41 hereof, and surveycosts; (d) title insurance charges and premiums; (e) title search orexamination costs, including abstracts, abstractors’ certificates and uniformcommercial code searches; (f) judgment and tax lien searches for Borrower;(g) escrow fees; (h) fees and costs of environmental investigations,site assessments and remediations; (i) recordation taxes, documentarytaxes, transfer taxes and mortgage taxes; (j) filing and recording fees;and (k) loan brokerage fees for which Borrower has specifically agreed topay. Borrower shall pay all costs and expenses incurred by AdministrativeAgent, including attorneys’ fees, if the obligations or any part thereof aresought to be collected by or through an attorney at Law, whether or notinvolving probate, appellate, administrative or bankruptcy proceedings.Borrower shall pay all costs and expenses of complying with the Junior LoanDocuments, whether or not such costs and expenses are included in the ComponentBudget. Borrower’s obligations under this Section shall survive thedelivery of the Junior Loan Documents, the making of Advances, the payment infull of the Obligations, the release or reconveyance of any of the Junior LoanDocuments, the foreclosure of the Mortgages or conveyance in lieu offoreclosure, any bankruptcy or other debtor relief proceeding, and any otherevent whatsoever (other than an enforceable waiver of Borrower’s obligationsunder this Section by Administrative Agent).

 

Section 8.41           Appraisal.

 

Lender may obtain from time to time anappraisal of all or any part of the Property prepared in accordance withwritten instructions from Lender by a third-party appraiser engaged directly byLender (i) after the occurrence and during the continuation of a Default; (ii) ifa Governmental Authority requests, or a governmental regulation requires, anappraisal; (iii) upon any action under the Junior Loan Documents orProject Documents which would affect the Obligations; and (iv) if Lenderhas received written confirmation from the Construction 

 

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Consultant confirming thatan event has occurred or condition exists at the Property which is reasonablylikely to have a Material Adverse Effect. Each such appraiser and appraisalshall be satisfactory to Lender (including satisfaction of applicable regulatoryrequirements). The reasonable cost of any such appraisal shall be borne byBorrower. Such cost is due and payable by the Borrower on demand and shall besecured by the Junior Loan Documents. Lender shall provide a copy of suchappraisal to the Borrower upon receipt.

 

Section 8.42           USA Patriot Act Notice.

 

Lender hereby notifies Borrower that pursuantto the requirements of the Act, Lender is required to obtain, verify and recordinformation that identifies Borrower, which information includes the name andaddress of Borrower and other information that will allow Lender to identifyBorrower in accordance with the Act.

 

Section 8.43           [Reserved]

 

Section 8.44           Confidentiality.

 

Notwithstanding anything to the contrarycontained in this Agreement or any other Junior Loan Document to the contrary,any information disclosed by Borrower or its Affiliates to Lender in connectionwith the Junior Loan (including any data, plans, specifications, proposals,financial projections and other financial information, material and informationregarding the Property, the Project, Borrower, its members, their affiliates,and their respective businesses), the terms and any insurance policies requiredor otherwise maintained pursuant hereto or thereto, and any other information providedby Borrower or its Affiliates designated in writing to Lender as confidential(collectively, the “Information”), shall be regarded by such parties asconfidential, shall not be used or disseminated for any purpose other than inconnection with providing banking, lending and other financial services forBorrower or in administering, enforcing, managing and disposing of the JuniorLoan and the rights and interest of Lender in the Collateral, and shall not bedisclosed to a third party (other than to the limited extent permitted by theexpress provisions of this Agreement), except for such disclosures ofInformation:

 

(a)           to Lender, the Cash Management Agent, the ConstructionConsultant, proposed transferees or assignees of Lender and the respective investors,auditors, agents, attorneys, consultants, legal representatives, successors andassigns of the foregoing to the extent commercially reasonable in connectionwith Lender providing banking, lending and other financial services forBorrower or with respect to administration, enforcement, management anddisposition of the Junior Loan and the rights and interest of Lender in theCollateral;

 

(b)           made with the prior agreement of Borrower;

 

(c)           to the extent such Information is otherwise alreadyavailable in the public domain other than as a result of a disclosure by othersin violation of this Section;

 

(d)           to the extent required to be disclosed by court orderin a legal proceeding or by applicable laws; provided, however, that ifpossible, before such disclosure, the Person so required to disclose theInformation shall give Borrower prompt written notice 

 

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of such order orlegal requirement, so as not to limit Borrower’s right to seek to obtain aprotective order or other appropriate remedy;

 

(e)           that were known to Lender or any of its affiliates atthe time of its initial receipt;

 

(f)            were independently developed by Lender or any of itsaffiliates;

 

(g)           become known to Lender or any of its affiliates froman independent source without breach of this provision by Lender or anyaffiliates, officer, director, employee or consultant of Lender;

 

(h)           are disclosed pursuant to regulatory reviews andinvestigations;

 

(i)            are disclosed to present or prospective, direct orindirect, holders of equity in the Lender or any present or prospective lenderto the Lender;

 

(j)            are disclosed to Lender’s attorneys, accountants, taxadvisors, investment advisors and manager, and other consultants engaged toassist Lender in connection with the Loan or in the performance of itsobligations or exercise of its rights hereunder or connection with regulatory,tax and any other compliance required under applicable law; or

 

(k)           as may be required by Law upon the advice of legalcounsel in order to comply with all financial reporting, securities laws andother legal requirements applicable to Lender, including any requireddisclosures to the Securities and Exchange Commission, any applicable stateagency involved in securities regulation and the Financial IndustryRegulatory Authority.

 

Section 8.45           Termination.

 

The terms, provisions and undertakings inthis Agreement and all other Junior Loan Documents shall terminate and cease tobe effective upon the indefeasible payment in full of the Junior Loan and thefull and final discharge of any other Obligations and except for anyindemnification provisions that expressly survive the payment in full of theLoan. Lender agrees, at Borrower’s reasonable expense, to take such actions asmay be necessary to evidence such termination and the release of any lienscreated hereunder or under any other Junior Loan Document, including (withoutlimitation) the filing of Uniform Commercial Code termination statements,releases of mortgages/deeds of trust and other lien releases. Borrower mayrequest in writing an extension of the maturity date of the Junior Loan fromLender in accordance with the Junior Note.

 

Section 8.46           Documents, etc. to be Satisfactory.

 

All instruments and documents required herebyor affecting the Property, or relating to Borrower’s capacity and authority toborrow the Junior Loan and to execute the Loan documents and such otherdocuments, instruments, opinions and assurances as Lender may request and allprocedures in connection herewith shall be subject to the approval, as to formand substance, of 

 

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Lender and its counsel. Allpersons or entities responsible for the preparation and/or execution of theinstruments specifically required hereby and all obligors thereunder shall bereasonably satisfactory to Lender.

