Exhibit 10.16


Morgans Hotel Portfolio


 


 


LOAN AND SECURITY AGREEMENT

(Senior Mezzanine Loan)


 


THIS LOAN AND
SECURITY AGREEMENT (this “Agreement”) is made as of the 29th
day of June, 2005, between MMRDH SENIOR MEZZ HOLDING COMPANY LLC, a Delaware
limited liability company, having an address at c/o Morgans Hotel Group LLC,
475 Tenth Avenue, New York, New York 10018 (“Borrower”) and WACHOVIA
BANK, NATIONAL ASSOCIATION, having an address at Commercial Real Estate
Services, 8739 Research Drive URP 4, NC 1075, Charlotte, North
Carolina  28262 (“Lender”).


 


W  I  T  N  E  S  S  E  T  H:


 


WHEREAS, Henry
Hudson Holdings LLC, a Delaware limited liability company (“Hudson”),
Morgans Holdings LLC, a Delaware limited liability company (“Morgans”),
Royalton, LLC, a Delaware limited liability company (“Royalton”), Beach
Hotel Associates LLC, a Delaware limited liability company (“Beach”) and
Mondrian Holdings LLC, a Delaware limited liability company (“Mondrian”)
(collectively, “Owner”) are the owners, respectively, of the fee and leasehold
estates in the premises described in Exhibit A attached hereto and
all buildings, foundations, structures, and improvements of any kind or nature
now or hereafter located thereon which premises are commonly known as the
Hudson Hotel located in New York, New York (the “Hudson Premises”), the
Morgans Hotel located in New York, New York (the “Morgans Premises”), the
Royalton Hotel located in New York, New York (the “Royalton Premises”),
the Delano Hotel located in Miami Beach, Florida (the “Delano Premises”)
and the Mondrian Hotel located in Los Angeles, California (the “Mondrian
Premises” and, together with the Hudson Premises, the Morgans Premises, the
Royalton Premises and the Delano Premises, collectively, the “Premises”);


 


WHEREAS,
Borrower is the present owner and holder directly or indirectly of one hundred
percent (100%) of the equity in Owner;


 


WHEREAS, Hudson,
Morgans, Royalton and Mondrian delivered a promissory note (the “New York/California
Mortgage Note”) to Wachovia Bank, National Association (“Mortgage Lender”)
which evidences a loan (the “New York/California Mortgage Loan”) in the
original principal amount of $366,339,439.66 which is secured by (a) certain
mortgages which were amended and consolidated pursuant to that certain
Agreement of Consolidation and Modification of Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing dated as of the date hereof by and
between Mortgage Lender, as lender, and Hudson, Morgans, and Royalton,
collectively as borrowers, encumbering the Hudson Premises, the Morgans
Premises and the Royalton Premises (the “New York Mortgage”) and (b) that
certain Deed of Trust, Security Agreement, Assignment of Rents and Fixture
Filing dated as of the date hereof by Mondrian, as borrower, for the benefit of
Mortgage Lender, as lender, encumbering the Mondrian Premises (the “California
Mortgage” and, together with the New York Mortgage, as same have been and
may hereafter be amended, restated, replaced, supplemented, spread,
consolidated or otherwise modified, from time to time, collectively, the “New
York/California Mortgage”);


 





















 


WHEREAS, Beach
delivered a promissory note (the “Florida Mortgage Note” and, together
with the New York/California Mortgage Note, collectively, the “Mortgage Note”)
to Mortgage Lender which evidences a loan (the “Florida Mortgage Loan”
and, together with the New York/California Mortgage Loan, collectively, the “Mortgage
Loan”) in the original principal amount of $107,410,560.34 which is secured
by that certain Third Amended and Restated Mortgage, Security Agreement,
Assignment of Rents and Fixture Filing dated as of the date hereof by Beach, as
borrower, in favor of Mortgage Lender, as lender, encumbering the Delano
Premises (as same has been and may hereafter be amended, restated, replaced,
supplemented, spread, consolidated or otherwise modified, from time to time,
the “Florida Mortgage” and, together with the New York/California
Mortgage, collectively, the “Mortgage” and, together with the Mortgage
Note and all other documents executed and delivered in connection with the
making of the Mortgage Loan, collectively, the “Mortgage Loan Documents”)
encumbering the Premises;


 


WHEREAS,
Lender has agreed to make a loan (the “Loan”) to Borrower, which Loan,
together with interest thereon, shall be evidenced by and payable in accordance
with the provisions of the promissory note issued by Borrower, as maker, to
Lender, as holder (the “Note”, and together with this Agreement and all
other documents executed and delivered in connection with the making of the
Loan, collectively, the “Loan Documents”) in the original principal
amount of $51,250,000.00 (the “Loan Amount” and together with interest
and all other sums which may or shall become due under the Note or this
Agreement or the other Loan Documents being hereinafter collectively referred
to as the “Debt”); and


 


WHEREAS,
Lender is willing to make the Loan to Borrower only if Borrower grants and
assigns to Lender, as security for the payment of the Debt and the observance
and performance by Borrower of all of the terms, covenants and provisions of
the Note and the other Loan Documents on the part of Borrower to be observed
and performed, a security interest in the Collateral (hereinafter defined) in
the manner hereinafter set forth;


 


NOW, THEREFORE,
in consideration of the making of the Loan and other good and valuable
consideration, the receipt of which is hereby acknowledged, Borrower hereby
grants and assigns to Lender, as security for the payment of the Debt and the
observance and performance by Borrower of all of the terms, covenants and
provisions of the Note on the part of Borrower to be observed or performed, a
security interest in all of Borrower’s right, title and interest in the
Collateral and Borrower hereby represents and warrants to and covenants and
agrees with Lender as follows:


 


ARTICLE I.  DEFINITIONS


 


Section 1.01.  Defined Terms.  Capitalized terms used herein that are not
otherwise defined shall have the respective meanings ascribed thereto in the
definitions list on Exhibit C attached hereto and if not defined
therein shall have the meaning set forth in the Mortgage.


 


ARTICLE II.  REPRESENTATIONS, COVENANTS AND 

WARRANTIES OF BORROWER


 


Section 2.01.  Pledge of Collateral.  (a)  As security for the due and
punctual payment and


 


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performance of all of the Debt (whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise, including, without limitation, the payment of amounts that would
become due but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. §362(a), whether allowed or allowable as claims),
Borrower hereby (i) pledges, transfers, hypothecates and assigns to Lender
the Collateral in which Borrower now or hereafter has rights, and (ii) grants
to Lender a continuing first priority lien on and security interest in and to all
of the Borrower’s rights, whether now owned or hereafter acquired, in the
Collateral.  The inclusion of Proceeds in
the definition of “Collateral” does not authorize Borrower to sell, dispose of
or otherwise use the Collateral in any manner not specifically authorized
hereby.  Lender is hereby
authorized:  (i) to transfer to the
account of Lender or its designee any Pledged Interests whether in the
possession of, or registered in the name of, The Depository Trust Company (the “DTC”)
or other clearing corporation or held otherwise; (ii) to transfer to the
account of Lender or its designee with any Federal Reserve Bank any Pledged Interests
held in book entry form with any such Federal Reserve Bank; and (iii) to
exchange certificates representing or evidencing the Pledged Interests for
certificates of smaller or larger denominations.  To the extent that the Pledged Interests have
not already been transferred to Lender or its designee in a manner sufficient
to perfect Lender’s security interest therein, Borrower shall promptly deliver
or cause to be delivered to Lender all certificates or instruments evidencing
the Pledged Interests, together with duly executed transfer powers or other
appropriate endorsements.  With respect
to any Collateral in the possession of or registered in the name of a custodian
bank or nominee therefor, or any Collateral represented by entries on the books
of any securities intermediary, Borrower agrees to cause such custodian bank or
nominee either to enter into an agreement with Lender satisfactory to Lender in
form and content confirming that the Collateral is held for the account of
Lender, or at the discretion of Lender and subject to the written instructions
of Lender, deliver any such Collateral to Lender and/or cause any such
Collateral to be put in bearer form, registered in the name of Lender or its
nominee, or transferred to the account of Lender with any Federal Reserve Bank,
DTC, or other clearing corporation.  With
respect to any Collateral held in an account maintained by Lender as securities
intermediary, Borrower hereby gives notice to Lender of Lender’s security
interest in such Collateral.  In addition,
Borrower agrees that in the event that any Collateral is held by Lender in a
fiduciary capacity for or on behalf of Borrower as the beneficial owner
thereof, any agreements executed by Borrower in connection therewith are hereby
amended to authorize and direct the pledge, hypothecation and/or transfer of
such Collateral to Lender, as lender, by Lender, as fiduciary, in accordance
with the terms, covenants and conditions of this Agreement.  The rights granted to Lender pursuant to this
Agreement are in addition to the rights granted to Lender pursuant to any such
agreements.  In case of conflict between
the provisions of this Agreement and those of any other such agreement, the
provisions hereof shall prevail.  In the
event that Borrower purchases or otherwise acquires or obtains any additional
Equity Interests in any Corporation, LLC or Partnership, or any rights, or
options, subscriptions or warrants to acquire such Equity Interests, all such
Equity Interests, rights, options, subscriptions or warrants shall
automatically be deemed to be a part of the Collateral pledged by
Borrower.  If any such Equity Interests
are to be evidenced by a certificate, such additional certificates shall be
promptly delivered to Lender, together with Powers related thereto, or other
instruments appropriate to a certificate representing an Equity Interest, duly
executed in blank.  Borrower shall
deliver to Lender all subscriptions, warrants, options and all such other
rights, and upon delivery to Lender, Lender shall hold such subscriptions,
warrants, options and other rights as additional collateral


 


3





















 


pledged to secure the Debt; provided,
however, that if Lender determines, in its sole discretion, that the value of
any such subscriptions, warrants, options or other rights shall terminate,
expire or be materially reduced in value by holding the same as Collateral,
Lender shall have the right (but not the obligation), in its sole discretion,
to sell or exercise the same, and if exercised, then the monies disbursed by
Lender in connection therewith shall become part of the Debt and all of the
stock, securities, evidences of indebtedness and other items so acquired shall
be titled in the name of Borrower and shall become part of the Collateral.


 


(b)           Borrower
hereby authorizes Lender to file any financing statements, and amendments to
financing statements, in any jurisdictions and with any filing offices as
Lender may determine, in its sole discretion, are necessary or advisable to
perfect the security interest granted to Lender hereunder. Such financing
statements may describe the collateral in the same manner as described in this
Agreement or may contain an indication or description of collateral that
describes such property in any other manner Lender so chooses, including,
without limitation, describing such property as “all assets, whether now owned
or hereafter acquired” or “all personal property, whether now owned or
hereafter acquired”.


 


Section 2.02.  Representations of Borrower.  Borrower represents and warrants to Lender:


 


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


 


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


 


(c)           Authorization
of Borrowing.  The execution,
delivery and performance of the Loan Documents to which Borrower is a party,
the making of the borrowings thereunder, the execution and delivery of the
Note, the grant of the lien and security interest on and in the Collateral
pursuant to the Loan Documents to which Borrower is a party and the
consummation of the Loan are within the powers of Borrower and have been duly
authorized by Borrower and, if applicable, the General Partners, by all
requisite action (and Borrower hereby represents that no approval or action of
any member, limited partner or shareholder, as applicable, of Borrower, which
has not been received or taken, is required to authorize any of the Loan
Documents to which Borrower is a party) and will constitute the legal, valid
and binding obligation of Borrower, enforceable against Borrower in accordance
with their terms, except as enforcement may be stayed or limited by bankruptcy,
insolvency or similar laws affecting the enforcement of


 


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creditors’ rights generally and by general
principles of equity (whether considered in proceedings at law or in equity)
and will not (i) violate any provision of its Organizational Documents,
or, to its knowledge, any law, judgment, order, rule or regulation of any
court, arbitration panel or other Governmental Authority, domestic or foreign,
or other Person affecting or binding upon Borrower or the Collateral, or (ii) violate
any provision of any indenture, agreement, mortgage, deed of trust, contract or
other instrument to which Borrower or, if applicable, any General Partner is a
party or by which any of their respective property, assets or revenues are
bound, or be in conflict with, result in an acceleration of any obligation or a
breach of or constitute (with notice or lapse of time or both) a default or
require any payment or prepayment under, any such indenture, agreement,
mortgage, deed of trust, contract or other instrument, or (iii) result in
the creation or imposition of any lien, except those in favor of Lender as
provided in the Loan Documents to which it is a party.


 


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


 


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


 


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


 


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


 


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


 


(iii)          Borrower and, if
applicable, each General Partner have done or caused to be done and will do all
things necessary to observe organizational formalities and


 


5





















 


preserve their
existence and Borrower and, if applicable, each General Partner will not amend,
modify or otherwise change the certificate and agreement of partnership or
certificate of incorporation and by-laws or articles of organization,
certificate of formation and operating agreement, as applicable, or other
organizational documents of Borrower and, if applicable, each General Partner
except for immaterial amendments which do not modify the Single Purpose Entity
provisions.


 


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


 


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


 


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


 


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


 


(viii)        Borrower and, if
applicable, each General Partner, (A) have not owned, do not own and will
not own any assets or property other than the Collateral, and, with respect to
General Partner, if applicable, its interest in Borrower, (B) have not
engaged and will not engage in any business other than the ownership, management
and operation of the Collateral, or with respect to General Partner, if
applicable, its interest in Borrower, (C) have not incurred and will not
incur any debt, secured or unsecured, direct or


 


6





















 


contingent
(including guaranteeing any obligation), other than in connection with the Loan,
(D) have not pledged (other than pledges in connection with loans which
have been paid in full prior to entering into the Loan) and will not pledge
their assets for the benefit of any other Person, and (E) have not made
and will not make any loans or advances to any Person (including any
Affiliate).


 


(ix)           Neither Borrower nor,
if applicable, any General Partner will change its name or principal place of
business unless thirty (30) days prior written notice thereof is provided to
Lender.


 


(x)            Neither Borrower nor,
if applicable, any General Partner has, and neither of such Persons will have,
any subsidiaries other than, with respect to Borrower, Owner.


 


(xi)           Borrower will preserve
and maintain its existence as a Delaware limited liability company and all
material rights, privileges, trade names, if any, and franchises.


 


(xii)          Neither Borrower nor, if
applicable, any General Partner, will merge or consolidate with, or sell all or
substantially all of its respective assets to any Person, or liquidate, wind up
or dissolve itself (or suffer any liquidation, winding up or dissolution).  Neither Borrower nor, if applicable, any
General Partner will acquire any business or assets from, or capital stock or
other ownership interest of, or be a party to any acquisition of, any Person.


 


(xiii)         Borrower and, if
applicable, each General Partner, has not at any time since their formation
assumed, guaranteed or held themselves out to be responsible for, and will not
assume, guarantee or hold themselves out to be responsible for the liabilities
or the decisions or actions respecting the daily business affairs of their
partners, shareholders or members or any predecessor company, corporation or partnership,
each as applicable, any Affiliates, or any other Persons other than in
connection with the Loan.  Borrower has not
at any time since its formation acquired, and will not acquire, obligations or
securities of its partners or shareholders, members or any predecessor company,
corporation or partnership, each as applicable, or any Affiliates.  Borrower and, if applicable, each General
Partner, have not at any time since their formation made, and will not make,
loans to its partners, members or shareholders or any predecessor company,
corporation or partnership, each as applicable, or any Affiliates of any of
such Persons.  Borrower and, if
applicable, each General Partner, have no known contingent liabilities nor do
they have any material financial liabilities under any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument to which such
Person is a party or by which it is otherwise bound other than under the Loan
Documents.


 


(xiv)        Borrower has not at any
time since its formation entered into and are not a party to, and, will not
enter into or be a party to, any transaction with its Affiliates, members,
partners or shareholders, as applicable, or any Affiliates thereof except in
the ordinary course of business of Borrower, on terms which are no less
favorable to Borrower than would be obtained in a comparable arm’s length
transaction with an unrelated third party.


 


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


 


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


 


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


 


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


 


(xix)         Borrower shall, and shall
cause its Affiliates to, conduct their business so that the assumptions made
with respect to Borrower in that certain opinion letter relating to substantive
non-consolidation dated the date hereof (the “Insolvency Opinion”)
delivered in connection with the Loan shall be true and correct in all
respects.


 


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


 


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


 


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


 


(j)            Investment
Company Act Status, etc.  Borrower is
not (i) an “investment company,” or a company “controlled” by an “investment
company,” as such terms are defined in the Investment Company Act of 1940, as
amended, (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended, or (iii) subject to any other federal or state law or
regulation which purports to restrict or regulate its ability to borrow money.


 


(k)           Compliance
with Law.  Borrower is and shall
remain in compliance in all material respects with all Legal Requirements to
which it or the Collateral are subject, including, without limitation, ERISA.


 


(l)            Transaction
Brokerage Fees.  Borrower has not
dealt with any financial advisors, brokers, underwriters, placement agents,
agents or finders in connection with the transactions contemplated by this Agreement
except for the Carlton Group.  Borrower
hereby agrees to indemnify and hold Lender harmless for, from and against any
and all claims, liabilities, costs and expenses of any kind in any way relating
to or arising from (i) a claim by any Person that such Person acted on
behalf of Borrower in connection with the transactions contemplated herein or (ii) any
breach of the foregoing representation. 
The provisions of this subsection (l) shall survive the repayment
of the Debt.


 


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


 


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


 


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


 


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


 


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


 


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


 


(s)           ERISA.
 (i) The
assets of Borrower are not and will not become treated as “plan assets”,
whether by operation of law or under regulations promulgated under ERISA.  Each Plan and Welfare Plan, and, to the
knowledge of Borrower, each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of ERISA, the Code and
any other applicable Legal Requirement, and no event or condition has occurred
and is continuing as to which Borrower would be under an obligation to furnish
a report to Lender under clause (ii)(A) of this Section.  Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United


 


10





















 


States Department of Labor or any court of
competent jurisdiction related to any Plan or Welfare Plan under which Borrower
or any ERISA Affiliate, directly or indirectly (through an indemnification
agreement or otherwise), could be subject to any material risk of liability
under Section 409 or 502(i) of ERISA or Section 4975 of the
Code.  No Welfare Plan, other than a
Multiemployer Plan, provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of Borrower or any ERISA Affiliate beyond his or
her retirement or other termination of service other than (A) coverage
mandated by applicable law, (B) death or disability benefits that have
been fully provided for by fully paid up insurance or (C) severance
benefits.


 


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


 


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


 


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


 


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


 


(D)          the
complete or partial withdrawal from a Multiemployer Plan (or other employee
benefit plan) by Borrower or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to satisfy
secondary liability as a result of a purchaser default) or the receipt by
Borrower or any ERISA Affiliate of notice from a Multiemployer Plan that it is
in


 


11





















 


reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under Section 4041A
of ERISA;


 


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


 


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


 


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


 


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


 


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


 


12





















 


(t)            Labor
Matters.  Borrower is not a party to
any collective bargaining agreement and has no employees.


 


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


 


(v)           Owner’s
Legal Status.  (i)  The owner of
the Premises and the maker of the Mortgage Note is and shall be Owner, (ii) there
are no defaults existing under the Mortgage Note, the Mortgage or the other
Mortgage Loan Documents, and, to the best of Borrower’s knowledge, there is no
event which, but for the passage of time or the giving of notice, or both,
would constitute an event of default under the Mortgage Loan Documents, (iii) the
Mortgage Loan Documents and the provisions thereof have not been amended,
modified or altered in any manner whatsoever, (iv) the Mortgage
constitutes a valid and enforceable first lien covering the Premises subject
only to Permitted Encumbrances (as defined in the Mortgage), (v) the
Premises are improved and income-producing and the improvements located thereon
have not been damaged by fire or other casualty, (vi) no condemnation or
other eminent domain proceedings have been commenced with respect to the
Premises and Borrower has no knowledge that any such proceedings are
contemplated, (vii) Borrower knows of no fact or circumstance which would
affect the enforceability, validity or priority of the Mortgage Loan Documents,
or which would affect the ability or willingness of Owner and any other Person
liable under the Mortgage Loan Documents to continue to perform and observe the
terms, covenants and provisions of the Mortgage Loan Documents, (viii) the
unpaid principal balance of the Mortgage Note as of the date of this Agreement
is as set forth on Exhibit B attached hereto.


 


(w)          Title.  Borrower (i) is the record and
beneficial owner of, and has good and marketable title to, (x) the Equity
Interests set forth in Schedule 1 attached hereto and (y) all of
the other Collateral owned by Borrower as of the date hereof, and (ii) will
have good and marketable title to the Equity Interests and all other Collateral
hereafter acquired, in any case, free and clear of all claims, liens, options
and encumbrances of any kind, and Borrower has the right and authority to
pledge and assign its portion of the Equity Interests and grant a security
interest therein as herein provided.


 


(x)            Securities
Laws.  The transactions contemplated
by this Agreement do not violate and do not require that any filing,
registration or other act be taken with respect to any and all laws pertaining
to the registration or transfer of securities, including without limitation the
Securities Act of 1933, as amended, and the Securities and Exchange Act of
1934, as amended, and any and all rules and regulations promulgated
thereunder (collectively, the “Securities Laws”), as such laws are
amended and in effect from time to time, and none of the Equity


 


13





















 


Interests in the Partnerships or LLCs are
represented by any “certificated security” as that term is defined in Section 8-102
of the UCC.  Borrower shall at all times
comply with the Securities Laws as the same pertain to all or any portion of
the Collateral or any of the transactions contemplated by this Agreement.  Lender agrees not take any action with
respect to the Collateral that, without the consent of Borrower, requires
Borrower to file a registration statement with the SEC or apply to qualify a
sale of a security under the securities laws of any state.


