Exhibit
10.9


 


HUDSON LEASECO LLC


 


A NEW YORK LIMITED
LIABILITY COMPANY


 


OPERATING
AGREEMENT


 


 


DATED AS OF
AUGUST 28, 2000


 





















 


TABLE OF CONTENTS


 


	
   

  	
  Page

  
	
  SECTION 1 : DEFINITIONS

  	
  2

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2
  : FORMATION

  	
  22

  
	
   

  	
  Section 2.1.

  	
  Formation

  	
  22

  
	
   

  	
  Section 2.2.

  	
  Name and Office; Service of Process

  	
  22

  
	
   

  	
  Section 2.3.

  	
  Purpose

  	
  22

  
	
   

  	
  Section 2.4.

  	
  Authorized Acts

  	
  23

  
	
   

  	
  Section 2.5.

  	
  Term and Dissolution

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3
  : LEASE AND PASS-THROUGH OF THE HISTORIC TAX CREDIT

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4
  : MEMBERS AND CAPITAL ACCOUNTS

  	
  26

  
	
   

  	
  Section 4.1.

  	
  Managing Member

  	
  26

  
	
   

  	
  Section 4.2.

  	
  Investor Member

  	
  26

  
	
   

  	
  Section 4.3.

  	
  Capital and Capital Accounts

  	
  26

  
	
   

  	
  Section 4.4.

  	
  Withdrawal of Capital

  	
  27

  
	
   

  	
  Section 4.5.

  	
  Liability of Members

  	
  27

  
	
   

  	
  Section 4.6.

  	
  Additional Members

  	
  28

  
	
   

  	
  Section 4.7.

  	
  Representations and Warranties of the
  Investor Member

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5
  : CAPITAL CONTRIBUTIONS OF INVESTOR MEMBER;

  	
  30

  
	
   

  	
  Section 5.1.

  	
  Investor Member’s Capital
  Contribution

  	
  30

  
	
   

  	
  Section 5.2.

  	
  Conditions to Payment

  	
  30

  
	
   

  	
  Section 5.3.

  	
  Historic Tax Credit Adjustments

  	
  31

  
	
   

  	
  Section 5.4.

  	
  Contests

  	
  34

  
	
   

  	
  Section 5.5.

  	
  Project Expense Loans

  	
  35

  
	
   

  	
  Section 5.6.

  	
  Third-Party Rights in Project Expense
  Loans

  	
  35

  
	
   

  	
  Section 5.7.

  	
  No Third-Party Rights in Capital

  	
  36

  
	
   

  	
  Section 5.8.

  	
  Reserve Requirements

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6
  : PROFITS AND LOSSES; CREDITS; DISTRIBUTIONS

  	
  37

  
	
   

  	
  Section 6.1.

  	
  Profits and Losses

  	
  37

  
	
   

  	
  Section 6.2.

  	
  Distributions Prior to Dissolution

  	
  38

  
	
   

  	
  Section 6.3.

  	
  Liquidation

  	
  39

  
	
   

  	
  Section 6.4.

  	
  Special Distribution and Payment
  Provisions

  	
  40

  
	
   

  	
  Section 6.5.

  	
  Special Allocation Provisions

  	
  40

  
	
   

  	
  Section 6.6.

  	
  Order of Application

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7
  : RIGHTS, POWERS AND DUTIES OF THE MANAGING MEMBER

  	
  44

  
	
   

  	
  Section 7.1.

  	
  Restrictions on Authority

  	
  44

  
	
   

  	
  Section 7.2.

  	
  Personal Services and Competition

  	
  45

  
	
   

  	
  Section 7.3.

  	
  Business Management and Control;
  Designation of Managing Member

  	
  46

  



 





















 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  Section 7.4.

  	
  Duties and Obligations of the
  Managing Member

  	
  46

  
	
   

  	
  Section 7.5.

  	
  Certain
  Payments to the Managing Member and its Affiliates

  	
  49

  
	
   

  	
  Section 7.6.

  	
  Fiduciary Duty
  of Managing Member

  	
  50

  
	
   

  	
  Section 7.7.

  	
  Limitations on
  Liability; Indemnification

  	
  50

  
	
   

  	
  Section 7.8.

  	
  Liability of
  Managing Member to Members

  	
  51

  
	
   

  	
  Section 7.9.

  	
  Tax Matters Partner

  	
  52

  
	
   

  	
  Section 7.10.

  	
  Access and Reports

  	
  53

  
	
   

  	
  Section 7.11.

  	
  Representations,
  Warranties and Covenants of the Managing Member

  	
  54

  
	
   

  	
  Section 7.12.

  	
  Indemnification

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8 : MATERIAL
  DEFAULT

  	
  60

  
	
   

  	
  Section 8.1.

  	
  General

  	
  60

  
	
   

  	
  Section 8.2.

  	
  Cure Rights and
  Penalties

  	
  60

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9
  : BOOKS AND REPORTING, ACCOUNTING, TAX ELECTIONS, ETC.

  	
  61

  
	
   

  	
  Section 9.1.

  	
  Books and Reporting

  	
  61

  
	
   

  	
  Section 9.2.

  	
  Bank Accounts

  	
  63

  
	
   

  	
  Section 9.3.

  	
  Tax Elections

  	
  63

  
	
   

  	
  Section 9.4.

  	
  Special Adjustments

  	
  63

  
	
   

  	
  Section 9.5.

  	
  Fiscal Year

  	
  64

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 10
  : WITHDRAWAL OF MANAGING MEMBER; NEW MANAGING MEMBER

  	
  65

  
	
   

  	
  Section 10.1.

  	
  Voluntary
  Withdrawal

  	
  65

  
	
   

  	
  Section 10.2.

  	
  Continuation

  	
  65

  
	
   

  	
  Section 10.3.

  	
  Successor
  Managing Member

  	
  65

  
	
   

  	
  Section 10.4.

  	
  Interest of
  Predecessor Managing Member

  	
  66

  
	
   

  	
  Section 10.5.

  	
  Designation of
  New Managing Members

  	
  66

  
	
   

  	
  Section 10.6.

  	
  Amendment of
  Articles; Approval of Certain Events

  	
  66

  
	
   

  	
  Section 10.7.

  	
  Admission of a
  Managing Member

  	
  67

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 11 : TRANSFER OF INTERESTS

  	
  68

  
	
   

  	
  Section 11.1.

  	
  Right To Assign

  	
  68

  
	
   

  	
  Section 11.2.

  	
  Restrictions

  	
  68

  
	
   

  	
  Section 11.3.

  	
  Substitute Members

  	
  68

  
	
   

  	
  Section 11.4.

  	
  Assignees

  	
  69

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 12 :
  MANAGEMENT OF PROJECT

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 13 :
  GENERAL PROVISIONS

  	
  71

  
	
   

  	
  Section 13.1.

  	
  Restrictions on
  Transfer

  	
  71

  
	
   

  	
  Section 13.2.

  	
  Notices

  	
  71

  
	
   

  	
  Section 13.3.

  	
  Word Meanings

  	
  71

  
	
   

  	
  Section 13.4.

  	
  Binding Provisions

  	
  71

  
	
   

  	
  Section 13.5.

  	
  Applicable Law

  	
  72

  
	
   

  	
  Section 13.6.

  	
  Counterparts

  	
  72

  



 





















 


	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
  Section 13.7.

  	
  Paragraph Titles

  	
  72

  
	
   

  	
  Section 13.8.

  	
  Separability of
  Provisions; Rights and Remedies

  	
  72

  
	
   

  	
  Section 13.9.

  	
  Effective Date
  of Admission

  	
  73

  
	
   

  	
  Section 13.10.

  	
  Amendment
  Procedure

  	
  73

  
	
   

  	
  Section 13.11.

  	
  Consent of
  Members; Meetings

  	
  73

  
	
   

  	
  Section 13.12.

  	
  Indemnification
  by Investor Member

  	
  74

  
	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE A

  	
  Partners and Capital

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  
	
  Exhibit A

  	
  Investor Note

  	
   

  
	
  Exhibit B

  	
  Investor Security
  Agreement

  	
   

  
	
  Exhibit C

  	
  Payment Certificate

  	
   

  
	
  Exhibit D

  	
  Tax Certificate

  	
   

  
	
  Exhibit E

  	
  Quarterly Financial
  Summary

  	
   

  
	
  Exhibit F

  	
  HTC Loan Agreement

  	
   

  
	
  Exhibit G

  	
  Projections

  	
   

  
	
  Exhibit H

  	
  Use of Proceeds of
  Installments

  	
   

  
	
  Exhibit I

  	
  Litigation

  	
   

  
	
  Exhibit J

  	
  Title Report

  	
   

  



 





















 


HUDSON LEASECO LLC


 


A NEW YORK LIMITED LIABILITY COMPANY


 


OPERATING AGREEMENT


DATED AS OF AUGUST 28, 2000


 


THIS OPERATING
AGREEMENT OF HUDSON LEASECO LLC (this “Agreement”) is made as of this 28th
day of August, 2000, by and between HUDSON MANAGING MEMBER LLC, a Delaware
limited liability company (“HMM”), as Managing Member, and CHEVRON TCI,
INC., a California corporation (“Chevron”), as Investor Member.


 


RECITALS


 


The parties desire
to form a limited liability company under the laws of the State of New York,
and, to that end, have filed Articles of Organization with the Department of
State of the State of New York (the “Filing Office”) on August 11,
2000 (such Articles of Organization, as amended from time to time, being
referred to herein as the “Articles”).


 


The purpose of
this Agreement is to set forth more fully the rights, obligations and duties of
the Members.


 


NOW, THEREFORE, it
is hereby agreed as follows:


 





















 


SECTION 1:
DEFINITIONS


 


The capitalized
terms used in this Agreement shall have the meanings ascribed to them in this
Section 1.


 


“Accountants”
means Reznick, Fedder & Silverman, CPA’s of Bethesda, Maryland or such
other firm of certified public accountants as may be engaged by the Managing
Member in accordance with the provisions of Section 9.1H.


 


“Act” means
the New York Limited Liability Company Act, as amended from time to time.
Reference to any section of the Act shall be deemed to refer to a similar
provision in any amendment to the Act.


 


“Actual Credit”
means, as of any point in time, the total amount of Historic Tax Credit properly
passed through to the Company by the Developer and reflected in the Company’s
federal income tax return filed with the IRS and properly allocable to the
Investor Member under the terms of this Agreement.


 


“Adjusted
Capital Account Deficit” means, with respect to any Member, the deficit
balance, if any, in such Member’s Capital Account as of the end of a Company
Fiscal Year, (or at such other time, as shall be required pursuant to the terms
of this Agreement) after giving effect to the following adjustments:


 


(i)                                     Such Capital Account shall be increased
by the amount of any Deficit Restoration Obligation of such Member.


 


(ii)                                  Such Capital Account shall be decreased
by the items described in Sections 1.704-l(b)(2)(ii)(d)(4), (5) and
(6) of the Allocation Regulations.


 


The foregoing
definition of Adjusted Capital Account Deficit and the application of such term
in the manner provided in Section 6.5E hereof is intended to comply with
the provisions of Section 1.704-l(b)(2)(ii)(d) of the Allocation
Regulations and shall be interpreted consistently therewith.


 


“Adjusted
Capital Contribution” means an amount, not less than zero, equal to the
aggregate Capital Contributions theretofore made by a Member to the Company
minus any Distributions theretofore made by the Company to such Member from
Capital Proceeds (other than (i) Distributions made to the Investor Member
pursuant to the provisions of Section 5.3 in excess of ninety-four percent
(94%) of the reduced or recaptured Historic Tax Credits that gave rise to the
Distributions, and (ii) Distributions pursuant to Section 6.2B Fourth
or Fifth to the extent a Distribution pursuant to item Fifth
exceeds ninety-four percent (94%) of the Tax Credits that were recaptured and
led to the payment of the Recapture Adjustment Amount).


 


“Admission Date”
means the date on which this Agreement is executed and the Investor Member is
admitted to the Company.


 


“Adverse
Consequences” means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages,


 


2





















 


dues, penalties,
fines, costs, amounts paid in settlement, liabilities, obligations, taxes,
liens, losses, expenses and fees, including court costs and reasonable
attorneys’ fees and expenses.


 


“Affiliate” means any Person which directly or
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with a Member. For purposes hereof, the terms “control,”
“controlled,” or “controlling” shall include, without limitation, (i) the
ownership or control of, or power to vote, ten percent (10%) or more of the
beneficial interest of any such Person, as the case may be, directly or
indirectly, or acting through one or more Persons, (ii) the control in any
manner over the managing member(s) or the election of more than one director or
trustee (or Persons exercising similar functions) of such Person, or
(iii) the power to exercise, directly or indirectly, control over the
management or policies of such Person.


 


“After-Tax Basis” means, with respect to any
payment to be received by the Investor Member, the amount of such payment
supplemented by a further payment or payments so that, after deducting from
such payments the amount of all Taxes (net of any current credits, deductions
or other tax benefits arising from the payment by the Investor Member of any
amount, including Taxes, for which the payment to be received is made) imposed
currently on the Investor Member by any Governmental Authority or other taxing
authority with respect to such payments, the balance of such payments shall be
equal to the original payment received; provided, however, for
the purposes of this definition, and for purposes of any payment to be made to
the Investor Member on an After-Tax Basis, it shall be assumed that federal,
state and local taxes are payable at the actual effective combined federal and
state statutory corporate income tax rate (taking into account the
deductibility of state income taxes for federal income tax purposes) applicable
to the Investor Member for the Fiscal Year with respect to which the payment is
made, as certified in writing by the Investor Member to the Managing Member.


 


“Agreement” means this Operating Agreement of
the Company, as amended from time to time.


 


“Allocation Regulations” means the Treasury
Regulations issued under Sections 704(b) and 752 of the Code, as the same
may be modified or amended from time to time. In the event that the Allocation
Regulations are revised or amended subsequent to the date of this Agreement,
references herein to sections or paragraphs of the Allocation Regulations shall
be deemed to be references to the applicable sections or paragraphs of the
Allocation Regulations as then in effect.


 


“Applicable Laws” means all federal, state,
municipal and local laws, ordinances, rules, regulations, requirements and all
judgments, decrees, determinations, awards and court orders applicable to the
Company and/or the Project, including, without limitation, usury laws, zoning
ordinances, tax laws and environmental laws.


 


“Applicable
Tax Rate” shall have the meaning set forth in Section 6.2A (ii).


 


“Articles”
shall have the meaning set forth in the Recitals.


 


3





















 


“Asset
Management Fee” means an annual fee in the amount of Ten Thousand Dollars
($10,000) payable to the Investor Member on or before February 15 of each
year (beginning February 15, 2001) for its services in monitoring the
operation of the Company. Any such fees not paid when due shall accrue with
interest at the Designated Prime Rate plus one percent (1%).


 


“Assignee”
means a Person who has acquired from a Member, in accordance with the terms of
this Agreement, a beneficial interest in the Company’s Profits, Losses, Tax
Credits or Distributions, but who is not a substituted Member.


 


“Best Knowledge”
means, in the case of a specified Person, actual knowledge after making due
inquiry and exercising due diligence with respect thereto. In connection
therewith, the knowledge of any general or managing partner, director, officer
or key employee of an Entity shall be deemed to be the knowledge of the Entity.


 


“Building”
means the building that is located at 353-361 West 57th Street in
New York, New York.


 


“Business Day”
means a day of the year on which banks are not required or authorized to close
in the State of New York.


 


“Capital
Account” means an individual capital account maintained for each Member in
accordance with the provisions of Section 4.


 


“Capital
Contribution” means the total amount of cash and the Gross Asset Value of
any property contributed to the Company by each Member pursuant to the terms of
this Agreement (minus any liabilities secured by such contributed property that
the Company assumes or takes subject to). Any reference in this Agreement to
the Capital Contribution of a then Member shall include a Capital Contribution
previously made by any prior Member in respect to the Company Interest of such
then Member.


 


“Capital
Proceeds” means the proceeds of a Capital Transaction.


 


“Capital
Transaction” means, with respect to the Lease or the Project:


 


(i)                                     a sale, assignment, or other disposition
of all or substantially of the Leasehold Interest;


 


(ii)                                  a mortgage financing or refinancing of
all or substantially all of the Leasehold Interest or the Project, but only to
the extent of the Company’s share, if any, of any distributions, fees, loan
repayments, or other amounts arising therefrom;


 


(iii)                               a taking or condemnation by any Governmental Authority
giving rise to Condemnation Proceeds, but only to the extent of the Company’s
share, if any, of such Condemnation Proceeds;


 


(iv)                              the termination of the Lease prior to the
expiration of its term;


 


4





















 


(v)                                 the repayment of all or any portion of
the principal amount of the HTC Loan in connection with a sale of the Project;
or


 


(vi)                              any other transaction generating cash
proceeds to the Company that are not includable in determining Cash Flow.


 


“Cash Flow”
means the excess of Cash Receipts over Project Expenses. Cash Flow shall be
determined separately for each Fiscal Year or portion thereof.


 


“Cash Receipts”
means all Hotel Revenues, rental income, all royalties, franchise and license
fees received by the Company, and any rights to refunds thereof, any and all
proceeds of any insurance, indemnity, warranty or guaranty payable to the
Company from time to time with respect to the Property or any other Company
Property, including insurance against business interruption, rental
interruption, or other loss of income (but excluding any insurance with respect
to a casualty affecting the Building), and any Capital Contributions to the
Company not required to be advanced as the HTC Loan. In addition, any amount withdrawn
from any escrow account or Company Reserve maintained by or for the Company
shall be considered to be a Cash Receipt of the Company for the Fiscal Year in
which such withdrawal occurs. Furthermore, any payment of principal or interest
with respect to the HTC Loan shall be considered a Cash Receipt of the Company
other than any payment in connection with a sale of the Project (which shall
constitute Capital Proceeds) or any payment in connection with a repayment of a
portion of the HTC Loan pursuant to Section 8 of the HTC Loan Agreement
(in which case such repayment shall be applied in accordance with
Section 5.3).


 


“City”
means the City of New York, New York.


 


“Classification
Regulations” means the final Regulations issued under
Section 7701(a)(2) of the Code relating to the classification of
certain business organizations for federal income tax purposes, as amended from
time to time.


 


“Code”
means the Internal Revenue Code of 1986, as amended, and the treasury
regulations promulgated thereunder, and any published rulings, procedures and
notices thereunder.


 


“Company”
means the limited liability company formed pursuant to the provisions of the
Articles and this Agreement.


 


“Company
Property” means all real and personal property owned or leased by the Company.


 


“Company
Reserves” means any and all reserves and escrow accounts maintained by or
for the benefit of the Company for working capital, capital improvements and
similar contingencies relating to the operation, maintenance, repair or
refurbishment of the Project, including, without limitation, the reserve
required to be maintained by the Company pursuant to the provisions of
Section 5.8.


 


5





















 


“Completion
Date” means the date on which the Rehabilitation of the Property has been
“substantially completed.” The Rehabilitation shall be considered to be
“substantially completed” upon satisfaction of the following conditions:


 


(i)            the substantial
completion of the Rehabilitation of the Property including, without limitation,
installation of substantially all appliances, FF&E, in accordance with the
Plans and Specifications and the detailed line-by-line budget for the
Rehabilitation of the Property;


 


(ii)           the issuance of
certificates of occupancy for all of the improvements comprising the Property
by the appropriate Government Authorities, provided, however, that if such
certificates are of a temporary nature, the “Completion Date” shall not be
deemed to have occurred unless the work remaining to be done is of a nature
that would not impair the permanent occupancy of the Building;


 


(iii)          the issuance of
standard A.I.A. certificates of completion for all of the improvements
constituting a part of the Property by the design architect for the
improvements;


 


(iv)          the issuance of a
title report subsequent to the date of the report of the inspecting
architect/engineer showing no mechanic’s or materialman’s liens affecting the
Property (excluding such liens as may be bonded or insured over to the
reasonable satisfaction of the Investor Member), together with such lien
waivers and releases or other evidence as the Lenders reasonably may require to
evidence the substantial completion of the Rehabilitation of the Property;


 


(v)           the issuance of all
necessary governmental permits and approvals for the use, occupancy and
operation of all leased areas within the improvements constituting a part of
the Property and the actual provision of utility services by public utilities;
and


 


(vi)          the Credit
Commencement Date with respect to the Building.


 


“Condemnation
Proceeds” means any and all payments made or due and payable to the Company
from time to time in connection with the requisition, confiscation,
condemnation, seizure or forfeiture of all or any part of the Property by any
Governmental Authority (or any Person acting under color of Governmental
Authority), including any award, including interest thereon, in eminent domain
proceedings for a taking (including any transfer made in lieu of the exercise
of said rights) or for loss of value of or to the Property or for a change in
the grade of any street or other public way. Such term shall include the
Company’s share of any Condemnation Proceeds required to be passed through to
the Company pursuant to the terms of the Lease.


 


“Condominium”
means that condominium created in the Building pursuant to the Condominium
Documents.


 


“Condominium
Documents” means the Amended and Restated Declaration Establishing a Plan
of Condominium Ownership of Premises located at 353-361 West 57th
Street (a/k/a 356


 


6





















 


West 58th
Street) in the Borough of Manhattan, City, County and State of New York,
pursuant to Article 9-B of the Real Property Law of the State of New York
dated as of February 12, 1999, the amendment thereto dated as of
September 30, 1999, and the By-laws of the Condominium association thereby
created and any other documents relating thereto.


 


“Consent of the
Investor Member” means the prior written consent or approval of the
Investor Member (or, if there is more than one Investor Member, of a majority
in interest of the Investor Members), which consent shall not be unreasonably
withheld or delayed.


 


“Cost
Certification” means the date on which the Developer has received (and has
furnished to the Investor Member a copy of ) the written certification of the
Accountants as to the itemized amounts of the rehabilitation and development
costs of the Rehabilitation of the Building and the QRE and the actual Historic
Tax Credit allocable to the Building.


 


“Costs of
Contest” means all direct and indirect costs that the Company and the
Members incur with respect to a contest of a Company tax item without regard to
the prevailing party.


 


“Credit
Commencement Date” means the date on which the Rehabilitation of the
Building is substantially completed and the QRE relating to the Building are
placed in service and otherwise eligible for the Historic Tax Credit.


 


“Deficit
Restoration Obligation” means, for each Member, the sum of (i) any
amounts which such Member is obligated to restore (or is treated as being
obligated to restore) to the Company in accordance with the provisions of
Sections 1.704-l(b)(2)(ii)(c), 1.704-1(b)(2)(ii)(h) or any other
applicable provisions of the Allocation Regulations, (ii) such Member’s Share
of Partnership Minimum Gain if any, and (iii) such Member’s Share of
Member Nonrecourse Debt Minimum Gain, if any.


 


“Depreciation”
means, for each Fiscal Year or other period, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year or other period, except that if the
Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such Fiscal Year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Gross Asset Value as the federal income tax depreciation, amortization, or
other cost recovery deduction for such Fiscal Year or other period bears to
such beginning adjusted tax basis; provided, however, that if the
adjusted basis for federal income tax purposes of an asset at the beginning of
such Fiscal Year is zero, Depreciation shall be determined with reference to
such beginning Gross Asset Value using any reasonable method selected by the
Managing Member.