 

Section 8.47           Factual Matters.

 

Any condition of this Agreement whichrequires the submission of evidence of the existence or non-existence of aspecified fact or facts implies as a condition of the existence ornon-existence, as the case may be, of such fact or facts that Lender shall, atall times, be free independently to establish to its satisfaction and in itsabsolute discretion such existence or non-existence.

 

Section 8.48           Modification of Junior Loan in AccordanceWith Lease.

 

Lender agrees, subject to the satisfaction ofthe requirements of this Section 8.48 and any other applicablerequirements of the Debt Documents, as defined in the Lock Box Agreement, toconsent to the amendment of the PAL Lease to reflect the inclusion of Parcel Cat Fort Shafter and Parcel B at TAMC (collectively, the “Hawaii Parcels”) inthe Site (as defined in the PAL Lease) and the conveyance of the improvementsthereon to the Borrower in accordance with Section 1.e. and 1.f. of thePAL Lease. The Lender’s obligation to provide any such consent, however, isconditioned on (i) execution, delivery and/or recordation of suchdocuments as are reasonably required by the Lender to confirm and/or provide asecond priority leasehold mortgage lien for the benefit of the Lender on theHawaii Parcels, including, without limitation, such additional real estate,environmental, title insurance and survey documents, reports and materials asare customarily required by the Lender for real estate transactions of the typecontemplated hereby and such consents and estoppels from the Government as arerequired or authorized under the PAL Lease, (ii) execution and delivery bythe Borrower of such other modifications to the Debt Documents as reasonablyrequired by the Lender to reflect the addition of the Hawaii Parcels to the PALLease, and (iii) delivery to the Lender of such legal opinions relating todocuments executed by the Borrower in connection with the amendment of the PALLease and any related amendments to the Debt Documents as the Lender shallreasonably request.

 

Section 8.49           Not Government Obligations.

 

The obligations of Borrower under thisAgreement are not obligations of the U.S Government.

 

Section 8.50           Refinancing of Senior Loan.

 

Notwithstanding anything to the contrarycontained in this Agreement, Borrower agrees that if the Senior Loan isrefinanced with a new loan secured by the Collateral or any part thereof (a “ReplacementSenior Loan”), it is the intent of such parties that the lender of theReplacement Senior Loan shall not be subrogated to the rights or priority ofthe Senior Lender and that the Replacement Senior Loan (including, withoutlimitation, all mortgages, liens, assignments, security interests andobligations created by the documents evidencing and securing the ReplacementSenior Loan) will in all respects be subordinate and inferior to the JuniorLoan (including, without limitation, all mortgages, liens, assignments,security interests and 

 

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obligations created by thedocuments evidencing and securing the Junior Loan) and the Junior LoanDocuments, unless Junior Lender executes a written instrument to the contrary.Accordingly, in the event a Replacement Senior Loan is obtained, Borrower shallexecute, and shall cause the lender of the Replacement Senior Loan to execute,such documents as Junior Lender may reasonably require in order to evidence thesubordination of the Replacement Senior Loan to the Junior Loan.

 

Section 8.51           Guarantor Controlled Person.

 

Subordinate Lender is executing thisAgreement for the sole purpose of acknowledging and agreeing that it is aGuarantor Controlled Person.

 

Section 8.52           New York Contacts.

 

As stated in Section 8.13 above, Lenderand Borrower have agreed that the laws of the State of New York shall governthis Agreement. This Agreement is being entered into as part of a transactionwhereby, among other things, the Army is granting a leasehold estate in theProperty to Borrower and concurrently therewith Borrower is obtaining theJunior Loan, the Senior Loan and the Subordinate Loan to perform improvementson the Property. Borrower and Lender acknowledge and agree that their selectionof the laws of the State of New York to govern this Agreement is appropriatebecause, among other things: (a) Senior Lender has multiple offices in NewYork; (b) the title company that is a party to the transaction of whichthe Senior Loan, the Junior Loan and the Subordinate Loan are a part has itschief executive office in New York; (d) substantive negotiations regardingthe transaction occurred in New York; (e) the Junior Lender, the SeniorLender and the Subordinate Lender will fund the initial advances of theirrespective loans through the offices of the title insurer and escrow agent inNew York; (f) one or more of the agreements relating to the transactionhave been signed in New York and (g) all ofthe Closing documents related to this transaction have been deliveredinto escrow with the title insurer at its office in New York.

 

Section 8.53           Payment at Maturity.

 

Borrower acknowledges and agrees that theMinimum Monthly Payment and all payments due and payable hereunder and underthe Junior Loan on the Maturity Date must be paid regardless of the sufficiencyof Revenue (as defined in the Lock Box Agreement.

 

Section 8.54           Payment in Full of Senior Loan/Purchaseof Senior Loan.

 

Notwithstanding anythingto the contrary set forth in the Project Documents or any other document,Borrower agrees that at such time as all obligations owed to Senior Lenderunder the Senior Loan Documents have been paid in full, Lender shallautomatically succeed to all approval, consent, participation, and similarrights of Senior Lender set forth in the Project Documents and all rights ofSenior Lender to receive notices, reports and other information pursuant to theProject Documents, as if such rights were validly assigned by Senior Lender toLender prior to payment of the obligations owed to the Senior Lender under theSenior Loan Documents; provided, however that Lender shall have the right toreject such assignment in whole or in part by sending written notice toBorrower. Borrower agrees to use reasonable efforts to cooperate with Lender incausing any third party to recognize the transfer of rights from 

 

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Senior Lender to Lenderdescribed in the preceding sentence. Borrower shall not purchase, or allow any Affiliate of Borrower topurchase the Senior Loan, unless (i) concurrently therewith, the JuniorLoan is sold to the same party on terms acceptable to the Junior Lender in itssole discretion, or (ii) the prior written consent of Junior Lender isobtained (which consent may be given or withheld in the sole discretion ofJunior Lender).

 

Section 8.55           Refinance of Subordinate Loan.

 

Borrower agrees that Borrower will notrefinance the Subordinate Loan without the prior written consent of Lender,which consent shall not be unreasonably withheld, conditioned or delayed. IfBorrower desires to refinance the Subordinate Loan, Borrower shall send writtennotice to Lender describing the identity of the person or entity providing suchrefinancing, certifying that such refinancing will not result in any amendmentof any of the Special Modification Terms of Subordinate Loan Documents, as suchterm is defined in the Intercreditor Agreement, and requesting Lender’sapproval thereof. Within fifteen (15) days after delivery of such notice,Lender shall respond to Borrower with a notice either approving or disapprovingthe contemplated refinancing. If Lender fails to respond to a notice sent byBorrower requesting Junior Lender’s approval of a refinancing withinfifteen (15) days after delivery, then Junior Lender shall be deemed to haveapproved such refinancing. Any refinancing made in violation of this Section shallbe deemed void.  Notwithstanding theforegoing, Lender’s consent shall not be required with respect to a refinancingby an Affiliate of Borrower, provided that Borrower provides Lender with priorwritten notice of the refinancing and the identity of the Affiliate, and theAffiliate provides a certification to Lender on or before the closing of therefinancing certifying that such refinancing does not result in any amendmentof any of the Special Modification Terms of Subordinate Loan Documents,acknowledging that such Affiliate is a Guarantor Controlled person as providedin Section 8.52 hereof, and that such Affiliate agrees to be bound by allof the terms and conditions of the Intercreditor Agreement binding onSubordinate Lender.