 


(y)           Ownership
Structure.  The ownership chart
attached hereto as Schedule 2 is true, correct and complete as of
the Closing Date. Except as set forth on Schedule 2, no other
Person has any direct or indirect interest in the Owner or Borrower.


 


(z)            Control
of Owner.  Borrower has the power and
authority and the requisite ownership interests to control the actions of the Owner
and at all times during the term of the Loan shall maintain the power and
authority to control the actions of Owner.


 


(aa)         Representations
and Warranties of Owner.  All of the
representations and warranties of Owner or any Affiliate of Owner under the
Mortgage Loan Documents are true, complete and correct in all material
respects.


 


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


 


(cc)         Operating
Company Status.  Borrower qualifies
as an “operating company,” as such term is defined in the regulation issued by
the U.S. Department of Labor known as the “plan assets regulation,” 29 C.F.R.
§2510.3-101 and, as long as the Loan is outstanding, Borrower will remain at
all times an operating company, as so defined.


 


(dd)         Affiliation.  Borrower is not an Affiliate of Lender.


 


(ee)         Insurance.  Borrower has obtained and delivered, or has
caused Owner to obtain and deliver, to Lender certified copies of all insurance
policies reflecting the insurance coverages, amounts and other requirements set
forth in this Agreement.  Borrower has
not, and to the best of Borrower’s knowledge no other Person has, done by act
or omission anything which would impair the coverage of any such policy.


 


(ff)           Absence
of UCC Financing Statements, Etc. 
Except with respect to the Mortgage Loan Documents and the Loan
Documents, there is no financing statement, security agreement, chattel
mortgage, real estate mortgage or other document filed or recorded with any
filing records, registry, or other public office, that purports to cover,
affect or give notice of any present or possible future lien on, or security
interest or security title in the interest in the Premises or any of the
Collateral.


 


(gg)         Compliance
with Anti-Terrorism, Embargo and Anti-Money Laundering Laws.   (i) Neither Borrower, General Partner,
nor any Person who owns any equity interest in or


 


14





















 


Controls Borrower or General
Partner currently is identified on the OFAC List or otherwise qualifies as a
Prohibited Person, and Borrower has implemented procedures, approved by General
Partner, to ensure that no Person who now or hereafter owns an equity interest
in Borrower or General Partner is a Prohibited Person or Controlled by a
Prohibited Person, (ii) no proceeds of the Loan will be used to fund any
operations in, finance any investments or activities in or make any payments
to, Prohibited Persons, and (iii) neither Borrower nor General Partner are
in violation of any Legal Requirements relating to anti-money laundering or
anti-terrorism, including, without limitation, Legal Requirements related to
transacting business with Prohibited Persons or the requirements of the Uniting
and Strengthening America by Providing Appropriate Tools Required to Intercept
and Obstruct Terrorism Act of 2001, U.S. Public Law 107-56, and the related
regulations issued thereunder, including temporary regulations, all as amended
from time to time.


 


(hh)         Collateral.  Borrower (i) represents and warrants to
Lender that the Collateral constitutes a “general intangible” (as defined in Section 9-102(a)(42)
of the UCC); and (ii) Borrower covenants and agrees that (A) the
Collateral is not and will not be dealt in or traded on securities exchanges or
securities markets, (B) the terms of the Collateral do not and will not
provide that they are securities governed by the UCC, (C) the Collateral
is not and will not be investment company securities within the meaning of Section 8-103
of the UCC and (D) Borrower shall not cause or permit any interests in the
Collateral to be certificated and delivered to any Person other than Lender.


 


(ii)           Lockbox
Account.


 


(i)            Pursuant
to the irrevocable direction letter delivered by Borrower to Owner on the
Closing Date, Borrower shall direct Owner to cause all Remaining Rents to be
deposited into the Lockbox Account;


 


(ii)           neither
Borrower nor Owner nor any other Person shall have any right, title or interest
in or to any Remaining Rents from and after the time at which the Mortgage
Lender becomes obligated under the Mortgage Loan Documents to transfer such
Remaining Rents to the Lockbox Account;


 


(iii)          there
are no other accounts maintained by Owner, Borrower or any other Person with
respect to the collection of rents, revenues, proceeds or other income from the
Premises or for the collection of Rents, except for the Rent Accounts and the
Central Account (as defined in Article 5 of the Mortgage) and the Lockbox
Account; and


 


(iv)          so
long as any of the Debt shall be outstanding, neither Borrower, Owner nor any
other Person shall open any other accounts with respect to the collection of
rents, revenues, proceeds or other income from the Premises or for the
collection of Rents.


 


(jj)           Perfected
Security Interest.  Upon the filing
of the UCC-1 financing statements with the Delaware Secretary of State, Lender
will have a valid, and duly perfected first priority, security interest in the
Collateral enforceable as such against all creditors of Borrower and any
Persons purporting to purchase any Pledged Interests and Proceeds from
Borrower.


 


(kk)         Financial
Information.  All financial data that
has been delivered by Borrower to


 


15





















 


Lender (i) is true, complete and correct
in all material respects, (ii) accurately represents the financial
condition and results of operations of the Persons covered thereby as of the
date on which the same shall have been furnished, and (iii) has been
prepared in accordance with GAAP, the Uniform System of Accountants (or such
other accounting basis as is reasonably acceptable to Lender) throughout the
periods covered thereby.  As of the date
hereof, neither Borrower nor, if applicable, any General Partner, has any
contingent liability, liability for taxes or other unusual or forward
commitment not reflected in such financial statements delivered to Lender.  Since the date of the last financial
statements delivered by Borrower to Lender, except as otherwise disclosed in
such financial statements or notes thereto, there has been no change in the
assets, liabilities or financial position of Borrower nor, if applicable, any
General Partner, or in the results of operations of Borrower which would have a
Material Adverse Effect.  Neither
Borrower nor, if applicable, any General Partner, has incurred any obligation
or liability, contingent or otherwise not reflected in such financial
statements which would have a Material Adverse Effect.


 


Section 2.03.  Further Acts, Etc.  Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, assignments, notices of assignments,
transfers and assurances as Lender shall, from time to time, reasonably require
for the better assuring, conveying, assigning, transferring, and confirming
unto Lender the property, security interest and rights hereby given, granted,
bargained, sold, alienated, enfeoffed, conveyed, confirmed, pledged, assigned
and hypothecated, or which Borrower may be or may hereafter become bound to
convey or assign to Lender, or for carrying out or facilitating the performance
of the terms of this Agreement or for filing, registering or recording this
Agreement and, within five (5) Business Days of written demand, will
execute and deliver and hereby authorizes Lender to execute in the name of
Borrower or without the signature of Borrower to the extent Lender may lawfully
do so, one or more financing statements, chattel mortgages or comparable
security instruments to evidence more effectively the lien hereof upon the
Collateral.  Without limiting the
generality of the foregoing, Borrower will: 
(i) if any Collateral shall be evidenced by a promissory note or
other instrument or chattel paper, deliver and pledge to Lender hereunder such
note or instrument or chattel paper duly indorsed and accompanied by duly
executed instruments of transfer or assignment, all in form and substance
satisfactory to Lender; (ii) execute or authenticate and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable and as Lender may
request, in order to perfect and preserve the security interest granted or
purported to be granted by Borrower hereunder; (iii) take all action
necessary to ensure that Lender has control of any Collateral consisting of
deposit accounts, electronic chattel paper, investment property and letter-of-credit
rights as provided in Sections 9-104, 9-105, 9-106 and 9-107 of the UCC; and (iv) deliver
to Lender evidence that all other action that Lender may reasonably deem
necessary or desirable in order to perfect and protect the security interest
granted or purported to be granted by Borrower under this Agreement has been
taken.  Borrower grants to Lender an
irrevocable power of attorney coupled with an interest for the purpose of
protecting, perfecting, preserving and realizing upon the interests granted
pursuant to this Agreement and to effect the intent hereof, all as fully and
effectually as Borrower might or could do; and Borrower hereby ratifies all
that Lender shall lawfully do or cause to be done by virtue hereof.  Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of the Note or any
other Loan Document which is not of public record, and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other


 


16





















 


applicable Loan Document, Borrower will
issue, in lieu thereof, a replacement Note or other applicable Loan Document,
dated the date of such lost, stolen, destroyed or mutilated Note or other Loan
Document in the same principal amount thereof and otherwise of like tenor.


 


Section 2.04.  Recording of Agreement, etc.  Borrower forthwith upon the execution and
delivery of this Agreement and thereafter, from time to time, will, at the
request of Lender, cause this Agreement, and any security instrument creating a
lien or security interest or evidencing the lien hereof upon the Collateral and
each instrument of further assurance to be filed, registered or recorded in
such manner and in such places as may be required by any present or future law
in order to publish notice of and fully protect the lien or security interest
hereof upon, and the interest of Lender in, the Collateral.  Borrower will pay all filing, registration or
recording fees, and all expenses incident to the preparation, execution and
acknowledgment of this Agreement, any additional security instrument with
respect to the Collateral and any instrument of further assurance, and all
federal, state, county and municipal, taxes, duties, imposts, assessments and
charges arising out of or in connection with the execution and delivery of this
Agreement, and any security agreement supplemental hereto, or any instrument of
further assurance, except where prohibited by law to do so, in which event
Lender may declare the Loan to be immediately due and payable.  Borrower shall hold harmless and indemnify
Lender, and its successors and assigns, against any liability incurred as a
result of the imposition of any tax on the making and recording of this
Agreement.


 


Section 2.05.  Cost of Defending and Upholding Lien.  If any action or proceeding is commenced to
which Lender is made a party relating to the Loan Documents and/or the
Collateral or Lender’s interest therein or in which it becomes necessary to
defend or uphold the lien of this Agreement or any other Loan Document,
Borrower shall, on demand, reimburse Lender for all expenses (including,
without limitation, reasonable attorneys’ fees and disbursements) incurred by
Lender in connection therewith, and such sum, together with interest thereon at
the Default Rate from and after such demand until fully paid, shall constitute
a part of the Loan.


 


Section 2.06.  Financial Reports.  Borrower shall keep accurate and complete
books, records and accounts in accordance with generally accepted accounting
principles (“GAAP”), the Uniform System of Accountants (or such other
accounting basis reasonably acceptable to Lender) consistently applied with
respect to the financial affairs of Borrower, including, but not limited to,
the financial affairs of Borrower which relate to the Collateral and all sums
due or which may become due thereunder. 
Borrower shall, within ten (10) Business Days after request and at
its sole cost and expense, deliver to Lender any of such books and records as
may be requested by Lender.  Lender shall
have the right from time to time at all times during normal business hours to
examine such books, records and accounts at the office of Borrower or other
Person maintaining such books, records and accounts and to make copies or
extracts thereof as Lender shall desire. 
Borrower shall, from time to time, within thirty (30) days after request
and at its sole cost and expense, deliver to Lender such information, reports
and additional financial information with respect to the financial affairs of
Borrower as Lender shall reasonably request. 
Borrower will furnish Lender annually, within one hundred twenty (120)
days following the end of each Fiscal Year of Borrower, with a complete copy of
Borrower’s financial statement audited by an Independent certified public
accountant that is acceptable to Lender in accordance with GAAP, the Uniform
System of Accountants (or such other accounting basis reasonably


 


17





















 


acceptable to Lender) consistently applied
covering (i) all of the financial affairs of Borrower for such Fiscal Year
and containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s equity.  Together with Borrower’s annual financial
statements, Borrower shall furnish to Lender an Officer’s Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operations and financial condition of
Borrower all in accordance with GAAP, the Uniform System of Accountants (or
such other accounting basis reasonably acceptable to Lender) consistently
applied, and (ii) whether there exists an event or circumstance which
constitutes, or which upon notice or lapse of time or both would constitute, a
Default under the Note or any other Loan Document executed and delivered by
Borrower, and if such event or circumstance exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy such
event or circumstance.  Borrower shall at
all times, whether or not the Mortgage Loan is outstanding, deliver or shall
cause Owner to deliver to Lender (x) a copy of all financial statements,
reports, books, records and accounts required to be delivered to Mortgage Lender
pursuant to the terms of the Mortgage Loan Documents within the time frames set
forth in the Mortgage Loan Documents for the delivery of such financial
statements, reports, books, records and accounts (and, with each monthly
statement of revenues and expenses delivered or required to be delivered under
the Mortgage Loan Documents, a comparison of such revenues and expenses to the
Annual Budget) and (y) annually, within thirty (30) days following the end of
each calendar year, and within thirty (30) days after Lender’s request
therefor, a true, complete and correct rent roll for the Premises, including a
list of which tenants are in default under their respective leases, dated as of
the end of the preceding month, identifying each tenant, the monthly rent and
additional rent, if any, payable by such tenant, the expiration date of such
tenant’s Lease, the security deposit, if any, held by Owner under the Lease,
the space covered by the Lease, each tenant that has filed a bankruptcy,
insolvency, or reorganization proceeding since delivery of the last such rent
roll, and the arrearages for such
tenant, if any, and such rent roll shall be accompanied by an Officer’s
Certificate, dated as of the date of the delivery of such rent roll, certifying
that such rent roll is true, correct and complete in all material respects as
of its date.  Borrower shall furnish to
Lender, within thirty (30) days after Lender’s request therefor, such further
detailed information with respect to the operation of the Premises and the financial
affairs of Borrower as may be reasonably requested by Lender.  Borrower acknowledges that notwithstanding
anything to the contrary contained herein or in the Note, all extension fees
and exit fees will be treated as additional interest.


 


Section 2.07.  Litigation.  Borrower will give prompt written notice to
Lender of any litigation or governmental proceedings pending or threatened (in
writing) against Borrower, Owner or Guarantor which are reasonably likely to
have a Material Adverse Effect and of any claim, option, lien or encumbrance
upon or against all or a portion of the Collateral.


 


Section 2.08.  Estoppel Certificates.  Borrower shall, or shall cause Owner to, from
time to time, request from Mortgage Lender such certificates of estoppel with
respect to compliance by Owner with the terms of the Mortgage Loan Documents as
may be requested by Lender and required to be given by Mortgage Lender pursuant
to the Mortgage Loan Documents.


 


Section 2.09.  Budget.  Borrower shall submit to Lender for Lender’s
written approval an annual budget (the “Annual Budget”) not later than fifteen
(15) days prior to the commencement of such Fiscal Year, in form reasonably satisfactory
to Lender setting forth in reasonable detail


 


18





















 


budgeted monthly operating income and monthly
operating capital and other expenses for the Premises.  Each Annual Budget shall contain, among other
things, management fees, third party service fees, and other expenses as
Borrower may reasonably determine. 
Lender shall have the right to approve such Annual Budget which approval
shall not be unreasonably withheld, and in the event that Lender objects to the
proposed Annual Budget submitted by Borrower, Lender shall advise Borrower of
such objections within fifteen (15) days after receipt thereof (and deliver to
Borrower a reasonably detailed description of such objections) and Borrower
shall, within ten (10) days after receipt of notice of any such
objections, revise such Annual Budget and resubmit the same to Lender.  Lender shall advise Borrower of any
objections to such revised Annual Budget within ten (10) days after
receipt thereof (and deliver to Borrower a reasonably detailed description of
such objections) and Borrower shall revise the same in accordance with the
process described herein until Lender approves an Annual Budget, provided,
however, that if Lender shall not advise Borrower of its objections to any
proposed Annual Budget within the applicable time period set forth in this Section,
then such proposed Annual Budget shall be deemed approved by Lender.  Until such time that Lender approves a
proposed Annual Budget, the most recently Approved Annual Budget shall apply;
provided that, such Approved Annual Budget shall be adjusted to reflect actual
increases in Basic Carrying Costs (as defined in the Mortgage) and utilities
expenses.  In the event that Owner must
incur an Extraordinary Expense (as defined in the Mortgage), then Borrower
shall promptly deliver to Lender a reasonably detailed explanation of such
proposed Extraordinary Expense for Lender’s approval, which approval may be
granted or denied in Lender’s sole and absolute discretion.


 


Section 2.10.  Intentionally Omitted. 


 


Section 2.11.  Transfers, Etc.  (a) Borrower shall not, without the
prior consent of Lender, in any manner allow a Transfer to occur or enter into
any agreement which expressly restricts Borrower from making amendments,
modifications or waivers to the Loan Documents. 
Without the express prior written consent of Lender, Borrower shall not,
and shall not cause or permit Owner to, enter into any consensual sale or other
similar transaction with respect to the Premises or impair or otherwise
adversely affect the interests of Lender in the Collateral or any portion
thereof or any interest therein.


 


(b)  Notwithstanding the foregoing
provisions of this Section 2.11, solely in connection with a sale of the
Premises permitted pursuant to Section 9.04 of the Mortgage a new borrower
(“New Borrower”), owning 100% of the unencumbered equity interests in
the proposed new owner of the Premises (the “New Owner”) may assume
Borrower’s obligations hereunder (hereinafter, a  “Proposed Loan Assumption”) provided
that each of the following terms and conditions are satisfied:


 


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


 


(ii)           Lender
shall have, in its sole and absolute discretion, consented to the Proposed Loan
Assumption; provided, however, in connection with an IPO with respect to which
not less than $50,000,000 of proceeds have been used to prepay first, the
Junior Mezz Loan, second, the Intermediate Mezz Loan and third, the Loan until
an amount of not less than


 


19





















 


$50,000,000 in the aggregate has been applied
to such indebtedness, no such consent shall be required;


 


(iii)          Borrower
gives Lender written notice of the terms of the Proposed Loan Assumption not
less than sixty (60) days, or in the case of an IPO, fifteen (15) days, before
the date on which such Proposed Loan Assumption is scheduled to close and,
concurrently therewith, gives Lender all such information concerning the New
Borrower and the New Owner as Lender would require in evaluating an initial
extension of credit to a borrower and Lender determines, in its sole discretion
that the New Borrower and the New Owner are acceptable to Lender in all
respects (other than in connection with an IPO);


 


(iv)          In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower pays Lender, concurrently with the closing of such Proposed
Loan Assumption, a non-refundable assumption fee in an amount equal to one
percent (1%) of the then outstanding Loan Amount for each Proposed Loan
Assumption, together with all out-of-pocket costs and expenses, including,
without limitation, reasonable attorneys’ fees, incurred by Lender in
connection with the Proposed Loan Assumption, provided, however, that no such
assumption fee shall be required in connection with a Transfer effected in
connection with an IPO (but Borrower shall be required to pay all out-of-pocket
costs and expenses of Lender);


 


(v)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower assumes all of the obligations under the Loan
Documents and, prior to or concurrently with the closing of such Proposed Loan
Assumption, New Borrower executes, without any cost or expense to Lender, such
documents and agreements as Lender shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as Lender may
require similar to those delivered at the closing of the Loan;


 


(vi)          In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower and New Borrower execute, without any cost or expense to
Lender, new financing statements or financing statement amendments and any
additional documents reasonably requested by Lender and New Borrower delivers
certificated securities to Lender representing 100% of the equity ownership
interests in New Owner (such interests, along with any other collateral
securing the Loan, the “New Collateral”) and grants Lender a perfected
first priority lien in such New Collateral;


 


(vii)         In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower delivers to Lender, without any cost or expense to
Lender, such endorsements to Lender’s “Eagle 9” (or equivalent) insurance
policy which insures Lender’s lien in the New Collateral, hazard insurance
policy endorsements or certificates and other similar materials as Lender may
deem necessary at the time of the Proposed Loan Assumption, all in form and
substance satisfactory to Lender;


 


(viii)        In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, Borrower executes and delivers to Lender, without any cost or
expense to Lender, a release of Lender, its officers, directors, employees and
agents, from all claims and liability relating to the transactions evidenced by
the Loan Documents, through and including the date of


 


20





















 


the closing of the Proposed Loan Assumption,
which agreement shall be in form and substance satisfactory to Lender and shall
be binding upon New Borrower;


 


(ix)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, subject to the provisions of Article VIII
hereof, such Proposed Loan Assumption does not relieve Borrower of any personal
liability under the Note or any of the other Loan Documents for any acts or
events occurring or obligations arising prior to or simultaneously with the
closing of such Proposed Loan Assumption, and Borrower executes, without any
cost or expense to Lender, such documents and agreements as Lender shall
reasonably require to evidence and effectuate the ratification of said personal
liability;


 


(x)            In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, such Proposed Loan Assumption does not relieve any Guarantor of its
obligations under any guaranty or indemnity agreement executed in connection
with the Loan and each such Guarantor executes, without any cost or expense to
Lender, such documents and agreements as Lender shall reasonably require to
evidence and effectuate the ratification of each such guaranty agreement,
provided that if New Borrower or a party associated with New Borrower approved
by Lender in its sole and absolute discretion assumes the obligations of the
current Guarantor under its guaranty and New Borrower or such party associated
with New Borrower, as applicable, executes, without any cost or expense to
Lender, a new guaranty in similar form and substance to the existing guaranty
and otherwise satisfactory to Lender, then Lender shall release the current
Guarantor from all obligations arising under its guaranty after the closing of
such Proposed Loan Assumption; and


 


(xi)           In
the event the applicable Transfer will result in a New Borrower owning the
Collateral, New Borrower is a Single Purpose Entity and Lender receives a
non-consolidation opinion relating to New Borrower from New Borrower’s counsel,
which opinion is in form and substance reasonably acceptable to Lender.


 


Section 2.12.  Sums Held In Trust.  To the extent Borrower receives any sums it
is not otherwise entitled to receive pursuant to the terms of this Agreement,
Borrower shall hold all such sums sufficient to discharge all sums due or to
become due on the Debt, in trust for use in payment of the Debt.


 


Section 2.13.  Notification of
Defaults.  Borrower shall
promptly (and in all events within one (1) Business Day of obtaining
knowledge thereof) notify Lender of the occurrence of any default under the
Mortgage Loan or of the occurrence of any event, which but for the passage of time
or the giving of notice or both, would constitute a default under the Mortgage
Loan.