 


“Designated
Prime Rate” means the prime rate of interest published from time to time in
the Wall Street Journal or other source as the Members may agree,
adjusted as such prime rate adjusts.


 


“Developer”
means Henry Hudson Holdings LLC, a Delaware limited liability company.


 


“Developer
Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP or other
counsel retained by the Company from time to time.


 


7





















 


“Developer
Entity” means the Developer, the Managing Member and any other Affiliate of
the Developer.


 


“Distribution”
means any cash or property which the Company distributes to a Member (in its
capacity as a Member) without consideration, including, without limitation,
distributions of Cash Flow (including the Priority Return) and Capital
Proceeds. A Distribution shall not include (i) a fee or other payment
based on the performance of services or (ii) the repayment of a loan.


 


“Election”
shall have the meaning set forth in Section 2(a) of the HTC Loan
Agreement.


 


“Entity”
means any general partnership, limited partnership, corporation, joint venture,
trust, limited liability company, business trust, cooperative or association.


 


“Environmental
Costs” means all liabilities, sums paid in settlement of claims,
obligations, charges, actions (formal or informal), claims (including, without
limitation, claims for personal injury or for real or personal property damage
related to an environmental condition), liens, taxes, administrative proceedings,
losses, damages (including, without limitation, punitive damages), penalties,
fines, court costs, administrative service fees, response and remediation
costs, stabilization costs, encapsulation costs, treatment, storage or disposal
costs, groundwater monitoring or environmental study, sampling or monitoring
costs, other causes of action, and any other costs and reasonable expenses
(including, without limitation, reasonable attorneys’, experts’, and
consultants’ fees and disbursements and investigating, laboratory and data
review fees) imposed upon or incurred by any Person (whether or not indemnified
against by any other party) as a result of any Environmental Laws.


 


“Environmental
Laws” means the Hazardous Materials Transportation Act, 49 U.S.C.
§ 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. §
6901 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, as amended by the Superfund Amendments and Reauthorization Act,
42 U.S.C. § 9601 et seq., and/or the Toxic Substances Control Act, 15
U.S.C. § 2601 et seq., each as amended from time to time and any other
federal, state, or local statute, code, ordinance, rule, regulation, permit,
consent, approval, license, judgment, order, writ, judicial decision, common law
rule, decree, agency interpretation, injunction or other authorization or
requirement whenever promulgated, issued, or modified, including the
requirement to register underground storage tanks, relating to:


 


(i)            emissions,
discharges, spills, releases, or threatened release of pollutants,
contaminants, Hazardous Substances (as hereinafter defined), materials
containing Hazardous Substances, or hazardous or toxic materials or wastes into
ambient air, surface water, groundwater, watercourses, publicly or privately
owned treatment works, drains, sewer systems, wetlands, septic systems or onto
land; or


 


(ii)           the use, treatment,
storage, disposal, handling, manufacturing, transportation, or shipment of
Hazardous Substances, materials containing Hazardous Substances or hazardous
and/or toxic wastes, material, products, or by-products (or of equipment or
apparatus containing Hazardous Substances).


 


8





















 


“Event of
Bankruptcy” or “Bankruptcy” means, as to a specified Person:


 


(i)            the entry of a
decree or order for relief by a court having jurisdiction in the premises in
respect of such Person in an involuntary case under the federal bankruptcy
laws, as now or hereafter constituted, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar official) of
such Person or for any substantial part of his property, or ordering the
winding-up or liquidation of his affairs and the continuance of any such decree
or order unstayed and in effect for a period of 90 consecutive days; or


 


(ii)           the commencement by
such Person of a voluntary case under the federal bankruptcy laws, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or other similar law, or the consent by him to the
appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator (or similar official) of such Person or for
any substantial part of his property, or the making by him of any assignment
for the benefit of creditors, or the taking of action by the Person in
furtherance of any of the foregoing.


 


“Filing Office”
means the Office of the Department of State of the State.


 


“Final
Determination” means the earliest to occur of (i) the date on which a
decision, judgment, decree or other order has been issued by any court of
competent jurisdiction, which decision, judgment, decree or other order has
become final (i.e., all allowable appeals requested by the parties to the
action have been exhausted), (ii) the date on which the IRS (or, if
applicable, any state or local taxing authority) has entered into a binding
agreement with the Company with respect to such issue or on which the IRS (or
such state or local taxing authority) has reached a final administrative or
judicial determination with respect to such issue which, whether by law or
agreement, is not subject to appeal, (iii) the date on which the time for
instituting a claim for refund has expired, or if a claim was filed the time
for instituting suit with respect thereto has expired with no such suit having
been filed, or (iv) the date on which the applicable statute of
limitations for raising an issue regarding a federal (or, if applicable, a
state or local) income tax matter with respect to the Company has expired with
such issue not having been raised.


 


“First Lender”
means Corus Bank N.A., or another commercial lender providing permanent first
mortgage financing for the Building from time to time.


 


“First Loan”
means the mortgage loan from the First Lender to the Developer secured by a
first priority mortgage on the Building.


 


“First Loan
Documents” means the First Note, the First Mortgage, the loan agreements
and all other documents executed in connection with the First Loan.


 


“First Mortgage”
means the Mortgage granted by the Developer to the First Lender, as security
for the obligations of the Developer under the First Note.


 


9





















 


“First Note”
means the two promissory notes in the aggregate original principal amount of
$80,000,000 dated September 30, 1999 from the Developer to Corus Bank N.A.
or any promissory note to any successor First Lender


 


“Fiscal Year”
means the twelve-month period which begins on the first day of January (or
the Admission Date in 2000) and ends on the thirty-first day of
December of each calendar year (or ends on the date of final dissolution
for the year in which the Company is wound up and dissolved).


 


“FF&E”
means any and all “furniture, furnishings, and equipment,” as such term is
commonly understood in the hotel industry, of the Hotel and owned by the
Developer or the Company), including any and all: fixtures, furnishings,
equipment, furniture, and other items of tangible personal property now or
hereafter located in, on or at the Property or in the Hotel or used in
connection with the use, occupancy, operation, promotion, marketing, repair, or
maintenance of all or any part of the Property, other than stocks of food and
other supplies held for consumption in normal operation; appliances; machinery,
equipment; athletic equipment (including weight machines, stair machines
stationary bicycles, dumbbells, free weights, treadmills, and all other
exercise equipment of whatever form); bicycles, carts; signs; artwork
(including paintings, prints, graphics, sculpture, and other artwork, of any
kind); office furnishings and equipment; guest room furniture and furnishings;
and specialized equipment for kitchens, laundries, bars, restaurant, public
rooms, and health and recreational facilities; linens; dishware; two-way
radios; telephones; switchboards; switching equipment and machines; satellite
dishes; partitions, screens, awnings, shades, blinds, and floor coverings; hall
and lobby equipment; heating, lighting, plumbing, ventilating, refrigerating,
and incinerating equipment; elevators; escalators; air conditioning and
communications machines, plans or systems with appurtenant fixtures; vacuum cleaning
systems; call or beeper systems; security systems; sprinkler systems and other
fire prevention and extinguishing apparatus and materials; all computer, data
processing and related equipment, including peripherals, diskettes, manuals,
hand-held data entry units, and network wiring, cabling, peripherals, and
equipment; antennas; all equipment, manual, mechanical or motorized, for the
construction, maintenance, repair and cleaning of parking areas, walks,
underground ways, truck ways, driveways, common areas, roadways, highways and
streets; ducts; building supplies wherever located; tools; all vehicles used or
useful in operation of the Hotel; all marketing materials, videotapes,
promotional materials, brochures, and presentations used or useful in marketing
and promotion of the Hotel.


 


“Force Majeure”
means any delay or failure in performance caused by acts beyond a Person’s
reasonable control, including, without limitation, acts of God, war, vandalism,
sabotage, accidents, fires, floods, strikes, labor disputes, mechanical
breakdown, shortages or delays in obtaining suitable parts or equipment,
material, labor, or transportation, acts of subcontractors, interruption of
utility services, acts of any Governmental Authority, or any similar cause.


 


“GAAP”
means generally accepted accounting principles as in effect from time to time.


 


“Governmental
Authority” means any state, federal, local, municipal or other governmental
authority, agency, or licensing authority of any kind whatsoever, including any
so-called “business improvement district” or similar Entity or organization.


 


10





















 


“Gross Asset
Value” means, with respect to any asset, the asset’s adjusted basis for
federal income tax purposes, except as follows:


 


(i)            The initial Gross
Asset Value of any asset contributed by a Member to the Company shall be the
gross fair market value of such asset, as determined by the contributing Member
and the Company;


 


(ii)           The Gross Asset
Values of all Company assets shall be adjusted to equal their respective gross
fair market values, as determined by the Managing Member, as of the following
times: (a) the acquisition of an additional interest in the Company by any
new or existing Member in exchange for more than a de minimis
Capital Contribution; (b) the distribution by the Company to a Member of
more than a de minimis amount of Company property as
consideration for an interest in the Company; and (c) the liquidation of
the Company within the meaning of Section 1.704-l(b)(2)(ii)(g) of the
Allocation Regulations; provided, however, that the adjustments
pursuant to clauses (a) and (b) above shall be made only if the
Managing Member reasonably determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Members in the
Company;


 


(iii)          The Gross Asset
Value of any Company asset distributed to any Member shall be the gross fair
market value of such asset on the date of distribution; and


 


(iv)          The Gross Asset
Values of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of such assets pursuant to Code
Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Section 1.704-l(b)(2)(iv)(m) of the Allocation Regulations and
Section 4.3 hereof; provided, however, that Gross Asset
Values shall not be adjusted pursuant to this clause (iv) to the extent
the Managing Member determines that an adjustment pursuant to clause
(ii) hereof is necessary or appropriate in connection with a transaction
that would otherwise result in an adjustment pursuant to this clause (iv).


 


If the Gross Asset
Value of an asset has been determined or adjusted pursuant to Section (i),
(ii) or (iv) hereof, such Gross Asset Value shall thereafter be
adjusted by the Depreciation taken into account with respect to such asset for
purposes of computing Profits or Losses.


 


“Guaranty
Agreement” means the Guaranty Agreement, dated as of the date hereof, by
Ian Schrager Hotels LLC in favor of the Investor Member.


 


“Hazardous
Substances” means (i) hazardous materials, hazardous wastes, and
hazardous substances as those terms are defined under any applicable
Environmental Laws, (ii) petroleum and petroleum products including crude
oil and any fractions thereof, (iii) natural gas, synthetic gas, and any
mixtures thereof, (iv) asbestos and/or any material which contains any
hydrated mineral silicate, including but not limited to chrysolite, amosite,
crocidolite, tremolite, anthophylite, and/or actinolite, whether friable or
non-friable, (v) PCBs, or PCB-containing materials or fluids,
(vi) radon, (vii) any other hazardous, radioactive, toxic, or noxious
substance, materials, pollutant, or solid, liquid or gaseous waste, and
(viii) any substance with respect to


 


11





















 


which a federal, state or
local Agency requires environmental investigation, monitoring, or remediation.


 


“Historic
Credit Adjustment” shall have the meaning set forth in Section 5.3B.


 


“Historic
Credit Determination” shall have the meaning set forth in
Section 5.3A.


 


“Historic Tax
Credit” means the tax credit allowable pursuant to Section 47 of the
Code for qualified rehabilitation expenditures incurred in connection with the
“certified rehabilitation” of a “qualified rehabilitated building”
first placed in service prior to 1936.


 


“Hotel”
means the hotel to be known as the Hudson Hotel, with approximately 825
guestrooms in the Building together with the related single room occupancy
space and commercial space, that will result from the Rehabilitation of the
Property.


 


“Hotel
Management Agreement” means (i) the Property Management Agreement,
dated as of September 30, 1999, by and between the Developer and the Hotel
Manager, as such agreement may be amended, modified, or supplemented and in
effect from time to time and assigned to and assumed by the Company;
(ii) any and all license agreements and other agreements relating to the
Hotel Manager’s operation of any bar and restaurant facilities located in or at
the Hotel; and (iii) any future management agreement with any future
manager of the Hotel.


 


“Hotel Manager”
means Ian Schrager Hotel Management LLC, a New York limited liability company,
or another hotel manager or operator selected by the Company, and its
successors.


 


“Hotel Revenues”
means all fees, charges, accounts, and/or other payments for the use or
occupancy of rooms and other public facilities in the Hotel, together with the
right to receive such fees, charges, accounts, or other payments, and including
fees, charges, accounts, and/or other payments (whether received directly by
the Company or indirectly through payments to the Company made pursuant to the
terms of the Hotel Management Agreement but excluding any such payments to
third-party subtenants or licensees), including, without limitation, those
arising from the following: (i) sale of food and beverages at the Hotel,
whether in a restaurant, through “room service” dining, or through banquets,
catering facilities, and services; (ii) sales of food and beverages from
mini-bar facilities in guest rooms; (iii) laundry, vending machine and
telecommunications receipts, whether billed to a Hotel guest or collected in
cash; (iv) use, rental, occupancy or licensing of hotel rooms, hotel
suites, conference rooms, meeting rooms, ballrooms, and other rooms and
facilities; (v) operation of health club, personal care and other
facilities located in, on or at the Hotel; (vi) incidental charges to
Hotel guests or other users or customers; (vii) any other charges of any
kind, for the direct or indirect benefit of the Hotel Manager or the Company,
that appear on any bill or statement rendered to any Hotel guest or other user
or customer of the Hotel or are otherwise collected from or paid by any such
Person (net of refunds); (viii) any payments of any kind from credit card
companies, travel agents, or reservation systems or services relating to the
Hotel; and (ix) charges for the parking of cars (whether “self-parking” or
“valet parking”) at or near the Hotel.


 


12





















 


“HTC Loan”
means the loan from the Company to the Developer to be funded with a portion of
the Investor Member’s Capital Contributions.


 


“HTC Loan Agreement”
means the HTC Loan Agreement, of even date herewith, by and between the Company
and the Developer, as amended.


 


“HTC Loan
Documents” means the HTC Loan Agreement, the HTC Note, the HTC Loan
Guaranty, and all other documents and instruments executed and/or delivered in
connection with the HTC Loan.


 


“HTC Loan
Guaranty” means the Guaranty of even date herewith by Ian Schrager Hotels
LLC in favor of the Company, as amended.


 


“HTC Note”
means the promissory note of even date herewith evidencing the obligation of
the Developer to repay the HTC Loan.


 


“Incentive
Management Fee” means the fee payable to the Managing Member pursuant to
the provisions of Section 7.5 and the Supplemental Management Agreement.


 


“Installment”
means an installment of the Capital Contribution of the Investor Member to the
Company, as more fully described in the Investor Note.


 


“Interest”
means the interest of a Member in the Company, including, without limitation,
its interest in the assets, capital, Profits or Losses, cash distributions and
Tax Credits of the Company.


 


“Investor
Member” means Chevron TCI, Inc., a California corporation, for so long
as it is a Member of the Company and owns an interest in the Company, or any
other Person who is admitted as an Investor Member of the Company and shown on
the books and records of the Company as a substituted Investor Member at the
time of reference thereto. If at any time there is more than one Investor
Member, the term “Investor Member,” as used herein, shall mean all such Investor
Members.


 


“Investor Note”
means the recourse non-interest bearing promissory note evidencing the
obligation of the Investor Member to make the deferred installments of its
Capital Contributions to the Company. A copy of the Investor Note is attached
hereto as Exhibit A.


 


“Investor
Security Agreement” means the meaning set forth in Section 5.1.


 


“IRS” means
the Internal Revenue Service.


 


“Land”
means the parcel of real estate on which the Building is located.


 


“Lease”
means the Lease of even date herewith between the Developer, as Landlord, and
the Company, as Tenant.


 


“Leasehold
Interest” means the Company’s leasehold interest as the Tenant under the
Lease.


 


13





















 


“Leasehold
Mortgage” means any Mortgage granted by the Company to a Lender and secured
in whole or in part by a collateral assignment of the Leasehold Interest.


 


“Lender”
means the First Lender, the Second Lender or any other lender making a loan to
the Developer pursuant to the Mortgage Loan Documents; the term “Lenders”
shall mean all such lenders. Such term also shall include any lender that makes
a loan to the Company secured by a Leasehold Mortgage.


 


“Managing
Member” means HMM and any other Managing Member appointed or admitted in
accordance with the terms of this Agreement. If at any time the Company has
more than one Managing Member, the term “Managing Member” shall mean and
include all the Managing Members.


 


“Master Leases”
means the Lease dated February 11, 1999 of the tenth floor of the Building
from Irving Schatz to Ian Schrager Hotels LLC, as assigned to the Developer,
and the Lease dated January    , 1999 of a portion of the ground
floor of the Building from Adrienne Schatz and Cheryl Hirsch to the Developer,
as amended as of September 30, 1999.


 


“Material
Default” means the occurrence of any of the following events if the event
has a material adverse effect on the Investor Member:


 


(i)            a material breach
by the Managing Member in the performance of any of its material obligations
under this Agreement;


 


(ii)           a Terminating Event
as to the Managing Member or an Event of Bankruptcy as to the Company;


 


(iii)          a material
violation by the Managing Member of its fiduciary duties as the Managing Member
of the Company;


 


(iv)          a violation by the
Managing Member of any Applicable Laws which has a material adverse effect on
the Company or the Project;


 


(v)           a breach by the
Company or the Managing Member under any Operating Document or other agreement
or document affecting the Company or the Project which has a material adverse
effect on the Company;


 


(vi)          the inability (for
any reason) of the Company to claim at least 30% of the Projected Credit;


 


(vii)         the failure of the
Developer to achieve the Completion Date of the Building by December 31,
2000 other than as a result of Force Majeure;


 


(viii)        the commencement of
foreclosure proceedings against the Project that would result in the
termination of the Lease or otherwise would have a material adverse impact on
the Company or the Investor Member and that are not dismissed within thirty
(30) days of such commencement;


 


14





















 


(ix)           the inability of
the Managing Member to deliver a Payment Certificate under Section 5.2
which continues for a period of six (6) months following the date on which
a payment is otherwise due under the Investor Note if such delay causes a
material adverse effect for the Company;


 


(x)            a failure by the
Managing Member to comply with the provisions of Section 5.8;


 


(xi)           the termination of
the Lease prior to the expiration of its term for any reason other than
(i) as provided in Section 2.3, 16 or 17 thereof or (ii) as the
result of a default by the Company thereunder; or


 


(xii)          the termination of
the Hotel Management Agreement as a result of a default by the Managing Member
(acting directly or in the name and on behalf of the Company) or any of its
Affiliates unless, within five (5) Business Days following such
termination, the Hotel Manager is replaced with another operator reasonably
acceptable to the Investor Member, provided, however, that no default shall
exist under this clause (xii) if the Managing Member can demonstrate to the
reasonable satisfaction of the Investor Member that the termination of the
Hotel Management Agreement has not caused any material disruption in the day to
day operations of the Hotel or otherwise does not have (and is not reasonably
expected to have) a material adverse impact on the business and operations of
the Company.


 


“Members”
means Investor Member and the Managing Member and/or any other Person admitted
to the Company from time to time as a Member in accordance with the terms of
this Agreement.


 


“Mortgage”
means the First Mortgage, the Second Mortgage and/or any subordinate mortgage,
as the context may require. In case any Mortgage is replaced by any subsequent
mortgage or mortgages such term shall refer to any such subsequent mortgage or
mortgages. The term “mortgage” means any mortgage, mortgage deed, deed of
trust, deed to secure debt or any similar security instrument, and “foreclose”
and words of like import include the exercise of a power of sale under a
mortgage or comparable remedies.


 


“Mortgage Loan”
means the First Loan, the Second Loan and/or any permitted subsequent loan
replacing the same.


 


“Mortgage Loan
Documents” means the First Loan Documents, the Second Loan Documents, and
any subsequent documents executed and/or delivered in connection with a
Mortgage Loan.


 


“Mortgage Note”
means the First Note, the Second Note and any subsequent promissory note that
evidences a Mortgage Loan.


 


“Nonrecourse
Debt or Nonrecourse Liability” means any indebtedness for which none of the
Members has any economic risk of loss other than through his or its interest in
the Company


 


15





















 


Property securing
such indebtedness, as defined in Section 1.704-2(b)(3) of the
Allocation Regulations.


 


“Nonrecourse
Deductions” shall have the meaning set forth in Section 1.704-2(b)(1)
of the Allocation Regulations.


 


“Operating
Deficit” means, for any specified period of time, the amount by which Cash
Receipts is less than the amount necessary to pay all Project Expenses.


 


“Operating
Documents” means the Lease, the Hotel Management Agreement, the Subleases,
the HTC Loan Documents, and all other documents or instruments executed and/or
delivered in connection with the Lease and the pass-through of the Historic Tax
Credit to the Company under Section 50(d) of the Code.


 


“Operating
Profits or Losses” means, for any Fiscal Year, the Profits or Losses of the
Company for that year as determined for federal income tax purposes by the
Accountants with the adjustments described in the definition of “Profits or
Losses,” excluding Profits or Losses from a Capital Transaction and determined
without regard to any adjustments to basis pursuant to Sections 734 or 743 of
the Code.


 


“Partner
Nonrecourse Debt” shall have the meaning set forth in
Section 1.704-2(b)(4) of the Allocation Regulations.


 


“Partner
Nonrecourse Debt Minimum Gain” shall have the meaning set forth in Sections
1.704-2(i)(2) and (3) of the Allocation Regulations.


 


“Partner
Nonrecourse Deductions” shall have the meaning set forth in Sections
1.704-2(i)(1) and 1.704-2(i)(2) of the Allocation Regulations.


 


“Partnership
Minimum Gain” shall have the meaning set forth in
Section 1.704-2(d) of the Allocation Regulations.


 


“Percentage
Interest” means the percentage interest of each of the Members in the
Company as reflected in the Schedule.


 


“Permits”
means all licenses, permits, variances and certificates used in connection with
the ownership, operation, construction, renovation, rehabilitation, alteration,
development, public assembly, use or occupancy of or other activities on the
Property (including liquor licenses, business licenses, state health department
licenses, two-way radio licenses, licenses to conduct business and all such
other permits, licenses and rights, obtained from any Governmental Authority or
private person concerning the foregoing).


 


“Person”
means any individual or Entity, and the heirs, executors, administrators, legal
representatives, successors and assigns of such Person where the context so
admits; and, unless the context otherwise requires, the singular shall include
the plural, and the masculine gender shall include the feminine and the neuter
and vice versa.


 


16





















 


“Plans and
Specifications” means the plans and specifications for the Rehabilitation
of the Building approved by the Lender, including, without limitation,
specifications for materials, and all amendments and modifications thereof.


 


“Premises”
means the Project.


 


“Priority
Return” means a cumulative annual Distribution to the Investor Member (pro
rated for periods of less than a full year) of an amount equal to three percent
(3%) of its Adjusted Capital Contribution beginning in 2000 for the Fiscal Year
ending on December 31, 2000, payable from Cash Flow or Capital Proceeds in
the manner set forth in Section 6.2. Any Priority Return not paid
currently shall bear interest from the date due until the date paid at the
Designated Prime Rate plus one percent (1%).