 

*[Signaturepages to follow]*

 

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[Signature page toJunior Loan Agreement]

 

IN WITNESS WHEREOF, Borrower and Lender havecaused this Agreement to be executed as of the date first above written.

 

 
|   | **BORROWER:**                         |
|--------|---------------------------------------|
|   |                                  |
|   | REST EASY LLC,                        |
|   | a Delaware Limited  liability company |
|   |                                  |   |
|   | By:                                   | RE Managing Member LLC, |
|   |                                  | its managing member |
|   |                                  |   |
|   |                                  | By: | Actus Lend Lease  Holdings LLC, |
|   |                                  |   | its sole member |
|   |                                  |   |   |   |
|   |                                  |   |   |   |
|   |                                  |   | By: | /s/  Marc Sierra |
|   |                                  |   |   | Marc  Sierra |
|   |                                  |   |   | Executive  Vice President |
|   |                                  |   |   |   |
|   |                                  |   |
|   | **LENDER:**                           |
|   |                                  |
|   | BEHRINGER  HARVARD PAL I, LLC,        |
|   | a  Delaware limited liability company |
|   |                                  |   |
|   |                                  |   |
|   | By:                                   | /s/  Gerald J. Reihsen, III |
|   |                                  | Gerald  J. Reihsen, III |
|   |                                  | Executive  Vice President — |
|   |                                  | Corporate  Development & Legal |

 

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[Signature page toJunior Loan Agreement]

 

Subordinate Lender is executing thisAgreement solely to evidence its agreement to Section 8.51

 

 
|   | **SUBORDINATE LENDER:**        |
|--------|--------------------------------|
|   |                           |
|   | LEND LEASE (US) CAPITAL  INC., |
|   | a Delaware corporation         |
|   |                           |
|   |                           |
|   |                           |
|   | By:                            | /s/  Kevin M. Davis |
|   |                           |   |
|   | Name:                          | Kevin  M. Davis |
|   |                           |   |
|   | Title:                         | Assistant  Secretary |

 

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Schedule 1

 

Definitions

 

Unless the context otherwise specifies orrequires, the following terms shall have the meanings herein specified, suchdefinitions to be applicable equally to the singular and the plural forms ofsuch terms and to all genders:

 

“AAA” means the American ArbitrationAssociation, or any successor thereof.

 

“Act” means the USA Patriot Act (TitleIII of Pub. L. 107-56 (signed into law October 26, 2001)).

 

“Actus” means Actus Lend Lease LLC, aDelaware limited liability company.

 

“Advance” means any advance of JuniorLoan proceeds by Lender made in accordance with the terms and conditions hereof(inclusive of the Initial Advance).

 

“Affiliate” with respect to anyspecified Person means (i) any Person directly or indirectly Controlling,Controlled by or under common Control with, the specified Person and shallinclude, if such Person is an individual, members of the Family of such Personand trusts for the benefit of such individual or Family members; (ii) anydirector, officer or trustee of the specified Person; and (iii) any Persondirectly, indirectly or beneficially owning or Controlling more than fiftypercent (50%) of any class of voting securities of the specified Person. Withoutlimiting the foregoing, a limited partnership, the limited partners of whichare trusts for the benefit of Family members of a Person and the generalpartners of which are beneficiaries or Family members of the beneficiaries ofsuch trusts, corporations or partnerships owned by any of the foregoing, shallbe an Affiliate of such trusts.

 

“Ancillary Lease” means a lease orlicense between the Army, as lessor and licensor, as applicable, and theBorrower, as lessee or licensee, as applicable, regarding the demise or licenseof property which is not demised, licensed or conveyed to the Borrower underthe PAL Lease, as such lease or license may be extended, amended, restated,supplemented, superseded or otherwise modified from time to time in accordance withthe terms thereof.

 

“Army” means The United States ofAmerica, by the Secretary of the Army.

 

“Asset and Property Management Agreement”means the agreement of that name by and between Borrower and the Asset Managerwith respect to the Project, as amended and supplemented from time to time.

 

“Asset Manager” means the managerengaged by the Borrower from time to time under the Asset and PropertyManagement Agreement or any substitute or replacement asset managementagreement with the Company. The initial Asset Manager is RE Asset ManagementLLC, a Delaware limited liability company.

 

“Assignment of Rents and Leases” meanseach Junior Assignment of Rents and Leases by the Borrower in favor of theLender, as amended and supplemented from time to time.

 

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“Authorized Signer” means anyrepresentative of Borrower duly designated and authorized by Borrower to signDraw Requests in a writing addressed to Lender, which writing may include aDraw Request in the form attached hereto as Schedule 2.

 

“Banking Day” means any day that isnot a Saturday, Sunday or banking holiday in the State.

 

“Bill of Sale” has the meaning setforth in Appendix A to the Lock Box Agreement.

 

“Business Days” shall have the meaningas set forth in Section 8.28.

 

“Cash Management Agent” means Bank ofAmerica, N.A. as “Cash Management Agent” under the Lock Box Agreement.

 

“Casualty” means an event of damage ordestruction to the Project by fire or other casualty.

 

“Casualty Proceeds” means theinsurance claims under and the proceeds of any and all policies of insurancecovering the Project or any part thereof, including all returned and unearnedpremiums with respect to any insurance relating to such Project, in each casewhether now or hereafter existing or arising, and all other amounts payable asa result of, or in connection with, any Casualty.

 

“Change Order” has the meaning setforth in the Design/Build Agreement.

 

“Claims” means any and allliabilities, obligations, damages, losses, demands, penalties, fines, claims,actions, suits, judgments, settlements, costs, expenses and disbursements(including, reasonable, actually incurred legal fees, expenses and costs ofinvestigation) of any kind and nature whatsoever.

 

“Closing” means the date of executionof this Junior Loan Agreement and the Junior Note, which shall be August 14,2009.

 

“Code” means the Internal Revenue Codeof 1986, as amended.

 

“Collateral” means any and all realand personal property, both tangible and intangible, that secures any of theObligations, including any after-acquired Collateral.

 

“Collateral Assignment” means theAssignment of Contracts, Permits and Approvals and acknowledgements andconsents thereto, as amended and supplemented from time to time.