 


Section 2.14.  Compliance With Mortgage Loan Documents.  Borrower shall cause Owner to comply with all
of the terms, covenants and conditions set forth in the Mortgage Loan
Documents, notwithstanding any waiver or future amendment of such covenants by
Mortgage Lender.  Borrower acknowledges
that the obligation to comply with such covenants is separate from, and may be
enforced independently from, the obligations of the Owner under the Mortgage
Loan Documents, and, to the extent such term, covenants and conditions require
any consents, approvals or waivers by Mortgage Lender, Lender shall have the
same rights to consent, approve or waive. 
The provisions of Sections 3.01, 4.01, 7.02(a) through (c) and
8.01 of the Mortgage


 


21





















 


are hereby incorporated by reference as if
fully restated herein and shall constitute the direct obligation of Borrower to
either perform or to cause Owner to perform such covenants on behalf of Lender.


 


Section 2.15.  No Change of
Accounts.  Borrower shall not permit
Owner to change the Rent Accounts or the Central Account (as such terms are
defined in the Mortgage), without the prior written consent of Lender and
Mortgage Lender.


 


Section 2.16.  Confirmation of Loan Documents, Etc.  (a)  After request by Lender, Borrower,
within fifteen (15) days and at its expense, will furnish or will cause Owner
to furnish to Lender with a statement, duly acknowledged and certified, setting
forth with respect to this Agreement, the Note and the Mortgage Note, as
applicable, (i) the amount of the original principal amount, and the
unpaid principal amount, (ii) the rate of interest, (iii) the date
payments of interest and/or principal were last paid, (iv) any offsets or
defenses to payment, and if any are alleged, the nature thereof, (v) that
no modifications have taken place, or if modified, giving particulars of such
modification and (vi) that there has occurred and is then continuing no
Default or if such Default exists, the nature thereof, the period of time it
has existed, and the action being taken to remedy such Default.


 


(b)           Within
fifteen (15) days after written request by Borrower, Lender shall furnish to
Borrower a written statement confirming the Principal Amount of the Loan, the
maturity date of the Note and the date to which interest has been paid.


 


Section 2.17.  Corporate Actions.  Without the prior written consent of Lender,
Borrower will not and will not cause or allow the Corporations, LLCs or
Partnerships at any time, to (and, without limiting the foregoing, will not
vote to enable, or take any other action to permit, the Corporations, LLCs or
Partnerships to):


 


(a)           purchase
or redeem or obligate itself to purchase or redeem any Equity Interests in
violation of this Agreement or any of the other Loan Documents; or


 


(b)           redeem
or cancel any Equity Interests or authorize to be issued any additional Equity
Interests; or


 


(c)           merge
into or merge or consolidate with any corporation, partnership or limited
liability company or entity or cause itself to dissolve or liquidate its
assets; or


 


(d)           enter
into, or cause or permit any affiliate of any of the Corporations, LLCs or
Partnerships to enter into, (x) any transaction with a Person or entity
affiliated with or related to itself, except upon arms-length terms and
conditions, or (y) any transaction which is motivated by an intent to
evade this Agreement; or


 


(e)           breach
any of the covenants or obligations of the Corporations, LLCs or Partnerships
pursuant to this Agreement.


 


Section 2.18.  Conduct of Operations.  To the extent that such matters are within
the control of Borrower pursuant to the terms of the Organizational Documents
and applicable laws, Borrower shall cause the Corporations, LLCs and
Partnerships to conduct their operations and to


 


22





















 


manage, protect and preserve their assets and
to act in a commercially reasonable manner to preserve the value of the
Collateral.


 


Section 2.19.  Voting Rights; Etc.  (a) So long as an Event of Default shall
not have occurred and be continuing, Borrower shall be permitted (i) to
receive any and all regular Distributions and dividends paid in cash and in the
ordinary course of business of the Partnerships, the LLCs and the Corporations
with respect to the Equity Interests and (ii) to exercise all voting and
other rights with respect to the Equity Interests as long as no vote shall be
cast, or right exercised or other action taken which would, directly or
indirectly, materially impair the value of any Collateral or which would be
inconsistent with or result in a default under this Agreement or any of the
other Loan Documents.  Upon the receipt
of a written request from Borrower, Lender shall execute and deliver (or cause
to be executed and delivered) to Borrower all such proxies and other
instruments as Borrower may reasonably request for the purpose of enabling
Borrower to exercise the voting and other rights which it is entitled to
exercise and to receive the dividends or interest payments which it is
authorized to receive and retain pursuant to this Agreement.  Upon the occurrence and during the
continuance of an Event of Default, the aforesaid rights shall immediately and automatically
vest in Lender.


 


(b)           If
Borrower shall receive, by virtue of Borrower’s being or having been an owner
of any Equity Interest, (i) any Distributions or dividends payable in cash
(except such Distributions and dividends permitted to be retained by Borrower
pursuant to sub-section (a) above) or in securities or other
property, or (ii) any Distributions or dividends in connection with a
partial or total liquidation or dissolution or a reclassification, increase or
reduction of capital, capital surplus or paid-in capital, Borrower shall
receive the same in trust for Lender, segregate the same from its other assets
and promptly deliver the same to Lender in the exact form received, with any
necessary endorsement and/or appropriate powers or other instruments of
assignment or conveyance, to be held by Lender as Collateral pursuant to this
Agreement.


 


Section 2.20.  Admission of New Equity.  Borrower will not agree to admit any new or
substitute shareholders, members or partners into the Corporations, LLCs or
Partnerships or transfer its interests in the Corporations, LLCs or
Partnerships unless such new shareholder, member or partner executes and
delivers, and agrees to be bound by, an agreement, in form and content
substantially identical to this Agreement, pursuant to which such new
shareholder, member or partner pledges its interests in the Corporations, LLCs
or Partnerships to Lender and such admission is otherwise in accordance with
the terms of the applicable Organizational Documents and the Loan Documents.


 


Section 2.21.  Proceeds of Collateral.  Upon the occurrence and during the
continuance of an Event of Default, all Proceeds of the Collateral received by
Borrower shall be promptly delivered to Lender, in the same form as received,
with the addition only of such endorsements and assignments as may be necessary
to transfer title to Lender, and pending such delivery, such Proceeds shall be
held in trust for Lender; and such Proceeds shall be applied to the Debt
secured hereby pursuant to the terms of the Loan Agreement.


 


Section 2.22.  Admission of Lender As Shareholder,
Member, Partner.  In the event that
Lender forecloses on the Collateral, notwithstanding anything to the contrary
in the Organizational Documents, Lender shall automatically be admitted as a
shareholder, member or


 


23





















 


partner of the Corporations, LLCs or
Partnerships, respectively, and shall be entitled to receive all benefits and
exercise all rights in connection therewith pursuant to the Organizational
Documents; provided, however, that Lender shall have no liability for matters
in connection with the Equity Interests arising or occurring, directly or
indirectly, prior to Lender’s becoming a shareholder, member or partner of the
Corporations, LLCs or Partnerships.


 


Section 2.23.  Purchase of Mortgage Loan, Etc.  Neither Borrower nor any Affiliate thereof or
any other Person acting upon their direction or request shall, directly or
indirectly, acquire or agree to acquire, obtain, purchase or control the
Mortgage Loan, or any portion thereof or any interest therein, or any direct or
indirect ownership interest in the holder of, or participant in, the Mortgage
Loan in any manner whatsoever.  If, solely
by operation of applicable subrogation law, Borrower or any Affiliate thereof
shall be in breach of or fail to comply with the foregoing, then such breach or
failure shall not be an Event of Default provided that Borrower (a) shall
immediately upon obtaining knowledge thereof notify Lender of such failure or
breach, and (b) shall cause Borrower and Affiliates thereof acquiring any
interest in the Mortgage Loan Documents (i) not to enforce the Mortgage
Loan Documents, and (ii) upon the request of Lender, to the extent any
Borrower or such Affiliate has the power or authority to do so, to promptly (A) cancel,
reconvey and release its interest in the Mortgage Loan Documents, (B) discontinue
and terminate any enforcement proceeding(s) under the Mortgage Loan Documents
and (C) assign and transfer its interest in the Mortgage Loan Documents to
Lender.


 


Section 2.24.  Deed-In-Lieu, etc.  Without the prior written consent of Lender,
Borrower shall not, and shall not cause or permit Owner to, enter into any
deed-in-lieu or consensual foreclosure with or for the benefit of Mortgage
Lender or any of Mortgage Lender’s Affiliates or designees.  Without the express prior written consent of
Lender, Borrower shall not, and shall not cause or permit Owner to, enter into
any consensual foreclosure or other similar transaction, impair or otherwise
adversely affect the interests of Lender in the Collateral or any portion
thereof or any interest therein.


 


Section 2.25.  Intercreditor Agreement.  Borrower acknowledges and agrees that Lender,
Intermediate Mezz Lender, Junior Mezz Lender and Mortgage Lender have entered
into an intercreditor agreement regarding their respective rights under the
Mortgage Loan and Loan (the “Intercreditor Agreement”).  Borrower acknowledges and agrees that:  (a) no Person other than Lender,
Intermediate Mezz Lender, Junior Mezz Lender and Mortgage Lender has any rights
whatsoever, direct or indirect, beneficial or otherwise, under the
Intercreditor Agreement and Borrower is not a third party beneficiary thereof; (b) Lender,
Intermediate Mezz Lender, Junior Mezz Lender and Mortgage Lender may amend,
modify, cancel, terminate, supplement or waive the Intercreditor Agreement at
any time without notice to, or the consent of Borrower, Owner or any other
Person, and (c) except as expressly set forth in this Agreement, any
restriction or other agreement between Lender, Intermediate Mezz Lender, Junior
Mezz Lender and Mortgage Lender set forth in the Intercreditor Agreement is
personal between Lender, Intermediate Mezz Lender, Junior Mezz Lender and Mortgage
Lender and, as between Lender, on the one hand, and Borrower, on the other
hand, no such agreement or restriction will be deemed to benefit or otherwise
modify any of the rights of Lender under the Loan Documents.


 


Section 2.26.  Payment of Impositions.  Borrower shall pay and discharge all taxes
now or hereafter imposed on it, or its income or profits, on any of its
property or upon the liens


 


24





















 


provided for herein prior to the date on
which penalties attach thereto; provided that Borrower shall have the right to
contest the validity or amount of any such tax in good faith and by proper
proceedings.  Borrower shall promptly pay
any valid, final judgment enforcing any such tax and cause the same to be
satisfied of record.


 


Section 2.27.  Central Cash Management.  (a)  All amounts paid by the issuer of
the Rate Cap Agreement (the “Counterparty”) to Borrower or Lender,
together with all rents, issues, profits, insurance proceeds, condemnation
proceeds, refinancing proceeds and all other sums received with respect to the
Premises after all sums which are then due and payable have been paid to
Mortgage Lender pursuant to the terms of the Mortgage Loan Documents (collectively,
“Remaining Rents”), shall be paid by federal wire transfer or automatic
clearing house funds (“ACH”) to Lender and shall be deposited
immediately into the Lockbox Account (as defined below).  Lender has established the Lockbox Account in
the name of Lender as secured party .  The
Lockbox Account shall be under the sole dominion and control of Lender.  The Lockbox Account shall have a sub-account
on a ledger basis entitled the “Debt Service Payment Account” (the “Debt
Service Sub-Account” and together with the other accounts now or hereafter
required to be established pursuant to this Section 2.27, collectively,
the “Accounts”) to which certain funds shall be allocated and from which
disbursements shall be made pursuant to the terms of the Lockbox
Agreement.  Borrower hereby irrevocably
directs and authorizes Lender to withdraw funds from the Lockbox Account, all
in accordance with the terms and conditions of the Lockbox Agreement.  Borrower shall have no right of withdrawal in
respect of the Lockbox Account.  Each
transfer of funds to be made hereunder shall be made only to the extent that
funds are on deposit in the Lockbox Account, and Lender shall have no
responsibility to make additional funds available in the event that funds on
deposit are insufficient.  Borrower shall
enter into or shall cause Owner to enter into a substitute cash management
agreement and related lockbox agreement (collectively, the “Substitute CMA
Agreements”) with substantially the same terms as the agreements entered
into as of the date hereof in connection with the Mortgage Loan as a condition
to the satisfaction of the Mortgage Loan or if Mortgage Lender is not requiring
that sums be deposited into any Sub-Accounts or Escrow Accounts (each as defined in the Mortgage).  Such substitute agreements shall provide that
all Remaining Rents shall be deposited into the Lockbox Account for
disbursement in accordance with the terms of the Substitute CMA Agreements, the
Lockbox Agreement (as amended to conform with the Substitute CMA Agreements)
and this Agreement.  Additionally, on or
before the Closing Date, Borrower shall establish or cause Owner to establish
such escrow and reserve accounts and deposit such amounts into such accounts as
required pursuant to the terms of the Mortgage Loan Documents.  After the occurrence and during the
continuance of an Event of Default, the funds on deposit in the Lockbox
Account, and all other funds received by Lender in respect of the Loan, shall
be disbursed and applied in such order and such manner as Lender shall elect in
its sole discretion.  If Borrower shall
receive any Remaining Rents other than in accordance with this Agreement,
Borrower shall hold all such payments in trust for Lender, will not co-mingle
such payments with other funds of Borrower, and will immediately pay and deliver
in kind, all such payments directly to Lender for application by Lender in
accordance with this Agreement.


 


(b)           Borrower
shall maintain the Rate Cap Agreement at all times during the term of the Loan
and pay all fees, charges and expenses incurred in connection therewith.  Borrower shall comply with all of its
obligations under the terms of the Rate Cap Agreement.  All amounts paid by the Counterparty to
Borrower or Lender shall be deposited immediately into the Lockbox


 


25





















 


Account. 
Borrower shall take all actions reasonably requested by Lender to
enforce Lender’s rights under the Rate Cap Agreement in the event of a default
by the Counterparty.  In the event that (a) the
long-term unsecured debt obligations of the Counterparty are downgraded by the
Rating Agency below “A+” or its equivalent or (b) the Counterparty shall
default in any of its obligations under the Rate Cap Agreement, Borrower shall,
at the request of Lender, promptly but in all events within five (5) Business
Days, replace the Rate Cap Agreement with an agreement having identical payment
terms and maturity as the Rate Cap Agreement and which is otherwise in form and
substance substantially similar to the Rate Cap Agreement and otherwise acceptable
to Lender with a cap provider, the long-term unsecured debt of which is rated
at least “AA-” (or its equivalent) by each Rating Agency, or which will allow
each Rating Agency to reaffirm their then current ratings of all rated
certificates issued in connection with the Securitization.  In the event that Borrower fails to maintain
the Rate Cap Agreement as provided in this Section, Lender may purchase the
Rate Cap Agreement and the cost incurred by Lender in connection therewith
shall be paid by Borrower to Lender with interest thereon at the Default Rate
from the date such cost is incurred until such cost is paid by Borrower to
Lender.  On or prior to the Payment Date
in June 2007, Borrower shall deliver to Lender a replacement Rate Cap
Agreement with a term expiring not earlier than the Maturity Date and otherwise
in form and substance acceptable to Lender which is issued by a Counterparty
having a long-term unsecured debt rating of “AA-” (or its equivalent) or better
from each Rating Agency (the “Replacement Rate Cap Agreement”).


 


(c)           At
any time that sums are not being deposited into the Sub-Accounts or Escrow
Accounts pursuant to the terms of the Mortgage, Borrower shall establish and
maintain one or more sub-accounts of the Lockbox Account into which Remaining
Rents shall be deposited for the purposes of paying Basic Carrying Costs,
Recurring Replacement Expenditures and Operating Expenses (each as defined in
the Mortgage).  In connection therewith,
Borrower and Lender shall modify the Lockbox Agreement to provide that, if sums
are required to be deposited into the Lockbox Account pursuant to this Section 2.27(c),
such funds shall be allocated in the order of priority set forth in Section 5.05
of the Mortgage and Borrower hereby irrevocably appoints Lender as its
attorney-in-fact, coupled with an interest, to execute any such amendment to
the Lockbox Agreement.  The amounts to be
deposited in such sub-accounts shall equal the amounts required to be deposited
in the Sub-Accounts and Escrow Accounts pursuant to the terms of the Mortgage (as
in effect on the Closing Date or as amended with Lender’s approval) and sums
deposited into such sub-accounts may be released on the same terms and
conditions as set forth in the Mortgage (as in effect on the Closing Date or as
amended with Lender’s approval).


 


(d)           Borrower
hereby agrees for the benefit of itself and Owner that all payments actually
received by Lender shall be deemed payments to Borrower by Owner.  Lender shall apply any and all such payments
actually received by Lender for application in accordance with this
Agreement.  After payment of all sums due
and payable with respect to the Loan, Lender shall return to Borrower that
portion of any payments actually received by Lender from Borrower or Owner which
is required to be paid to Borrower pursuant to the Loan Documents.


 


Section 2.28.  Certain Additional Rights of Lender.  Notwithstanding anything to the contrary
which may be contained in this Agreement, Lender shall have:


 


26


















 


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


 


(b)           the
right, without restricting any other rights of Lender under this Agreement
(including any similar right), to restrict financing to be obtained in
connection with future property transactions, refinancing of any acquisition
financings, and unsecured debt unless the Loan has been paid in full or as
otherwise permitted hereunder;


 


(c)           the
right, without restricting any other right of Lender under this Agreement
(including any similar right), to restrict, upon the occurrence of an Event of
Default, Borrower’s payments of management consulting, director or similar fees
to affiliates of Borrower (or their personnel) other than management fees due
pursuant to the Management Agreement which will continue to be paid as long as
Manager is managing the Premises and is not in default pursuant to its
Management Agreement;


 


(d)           the
right, without restricting any other rights of Lender under this Agreement
(including any similar right), to approve any acquisition by Borrower of any
other significant property (other than personal property required for the day
to day operation of the Premises);


 


(e)           the
right, without restricting any other rights of Lender under this Agreement
(including any similar right), in the event of an Event of Default, to vote the
owners’ interests in Borrower pursuant to irrevocable proxies granted, at the
request of Borrower in advance for this purpose; and


 


(f)            the
right, without restricting any other rights of Lender under this Agreement
(including any similar right), to restrict the transfer of voting interests in
Borrower held by its members, and the right to restrict the transfer of
interests in such member, except for any transfer that is a permitted Transfer.


 


The rights contained in this Section 2.28 may be exercised by any
Person which owns or Controls, directly or indirectly, substantially all of the
interests in Lender.


 


Section 2.29.  Refinancing, Liens, etc.  Borrower shall not and shall not permit Owner
to, without the prior written consent of Lender, which consent may be withheld,
delayed or conditioned in the sole discretion of Lender, give its consent or
approval or agree to any of the following:


 


(a)           (i) any
refinancing of the Mortgage Loan, (ii) any prepayment in full of the
Mortgage Loan, (iii) any Transfer (for purposes of this Section 2.29(a) only,
as defined in the Mortgage (as in effect on the Closing Date or as amended with
Lender’s approval)) of the Premises except pursuant to Section 2.11 hereof,
or (iv) any action in connection with or in furtherance of the foregoing;


 


(b)           placing
or permitting to attach any additional liens or encumbrances on the


 


27





















 


Premises (except for liens and encumbrances
permitted under the Mortgage Loan Documents (as in effect on the Closing Date
or as amended with Lender’s approval) not requiring the consent of Mortgage
Lender); or


 


(c)           any
modification, amendment, consolidation, spread, restatement or waiver of any
provision of the Mortgage Loan Documents.


 


Section 2.30.  Insurance.  (a) The insurance described in Section 3.01
of the Mortgage and Section 2.30(c) hereof (except policies for
worker’s compensation) shall be in the form (other than with respect to
Sections 3.01(a)(vi) and (vii) of the Mortgage when insurance in
those two sub-sections is placed with a governmental agency or instrumentality
on such agency’s forms) and amount and with deductibles as, from time to time,
shall be reasonably acceptable to Lender, under valid and enforceable policies
issued by financially responsible insurers authorized to do business in the
State where the Premises is located, with a general policyholder’s service
rating of not less than “A” and a financial rating of not less than XIII as
rated in the most currently available Best’s Insurance Reports (or the
equivalent, if such rating system shall hereafter be altered or replaced) and
shall have a claims paying ability rating and/or financial strength rating, as
applicable, of not less than “A” (or its equivalent), or such lower claims
paying ability rating and/or financial strength rating, as applicable, as
Lender shall, in its reasonable discretion (taking into account then current
Rating Agency guidelines), consent to, from a Rating Agency (one of which after
a Securitization in which Standard & Poor’s rates any securities
issued in connection with such Securitization, shall be Standard &
Poor’s) or by a syndicate of insurers through which at least 90% of the
coverage is with carriers having claims-paying ability or financial strength
ratings of “A” (or its equivalent) from the Ratings Agencies, provided that all
members of the syndicate shall have claims-paying ability ratings and/or
financial strength ratings, as applicable, of not less than “A-” (or its
equivalent) from the Ratings Agencies and Borrower shall cause Owner to carry
all such insurance (whether or not the Mortgage Loan is outstanding) for so
long as any portion of the Debt remains outstanding.  Notwithstanding the foregoing, Lender
approves (i) Continental Casualty Company, (ii) RSUI Indemnity
Company, and (iii) Fidelity National Insurance Company as insurers,
provided that throughout the term of the Loan the claims paying ability rating
and/or financial strength rating, as applicable, from each Rating Agency for
such insurers shall be no less than “A-” (or its equivalent).  All such policies (except policies for worker’s
compensation) shall name Lender as an additional named insured (subject to the
rights of Mortgage Lender), with respect to the insurance required pursuant to Section 3.01(a)(iii) of
the Mortgage, shall provide, subsequent to the satisfaction of the Mortgage
Loan, for loss payable to Lender and shall contain (or have attached):  (i) standard “non-contributory mortgagee”
endorsement or its equivalent relating, inter  alia, to recovery
by Lender notwithstanding the negligent or willful acts or omissions of
Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an
endorsement indicating that neither Lender nor Borrower shall be or be deemed
to be a co-insurer with respect to any casualty risk insured by such policies
and shall provide for a deductible per loss of an amount not more than that
which is customarily maintained by owners of similar properties similarly
situated, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty
(30) days’ prior written notice to Lender in each instance.  Not less than thirty (30) days prior to the
expiration dates of the insurance policies obtained pursuant to this Agreement,
originals or certified copies of renewals of such policies (or certificates


 


28





















 


evidencing such renewals) bearing notations
evidencing the payment of premiums or accompanied by other reasonable evidence
of such payment (which premiums shall not be paid by Borrower or Owner through
or by any financing arrangement which would entitle an insurer to terminate a
policy) provided, however, premiums for the insurance required pursuant to this
Section may be paid quarterly in advance or as otherwise reasonably
acceptable to Lender, it being acknowledged that paying the premium for such
policies by financing the same, paying twenty percent (20%) of the total annual
premium (inclusive of finance charges) at the time of the applicable policy
renewal and paying the remaining eighty percent (80%) of the total annual
premium (inclusive of finance charges) in nine (9) equal monthly
installments is acceptable to Lender) shall be delivered by Borrower to
Lender.  Borrower shall not carry
separate insurance, concurrent in kind or form or contributing in the event of
loss, with any insurance required under Section 3.01 of the Mortgage or Section 2.30(c) hereof.