 


“Profits or
Losses” means, for each Fiscal Year or other period, an amount equal to the
Company’s taxable income or loss for such Fiscal Year or period, determined in
accordance with Section 703(a) of the Code (for this purpose, all
items of income, gain, loss, or deduction required to be stated separately
pursuant to Section 703(a)(1) of the Code shall be included in taxable
income or loss), with the following adjustments:


 


(i)            Any items described
in Sections 705(a)(1)(B) and 705(a)(1)(C) of the Code which are not
otherwise taken into account in computing Profits or Losses shall be added to
such taxable income or loss.


 


(ii)           Any expenditures of
the Company described in Section 705(a)(2)(B) of the Code or treated
as Section 705(a)(2)(B) expenditures pursuant to
Section 1.704-1(b)(2)(iv)(i) of the Allocation Regulations, and not
otherwise taken into account in computing Profits or Losses, shall be subtracted
from such taxable income or loss.


 


(iii)          Gain or loss
resulting from any disposition of Company Property with respect to which gain
or loss is recognized for federal income tax purposes shall be computed by
reference to the Gross Asset Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its Gross Asset
Value.


 


(iv)          In the event of a
distribution of Company assets to a Member (whether in connection with a
liquidation or otherwise), or in the event the Gross Asset Value of any Company
asset is adjusted upon the acquisition of an additional interest in the
Company, unrealized income, gain, loss and deduction inherent in such
distributed or adjusted assets (not previously reflected in Capital Accounts)
shall be allocated pursuant to Section 6.1 hereof as if there had been a
taxable disposition of such distributed or adjusted assets at fair market
value.


 


(v)           In lieu of the
depreciation, amortization, and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into
account Depreciation for such Fiscal Year or other period, computed in
accordance with the definition of “Depreciation” set forth herein.


 


17





















 


(vi)          Notwithstanding any
other provision of this definition, any items which are specially allocated
pursuant to Section 6.5 hereof shall be taken into account in computing
Profits or Losses only if required under the applicable provisions of the Code
and Allocation Regulations.


 


“Profits or
Losses from a Capital Transaction” means the Profits or Losses, if any,
recognized by the Company as a result of a Capital Transaction, as determined
for federal income tax purposes by the Accountants with the adjustments
described in the definition of “Profits or Losses,” but without regard to any
adjustments to basis pursuant to Section 734 and 743 of the Code.


 


“Project”
means the Property following the completion of the Rehabilitation.


 


“Project
Documents” means the construction contract for the Building, the Operating
Documents, the Mortgage Loan Documents, the Master Leases, the Condominium
Documents, and all other documents relating to the Property which are required
by, or have been executed in connection with, any of the foregoing documents.


 


“Project
Expenses” means all operating and other costs and expenses of the Company
determined on a cash basis during the Fiscal Year (excluding Distributions to
Members), including, without limitation, payment of operating expenses, payment
of rent due under the Lease, payment of principal and interest as due on any
indebtedness of the Company (other than payments of principal and interest on
Project Expense Loans), the costs of any necessary repairs, replacements and
restoration of the Project, amounts allocated to Company Reserves, the payment
of fees (other than the Incentive Management Fee), payment of fees and expenses
of Developer Counsel and Special Counsel and any other costs or expenses
designated herein as “Project Expenses,” but not including any and all
depreciation and amortization deductions and any other non-cash items.


 


“Project
Expense Loans” shall have the meaning set forth in Section 5.5.


 


“Projected
Credit” means $9,372,739, the aggregate amount of Historic Tax Credit
projected to be allocated to the Investor Member, as reflected in the
Projections.


 


“Projections”
means the Financial Projections attached hereto as Exhibit G.


 


“Property”
means the Company’s interest in the Land and the Building.


 


“Purchase
Agreement” means the Purchase Agreement dated of even date herewith by and
between the Managing Member and the Investor Member.


 


“QRE” means
“qualified rehabilitation expenditures” as such term is defined in
Section 47(c)(2) of the Code.


 


“Qualified
Counsel” shall have the meaning set forth in the HTC Loan Agreement.


 


“Recapture
Adjustment Amount” shall have the meaning set forth in Section 5.3G.


 


18





















 


“Recapture
Event” shall be deemed to occur if, at any time during the recapture period
for the Historic Tax Credit set forth in Section 50 of the Code, any event
(other than a recapture arising solely as a result of the acts or omissions of
the Investor Member) shall occur that results in the recapture of Historic Tax
Credits under the Code.


 


“Regulations”
means the rules and regulations applicable to the Project or the Company
of the City, the State, and any other Governmental Authority having
jurisdiction.


 


“Regulatory Allocations” means the allocations
set forth in Sections 6.5A through 6.5G hereof.


 


“Rehabilitation”
means the development, construction, renovation, and rehabilitation work on the
Building described in the Plans and Specifications.


 


“Related Person” shall have the meaning set
forth in Section 1.752-4(b) of the Allocation Regulations.


 


“Requisite Approvals” means the approval or
consent of any Lender, Governmental Authority or other Person, to the extent
required pursuant to the terms of any of the Operating Documents.


 


“Routine Operating Credit” means routine
unsecured short-term extensions of credit (including equipment leases) made in
the ordinary course by the Company arising from the operations of the Hotel as
contemplated by the Operating Documents in the ordinary course of business in
accordance with prior practice of the Company, the Developer or its Affiliates
or industry practice, provided that, except in the case of equipment leases,
such extensions of credit (i) shall at no time exceed in the aggregate
$4,000,000; (ii) shall be repaid within 120 days after the date incurred;
and (iii) shall not be evidenced by a promissory note.


 


“Schedule”
means Schedule A attached hereto (as it may be amended from time to time).


 


“Second Lender” means Starwood Financial Trust
or another commercial lender providing permanent second mortgage financing for
the Building from time to time.


 


“Second Loan” means the mortgage loan from the
Second Lender to the Developer secured by a second priority mortgage on the
Building.


 


“Second Loan Documents” means the Second Note,
the Second Mortgage, the loan agreement and all other documents executed in
connection with the Second Loan.


 


“Second Mortgage” means the Mortgage granted by
the Developer to the Second Lender as security for the obligations of the
Developer under the Second Note.


 


“Second Note” means the promissory note in the
original principal amount of $30,000,000 dated as of September 30, 1999
from the Developer to Starwood Financial Trust.


 


19





















 


“Share of
Partner Nonrecourse Debt Minimum Gain” means, for each Member, an amount
equal to such Member’s “share of partner nonrecourse debt minimum gain,”
determined in accordance with the provisions of
Section 1.704-2(i)(5) of the Allocation Regulations.


 


“Share of
Partnership Minimum Gain” means, for each Member, an amount equal to such
Member’s “share of partnership minimum gain,” determined in accordance with the
provisions of Section 1.704-2(g) of the Allocation Regulations.


 


“Special
Class Member” shall mean a Managing Member whose Interest has been
reclassified pursuant to the provisions of Section 10.4B.


 


“Special
Counsel” means Holland & Knight LLP, of Boston, Massachusetts.


 


“Special Sale
Distribution” means, (i) in the case of the Investor Member, an amount
equal to twenty-five percent (25%) of the Investor Member’s Adjusted Capital
Contribution; and (ii) in the case of the Managing Member, an amount equal
to the excess of (A) the excess of the Special Sale Proceeds over
(B) the sum of (x) the Special Sale Distribution to the Investor Member
plus (ii) the total amounts distributable pursuant to Section 6.2B First
through Fifth.


 


“Special Sale
Proceeds” means the sum of any lease termination payment and HTC Loan
repayment received by the Company pursuant to the terms of the HTC Loan
Documents upon a sale of the Project or other direct or indirect transfer of
Developer’s interest in the Project and termination of the Lease.


 


“Special Tax
Distribution” shall have the meaning set forth in Section 6.2A (iii).


 


“State”
means the State of New York.


 


“Subleases”
means the leases by the Company of commercial space and long-term residential
space in the Building as listed in the Lease.


 


“Substitute
Member” shall have the meaning set forth in Section 11.3A.


 


“Supplemental
Management Agreement” shall have the meaning set forth in
Section 7.5A.


 


“Syndication
Expenses” means all expenditures classified as syndication expenses
pursuant to Treasury Regulation Section 1.709-2(b).  Syndication Expenses shall be taken into
account under this Agreement at the time they would be taken into account under
the Company’s method of accounting if they were deductible expenses.


 


“Tax” or “Taxes”
means any and all liabilities, losses, expenses and costs that are, or are in
the nature of, taxes, fees or other governmental charges, including interest,
penalties, fines and additions to tax imposed by any Governmental Authority.


 


“Tax
Certificate” means the certificate as to certain tax matters attached
hereto as Exhibit D.


 


20





















 


Tax Credit. The Historic Tax Credit available to the Company
under applicable provisions of the Code.


 


“Tax
Indemnity Payment” shall have the meaning set forth in Section 5.3.


 


“Terminating
Capital Transaction” means a Capital Transaction resulting in or involving
the termination and winding up of the business of the Company or any other
event resulting in the “liquidation” of the Company within the meaning of
Section 1.704-1(b)(2)(ii)(g) of the Allocation Regulations.


 


“Terminating Event” means the Bankruptcy or
dissolution of a Managing Member or the voluntary or involuntary withdrawal of
a Managing Member from the Company. Involuntary withdrawal shall occur whenever
a Managing Member may no longer continue as a Managing Member by law or
pursuant to any terms of this Agreement.


 


“Transfer” means any sale, exchange,
assignment, encumbrance, hypothecation, pledge, foreclosure, conveyance in
trust, gift or other transfer of any kind, whether direct or indirect,
voluntary or involuntary other than as a direct consequence of a Terminating
Event. When used as a verb, such term shall mean, voluntarily or involuntarily,
to sell, exchange, assign, encumber, hypothecate, pledge, foreclose, convey in
trust, give or otherwise transfer.


 


“Uniform
System of Accounts” means the Uniform System of Accounts for Hotels, 9th
Edition, International Association of Hospitality Accountants (1986), as
amended from time to time.


 


21


















 


SECTION 2: FORMATION


 


Section 2.1.                                   Formation


 


The Members hereby agree to form the Company pursuant to the provisions
of the Act and this Agreement.


 


Section 2.2.                                   Name and Office; Service of Process


 


A.                                   The
Company shall be conducted under the name “Hudson Leaseco LLC.” The principal
office of the Company shall be c/o Ian Schrager Hotels LLC, 475 Tenth Avenue, 11th
Floor, New York, NY 10018, Attention: Ian Schrager. The Managing Member may at
any time change the location of such office and shall give due notice of any
such change to the Investor Member. The Company’s registered agent for service
of process shall be the Secretary of State of the State of New York.


 


B.                                     The Managing Member shall, to the extent
required by law, cause an amendment to the Articles to be filed in the Filing
Office to reflect the terms of this Agreement and shall take any and all other
actions reasonably necessary to perfect and maintain the status of the Company as
a limited liability company under the laws of the State and under the laws of
New York. The Managing Member shall cause further amendments to the Articles to
be filed whenever required by the Act. Such amendments may be executed by any
Managing Member or by any Person designated in the amendment as a new Managing
Member.


 


C.                                     In addition to any other limitation or
restriction contained herein on the activities of the Company, the Company
shall not, without the Consent of the Investor Member, engage in any business
or activity outside the State of New York. The Managing Member shall hold the Investor
Member and its Affiliates harmless from and against any Adverse Consequence
that it (or any of them) may incur in connection with any claim that the
Investor Member, or any of its Affiliates, is liable for obligations of the
Company for causes of action arising in another state as a result of business
done or actions taken in such other state by the Company in contravention of the
provisions of this Section 2.2C, to the extent that such Adverse
Consequences arise directly and solely from the gross negligence or willful
acts or omissions of the Managing Member.


 


Section 2.3.                                   Purpose


 


The sole purpose of the Company is to lease, hold, maintain, and
operate the Project, as a hotel and restaurants and residential and commercial
space, together with such other activities as may be necessary or advisable in
connection with the operation of the Project. Notwithstanding anything
contained herein to the contrary, the Company shall not engage in any business,
and it shall have no purpose, unrelated to the Project and shall not acquire
any real property or own assets other than those related to the Project and/or
otherwise in furtherance of the purposes of the Company. The Company shall have
no indebtedness or incur any liability other than (i) debts and
liabilities for trade payables and accrued expenses incurred in the ordinary
course of business of operating the Project and other Routine Operating Credit,
and (ii) the obligations reflected in the Operating Documents.


 


22





















 


Section 2.4.                                   Authorized Acts


 


A.                                   In furtherance of its purposes, but subject
to all other provisions of this Agreement including, but not limited to,
Section 3 and Section 7, the Company is hereby authorized:


 


(i)                                     To acquire by purchase, lease or otherwise
any real or personal property which may be necessary, convenient or incidental
to the accomplishment of the purposes of the Company;


 


(ii)                                  To construct, reconstruct, rehabilitate,
operate, maintain, finance and improve, and to own, sell, convey, assign,
mortgage or lease any real estate and any personal property necessary,
convenient or incidental to the accomplishment of the purposes of the Company;


 


(iii)                               To borrow money and issue evidences of
indebtedness in furtherance of any or all of the purposes of the Company, and
to secure the same by mortgage, pledge or other lien on the Project or any
other assets of the Company, to the extent permitted by the Operating
Documents, provided, however, that, without the Consent of the Investor Member,
the Company shall not incur any additional debt other than trade payables and
similar items incurred in the ordinary course of business and other Routine
Operating Credit and any debt reflected in the Operating Documents;


 


(iv)                              To prepay in whole or in part, refinance,
recast, increase, modify or extend any Leasehold Mortgage or any other
mortgages affecting the Project and in connection therewith to execute any
extensions, renewals, or modifications of any Leasehold Mortgage or any such other
mortgages secured by the Leasehold Interest;


 


(v)                                 To enter into, perform and carry out,
contracts of any kind, including contracts with Affiliates of a Member,
necessary to, in connection with or incidental to, the accomplishment of the
purposes of the Company, specifically including, but not limited to, the
execution and delivery of all agreements, certificates, instruments or
documents required by any Governmental Authority or Lender in connection with
the leasing, improvement, maintenance and operation of the Project;


 


(vi)                              To enter into and perform the Project
Documents to which it is a party;


 


(vii)                           To employ any Person, including an Affiliate,
to perform services for, or to sell goods to, the Company (including without
limitation, management, architectural, engineering, accounting and legal
services) and to pay for such goods and services; provided that (except with
respect to any contract specifically authorized by this Agreement) the terms of
any such transaction with an Affiliate shall satisfy the requirements of Section 7.4J
of this Agreement;


 


(viii)                        To modify or amend the terms of any agreement
or contract which the Managing Member is authorized to enter into on behalf of
the Company; provided, however, that, without the Consent of the Investor
Member, such terms as amended shall


 


23





















 


not (i) have a material adverse effect on the Company or the
Investor Member, or (ii) be in contravention of any of the terms or
conditions of this Agreement or the Operating Documents;


 


(ix)                                To execute contracts with Governmental
Authorities;


 


(x)                                   To make the HTC Loan and to execute and
deliver the HTC Loan Documents; and


 


(xi)                                To enter into any kind of activity and to
perform and carry out contracts of any kind necessary to, or in connection
with, or incidental to, the accomplishment of the purposes of the Company, so
long as said activities and contracts may be lawfully carried on or performed
by a limited liability company under the laws of the State.


 


Section 2.5.                                   Term and Dissolution


 


A.                                   The Company shall continue in full force and
effect until December 31, 2050, except that the Company shall be dissolved
prior to such date upon the happening of any of the following events:


 


(i)                                     The termination of the Lease or the sale or
other disposition of all or substantially all the assets of the Company
(including, without limitation, the Leasehold Interest);


 


(ii)                                  The occurrence of a Terminating Event if the
Members elect not to continue the business of the Company pursuant to the
provisions of Section 10;


 


(iii)                               The election to dissolve the Company made in
writing by the Managing Member with the Consent of the Investor Member and, if
required, any Requisite Approvals; or


 


(iv)                              The entry of a final decree of dissolution of
the Company by a court of competent jurisdiction.


 


B.                                     The Company shall not terminate solely as a
consequence of the Bankruptcy, insolvency, appointment of a receiver,
liquidator, assignee, trustee or sequestrator (or other similar official) of a
Member of the Company or a substantial part of such Member’s property, or assignment
for the benefit of its creditors, or an admission in writing of the inability
to pay its debts generally as they become due, or any similar action, of one or
more of the Members, so long as there remains a solvent Managing Member of the
Company.


 


C.                                     Upon dissolution of the Company (unless the
business of the Company is continued pursuant to the provisions of Section 10),
the Managing Member (or its trustees, receivers, successors or legal
representatives) shall cause the cancellation of the Articles and liquidate the
Company assets and apply and distribute the proceeds thereof in accordance with
Section 6.3.


 


24





















 


SECTION 3:
LEASE AND PASS-THROUGH OF THE HISTORIC TAX CREDIT


 


A.                                   The Managing Member is specifically
authorized, for and on behalf of the Company, to execute the Operating
Documents, and, subject to the limitations set forth herein, such other
documents as the Managing Member deems to be necessary in connection with the lease
of the Project, the pass-through of the Historic Tax Credit to the Company
under Section 50(d) of the Code, and the implementation of the terms and
conditions of the Hotel Management Agreement.


 


B.                                     The Managing Member shall be bound by the
terms of the Operating Documents. Any incoming Managing Member shall as a
condition of receiving any Interest in the Company agree to be bound by the
Operating Documents to the same extent and on the same terms as the other Managing
Member(s). Upon the dissolution of the Company or any transfer of the Leasehold
Interest, no right to the possession and control of the Project (to the extent
available from the Leasehold Interest) and no right to collect the rents or
other income therefrom shall pass to any Person who is not, or does not become,
bound by the provisions of this Agreement and the Operating Documents. The
Operating Documents shall be binding upon and shall govern the rights and
obligations of the Members, their heirs, executors, administrators, successors
and assigns as long as the Lease is outstanding.


 


C.                                     In connection with any proposed assignment or
disposition by the Company of the Leasehold Interest (including, without
limitation, the granting of a Leasehold Mortgage in connection with a borrowing
by the Company), and in addition to any other rights granted to the Investor
Member hereunder (including, without limitation, the approval rights set forth
in Section 7.1B(vii), the Investor Member (or its designee), shall have
the right to (i) receive and review copies of all documents relating to
the transaction, (ii) meet with the prospective lender, purchaser or
assignee, as the case may be, and participate in the negotiations and (iii) take
all other actions or provide such services in connection with the proposed
transaction as it deems necessary or appropriate, including, without
limitation, soliciting alternative offers.


 


25





















 


SECTION 4:
MEMBERS AND CAPITAL ACCOUNTS


 


Section 4.1.                                   Managing Member


 


The Managing Member of the Company is HMM; its address and Capital
Contributions are set forth in the Schedule.


 


Section 4.2.                                   Investor Member


 


Chevron TCI, Inc. is hereby admitted to the Company as the
Investor Member; its address and Capital Contribution are set forth in the
Schedule. The payment of its Capital Contributions is governed by the terms and
conditions of Section 5.1.


 


Section 4.3.                                   Capital and Capital Accounts


 


A.                                   The capital of the Company shall be the
aggregate amount of the cash and the Gross Asset Value of property contributed
by each Member as set forth in the Schedule. Except as specifically set forth
herein, no Member shall have any right to make voluntary Capital Contributions
to the Company. No interest shall be paid by the Company on any Capital Contribution
to the Company. The Schedule shall be amended from time to time to reflect
the withdrawal or admission of Members, any changes in the Interest held by a
Member arising from the transfer of an Interest to or by such Member and any
change in the amounts to be contributed or agreed to be contributed by any
Member.


 


B.                                     An individual Capital Account shall be
established and maintained for each Member, including any additional or
substituted Member who shall hereafter receive an interest in the Company. The
Capital Account of each Member shall be maintained in accordance with the
following provisions:


 


(i)                                     To each Member’s Capital Account there shall
be credited such Member’s Capital Contributions, such Member’s distributive
share of Profits, and any items in the nature of income or gain that are
specially allocated pursuant to Section 6.5 hereof, and the amount of any
Company liabilities that are assumed by such Member or that are secured by any
Company Property distributed to such Member;


 


(ii)                                    To each Member’s Capital Account there shall
be debited the amount of cash and the Gross Asset Value of any Company Property
distributed to such Member pursuant to any provision of this Agreement, such
Member’s distributive share of Losses, and any items in the nature of expenses
or losses that are specially allocated pursuant to Section 6.5 hereof, and
the amount of any liabilities of such Member that are assumed by the Company or
that are secured by any property contributed by such Member to the Company.


 


In the event that the Gross Asset Values of Company assets are adjusted
pursuant to this Agreement, the Capital Accounts of all Members shall be
adjusted simultaneously to reflect the aggregate net adjustment as if the Company
recognized gain or loss equal to the amount of such aggregate net adjustment.


 


26





















 


C.                                     The
original Capital Account established for any substituted Member shall be in the
same amount as, and shall replace, the adjusted Capital Account of the Member
which such substituted Member succeeds, and, for the purposes of the Agreement,
such substituted Member shall be deemed to have made the Capital Contribution,
to the extent actually paid in, of the Member which such substituted Member
succeeds. The term “substituted Member,” as used in this paragraph, shall mean
a Person who shall become entitled to receive a share of the Profits, Losses,
Tax Credits and Distributions of the Company by reason of such Person succeeding
to the Interest of a Member by assignment of all or any part of an Interest. To
the extent a substituted Member receives less than 100% of the Interest of a
Member, his Capital Account and Capital Contribution shall be in proportion to
the Interest he receives, and the Capital Account and Capital Contribution of
the Member who retains a partial interest in the Company shall continue, and
not be replaced, in proportion to the Interest he retains.


 


D.                                    The foregoing provisions and the other
provisions of this Agreement relating to the maintenance of the Capital
Accounts are intended to comply with the Allocation Regulations, and shall be
interpreted and applied in a manner consistent with such Allocation
Regulations. In the event that the Managing Member shall determine that it is
prudent to modify the manner in which the Capital Accounts, or any debits or
credits thereto, are computed in order to comply with the Allocation
Regulations, the Managing Member may make such modification, subject to the
provisions of Section 6.3D. The Managing Member shall adjust the amounts
debited or credited to Capital Accounts with respect to (i) any property
contributed to the Company or distributed to the Members, and (ii) any
liabilities that are secured by such contributed or distributed property that
are assumed by the Company or the Members, in the event that the Managing
Member shall determine such adjustments are necessary or appropriate pursuant
to Section 1.704-1(b)(2)(iv) of the Allocation Regulations. Subject
to the provisions of Section 6.3D, the Managing Member also shall make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with the Allocation Regulations.


 


Section 4.4.                                   Withdrawal of Capital


 


Except as may be specifically provided for in this Agreement,
(i) no Member shall have the right to withdraw from the Company all or any
part of its Capital Contribution, (ii) no Member shall have any right to
any Distribution or to demand and receive property of the Company in return for
its Capital Contribution or with respect to its Interest, and (iii) no
Member shall be entitled to demand a redemption or repurchase of its Interest.
Any return of Capital Contributions to the Members pursuant to this Agreement
shall be solely from Company assets, and the Managing Member shall not be
personally liable for any such return.