 

“Collateral Assignment of LodgingManagement Agreement” means the Collateral Assignment of Lodging ManagementAgreement between the Borrower and the Lender, as amended and supplemented fromtime to time.

 

“Commencement Date” means the date ofcommencement of the construction of the Improvements, as determined by theConstruction Consultant. Subject to extension for Force Majeure and ExcusableDelay, Commencement Date shall occur no later than the earlier of: (i) 

 

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February 1, 2010, or (ii) thefirst Advance after the Initial Advance under the Senior Loan Agreement.

 

“Completion of Construction” means,with respect to the construction of the Improvements or any component thereof,the satisfaction of all of the conditions of Section 5 of Schedule 5.

 

“Component” has the meaning set forthin the Design/Build Agreement.

 

“Component Budget” has the meaning setforth in the Design/Build Agreement and is subject to modification inaccordance with the terms and conditions set forth in the Design/BuildAgreement.

 

“Component Scope” has the meaning setforth in the Design/Build Agreement and is subject to modification inaccordance with the terms and conditions set forth in the Design/BuildAgreement.

 

“Condemnation” means the condemnation,requisition or other taking or sale of the use, occupancy or title to theProject or any part thereof in, by or on account of any eminent domainproceeding or other action by any Governmental Authority or other Person underthe power of eminent domain or otherwise or any transfer in lieu of or inanticipation thereof.

 

“Condemnation Awards” means any andall judgments, awards of damages (including severance and consequentialdamages), payments, proceeds, settlements, amounts paid for a taking in lieu ofCondemnation, or other compensation heretofore or hereafter made, includinginterest thereon, and the right to receive the same, as a result of, or inconnection with, any Condemnation or threatened Condemnation.

 

“Consent of Lessor” means the Consentof Lessor among the Army, Borrower, the Junior Lender, the Junior Lender andthe Subordinate Lender, as amended and supplemented from time to time.

 

“Construction Consultant” means aperson or firm appointed or designated as provided by the Lease from time totime to inspect the progress of the development of the Land, the Constructionof the Improvements and the conformity of construction with the Plans andSpecifications, and the Design/Build Agreement in accordance with an agreementbetween the Borrower, Lender, Army and Construction Consultant.

 

“Construction Escrow Reserve Subaccount”has the meaning set forth in the Lock Box Agreement.

 

“Construction Guaranty” means theConstruction Guaranty made by Lend Lease Corporation Limited in favor of theBorrower with respect to the Project, as the same may be extended, amended,restated, supplemented, superseded or otherwise modified from time to time inaccordance with the terms thereof.

 

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“Construction of the Improvements” or “constructionof Improvements” means the development of the Land and/or the constructionof the Improvements described as the LSCR Phase in the PAL Lease.

 

“Control” (and the co-relative terms “Controlling,”“Controlled by” and “under common Control with”) means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of a Person, whether through theownership of outstanding securities, equity or other beneficial ownership interests,by contract or otherwise.

 

“Control Agreement” means,collectively, the Deposit Account Control Agreements of even date herewithamong Borrower, the Senior Lender, the Junior Lender, Subordinate Lender andBank of America, N.A., as amended and supplemented from time to time.

 

“Default” means an event orcircumstance that, with the giving of Notice or lapse of time, or both, wouldconstitute an Event of Default under the provisions of this Agreement.

 

“Design/Build Agreement” means the (i) Design/BuildAgreement dated as of August 14, 2009, by and between Borrower, as owner,and the Design/Build Contractor, as general contractor, (ii) any othercontract for the development of the Land and/or the Construction of theImprovements between Borrower and a contractor, and approved in writing byLender, as the same may be amended from time to time with the prior writtenapproval of Lender; and (iii) any purchase orders for the acquisitionand/or installation of budgeted FF&E and OS&E in connection with theoperation of the Project in accordance with Schedule 12.

 

“Design/Build Contractor” means ActusLend Lease LLC, a Delaware limited liability company, its successors andpermitted assigns and any other contractor pursuant to a Design/BuildAgreement.

 

“Development Manager” means thedevelopment manager, from time to time, under the Development ServicesAgreement. The initial Development Manager will be RE Development ManagementLLC, a Delaware limited liability company.

 

“Development Management Services Agreement”means that certain Development Management Services Agreement, dated as of theEffective Date, by and between the Company and Development Manager, as the samemay be extended, amended, restated, supplemented, superseded or otherwisemodified from time to time in accordance with the terms thereof.

 

“Direct Costs” means the aggregate ofall design build costs and expenses under the Design/Build Agreement, labor,materials, equipment, and fixtures necessary for completion of construction ofthe Improvements.

 

“Direct Costs Statement” means astatement in form reasonably approved by Lender of Direct Costs incurred and tobe incurred, trade by trade, to be prepared by the Design/Build Contractor,including the Direct Cost contingencies amount.

 

“Dispute” means any controversy, claimor dispute between or among the parties to this Agreement, including any suchcontroversy, claim or dispute arising out of or relating to (a) thisAgreement, (b) any other Junior Loan Document, (c) any relatedagreements or instruments, or 

 

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(d) the transactioncontemplated herein or therein (including any claim based on or arising from analleged personal injury or business tort).

 

“Draw Request” means a statementprepared by the Borrower in form and substance similar to Schedule 2attached hereto and made a part hereof satisfactory to Lender setting forth theamount of the Junior Loan advance requested in each instance with respect tothe Improvements and including, if requested by Lender (i) the Direct CostStatement and Indirect Cost Statement; (ii) acost certification executed by the Design/Build Contractor in form approved inwriting by Lender and the Construction Consultant; (iii) paymentreceipts from all Subcontractors in a form approved in writing by Lender andConstruction Consultant; (iv) proof of paymentof all Direct and Indirect Costs covered by all previous Draw Requests; and (v) atthe time of the Draw Request, a conditional “Lien Waiver” in Proper Form fromthe Design/Build Contractor and a conditional “Lien Waiver” in Proper Form,from all Subcontractors or suppliers for all sums in excess of $250,000 perSubcontractor or supplier advanced up to and including the previous DrawRequest and within the earlier of (i) thirty (30) days after the priorDraw Request and (ii) the date of Draw Request next following the DrawRequest related to such payment, an unconditional waiver from the Design/BuildContractor.

 

“Effective Date” shall mean August 14,2009.

 

“Eligible Assignee” means: (a) SeniorLender or Subordinate Lender; (b) an Affiliate of the Borrower; (c) anAffiliate of the Lender, the Senior Lender or the Subordinate Lender or anentity or an Affiliate of an entity that administers or manages the Lender, theSenior Lender or the Subordinate Lender; (d) any person (other than anatural person) that is (or will be) engaged in making, purchasing, holding orotherwise investing in commercial real estate loans and similar extensions ofcredit in the ordinary course of its business and is able, after giving effectto the purchase of the Junior Loan, to assume the Lender’s obligationshereunder; (e) any entity approved by the Borrower (such approval not tobe unreasonably withheld, conditioned or delayed); or (f) such entity asthe Lender shall be required to transfer or assign its rights and obligationshereunder pursuant to any order of Governmental Authority.