 


(b)           If
Borrower fails to maintain and deliver to Lender the original policies or
certificates of insurance required by this Agreement, Lender may, at its
option, procure such insurance, and Borrower shall pay, or as the case may be,
reimburse Lender for, all premiums thereon promptly, upon demand by Lender,
with interest thereon at the Default Rate from the date paid by Lender to the
date of repayment and such sum shall constitute a part of the Debt.


 


(c)           Borrower
shall deliver to Lender such other insurance as may from time to time be
required by Lender and which is then customarily required by Institutional
Lenders for similar properties similarly situated, against other insurable
hazards, including, but not limited to, malicious mischief, vandalism, acts of
terrorism, windstorm and/or earthquake, due regard to be given to the size and
type of the Premises, Improvements, Fixtures and Equipment and their location,
construction and use.  Additionally,
Borrower shall carry such insurance coverage as Lender may from time to time
require if the failure to carry such insurance may result in a downgrade,
qualification or withdrawal of any class of securities issued in connection
with a Securitization.


 


Section 2.31.  Casualty.  Borrower shall give Lender prompt notice of
any loss or damage to the Premises and, subject to the rights of the Mortgage
Lender under the Mortgage Loan Documents (which shall in all respects supercede
the rights of Lender under this Section 2.31);


 


(a)           After
the Mortgage Loan has been paid in full, in the event of any loss or damage
covered by any insurance, Lender is hereby authorized (i) if an Event of
Default shall have occurred or, if no Event of Default shall have occurred but
Borrower or Owner fails to settle and adjust any claim within ninety (90)
Business Days after such casualty has occurred, to settle and adjust any claim
under such insurance without the consent of Borrower or Owner, or (ii) if
no Event of Default has occurred, to allow Borrower or Owner within ninety (90)
Business Days after such casualty to settle and adjust such claim with, if any
settlement may reasonably be anticipated to result in proceeds in excess of $250,000.00,
the consent of Lender, not to be unreasonably withheld; provided, however, that
in either case Lender shall, and is hereby authorized to, collect and receive
any such insurance proceeds, subject, however, to the rights of Mortgage Lender
under the Mortgage Loan Documents.  The
expenses incurred by Lender in the adjustment and collection of such proceeds
of insurance shall be additional Debt of Borrower, and shall be reimbursed to
Lender upon demand or, at Lender’s option, in the event and to the extent
sufficient proceeds are available, deducted by Lender from such proceeds of
insurance


 


29





















 


prior to any other application thereof.  If the Mortgage Loan has been paid in full,
each insurance company which has issued insurance is hereby authorized and
directed to make payment for all losses covered by such insurance to Lender
alone, and not to Lender and Borrower or Owner jointly.  Borrower agrees to execute and cause Owner to
execute all documents and make all deliveries required in order to permit
adjustment and payment of insurance proceeds as provided above.


 


(b)           Borrower
hereby assigns to Lender the proceeds of all insurance (other than worker’s
compensation and liability insurance) obtained pursuant to this Agreement, all
of which proceeds shall be payable to Lender as collateral and further security
for the payment of the Debt and the performance of Borrower’s obligations
hereunder and under the other Loan Documents, and Borrower hereby authorizes
and directs the issuer of any such insurance to, subject to the rights of
Mortgage Lender under the Mortgage Loan Documents, make payment of such
proceeds directly to Lender.  Lender may,
in its sole discretion, apply the proceeds of insurance received upon any
casualty either (i) to reduce the Debt, in such order or manner as Lender
may elect; or (ii) at Lender’s election, to reimburse Borrower or Owner
for or to pay the costs of restoring, repairing, replacing or rebuilding
(collectively, a “Restoration”) the loss or damage caused by such
casualty, in accordance with and subject to such conditions as Lender may determine
in its sole discretion.


 


Section 2.32.  Management of Premises.  Borrower shall cause Owner to operate and manage
the Premises or cause the Premises to be operated and managed in a manner which
is consistent with the Approved Manager Standard (as defined in the
Mortgage).  Borrower covenants and agrees
with Lender that (a) the Premises will be managed at all times by Manager
pursuant to the management agreement approved by Lender (the “Management
Agreement”), (b) after Borrower has knowledge of a fifty percent (50%)
or more change in control of the ownership of Manager (other than in connection
with an IPO, provided Manager, directly or indirectly, is Controlled by the
same Person that Controls Borrower, Borrower will promptly give Lender notice
thereof (a “Manager Control Notice”) and (c) the Management
Agreement may be terminated by Lender at any time for cause (including, but not
limited to, Manager’s gross negligence, misappropriation of funds, willful
misconduct or fraud) or at any time following (A) the occurrence of an
Event of Default, or (B) the receipt of a Manager Control Notice, or (C) the
date upon which the trailing twelve (12) month Debt Service Coverage (as
defined in the Mortgage) is less than the Debt Service Coverage set forth on Exhibit H
to the Mortgage and a substitute managing agent shall be appointed by Lender,
subject to Lender’s prior written approval, which may be given or withheld in
Lender’s sole discretion and which may be conditioned on, inter alia, a letter
from the Rating Agency confirming that any rating issued by the Rating Agency
in connection with a Securitization or Mortgage Securitization will not, as a
result of the proposed change of Manager, be downgraded from the then current
ratings thereof, qualified or withdrawn. 
Borrower may from time to time appoint a successor manager to manage the
Premises with Lender’s prior written consent which consent shall not be
unreasonably withheld or delayed, provided that any such successor manager
shall be a reputable management company which meets the Approved Manager
Standard (as defined in the Mortgage) and each Rating Agency shall have
confirmed in writing that any rating issued by the Rating Agency in connection
with a Securitization or in connection with a Mortgage Securitization will not,
as a result of the proposed change of Manager, be downgraded from the then
current ratings thereof, qualified or withdrawn.  Borrower further covenants and agrees that


 


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Borrower shall require the Manager (or any
successor managers) to maintain at all times during the term of the Loan worker’s
compensation insurance as required by Governmental Authorities.


 


Section 2.33.  Power of Attorney.  Borrower hereby irrevocably appoints and
instructs Lender as its attorney-in-fact, with full authority in the place and
stead of Borrower and in the name of Borrower, Lender or otherwise, from time
to time in Lender’s discretion to take any and all actions necessary and
proper, to carry out the intent of this Agreement and (a) to perfect and
protect the lien, pledge, assignment and security interest of Lender created
hereunder, (b) from and during the continuance of an Event of Default, (i) to
ask, demand, collect, sue for, recover, compromise, receive and give
acquittance and receipts for moneys due and to become due under or in respect
of any of the Collateral, (ii) to file any claims or take any action or
institute any proceedings for the collection of any of the Collateral or
otherwise to enforce the rights of Lender with respect to any of the
Collateral, and (iii) in connection with the exercise of any power, right,
privilege or remedy pursuant to this Agreement, to make all necessary
assignments, transfers and deliveries of the Collateral and rights and to
execute all applications, certificates, instruments, assignments and other
documents and papers, (c) to collect and receive any insurance proceeds
paid with respect to any portion of the insurance policies required to be
maintained hereunder, and to endorse any checks, drafts or other instruments
representing any insurance proceeds whether payable by reason of loss
thereunder or otherwise, (d) to exercise any option to extend or renew the
term of the Ground Lease in the name of and on behalf of Borrower or Owner and (e) from
and during the continuance of an Event of Default, to file and prosecute, to
the exclusion of Borrower and Owner, any proofs of claim, complaints, motions,
applications, notices and other documents, in any case in respect of the Ground
Lessor under the Bankruptcy Code.  Borrower
hereby ratifies, approves and confirms all actions taken by Lender and its
attorneys-in-fact pursuant to this Section 2.33.  Neither Lender nor any said Lender or
attorney-in-fact will be liable for any acts of commission or omission nor for
any error of judgment or mistake of fact or law with respect to its dealings
with the Collateral.  This power of
attorney, being coupled with an interest, is irrevocable until the date upon
which the Debt has been indefeasibly satisfied in full.  Without limiting the foregoing, if Borrower
fails to perform any agreement or obligation contained herein, Lender may
itself perform, or cause performance of, where necessary or advisable in the
name or on behalf of Borrower, and at the expense of Borrower, as applicable.


 


Section 2.34.  Leases.  (a)  Borrower covenants and agrees that,
from the date hereof and until payment in full of the Debt, Borrower shall, or
shall cause Owner to, comply with the terms and provisions of Section 7.02(a) through
(c) of the Mortgage as provided in Section 2.14 hereof, and, to the
extent such term, covenants and conditions require any consents, approvals or
waivers by Mortgage Lender, Lender shall have the same rights to consent,
approve or waive.


 


(b)           Subject
to the rights of Mortgage Lender in respect of the Rents under the Mortgage
Loan Documents at any time that (i) payments are not being made to the
Central Account, (ii) following repayment of the Mortgage Loan or (iii) following
the occurrence of an Event of Default, then Lender shall have the immediate
right to notify all tenants and other third parties to make payments directly
to the Lockbox Account.  Borrower hereby
authorizes and directs the tenants and other third parties to make such payments
directly to the Lockbox Account upon notice by Lender.  Subject to the rights of Mortgage Lender
under the Mortgage Loan Documents, security and other refundable deposits of
tenants, whether held in cash or any


 


31





















 


other form, shall, after and during the
continuance of an Event of Default, be turned over to Lender (together with any
undisbursed interest earned thereon) upon Lender’s request therefor to be held
by Lender subject to the terms of the Leases. 
Any letter of credit or other instrument which Borrower or Owner holds
in lieu of cash security deposit shall be maintained in full force and effect
in the full amount of such deposits unless replaced by cash deposits as
herein-above described and shall in all respects comply with any applicable
Legal Requirements and otherwise be satisfactory to Lender.  Borrower shall, upon request, provide Lender
with evidence satisfactory to Lender of Borrower’s and Owner’s compliance with
the foregoing.


 


(c)           Borrower
(i) shall cause Owner to observe and perform all of its material
obligations under the Leases pursuant to applicable Legal Requirements and
shall not do or permit to be done anything to impair the value of the Leases; (ii) shall
cause Owner to promptly send copies to Lender of all notices of material
default which Owner shall receive under the Leases; (iii) shall,
consistent with the Approved Manager Standard, enforce all of the terms,
covenants and conditions contained in the Leases to be observed or performed; (iv) shall
not permit Owner to collect any of the Rents under the Leases more than one (1) month
in advance (except that Owner may collect in advance such security deposits as
are permitted pursuant to applicable Legal Requirements and are commercially
reasonable in the prevailing market); (v) shall not permit Owner to cancel
or terminate any of the Leases or accept a surrender thereof in any manner
inconsistent with the Approved Manager Standard; (vi) shall not permit
Owner to alter, modify or change the terms of any guaranty of any Major Space
Lease or cancel or terminate any such guaranty; (vii) shall cause Owner,
in accordance with the Approved Manager Standard, to make all reasonable
efforts to seek lessees for space as it becomes vacant and enter into Leases in
accordance with the terms hereof; and (viii) shall not permit Owner to
materially modify, alter or amend any Major Space Lease or Premises Agreement
without Lender’s consent, which consent will not be unreasonably withheld or
delayed.  In all instances that Owner is
required to obtain the consent of Mortgage Lender prior to entering into any
Lease, Lease amendment, modification or termination, Borrower shall cause Owner
to obtain Lender’s consent to such proposed Lease, Lease amendment, modification
or termination prior to permitting or causing Owner to submit the proposed
Lease, Lease amendment, modification or termination to Mortgage Lender.  Borrower shall, and shall cause Owner to,
promptly send copies to Lender of all notices of material default which Owner
shall receive under the Leases.


 


Section 2.35.  Condemnation.  In the event that all or any portion of the
Premises shall be damaged or taken through condemnation (which term shall
include any damage or taking by any governmental authority, quasi-governmental
authority, any party having the power of condemnation, or any transfer by
private sale in lieu thereof), or any such condemnation shall be threatened,
Borrower shall give prompt written notice to Lender.  Lender acknowledges that Owner’s rights to
any condemnation award is subject to the terms of the Mortgage.  Notwithstanding the foregoing, Borrower may
not and shall not permit Owner to settle or compromise any claim, action or
proceeding relating to such damage or condemnation without the prior written
consent of Lender, which shall not be unreasonably withheld, delayed or denied;
provided, further, that Owner may settle, adjust and compromise any such claim,
action or proceeding which is of an amount less than $250,000 provided no Event
of Default has occurred.  Any proceeds
remaining after the application of any award to reconstruct or repair the
Premises or to the payment of the Mortgage Loan shall be paid to Lender and
applied to the payment of the Debt whether or not then due.  In the event that Owner is permitted pursuant
to the terms of


 


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the Mortgage to reconstruct, restore or
repair the Premises following a condemnation of any portion of the Premises,
Borrower shall cause Owner to promptly and diligently repair and restore the
Premises in the manner and within the time periods required by the Mortgage,
the Leases and any other agreements affecting the Premises.  In the event that Owner is permitted pursuant
to the terms of the Mortgage to elect not to reconstruct, restore or repair the
Premises following a condemnation of any portion of the Premises, Borrower
shall not permit Owner to elect not to reconstruct, restore or repair the Premises
without the prior written consent of Lender.


 


Section 2.36.  Ground Lease.


 


(a)           Borrower
will, and will cause Owner to, comply in all material respects with the terms
and conditions of the Ground Lease. 
Borrower will not, and will not permit Owner to, do or permit anything
to be done, the doing of which, or refrain from doing anything, the omission of
which, will impair or tend to impair the security of the Premises under the
Ground Lease or will be grounds for declaring a forfeiture of the Ground
Lease.  Borrower shall, and shall cause Owner
to, promptly send copies of all notices of default which Owner may receive
under the Ground Lease to Lender.


 


(b)           Borrower
shall, and shall cause Owner to, enforce the Ground Lease and not terminate,
modify, cancel, change, supplement, alter or amend the Ground Lease, or waive,
excuse, condone or in any way release or discharge Ground Lessor of or from any
of the material covenants and conditions to be performed or observed by Ground
Lessor.


 


(c)           Lender
shall have the right, but not the obligation, to perform any obligations of
Borrower or Owner under the terms of the Ground Lease during the continuance of
an Event of Default.  All costs and
expenses (including, without limitation, reasonable attorneys’ fees and
expenses) so incurred, shall be treated as an advance secured by this
Agreement, shall bear interest thereon at the Default Rate from the date of
payment by Lender until paid in full and shall be paid by Borrower to Lender
during the continuance of an Event of Default on demand.  No performance by Lender of any obligations
of Borrower or Owner shall constitute a waiver of any Event of Default arising
by reason of Borrower’s or Owner’s failure to perform the same.  If Lender shall make any payment or perform
any act or take action in accordance with this Section 2.36(c), Lender
will notify Borrower of the making of any such payment, the performance of any
such act, or the taking of any such action.


 


(d)           Borrower
shall cause Owner to exercise each individual option, if any, to extend or
renew the term of the Ground Lease not less than thirty (30) days prior to the
last day upon which any such option may be exercised (and in all events within
five (5) days after demand by Lender made at any time within one (1) year
of the last day upon which any such option may be exercised), and Borrower
hereby expressly authorizes and appoints Lender its attorney-in-fact to
exercise any such option on behalf of Owner to so exercise such option if
Borrower fails to cause Owner to exercise as herein required, which power of
attorney shall be irrevocable and shall be deemed to be coupled with an
interest.  Borrower shall give Lender
notice of Owner’s exercise of any such option to extend or renew the term of
the Ground Lease within five (5) days of the exercise of any such option.


 


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(e)           Subject
to Mortgage Lender’s rights under the Mortgage Loan, Borrower shall cause Owner
to assign, transfer and set over to Lender all of Borrower’s claims and rights
to the payment of damages arising from any rejection by the Ground Lessor of
the Ground Lease under the Bankruptcy Code. 
Borrower shall notify Lender promptly (and in any event within ten (10) days)
of any claim, suit, action or proceeding relating to the rejection of the Ground
Lease.  Lender is hereby irrevocably
appointed as Borrower’s attorney-in-fact, coupled with an interest, with
exclusive power to file and prosecute, to the exclusion of Borrower, any proofs
of claim, complaints, motions, applications, notices and other documents, in
any case in respect of the Ground Lessor under the Bankruptcy Code during the
continuance of an Event of Default. 
Borrower may make any compromise or settlement in connection with such
proceedings (subject to Lender’s reasonable approval); provided, however, that
Lender shall be authorized and entitled to compromise or settle any such
proceeding if such compromise or settlement is made after the occurrence and
during the continuance of an Event of Default. 
Borrower shall promptly execute and deliver to Lender any and all
instruments reasonably required in connection with any such proceeding after
request therefor by Lender.  Except as
set forth above, Borrower shall not, nor permit Owner to, adjust, compromise,
settle or enter into any agreement with respect to such proceedings without the
prior written consent of Lender, which consent shall not be unreasonably
withheld or delayed.


 


(f)            Borrower
shall not permit Owner to, without Lender’s prior written consent, elect to
treat the Ground Lease as terminated under Section 365(h)(1) of the
Bankruptcy Code.  Any such election made
without Lender’s prior written consent shall be void.


 


(g)           If
pursuant to Section 365(h)(2) of the Bankruptcy Code, Owner seeks to
offset against the rent reserved in the Ground Lease the amount of any damages
caused by the non-performance by the Ground Lessor of any of the Ground Lessor’s
obligations under the Ground Lease after the rejection by the Ground Lessor of
the Ground Lease under the Bankruptcy Code, Borrower shall, prior to Owner
effecting such offset, notify Lender of its intention to do so, setting forth
the amounts proposed to be so offset and the basis therefor.  If Lender has failed to object as aforesaid
within ten (10) days after notice from Borrower in accordance with the
first sentence of this Section 2.35(g), Borrower may permit Owner to
proceed to effect such offset in the amounts set forth in Borrower’s
notice.  Neither Lender’s failure to
object as aforesaid nor any objection or other communication between Lender and
Borrower relating to such offset shall constitute an approval of any such
offset by Lender.  Borrower shall
indemnify and save Lender harmless from and against any and all claims,
demands, actions, suits, proceedings, damages, losses, costs and expenses of
every nature whatsoever (including, without limitation, reasonable attorneys’
fees and disbursements) arising from or relating to any such offset by Owner
against the rent reserved in the Ground Lease.


 


(h)           Borrower
shall immediately, after obtaining knowledge thereof, notify Lender of any
filing by or against the Ground Lessor of a petition under the Bankruptcy
Code.  Borrower shall thereafter
forthwith give written notice of such filing to Lender, setting forth any
information available to Borrower or Owner as to the date of such filing, the
court in which such petition was filed, and the relief sought therein.  Borrower shall promptly deliver to Lender
following receipt any and all notices, summonses, pleadings, applications and
other documents received by Borrower or Owner in connection with any such
petition and any proceedings relating thereto.


 


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(i)            Borrower
shall, and shall cause Owner to, perform all other covenants with respect to
the Ground Lease as set forth in the Mortgage for so long as any portion of the
Debt remains outstanding (regardless of whether the Mortgage Loan remains
outstanding).


 


ARTICLE III.  EVENTS OF
DEFAULT/REMEDIES


 


Section 3.01.  Events of Default.  The Loan shall become immediately due at the
option of Lender upon any one or more of the following events (“Event of
Default”):


 


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


 


(b)           if
any monthly payment of interest and/or principal due under the Note (other than
the sums described in (a) above) shall not be fully paid on the date upon
which the same is due and payable thereunder;


 


(c)           if
payment of any sum (other than the sums described in (a) above or (b) above)
required to be paid pursuant to the Note, this Agreement or any other Loan
Document shall not be paid within five (5) days after Lender delivers
written notice to Borrower that same is due and payable thereunder or
hereunder;


 


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


 


(e)           if
a default beyond applicable notice and grace periods shall occur under any of
the Mortgage Loan Documents or any other event or condition shall exist, if the
effect of such event or condition is to accelerate or permit Mortgage Lender to
accelerate the maturity of any portion of the Mortgage Loan;


 


(f)            if
Borrower, Owner or Guarantor attempts to assign its rights under this Agreement
or any other Loan Document or any interest herein or therein, or if any
Transfer occurs other than as permitted hereunder;


 


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


 


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


 


(i)            if
a receiver, liquidator or trustee of Borrower, Owner or Guarantor or any
general


 


35





















 


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


 


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


 


(k)           if
a default beyond applicable notice and grace periods shall occur under any loan
and security agreement executed by Borrower or any Affiliate of Borrower which
secures, in whole or in part, the Debt;


 


(l)            if
any pledge or security interest made or granted or purported to be made or
granted pursuant to this Agreement or any of the other Loan Documents shall
cease to be in full force and effect or shall not be enforceable or shall not
be of the effect or have the priority stated herein or therein for such pledge
or security interest;


 


(m)          if
a sale of the Premises occurs pursuant to Section 9.04 of the Mortgage and
concurrently therewith a Proposed Loan Assumption does not occur for any
reason; or


 


(n)           if
a default shall occur under any of the other terms, covenants or conditions of
the Note, this Agreement or any other Loan Document, other than as set forth in
(a) through (m) above, for ten (10) days after notice from Lender in
the case of any default which can be cured by the payment of a sum of money, or
for thirty (30) days after notice from Lender in the case of any other default
or an additional ninety (90) days if Borrower is diligently and continuously
effectuating a cure of a curable non-monetary default, other than as set forth
in (a) through (m) above.