 


Section 4.5.                                   Liability of Members


 


Except as otherwise specifically provided in the Operating Documents,
no Member shall be liable for any debts, liabilities, contracts, or obligations
of the Company. A Member shall be liable only to make payments of its Capital
Contributions as and when due hereunder. After its Capital Contributions shall
be fully paid, no Member shall, except as otherwise required by the Act or by
the terms of this Agreement, be required to make any further Capital
Contributions or payments or lend any funds to the Company.


 


27





















 


Section 4.6.                                   Additional Members


 


A.                                   The Managing Member may admit additional
Members only (i) with the Consent of the Investor Member and any Requisite
Approvals or (ii) as permitted by Section 11.


 


B.                                     Any incoming Member shall, by its execution
of this Agreement and as a condition of receiving its Interest in the Company,
agree to be bound by the Project Documents to the same extent and on the same
terms as the other Members of the same class.


 


C.                                     Upon the admission of any additional Members,
an amendment to the Articles reflecting such admission, shall, to the extent
required by law, be filed with the Filing Office and/or any other appropriate
Governmental Authority. In addition, there shall be an amendment, to this
Agreement which shall amend the Schedule to reflect the names, addresses
and Capital Contributions of such additional Member, and shall set forth the
agreement of such additional Members to be bound by all the provisions of this
Agreement.


 


Section 4.7.                                   Representations and Warranties of the
Investor Member


 


The Investor Member represents and warrants to the Company and the
Managing Member as follows:


 


A.                                   The Investor Member is a corporation duly
organized, validly existing and in good standing under the laws of the state of
California.


 


B.                                     The Investor Member has the corporate power
and authority to carry on the business in which it is engaged and to become a
Member in the Company.


 


C.                                     This Agreement, the Investor Note, the
Investor Security Agreement and all other instruments executed and delivered by
the Investor Member in connection with its investment in the Company have been
duly authorized by all necessary corporate action, have been duly executed and
delivered by the investor Member, and are the legal, valid and binding
obligations of the Investor Member, enforceable in accordance with their terms.


 


D.                                    The execution and delivery by the Investor
Member of this Agreement and the Investor Note does not, and the performance
thereof will not, contravene any provision of existing law or regulations, or
of the charter or by-laws of the Investor Member, conflict with or result in
any breach of the terms, conditions or provisions of, or constitute a default
under, or result in or permit the creation or imposition of any lien, charge or
encumbrance upon any of the properties of the Investor Member pursuant to, any
indenture, mortgage, or other agreement or instrument or any judgment, decree,
order or decision to which the Investor Member is a party or by which it is
bound.


 


E.                                      The Investor Member is an “accredited
investor” as defined in Regulation D under the Securities Act of 1933, as
amended (the “Securities Act”). The Investor Member was not formed for the
specific purpose of acquiring the investor member interest in the Company, has
(or, if the Investor Member is a wholly-owned subsidiary, it together with its
corporate parent has) total assets in excess of $5,000,000 and its investment
in the Interest constitutes less than 10% of the net worth of the Investor
Member (or, if the Investor Member is a wholly-owned


 


28





















 


subsidiary,
the consolidated net worth of its corporate parent). The Investor Member has
such knowledge and experience in financial and business matters in general and
in particular with respect to this type of investment that it is capable of
evaluating the merits and risks of an investment in the Company.


 


29





















 


SECTION 5:
CAPITAL CONTRIBUTIONS OF INVESTOR MEMBER;


PROJECT EXPENSE LOANS AND
WORKING CAPITAL


 


Section 5.1.                                   Investor Member’s Capital Contribution


 


Subject to the provisions of Sections 5.2 and 5.3 below, the Investor
Member shall make Capital Contributions to the Company in an amount equal to
Eight Million Eight Hundred Ten Thousand Three Hundred Seventy-Five Dollars
($8,810,375), as such amount may be adjusted pursuant to the provisions of
Section 5.3 hereof. The obligation of the Investor Member to make such
Capital Contributions is evidenced by an Investor Note, a copy of which is
attached to this Agreement as Exhibit A and incorporated
herein by this reference, which Investor Note shall be secured by the Investor
Member’s Interest pursuant to a security agreement to be executed in favor of
the Company in the form of Exhibit B (the “Investor
Security Agreement”). In addition to the foregoing amounts, the Investor
Member shall also pay the fees of the Accountants and Special Counsel for
services performed prior to the Admission Date, and such payments shall be
treated for all purposes as if paid by the Investor Member to the Company as
additional Capital Contributions and paid by the Company to the Accountants and
Special Counsel; provided, however, that if such fees exceed One Hundred
Thousand Dollars ($100,000), the Investor Member’s Adjusted Capital
Contribution shall be reduced by the excess for purposes of calculating its
Priority Return and any Distribution of its Adjusted Capital Contributions or a
specified percentage thereof.


 


Section 5.2.                                   Conditions to Payment


 


A.                                   At least twenty (20) days before the Managing
Member intends to call for a payment under the Investor Note, and as a
condition thereto, the Managing Member shall notify the Investor Member of the
payment amount due (and, if applicable, the impact of any adjustments to such
payment made pursuant to Section 5.3) and where the payment should be sent
and shall provide a written statement substantially in the form attached hereto
as Exhibit C (a “Payment Certificate”) certifying
that the conditions to such payment have been satisfied and that (i) the
Managing Member has satisfied and continues to satisfy all of its material
obligations under this Agreement, including without limitation maintaining and
funding the reserve described in Section 5.8, (ii) the covenants,
representations and warranties set forth in Section 7.11 are true and
correct as of the date of the Payment Certificate or, to the extent any such
representations and warranties are no longer true and correct, shall describe
any such change in circumstances and shall represent and warrant that any such
change has been compensated for in accordance with the provisions of
Section 5.3 or shall not have a material adverse effect on the Company or
on the tax consequences to the Investor Member of an investment in the Company
as projected in the Projections, (iii) the Company is not in material
default under any of the Operating Documents or other material agreement to
which it is a party (excluding a default arising from a breach by the Investor
Member hereunder), and (iv) the Managing Member has delivered to the Investor
Member copies of the Company’s federal and state tax returns for the most
recently ended Fiscal Year. The statements in such Payment Certificate shall be
true and correct on the date thereof and on the payment date. Notwithstanding
anything to the contrary contained herein or in the Investor Note, no
Installment of the Investor Member’s Capital Contribution shall be due until
twenty (20) days following the date on which the Payment Certificate relating
to such Installment has been received by the Investor Member. Each


 


30





















 


Payment
Certificate shall be accompanied by a copy of the corresponding Loan Advance
Certificate received by the Company pursuant to the provisions of
Section 3(d) of the HTC Loan Agreement. The Payment Certificate with
respect to the Completion Date Installment due under the Investor Note shall be
accompanied by a Tax Certificate in the form attached hereto as Exhibit D.


 


B.                                     The Managing Member represents that it will
use each of the Installments for the purposes set forth in Exhibit H
in the amounts set forth therein unless the Consent of the Investor Member is
obtained for a change in the application of funds. At the time the Managing
Member presents a Payment Certificate for an Installment, it shall provide
wiring instructions for all payments to be made to Persons other than the
Company (including, without limitation, the Developer in its capacity as
borrower under the HTC Loan Documents) and shall authorize the Investor Member
to make payments of its Capital Contribution directly to such Persons on behalf
of the Company, with the balance made to the Company as set forth in the wiring
instructions. In the event that any Installment has been reduced because of the
application of Section 5.3 of this Agreement, unless otherwise agreed to
by the Investor Member, all payments to Persons other than the Managing Member
shall be made in the full amount due, and the payments to the Managing Member
shall be made in proportion to the amounts available therefor, with any amounts
not then paid to be paid from amounts first available therefor under the terms
of this Agreement. Additionally, if at the time any Installment is due all
payments to be made from any prior Installment have not been made in full, the
current Installment shall first be applied to any payments due from prior
Installments to Persons other than the Managing Member, then to payments due
from the current Installment to Persons other than the Managing Member, and
then to payments due from the prior and current Installments to the Managing
Member.


 


Section 5.3.                                   Historic Tax Credit Adjustments.


 


A.                                   If, as a result of a reduction or increase in
QRE, a reallocation of Profits or Losses, or for any other reason other than
(i) a Recapture Event or (ii) an event which would be a Recapture
Event but for the fact it resulted from the acts or omissions of the Investor
Member, the Accountants shall determine in preparing the Company’s tax returns
(or an amended return), or there shall be a Final Determination, that the
Actual Credit is more or less than the Projected Credit (such determination
being referred to herein as the “Historic Credit Determination”), the
provisions of Sections 5.3B through 5.3H shall apply.


 


B.                                     After the Historic Credit Determination is
made, the Accountants shall calculate the difference between the Actual Credit
and the Projected Credit. Such difference shall be multiplied by ninety-four
percent (94%) and the product shall be referred to herein as the “Historic
Credit Adjustment.” If the Historic Credit Adjustment is positive (i.e.,
the Actual Credit is greater than the Projected Credit), the next succeeding
unpaid Capital Contribution Installment of the Investor Member shall be
increased by the amount of such positive Historic Credit Adjustment. If there
are no remaining unpaid Installments, the Investor Member shall contribute the
amount of such positive Historic Credit Adjustment to the capital of the
Company within twenty (20) Business Days following the receipt of notice of the
positive Historic Credit Adjustment. Prior to any such increase in the amount
of a remaining Installment or obligation to contribute additional capital, the
Investor Member shall be provided with evidence reasonably sufficient to enable
it to verify the calculation of such positive Historic Credit Adjustment.


 


31





















 


C.                                     If the Historic Credit Adjustment is negative
(i.e., the Actual Credit is less than the Projected Credit), the amount of the
next succeeding Capital Contribution Installment(s) to be paid by the Investor
Member after the Historic Credit Determination has been made shall be reduced
by the Historic Credit Adjustment. If the Historic Credit Adjustment exceeds
the amount of any remaining Capital Contribution Installments, the Company
shall distribute to the Investor Member, from the proceeds of any principal,
interest or penalty payments paid to the Company pursuant to the terms of
Section 8 of the HTC Loan Agreement as a result of such negative Historic
Credit Adjustment, an amount that, on an After-Tax Basis, is equal to the
amount of the shortfall. Such distribution shall be made within five
(5) Business Days following the Company’s receipt of such HTC Loan
payments. If the Company does not receive any such HTC Loan payments or does
not distribute to the Investor Member from the proceeds of any such HTC Loan
payments, the full amount of the adjustment required under this
Section 5.3C within twenty (20) Business Days (sixty (60) Business Days in
the case of payments in excess of $1,000,000) following the date of the
Historic Credit Determination, the Managing Member shall forthwith pay to the
Investor Member, as a Tax Indemnity Payment (a “Tax Indemnity Payment”),
an amount that, on an After-Tax Basis is equal to the difference between the
negative Historic Credit Adjustment and the Capital Contribution Installments
in question.


 


D.                                    If the Historic Credit Determination is made
after the Investor Member has paid in all of its Capital Contribution Installments
to the Company, the Company shall distribute to the Investor Member, from the
proceeds of any principal, interest or penalty payments paid to the Company
pursuant to the terms of the HTC Loan Agreement as a result of such negative
Historic Credit Adjustment, an amount that, on an After-Tax Basis, is equal to
the amount of the shortfall. Such distribution shall be made within five
(5) Business Days following the Company’s receipt of such HTC Loan
payments. If the Company does not receive any such HTC Loan payments or does
not distribute to the Investor Member, from the proceeds of any such HTC Loan
payments, the full amount of the adjustment required under this
Section 5.3D within twenty (20) Business Days (sixty (60) Business Days in
the case of payments in excess of $ 1,000,000) following the date of the
Historic Credit Determination, the Managing Member shall forthwith pay to the
Investor Member, as a Tax Indemnity Payment (a “Tax Indemnity Payment”),
an amount which, on an After-Tax Basis, is equal to the Historic Credit
Adjustment.


 


E.                                      Any Tax Indemnity Payments made by the
Managing Member pursuant to this Section 5.3 shall not be construed as
being Capital Contributions, loans or advances by the Managing Member to the
Company, but shall be treated as a payment of damages by the Managing Member to
the Investor Member for a breach of warranty by the Managing Member to the
Investor Member.


 


F.                                      If any Tax Indemnity Payment due from the
Managing Member under this Section 5.3 is not made when due, the unpaid
balance shall bear interest at an annual rate equal to the Designated Prime
Rate plus one percent (1%). In addition, the failure to make such payments
within thirty (30) days following notice of payment due shall be deemed to be a
Material Default by the Managing Member.


 


G.                                     If a Recapture Event occurs prior to the time
the Investor Member has paid in all its Capital Contribution Installments to
the Company, the next succeeding Capital Contribution Installment(s) of the
Investor Member shall be reduced by an amount (herein referred to as a


 


32





















 


“Recapture
Adjustment Amount”) that, on an After-Tax Basis, is equal to any increase
in Taxes payable by the Investor Member as a result of such Recapture Event. If
the Recapture Adjustment Amount exceeds the amount of the remaining
Installments or if the determination that a Recapture Event has occurred is
made after all the Installments have been paid, the Company shall distribute to
the Investor Member, from the proceeds of any principal, interest or penalty
payments paid to the Company under the HTC Loan Documents as a result of such
Recapture Event, an amount that, on an After-Tax Basis, is equal to the amount
of such shortfall. Such distribution shall be made within ten
(10) Business Days following the Company’s receipt of such HTC Loan
payments. If the Company does not receive any such HTC Loan payments or does
not distribute to the Investor Member, from the proceeds of any such HTC Loan
payments, the full amount due to the Investor Member under this
Section 5.3G within thirty (30) Business Days following the date of the
delivery by the Investor Member to the Managing Member of a notice indicating
the amount of such Recapture Adjustment Amount (a “Recapture Notice”),
the Managing Member shall forthwith make a Tax Indemnity Payment to the
Investor Member in an amount equal to the Recapture Adjustment Amount.


 


H.                                    Notwithstanding the foregoing provisions of
this Section 5.3 or any other indemnification provision in this Agreement,
if there is a negative Historic Credit Adjustment or a Recapture Event because
of a change of tax law or for any other reason other than (i) the QREs
attributable to the Project are less than projected, (ii) the Developer
has failed to satisfy a condition necessary for the Project to be eligible for
the full amount of the Projected Credit in the hands of the Developer or
(iii) a Recapture Event is caused by the Developer or the Managing Member
or an Affiliate thereof, including, without limitation, by a sale of the
Project, then, in lieu of the adjustments or Tax Indemnity Payments described
in the preceding paragraphs of this Section 5.3, with respect to that
Historic Credit Adjustment or that Recapture Event, the Managing Member shall
cause the Company to distribute to the Investor Member an amount equal to the “5.3H
Amount.” For purposes of this Section 5.3H in the case of a Recapture
Event, the term Historic Credit Adjustment shall mean ninety-four percent (94%)
of the Historic Tax Credit that is subject to recapture. The 5.3H Amount shall
be an amount equal to (x) the Historic Credit Adjustment, plus interest on the
Historic Credit Adjustment from the date of the Investor Member’s Capital
Contributions until the date such distribution is made at the Designated Prime
Rate Plus one percent (1%) less (y) the amount of any Priority Return
previously distributed to the Investor Member relating to an amount of Capital
Contributions equal to the Historic Credit Adjustment, plus interest on each
distribution of Priority Return from the date of such distribution until the
date of payment of the 5.3H Amount at the Designated Prime Rate plus one
percent (1%). The distribution shall be made within twenty (20) Business Days
(sixty (60) Business Days in the case of distributions in excess of $1,000,000)
of the date the Historic Credit Determination is made. If the provisions of
this Section 5.3H apply in lieu of the other paragraphs of
Section 5.3 and the Actual Credit is less than thirty percent (30%) of the
Projected Credit, such deficiency shall not be deemed to be a Material Default,
and if the Actual Credit is zero, the Investor Member agrees to withdraw from
the Company upon distribution to it of the amounts due pursuant to this
Section 5.3H.


 


I.                                         The provisions of this Section 5.3 shall
survive the termination of this Agreement or the sale, transfer, or other
assignment of the Interest of the Investor Member. If it is determined that an
adjustment or other payment must be made to the Investor Member pursuant to
this Section 5.3 after the Investor Member’s Interest has been purchased
pursuant to the


 


33





















 


Purchase
Agreement, the purchase price payable thereunder shall be recalculated based on
the adjustment made pursuant to this Section 5.3 and offsetting
adjustments or other appropriate adjustments made so that the Members are in
substantially the same positions in which they would have been had the Historic
Credit Determination been made prior to the purchase of the Investor Member’s
Interest.


 


Section 5.4.                                   Contests


 


A.                                   The Managing Member, in its capacity as the
TMP, shall inform the Investor Member promptly of any oral or written
communication or request for information which the Managing Member may receive
from, or conference with, the IRS directly related to an administrative
proceeding with respect to the Company, the Project or the Historic Tax Credit
relating to the Project.


 


B.                                     The Managing Member, in its capacity as the
TMP, shall confer with the Investor Member and its counsel before responding to
any notice, letter, request for information, request for inspection of
documents, subpoena or other correspondence or item of communication or
document received by the Managing Member, from, or oral request made by, the
IRS which is directly related to an administrative proceeding with respect to
the Company, Project or the Historic Tax Credit relating to the Project.


 


C.                                     If the Managing Member desires to contest a
determination by the IRS with respect to a Company tax item that would result
in an adjustment, Tax Indemnity Payment, distribution, or other payment under
the provisions of Section 5.3 (a “Deficiency Amount”) and the
Investor Member objects to such a contest, the Investor Member shall waive in writing
its right to receive distributions or payments under this Agreement with
respect to that Company item and the Managing Member shall waive in writing its
right as TMP to pursue the contest with respect to the Company item.


 


D.                                    If the Managing Member and the Investor
Member want to contest a determination by the IRS with respect to a Company tax
item, then the Company shall be liable for the Costs of Contest, and


 


(i)                                     the Investor Member shall select Qualified
Counsel for the contest, which counsel shall be reasonably satisfactory to the
Managing Member, and shall control the contest, or


 


(ii)                                  if either (a) the credit quality (in the
reasonable judgment of the Investor Member) of the Guarantor has not decreased
materially from that set forth in its audited financial statements dated as of
December 31, 1999, or (b) the Managing Member provides the Investor
Member security, in a form reasonably satisfactory to the Investor Member, in
an amount necessary to secure the Managing Member’s obligations that may become
due under this Agreement if the conflict were not resolved favorably for the
Company and the Managing Member agrees in writing that all amounts due to the
IRS as a result of the resolution of such contest are indemnified by the
Managing Member, then the TMP shall select Qualified Counsel for the contest,
which counsel shall be reasonably satisfactory to the Investor Member, and
shall control the contest.


 


34





















 


E.                                      If the Managing Member does not want, and the
Investor Member does want, to contest a determination by the IRS with respect
to a Company tax item, the Investor Member shall select Qualified Counsel and
control the contest and, if the credit quality (in the reasonable judgment of
the Investor Member) of the Guarantor has not decreased materially from that
set forth in its audited financial statements dated as of December 31,
1999, the Managing Member shall provide the Investor Member with security in a
form reasonably satisfactory to the Investor Member, in an amount equal to the
amount due under this Agreement if such determination was not contested, and,
whether or not such security is required to be given, the Managing Member shall
be liable for the Deficiency Amount that results from the contest, and shall
pay that Deficiency Amount and also shall be liable for the Costs of Contest,
provided, however, the Managing Member’s maximum liability shall not exceed the
maximum liability it would have had were the determination not contested.


 


F.                                      If the Managing Member timely pays the full
amount due under Section 5.4D or 5.4E, as applicable, the Investor Member
shall release the security given pursuant to Section 5.4D or 5.4E as
applicable, or, if the full amount is not timely paid, the Investor Member may
apply or otherwise realize upon any and all security given by the Managing
Member to satisfy the amount due under Section 5.4D or 5.4E, as
applicable.


 


G.                                     In the event of any conflict between the
provisions of this Section 5.4 and the provisions of Section 7.9, the
provisions of this Section 5.4 shall apply.


 


Section 5.5.                                   Project Expense Loans


 


A.                                   The Managing Member agrees that, if at any
time, the Company requires funds to eliminate any Operating Deficit, the
Managing Member shall loan (or shall cause one or more of its other Affiliates
to loan) to the Company the funds required. Such loans, which shall bear
interest at an annual rate equal to the Designated Prime Rate plus 1%, shall be
evidenced by unsecured promissory notes of the Company, and are referred to
herein as “Project Expense Loans.” Any Project Expense Loans provided
for under this Agreement shall be repaid only as provided in Section 6,
and no recourse for the payment thereof may be had against any other property
of the Company or against any Member.


 


B.                                     Any funds drawn down to pay Project Expenses
or the other items described in Section 5.5A above under any letters of
credit or escrows required to be maintained pursuant to the Project Documents
(to the extent such funds drawn are repaid by the Managing Member or one or
more of its Affiliates to the issuing bank or to the account party) shall be
deemed to be Project Expense Loans.


 


Section 5.6.                                   Third-Party Rights in Project Expense Loans


 


The obligation of the Managing Member to make Project Expense Loans
pursuant to Section 5.5A is for the benefit of the Company and the Members
and shall not inure to the benefit of any creditor of the Company other than a
Member, notwithstanding any pledge or assignment by the Company of this
Agreement or any rights hereunder.


 


35





















 


Section 5.7.                                   No Third-Party Rights in Capital


 


The obligations or rights of the Company or of Members to make or
require any Capital Contribution under this Agreement or the Investor Note
shall not grant any rights to, or confer any benefits upon, any Person who is
not a Member. The making of a nonrecourse loan to the Company shall not make
the lender a Member.


 


Section 5.8.                                   Reserve Requirements


 


The Managing Member shall cause the Company to establish and maintain
all reserves required to be maintained by it pursuant to any and all of the
Project Documents and the Operating Documents.


 


36





















 


SECTION 6:
PROFITS AND LOSSES; CREDITS; DISTRIBUTIONS


 


Section 6.1.                                   Profits and Losses


 


A.                                   After giving effect to the special allocation
provisions of Section 6.5, Operating Profits and Losses and Tax Credits
for any Company Fiscal Year shall be allocated 0.1% to the Managing Member and
99.9% to the Investor Member.


 


B.                                     After giving effect to the special allocation
provisions of Section 6.5, Profits and Losses from a Capital Transaction
in any Company Fiscal Year shall be allocated to and among the Members as
follows:


 


As to Profits:


 


First, an amount of Profits equal to the aggregate
negative balances (if any) in the Capital Accounts of all Members having
negative balance Capital Accounts shall be allocated to such Members in
proportion to their negative Capital Account balances until all such Capital Accounts
have zero balances; and


 


Second, an amount of Profits shall be
allocated to each of the Members until the positive balance in the Capital
Account of each Member equals the amount of cash which would be distributed to
such Member if such Profits were cash available to be distributed in accordance
with the provisions of Clauses Fourth through Eighth of
Section 6.2B.