 

“Environmental Agreement” means theAgreement of Environmental Indemnification of even date herewith by and betweenBorrower and Lender pertaining to the Property, as the same may from time totime be extended, amended, restated or otherwise modified.

 

“Environmental Claim” means anycomplaint, action, notice, order, claim, investigation, judicial oradministrative proceeding or action, or other similar claims or communicationsfrom any Person (defined below) involving or alleging any non-compliance withany Environmental Requirement (defined below) or the existence of any unsafe orhazardous condition resulting from or related to the Release (defined below) ofany Hazardous Material (defined below).

 

“Environmental Law” means any and allapplicable federal, state or local laws, statutes, ordinances, rules,regulations, orders, principles of common law, judgments, permits, licenses orother determinations of any judicial or regulatory authority, now or hereafterin effect, imposing liability, establishing standards of conduct or otherwiserelating to protection of the environment (including natural resources, surfacewater, groundwater, soils, and indoor and ambient air), 

 

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health and safety, land usematters or the presence, generation, treatment, storage, disposal, Release orthreatened Release, transport or handling of any Hazardous Material.

 

“Environmental Matters” means (a) thepresence, Release or threatened Release of any Hazardous Material at or fromthe Project, on or before the Closing; (b) the breach of anyrepresentation, warranty, covenant or agreement contained in this Agreementwith respect to any Environmental Requirement because of any act, omission,event or condition existing or occurring on or before the Closing; (c) anyviolation, on or before the Transition Date, of any Environmental Requirementin effect on or before the Closing, regardless of whether any act, omission,event or circumstance giving rise to the violation constituted a violation atthe time of the occurrence or inception of such act, omission, event orcircumstance; (d) any Environmental Claim related to any, act, omission,event or condition existing or occurring in connection with the use oroccupancy of the Project at any time on or before the Closing; (e) thefiling or imposition of any environmental lien against the Project; and regardlessof whether any matter set forth in the foregoing subsections (a) through(e) was caused by Borrower, a prior owner of the Project, or any otherPerson whatsoever.

 

“Environmental Requirement” means anyEnvironmental Law, or any other applicable agreement or restriction (includingany condition or requirement imposed by any third party or insurance or suretycompany), now or hereafter in effect, which relates to any matters addressed byany Environmental Law, Hazardous Material, or the prevention of any unsafe orhazardous condition resulting from or related to the Release of any HazardousMaterial.

 

“ERISA” means the Employee RetirementIncome Security Act of 1974, as amended.

 

“Event of Default” means any event orcircumstance specified in Article VI and the continuance of suchevent or circumstance beyond the applicable grace and/or cure periods therefor,if any, set forth in Article VI.

 

“Excusable Delay” shall have themeaning set forth in the Design/Build Agreement as of the date hereof, providedthat such definition shall not be amended without Lender’s consent.

 

“Expenses” means all reasonable,actual and documented fees, charges, costs and expenses of any naturewhatsoever incurred at any time and from time to time (whether before or afteran Event of Default) by Lender in making, funding, administering or modifyingthe Junior Loan, in negotiating or entering into any “workout” of the JuniorLoan, or in exercising or enforcing any rights, powers and remedies provided inthe Mortgages or any of the other Junior Loan Documents, including reasonableoutside attorneys’ fees, court costs, receiver’s fees, management fees andreasonable costs incurred in the repair, maintenance and operation of, ortaking possession of, or selling, the Property up and to the time that Lenderaccepts title to the Property (through foreclosure, power of sale or theacceptance of a deed in lieu of foreclosure).

 

“FF&E” means all furniture,furnishings and equipment (excepting which is deemed to be OS&E (ashereinafter defined) now or hereafter located and installed in or about thehotels which are used in the operation thereof as hotels in accordance with thestandards set forth in the Hotel Operating Agreement, including, withoutlimitation, (i) office furnishings and equipment; (ii) specializedhotel equipment necessary for the operation of any portion of the 

 

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Improvements as hotels,including equipment for kitchens, laundries, dry cleaning facilities, bars,restaurants, public rooms, commercial space, parking areas, and recreationalfacilities; and (iii) all other furnishings and equipment hereafterlocated and installed in or about the Improvements which are used in theoperation of the Improvements as hotels in accordance with the standardsset forth in the Hotel Operating Agreement.

 

“Final Project Completion Date” meansthe date by which Borrower shall cause to occur the completion of theGuaranteed Scope of Work, in accordance with the Design/Build Agreement and PALLease but no later than the earlier of (i) subject to extension for Forcemajeure and Excusable Delay, the day prior to the thirty-seventh (37th) month anniversary of thedate of this Agreement; provided, however, that such date shall be extendedevery month thereafter (but in no event beyond September 1, 2013) byBorrower, so long as cash flow derived from the Project and paid in accordancewith the Lock Box Agreement is sufficient to satisfy Borrower’s paymentobligations under the Senior Note and Junior Note as determined by Lender inits sole discretion; and (ii) September 1, 2013.

 

“Force Majeure” or “Force MajeureEvent” means an act of God, fire, earthquake, hurricane, cyclone, volcaniceruption, tsunami, flood, war, invasion, terrorist action, acts of publicenemies, civil commotion, civil disorder, riot, mob violence, insurrection,sabotage, embargos, blockade, epidemics, quarantines, inability to procure or ageneral shortage of labor, equipment, facilities, materials or supplies in theopen market, impediment or delay in transportation, utilities, computers,equipment, communication and other facilities, strike, lockout, action of laborunions, a taking by eminent domain, acts of any Governmental Authorities, or ofcivil or military authorities (other than actions of the Army under theOperative Documents), ionizing radiation or contamination by radioactivity fromany nuclear weapons, nuclear fuel or from any nuclear waste or from thecombustion of nuclear material or nuclear fuel, previously unknown environmentalor archaeological conditions, or any other cause whether similar or dissimilarto the foregoing, not within the reasonable control of any relevant Person,including reasonable delays for adjustments of insurance; provided, however,that (a) Borrower must give Notice to Lender within ten (10) daysafter the occurrence of an event which it believes to constitute Force Majeure,(b) in no event shall Force Majeure extend the time for the performance ofan Obligation by more than ninety (90) days, and (c) circumstances thatcan be remedied or mitigated through the payment of money shall not constituteForce Majeure hereunder to the extent such remedy or mitigation is deemedreasonable by Lender in its sole discretion.