 


Section 3.02.  Remedies.  (a)  Upon the occurrence and during the
continuance of any Event of Default, Lender may, in addition to any other
rights or remedies available to it hereunder or under any other Loan Document,
at law or in equity, take such action, without notice or demand, as it
reasonably deems advisable to protect and enforce its rights against Borrower
and in and to the Collateral, including, but not limited to, the following
actions, each of which may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting any other rights and remedies of
Lender hereunder, at law or in equity:  (i) declare
all or any portion of the unpaid Loan to be immediately due and payable;
provided, however, that upon the occurrence of any of the events specified in Section 3.01(i),
the entire Loan will be immediately due and


 


36





















 


payable without notice or demand or any other
declaration of the amounts due and payable; or (ii) bring an action to
foreclose this Agreement and thereupon Lender may (A) exercise all rights
and powers of Borrower with respect to the Collateral or any part thereof,
whether in the name of Borrower or otherwise and (B) apply the receipts
from the Collateral to the payment of the Debt, after deducting therefrom all
expenses (including, without limitation, reasonable attorneys’ fees and
disbursements and all applicable transfer taxes) reasonably incurred in
connection therewith, as well as just and reasonable compensation for the
services of Lender’s third-party agents; or (iii) sell the Collateral or
institute proceedings for the complete foreclosure of this Agreement, or take
such other action as may be allowed pursuant to Legal Requirements, at law or
in equity, for the enforcement of this Agreement; or (iv) pursue any or
all such other rights or remedies as Lender may have under applicable law or in
equity (including, without limitation, all rights and remedies to a secured
party under the UCC); provided, however, that the provisions of this Section shall
not be construed to extend or modify any of the notice requirements or grace
periods provided for hereunder or under any of the other Loan Documents.


 


(b)           In
addition to the remedies described in subsection (a) above, if any
Event of Default shall occur, so long as such Event of Default shall be
continuing, (i) Lender and/or its nominees or designees shall have the
right to receive any and all dividends, payments or Distributions paid with
respect to the Equity Interests and the other Collateral, as applicable, and
make application thereof in accordance with this Agreement (and any dividends
and other payments received in trust by Borrower for the benefit of Lender
shall be segregated from the other funds of Borrower) and (ii) at Lender’s
election, all Equity Interests shall be transferred to Lender and/or one (1) or
more nominee(s) or designee(s) thereof, and Lender and/or such nominee(s) or
designee(s) may in the name of Borrower or in Lender’s and/or such nominee’s(s’)
or designee’s(s’) own name, collect all payments and assets due Borrower
pursuant to the Equity Interests and/or the applicable Organizational
Documents, and Lender and/or such nominee(s) or designee(s) may thereafter
exercise (A) all voting and other rights pertaining to the Equity
Interests under the Organizational Documents, and (ii) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to the Equity Interests as if they were the absolute owners
thereof (including the right to exchange at their discretion any and all of the
Equity Interests upon the merger, consolidation, reorganization,
recapitalization or other change in the structure of any Corporation, LLC or
Partnership), or upon the exercise by Borrower or Lender and/or such nominee(s)
or designee(s) of any right, privilege or option pertaining to such Equity
Interests, and, in connection therewith, the right to deposit and deliver
evidences of the Equity Interests with any committee, depository, transfer
agent, registrar or other designated agency (upon such terms and conditions as they
may determine), all without liability except to account for property actually
received by them, but neither Lender nor any such nominee or designee shall
have any duty to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.  Further, unless and until Lender and/or such
nominee(s) or designee(s) succeeds to actual ownership thereof, pursuant to the
exercise of Lender’s remedies described in subsection (a) above,
neither Lender nor any such nominee or designee shall be obligated to perform
or discharge any obligation, duty or liability in connection with the Equity
Interests or the Collateral.  The rights
of Lender hereunder shall not be conditioned or contingent upon the pursuit by
Lender of any other right or remedy against Borrower or any guarantor of any of
the Debt, or against any other Person which may be or become liable in respect
of all or any part of the Debt or against any other collateral security
therefor, guarantee thereof or right of offset with respect thereto.  Neither Lender nor


 


37





















 


any of its nominees or designees shall be
liable for any failure to demand, collect or realize upon all or any part of
the Collateral or for any delay in doing so, nor shall they be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
Borrower or any other Person or to take any other action whatsoever with regard
to the Collateral or any part thereof.


 


(c)           Following
the occurrence and during the continuance of an Event of Default, Lender may,
at its election, and in addition to any other remedies available hereunder, in
its sole and absolute discretion, no such duty being imposed hereby, pay,
purchase, contest or compromise any encumbrance, charge or lien which is prior
or superior to its security interest in the Collateral and pay all expenses
incurred therewith (any payment or expense so incurred shall be deemed a part
of the Debt and shall be immediately due and payable and secured hereby), all
of which shall be deemed authorized by Borrower.  All such expenses not paid when due shall
accrue interest at the Default Rate.


 


(d)           Without
limiting the generality of the other provisions of this Agreement, Lender is
hereby authorized by Borrower, but not obligated, in the event of any Event of
Default hereunder giving rise to Lender’s rights to sell or otherwise dispose
of the Collateral, and after the giving of any notices required herein, to sell
all or any part of the Collateral at private sale, subject to an investment
letter or in any other manner which will not require the Collateral, or any
part thereof, to be registered in accordance with the Securities Act of 1933,
as amended (the “Securities Act”), or other applicable rules and
regulations promulgated thereunder, or any other law or regulation, at the best
price reasonably obtainable by Lender at any such private sale or other
disposition in the manner mentioned above, and Borrower specifically
acknowledges that any such disposition shall be commercially reasonable under
the UCC even though any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such
restrictions, and agrees that Lender shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale required by registration under the Securities Act or under applicable
state securities laws, even if such issuer would, or should agree to, so
register it.  Lender is also hereby
authorized by Borrower, but not obligated, to take such actions, give such
notices, obtain such consents, and do such other things as Lender may deem
required or appropriate in the event of a sale or disposition of any of the
Collateral.  If Lender determines to
exercise its right to sell any or all of the Collateral, upon written request,
Borrower shall and shall cause each issuer of any Pledged Interests or other
Equity Interests owned by Borrower to be sold hereunder from time to time to
furnish to Lender all such information as Lender may request in order to
determine the number of shares and other instruments included in the Collateral
which may be sold by Lender in exempt transactions under the Securities Act and
the rules and regulations of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.  Borrower clearly understands that Lender may
at its discretion approach a restricted number of potential purchasers and that
a sale under such circumstances may yield a lower price for the Collateral, or
any part or parts thereof, than would otherwise be obtainable if same were
registered and sold in the open market. 
Borrower agrees:  (i) in the
event Lender shall, upon an Event of Default hereunder, sell the Collateral, or
any portion thereof, at such private sale or sales, Lender shall have the right
to rely upon the advice and opinion of any member firm of the National Security
Exchange as to the best price reasonably obtainable upon such private sale
thereof; and (ii) that such reliance shall


 


38





















 


be conclusive evidence that Lender handled
such matter in a commercially reasonable manner under the UCC.


 


(e)           In
order to permit Lender to exercise the voting and other consensual rights which
it may be entitled to exercise pursuant to this Agreement and to receive all
dividends and other Distributions which it may be entitled to receive under
this Agreement, (i) Borrower shall promptly execute and deliver (or cause
to be executed and delivered) to Lender all such proxies, dividend payment
orders and other instruments as Lender may from time to time reasonably request
and (ii) WITHOUT LIMITING THE EFFECT OF
THE IMMEDIATELY PRECEDING CLAUSE (i), BORROWER HEREBY GRANTS TO LENDER AN
IRREVOCABLE PROXY TO VOTE THE PLEDGED INTERESTS AND OTHER EQUITY INTERESTS
PLEDGED BY BORROWER AND TO EXERCISE ALL OTHER RIGHTS, POWERS, PRIVILEGES AND
REMEDIES TO WHICH A HOLDER OF THE PLEDGED INTERESTS OR OTHER EQUITY INTERESTS
WOULD BE ENTITLED (INCLUDING WITHOUT LIMITATION GIVING OR WITHHOLDING WRITTEN
CONSENTS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS APPLICABLE, CALLING SPECIAL
MEETINGS OF SHAREHOLDERS, MEMBERS OR PARTNERS, AS APPLICABLE, AND VOTING AT
SUCH MEETINGS), WHICH PROXY SHALL BE EFFECTIVE, AUTOMATICALLY AND WITHOUT THE
NECESSITY OF ANY ACTION (INCLUDING ANY TRANSFER OF ANY PLEDGED INTERESTS ON THE
RECORD BOOKS OF THE ISSUER THEREOF) BY ANY OTHER PERSON (INCLUDING THE ISSUER
OF THE PLEDGED INTERESTS OR ANY OFFICER OR AGENT THEREOF), UPON THE OCCURRENCE
AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT AND WHICH PROXY SHALL ONLY
TERMINATE UPON THE PAYMENT IN FULL OF THE DEBT OTHER THAN THE SURVIVING
OBLIGATIONS (WHICH, HOWEVER, SHALL REMAIN SUBJECT TO THE PREFERENTIAL PAYMENT
PROVISIONS).


 


(f)            Any
time after an Event of Default Lender shall have the power to sell the
Collateral or any part thereof at public auction, in such manner, at such time
and place, upon such terms and conditions, and upon such public notice as
Lender may deem best for the interest of Lender, or as may be required or
permitted by applicable law, consisting of advertisement in a newspaper of
general circulation in the jurisdiction and for such period as applicable law
may require and at such other times and by such other methods, if any, as may
be required by law to convey the Collateral to and at the cost of the
purchaser, who shall not be liable to see to the application of the purchase
money.  Notwithstanding anything
contained in this Agreement or in any other Loan Document, the proceeds or
avails of any sale made under or by virtue of this Section, together with any
other sums which then may be held by Lender under this Agreement, whether under
the provisions of this Section or otherwise, shall be applied as follows:


 


First: 
To the payment of the third-party costs and expenses reasonably incurred
in connection with any such sale (including, without limitation, any transfer
taxes) and to advances, fees and expenses, including, without limitation,
reasonable fees and expenses of Lender’s legal counsel as applicable, and of
any judicial proceedings wherein the same may be made, and of all expenses,
liabilities and advances reasonably made or incurred by Lender under this
Agreement, together with interest as provided herein on all such advances made
by Lender;


 


39





















 


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


 


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


 


Fourth: 
The surplus, if any, to Intermediate Mezz Lender if the Intermediate
Mezz Loan is then outstanding and if the Intermediate Mezz Loan is not
outstanding, then to Junior Mezz Lender if the Junior Mezz Loan is then
outstanding and if the Junior Mezz Loan is not outstanding then to Borrower
unless otherwise required by Legal Requirements.


 


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


 


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


 


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


 


(i)            In
the event of any sale made under or by virtue of this Section, the entire Loan
immediately thereupon shall, anything in the Loan Documents to the contrary
notwithstanding, become due and payable.


 


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(j)            Upon
any sale made under or by virtue of this Section (whether made under the
power of sale herein granted or under or by virtue of judicial proceedings or a
judgment or decree of foreclosure and sale), Lender may bid for and acquire the
Collateral or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Loan the net sales
price after deducting therefrom the expenses of the sale (including, without limitation,
transfer taxes) and the costs of the action.


 


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


 


(l)            Upon
the exercise by Lender of any power, right, privilege, or remedy pursuant to
this Agreement which requires any consent, approval, registration,
qualification, or authorization of any Governmental Authority, Borrower agrees
to execute and deliver, or will cause the execution and delivery of, all
applications, certificates, instruments, assignments and other documents and
papers that Lender or any purchaser of the Collateral may be required to obtain
for such governmental consent, approval, registration, qualification, or
authorization and Lender is hereby irrevocably appointed the true and lawful
attorney-in-fact of Borrower (coupled with an interest), in its name and stead,
to execute all such applications, certificates, instruments, assignments and
other documents and papers.


 


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


 


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


 


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


 


Section 3.03.  No Conditions Precedent to Exercise of
Lender’s Remedies.  Borrower waives
any and all legal requirements that Lender institute any action or proceeding
at law or in equity against Borrower or any other party or exhaust its remedies
against Borrower or any other party in respect of any other security held by
Lender for the Debt or any portion thereof as a condition precedent to
exercising its right and remedies pursuant to this Agreement.


 


Section 3.04.  Additional Security.  Borrower authorizes Lender without notice or
demand and without affecting its liability under this Agreement or under the
Note (i) to take and


 


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hold security in addition to the security
interest in the Collateral granted by Borrower to Lender pursuant to this
Agreement, for the payment of the Debt or any part thereof, and to exchange,
waive or release any such other security and (ii) to release or substitute
Borrower.


 


Section 3.05.  Rights and Remedies Continue.  Until the Debt shall have been paid in full,
all rights, powers and remedies granted to Lender under this Agreement shall
continue to exist and may be exercised by Lender at any time and from time to
time irrespective of the fact that the Debt or any part thereof may have become
barred by any statute of limitations or that the liability of Borrower therefor
may have ceased.


 


Section 3.06.  Right to Terminate Proceedings.  Lender may terminate or rescind any
proceeding or other action brought in connection with its exercise of the
remedies provided in Section 3.02 at any time before the conclusion
thereof, as determined in Lender’s sole discretion and without prejudice to
Lender.


 


Section 3.07.  No Waiver or Release.  The failure of Lender to exercise any right,
remedy or option provided in the Loan Documents shall not be deemed a waiver of
such right, remedy or option or of any covenant or obligation contained in the
Loan Documents.  No acceptance by Lender
of any payment after the occurrence of an Event of Default and no payment by
Lender of any payment or obligation for which Borrower is liable hereunder
shall be deemed to waive or cure any Event of Default.  No sale of all or any portion of the
Collateral, no forbearance on the part of Lender, and no extension of time for
the payment of the whole or any portion of the Loan or any other indulgence
given by Lender to Borrower or any other Person, shall operate to release or in
any manner affect the interest of Lender in the Collateral or the liability of
Borrower to pay the Loan.  No waiver by
Lender shall be effective unless it is in writing and then only to the extent
specifically stated.


 


Section 3.08.  Payment of Debt After Default.  If following the occurrence of any Event of
Default, Borrower shall tender payment of an amount sufficient to satisfy the
Debt in whole or in part at any time prior to a UCC sale of the Collateral, and
if at the time of such tender prepayment of the principal balance of the Note
is not permitted by the Note and this Agreement, Borrower shall, in addition to
the entire Debt, also pay to Lender a sum equal to interest which would have
accrued on the principal balance of the Note at an interest rate equal to the
LIBOR Margin for the Note plus the greater of (x) the then current LIBOR Rate
and (y) the then current average yield for “This Week” as published by the
Federal Reserve Board during the most recent full week preceding the date on
which Borrower tenders such payment in Federal Reserve Statistical Release H.15
(519) for instruments having a ten (10) year maturity, from the date of
such tender to the earlier of (a) the Maturity Date or (b) the first
day of the period during which prepayment of the principal balance of the Note
would have been permitted together with a prepayment consideration equal to the
prepayment consideration which would have been payable as of the first day of
the period during which prepayment would have been permitted.  If at the time of such tender, prepayment of
the principal balance of the Note is permitted, such tender by Borrower shall
be deemed to be a voluntary prepayment of the principal balance of the Note and
Borrower shall, in addition to the entire Debt, also pay to Lender the
applicable Exit Additional Interest Payment and prepayment consideration
specified in the Note and this Agreement.


 


Section 3.09.  No Impairment; No Releases.  The interests and rights of Lender under the


 


42





















 


Loan Documents shall not be impaired by any
indulgence, including (a) any renewal, extension or modification which
Lender may grant with respect to any of the Loan; (b) any surrender,
compromise, release, renewal, extension, exchange or substitution which Lender
may grant with respect to the Loan Documents or any portion thereof; or (c) any
release or indulgence granted to any maker, endorser, or surety of any of the
Loan.


 


Section 3.10.  Interest After Default.  If any amount due under the Note, this
Agreement or any of the other Loan Documents is not paid within any applicable
notice and grace period after same is due, whether such date is the stated due
date, any accelerated due date or any other date or at any other time specified
under any of the terms hereof or thereof, then, in such event, Borrower shall
pay interest on the amount not so paid from and after the date on which such
amount first becomes due at the Default Rate; and such interest shall be due
and payable at such rate until the earlier of the cure of all Events of Default
or the payment of the entire amount due to Lender, whether or not any action
shall have been taken or proceeding commenced to recover the same or to
foreclose this Agreement.  All unpaid and
accrued interest shall be secured by this Agreement as part of the Debt.  Nothing in this Section or in any other
provision of this Agreement shall constitute an extension of the time for
payment of the Debt.


 


Section 3.11.  Late Payment Charge.  If any portion of the Debt is not paid in
full on or before the date on which it is due and payable hereunder (other than
the principal portion of the Debt due on the Maturity Date), Borrower shall pay
to Lender an amount equal to five percent (5%) of such unpaid portion of the
Debt (“Late Charge”) to defray the expense incurred by Lender in
handling and processing such delinquent payment, and such amount shall
constitute a part of the Debt.


 


Section 3.12.  Recovery of Sums Required To Be Paid.  Lender shall have the right from time to time
to take action to recover any sum or sums which constitute a part of the Debt
as the same become due and payable hereunder (after the expiration of any grace
period or the giving of any notice herein provided, if any), without regard to
whether or not the balance of the Debt shall be due, and without prejudice to
the right of Lender thereafter to bring an action of foreclosure, or any other
action, for a default or defaults by Borrower existing at the time such earlier
action was commenced.


 


Section 3.13.  Control By Lender After Default.  Notwithstanding the appointment of any
custodian, receiver, liquidator or trustee of Borrower, or of any of its
property, or of the Collateral or any part thereof, to the extent permitted by
Legal Requirements, Lender shall be entitled to obtain possession and control
of all Collateral.


 


ARTICLE IV.  INDEMNIFICATION


 


Section 4.01.  Indemnification Covering Property.  In addition, and without limitation, to any
other provision of this Agreement or any other Loan Document, Borrower shall
protect, indemnify and save harmless Lender and its successors and assigns, and
each of their agents, employees, officers, directors, stockholders, partners
and members (collectively, “Indemnified Parties”) for, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature, known or unknown, contingent or
otherwise, whether incurred or imposed within or outside the judicial process,
including, without


 


43





















 


limitation, reasonable attorneys’ fees and
disbursements imposed upon or incurred by or asserted against any of the
Indemnified Parties by reason of (a) ownership of this Agreement or the
Collateral; (b) any accident, injury to or death of any person or loss of
or damage to property occurring in, on or about the Premises or any part thereof
or on the adjoining sidewalks, curbs, parking areas, streets or ways; (c) any
use, nonuse or condition in, on or about, or possession, alteration, repair,
operation, maintenance or management of, the Premises or any part thereof or on
the adjoining sidewalks, curbs, parking areas, streets or ways; (d) any
failure on the part of Borrower to perform or comply with any of the terms of
this Agreement; (e) performance of any labor or services or the furnishing
of any materials or other property in respect of the Premises or any part
thereof; (f) any claim by brokers, finders or similar Persons claiming to
be entitled to a commission in connection with any Lease or other transaction
involving the Premises or any part thereof; (g) any Imposition including, without
limitation, any Imposition attributable to the execution, delivery, filing, or
recording of any Loan Document, Lease or memorandum thereof; (h) any lien
or claim arising on or against the Premises or any part thereof under any Legal
Requirement or any liability asserted against any of the Indemnified Parties
with respect thereto; (i) any claim arising out of or in any way relating
to any tax or other imposition on the making and/or recording of this
Agreement, the Note or any of the other Loan Documents; (j) a Default under
Sections 2.02(f), 2.02(g), 2.02(k) or 2.02(s) hereof, (k) the failure of any
Person to file timely with the Internal Revenue Service an accurate Form 1099-B,
Statement for Recipients of Proceeds from Real Estate, Broker and Barter
Exchange Transactions, which may be required in connection with the Loan, or to
supply a copy thereof in a timely fashion to the recipient of the proceeds of
the Loan; (l) the claims of any lessee or any Person acting through or under
any lessee or otherwise arising under or as a consequence of any Lease; or (m)
the actual or alleged presence, disposal, escape, seepage, leakage, spillage,
discharge, emission, release or threat of release of any Hazardous Materials
in, on, over, under, from or affecting the Premises or (n) the failure to pay
any insurance premiums.  Notwithstanding
the foregoing provisions of this Section to the contrary, Borrower shall
have no obligation to indemnify the Indemnified Parties pursuant to this Section for
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses relative to the foregoing which result from Lender’s, and its
successors’ or assigns’, willful misconduct or gross negligence.  Any amounts payable to Lender by reason of
the application of this Section shall constitute a part of the Debt
secured by this Agreement and the other Loan Documents and shall become
immediately due and payable and shall bear interest at the Default Rate from
the date the liability, obligation, claim, cost or expense is sustained by
Lender, as applicable, until paid.  The
provisions of this Section shall survive the termination of this Agreement
whether by repayment of the Debt, foreclosure of this Agreement, assignment or
otherwise.  In case any action, suit or proceeding
is brought against any of the Indemnified Parties by reason of any occurrence
of the type set forth in (a) through (m) above, Borrower shall, at
Borrower’s expense, resist and defend such action, suit or proceeding or will
cause the same to be resisted and defended by counsel at Borrower’s expense for
the insurer of the liability or by counsel designated by Borrower (unless
reasonably disapproved by Lender promptly after Lender has been notified of
such counsel); provided, however, that nothing herein shall
compromise the right of Lender (or any other Indemnified Party) to appoint its
own counsel at Borrower’s expense for its defense with respect to any action
which, in the reasonable opinion of Lender or such other Indemnified Party, as
applicable, presents a conflict or potential conflict between Lender or such
other Indemnified Party that would make such separate representation
advisable.  Any Indemnified Party will
give Borrower prompt notice after such Indemnified


 


44





















 


Party obtains actual knowledge of any
potential claim by such Indemnified Party for indemnification hereunder.  The Indemnified Parties shall not settle or
compromise any action, proceeding or claim as to which it is indemnified hereunder
without notice to Borrower. 
Notwithstanding the foregoing, so long as no Default has occurred and is
continuing and Borrower is resisting and defending such action, suit or
proceeding as provided above in a prudent and commercially reasonable manner,
in order to obtain the benefit of this Section with respect to such
action, suit or proceeding, Lender and the Indemnified Parties agree that they
shall not settle such action, suit or proceeding without obtaining Borrower’s
consent which Borrower agrees not to unreasonably withhold, condition or delay;
provided, however, (x) if Borrower is not diligently defending
such action, suit or proceeding in a prudent and commercially reasonable manner
as provided above and Lender has provided Borrower with thirty (30) days’ prior
written notice, or shorter period if mandated by the requirements of the
applicable law, and Borrower has failed to correct such failure, or (y) failure
to settle could, in Lender’s reasonable judgment, expose Lender to criminal
liability, Lender may settle such action, suit or proceeding without the
consent of but upon notice to Borrower and be entitled to the benefits of this Section with
respect to the settlement of such action, suit or proceeding.