 


As to Losses:


 


First, an amount of Losses equal to the
aggregate positive balances (if any) in the Capital Accounts of all Members
having positive balance Capital Accounts shall be allocated to such Members in
proportion to their positive Capital Account balances until all such Capital
Accounts have zero balances; provided, however, that if the
amount of Losses so to be allocated is less than the sum of the positive
balances in the Capital Accounts of those Members having positive balances in
their Capital Accounts, then such Losses shall be allocated to the Members in
such proportions and in such amounts so that the Capital Account balances of
each Member shall equal, as nearly as possible, the amount such Member would
receive if an amount equal to the excess of (i) the sum of all Members’
balances in their Capital Accounts computed prior to the allocation of Losses
under this clause First over (ii) the aggregate amount of Losses to
be allocated to the Members pursuant to this clause First were
distributed to the Members in accordance with the provisions of Clauses Fourth
through Eighth of Section 6.2B; and


 


Second, the balance, if any, of such Losses shall
be allocated 0.1% to the Managing Member and 99.9% to the Investor Member.


 


37





















 


Section 6.2.                                   Distributions Prior to Dissolution 


 


A.                                   Distribution of Cash Flow


 


(i)                                     Subject to the terms of the Operating
Documents and any applicable Regulations, any Cash Flow for each Fiscal Year
(or fractional portion thereof) shall be distributed or applied within ninety
(90) days after the end of each Fiscal Year in the following order of priority:


 


First, to distribute to the Members any amounts
due to them pursuant to the provisions of Section 6.2A(ii);


 


Second, to pay the Asset Management Fee for the
current Fiscal Year and any unpaid amounts from any prior Fiscal Year;


 


Third, to distribute to the Investor Member its
Priority Return for the Fiscal Year plus any outstanding Priority Return for
any prior Fiscal Year;


 


Fourth, to repay any Project Expense Loans, with
payments to be applied first to accrued but unpaid interest and then to
principal;


 


Fifth, to the payment of the Incentive Management
Fee; and


 


Sixth, any balance remaining shall be distributed
99.9% to the Investor Member and 0.1% to the Managing Member.


 


(ii)                                  Special Tax Distribution. Notwithstanding anything to the contrary
contained in this Section 6, in any Fiscal Year in which the Company
generates Operating Profits, Cash Flow in an amount equal to the product of
(i) the Operating Profits allocable to a Member and (ii) the
Applicable Tax Rate (as hereinafter defined) shall be distributed to each Member
before any other Distributions or payments are made from Cash Flow in such
Fiscal Year. If there is insufficient Cash Flow in any Fiscal Year to pay any
amount due to the Investor Member pursuant to the provisions of this
Section 6.2A(ii), the Managing Member shall advance the amount of the
deficiency to the Company as a Project Expense Loan. For purposes of this
Section 6.2A(ii), the term “Applicable Tax Rate” shall mean the combined
effective federal, state, and local income tax rate applicable to a Member in
the Fiscal Year in which the Operating Profits are allocated to the Member.
Each of the Members shall notify the other Member, on or before
December 31 of each Fiscal Year, of its Applicable Tax Rate for such
Fiscal Year. If a Member fails to so notify the other Member, the Applicable
Tax Rate for the previous Fiscal Year shall remain in effect.


 


(iii)                               The Managing Member is authorized, but not
required, to make monthly distributions of Cash Flow to the Members following
the end of each calendar month in the amount of one-twelfth (1/12) of the
estimated amount of Cash Flow to be distributed to each for the Fiscal Year.
Notwithstanding the foregoing Cash Flow for each Fiscal Year is to be
distributed in the amounts and priorities set forth in Section 6.2A(i) above,
and any Member who receives monthly distributions aggregating more than the
amount it


 


38





















 


is entitled to receive pursuant to Section 6.2A(i) for any
Fiscal Year shall immediately repay such excess to the Company.


 


B.                                     Distributions of Capital Proceeds.


 


Subject to the terms of the Operating Documents and to any applicable
Regulations and further subject to the provisions of Section 6.3 below,
any Capital Proceeds shall be distributed to and among the Members in the
following amounts and order of priority:


 


First, to discharge, to the extent required by any
lender or creditor, the debts and obligations of the Company (including any
unpaid Asset Management Fees but not including items listed in the ensuing
clauses of this Section 6.2B);


 


Second, to fund reserves for contingent or
unforeseen liabilities or obligations of the Company to the extent deemed
reasonable by the Managing Member (other than items listed in the ensuing
clauses of this Section 6.2B);


 


Third, to the payment of any outstanding Project
Expense Loans, with payments to be applied first to accrued but unpaid interest
and then to principal;


 


Fourth, to the distribution to the Investor Member
of any undistributed Priority Return for the current Fiscal Year and any prior
Fiscal Years;


 


Fifth, to the payment to the Investor Member of
any Recapture Adjustment Amount;


 


Sixth, in the event of a sale of the Project by
the Developer or other direct or indirect transfer of Developer’s interest in
the Project and a termination of the Lease, to the distribution to each Member
of a Special Sale Distribution; and


 


Seventh, to the distribution to each Member, on a pari
passu basis, of its Adjusted Capital Contribution;


 


Eighth, the balance of such proceeds, if any, shall
be distributed 49% to the Managing Member and 51% to the Investor Member.


 


Section 6.3.                                   Liquidation


 


A.                                   Upon the liquidation and dissolution of the
Company, unless the business of the Company is continued pursuant to the
provisions of Section 2.5 or Section 10.2 hereof, the Managing Member
shall liquidate the assets of the Company and cause the business of the Company
to be wound up in accordance with the Act and cause the Articles to be
cancelled in accordance with the provisions of Section 2.5B.


 


B.                                     Subject to the provisions of
Section 6.3C below, any Capital Proceeds from a Terminating Capital
Transaction remaining after payment of, or adequate provision for, the debts
and obligations of the Company shall be distributed to those Members with
positive Capital Account balances (after taking into account all Capital
Account adjustments for the Company


 


39





















 


taxable
year) in proportion to their positive Capital Account balances until such Capital
Accounts have been reduced to zero.


 


C.                                     Except to the extent of its Share of
Partnership Minimum Gain or Partner Nonrecourse Debt Minimum Gain (which
creates a deemed Deficit Restoration Obligation under the applicable provisions
of the Code and the Allocation Regulations), if any, no Member shall have a
Deficit Restoration Obligation nor shall any Member otherwise be required to
restore any deficit balance in its Capital Account at any time. If any Member
has a deficit balance in its Capital Account (after giving effect to all
contributions, Distributions and allocations for all taxable years, including
the taxable year in which any liquidation of the Company or of such Member’s
interest in the Company occurs), such Member shall have no obligation to make
any contribution to the capital of the Company with respect to such deficit,
and such deficit shall not be considered to be a debt owed to the Company or to
any other Person for any purpose whatsoever.


 


D.                                    The parties intend that, as a result of the
application of the allocation and distribution provisions contained in this
Section 6, any Capital Proceeds from a Terminating Capital Transaction
will be distributed in the same manner as Capital Proceeds are distributed
under the provisions of Section 6.2B. If the Company is advised at any
time by the Accountants or Special Counsel that an actual distribution of
Capital Proceeds at the end of any Fiscal Year in accordance with the
provisions of Section 6.3B would not result in each Member receiving the amount
that it would have received if Section 6.2B rather than Section 6.3B
applied to such distribution, the Managing Member shall so notify the Investor
Member and, with the Consent of the Investor Member, which consent shall not be
unreasonably withheld, is authorized and empowered to amend the provisions of
this Section 6 relating to the allocation of Profits and Losses (other
than the Regulatory Allocations) for such Fiscal Year (and for subsequent
Fiscal Years if necessary) to cure such defect consistent with the principles
set forth in the first sentence of this Section 6.3D.


 


Section 6.4.                                   Special Distribution and Payment Provisions


 


If the funds available for any Distribution to the Members are
insufficient to distribute to any class of Members the maximum amount which
otherwise would be distributable to such class under the applicable
provision(s) of this Section 6, the amount available for distribution
shall be distributed pro rata to the members of such class in proportion to
their respective paid-in Capital Contributions.


 


Section 6.5.                                   Special Allocation Provisions 


 


Notwithstanding anything to the contrary contained herein:


 


A.                                   Nonrecourse Deductions shall be allocated
99.9% to the Investor Member and 0.1% to the Managing Member.


 


B.                                     Partner Nonrecourse Deductions shall be
allocated to and among the Members in the manner provided in the Allocation
Regulations.


 


40





















 


C.                                     Subject to the provisions of
Section 6.5Q, if there is a net decrease in Partnership Minimum Gain for a
Company Fiscal Year, the Members shall be allocated items of Company income and
gain in accordance with the provisions of Section 1.704-2(f) of the
Allocation Regulations.


 


D.                                    Subject to the provisions of
Section 6.5Q, if there is a net decrease in Partner Nonrecourse Debt
Minimum Gain for a Company Fiscal Year, then any Member with a Share of such
Partner Nonrecourse Debt Minimum Gain shall be allocated items of Company
income and gain in accordance with the provisions of Section 1.704-2(i)(4) of
the Allocation Regulations.


 


E.                                      Subject to the provisions of Sections 6.5A
through 6.5D above, in the event that any Member (who is not also a Managing
Member) unexpectedly receives any adjustments, allocations or distributions
described in Section 1.704-l(b)(2)(ii)(d)(4), (5) or (6) of the
Allocation Regulations, items of Company income and gain shall be specially
allocated to each such Member in an amount and manner sufficient to eliminate,
to the extent required by the Allocation Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible. This Section 6.5E
is intended to constitute a “qualified income offset” provision within the
meaning of the Allocation Regulations and shall be interpreted consistently
therewith.


 


F.                                      Subject to the provisions of Sections 6.5A
through 6.5E above, in no event shall any Member be allocated Losses which
would cause it to have an Adjusted Capital Account Deficit as of the end of any
Company Fiscal Year. Any Losses which are not allocated to a Member by reason
of the application of the provisions of this Section 6.5F shall be
allocated to the other Members (to the extent otherwise permitted under the
terms of this Section 6.5).


 


G.                                     Subject to the provisions of Sections 6.5A
through 6.5F above, in the event that any Member has an Adjusted Capital
Account Deficit at the end of any Company Fiscal Year, items of Company income
and gain shall be specially allocated to each such Member in the amount of such
Adjusted Capital Account Deficit as quickly as possible.


 


H.                                    In accordance with Code
Section 704(c) and the Treasury Regulations thereunder, income, gain,
loss, and deduction with respect to any property contributed to the capital of
the Company shall, solely for tax purposes, be allocated among the Members so
as to take account of any variation between the adjusted basis of such property
to the Company for federal income tax purposes and its initial Gross Asset
Value. In the event that the Gross Asset Value of any Company Property is
adjusted pursuant to the terms of this Agreement, subsequent allocations of
income, gain, loss, and deduction with respect to such asset shall take account
of any variation between the adjusted basis of such asset for federal income
tax purposes and its Gross Asset Value in the same manner as under Code
Section 704(c) and the Treasury Regulations thereunder. Any elections
or other decisions relating to such allocations shall be made by the Managing
Member in any manner that reasonably reflects the purpose and intention of this
Agreement. Allocations pursuant to this Section 6.5H are solely for
purposes of federal, state, and local taxes and shall not affect, or in any way
be taken into account in computing, any Member’s Capital Account or share of
Profits, Losses, other items, or distributions pursuant to any provision of
this Agreement.


 


41





















 


I.                                         Syndication Expenses for any Fiscal Year or
other period shall be specially allocated to the Investor Member.


 


J.                                        For purposes of determining the Profits,
Losses, Tax Credits or any other items allocable to any period, Profits,
Losses, Tax Credits and any such other items shall be determined on a daily,
monthly, or other basis, as determined by the Managing Member using any permissible
method under Code Section 706 and the Treasury Regulations thereunder.


 


K.                                    To the extent that interest on loans (or
other advances which are deemed to be loans) made by any Member to the Company
is determined to be deductible by the Company in excess of the amount of
interest actually paid by the Company, such additional interest deduction(s)
shall be allocated solely to such Member.


 


L.                                      Except as otherwise specifically provided in
this Section 6, all Profits, Losses and Tax Credits allocated to each class
of Members shall be shared by the respective Members in such class in the ratio
which the paid-in Capital Contribution of each Member in such class bears to
the aggregate paid-in Capital Contributions of all Members in such class.


 


M.                                 For purposes of determining each Member’s
proportionate share of the excess Nonrecourse Liabilities of the Company
pursuant to Section 1.752-3(a)(3) of the Allocation Regulations, the
Investor Member shall be deemed to have a 99.9% interest in Profits and the
Managing Member shall be deemed to have a 0.1% interest in Profits.


 


N.                                    Any recapture of any Tax Credit shall be
allocated to and among the Members in the same manner in which the Members
shared such Tax Credit.


 


O.                                    In the event that the adjusted tax basis of
any investment credit property that has been placed in service by the Company
is increased pursuant to Section 50(c) of the Code, such increase
shall be allocated among the Members (as an item in the nature of income or
gain) in the same proportions as the investment tax credit that is recaptured
with respect to such property is shared among the Members. Any reduction in the
adjusted tax basis (or cost) of Company investment credit property pursuant to
Section 50(c) of the Code shall be allocated among the Members (as an
item in the nature of expenses or losses) in the same proportions as the basis
(or cost) of such property is allocated pursuant to Treasury Regulation
Section 1.46-3(f)(2)(i).


 


P.                                      The basis (or cost) of any Company investment
credit property shall be allocated to and among the Members in accordance with
Treasury Regulation Section 1.46-3(f)(2)(i). All Tax Credits shall be
allocated to and among the Members in accordance with the applicable provisions
of the Code.


 


Q.                                    If for any Fiscal Year the application of the
minimum gain chargeback provisions of Section 6.5C or Section 6.5D
would cause a distortion in the economic arrangement among the Members and it
is not expected that the Company will have sufficient other income to correct
that distortion, the Managing Member may request a waiver from the Commissioner
of the IRS of the application in whole or in part of Section 6.5C or
Section 6.5D in accordance with Section 1.704-2(f)(4) of the
Allocation Regulations. Furthermore, if additional exceptions to the minimum
gain chargeback requirements of the Allocation Regulations have been provided


 


42





















 


through
revenue rulings or other IRS pronouncements, the Managing Member is authorized
to cause the Company to take advantage of such exceptions if to do so would be
in the best interest of a majority in interest of the Members.


 


R.                                     Any cancellation of debt income realized by
the Company shall be allocated to the Members in the same proportions as the
debt which was discharged was included in each Member’s tax basis in accordance
with the applicable provisions of the Allocation Regulations.


 


S.                                      Except as otherwise specifically provided in
this Agreement, all items of Company income, gain, loss, deduction and other
items not specifically provided for shall be allocated to and among the Members
in the same manner as Profits and Losses are allocated pursuant to the
provisions of Section 6.1. Allocations pursuant to this Section 6.5S
are solely for purposes of federal, state and local taxes and shall not affect,
or in any way be taken into account in computing, any Member’s Capital Account
or share of Profits, Losses, Tax Credits or Distributions pursuant to any other
provisions of this Agreement.


 


Section 6.6.                                   Order of Application


 


The provisions of this Section 6 shall be applied in the order
required by the applicable provisions of the Allocation. Regulations or if no
such order is specified, in the manner determined by the Accountants.


 


43





















 


SECTION 7:
RIGHTS, POWERS AND DUTIES OF THE MANAGING MEMBER


 


Section 7.1.                                   Restrictions on Authority.


 


A.                                   Notwithstanding any other provisions of this
Agreement, the Managing Member shall not have authority to:


 


(i)                                     perform any act in violation of any law or
regulation applicable to the Project or any agreement between the Company and
any Lender (or its successors or assigns);


 


(ii)                                  except as otherwise specifically permitted
with the Consent of the Investor Member, perform any act in violation of the
provisions of any of the Operating Documents;


 


(iii)                               do any act required to be approved or
ratified in writing by all Members under the Act unless the right to do so is
expressly otherwise given in this Agreement; or


 


(iv)                              borrow from the Company (other than its
Affiliate as Developer pursuant to the HTC Loan Documents) or commingle Company
funds with funds of any other Person.


 


B.                                     The Managing Member shall not have any
authority to cause the Company to do any of the following acts without the Consent
of the Investor Member and, if required, any Requisite Approvals:


 


(i)                                     to incur indebtedness for money borrowed on
the general credit of the Company, except for Routine Operating Credit or as
specifically permitted by Section 3 or Section 5.5 (provided,
however, this provision does not limit the right of the Managing Member to
execute instruments to bind the Company to the extent provided in
Article 19 of the Lease and in compliance with said Article 19); or


 


(ii)                                  following completion of the Rehabilitation of
the Building, other than as contemplated by the Lease, to construct any new
capital improvements, or to replace any existing capital improvements if
construction or replacement would substantially alter the character or use of
the Project; or


 


(iii)                               to acquire any real property in addition to
the Project (other than easements or servitudes or similar rights necessary or
convenient for the operation of the Project); or


 


(iv)                              to take any action that would prevent the
Historic Tax Credit relating to the Rehabilitation from being passed through to
the Company; or


 


(v)                                 to cause the Company to make any loan or
advance to any Person in excess of $100,000 except as specifically provided in
Section 2.4 (for purposes of this clause, accounts receivable in the ordinary
course of business from Persons other than the


 


44





















 


Managing Member or its Affiliates or extensions of credits to tenants
in the ordinary course of business shall not be deemed to be advances or loans);
or


 


(vi)                              to lease any space in the Project or
otherwise to operate the Project in such a manner or to take any action which
would make the Historic Tax Credit unavailable for the Building or cause a
Recapture Event to occur (including, without limitation, any lease that would
cause the Building to constitute tax-exempt use property within the meaning of
Section 168(h) of the Code or leases that would cause the Project to
constitute property used predominantly to furnish lodging within the meaning of
Section 50(b)(2) of the Code); or


 


(vii)                           to grant or refinance any Leasehold Mortgage
or other indebtedness of the Company, or to sell or convey the Leasehold
Interest, except that the Managing Member may cause the Company to grant
easements and similar rights affecting the Property to obtain utility services
for the Project or for other purposes necessary or convenient for the operation
of the Project; or


 


(viii)                        to confess a judgment against the Company in
an amount in excess of $50,000; or


 


(ix)                                to possess Company Property, or assign rights
in specific Company Property, for other than a Company purpose; or


 


(x)                                   to knowingly perform any act that would
subject any Member to personal liability in any jurisdiction beyond the amount
of its investment in the Company; or


 


(xi)                                to cause the Company voluntarily to take any
action that would cause a Bankruptcy of the Company; or


 


(xii)                             to cause the Company to acquire any equity or
debt securities of the Managing Member or any of its Affiliates or otherwise
make loans to the Managing Member or any of its Affiliates (other than pursuant
to the HTC Loan Documents);


 


(xiii)                          to replace, renew, cancel or materially amend
the Lease or the HTC Loan Documents; or


 


(xiv)                         to elect to dissolve the Company.


 


Section 7.2.                                   Personal Services and Competition


 


A.                                   The Managing Member shall not receive any
compensation for its services as Managing Member except as specifically
provided in this Agreement.


 


B.                                     The Managing Member, together with any
additional or successor Managing Member, may not be an individual.


 


C.                                     Either Member may engage in and have an
interest in other business ventures of every nature and description,
independently or with others, including, but not limited to, the


 


45





















 


ownership,
financing, leasing, operation, construction, rehabilitation, renovation,
improvement, management and development of real property whether or not such
real property is directly or indirectly in competition with the Project.
Neither the Company nor any other Member shall have any rights by virtue of
this Agreement in and to such independent ventures or the income or profits
derived therefrom, regardless of the location of such real property and whether
or not such venture was presented to such Member as a direct or indirect result
of its connection with the Company or the Project.


 


Section 7.3.                                   Business Management and Control; Designation
of Managing Member


 


A.                                   The Managing Member shall have the exclusive
right to manage the business of the Company and to be the Manager of the
Company and, except as otherwise specifically provided herein, shall have all
of the rights and powers granted to managers pursuant to the provisions of the
Act. No Member (except one who may also be a Managing Member, and then only in
its capacity as a Managing Member) shall (i) have any authority or right
to act for or bind the Company, or (ii) except as required by law,
participate in or have any control over the Company business. The Members
hereby consent to the exercise by the Managing Member of the powers conferred
on it by this Agreement. Any action required or permitted to be taken by a
corporate or other non-individual Managing Member hereunder may be taken by
such of its proper officers or agents as it may validly designate for such
purpose.


 


B.                                     The Managing Member is hereby authorized to
execute and deliver in the name and on behalf of the Company all such documents
and papers (including any required by any Lender or Governmental Authority) as
such Managing Member deems to be necessary or desirable in carrying out such
duties hereunder. Without limiting the foregoing, the Managing Member is
authorized to have the Company enter into a “lockbox” arrangement with the
Developer’s Lenders, provided that arrangement will not restrict the ability of
the Company to make distributions or payments to the Investor Member as
contemplated by this Agreement, assuming the Company pays all rent due under
the Lease in a timely fashion. HMM is hereby designated as the initial Managing
Member. In the event that it or its successors shall become unable to serve in
such capacity or shall cease to be a Member without appointing a successor, the
remaining Members, including HMM’s successor, may, subject to any Requisite
Approvals, from time to time designate from among themselves by consent one or
more substitute or additional Managing Members. If for any reason no
designation is in effect, the powers of the Managing Member shall be exercised
by the majority consent of any remaining Members. Any action required or
permitted to be taken by a corporate or other non-individual Managing Member
hereunder may be taken by such of its proper officers or agents as it shall
validly designate for such purpose.


 


Section 7.4.                                   Duties and Obligations of the Managing Member


 


A.                                   The Managing Member shall use its best
efforts to carry out the purposes, business and objectives of the Company
referred to in Section 2.3, and shall devote to Company business such time
and effort as shall be reasonably required, in its sole discretion, for the
Company’s welfare and success, including, without limitation, such of its time
as may be necessary to (i) supervise the activities of the Hotel Manager,
(ii) make inspections of the Project to determine if the Project is being
properly maintained and that necessary repairs are being


 


46





















 


made
thereto (and to take, or to cause the Hotel Manager to take, such steps as are
necessary to effectuate such repairs), (iii) prepare or cause to be prepared
all reports of operations which are to be furnished to the Members or which are
required to be furnished pursuant to the terms of the Operating Documents or by
any taxing bodies or any other Governmental Authorities, (iv) cause the
Project to be insured against fire and other risks covered by such insurance in
the manner specified in the Operating Documents, (v) obtain and keep in
force during the term of the Company business or rental interruption, worker’s
compensation (if applicable) and public liability insurance for the benefit of
the Company and its Members in amounts which satisfy the requirements specified
in the Operating Documents, (vi) enforce all material contracts entered
into for the benefit of the Company, and (vii) do all other things which
may be necessary to manage the affairs and business of the Company. All of the
insurance policies required by this Section 7.4A shall satisfy the
requirements specified in the Operating Documents. In addition, the Managing
Member shall promptly provide the Investor Member or its representatives with
copies of such insurance policies upon request from time to time. The Managing
Member shall review regularly all of the Company and Project insurance coverage
to insure that it is adequate and that it complies with the provisions of the
Operating Documents. Further, in the event of any casualty, to the extent
required by this Agreement and/or the Operating Documents and subject to the
applicable terms of the Mortgage Loan Documents, and provided that the insurance
proceeds shall be made available therefor, the Managing Member shall repair any
damage to the Project which was caused by such event, so as to restore the
Project (as nearly as possible) to the condition and market value thereof
immediately prior to such occurrence.