 

“Governmental Authority” means anyfederal, state, county, municipal or other governmental or regulatoryauthority, agency, board, body, commission, instrumentality, court orquasi-governmental authority with jurisdiction over the Project or the Personin question; provided, however, that the term “Governmental Authority” shallnot include, nor shall it be deemed to include, the Army in any of itscapacities as a party under the Operative Documents, as defined in the Lock BoxAgreement.

 

“Guarantor” means Actus Lend LeaseLLC, a Delaware limited liability company, its successors and permittedassigns, and any other Person executing a Guaranty in connection with theJunior Loan.

 

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“Guarantor Controlled Person” has themeaning given in the Guaranty.

 

“Guaranty” means the Guaranty andIndemnity to be executed by Guarantor at Closing in the form attached hereto asSchedule 6.

 

“Guaranteed Maximum Price” shall havethe meaning set forth in the Design/Build Agreement as of the date hereof,provided that such definition shall not be amended without the Lender’sconsent.

 

“Guaranteed Scope of Work” shall havethe meaning set forth in the Design/Build Agreement as of the date hereof,provided that such definition shall not be amended without the Lender’sconsent.

 

“Hazardous Material” means petroleumand petroleum products or byproducts or components or wastes and compoundscontaining them, including, without limitation, gasoline, diesel fuel and oil;explosives; flammable materials; radioactive materials; polychlorinatedbiphenyls (“PCBs”) and compounds, equipment or materials containing them; leadand lead-based paint; asbestos or asbestos-containing materials in any form;mold or fungus or similar substances; urea formaldehyde foam; underground oraboveground storage tanks, whether empty or containing any substance;infectious material; unexploded or discharged ordnance; pesticide or pesticideresidues; noise; any substance the manufacture, possession, presence, use,generation, storage, release, treatment, processing, transport, emission,disposal, abatement, cleanup, removal, remediation, handling or discharge ofwhich is prohibited, limited or regulated by, or that may give rise toliability or damages under, any Environmental Law; any material or substancethat is subject to the requirements of any Environmental Law; any material orsubstance that may reasonably be expected to constitute or contribute to arisk, danger or hazard to public health, safety or welfare or to theenvironment; and any other material or substance (whether or not naturallyoccurring) now or in the future defined as a “hazardous substance,” “hazardousmaterial,” “hazardous waste,” “toxic substance,” “toxic pollutant,” “solidwaste,” “pesticide, contaminant,” “toxic” or “pollutant” or words of similarmeaning or otherwise classified as hazardous, radioactive or toxic within themeaning of any Environmental Law.

 

“Hotel Operator” means the hoteloperator or lodging manager engaged by the Company from time to time under theHotel Operating Agreement. The initial Hotel Operator is PML Services LLC, anaffiliate of InterContinental Hotels Group Resources, Inc.

 

“Hotel Operating Agreement” means (i) thatcertain Lodging Management Agreement, by and between the Company and HotelOperator, dated as of August 14, 2009, as extended, amended, restated,supplemented, superseded or otherwise modified from time to time in accordancewith the terms thereof, or (ii) any replacement or successor hoteloperating agreement or lodging management agreement between the Company and asuccessor Hotel Operator, as the same shall be extended, amended, restated,supplemented, superseded or otherwise modified from time to time in accordancewith the terms thereof.

 

“Improvements” shall mean,collectively (i) the “Improvements” as defined in the PAL Lease (expresslyexcluding the Excluded Improvements, as defined in the Lock Box Agreement), assuch definition shall be amended from time to time in accordance with the PALLease, and 

 

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(ii) any building orother improvement (or portion thereof) which is demised or licensed under anyAncillary Lease, as such portion of the demised or licensed premises under suchAncillary Lease shall be amended from time to time in accordance with theapplicable Ancillary Lease.

 

“Indemnified Party” means and includesLender, any Persons owned or controlled by, owning or controlling, or undercommon control or directly affiliated with Lender, any participants in theJunior Loan, the directors, officers, partners, employees and agents of Lenderand/or such Persons, and the successors and assigns of each of the foregoingPersons.

 

“Independent Construction ConsultingAgreement” has the meaning set forth in Appendix A to the Lock Box Agreement.

 

“Indirect Costs” means certain costs(other than Direct Costs) of completion of the Improvements, including but notlimited to, architects’, engineers’ and Lender’s counsel’s fees, filing fees,ground rents, interest on and recording taxes and title charges in respect ofMortgages, real estate taxes, water and sewer rents, survey costs, Loancommitment fees and insurance and bond premiums to the extent not Direct Costs,FF&E, OS&E, costs and expenses incurred by Developer Manager and feespaid to the Developer Manager under the Development Management ServicesAgreement, but not design build costs and expenses under the Design/BuildAgreement.

 

“Initial Advance” means the firstAdvance of the Junior Loan proceeds to be made hereunder in the amount of$12,756,086.68.

 

“Information” shall have the meaningas set forth in Section 8.42.

 

“Insurance Proceeds” means theinsurance claims under and the proceeds of any and all policies of insurancecovering the Property or any part thereof, including all returned and unearnedpremiums with respect to any insurance relating to such Property, in each casewhether now or hereafter existing or arising.

 

“Intercreditor Agreement” means theIntercreditor and Subordination Agreement among the Junior Lender, Junior Lenderand Subordinate Lender, as amended and supplemented, and each Memorandum ofIntercreditor Agreement with respect thereto.

 

“Junior Lender” means BehringerHarvard PAL I, LLC.

 

“Junior Loan” means that certain loanfrom the Junior Lender to the Borrower in the amount of $25,000,000 pursuant tothe Junior Loan Agreement, which indebtedness is evidenced by the Junior Note.

 

“Junior Loan Agreement” means thisAgreement, as the same may be extended, amended, restated, supplemented,superseded or otherwise modified from time to time in accordance with the termsthereof.

 

“Junior Loan Documents” means thisAgreement, the Junior Note, the Mortgages, the Guaranty, the EnvironmentalAgreement, Consent of Lessor, the Lock Box Agreement, the Control Agreement,the Collateral Assignment, the Assignment of Rents and Leases, Independent 

 

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Construction ConsultantAgreement, and the Collateral Assignment of Lodging Management Agreement andany and all other documents which Borrower, or any other party or parties, haveexecuted and delivered, or may hereafter execute and deliver, to evidence,secure or guarantee the Obligations, or any part thereof, as the same may fromtime to time be extended, amended, restated, supplemented or otherwisemodified.

 

“Junior Note” shall mean that certainpromissory note, dated as of the Effective Date, made by the Borrower in favorof the Junior Lender in the original principal balance of up to $25,000,000, asthe same may be extended, amended, restated, supplemented, superseded orotherwise modified from time to time in accordance with the terms thereof.

 

“Land” means the land described in andencumbered by the Mortgages and land conveyed to the Borrower under AncillaryLeases.