 


ARTICLE V.  SECURITY
AGREEMENT


 


Section 5.01.  Security Agreement.  (a)  This Agreement is a “security
agreement” within the meaning of the UCC. 
If an Event of Default shall occur, Lender, in addition to any other
rights and remedies which it may have, shall have and may exercise immediately
and without demand, any and all rights and remedies granted to a secured party
upon default under the UCC, including, without limiting the generality of the
foregoing, the right to take possession of the Collateral or any part thereof,
and to take such other measures as Lender may deem necessary for the care,
protection and preservation of the Collateral. 
Upon request or demand of Lender following an Event of Default, Borrower
shall, at its expense, assemble the Collateral and make it available to Lender at
a convenient place acceptable to Lender. 
Borrower shall pay to Lender on demand any and all expenses, including
reasonable legal expenses and attorneys’ fees and all transfer taxes, incurred
or paid by Lender in protecting its interest in the Collateral and in enforcing
its rights hereunder with respect to the Collateral.  Any notice of sale, disposition or other
intended action by Lender with respect to the Collateral given to Borrower in
accordance with the provisions hereof at least ten (10) days prior to such
action shall constitute reasonable notice to Borrower.


 


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


 


(c)           Borrower
will furnish to Lender from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as Lender may reasonably request, all in reasonable detail.


 


(d)           The
powers conferred on Lender hereunder are solely to protect Lender’s interest in
the Collateral and shall not impose any duty upon it to exercise any such
powers.  Except for the safe custody of
any Collateral in its possession and the accounting for moneys actually


 


45





















 


received by it hereunder, Lender shall have
no duty (and neither Lender nor any of its officers, directors, employees or
agents shall be responsible to Borrower for any act or failure to act) as to
any Collateral, as to ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Collateral, whether or not Lender has or is deemed to have knowledge of such
matters, or as to the taking of any necessary steps to preserve rights against
any parties or any other rights pertaining to any Collateral.  Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which it accords its own property.


 


ARTICLE VI.  PREPAYMENT


 


Section 6.01.  Prepayment.  (a) Except as set forth in Section 6.01(b) hereof,
no prepayment of the Debt may be made in whole or in part.


 


(b)           Borrower
may prepay the Loan, in whole or in part, as of the last day of an Interest
Accrual Period in accordance with the following provisions:


 


(i)            Lender
shall have received from Borrower, not less than thirty (30) days’, or in the
case of the IPO, fifteen (15) days, nor more than ninety (90) days’, prior
written notice specifying the date proposed for such prepayment and the amount
which is to be prepaid.


 


(ii)           Borrower shall also pay
to Lender all interest due through and including the last day of the Interest
Accrual Period in which such prepayment is being made, together with any and
all other amounts due and owing pursuant to the terms of the Note, this
Agreement or the other Loan Documents.


 


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


 


(iv)          Intentionally omitted.


 


(v)           Any partial prepayment
of the Principal Amount, including, without limitation, Unscheduled Payments,
shall be applied to the installments of principal last due hereunder and shall
not release or relieve Borrower from the obligation to pay the Minimum
Amortization Payments (as defined in the Note) becoming due under the Note.


 


(vi)          In the event that the
Loan is prepaid in whole or in part prior to the first (1st) anniversary of the
date hereof, Borrower shall pay to Lender, together with such prepayment and
all other amounts due in connection therewith, a non-refundable amount which
shall be deemed earned by Lender upon the funding of the Loan and shall not
count to or be credited to payment of the Principal Amount, any interest thereon
or any other amounts payable under the Note, the Agreement or any of the Loan
Documents, equal to the Spread Maintenance Premium.


 


(vii)         No prepayments shall be
made on the Mortgage Loan until the Loan shall have been paid in full other
than in connection with a Release pursuant to the Mortgage Loan, in which case Borrower
shall be required to prepay only a portion of the Loan in an


 


46





















 


amount equal
to the outstanding principal amount of the Loan for the Cross-collateralized
Property which is the subject of the Release multiplied by a fraction, the numerator
of which is (A) one hundred fifteen percent (115%) of the Allocated Loan
Amount for the Cross-collateralized Property which is the subject of the Release
or (B) with respect to the Delano Hotel only, one hundred ten percent
(110%) of the Allocated Loan Amount of the Delano Hotel, and the denominator of
which is the original principal amount of the Loan.  Upon the payment of the release price set
forth in clause (A) or (B) above, Lender shall, at the request of and
at the sole cost and expense of Borrower, release its lien from the applicable
Pledged Interest relating to the Cross-collateralized Property which is the
subject of the Release.


 


Section 6.02.  Additional Interest.  Upon any repayment or prepayment of the Loan,
Borrower shall be required to pay to Lender a non-refundable sum (the “Exit Additional
Interest Payment”) on the date of such repayment or prepayment equal to
one-quarter of one percent (0.25%) of the principal amount of the Debt being
repaid or prepaid.  All Exit Additional
Interest Payments shall be deemed to be earned by Lender upon the funding of
the Loan.  Notwithstanding the foregoing,
no Exit Additional Interest Fee shall be due with respect to repayments of the
Loan made (a) in connection with an IPO, (b) from sales proceeds from
the conversion of the Premises to a condominium form of ownership with respect
to which Borrower or Owner shall sell residential condominium units to the public,
which conversion the parties hereto acknowledge may only be done with the
consent of Lender and subject to such conditions as Lender shall, in its sole
and absolute discretion, impose, or (c) in connection with a prepayment
resulting from (i) regularly scheduled amortization payments made pursuant
to the Note, (ii) proceeds of asset sales to bona fide third parties which
are not Affiliates of Borrower, (iii) equity contributions from members of
Borrower or (iv) Additional Financing, so long as any such equity
contributions or Additional Financings are not refinanced through mortgage
financing within 180 days following the date of such equity contribution or the
incurrence of Additional Financings, as applicable.


 


ARTICLE VII.  MISCELLANEOUS


 


Section 7.01.  Notices.  Any notice, demand, statement, request or
consent made hereunder shall be in writing and delivered personally or sent to
the party to whom the notice, demand or request is being made by overnight
delivery by Federal Express or other nationally recognized overnight delivery
service, as follows and shall be deemed given when delivered personally or one (1) Business
Day after being deposited with Federal Express or such other nationally
recognized delivery service:


 


	
  If to
  Lender:

  	
   

  	
  Wachovia Bank,
  National Association

  
	
   

  	
   

  	
  Commercial
  Real Estate Services

  
	
   

  	
   

  	
  8739
  Research Drive URP-4

  
	
   

  	
   

  	
  NC 1075

  
	
   

  	
   

  	
  Charlotte,
  NC 28262

  
	
   

  	
   

  	
  Loan Number:                                  

  
	
   

  	
   

  	
  Attention:
  Portfolio Management

  
	
   

  	
   

  	
  Fax No.:
  (704) 715-0036

  



 


47





















 


	
  with copies to:

  	
   

  	
  Hypo Real Estate Capital Corporation

  
	
   

  	
   

  	
  622 Third Avenue

  
	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
  Attn: Chief Risk Officer

  
	
   

  	
   

  	
  Facsimile No.: (212) 671-6445

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Hypo Real Estate Capital Corporation

  
	
   

  	
   

  	
  622 Third Avenue

  
	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
  Attn: Chief Legal Officer

  
	
   

  	
   

  	
  Facsimile No.: (212) 671-6368

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Proskauer Rose LLP

  
	
   

  	
   

  	
  1585 Broadway

  
	
   

  	
   

  	
  New York, New York 10036

  
	
   

  	
   

  	
  Attn: David J. Weinberger, Esq.

  
	
   

  	
   

  	
  Facsimile No.: (212) 969-2900

  
	
   

  	
   

  	
   

  
	
  If to Borrower:

  	
   

  	
  To Borrower,
  at the address first written above, to the

  attention of Chief Financial Officer, Facsimile No. (212)

  277-4268,

  
	
   

  	
   

  	
   

  
	
  with copies
  to:

  	
   

  	
  NorthStar
  Capital Investment Corp.

  
	
   

  	
   

  	
  527 Madison
  Avenue, 17th Floor

  
	
   

  	
   

  	
  New York,
  New York 10022

  
	
   

  	
   

  	
  Attn: Marc
  S. Gordon

  
	
   

  	
   

  	
  Facsimile
  No.: (212) 319-4557

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Skadden,
  Arps, Slate, Meagher & Flom LLP

  
	
   

  	
   

  	
  Four Times
  Square

  
	
   

  	
   

  	
  New York,
  New York 10036

  
	
   

  	
   

  	
  Attn: Neil
  L. Rock, Esq.,

  
	
   

  	
   

  	
  Facsimile
  No.: (917) 777-3787,

  



 


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


 


Section 7.02.  Exhibits Incorporated.  The information set forth on the cover
hereof, and the Exhibits annexed hereto, are hereby incorporated herein as a
part of this Agreement with the same effect as if set forth in the body hereof.


 


48





















 


Section 7.03.  Severable Provisions.  If any term, covenant or condition of the
Loan Documents including, without limitation, the Note or this Agreement, is
held to be invalid, illegal or unenforceable in any respect, such Loan Document
shall be construed without such provision.


 


Section 7.04.  Cumulative Rights.  The rights, powers and remedies of Lender
under this Agreement shall be separate, distinct and cumulative and none shall
be given effect to the exclusion of the others. 
No act of Lender shall be construed as an election to proceed under any
one provision herein to the exclusion of any other provision.  Lender shall not be limited exclusively to
the rights and remedies herein stated but shall be entitled, subject to the
terms of this Agreement, to every right and remedy now or hereafter afforded by
law.


 


Section 7.05.  Duplicate Originals.  This Agreement may be executed in any number
of duplicate originals and each such duplicate original shall be deemed to
constitute but one and the same instrument.


 


Section 7.06.  Waiver of Notice.  Borrower shall not be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Agreement specifically and expressly provides for the giving of notice by
Lender to Borrower and except with respect to matters for which Borrower is
not, pursuant to applicable legal requirements permitted to waive the giving of
notice.


 


Section 7.07.  Joint and Several Liability.  If Borrower consists of more than one Person,
the obligations and liabilities of each such Person hereunder shall be joint
and several.


 


Section 7.08.  No Oral Change.  The terms of this Agreement, together with
the terms of the Note and the other Loan Documents constitute the entire
understanding and agreement of the parties hereto and supersede all prior
agreements, understandings and negotiations between Borrower and Lender with
respect to the Loan.  This Agreement, and
any provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act on the part of Borrower or
Lender, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change,
discharge or termination is sought.


 


Section 7.09.  WAIVER OF COUNTERCLAIMS, ETC.  BORROWER HEREBY WAIVES THE RIGHT TO ASSERT A
COUNTERCLAIM, OTHER THAN A COMPULSORY COUNTERCLAIM, IN ANY ACTION OR PROCEEDING
BROUGHT AGAINST IT BY LENDER OR ITS AGENTS, AND WAIVES TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BROUGHT BY EITHER PARTY HERETO AGAINST THE OTHER OR IN ANY
COUNTERCLAIM BORROWER MAY BE PERMITTED TO ASSERT HEREUNDER OR WHICH MAY BE
ASSERTED BY LENDER OR ITS AGENTS, AGAINST BORROWER, OR IN ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS AGREEMENT OR THE
DEBT.


 


Section 7.10.  Headings; Construction of Documents, etc.  The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.


 


49





















 


Borrower acknowledges that it was represented
by competent counsel in connection with the negotiation and drafting of this
Agreement and the other Loan Documents and that neither this Agreement nor the
other Loan Documents shall be subject to the principle of construing the
meaning against the Person who drafted same.


 


Section 7.11.  Sole Discretion of Lender.  Whenever Lender exercises any right given to
it to approve or disapprove, or any arrangement or term is to be satisfactory
to Lender, the decision of Lender to approve or disapprove or to decide that
arrangements or terms are satisfactory or not satisfactory shall be in the sole
discretion of Lender and shall be final and conclusive, except as may be
otherwise specifically provided herein.


 


Section 7.12.  APPLICABLE LAW.  THIS AGREEMENT WAS NEGOTIATED IN THE STATE OF
NEW YORK AND MADE BY BORROWER AND ACCEPTED BY LENDER IN THE STATE OF NEW YORK AND
THE PROCEEDS OF THE NOTE WERE DISBURSED FROM THE STATE OF NEW YORK WHICH STATE
THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO THE
UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING, WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, MATTERS OF CONSTRUCTION, VALIDITY AND
PERFORMANCE.  THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA.


 


Section 7.13.  Actions and Proceedings.  Lender has the right to appear in and defend
any action or proceeding brought with respect to the Collateral in its own name
or, if required by Legal Requirements or, if in Lender’s reasonable judgment,
it is necessary, in the name and on behalf of Borrower, which Lender believes
will adversely affect the Collateral or this Agreement and to bring any action
or proceedings, in its name or in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Note, this Agreement and the other Loan Documents.


 


Section 7.14.  Usury Laws.  This Agreement and the Note are subject to
the express condition, and it is the expressed intent of the parties, that at
no time shall Borrower be obligated or required to pay interest on the
principal balance due under the Note at a rate which could subject the holder
of the Note to either civil or criminal liability as a result of being in
excess of the maximum interest rate which Borrower is permitted by law to
contract or agree to pay.  If by the
terms of this Agreement or the Note, Borrower is at any time required or
obligated to pay interest on the principal balance due under the Note at a rate
in excess of such maximum rate, such rate of interest shall be deemed to be
immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. 
No application to the principal balance of the Note pursuant to this Section shall
give rise to any requirement to pay any prepayment fee or charge of any kind
due hereunder, if any.


 


Section 7.15.  Remedies of Borrower.  In the event that a claim or adjudication is
made


 


50





















 


that Lender has acted unreasonably or
unreasonably delayed acting in any case where by law or under the Note, this
Agreement or the Loan Documents, it has an obligation to act reasonably or
promptly, Lender shall not be liable for any monetary damages, and Borrower’s
remedies shall be limited to injunctive relief or declaratory judgment.


 


Section 7.16.  Offsets, Counterclaims and Defenses.  Any assignee of this Agreement and the Note
shall take the same free and clear of all offsets, counterclaims or defenses
which are unrelated to the Note or this Agreement which Borrower may otherwise
have against any assignor of this Agreement and the Note and no such unrelated
counterclaim or defense shall be interposed or asserted by Borrower in any
action or proceeding brought by any such assignee upon this Agreement or the
Note and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower.


 


Section 7.17.  Restoration of Rights.  In case Lender shall have proceeded to
enforce any right under this Agreement and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then, in every such case, Borrower and Lender shall be restored to
their former positions and rights hereunder with respect to the Collateral
subject to the lien hereof.


 


Section 7.18.  Waiver of Statute of Limitations.  The pleadings of any statute of limitations
as a defense to any and all obligations secured by this Agreement are hereby
waived to the full extent permitted by Legal Requirements.


 


Section 7.19.  Advances.  This Agreement shall cover any and all
advances made pursuant to the Loan Documents, rearrangements and renewals of
the Loan and all extensions in the time of payment thereof, even though such
advances, extensions or renewals be evidenced by new promissory notes or other
instruments hereafter executed and irrespective of whether filed or
recorded.  Likewise, the execution of
this Agreement shall not impair or affect any other security which may be given
to secure the payment of the Loan, and all such additional security shall be
considered as cumulative.  The taking of
additional security, execution of partial releases of the security, or any
extension of time of payment of the Loan shall not diminish the force, effect
or lien of this Agreement and shall not affect or impair the liability of
Borrower and shall not affect or impair the liability of any maker, surety, or
endorser for the payment of the Loan.


 


Section 7.20.  Application of Default Rate Not a Waiver.  Application of the Default Rate shall not be
deemed to constitute a waiver of any Default or Event of Default or any rights
or remedies of Lender under this Agreement, any other Loan Document or
applicable Legal Requirements, or a consent to any extension of time for the
payment or performance of any obligation with respect to which the Default Rate
may be invoked.


 


Section 7.21.  Intervening Lien.  To the fullest extent permitted by law, any
agreement hereafter made pursuant to this Agreement shall be superior to the
rights of the holder of any intervening lien.


 


Section 7.22.  No Joint Venture or Partnership.  Borrower and Lender intend that the
relationship created hereunder be solely that of pledgor and pledgee or
borrower and lender, as


 


51





















 


the case may be.  Nothing herein is intended to create a joint
venture or partnership relationship between Borrower and Lender nor to grant
Lender any interest in the Collateral other than that of pledgee or lender.


 


Section 7.23.  Time of the Essence.  Time shall be of the essence in the
performance of all obligations of Borrower hereunder.


 


Section 7.24.  Borrower’s Obligations Absolute.  Borrower acknowledges that Lender and/or
certain Affiliates of Lender are engaged in the business of financing, owning,
operating, leasing, managing, and brokering real estate and in other business
ventures which may be viewed as adverse to or competitive with the business,
prospect, profits, operations or condition (financial or otherwise) of
Borrower.  Except as set forth to the
contrary in the Loan Documents, all sums payable by Borrower hereunder shall be
paid without notice or demand, counterclaim, set-off, deduction or defense and
without abatement, suspension, deferment, diminution or reduction, and the
obligations and liabilities of Borrower hereunder shall in no way be released,
discharged, or otherwise affected (except as expressly provided herein) by
reason of:  (a) any bankruptcy
proceeding relating to Owner, Borrower, any General Partner, or any indemnitor,
or any action taken with respect to this Agreement or any other Loan Document
by any trustee or receiver of Owner, Borrower or any such General Partner or
indemnitor, or by any court, in any such proceeding; (b) any claim which
Borrower has or might have against Lender; (c) any default or failure on
the part of Lender to perform or comply with any of the terms hereof or of any
other agreement with Borrower; or (d) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing, whether or not Borrower shall
have notice or knowledge of any of the foregoing.


 


Section 7.25.  Publicity.  All promotional news releases, publicity or
advertising by Borrower or its Affiliates through any media intended to reach
the general public shall not refer to the Loan Documents or the financing
evidenced by the Loan Documents, or to Lender or to any of its Affiliates
without the prior written approval of Lender or such Affiliate, as applicable,
in each instance, such approval not to be unreasonably withheld or
delayed.  Lender shall be authorized to
provide information relating to the Collateral, the Loan and matters relating
thereto to rating agencies, underwriters, potential securities investors,
auditors, regulatory authorities and to any Persons which may be entitled to
such information by operation of law and may use basic transaction information
(including, without limitation, the name of Borrower, the name and address of
the Premises and the Loan Amount) in press releases or other marketing
materials.


 


Section 7.26.  Securitization Opinions.  In the event the Loan is included as an asset
of a Securitization by Lender or any of its Affiliates, Borrower shall, within fifteen
(15) Business Days after Lender’s written request therefor, at Lender’s sole
cost and expense, deliver opinions in form and substance and delivered by
counsel reasonably acceptable to Lender and the Rating Agency, as may be
reasonably required by Lender and/or the Rating Agency in connection with such
securitization.  Borrower’s failure to
deliver the opinions required hereby within such fifteen (15) Business Day
period shall constitute an “Event of Default” hereunder.  Notwithstanding the foregoing, in no event
shall Borrower be required to deliver a “10b-5 opinion” in connection with any
Securitization.  Notwithstanding the
foregoing, Borrower shall, upon demand, reimburse Lender for up to $10,000 of
the cost incurred by Lender pursuant to the terms of this Section 7.26 and
Lender shall only be obligated to pay reasonable costs and


 


52





















 


expenses upon receipt of detailed billing
information containing the description of services rendered, attorneys’ billing
rates, number of hours worked and other information as Lender may reasonably
require.