 


B.                                     The Managing Member shall operate the Project
in accordance with the terms of this Agreement and (i) the Operating
Documents, (ii) all applicable statutes, rules and regulations with
respect to the Project, and (iii) any other agreement relating to the
Lease or the Project.


 


C.                                     The Managing Member shall prepare and submit
to the Secretary of the Treasury or the IRS (or any other Governmental
Authority designated for such purpose), on a timely basis, the Election (to the
extent required to be signed by the Company) and any and all other annual
reports, information returns and other certifications and information required
(i) to ensure that the Company (and its Members) qualify for the Historic
Tax Credit and (ii) to avoid recapture of the Historic Tax Credit or the
imposition of penalties or interest on the Company or any of its Members for
failure to comply with the requirements of the Code or any other Applicable
Laws relating to the Historic Tax Credit.


 


D.                                    The Managing Member shall (i) not store
(except in compliance with all laws, ordinances, and regulations pertaining
thereto), or dispose of any Hazardous Material at the Project, or at or on any
other site owned, occupied, or operated either by the Managing Member, or any Person
for whose conduct the Managing Member is or was responsible; (ii) neither
directly nor indirectly transport or arrange for the transport of any Hazardous
Material (except in compliance with all laws, ordinances, and regulations
pertaining thereto); (iii) provide the Investor Member with written notice
(x) upon the Managing Member’s obtaining knowledge of any potential or known
release, or threat of release, of any Hazardous Material at or from the Project
or any other site owned, occupied, or operated by the Managing Member, or any
Person for whose conduct the Managing Member is or was responsible or whose
liability may result in a lien on the Project; (y) upon the Managing Member’s
receipt of any notice to such effect from any Federal, state, or other Governmental
Authority; and (z) upon the Managing Member’s


 


47





















 


obtaining
knowledge of any incurring of any expense or loss by any such Governmental
Authority in connection with the assessment, containment, or removal of any
Hazardous Material for which expense or loss the Managing Member may be liable
or for which expense or loss a lien may be imposed on the Project.


 


E.                                      If the Managing Member becomes aware of the
presence of levels of Hazardous Material at (or in connection with the
operations of) the Project, in concentrations and under conditions deemed
detrimental to human health under any applicable Hazardous Substance Laws,
and/or in quantities or proportions that exceed safe limits for such substance
established by any such Hazardous Substance Laws, the Managing Member shall
(i) notify all Members of such situation and (ii) take all actions
necessary to correct such situation as expeditiously as possible and to prevent
the Project from being in violation of any Hazardous Substance Laws, provided,
however, that the Managing Member may use Company funds for such purposes and
shall not be required by the provisions hereof to use its own personal funds,
except as may be required pursuant to the terms of this Agreement.


 


F.                                      The Managing Member shall give the Investor
Member prompt written notice of any material adverse event affecting the
Project or the business or operations of the Company (including, without
limitation, any notice of default under the Operating Documents). The Managing
Member also shall require that the Developer and shall request that the Hotel
Manager notify the Investor Member in writing of any default under the
Operating Documents.


 


G.                                     Except as otherwise specifically provided
herein, no Member, nor any director, employee or agent of any Member, its
subcontractors or vendors, shall give to or receive from any director,
employee, agent or other Affiliate of the Investor Member, any gift or
entertainment of significant value or any commission, fee or rebate in
connection with the organization, business or operations of the Company. In
addition, no Member nor any director, employee, agent or other Affiliate of any
Member, nor its subcontractors or vendors, shall enter into any business
arrangement with any director, employee, agent or other Affiliate of the
Investor Member who is not acting as a representative of the Investor Member,
or its Affiliates, without prior written notification thereof to the Investor
Member. Any representatives authorized by the Investor Member may audit any and
all records of the other Members and the Company, and any subcontractors or
vendors of either for the sole purpose of determining whether there has been
compliance with the provisions of this Section 7.4G.


 


H.                                    In operating the Project, the Managing Member
shall use commercially reasonable efforts to obtain all contracts, materials,
supplies, utilities and services required by the Project on the most
advantageous terms available to the Project. Except as otherwise approved by
the Consent of the Investor Member, the Managing Member shall secure and credit
to the Company, and not receive or retain for itself, its agents, employees or
Affiliates, any discounts, compensation, rebates or commissions obtainable with
respect to any and all purchases, service contracts, and all other transactions
affecting the Project, including without limitation, any compensation received
from the assignment or transfer of any contracts affecting the Project.


 


I.                                         The Managing Member and its Affiliates shall
have the right to contract or otherwise deal with the Company for the sale of
goods or services to the Company in addition to those set forth herein or
contemplated hereby, if (i) the compensation paid or promised for such


 


48


















goods or services is
reasonable (i.e., at fair market value) and is paid only for goods or services
actually furnished to the Company, (ii) the goods or services to be
furnished shall be reasonable for the Company, (iii) the fees, terms and
conditions of such transaction are at least as favorable to the Company as
would be obtainable in an arm’s-length transaction, and (iv) no agent,
attorney, accountant or other independent consultant or contractor who also is
employed on a full-time basis by the Managing Member or any Affiliate shall be
compensated by the Company for his services. 
Neither the Managing Member nor any Affiliate shall, by the making of
lump-sum payments to any other Person for disbursement by such other Person,
circumvent the provisions of this Section 7.4I.


 


J.             The Managing Member shall cause the
Company to conduct its business and operations separate and apart from that of
the Managing Member or any of its Affiliates, including, without limitation,
(i) segregating Company assets and not allowing funds or other assets of
the Company to be commingled with the funds or other assets of, held by, or
registered in the name of, the Managing Member or any of its Affiliates,
(ii) maintaining books and financial records of the Company separate from
the books and financial records of the Managing Member and its Affiliates, and
observing all Company procedures and formalities, including, without
limitation, maintaining minutes of Company meetings and acting on behalf of the
Company only pursuant to due authorization of the Members, (iii) causing
the Company to pay its debts and liabilities from assets of the Company and
(iv) causing the Company to conduct its dealings with third parties in its
own name and as a separate and independent Entity.


 


K.            The Managing Member shall take all
actions which may be reasonably necessary or appropriate (i) for the
continuation of the Company’s valid existence as a limited liability company
under the laws of the State and of each other jurisdiction in which such existence
is necessary
to protect the limited liability of the Members or to enable the Company to
conduct the business in which it is engaged, and (ii) for the
accomplishment of the Company’s purposes, including the acquisition,
development, maintenance, preservation, and operation of Company Property in
accordance with the provisions of this Agreement and any Applicable Laws.


 


L.             The Managing Member shall cause all
Company Reserves to be funded and maintained in accordance with the applicable
provisions of the Operating Documents and the Mortgage Loan Documents.  Unless otherwise required by the Operating
Documents and the Mortgage Loan Documents or approved by the Consent of the
Investor Member, disbursements from any replacement reserve maintained by the
Company shall be made only for (i) replacement of FF&E for the Hotel
and (ii) other capitalized building expenditures to the extent that such
items are the responsibility of the Company under the Lease.


 


Section 7.5.            Certain Payments to the Managing
Member and its Affiliates


 


A.            Supplemental Management Agreement.  Subject to the provisions of Sections 7.5B
and 7.5C below, the Company shall enter into a supplemental management
agreement (the “Supplemental Management Agreement”) with the Managing
Member (the “Supervisory Management Agent”) under which the Supervisory
Management Agent shall agree to provide consulting services to the Company and
the Project, to undertake to perform such bookkeeping, financial and reporting
services to be performed under Section 9 (other than those to be performed
by the Accountants or the Hotel Manager) as the Company may request, and to


 


49





















 


perform the other
services provided in the Supplemental Management Agreement.  The Managing Member is authorized to
determine on behalf of the Company whether the Supervisory Management Agent is
performing adequately under the Supplemental Management Agreement.  The Supplemental Management Agreement shall
provide that the sole compensation payable to the Supervisory Management Agent
for such services shall be the Incentive Management Fee if and to the extent
funds are available for the payment thereof out of Cash Flow of the Company,
which fee for each Fiscal Year shall be calculated in the manner specified in
the Supplemental Management Agreement.


 


B.            Transfer of Managing Membership
Interests.   If the Managing Member
sells, assigns or otherwise Transfers its Interest as the Managing Member
(other than a Transfer pursuant to the provisions of Section 8.3), any
amounts due the transferor Managing Member, in its capacity as a manager
pursuant to the Act, or due to any of its Affiliates and all rights to
repayment of loans under Section 5.5 shall be assigned and shall inure to
the benefit of the transferee Managing Member, subject to all of the
limitations set forth in this Agreement.


 


C.            Subordination of Fees.   The payment of any fees or reimbursements
under this Section 7.5 shall be subordinated to the repayment of any
Project Expense Loans.


 


D.            Nonassignability of Fees.   Except to the extent set forth in the
Supplemental Management Agreement, and except to the extent required by the
Lenders, no interest in any fees payable to the Managing Member or its
Affiliates pursuant to Section 7.5 shall be assigned or pledged to any
third party without the Consent of the Investor Member.


 


E.             Defaults.   Notwithstanding anything to the contrary
contained herein, in no event shall the Company pay any fees of any kind to the
Managing Member or any Affiliate of the Managing Member other than the Hotel
Manager while any Material Default exists. 
Except as otherwise specifically provided herein, any fees that are
suspended pursuant to the terms of this Section 7.5E shall accumulate
(without interest) and shall be paid from the next available Cash Flow or
Capital Proceeds after such Material Default has been cured or otherwise
eliminated.


 


Section 7.6.            Fiduciary Duty of Managing Member


 


The Managing
Member shall have a fiduciary responsibility to the Investor Member for the
safekeeping and use of all Company Property, whether or not in its immediate
possession or control, and shall not use or dispose of Company Property in any
manner except for the Company’s exclusive benefit.  The Managing Member shall not contract away its
fiduciary duties under the common law of agency.


 


Section 7.7.            Limitations on Liability;
Indemnification


 


A.            Except as set forth in
Section 7.8B, no Member or Affiliate of a Member shall have any liability
to the Company or to any Member for any loss suffered by the Company which
arises out of any action or inaction of such Member or such Affiliate if such
Member or Affiliate, in good faith, determined that such course of conduct was
in the best interest of the Company and such course of conduct did not
constitute gross negligence or willful misconduct of such Member or such
Affiliate.  To the full extent permitted
by law, each Managing Member


 


50





















 


and its Affiliates shall
be indemnified by the Company from and against any Adverse Consequences
sustained by it in connection with the Company, provided that the same were not
the result of gross negligence or willful misconduct on the part of such
Managing Member or such Affiliate and were the result of a course of conduct
which such Managing Member or Affiliate, in good faith, determined was in the
best interest of the Company.  Any
indemnity under this Section 7.7 shall be provided out of and to the
extent of Company assets only, and no Member shall have any personal liability
on account thereof.


 


B.            Notwithstanding the provisions of
Section 7.7A, no Managing Member, no Person acting as a broker-dealer, nor
any Affiliate thereof shall be indemnified for any Adverse Consequences arising
from or out of an alleged violation of federal or state securities laws unless
(i) there has been a successful adjudication on the merits of each count
involving alleged securities law violations as to the particular indemnitee and
the court approves indemnification of litigation costs, or (ii) such
claims have been dismissed with prejudice on the merits by a court of competent
jurisdiction as to the particular indemnitee and the court approves
indemnification of litigation costs, or (iii) a court of competent
jurisdiction approves a settlement of the claims against a particular
indemnitee and finds that indemnification of the settlement and related costs
should be made.


 


C.            The Company shall not incur the
costs of that portion of any insurance, other than public liability insurance,
which insures any party against any liability as to which such party is herein
prohibited from being indemnified. Nothing in this Section 7.7, however,
shall restrict the right of the Company to (i) indemnify unaffiliated
parties who will be performing services on behalf of the Company, including but
not limited to consultants, engineers and experts, pursuant to any contract
entered into by the Managing Member on behalf of the Company in order to carry
out the objectives of the Company, or (ii) apply Company funds, including,
without limitation, proceeds of public liability insurance in favor of the
Company, to cover damage to property or personal injuries to unaffiliated
parties.


 


Section 7.8.            Liability of Managing Member to
Members


 


A.            Except as otherwise specifically
provided in this Agreement, neither the Managing Member nor any Affiliate
thereof shall otherwise be liable, responsible or accountable for damages or
otherwise to any Member for any act performed within the scope of the authority
conferred by this Agreement, except for acts of gross negligence or willful
misconduct or for damages arising from any material misrepresentation or breach
of any covenant or warranty set forth herein. 
In any instance in which the Managing Member or any Affiliate thereof is
in doubt as to the propriety of any proposed action or omission under the terms
of this Agreement, the Managing Member or such Affiliate may, but shall not be
under any duty to, seek the ratification of such action or omission by the
Consent of the Investor Member; if such Consent of the Investor Member is
obtained thereto, the Managing Member or such Affiliate shall be fully
protected in relying thereon, and actions or omissions in reliance thereon
shall not be deemed to be a breach of any provisions of this Agreement.


 


B.            In the event that the Investor
Member becomes personally liable for Company violations with respect to the
Company Property under any Environmental Laws, the Managing Member shall
indemnify and hold harmless the Investor Member from and against any and all


 


51





















 


Environmental Costs or
other Adverse Consequences to the extent that the Investor Member is required
personally to discharge such Environmental Costs or other Adverse Consequences
in whole or in part from any source other than Company resources.  The foregoing indemnification shall be a
recourse obligation of the Managing Member and shall survive the dissolution of
the Company with respect to violations which occurred prior to any Terminating
Event with respect to the Managing Member against whom the indemnification
provided in this paragraph is sought to be enforced.


 


Section 7.9.            Tax Matters Partner


 


A.            The Tax Matters Partner (“TMP”)
for the Company shall be the Managing Member.


 


B.            The TMP shall have the right to
resign as the TMP by giving thirty (30) days written notice to each Member,
provided there is another Member willing to serve in such capacity.  Upon the resignation, death, legal incompetency
or Bankruptcy of the Person serving as the TMP, any successor to the interest
of the TMP pursuant to the applicable provisions of this Section 7.9 shall
be designated as the successor TMP, but such designee shall not become the TMP
until the designation of such Person has been approved by the Consent of the
Investor Member, which consent shall not be unreasonably withheld or
delayed.  In addition to the foregoing,
should the Managing Member be removed as such, it shall have the right to resign
as TMP by giving thirty (30) days written notice to each Member.  Following such a resignation, the removed
Managing Member agrees to cooperate with any subsequent TMP and to provide
records relating to the Company prior to the date of such removal as are
reasonably requested by the subsequent TMP.


 


C.            The TMP shall employ experienced tax
counsel to represent the Company in connection with any audit or investigation
of the Company by the IRS, and in connection with all subsequent administrative
and judicial proceedings arising out of such audit.  The fees and expenses of such counsel shall
be a Company expense and shall be paid by the Company.  Such counsel shall be responsible for
representing the Company; it shall be the responsibility of the Managing Member
and of the Investor Member, at their expense, to employ tax counsel to
represent their respective separate interests.


 


D.            The TMP shall keep the Members
informed of all administrative and judicial proceedings, as required by
Section 6623(g) of the Code, and shall furnish to each Member who so
requests in writing, a copy of each notice or other communication received by
the TMP from the IRS (except such notices or communications as are sent
directly to such requesting Member by the IRS). All third party costs and
expenses incurred by the TMP in serving as the TMP shall be Company expenses
and shall be paid by the Company, provided, however, that if the
Company does not have sufficient funds to pay such costs and expenses, the
Members shall make additional Capital Contributions to the Company to pay such
costs and expenses, pro rata in accordance with their respective interests in
Operating Profits and Losses, within thirty (30) days after notice from the
TMP.


 


E.             The TMP shall not have the
authority, unless such action has been approved by the Consent of the Investor
Member, to do all or any of the following:


 


52





















 


(i)            to enter into a
settlement agreement with the IRS which purports to bind members other than the
TMP,


 


(ii)           to file a petition
as contemplated in Section 6226(a) or 6228 of the Code,


 


(iii)          to intervene in any
action as contemplated in Section 6226(b) of the Code,


 


(iv)          to file any request
contemplated in Section 6227(b) of the Code, or


 


(v)           to enter into an
agreement extending the period of limitations as contemplated in
Section 6229(b)(l)(B) of the Code.


 


F.             The relationship of the TMP to the
Investor Member is that of a fiduciary, and the TMP has a fiduciary obligation
to perform its duties, subject to Section 7.9E, in such manner as will
serve the best interests of the Company and the Investor Member.


 


G.            Subject to the provisions of
Section 5.6, the Company shall indemnify the TMP (including the officers
and directors of a corporate TMP or member of a limited liability company TMP)
from and against judgments, fines, amounts paid in settlement, and expenses
(including attorneys’ fees) reasonably incurred by it in any civil, criminal or
investigative proceeding in which it is involved or threatened to be involved
by reason of being the TMP, provided that the TMP acted in good faith, within
what is reasonably believed to be the scope of its authority and for a purpose
which it reasonably believed to be in the best interests of the Company or the
Members.  The TMP shall not be indemnified
under this provision against any liability to the Company or its Members to any
greater extent than the indemnification allowed by Section 7.7 of this
Agreement.  The indemnification provided
hereunder shall not be deemed to be exclusive of any other rights to which
those indemnified may be entitled under any applicable statute, agreement, vote
of the Members, or otherwise.


 


Section 7.10.          Access and Reports


 


A.            Subject to the terms of the
Operating Documents, the Managing Member shall permit the Investor Member and
its representatives to have access to the Project during normal business hours
without prior notice and to examine all agreements and plans and specifications
relating to the Project and shall deliver copies and such reports as may
reasonably be required by the Investor Member. 
The Managing Member shall promptly provide the Investor Member with
copies of all material correspondence, notices and reports sent pursuant to and
received under the Operating Documents or from any Governmental Authority with
respect to the Project, together with copies of all other correspondence that a
prudent investor would wish to examine in connection with a similar
transaction.


 


B.            The Managing Member shall, within
five (5) days after any of the following specified events occurs, notify
the Investor Member of any correspondence from the IRS or any other
Governmental Authority relating to or referencing the Historic Tax Credit, or
any other Tax Credit, any material damage to or change in the Project, any
notice of default under the Operating Documents, any non-payment of taxes, the
filing of any lien against the Leasehold Interest, or non-compliance with any
Applicable Laws, the commencement or termination of any


 


53





















 


lawsuit against the
Company or any of its property that is likely to have a material adverse effect
on the Company or its property, any material change to the Operating Documents,
any extraordinary item charges or credits or any other material charges or credits
to income of an unusual nature or any material provisions for loss, any other
circumstance which, either in amount or time or otherwise materially affects
the business of the Company or the interests of the Members or the amount and
timing of any Tax Credit, or any occurrence that would cause any representation
or warranty of the Managing Member herein to become untrue or inaccurate in any
material respect.


 


Section 7.11.          Representations, Warranties and
Covenants of the Managing Member


 


In addition to any
other representations, warranties or covenants contained herein, the Managing
Member hereby represents, warrants and covenants to and with the Company and
the Investor Member that as of the date of this Agreement:


 


A.            The Company is a duly organized limited
liability company validly existing under the laws of the State and has complied
with all recording requirements with the proper authorities in the State
necessary to establish the limited liability of the Members as provided herein
and under the Act.


 


B.            The Developer is a duly organized
limited liability company validly existing under the laws of the State of
Delaware and has full power and authority to perform its obligations under the
Project Documents and/or the Operating Documents to which it is a party; and
the Managing Member is a duly organized limited liability company validly
existing under the laws of the State of Delaware, has full power and authority
to perform its obligations under the Project Documents and/or the Operating
Documents to which it is a party.


 


C.            No litigation, demand,
investigation, claim or proceeding against the Company, the Managing Member or
the Developer or any other litigation or proceeding directly affecting the
Project is pending or, to the Best Knowledge of the Managing Member,
threatened, before any court, administrative agency or other Governmental
Authority which would, if adversely determined, have a material adverse effect
on the Company, the Managing Member, the Developer, or their respective
business or operations, except for such matters as to which, in the opinion of
the Managing Member, it is unlikely that such a determination would be
materially adverse to the Company, the Managing Member or the Developer, as the
case may be.  All litigation involving
the Company, the Developer or the Project is listed on Exhibit I
hereto, and none of that litigation should have a material adverse impact on
the Company, the Developer or the Project.


 


D.            No default by the Managing Member,
the Developer or any Affiliate thereof having any relationship with the Project
or the Company, in any material respect has occurred or is continuing (nor has
there occurred any continuing event which, with the giving of notice or the
passage of time or both, would constitute such a default in any material
respect) under any of the Project Documents, and the Project Documents are in
full force and effect (except to the extent fully performed in accordance with
their respective terms).


 


54





















 


E.             All material building, zoning,
health, safety, business and other applicable Permits necessary to permit the
construction, use, occupancy and operation of the Project have been or will, at
the time required, be obtained and maintained (other than, prior to completion
of the Rehabilitation of the Building such as are issuable only on the
completion of the Rehabilitation of the Building); and neither the Company nor
the Managing Member or the Developer has received any notice or has any
knowledge of any violation with respect to the Project of any law, rule,
regulation, order or decree of any Governmental Authority having jurisdiction
which would have a material adverse effect on the Project or the construction,
use or occupancy thereof, except for violations which have been cured and
notices or citations which have been withdrawn or set aside by the issuing
agency or by an order of a court of competent jurisdiction.


 


F.             The Developer has a good and
marketable fee interest in Units 1 and 2 of the Condominium and a good and
marketable leasehold interest with remaining terms in excess of 90 years under
each of the Master Leases, and the Company has a good and marketable leasehold
interest in all of the foregoing, in each case free and clear of any liens,
charges or encumbrances other than matters set forth in the title update
furnished to the Investor Member dated August    , 2000, a
copy of which is attached as Exhibit J, and encumbrances that the
Company is permitted to create under the terms of this Agreement


 


G.            The execution and delivery of all
instruments and the performance of all acts heretofore or hereafter made or
taken or to be made or taken, pertaining to the Company or the Project by each
of the Managing Member and the Developer have been or will be duly authorized
by all necessary corporate or other action, and the consummation of any such
transactions with or on behalf of the Company will not constitute a breach or
violation of, or a default under, the charter or by-laws or other governing
documents of any such Entity or any agreement by which any such Entity or any
of its properties is bound, nor constitute a violation of any law,
administrative regulation or court decree.


 


H.            No Material Default has occurred
and/or is continuing.


 


I.              The Developer is not in default in
any material respect in the observance or performance of any provision of the
Project Documents to be observed or performed by the Developer.


 


J.             No Event of Bankruptcy has occurred
as to the Company, the Managing Member or the Developer.


 


K.            The Managing Member or its
Affiliates have provided the Investor Member copies of all material documents
available to the Managing Member relating to the development, financing and
operation of the Project.


 


L.             The Managing Member has disclosed
all material facts and transactions known to it that relate to the Project to
the Investor Member.


 


M.           To the Best Knowledge of the Managing
Member, the Project has no material design, maintenance or construction
defects.


 


55





















 


N.            There are no mechanic’s liens
recorded against the Project or the Leasehold Interest and, to the Best
Knowledge of the Managing Member, no Person has threatened to assert or record
any such mechanic’s lien.


 


O.            Other than obligations incurred in
the ordinary course of business, including equipment leases, as of the date
hereof, the Company has no material outstanding obligations except for the
Project Documents and this Agreement.