 

“Laws” means all federal, state andlocal laws, statutes, rules, ordinances, regulations, codes, licenses,authorizations, decisions, injunctions, interpretations, orders or decrees ofany court or other Governmental Authority having jurisdiction as may be ineffect from time to time.

 

“Lease” means, collectively, (i) PALLease and (ii) Ancillary Leases.

 

“Letter of Intent” means that certainletter of interest from Behringer Harvard Opportunity REIT II, Inc.,Lender’s ultimate parent, dated June 25, 2009 and accepted by Borrower andActus Lend Lease Holdings LLC.

 

“Lien Waiver” means the lien waiver inthe applicable form set forth in Schedule 11 attached hereto andmade a part hereof, or in such other form approved by Lender in writing.

 

“Lock Box Account” means the accountof such name, including the Restricted Subaccounts, described in Article IIof the Lock Box Agreement.

 

“Lock Box Agreement” means thatcertain Lock Box, Cash Management and Disbursement Agreement, by and among theBorrower, the Lenders and the Cash Management Agent, dated as of the EffectiveDate, as the same may be extended, amended, restated, supplemented, supersededor otherwise modified from time to time in accordance with the terms thereof.

 

“LSCR Phase” has the meaning ascribedthereto in the PAL Lease.

 

“Maturity Date,” with respect to theJunior Note, means the earlier of (i) September 1, 2016 or (ii) suchearlier maturity date as provided in the Junior Note.

 

“Material Adverse Effect” means (1) amaterial adverse effect upon (a) the business or financial position orresults of operation of Borrower, (b) the ability of Borrower to performany material obligations and/or undertakings as set forth in the Junior LoanDocuments or (c) the value of the Property and/or (2) such event oraction would not lessen, impair, diminish or limit, in each case to a materialextent, any of Lender’s rights or remedies under any of the Junior LoanDocuments or result in a default or event of default under any of the ProjectDocuments (or a Termination Default, as such term is defined under the PALLease).

 

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“Minimum Monthly Payment” has themeaning ascribed thereto in the Junior Note.

 

“Mortgage” means each certain JuniorConstruction Leasehold Mortgage or Leasehold Deed of Trust, Assignment,Security Agreement and Fixture Filing from the Borrower for the benefit of theLender with respect to the Obligations, as amended and supplemented from timeto time.

 

“Municipal Agreement” means thatcertain Municipal Services and Utility Support Agreement, by and between theArmy and the Borrower, dated as of the Effective Date, as the same may beextended, amended, restated, supplemented, superseded or otherwise modifiedfrom time to time in accordance with the terms thereof.

 

“Net Award,” when used with respect toany Condemnation Awards or Insurance Proceeds, means the entire award,compensation, insurance proceeds and/or other payment, if any, on account ofany Condemnation or Casualty, excluding proceeds of business interruptionand/or use and occupancy insurance and less any reasonable expenses (includingreasonable attorneys’ fees and expenses) actually incurred by the EntitledPerson, as defined in the Lock Box Agreement, in collecting such award,compensation, insurance proceeds or other payment.

 

“Notice” means a notice, request,consent, demand or other communication given in accordance with the provisionsof Section 8.6 of this Agreement.

 

“Obligations” means all present andfuture debts, obligations and liabilities of Borrower to Lender arisingpursuant to the provisions of this Agreement, the Junior Note or any of theother Junior Loan Documents, including the obligations: (a) to pay allprincipal, interest, late charges and other amounts due at any time under theJunior Note; (b) to pay all Expenses, indemnification payments, reasonablefees and other amounts due at any time under the Mortgages or any of the otherJunior Loan Documents, together with interest thereon as provided in theMortgages or such Junior Loan Document; and (c) to perform, observe andcomply with all of the terms, covenants and conditions, expressed or implied,which Borrower is required to perform, observe or comply with pursuant to theterms of the Mortgages or any of the other Junior Loan Documents or any of theProject Documents. Notwithstanding any language contained in the Junior Loan Documents,the Obligations of Borrower to pay and perform under the EnvironmentalAgreement are unsecured.

 

“Operating Agreement” means theAmended and Restated Limited Liability Company Operating Agreement of Borrower,as originally executed or as the same may be amended from time to time inaccordance with its terms and the terms of this Agreement.

 

“OS&E” means (i) any supplyitems required for the operation of the Project, including, without limitation,chinaware, glassware, silverware, utensils, miscellaneous serving equipment,lines, towels, uniforms and similar items of personal property; and (ii) foodand beverages and other consumable items used in the operation of a hotel, suchas fuel, soap, cleaning materials, matches, stationary, brochures, folios andall other items used in the routine operations of a hotel which are consumableby nature.

 

“PAL Lease” means that certainDepartment of the Army Lease and Conveyance of Improvements, Privatization ofArmy Lodging (PAL) Group A, by and between the Army, as 

 

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lessor, and the Borrower, aslessee, dated as of the Effective Date, as the same may be extended, amended,restated, supplemented, superseded or otherwise modified from time to time inaccordance with the terms thereof (including, without limitation, any leasewhich is intended to replace the PAL Lease, in whole or in part, that isentered into in accordance with the terms of the PAL Lease).

 

“Patriot Act” means the Uniting andStrengthening America by Providing Appropriate Tools Required to Intercept andObstruct Terrorism Act (USA PATRIOT ACT) of 2001, as the same may be amendedfrom time to time, and corresponding provisions of future laws.

 

“Patriot Act Offense” shall have themeaning set forth in Section 3.22 hereof.

 

“Payment Certificate” means those certain certificates deliveredfrom time to time by the Construction Consultant (in connection with any DrawRequest) in accordance with Section 9.2.2 of the Design/Build Agreement.

 

“Payment Date” means the 1st day ofeach calendar month, commencing on October 1, 2009 and the Maturity Dateof the Junior Note.

 

“Person” means an individual, acorporation, a partnership, a joint venture, a limited liability company, atrust, an unincorporated association, any Governmental Authority or any otherentity.

 

“Plans and Specifications” means anyand all plans and specifications prepared in connection with the development ofthe Land and the Construction of the Improvements in accordance with the Design/BuildAgreement and, to the extent required in the Design/Build Agreement, approvedin writing by Lender, as the same may from time to time be amended inaccordance with the Design/Build Agreement.

 

“Prepayment Premium” shall have themeaning given in the Junior Note.

 

“Project” means, collectively, theSite, as defined in the Lock Box Agreement, the Improvements and the PersonalProperty, as defined in the Lock Box Agreement.

 

“Project Costs” means, collectively,all costs and expenses relating to the Improvements being paid from the JuniorLoan that are not evidenced by the Junior Note as are approved by Lender.

 

“Project Documents” means the Lease,the Design/Build Agreement (and each other Construction Contract as defined inAppendix A to the Lock Box Agreement), the Asset and Property ManagementAgreement, the Construction Guaranty, the Development Management ServicesAgreement, the Municipal Agreement, the Hotel Operating Agreement, Bill of Saleand all other material agreements entered into by Borrower other than JuniorLoan Documents relating to Borrower’s use, development, construction,renovation or occupancy of the Project other than the Debt Documents (asdefined in the Lock Box Agreement).