 


Section 7.27.  Sale of Loan, Participations,
Securitization.  (a) Nothing
contained in this Agreement shall be construed as preventing Lender, at any
time after the date hereof, from selling, pledging, assigning or transferring
the Note and in connection with any such sale, pledge, assignment or transfer
from assigning this Agreement and transferring possession of the Collateral, if
any, in Lender’s possession, to the purchaser of the Note.  Upon any sale, pledge, assignment or transfer
of the Note and upon assignment of this Agreement and a transfer in connection
therewith of possession of the Collateral, if any, in Lender’s possession to
the purchaser of the Note, Lender shall be released and discharged from any
liability or responsibility with respect to the Loan Documents and references
to “Lender” in this Agreement shall, with respect to any matters
thereafter occurring, be deemed to be references to the purchaser of the
Note.  Borrower or any agent of Borrower
acting on its behalf shall maintain at its offices a copy of each notice of a sale,
pledge, assignment or other transfer of the Loan or a portion thereof as a
whole loan delivered to it and a register (the “Register”)
for the recordation of the names and addresses of each Lender and the principal
amount of the Loan or portion thereof owing to each Lender from time to
time.  The entries in the Register shall
be conclusive, in the absence of manifest error, and Borrower may treat each
Person whose name is recorded in the Register as the owner of the Loan or
portion thereof recorded therein, hereunder for all purposes of this
Agreement.  A sale, pledge, assignment or
other transfer of the Loan or a portion thereof as a whole loan, whether or not
evidenced by a Note, shall be effective only upon appropriate entries with
respect thereto being made in the Register (and, if applicable, each Note shall
expressly so provide).  The Register
shall be available for inspection by each Lender at any reasonable time and
from time to time upon reasonable prior notice. 
Borrower hereby appoints Lender as its agent to maintain the Register
and Lender hereby accepts such appointment. 
Lender shall indemnify and hold harmless Borrower for any losses
resulting from Lender’s failure to maintain the Register and no failure by
Lender, as Borrower’s agent (solely for the purposes of maintaining the
Register), shall result in a default hereunder or under any other Loan Document
or otherwise subject Borrower to any liability.


 


(b)           Borrower
acknowledges that Lender may on or after the Closing Date sell and assign
participation interests in and to the Loan, or pledge, hypothecate or encumber,
or sell and assign all or any portion of the Loan, to or with such domestic or
foreign banks, insurance companies, pension funds, trusts or other
institutional lenders or other Persons, parties or investors (including,
without limitation, grantor trusts, owner trusts, special purpose corporations,
real estate investment trusts or other similar or comparable investment
vehicles) as may be selected by Lender in its sole and absolute discretion and
on terms and conditions satisfactory to Lender in its sole and absolute
discretion.  Borrower and all Affiliates
of Borrower shall cooperate in all respects with Lender in connection with the
sale of participation interests in, or the pledge, hypothecation or encumbrance
or sale of all or any portion of, the Loan, and shall, in connection therewith,
at Borrower’s sole cost and expense with respect to the first request made by
Lender following the Closing Date and at Lender’s expense for any additional
requests thereafter, execute and deliver such estoppels, certificates,
instruments and documents as may be reasonably requested by Lender.  Borrower grants to Lender the right to
distribute financial and other information concerning Borrower, the Collateral,
and all other pertinent


 


53





















 


information with respect to the Loan to any
Person who has purchased a participation interest in the Loan, or who has
purchased the Loan, or who has made a loan to Lender secured by the Loan or who
has expressed an interest in purchasing a participation interest in the Loan,
or expressed an interest in purchasing the Loan or the making of a loan to
Lender secured by the Loan.  If requested
by Lender, Borrower shall execute and deliver, and shall cause each Affiliate
of Borrower to execute and deliver, at no cost or expense to Borrower, such
documents and instruments as may be necessary to split the Loan into two or
more loans evidenced by separate sets of notes and secured by separate sets of
other related Loan Documents to the full extent required by Lender to
facilitate the sale of participation interests in the Loan or the sale of the
Loan or the making of a loan to Lender secured by the Loan, it being agreed
that (a) any such splitting of the Loan will not adversely affect or
diminish the rights of Borrower as presently set forth herein and in the other
Loan Documents and will not increase the respective obligations and liabilities
of Borrower or any other Person associated or connected with the Loan or the
Collateral, (b) the Loan Documents securing the Loan as so split will have
such priority of lien as may be specified by Lender, and (c) the retained
interest of Lender in the Loan as so split shall be allocated to or among one
or more of such separate loans in a manner specified by Lender in its sole and
absolute discretion.  From and after the
effective date of any assignment of all or any portion of the Loan to any
Person (an “Assignee”) (a) such Assignee shall be a party hereto
and to each of the other Loan Documents to the extent of the applicable
percentage or percentages assigned to such Assignee and, except as otherwise
specified herein, shall succeed to the rights and obligations of Lender
hereunder in respect of such applicable percentage or percentages and (b) Lender
shall relinquish its rights and be released from its obligations hereunder and
under the Loan Documents to the extent of such applicable percentage or
percentages.  The liabilities of Lender
and each of the other Assignees shall be separate and not joint and several.  Neither Lender nor any Assignee shall be
responsible for the obligations of any other Assignee.  Borrower acknowledges that the information
provided by Borrower to Lender may be incorporated into the offering documents
for a Securitization and to the fullest extent permitted, Borrower irrevocably
waives all rights, if any, to prohibit such disclosures including, without
limitation, any right of privacy.  Lender
and each Rating Agency shall be entitled to rely on the information supplied
by, or on behalf of, Borrower and Borrower indemnifies Lender as to any
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses, (including, without limitation, reasonable attorney’s fees and
expenses, whether incurred within or outside the judicial process) that arise
out of or are based upon any untrue statement or alleged untrue statement of
any material fact contained in such information or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated in such information or necessary in order to make the statements
in such information, or in light of the circumstances under which they were
made, not misleading.


 


(c)           Lender,
at its option, may elect to effect a Securitization by means of the issuance of
certificates of interest therein or notes secured thereby (the “Securities”)
rated by one or more Rating Agencies.  In
such event and upon request by Lender to seek to effect such a Securitization,
Borrower shall promptly thereafter cooperate in all reasonable respects with
Lender in the Securitization including, without limitation, providing such
information as may be requested in connection with the preparation of a private
placement memorandum or registration statement required to privately place or
publicly distribute the Securities in a manner which does not conflict with
federal or state securities laws.


 


54


















 


Section 7.28.  Expenses.  Borrower shall reimburse Lender upon receipt
of notice for all reasonable costs and expenses (including reasonable attorneys’
fees and disbursements) incurred by Lender in connection with (i) the
preparation, negotiation, execution and delivery of the Loan Documents and the
consummation of the transactions contemplated thereby (other than, except as
specifically set forth herein, participations, assignments by Lender or a Securitization);
(ii) Borrower’s, its Affiliates’ and Lender’s ongoing performance under
and compliance with the Loan Documents, including confirming compliance with
environmental and insurance requirements; (iii) unless otherwise set forth
herein, the negotiation, preparation, execution, delivery and administration of
any consents, amendments, waivers or other modifications of or under any Loan
Document and any other documents or matters requested by Lender; (iv) filing
and recording of any Loan Documents; (v) surveys, inspections and
appraisals; (vi) enforcing or preserving any rights, in response to third
party claims or the prosecuting or defending of any action or proceeding or
other litigation, in each case against, under or affecting Borrower, Owner, the
Loan Documents, the Collateral, the Premises, or any other security given for
the Loan; and (vii) enforcing any obligations of or collecting any
payments due from Borrower, or Owner under any Loan Document or with respect to
the Collateral, the Premises or in connection with any refinancing or
restructuring of the Loan in the nature of a “work-out”, or any insolvency or
bankruptcy proceedings.  Any costs and
expenses due and payable to Lender hereunder which are not paid by Borrower
within ten (10) days after demand may be paid from any amounts in the Lockbox
Account.  The obligations and liabilities
of Borrower under this Section shall survive the Maturity Date and the
exercise by Lender of any of its rights or remedies under the Loan Documents.


 


Section 7.29.  Mortgage Loan Defaults.


 


(a)           Without
limiting the generality of the other provisions of this Agreement, and without
waiving or releasing Borrower from any of its obligations hereunder, if there
shall occur any Event of Default under the Mortgage Loan Documents (without
regard to any other defenses or offset rights Owner may have against Mortgage
Lender), Borrower hereby expressly agrees that Lender shall have the immediate
right, without notice to or demand on Borrower or Owner, but shall be under no
obligation:  (i) to pay all or any
part of the Mortgage Loan, and any other sums, that are then due and payable
and to perform any act or take any action on behalf of Owner, as may be
appropriate, to cause all of the terms, covenants and conditions of the
Mortgage Loan Documents on the part of Owner to be performed or observed
thereunder to be promptly performed or observed; and (ii) to pay any other
amounts and take any other action as Lender, in its sole and absolute
discretion, shall deem advisable to protect or preserve the rights and
interests of Lender in the Loan and/or the Collateral.  Lender shall have no obligation to complete
any cure or attempted cure undertaken or commenced by Lender.  All sums so paid and the third party costs
and expenses actually incurred by Lender in exercising rights under this Section (including,
without limitation, reasonable attorneys’ and other professional fees), with
interest at the Default Rate, for the period from the date of demand by Lender
to Borrower for such payments to the date of payment to Lender, shall
constitute a portion of the Debt, shall be secured by this Agreement and shall
be due and payable to Lender within two (2) Business Days following demand
therefor.  In the event that Lender makes
any payment in respect of the Mortgage Loan, Lender shall be subrogated to all
of the rights of Mortgage Lender under the Mortgage Loan Documents against the Premises
and Owner in addition to all other rights Lender may have under the Loan
Documents or applicable law.


 


55





















 


(b)           Subject
to the rights of tenants, Borrower hereby grants, and shall cause Owner to
grant, Lender and any Person designated by Lender the right to enter upon the Premises
at any time for the purpose of carrying out the rights granted to Lender under
this Section 7.29.  Borrower shall
not, and shall not cause or permit Owner or any other Person to impede,
interfere with, hinder or delay, any effort or action on the part of Lender to
cure any Event of Default under the Mortgage Loan as permitted by this Section 7.29,
or to otherwise protect or preserve Lender’s interests in the Loan and the
Collateral, including the Premises in accordance with the provisions of this
Agreement and the other Loan Documents.


 


(c)           Borrower
hereby indemnifies Lender from and against all out-of-pocket liabilities,
obligations, losses, damages, penalties, assessments, actions, or causes of
action, judgments, suits, claims, demands, costs, expenses (including, without
limitation, reasonable attorneys’ and other professional fees, whether or not
suit is brought, and settlement costs), and disbursements of any kind or nature
whatsoever which may be imposed on, incurred by or asserted against Lender as a
result of the foregoing actions described in Section 7.29(a) or (b) other
than as a result of gross negligence or willful misconduct of Lender.  Lender shall have no obligation to Borrower,
Owner or any other party to make any such payment or performance.


 


(d)           If
Lender shall receive a copy of any notice of default under the Mortgage Loan
Documents sent by Mortgage Lender to Owner, such notice shall constitute full
protection to Lender for any action taken or omitted to be taken by Lender, in
good faith, in reliance thereon.  As a
material inducement to Lender’s making the Loan, Borrower hereby absolutely and
unconditionally releases and waives all claims against Lender arising out of
Lender’s exercise of its rights and remedies provided in this Section other
than claims arising out of the fraud, illegal acts, gross negligence or willful
misconduct of Lender.


 


Section 7.30.  Discussions With Mortgage Lender; Etc.  In connection with the exercise of its rights
set forth in the Loan Documents, Lender shall have the right at any time to
discuss the Premises, the Mortgage Loan, the Loan or any other matter directly
with Mortgage Lender or Mortgage Lender’s consultants, agents or
representatives without notice to or permission from Borrower, nor shall Lender
have any obligation to disclose such discussions or the contents thereof with
Borrower.


 


Section 7.31.  Independent Approval Rights.  If any action, proposed action or other
decision is consented to or approved by Mortgage Lender, such consent or
approval shall not be binding or controlling on Lender.  Borrower hereby acknowledges and agrees that (a) the
risks of Mortgage Lender in making the Mortgage Loan are different from the
risks of Lender in making the Loan, (b) in determining whether to grant,
deny, withhold or condition any requested consent or approval Mortgage Lender and
Lender may reasonably reach different conclusions, and (c) Lender has an
absolute independent right to grant, deny, withhold or condition any requested
consent or approval based on its own point of view in accordance with the terms
hereof.  Further, the denial by Lender of
a requested consent or approval in accordance with the Loan Documents shall not
create any liability or other obligation of Lender if the denial of such
consent or approval results directly or indirectly in a default under the
Mortgage Loan, and Borrower hereby waives any claim of liability against Lender
arising from any such denial.


 


Section 7.32.  Reinstatement.  This Agreement and each other Loan Document
shall


 


56





















 


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


 


ARTICLE VIII.  EXCULPATION


 


Section 8.01.  Exculpation.  Notwithstanding anything herein or in any
other Loan Document to the contrary, except as otherwise set forth in this Section 8.01
to the contrary, Lender shall not enforce the liability and obligation of
Borrower and (a) if Borrower is a partnership, its constituent partners or
any of their respective partners, (b) if Borrower is a trust, its
beneficiaries or any of their respective Partners (as hereinafter defined), (c) if
Borrower is a corporation, any of its shareholders, directors, principals,
officers or employees, or (d) if Borrower is a limited liability company,
any of its members and their respective legal, equitable and beneficial owner (the
Persons described in the foregoing clauses (a) - (d), as the case may be,
are hereinafter referred to as the “Partners”) to perform and observe
the obligations contained in this Agreement or any of the other Loan Documents
by any action or proceeding wherein a money judgment shall be sought against
Borrower or the Partners, except that Lender may bring a UCC sale, action for
specific performance, or other appropriate action or proceeding (including,
without limitation, an action to obtain a deficiency judgment) solely for the
purpose of enabling Lender to realize upon (i) Borrower’s interest in the
Collateral and (ii) any other collateral given to Lender under the Loan
Documents (the “Default Collateral”); provided, however,
that any judgment in any such action or proceeding shall be enforceable against
Borrower and the Partners only to the extent of any such Default
Collateral.  The provisions of this Section shall
not, however, (a) impair the validity of the Debt evidenced by the Note or
in any way affect or impair the lien of this Agreement or any of the other Loan
Documents or the right of Lender to enforce this Agreement following the
occurrence of an Event of Default; (b) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure
and sale under this Agreement; (c) affect the validity or enforceability
of the Note, this Agreement, or any of the other Loan Documents, or impair the
right of Lender to seek a personal judgment against the Guarantor; (d) impair
the right of Lender to obtain the appointment of a receiver; (e) impair
the right of Lender to bring suit for a monetary judgment with respect to damages
incurred by Lender resulting from fraud or intentional misrepresentation by
Borrower, or any other Person in connection with this Agreement, the Note or
the other Loan Documents, and the foregoing provisions shall not modify,
diminish or discharge the liability of Borrower or the Partners with respect to
same; (f) impair the right of Lender to bring suit for a monetary judgment
to obtain the Recourse Distributions received by Borrower including, without
limitation, the right to bring suit for a monetary judgement to proceed against
any Partner, to the extent of any such Recourse Distributions theretofore
distributed to and received by such Partner, and the foregoing provisions shall
not modify, diminish or discharge the liability of Borrower or the Partners
with respect to same; (g) impair the right of Lender to bring suit for a
monetary judgment with respect to Borrower’s misappropriation of tenant
security deposits or Rent, and the foregoing provisions shall not modify,
diminish or discharge the liability of Borrower or the Partners with respect to
same; (h) impair the right of Lender to obtain insurance


 


57





















 


proceeds due to Lender pursuant to this
Agreement; (i) impair the right of Lender to enforce the provisions of
Sections 2.02(g) and 4.01, inclusive of this Agreement, even after repayment
in full by Borrower of the Debt; (j) prevent or in any way hinder Lender from
exercising, or constitute a defense, or counterclaim, or other basis for relief
in respect of the exercise of, any other remedy against any or all of the
collateral securing the Note as provided in the Loan Documents; (k) impair the
right of Lender to bring suit for a monetary judgment with respect to damages
incurred by Lender resulting from any misapplication or conversion of Loss
Proceeds (as defined in the Mortgage), and the foregoing provisions shall not
modify, diminish or discharge the liability of Borrower or the Partners with
respect to same; (l) impair the right of Lender to sue for, seek or demand a
deficiency judgment against Borrower solely for the purpose of foreclosing the
Premises or any part thereof, or realizing upon the Default Collateral; provided,
however, that any such deficiency judgment referred to in this clause
(l) shall be enforceable against Borrower and the Partners only to the extent
of any of the Default Collateral; (m) impair the ability of Lender to bring
suit for monetary judgment with respect to damages incurred by Lender resulting
from arson or waste to or of the Premises and/or the Collateral or damage to
the Premises committed by Borrower or its Affiliates; (n) impair the right of
Lender to bring a suit for a monetary judgment in the event of the exercise of
any right or remedy under any federal, state or local forfeiture laws resulting
in the loss of the lien of this Agreement, or the priority thereof, against the
Collateral; (o) be deemed a waiver of any right which Lender may have under
Sections 506(a), 506(b), 1111(b) or any other provision of the Bankruptcy
Code to file a claim for the full amount of the Debt or to require that all
collateral shall continue to secure all of the Debt; (p) impair the right of
Lender to bring suit for monetary judgment with respect to damages incurred by
Lender resulting from any losses resulting from any claims, actions or
proceedings initiated by Borrower (or any Affiliate of Borrower) alleging that
the relationship of Borrower and Lender is that of joint venturers, partners,
tenants in common, joint tenants or any relationship other than that of debtor
and creditor; (q) impair the right of Lender to bring suit for a monetary
judgment for damages incurred by Lender in the event of a Transfer in violation
of the provisions of Section 2.11 hereof, including, without limitation,
the failure to obtain Lender’s consent to a Transfer as, when and to the extent
required thereunder; (r) impair the right of Lender to bring suit for a
monetary judgment in the event that Borrower moves its principal place of
business or its books and records relating to the Collateral which are governed
by the UCC, or changes its name, its jurisdiction of organization, type of
organization or other legal structure or, if it has one, organizational
identification number, without first giving Lender thirty (30) days prior
written notice or (s) impair the right of Lender to bring suit for a monetary
judgment in the event that Borrower changes its name of otherwise does anything
which would make the information set forth in any UCC Financing Statements
relating to the Collateral materially misleading without giving Lender thirty
(30) days prior written notice thereof.  The provisions of this Section shall be
inapplicable to Borrower if (a) any proceeding, action, petition or filing
under the Bankruptcy Code, or any similar state or federal law now or hereafter
in effect relating to bankruptcy, reorganization or insolvency, or the
arrangement or adjustment of debts, shall be filed by, consented to or
acquiesced in by or with respect to Borrower, or if Borrower shall institute
any proceeding for its dissolution or liquidation, or shall make an assignment
for the benefit of creditors or (b) Borrower or any Affiliate contests or
in any material way interferes with, directly or indirectly (collectively, a “Contest”)
any UCC sale or other material remedy exercised by Lender upon the occurrence
of any Event of Default under the Loan Documents whether by making any motion,
bringing any counterclaim, claiming any defense, seeking any


 


58





















 


injunction or other restraint, commencing any
action, or otherwise (provided that if any such Person obtains a non-appealable
order successfully asserting a Contest, Borrower shall have no liability under
this clause (b)) or (c) Borrower (i) fails to cause Owner to deliver
notice of default under the Ground Lease to Lender or any other Person
designated in writing by Lender or (ii) fails to prevent Owner from amending
or modifying the Ground Lease without the prior written consent of Lender, in
which event Lender shall have recourse against all of the assets of Borrower
including, without limitation, any right, title and interest of Borrower in and
to the Premises, and any partnership interests in Borrower (but excluding the
other assets of such Partners to the extent Lender would not have had recourse
thereto other than in accordance with the provisions of this Section).


 


*  * 
*  *  *


 


59





















 


IN WITNESS WHEREOF, Borrower has duly
executed this Agreement the day and year first above written.


 


 


	
  Borrower’s Organizational Identification

  Number: 3829432

  	
  MMRDH SENIOR MEZZ HOLDING

  COMPANY LLC, Borrower 

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
  ,

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon 

  	
   

  
	
   

  	
   

  	
  Title: Authorized Signatory

  	
   

  
						



 





















 


EXHIBIT A


 


Description of the Premises


 


 


A-1





















 


EXHIBIT B


 


Unpaid
Principal Balance of Mortgage Loan: 
$473,750,000.00


 


B-1





















 


EXHIBIT C


 


CERTAIN DEFINED TERMS


 


“Accounts”
shall have the meaning set forth in Section 2.27.


 


“ACH”
shall have the meaning set forth in Section 2.27.


 


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


 


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


 


“Allocated
Loan Amount” shall have the meaning set forth on Schedule 5 attached
hereto.


 


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


 


“Borrower”
shall mean Borrower named herein and its successors and assigns.