 


P.             The Company has not been notified
in writing by a federal, state or municipal agency that it is in violation of
any Environmental Laws with respect to the Project and that such violation is
continuing, nor to the Best Knowledge of the Managing Member, does such a
violation exist, nor is the Managing Member actually aware of a condition which
should, in the exercise of due diligence, cause it to investigate the existence
of an environmental condition of such a nature as described above, except as
may otherwise be disclosed in an environmental report provided to the Members
prior to the Admission Date.  The
Developer has remedied any violation of any Environmental Laws, including,
without limitation, lead paint and asbestos remediation and removal of chemical
containers, in compliance with all applicable legal requirements.


 


Q.            To the Best Knowledge of the
Managing Member, except as may otherwise be disclosed in an environmental
report provided to the Members prior to the Admission Date, no Hazardous
Substances were ever or are now stored on (except to the extent any such
storage was in substantial compliance with all Environmental Laws pertaining
thereto, including commercially reasonable amounts of such Hazardous Substances
as are ordinarily used at properties of the character of the Project or if not
in substantial compliance was cured to the reasonable satisfaction of all
Governmental Authorities having jurisdiction over the matter), transported, or
disposed of on the Project.


 


R.            As of the Admission Date, all
accounts of the Company required to be maintained under the terms of the
Project Documents, including, without limitation, any Company Reserves, are
currently funded to levels required by any Person or Governmental Authority
with jurisdiction over the Company or the Project.


 


S.             The balance of the reserve required
to be maintained by the Company pursuant to the provisions of Section 5.8
equals or exceeds the minimum levels required to be maintained thereunder.


 


T.            On and after the date of the
Completion Date Installment with respect to the Building, the representations
and warranties in the Tax Certificate are or will be true and correct in all
material respects.


 


U.            Except as otherwise required by the
Lenders, the Company’s bank accounts and funds have been and will be maintained
separately from those of any Developer Entity, have been and will be maintained
in the name of the Company and no Developer Entity has been or will be an
account party, has made or will make deposits to, or has had or will have the
power to make withdrawals from such accounts or funds, except certain members
or officers of the


 


56





















 


co-managers of the
Managing Member, and then only in accordance with the terms of the Hotel
Management Agreement and the other Operating Documents.


 


V.            Each of the Company and the Managing
Member maintains and will maintain its own separate minutes of its
actions.  Each of the Company and the
Managing Member maintains and will maintain separate and full records and
financial records for itself only, and maintains and will maintain its assets
and the Managing Member’s assets in a manner that facilitates their
identification and segregation from those of any Developer Entity.


 


W.           The financial records and accounts of
each of the Company and the Managing Member have been and will be prepared and
maintained in accordance with generally accepted accounting principles and at
all times will be separate and distinct from the financial records and accounts
of each Developer Entity.


 


X.            The Company has conducted and will
conduct its own business through the Managing Member or the Hotel Manager, as
applicable, and that business has been and will be conducted solely in the name
of the Company and in such a way as to not mislead others as to the identity of
the Entity with which they are dealing. 
In that regard, all written communications by the Company or the
Managing Member, including, without limitation, letters, invoices, purchase
order and contracts, have been and will be made solely in the name of the
Company or the Managing Member, as appropriate. 
The Company has described and will always describe itself as a separate
legal entity and not as a division or department of any Developer Entity.  The Company has and will have its own
stationery, invoices, checks and other business forms, separate from those of
any Developer Entity.  The Managing
Member has and will have as its only office the registered office of the
Company.


 


Y.            Each of the Company and the Managing
Member has paid and will pay its own expenses and liabilities from its own
funds.  Invoices and other statements of
account from creditors of the Company will be addressed and mailed directly to
the Company.  Except for the Lease, the
HTC Loan Documents and the Hotel Management Agreement, all of which have been
approved by the Members, neither the Company nor the Managing Member has
entered into any contract or agreement with any Developer Entity, and will not
enter into any further agreements with any Developer Entity except on terms and
conditions that are intrinsically fair and reasonable.  The Company shall pay fees and expenses owed
to the Hotel Manager only in accordance with the terms of the Hotel Management
Agreement, as amended from time to time.


 


Z.            Except as set forth in the Lease,
the Company has not guaranteed, will not guarantee, and has not and will not
otherwise become liable for the payment of any obligation of any Developer
Entity.  Except for the statutory
liability of the Managing Member as the manager member of the Company, the
Managing Member has not guaranteed, will not guarantee, and has not and will
not otherwise become liable for the payment of any obligation of any Developer
Entity. Assets have not been and will not be transferred between the Company
and any Developer Entity without reasonably equivalent value or with the intent
to hinder, delay or defraud creditors. 
Assets have not been and will not be transferred between the Company and
any Developer Entity without reasonably equivalent value or with the intent to
hinder, delay or defraud creditors. 
Except for the HTC Loan and any Project Expense Loans, no loans have
been or will be made between the Company and any Developer Entity and no loans
have been or will


 


57





















 


be made between the Hotel
Manager and any Developer Entity.  The
Company’s existence is and will not be dependent on the Managing Member or any
other Developer Entity being its managing member, and the Company’s business
could be maintained even if the Managing Member or any other Developer Entity
were not its manager.


 


Section 7.12.          Indemnification


 


A.            In the event that the Managing
Member breaches any of its representations, warranties or covenants contained
in Section 7.11 above, the Managing Member shall release, indemnify and
hold the Investor Member harmless from and against any and all Adverse
Consequences which the Investor Member suffers or incurs, or to which the
Investor Member becomes subject, resulting from, arising out of, relating to,
in the nature of or caused by such breach.


 


B.            If any third party shall notify the
Investor Member with respect to any matter which may give rise to a claim for
indemnification against the Managing Member under this Section 7.12, the
Investor Member shall notify the Managing Member (referred to in this Section
7.12 as the “Indemnitor”) thereof promptly; provided, however,
that no delay on the part of the Investor Member in notifying the Indemnitor
shall relieve the Indemnitor from any liability or obligation hereunder unless
(and then solely to the extent) the Indemnitor thereby is damaged.  In the event that the Indemnitor notifies the
Investor Member within thirty (30) days after the Investor Member has given
notice of the matter that the Indemnitor is assuming the defense thereof,
(i) the Indemnitor will defend the Investor Member against the matter with
counsel of its choice reasonably satisfactory to the Investor Member,
(ii) the Investor Member may retain separate co-counsel at its sole cost
and expense (except that the Indemnitor will be responsible for the reasonable
fees and expenses of the separate co-counsel to the extent that the Investor
Member concludes reasonably that the counsel the Indemnitor has selected has a
conflict of interest), (iii) the Indemnitor will not consent to the entry
of any judgment or enter into any settlement with respect to the matter without
the Consent of the Investor Member, which shall not be unreasonably withheld or
delayed, and (iv) the Indemnitor will not consent to the entry of any
judgment with respect to the matter, or enter into any settlement which does
not include a provision whereby the plaintiff or claimant in the matter
releases the Investor Member from all liability with respect thereto, without
the Consent of the Investor Member, which shall not be unreasonably withheld or
delayed.  In the event that the
Indemnitor does not notify the Investor Member within thirty (30) days after
the Investor Member has given notice of the matter that the Indemnitor is
assuming the defense thereof, however, the Investor Member may defend against,
or enter into any settlement with respect to, the matter in any manner it
reasonably may deem to be appropriate.


 


C.            In addition to the foregoing,
whether or not the Indemnitor has breached any of its representations, warranties
or covenants contained herein, if the Investor Member is made a party to any
suit or proceeding by virtue of its being a Member of the Company (other than
in connection with an audit by the IRS of the Investor Member’s tax returns),
the Indemnitor shall use its best efforts to have the suit or proceeding
dismissed, shall assume the defense of such suit or proceeding if it is not
dismissed, with counsel of its choice reasonably satisfactory to the Investor
Member, shall pay all costs associated therewith and shall indemnify and hold
the Investor Member harmless from and against any and all Adverse Consequences
which the


 


58





















 


Investor Member suffers
or incurs, or to which the Investor Member becomes subject, resulting from,
arising out of, relating to or caused by such action against the Investor
Member.


 


59





















 


SECTION 8:  MATERIAL DEFAULT


 


Section 8.1.            General


 


If a Material
Default occurs and is continuing, the following provisions shall apply.


 


Section 8.2.            Cure Rights and Penalties


 


A.            In the event that a Material Default
occurs, the Managing Member shall use reasonable commercial efforts to cure
such Default.  The Managing Member shall
have thirty (30) days from the date of the default (or from the date of notice
of default in the event notice is given) to cure the Material Default; provided,
however, that if a Material Default, other than a monetary default,
cannot be reasonably cured within thirty (30) days, it shall be sufficient if
the Managing Member commences the cure within thirty (30) days and proceeds to
cure diligently thereafter, provided that the cure is completed within ninety
(90) days, or such lesser period as is required to cure the Material Default,
after receipt of the notice to cure. 
Provided that the Managing Member provides the Investor Member the
information and documentation required by Section 9.1, the Investor Member
shall notify the Managing Member if the Investor Member believes there exists a
Material Default.  In such case, the cure
periods described in the preceding sentence shall apply beginning with the date
the Managing Member receives notice from the Investor Member.  If the Managing Member fails to cure within
the specified time period, the following penalties shall apply.


 


B.            In the event the Managing Member
fails to cure a Material Default within the time periods set forth in
Section 8.2A, the Investor Member shall have the right, but not the
obligation, to require the Managing Member to purchase the Interest of the
Investor Member in the Company for a price equal to the sum of (i) the Put
Price described in the Purchase Option, (ii) any Recapture Adjustment
Amount due the Investor Member pursuant to Section 5.3G as a result of the
purchase of the Investor Member’s Interest, plus (iii) Five Hundred
Thousand Dollars ($500,000).  The
Investor Member shall provide the Managing Member with written notice that it
intends to exercise its put right hereunder, and such payment shall be made to
the Investor Member within ten (10) Business Days of the receipt of such
notice by the Managing Member.  Upon
receipt of the full amount due under this paragraph, the Investor Member shall
withdraw form the Company and cease to be a Member of the Company.  Should the Investor Member elect not to have
its Interest purchased upon the occurrence of a Material Default that is not
timely cured, the Investor Member shall continue as the Investor Member of the
Company with all rights granted to it under this Agreement.


 


60





















 


SECTION 9:  BOOKS AND REPORTING, ACCOUNTING, TAX
ELECTIONS, ETC.


 


Section 9.1.            Books and Reporting


 


A.            The Managing Member shall maintain
or cause to be maintained for the term of the Company a complete and accurate
set of books and supporting documentation of transactions with respect to the
conduct of the Company’s business.  The
books of the Company shall be kept on the accrual basis and shall at all times
be maintained at the principal office of the Company.  Each Member and its duly authorized
representatives shall have the right to examine the books of the Company and
all other records and information concerning the operation of the Property from
time to time without prior notice during regular business hours provided that
such examination shall not unreasonably disrupt or interfere with the Company’s
business or operations and the costs of such examination shall be borne by the
examining Member.


 


B.            The books of the Company shall be
examined in accordance with generally accepted auditing standards annually as
of the end of each Fiscal Year of the Company by the Accountants.  The Managing Member shall determine and
prepare a balance sheet as of the end of each such Fiscal Year and statements
of income, members’ equity and changes in financial position for such Fiscal
Year.  Such balance sheet and statements
shall be accompanied by the opinion of the Accountants that such balance sheet
and statements have been prepared in accordance with GAAP and the Uniform
System of Accounts applied consistently with prior periods, identifying any
matters to which the Accountants take exception and stating, to the extent
practicable, the effect of each such exception on such financial statements.  As a note to such financial statements, the
Managing Member shall prepare (or shall cause to have prepared) a
schedule of all loans to the Company, setting forth the section of
this Agreement under which such debt was incurred and the purpose for which
such loan was applied by the Company and such schedule will be reviewed by
the Accountants.  Such
schedule shall demonstrate that loans have been made, used, carried on the
books of the Company (and repaid, if applicable) in accordance with the
provisions of this Agreement.  The
Managing Member shall, promptly upon receipt of such balance sheet and
statements and in any event within one hundred twenty (120) days after the end
of each Fiscal Year, transmit to the Investor Member a copy thereof.


 


C.            The Accountants also shall review
and sign the federal and state income tax returns of the Company.  Subject to the provisions of the last
sentence of Section 9.1B, the Managing Member or its designee shall
complete the books of the Company in such time as will allow the Accountants to
complete such tax returns within one hundred twenty (120) days after the end of
such Fiscal Year.  The Managing Member
shall cause such tax returns to be filed within such time periods and shall
immediately upon the filing thereof transmit to the Investor Member a copy of
the complete federal Company tax return (i.e., Form 1065 and all accompanying
schedules, including Schedule K-1) and all state income tax returns.  If the Managing Member fails to complete such
tax returns and to transmit such tax returns and Schedule K-l to the
Investor Member within one hundred twenty (120) days after the end of such
Fiscal Year, the Managing Member shall be subject to a penalty of $200 for each
day such tax returns and Schedule K-l are delayed beyond such 120-day
period, which penalty shall be paid to the Investor Member within 10 days
following the delivery of such returns and Schedule K-l; provided,
however, such penalty shall be waived if the delay is solely caused by the
Accountants.  Unless and until such tax
returns and Schedule K-1 are delivered to the


 


61





















 


Investor Member, the
Managing Member and its Affiliates other than the Hotel Manager shall not be
entitled to receive any Distributions or fees to which they may otherwise be
entitled under Section 6 hereof, and the Investor Member shall not be
required to pay any additional Installment of its Capital Contribution.  Such Distributions and payments of fees and
the obligation of the Investor Member to pay any additional Installment of its
Capital Contribution shall be restored and allowed only upon the delivery to
the Investor Member of such tax returns and Schedule K-l and the payment
of the $200 per day penalty described above and any interest or penalties imposed
on the Investor Member by the IRS or any other taxing authority as a result of
the Managing Member’s failure to deliver such tax returns and Schedule K-l
in a timely fashion.  In the event that
any such items will not be delivered within the time limits set forth herein,
the Managing Member shall immediately notify the Investor Member, and shall
furnish it with copies of any extensions relating thereto.


 


D.            The reports and estimates described
in this Section 9.1 shall clearly indicate the methods under which they
were prepared and shall be made at the expense of the Company.


 


E.             If the Managing Member fails to
complete such tax returns and submit such Schedule K-1 on a timely basis,
the Investor Member may select a firm of accountants who shall prepare such
returns and Schedule K-1.  The
Managing Member shall immediately furnish all necessary documentation and other
information so as to prepare such tax returns and such Forms K-1 to such
accountants.  Such firm of accountants
shall be paid out of Company funds or, if and to the extent that no Company
funds are available therefor, by the Managing Member.


 


F.             Annual pro forma operating and
capital budgets shall be prepared by the Managing Member and furnished to the
Investor Member within ninety (90) days after the beginning of each Fiscal
Year.  In addition, the Managing Member
shall furnish to the Investor Member copies of all operating budgets, capital
budgets, monthly or other periodic reports, and financial statements required
to be delivered to the Company by the Hotel Manager from time to time pursuant
to the provisions of the Hotel Management Agreement.  Without limiting the generality of the
foregoing, the Managing Member shall furnish, at the time of the delivery of
its annual operating budget, projections of income, expenses and Cash Flow for
the period covered by such budget.  Such
projections shall be consistent with the information prepared by the Hotel
Manager and with the standards set forth in the Uniform System of Accounts and
shall include projections of average daily room rates and occupancy
levels.  The capital budget furnished by
the Managing Member shall contain similar information prepared in a similar
manner for all capital expenditures as well as expenses for FF&E.  The Managing Member also shall prepare and
furnish to the Investor Member an estimate of the Profits and Losses of the
Company for federal tax purposes for the current Fiscal Year not later than
September 30 of each year.


 


G.            The Managing Member shall send to
the Investor Member no later than 45 days following the close of each calendar
quarter a financial report providing the following information (which need not
be audited): (i) a balance sheet as at the end of such quarter;
(ii) a statement of income for such quarter; (iii) a quarterly
financial summary in the form of Exhibit E; and (iv) a
report of the significant activities of the Company during the fiscal quarter.


 


H.            The Managing Member may from time to
time change the Accountants for the Company to another firm of certified
independent accountants; provided, however, that unless


 


62





















 


both (i) the
proposed new Accountants are a firm of nationally recognized standing with
substantial experience with projects eligible for the Historic Tax Credit, and
(ii) prior to any such change the Managing Member shall have delivered to
the Investor Member a certificate to the effect that such change has not been
necessitated by any dispute over Company accounting practices and procedures,
such change in Accountants shall require the Consent of the Investor Member.
Notwithstanding the foregoing, the Investor Member hereby agrees that following
the last Fiscal Year in which the Company receives Historic Tax Credits, the
Managing Member may engage David Berdon & Co. LLP of New York, NY as
the Company’s Accountants.


 


Section 9.2.            Bank Accounts


 


The bank accounts
of the Company shall be maintained in such banking institutions authorized to
do business in the State or, subject to any Requisite Approvals, such other
states as the Managing Member shall determine, and withdrawals shall be made on
such signature or signatures as the Managing Member shall determine.  The Company’s funds shall not be commingled with
the funds of any other Person and shall not be used except for the business of
the Company.  All deposits (including
security deposits and other funds required by any Lender to be placed in escrow
and other funds not needed in the operation of the Company’s business) shall be
deposited, to the extent permitted under the Project Documents, in
interest-bearing accounts or invested in obligations of or guaranteed by the
United States, any state thereof, or any agency, municipality or other
political subdivision of any of the foregoing, commercial paper (investment
grade), certificates of deposit and time deposits in commercial banks with
capital in excess of $50,000,000 and in mutual (money market) funds investing
in any or all of the foregoing; provided, however, that any funds
required to be placed in escrow by the Lender shall be controlled by such
Lender and the Managing Member shall not be permitted to make any withdrawal
from the funds without the express written consent of the Lender to the extent
required.


 


Section 9.3.            Tax Elections


 


Subject to the
provisions of Section 9.4 hereof and to the provisions of the HTC Loan
Agreement, all elections required or permitted to be made by the Company under
the Code shall be made by the Managing Member in such manner as it determines
to be most advantageous to the Investor Member. 
The Managing Member may consult with the Accountants in making such
determination.


 


Section 9.4.            Special Adjustments


 


A.            In the event of a Transfer of all or
any part of the Interest of any Member, the Company shall elect, if requested
to do so by any Member, pursuant to Section 754 of the Code (or
corresponding provisions of succeeding law) to adjust the basis of Company
assets.  Any adjustments made pursuant to
Section 754 shall affect only the successor in interest to the
transferring Member.  Each Member will
furnish the Company with all information necessary to give effect to such
election.


 


B.            If, as a result of an adjustment
made by the IRS and accepted by the Company, any item shall be capitalized,
then the depreciation or cost recovery for the amount so capitalized


 


63





















 


shall be appropriately
allocated, as determined by the Accountants, to those Members affected by the
adjustment.


 


Section 9.5.            Fiscal
Year


 


The Fiscal Year of the
Company shall be the calendar year, or such other year as may be required by
the Code.


 


64





















 


SECTION 10:  WITHDRAWAL OF MANAGING MEMBER;

NEW MANAGING MEMBER


 


Section 10.1.          Voluntary Withdrawal


 


A.            The Managing Member shall not have
the right to withdraw voluntarily from the Company or otherwise to Transfer all
or a portion of its Interest without the Consent of the Investor Member and the
receipt of all Requisite Approvals.


 


B.            Notwithstanding the foregoing, the
Managing Member may at any time propose to the Investor Member a Person to
serve as his or its successor.  If the
Consent of the Investor Member is obtained, and all Requisite Approvals are
obtained to such withdrawal and the admission of such successor, all Members
hereby agree that this Agreement and the Articles shall be appropriately
amended to effect such withdrawal and admission.


 


C.            Further notwithstanding the
foregoing, the Managing Member may Transfer its Interest without the Consent of
the Investor Member provided that the Guaranty Agreements shall remain in
effect following such Transfer.


 


Section 10.2.          Continuation


 


In the event of
the occurrence of a Terminating Event with respect to the Managing Member, the
business of the Company shall be continued unless, within ninety (90) days
following such Terminating Event, the remaining Members of the Company
affirmatively elect to dissolve the Company and discontinue its business and
operations.


 


Section 10.3.          Successor Managing Member


 


A.            Upon the occurrence of any
Terminating Event referred to in Section 10.2, the remaining Members may
(but are not required to) designate a Person to become a successor Managing
Member to the Managing Member as to whom such event shall have occurred.  Any Person so designated, subject to the
Consent of the Investor Member (and, if required by the Act or any other
applicable law, the consent of any other Member so required), shall become a
successor Managing Member upon its written agreement to be bound by the Operating
Documents and by the provisions of this Agreement.


 


B.            If any Terminating Event referred to
in Section 10.2 shall occur at a time when there is no remaining Managing
Member and no successor becomes a successor Managing Member pursuant to the
preceding provisions of this Section 10.3 or the remaining Managing
Members do not elect to continue the business of the Company pursuant to
Section 10.2, then the Investor Member shall have the right to designate a
Person to become a successor Managing Member upon his or its written agreement
to be bound by the Operating Documents and by the provisions of this Agreement.


 


C.            If the Investor Member elects to
admit a successor Managing Member pursuant to the provisions of this
Section 10.3, the relationship of the parties in the Company shall
continue to be governed by the provisions of this Agreement.


 


65





















 


Section 10.4.          Interest of Predecessor Managing
Member


 


A.            Except as provided in
Section 10.3, no assignee or transferee of all or any part of the Interest
of the Managing Member shall have any automatic right to become the Managing
Member.  Upon the designation of a
successor Managing Member (if any) pursuant to Section 10.3 (but not a removal
of the Managing Member and designation of a successor pursuant to the terms of
Section 8), such successor Managing Member shall have the obligation to
acquire the predecessor Managing Member’s Interest by paying to such Managing
Member or its representatives the fair market value of such Interest (provided
that if the predecessor Managing Member is in violation of any of the covenants
or undertakings contained in this Agreement, or has violated any representation
or warranty contained herein, the designated successor Managing Member may pay
such amount into escrow until such violation has been corrected).


 


B.            If no successor Managing Member is
designated or if the designated successor Managing Member of the predecessor
Managing Member does not desire to purchase the Interest of the predecessor
Managing Member, such Interest of the predecessor Managing Member shall be
deemed to be that of a Special Class Member, and the holder thereof shall
be entitled only to such rights as the assignee of an Interest may have as such
under the provisions of Section 11.4 hereof, the Act and other applicable
laws of the State.


 


C.            Anything herein contained to the
contrary notwithstanding, if the Managing Member withdraws voluntarily in
violation of the provisions of Section 10.1, it shall remain liable for
all of its obligations under this Agreement, for its obligations under the
Project Documents, for all its other obligations and liabilities hereunder
incurred or accrued prior to the date of its withdrawal and for any loss or
damage which the Company or any of its Members may incur as a result of such
withdrawal, except for any loss or damage attributable to the activities of the
remaining and/or successor Managing Members subsequent to such withdrawal.