 

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“Project Schedule” means the schedulefor commencement and completion of the development of the land and Constructionof the Improvements attached hereto as Schedule 4, as the same maybe revised from time to time with the written approval of Lender.

 

“Proper Form” means in form andsubstance reasonably satisfactory to Lender.

 

“Protective Advances”means any and all sums advanced or expended by Junior Lender which JuniorLender deems necessary or appropriate (a) to advance or completeconstruction of the Project and any Improvements and market the Property, (b) torepair, maintain or otherwise protect the Project and any Improvements or toprevent waste or destruction or to pay or prevent liens or to defend Borrower’stitle or Junior Lender’s lien priority, (c) to pay taxes, assessments orinsurance premiums in respect of the Project or any Improvements or tootherwise protect Junior Lender’s security interest in the Project, anyImprovements and any other Collateral, or (d) in connection with JuniorLender’s protection or exercise of its rights or remedies under the thisAgreement and the other Junior Loan Documents.

 

“Property” means the real and personalproperty conveyed and encumbered by the Mortgages.

 

“Release” means any spilling, leaking,pumping, pouring, emitting, emptying, discharging, injecting, dumping ordisposing of any Hazardous Material (including the abandonment or discarding ofbarrels, drums, tanks, and other similar containers, containing any HazardousMaterial) into the indoor or outdoor environment.

 

“RE-MM” means RE ManagingMember LLC, a Delaware limited liability company.

 

“Rents” means all of the rents,royalties, issues, profits, revenues, earnings, income and other benefits ofthe Property or any part thereof, or arising from the use or enjoyment of theProperty or any part thereof, including all such amounts paid under or arisingfrom any of the Leases and all fees, charges, accounts or other payments forthe use or occupancy of rooms or other public facilities within the Property orany part thereof.

 

“Revenue” has the meaning ascribedthereto in the Lock Box Agreement.

 

“Senior Lender” means Bank of America,N.A.

 

“Senior Loan” means the Senior Loanfrom Lender to Borrower in the aggregate maximum amount of $35,000,000, whichis evidenced by the Senior Note and secured by the Senior Mortgages.

 

“Senior Loan Amount” means an amountnot to exceed Thirty-five Million and No/100 Dollars ($35,000,000).

 

“Senior Loan Agreement” means thatcertain Senior Loan Agreement, dated as of the Effective Date between theBorrower and the Senior Lender, as the same may be extended, amended, restated,supplemented, superseded or otherwise modified from time to time in accordancewith the terms thereof.

 

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“Senior Loan Documents” means thedocuments evidencing and securing the Senior Loan.

 

“Senior Loan Note” means the SeniorLoan Note of even date herewith, in a principal amount equal to the Senior LoanAmount, made by Borrower to the order of Lender, as the same may from time totime be extended, amended, restated, supplemented or otherwise modified.

 

“SPE Provisions” shall have themeaning set forth in Section 4.28 herein.

 

“State” means the State of New York.

 

“Stored Materials” means buildingmaterials or furnishings that have not yet been incorporated into theImprovements.

 

“Subcontractors”; “Subcontract” meansany Person engaged by the Borrower who has performed work and/or supplied anylabor and/or materials with respect to the Improvements other than theDesign/Build Contractor; any such contract or work order.

 

“Subordinate Lender” means Lend Lease(US) Capital Inc.

 

“Subordinate Loan” means the loan inthe amount of $21,500,000 from the Subordinate Lender to the Borrower pursuantto the Subordinate Loan Agreement, which indebtedness is evidenced by theSubordinate Loan Note, which is subordinate to the Junior Loan and the JuniorLoan.

 

“Subordinate Loan Agreement” meansthat certain loan agreement, dated as of the Effective Date, by and between theBorrower and the Subordinate Lender, as the same may be extended, amended,restated, supplemented, superseded or otherwise modified from time to time inaccordance with the terms thereof.

 

“Subordinate Loan Documents” means thedocuments evidencing and securing the Subordinate Loan.

 

“Subordinate Loan Note” means thatcertain promissory note, dated as of the Effective Date, made by the Borrowerin favor of the Subordinate Lender in the original principal balance of up to$21,500,000, as the same may be extended, amended, restated, supplemented,superseded or otherwise modified from time to time in accordance with the termsthereof.

 

“Subordination,Non-Disturbance and Attornment Agreement” means the agreement of thatname, among the Lender, Borrower and PML Services LLC, dated as of theEffective Date, as it may be amended and supplemented.

 

“Survey” means a map or plat of surveyof the Land which conforms with “Minimum Standard Detail Requirements forALTA/ACSM Land Title Surveys,” jointly established and adopted by ALTA and NSPSin 2005 (excluding requirements 5(c), 5(g) and 5(i) thereof) andincludes items 2, 3, 4, 10, 11(a) and 15 of Table A thereof.

 

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“Swap Contract” means any agreement,whether or not in writing, relating to any Swap Transaction, including, unlessthe context otherwise clearly requires, any form of master agreement (the “MasterAgreement”) published by the International Swaps and DerivativesAssociation, Inc., or any other master agreement, entered into prior tothe date hereof or any time after the date hereof, between Swap Counterpartyand Borrower (or its Affiliate), together with any related schedule andconfirmation, as amended, supplemented, superseded or replaced from time totime.

 

“Swap Counterparty” means SeniorLender, an Affiliate of Senior Lender, or such other party as may be permittedunder the Senior Loan Agreement, in its capacity as the counterparty under anySwap Contract.

 

“Swap Obligations” means, with respectto any Person, the net liabilities of such Person under any Swap Transaction.

 

“Swap Transaction” means anytransaction that is a rate swap, basis swap, forward rate transaction,commodity swap, commodity option, equity or equity index swap or option, bondoption, note or bill option, interest rate option, forward foreign exchangetransaction, cap transaction, collar transaction, floor transaction, currencyswap transaction, cross-currency rate swap transaction, swap option, currencyoption, credit swap or default transaction, T-lock, or any other similartransaction (including any option to enter into the foregoing) or anycombination of the foregoing, entered into prior to the date hereof or any timeafter the date hereof, between Swap Counterparty and Borrower (or itsAffiliate).

 

“Taxes” means all taxes andassessments whether general or special, ordinary or extraordinary, or foreseenor unforeseen, which at any time may be assessed, levied, confirmed or imposedby any Governmental Authority or any communities facilities or other privatedistrict on Borrower or on any of its properties or assets or any part thereofor in respect of any of its franchises, businesses, income or profits.

 

“Yearly Budget” has the meaning setforth in the Hotel Operating Agreement.

 

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