 


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


 


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


 


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


 


“Collateral”
shall mean (a) all Equity Interests, (b) all additional Equity
Interests acquired by Borrower, including all rights, options, subscriptions
and/or warrants acquired by Borrower with respect to additional Equity
Interests in any Pledged Entity, (c) all rights to payment of all monetary
obligations owed to Borrower, if any, by a Pledged Entity, (d) the Lockbox
Account, including any and all funds from time to time credited to the Lockbox
Account; (e) the Accounts and all cash, checks, drafts, securities entitlements,
securities, securities accounts, funds or deposit accounts maintained or
deposited with Lender and other investment property, certificates, instruments
and other property, including, without limitation, all deposits and/or wire
transfers from time to time deposited or held in, credited to or made to any of
the foregoing; (f) all interest, dividends, cash, instruments, securities,
securities entitlements and other investment property, and other property from
time to time received, receivable or otherwise payable in respect of, or in
exchange for, any or all of the foregoing or purchased with funds from the
Accounts; (g) all of Borrower’s rights in the Rate Cap Agreement; (h) all
rights of Borrower in, to and under Owner’s certificate of formation, limited
liability company agreement


 


C-1





















 


and all other organizational
documents of Owner (collectively, the “Owner Organizational Documents”),
or any other agreement or instrument relating to the Pledged Interests,
including, without limitation, (i) all rights of Borrower to receive
moneys due and to become due under or pursuant to Owner Organizational
Documents, (ii) all rights of Borrower to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to Owner Organizational
Documents, (iii) all claims of Borrower for damages arising out of or for
breach of or default under Owner Organizational Documents, and (iv) any
right of Borrower to perform thereunder and to compel performance and otherwise
exercise all rights and remedies thereunder; and (i) all Proceeds.


 


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


 


“Contractual
Obligation” shall mean, as to any Person, any provision of any security
issued by such Person or of any agreement, instrument or undertaking to which
such Person is a party or by which it or any of the property owned by it is
bound.


 


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


 


“Corporations”
shall mean the corporations identified on Schedule 1 hereto, and
each being a “Corporation”.


 


“Counterparty”
shall have the meaning set forth in Section 2.27.


 


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


 


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


 


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


 


“Default
Rate Interest” shall mean, to the extent the Default Rate becomes
applicable, interest in excess of the interest which would have accrued on (a) the
principal amount of the Loan which is outstanding from time to time and (b) any
accrued but unpaid interest, if the Default Rate was not applicable.


 


“Distributions”
shall mean all dividends, distributions, liquidation proceeds, cash, profits,
instruments and other property and economic benefits to which Borrower is
entitled with respect to any one or more Equity Interests, whether or not
received by or otherwise distributed to Borrower, in each case whether cash or
non-cash and whether such dividends, distributions,


 


C-2





















 


liquidation proceeds, cash,
profits, instruments and other property and economic benefits are paid or
distributed by the Pledged Entities in respect of operating profits, sales,
exchanges, refinancings, condemnations or insured losses of the relevant
Pledged Entity’s assets, the liquidation of such Pledge Entity’s assets and
affairs, management fees, guaranteed payments, repayment of loans, or
reimbursement of expenses or otherwise in respect of or in exchange for any or
all of the Equity Interests.


 


“DTC”
shall have the meaning set forth in Section 2.01.


 


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


 


“Equity
Interests” shall mean the LLC Interests, the Partnership Interests and the
Pledged Interests.


 


“ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended from
time to time, and any successor statute thereto, and the regulations
promulgated thereunder.


 


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


 


C-3





















 


Section 412(n) of the
Code, described in Section 414(m) or (o) of the Code of which Borrower is
a member.


 


“Event of
Default” shall have the meaning set forth in Section 3.01.


 


“Exit
Additional Interest Payment” shall have the meaning set forth in Section 6.02.


 


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


 


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


 


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


 


“Guarantor”
shall mean Morgans Hotel Group LLC, a Delaware limited liability company.


 


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


 


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


 


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


 


“Intermediate
Mezz Lender” shall mean the holder of the Intermediate Mezz Loan.


 


C-4





















 


“Intermediate
Mezz Loan” shall mean that certain mezzanine loan secured by 100% of the
direct or indirect equity interests in Borrower.


 


“Junior
Mezz Lender” shall mean the holder of the Junior Mezz Loan.


 


“Junior
Mezz Loan” shall mean that certain mezzanine loan secured by 100% of the
direct or indirect equity interests in Intermediate Mezz Lender.


 


“Late
Charge” shall have the meaning set forth in Section 3.11 hereof.


 


“Lease”
means all leases and other agreements or arrangements affecting the use,
enjoyment or occupancy of all or any portion of the Premises now in effect or
hereafter entered into (including, without limitation, all lettings, subleases,
licenses, concessions, tenancies and other occupancy agreements covering or
encumbering all or any portion of the Premises), whether before or after the
filing by or against Owner of any petition for relief under the Bankruptcy
Code, together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto.


 


“Legal
Requirement” shall mean as to any Person, the certificate of incorporation,
by-laws, certificate of limited partnership, agreement of limited partnership
or other organizational or governing documents of such Person, and any law,
statute, order, ordinance, judgment, decree, injunction, treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental Authority
and all covenants, agreements, restrictions and encumbrances contained in any
instruments, in each case applicable to or binding upon such Person or any of
its property or to which such Person or any of its property is subject.


 


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


 


“LLC
Interests” shall mean, with respect to Borrower, all membership, equity or
ownership and/or other interests now or hereafter owned by Borrower in the
LLCs, and including all of Borrower’s right, title and interest in and to: (a) any
and all now existing and hereafter acquired membership, equity or ownership
interest of Borrower in the LLCs, whether in capital, profits or otherwise; (b) any
and all now existing and hereafter arising rights of Borrower to receive Distributions
or payments from the LLCs, whether in cash or in kind and whether such Distributions
or payments are on account of Borrower’s interest as owner of a membership,
equity or ownership interest of the LLCs or as a creditor in the LLCs or otherwise,
and all other economic rights and interests of any nature of Borrower in the
LLCs; (c) any and all now existing and hereafter acquired management and
voting rights of Borrower of, in, or with respect to the LLCs, whether as an
owner of a membership, equity or ownership interest in the LLCs or otherwise,
and whether provided for under the Operating Agreements and/or applicable law,
and all other rights of and benefits to Borrower of any nature arising or
accruing under the Operating Agreements; (d) any and all now existing and
hereafter acquired rights of Borrower to any specific property owned by the
LLCs; (e) all certificates evidencing any or all of the foregoing;  and (f) all Proceeds of the foregoing.


 


C-5





















 


“LLCs”
shall mean the limited liability companies identified on Schedule 1
hereto, and each being a “LLC”.


 


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


 


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


 


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


 


“Lockbox
Account” shall mean account number 5000000076000 established with Wachovia
Bank, National Association in the name “Wachovia Bank, National Association, as
secured party of MMRDH Senior Mezz Holding Company LLC”.


 


“Lockbox
Agreement” shall mean that certain mezzanine lockbox agreement dated as of
the date hereof between Borrower, Lender and Wachovia Bank, National
Association.


 


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


 


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


 


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


 


“Mortgage”
shall have the meaning set forth in the recitals hereto.


 


“Mortgage
Lender” shall have the meaning set forth in the recitals hereto.


 


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


 


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


 


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


 


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


 


C-6





















 


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


 


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


 


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


 


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


 


“Operating
Agreements” shall mean all operating agreements and articles of
organization, certificates of formation or other formation documents and all
other agreements, certificates and other documents which govern the existence,
operation and ownership of an LLC, as the same are in effect as of the date
hereof and as the same hereafter may be modified from time to time.


 


“Organizational
Documents” shall mean (i) all articles or certificate of incorporation
(including any amendments thereto or restatements thereof), bylaws and any
certificate or statement of designation of any Corporation, (ii) the
Operating Agreements and (iii) the Partnership Agreements.


 


“Owner”
shall have the meaning set for in the recitals hereto.


 


“Partnership
Agreements” shall mean any and all partnership agreements, together with
all agreements, certificates and other documents which govern the existence,
operation and ownership of any Partnership.


 


“Partnership
Interests” shall mean all partnership, equity or ownership and/or other
interests now or hereafter owned by Borrower in the Partnerships, and including
all of Borrower’s right, title and interest in and to: (a) any and all now
existing and hereafter acquired membership, equity or ownership interest of
Borrower in the Partnerships whether in capital, profits or otherwise; (b) any
and all now existing and hereafter arising rights of Borrower to receive Distributions
or payments from the Partnerships, whether in cash or in kind and whether such Distributions
or payments are on account of Borrower’s interest as an owner of a partnership,


 


C-7





















 


equity or ownership interest in
the Partnerships or as a creditor of the Partnerships or otherwise, and all
other economic rights and interests of any nature of Borrower in the
Partnerships; (c) any and all now existing and hereafter acquired
management and voting rights of Borrower of, in, or with respect to the
Partnerships, whether as an owner of a partnership, equity or ownership
interest in the Partnerships or otherwise, and whether provided for under the
Partnership Agreements and/or applicable law, and all other rights of and benefits
to Borrower of any nature arising or accruing under the Partnership Agreements;
(d) any and all now existing and hereafter acquired rights of Borrower to
any specific property owned by the Partnerships; (e) all certificates
evidencing any or all of the foregoing; and (f) all Proceeds of the
foregoing.


 


“Partnerships”
shall mean the partnerships identified on Schedule 1 attached
hereto, and each being a “Partnership”.


 


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


 


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


 


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


 


“Pledged
Entities” shall mean the Corporations, the LLCs and the Partnerships.


 


“Pledged
Interests” shall mean with respect to Borrower, (a) all shares of
capital stock of the Corporations, now owned or hereafter acquired by Borrower,
and the certificates representing the shares of such capital stock and any
interest of Borrower in the entries on the books of any securities intermediary
pertaining to such shares (such now-owned shares being identified on Schedule 1
attached hereto), and all options and warrants for the purchase of shares of
the stock of the Corporations now or hereafter held in the name of Borrower, (b) all
certificated LLC Interests or Partnership Interests, now owned or hereafter
acquired by Borrower, and the certificates representing such interests and any
interest of Borrower in the entries on the books of any securities intermediary
pertaining to such certificated interests (such now-owned certificated
interests being identified on Schedule 1 attached hereto), and all
options and warrants for the purchase of certificated interests in such LLCs or
Partnership now or hereafter held in the name of Borrower, (c) all
additional shares of stock or certificated interests of the Corporations, LLCs,
or Partnerships from time to time acquired by Borrower in any manner, and the
certificates representing such additional shares and any interest of Borrower
in the entries on the books of any securities intermediary pertaining to such
shares and interests, and all securities convertible into and options,
warrants, dividends, cash, instruments and other rights and options from time
to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such shares, (including all rights to request or
cause the issuer thereof to register any or all of the foregoing under federal
and state securities laws to the maximum extent possible under any agreement
for such registration rights, and all put rights, tag-along rights or other
rights


 


C-8





















 


pertaining to the sale or other
transfer of any of the foregoing, together in each case with all rights under
any agreements, articles or certificates of incorporation or otherwise
pertaining to such rights; and (d) all voting rights and rights to cash
and non-cash dividends, securities, securities entitlements and other
investment property, instruments and other property from time to time received,
receivable or otherwise distributed in respect of, or in exchange for, any or
all of the foregoing, and (e) all Proceeds of the foregoing.


 


“Powers”
shall mean transfer powers in the form of Schedule 4 attached
hereto.


 


“Premises”
shall have the meaning set forth in the recitals hereto.


 


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


 


“Proceeds”
shall mean (a) all “proceeds” (as such term is defined in the UCC) and “products”
(as such term is defined in the UCC) with respect to the Collateral and (b) includes,
without limitation:  whatever is
receivable or received when Collateral is sold, collected, exchanged or
otherwise disposed of, whether such disposition is voluntary or involuntary;
all rights to payment, including return premiums, with respect to any insurance
relating thereto; all interest, dividends and other property receivable or
received on account of the Collateral or proceeds thereof, (including all Distributions
or other income from the Equity Interests, all collections thereon or all Distributions
with respect thereto); and proceeds of any indemnity or guaranty payable to
Borrower or Lender from time to time with respect to any Collateral.


 


“Prohibited
Person” means any Person identified on the OFAC List or any other Person
with whom a U.S. Person may not conduct business or transactions by prohibition
of Federal law or Executive Order of the President of the United States of America.


 


“Rate Cap
Agreement” shall mean that certain interest rate protection agreement
(together with the confirmation and schedules relating thereto) with a notional
amount which shall not at any time be less than the Principal Amount and a LIBOR
strike price equal to four and one-quarter percent (4.25%) entered into by
Borrower in accordance with the terms hereof or of the other Loan Documents and
any similar interest rate cap or collar agreements subsequently entered into in
replacement or substitution therefor by Borrower with respect to the Loan.


 


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


 


“Register”
shall have the meaning set forth in Section 7.27(a).


 


“Remaining
Rents” shall have the meaning set forth in Section 2.27.


 


“Securities
Act” shall have the meaning set forth in Section 3.02(d).


 


C-9





















 


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


 


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


 


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


 


“Spread
Maintenance Premium” shall mean (a) the amount of the prepayment,
multiplied by (b) the LIBOR Margin (as defined in the Note) multiplied by (c) a
fraction, the numerator of which is the number of full and partial months from
such prepayment date through the end of the first (1st) Loan Year and the
denominator of which is 12; provided, however, if the Loan is repaid in whole
or in part as a result of an IPO at any time prior to the Payment Date
occurring in July, 2006, the Spread Maintenance Premium shall be calculated
based on (a) the amount of the prepayment multiplied by (b) the LIBOR
Margin multiplied by (c) a fraction the numerator of which is the number
of full and partial months from said prepayment date through the Payment Date
occurring in January, 2006, and the denominator of which is 12.


 


“Substitute
CMA Agreement” shall have the meaning set forth in Section 2.27.


 


“Transfer”
shall mean any conveying, assigning, selling, mortgaging, encumbering,
pledging, hypothecating, granting of a security interest in, granting of
options with respect to or other disposition (directly or indirectly,
voluntarily or involuntarily, by operation of law or otherwise and whether or
not for consideration or of record) of all or any portion of any legal or
beneficial interest in the Collateral, Borrower, Owner, the Premises or any
other portion of the


 


C-10





















 


Property (as defined in the
Mortgage); provided, however, notwithstanding the foregoing or anything to the
contrary contained in any other Loan Document, “Transfer” shall not include (a) any
sale, transfer, conveyance, encumbrance or assignment of any direct or indirect
legal or beneficial ownership interest in Borrower, provided, in each case,
that no Person or group of Affiliated Persons which did not, as of the Closing
Date, own 49% or more of Borrower, obtains a direct or indirect ownership
interest in Borrower of more than 49% or obtains, directly or indirectly,
Control of Borrower (other than a Person to whom Control is attributed under
the Securities Act solely by virtue of being a director of a public company and
other than, in connection with an IPO, to a Person with respect to which Edward
Scheetz or David Hamamoto have the title and responsibilities of a chief
executive officer, president and/or chief financial officer and a seat on the
board of directors of the public company formed in connection with the IPO so
long as Edward Scheetz or David Hamamoto remain actively involved in the
management of the operations of Borrower) unless such Person or group of
Affiliated Persons (the “Sub Owners”) are owned by a Person or group of
Affiliated Persons (the “Parent Owner”), which owned 49% or more of the
direct and/or indirect legal or beneficial ownership interest in Borrower prior
to such transfer and either (A) Borrower had previously delivered an
opinion of counsel which discussed the substantive non-consolidation of such
Parent Owner in form and substance and prepared by counsel reasonably
acceptable to Lender or (B) Sub-Owner owns such interest in Borrower
through ownership of a Person or group of Affiliated Persons with respect to
which such a substantive non-consolidation opinion was previously delivered to
Lender or (b) subsequent to an IPO, transfers of publicly traded stock on
a national stock exchange or on the NASDAQ Stock Market in the normal course of
business and not in connection with a tender offer or a sale of the public
Person resulting from the IPO or substantially all of the assets of such Person.


 


“UCC”
shall mean the Uniform Commercial Code as in effect from time to time in the
State of New York; provided that, if perfection or the effect of perfection or
non-perfection or the priority of any security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of New York, “UCC” means the Uniform Commercial Code as in
effect from time to time in such other jurisdiction for purposes of the
provisions hereof relating to such perfection, effect of perfection or
non-perfection or priority.


 


“Unscheduled
Payments” shall mean insurance proceeds that have been applied to the
repayment of the Debt, any funds representing a voluntary or involuntary
principal prepayment and proceeds of any foreclosure action or UCC sale.


 


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


 


C-11





















 


Schedule 1


 


Corporations, Limited Liability
Corporations and Partnerships


 


Morgans Holdings LLC, a Delaware limited liability company


 


Beach Hotel Associates LLC, a Delaware limited liability company


 


Royalton, LLC, a Delaware limited liability company


 


Mondrian Holdings LLC, a Delaware limited liability company


 


Henry Hudson Holdings LLC, a Delaware limited liability company


 





















 


Schedule 2


 


Ownership Chart


 


 





















 


Schedule 3


 


Intentionally Omitted.


 





















 


Schedule 4


 


Stock Power


 


A transfer power in form and substance acceptable to Lender.


 





















 


Schedule 5


 


Allocated Loan Amount


 




	
  Property

  	
   

  	
  Allocated Loan Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hudson Hotel

  	
   

  	
  $

  	
  20,146,551.72

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel

  	
   

  	
  $

  	
  3,711,206.90

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Royalton Hotel

  	
   

  	
  $

  	
  5,345,905.17

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Delano Hotel

  	
   

  	
  $

  	
  11,619,612.07

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mondrian Hotel

  	
   

  	
  $

  	
  10,426,724.14

  	
   

  






 





















 


CONSENT AND WAIVER


 


As a material inducement for Lender to enter
into the Loan and Security Agreement (“Loan Agreement”) dated June 29, 2005
between MMRDH SENIOR MEZZ HOLDING COMPANY LLC (“Borrower”) and WACHOVIA BANK,
NATIONAL ASSOCIATION (“Lender”), and for valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the undersigned, as of the
29th day of June, 2005, hereby consents to the pledge of the Collateral
contained in the Loan Agreement and ratifies all encumbrances and terms
contained therein.


 


The undersigned agrees that, by acceptance of
the Loan Agreement, Lender assumes no obligations with respect to the Pledged
Entities or to the constituent members, partners, or shareholders in the
Pledged Entities and, without the prior written consent of Lender, the
undersigned shall not: (a) terminate or materially amend or modify the
Organizational Documents of the Pledged Entities or consent thereto; or (b) take
any action that would operate to dilute the interest of Borrower in the Pledged
Entities.


 


The undersigned agrees that, upon written
notice from Lender stating that an Event of Default has occurred under the Loan
Agreement, all Distributions, dividends, or other sums payable to Borrower in
connection with the Pledged Entities shall be made payable to and delivered to
Lender.  The undersigned further agrees
that, upon written notice from Lender that it has foreclosed the Loan Agreement
following an Event of Default, Borrower shall be removed as a manager, managing
member or general partner in the Pledged Entity, as applicable, and replaced
with the assignee designated in such notice, which assignee shall be Lender or
its nominee.  In connection therewith,
the undersigned agrees to request (and use reasonable efforts to ensure) that
Lender is provided with a written statement of Borrower’s defaults under the
Organizational Documents and agrees that Lender be entitled to rely on such
statement in determining whether to become a substitute member, shareholder or
partner in the applicable Pledged Entity. 
If Lender so requests, the undersigned covenants and agrees to consent
to the execution of an amendment to the Organizational Documents to reflect any
such assignee’s substitution in place of Borrower, as applicable.


 


The undersigned further consents and agrees
to (a) Borrower’s assignment to Lender for security purposes, of Borrower’s
Equity Interests, (b) any foreclosure and/or subsequent sale by Lender or
its nominee of its rights with respect to such Equity Interests and the
substitution of Lender or nominee of its rights with respect to such Equity
Interests, (c) the exercise of any remedy by Lender or its nominee under
the Loan Agreement and (d) notwithstanding anything to the contrary
contained in the Organizational Documents of the Pledged Entities, Lender, its
nominee or any third-party purchaser at a foreclosure sale becoming a member,
partner or shareholder, or a substitute manager, managing member or general
partner, as applicable, in a Pledged Entity, with all of the rights enjoyed by
Borrower prior to such foreclosure.  Any
such foreclosure will not require any further consent of the undersigned or any
other member, shareholder, or partner in the applicable Pledged Entity and will
not cause the dissolution of any LLC or Partnership.


 


The undersigned agrees that neither the
execution and delivery of the Loan Agreement, the enforcement by Lender of any
of its rights thereunder, nor the transfer (or agreement to


 





















 


transfer) by
Lender of any of its rights in the Pledged Entities or under the Loan Agreement
shall constitute a default under the Organizational Documents, and the
undersigned expressly waives any rights it may have under the Organizational
Documents as a result of the foregoing. 
The undersigned hereby waives any and all rights under the
Organizational Documents which, whether exercised by the undersigned or not,
would prevent, inhibit or interfere with the granting of a security interest in
the Collateral to Lender, the foreclosure of such security interest in the
Collateral by Lender or the full realization by Lender of any of its other
rights under the Loan Agreement.


 


The undersigned acknowledges that Lender is
materially relying on the undersigned’s execution of this Consent and Waiver in
entering into the Loan Agreement and the other Loan Documents.


 


All capitalized terms not otherwise defined
herein shall have the meaning set forth in the Loan Agreement.


 


IN WITNESS WHEREOF, the undersigned has duly
executed this consent and waiver as of this 29th day of June, 2005.


 


	
   

  	
  HENRY HUDSON HOLDINGS LLC, a Delaware

  limited liability company, Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MORGANS HOLDINGS LLC, a Delaware limited

  liability company, Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BEACH HOTEL ASSOCIATES LLC, a Delaware

  limited liability company, Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory

  



 





















 


	
   

  	
  ROYALTON, LLC, a Delaware limited liability

  company, Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MONDRIAN HOLDINGS LLC, a Delaware

  limited liability company, Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized Signatory