 


Section 10.5.          Designation of New Managing Members


 


A.            The Managing Member may, with the
written consent of all Members, and any Requisite Approvals, at any time
designate one or more new Managing Members with such Interest(s) as the
Managing Member may specify.


 


B.            Any new Managing Member shall, as a
condition of receiving any interest in the Company or Company Property, agree
to comply with the terms of the Operating Documents and by the provisions of
this Agreement to the same extent and on the same terms as any other Managing
Member.


 


Section 10.6.          Amendment of Articles; Approval of
Certain Events


 


A.            Upon the admission of a new Managing
Member, pursuant to the preceding provisions of this Section 10, the
Schedule shall be amended to reflect such admission and an amendment to
the Articles, also reflecting such admission, shall be filed in the manner and
to the extent required by the Act.


 


66





















 


B.            Each Member hereby consents to and
authorizes any admission or substitution of a Managing Member or any other
transaction, including, without limitation, the continuation of the Company
business, which has been authorized by the requisite percentage of Members
under the provisions of this Agreement, subject to the provisions of
Section 10.7, and hereby ratifies and confirms each amendment of this
Agreement and/or the Articles necessary or appropriate to give effect to any
such transaction.


 


Section 10.7.          Admission of a Managing Member


 


Notwithstanding
any other provisions of this Agreement, no Person shall be admitted as an
additional or successor Managing Member without the written approval of all
Members, such approval not to be unreasonably withheld or delayed.


 


67





















 


SECTION 11:  TRANSFER OF INTERESTS


 


Section 11.1.          Right
To Assign


 


A.            The Investor Member may not Transfer
its Interest, or enter into any agreement as a result of which any Person shall
become interested with it in the Company, without the consent of the Managing
Member, which consent may be given or withheld in its sole discretion.


 


B.            Notwithstanding the provisions of
Section 11.1A above, the Investor Member shall have the right, at any time
or from time to time, to Transfer its Interest to any of its Affiliates without
the consent of any other Member, provided, however, that in the
event of a Transfer by the Investor Member of its Interest prior to the payment
of all amounts due under the Investor Note, the Investor Member shall remain
liable on the Investor Note at all times until fully paid.


 


Section 11.2.          Restrictions


 


A.            No Transfer of the Interest of any
Person shall be made if such Transfer would violate the provisions of
Section 13.1.


 


B.            In no event shall all or any part of
an Interest be Transferred to a minor or to an incompetent.


 


C.            The Managing Member may require, as
a condition to any Transfer of an Interest, that the assignor or assignee
(i) assume all costs incurred by the Company in connection therewith, and
(ii) furnish it with an opinion of counsel satisfactory to counsel to the
Company that such Transfer complies with applicable federal and state
securities laws.


 


D.            Any Transfer in contravention of any
of the provisions of Section 11.1 or this Section 11.2 shall be void
and ineffectual and shall not bind, or be recognized by, the Company.


 


Section 11.3.          Substitute Members


 


A.            In the event of a Transfer permitted
under the provisions of Section 11.1 above, the Investor Member shall have
the right to substitute the Assignee as a Member (a “Substitute Member”)
in its place without the consent of any other Member.  In all other cases, the consent of the
Managing Member shall be required for substitution of an Assignee of the
Investor Member as a Member.  Any Substitute
Member shall, as a condition of receiving any interest in the Company, agree to
be bound (to the same extent as its assignor was bound) by the Operating
Documents and by the provisions of this Agreement including, without
limitation, the obligation to make all payments required to be made under the
Investor Note as and when the same are due.


 


B.            Upon the admission of a Substitute
Member, the Schedule shall be amended to reflect the name, address and
Percentage Interest of such Substitute Member and to eliminate the name,
address and Percentage Interest of its assignor, and an amendment to the
Articles reflecting such admission shall be filed, if required by the Act, in
accordance with the applicable provisions of the Act.  Each Substitute Member shall execute such
instrument or instruments as


 


68





















 


shall be required by the Managing Member to signify such Substitute
Member’s agreement to be bound by all the provisions of this Agreement.


 


Section 11.4.          Assignees


 


A.            In the event of the death or
incapacity of any Member who is a natural person, his legal representatives
shall have such rights as are afforded them by the Act.  The death of a Member shall not dissolve the
Company.


 


B.            An Assignee of a Member who does not
become a Substitute Member in accordance with Section 11.3 shall, if such
assignment is in compliance with the terms of this Agreement, have the right to
receive the same share of Profits, Losses, Tax Credits and Distributions of the
Company to which the assigning Member would have been entitled if no such
assignment had been made by such Member but, except as otherwise required under
the Act, shall have no other rights granted to the Members under this
Agreement.


 


C.            Except as otherwise provided in
Section 11.1, any Member who shall assign all of its Interest shall cease to
be a Member of the Company, and shall no longer have any rights or privileges
or obligations of a Member except that, unless and until the Assignee of such
Member is admitted to the Company as a Substitute Member in accordance with
Section 11.3, said assigning Member shall retain the statutory rights and
be subject to the statutory obligations of an assignor member under the Act as
well as the obligation to make the Capital Contributions attributable to the
Interest in question, if any portion thereof remains unpaid.


 


D.            In the event of any assignment of an
Interest, there shall be filed with the Company a duly executed and
acknowledged counterpart of the instrument making such assignment; such
instrument must evidence the written acceptance of the Assignee to all the
terms and provisions of this Agreement; and if such an instrument is not so
filed, the Company need not recognize any such assignment for any purpose.


 


E.             An Assignee of an Interest who does
not become a Substitute Member as provided in Section 11.3 and who desires
to make a further assignment of its Interest shall be subject to the provisions
of this Section 11 to the same extent and in the same manner as any Member
desiring to make an assignment of its Interest.


 


69





















 


SECTION 12:  MANAGEMENT OF PROJECT


 


The Managing Member has
caused the Company as the assuming party to enter into an assignment and
assumption agreement with respect to the Hotel Management Agreement.  Notwithstanding anything to the contrary
contained herein, the Managing Member is authorized to execute amendments to
the Hotel Management Agreement from time to time on behalf of the Company to
authorize the Company to pay franchise fees, reservation fees and other
commercially reasonable compensation for the services provided by the Hotel
Manager or its affiliates.


 


70





















 


SECTION 13:  GENERAL PROVISIONS


 


Section 13.1.          Restrictions on Transfer


 


A.            No Transfer of any Interest may be
made except in compliance with the Regulations. 
The Managing Member may require as a condition of any Transfer of such
Interest that the transferor furnish an opinion of counsel reasonably
satisfactory to the Managing Member that the proposed transfer will comply with
applicable federal and state securities laws.


 


B.            Any Transfer in contravention of any
of the provisions of this Section 13.1 shall be void and ineffective, and
shall not bind or be recognized by the Company.


 


Section 13.2.          Notices


 


Except as otherwise
specifically provided herein, all notices, demands or other communications
hereunder shall be in writing and shall be deemed to have been given when the
same are (i) deposited in the United States mail and sent by certified or
registered mail, postage prepaid, (ii) delivered to a nationally
recognized overnight delivery service, (iii) sent by telecopier or other
facsimile transmission, answerback requested, or (iv) delivered
personally, in each case, to the parties at the addresses set forth below or at
such other addresses as such parties may designate by notice to the Company:


 


(a)           If to the Company, at the principal
office of the Company set forth in Section 2.


 


(b)           If to a Member, at
its address set forth in the Schedule, with copies to William F.  Machen, Esq., Holland & Knight
LLP, One Beacon Street, 32nd Floor, Boston, MA 02108 and Neil L.
Rock, Esq., Skadden, Arps, Slate, Meagher & Flom LLP, Four Times
Square, New York, NY 10036.


 


Section 13.3.          Word
Meanings


 


The words such as
“herein,” “hereinafter,” “hereof,” and “hereunder” refer to this Agreement as a
whole and not merely to a subdivision in which such words appear unless the
context otherwise requires.  The singular
shall include the plural and the masculine gender shall include the feminine and
neuter, and vice versa, unless the context otherwise requires. Any references
to “Sections” or “Articles” are to Sections or Articles of this Agreement,
unless reference is expressly made to a different document.


 


Section 13.4.          Binding Provisions


 


The covenants and
agreements contained herein shall be binding upon, and inure to the benefit of,
the heirs, legal representatives, successors and assignees of the respective
parties hereto, except in each case as expressly provided to the contrary in
this Agreement.


 


71





















 


Section 13.5.          Applicable Law


 


This Agreement shall be
construed and enforced in accordance with the internal laws of the State.


 


Section 13.6.          Counterparts


 


This Agreement may
be executed in several counterparts and all so executed shall constitute one
agreement binding on all parties hereto, notwithstanding that all the parties
have not signed the original or the same counterpart.


 


Section 13.7.          Paragraph Titles


 


Paragraph titles
and any table of contents herein are for descriptive purposes only, and shall
not control or alter the meaning of this Agreement as set forth in the text.


 


Section 13.8.          Separability of Provisions; Rights
and Remedies


 


A.            Each provision of this Agreement
shall be considered separable and (a) if for any reason any provision or
provisions herein are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid, or (b) if for any reason any
provision or provisions herein would cause the Members to be bound by the
obligations of the Company under the laws of the State as the same may now or
hereafter exist, such provision or provisions shall be deemed void and of no
effect.


 


B.            Each of the parties hereto
irrevocably waives during the term of the Company (including any periods during
which the business of the Company is required to be continued under
Section 10) any right that such party may have to maintain any action for
partition with respect to the property of the Company.


 


C.            Unless otherwise specifically
provided herein, the rights and remedies of any of the parties hereunder shall
not be mutually exclusive, and the exercise of one or more of the provisions
hereof shall not preclude the exercise of any other provisions hereof.  Each of the parties confirms that damages at
law may be an inadequate remedy for breach or threat of breach of any
provisions hereof.  The respective rights
and obligations hereunder shall be enforceable by specific performance,
injunction, or other equitable remedy, but nothing herein contained is intended
to limit or affect any rights at law or by statute or otherwise of any party
aggrieved as against the other parties for a breach or threat of breach of any
provision hereof, it being the intention by this paragraph to make clear that
under this Agreement the respective rights and obligations of the Members shall
be enforceable in equity as well as at law or otherwise.


 


D.            To the extent permitted by law, each
Member hereby irrevocably:


 


(i)            consents to any
suit, action, or proceeding with respect to this Agreement being, if brought by
the Investor Member, brought in any court of competent jurisdiction located in
the State of New York, as the Investor Member may elect and, if brought by


 


72





















 


the Managing
Member, brought in any court of competent jurisdiction located in the State of
California, as the Managing Member may elect;


 


(ii)           waives any objection
that it may have now or hereafter to the venue of any such suit, action or
proceeding in any such court and any claim that any of the foregoing have been
brought in any inconvenient forum;


 


(iii)          (a) acknowledges
the competence of any such court, (b) submits to the jurisdiction of any
such court in any such suit, action or proceeding, and (c) agrees that the
final judgment in any such suit, action or proceeding brought in any such court
shall be conclusive and binding upon it and may be enforced in any court to the
jurisdiction of which it is or may be subject by a suit upon such judgment, a
certified copy of which shall be conclusive evidence of its liability;


 


(iv)          submits to the
nonexclusive jurisdiction of the state and federal courts in San Francisco,
California, in the case of the Investor Member, and in New York, New York, in
the case of the Managing Member, and agrees that service of process in any
suit, action or proceeding brought in any such court may be made at its address
set forth in Section 13.2, or such other address designated by it pursuant
to the terms of Section 13.2; and


 


(v)           waives all claims of
error by reason of any service effected in accordance with the provisions of
subparagraph (iv) above and agrees that such service shall in every
respect effect service upon it in any suit, action or proceeding and shall be
taken and held to be valid personal service upon or personal delivery to it, to
the fullest extent permitted by law.


 


Section 13.9.          Effective Date of Admission


 


Subject to the
provisions of Section 6.5J, the Investor Member shall be deemed to have
been admitted as of the first day of the calendar month in which the Admission
Date occurs, for all purposes of this Agreement, including the allocation of
Profits and Losses under Section 6 hereof.


 


Section 13.10.        Amendment Procedure


 


This Agreement may
be amended by the Managing Member with the Consent of the Investor Member.


 


Section 13.11.        Consent of Members; Meetings


 


A.            Each Member, by signing this
Agreement, has signified its consent to the specific consent provisions set
forth herein.  However, whenever the
applicable laws of the State require a higher percentage of consent than those
specified in this Agreement, and if the consent evidenced by the signing of
this Agreement is insufficient under the laws of the State to satisfy such
requirement, such higher percentage of consent shall be obtained.


 


73





















 


B.            A meeting of the Members may be
called at any time by the Managing Member or by those Members holding at least
a majority of the Percentage Interests of the Members.  Meetings of Members shall be held at the
Company’s principal place of business or at any other place in New York, New
York, designated by the Person calling the meeting.  Not less than (10) or more than ninety (90)
days before each meeting, the Person calling the meeting shall give written
notice of the meeting to each Member entitled to vote at the meeting.  The notice shall state the time, place, and
purpose of the meeting.  Notwithstanding
the foregoing provisions, each Member who is entitled to notice waives notice
if before or after the meeting the Member signs a waiver of the notice which is
filed with the records of Member’s meetings, or is present at the meeting in
person or by proxy.  Unless this
Agreement provides otherwise, at a meeting of Members, the presence in person
or by proxy of Members holding not less than a majority of the Percentage
Interests of the Members shall constitute a quorum.  A Member may vote either in person or by
written proxy signed by the Member or by the Member’s duly authorized
attorney-in-fact.


 


C.            Except as otherwise provided in this
Agreement, the affirmative vote of Members holding at least a majority of the
Percentage Interests of the Members shall be required to approve any matter
coming before the Members but no action may be taken without the approval of
the Managing Member.


 


D.            In lieu of holding a meeting, the
Members may vote or otherwise take action by a written instrument indicating
the consent of Members holding all of the Percentage Interests of the Members.


 


Section 13.12.        Indemnification by Investor Member


 


In the event that
the Investor Member breaches any of its representations, warranties or
covenants contained in this Agreement, the Investor Member shall release,
indemnify and hold the Managing Member harmless from and against any and all
Adverse Consequences which the Managing Member suffers or incurs, or to which
the Managing Member becomes subject, resulting from, arising out of, relating
to, in the nature or caused by such breach. 
In the event of any claim for indemnification by the Managing Member,
procedures described in Section 7.12B shall apply.


 


74










 










 


IN WITNESS
WHEREOF, each of the Members has executed this Agreement as of the date first
written above.


 


	
  MANAGING MEMBER:

  	
  HUDSON MANAGING MEMBER
  LLC, a

  
	
   

  	
  Delaware limited
  liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/

  	
   

  
	
   

  	
  Its:

  	
  AUTHORIZED
  SIGNATORY

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  INVESTOR MEMBER:

  	
  CHEVRON TCI, INC., a
  California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ JOHN H. MEDINGER

  	
   

  
	
   

  	
  Its:

  	
  JOHN H. MEDINGER

  	
   

  
	
   

  	
   

  	
  VICE PRESIDENT
  AND DIRECTOR

  	
   

  
	
   

  	
   

  	
  CHEVRON TCI,
  INC.

  	
   

  



 


75





















 


SCHEDULE A


 


HUDSON MANAGING MEMBER LLC


 


	
   

  	
   

  	
  Percentage

  	
   

  	
   

  	
   

  
	
  Names and Addresses of Members

  	
   

  	
   

  	
  Interest

  	
   

  	
  Capital Contribution

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HUDSON MANAGING MEMBER
  LLC

  	
   

  	
  0.1%

  	
   

  	
  $1,000

  	
   

  
	
  c/o Ian Schrager Hotels

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  475 Tenth Avenue

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11th Floor

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  New York, NY 10018

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attention: Ian Schrager

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone Number:

  	
  (212) 277-4200

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Facsimile Number:

  	
  (212) 277-4201

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Chevron TCI, Inc.

  	
   

  	
  99.9%

  	
   

  	
  $8,810,375*

  	
   

  
	
  575 Market Street

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  San Francisco, CA 94105

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attn: John H. Medinger

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone Number:

  	
  (415) 894-1336

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Facsimile Number:

  	
  (415) 894-0281

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  100%

  	
   

  	
  $8,811,375

  	
   

  
								



 


* To be paid in
installments as described in Section 5.


 





















 


Exhibit A


 


Investor Note


 





















 


Exhibit B


 


Investor Security Agreement


 


2





















 


Exhibit C 


 


MANAGING MEMBER PAYMENT CERTIFICATE


 


Certificate, dated
as
of                   , 200   (this
“Certificate”), of HUDSON MANAGING MEMBER LLC, a Delaware limited
liability company (the “Managing Member”).


 


This Certificate
is delivered pursuant to the provisions of Section 5.2 of the Operating
Agreement, dated as of August 28, 2000 (the “Operating Agreement”)
of Hudson Leaseco LLC, a New York limited liability company (the “Company”).


 


The undersigned
hereby certifies that:


 


(i)                                     The Managing Member has satisfied and
continues to satisfy all of its material obligations under the Operating
Agreement.


 


(ii)                                  The covenants, representations and
warranties set forth in Section 7.11 of the Operating Agreement are true
and correct as of the date hereof.


 


(iii)                               The Company is not in material default under any of
the Operating Documents or any other material obligation of the Company.


 


(iv)                              The Managing Member has delivered to the
Investor Member copies of the Company’s federal and state tax returns for the
most recently ended Fiscal Year.


 


(v)                                 The Completion Date (as defined in the
Operating Agreement) has occurred.


 


(vi)                              The covenants, representations and
warranties set forth in the Tax Certificate issued by the Managing Member to
Chevron TCI, Inc. and dated as
of                ,
200   are correct as of the date hereof.


 


(vii)                           Attached hereto is the original Loan Advance
Certificate received from the Developer pursuant to the provisions of
Section 3(d) of the HTC Loan Agreement (if required in connection
with the Installment requested herewith).


 


IN WITNESS
WHEREOF, the undersigned has caused this Certificate to be executed as of the
day and year set forth above.


 


	
   

  	
   

  	
  HUDSON MANAGING MEMBER
  LLC, a

  
	
   

  	
   

  	
  Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  	
   

  



 





















 


8.             No one other than the Members has
claimed or will claim any Historic Tax Credits with respect to the qualified
rehabilitation expenditures incurred by the Developer.


 


9.             The Building was placed in service
at least once by a prior owner before the beginning of its rehabilitation by
the Developer.


 


10.           The Building was first placed in
service prior to 1936.


 


11.           The Building is not listed
individually nor is it located in an historic district that is listed in the
National Register of Historic Places maintained by the Department of Interior
pursuant to the National Historic Preservation Act of 1966.


 


12.           In the case of the Building, in the
rehabilitation process, (I) 50 percent or more of the existing external walls
of the Building will be retained in place as external walls, (II) 75 percent or
more of the existing external walls of the Building will be retained in place
as internal or external walls, and (III) 75 percent or more of the existing
internal structural framework of the Building will be retained in place within
the meaning of Section 47(c)(1)(A)(iii) of the Code.


 


13.           The rehabilitation expenditures that
form the basis for the Historic Tax Credit of the Building do not include
(i) any expenditure with respect which a method other than the
straight-line method of depreciation over a recovery period determined under
Section 168(c) or (g) of the Code (as modified by
Section 251(d)(4) of the Tax Reform Act of 1986) will be used,
(ii) the cost of acquiring the Building, or (iii) the cost of any
enlargement of the Building, excluding any increase in floor space resulting
solely from interior remodeling or (iii) any expenditure with respect to
any room in the Building that is being used as a dwelling unit rather than a hotel
room as of the Completion Date.


 


14.           No portion of the Building is, or
will be, tax-exempt use property (within the meaning of
Section 168(h) of the Code).


 


15.           The Building is not property used
predominantly to furnish lodging within the meaning of Section 50(b)(2) of
the Code.


 


16.           The undersigned believes that the
rent payable under the Lease is commercially reasonable in view of the nature
and character of the Project and market conditions in the geographic area in
which the Project is located.


 


IN
WITNESS WHEREOF, the undersigned has executed this Certificate as of
the          day
of                       ,      .


 


	
  MANAGING MEMBER:

  	
   

  	
  HUDSON MANAGING MEMBER
  LLC, a

  
	
   

  	
   

  	
  Delaware limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
   

  



 


2





















 


Exhibit D


 


TAX CERTIFICATE


 


Reference is
hereby made to the Operating Agreement dated as of August 28, 2000 (the “Operating
Agreement”), of Hudson Leaseco LLC, a New York limited liability company
(the “Company”).


 


Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Operating Agreement.


 


In order to induce
Chevron TCI, Inc. (“Chevron”) to contribute capital as the Investor
Member of the Company, the undersigned, who is the Managing Member of the
Company, hereby certifies as follows:


 


1.             The Company has not elected, and
will not in the future elect, to be treated as a corporation for federal tax
purposes.


 


2.             The Building has been and will be
financed, rehabilitated, and used substantially in the manner described in the
Projections, it being noted that any refinancing will be subject to market
conditions at the time of such refinancing and that no certification as to the
result of operations or the final cost of development is intended to be made
hereby.


 


3.             The assumptions as to
rehabilitation costs for each taxable year shown in the Projections correspond,
or can reasonably be expected to correspond, in all material respects, to the
actual work that has been or will be completed within that taxable year.


 


4.             The assumptions in the Projections
as to the annual revenues and expenditures of the Company for each taxable year
shown in the Projections were reasonable assumptions at the time the
Projections were prepared.


 


5.             The qualified rehabilitation
expenditures (within the meaning of section 47(c)(2) of the Code)
incurred during the 24-month period ending on the Credit Commencement Date (the
“Measuring Period”) exceed the greater of (i) $5,000 or
(ii) the adjusted basis (within the meaning of Section 47(c)(1)(C)(i) of
the Code) of the Building and its structural components as of the first day of
the Measuring Period.


 


6.             Substantially all of the
expenditures included in the calculation of qualified rehabilitation
expenditures shown in the Projections for the Building are properly chargeable
to a capital account for commercial real property (or an addition or
improvement thereto) for which depreciation is allowable under Section 168
of the Code.


 


7.             The Developer did not use for
personal or business purposes or place in service any portion of the Building
on or prior to the Admission Date
[except                       ].
As of the Admission Date, the Building was not in a condition or state of
readiness for its operation or occupancy as a hotel.  Without limiting the generality of the
foregoing, as of the Admission Date, (i) the Completion Date had not
occurred, and (ii) the Building had not received nor was it in a position
to receive a certificate of occupancy permitting its use and operation for its
intended purpose. [describe exceptions]


 





















 


QUARTERLY CASH
FLOW REPORT


 


	
   

  	
   

  	
  Year

  
	
  (000’s)

  	
   

  	
  1Q

  	
   

  	
  2Q

  	
   

  	
  3Q

  	
   

  	
  4Q

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1. Cash On Hand
  (Include Reserve Balances) – Beginning 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2. Cash Flow From
  Operations (Excl. Loan & MM Pymts)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3. Loan payments made
  by the Company

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unrelated
  Lenders:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Managing
  Member Operating Deficit:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4. Payments to the
  Managing Member and Affiliates

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Incentive
  Management Fee

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other
  (Please Describe)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5. Company borrowing
  during the quarter

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unrelated
  Third Party Loans 

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Managing
  Member or Related Party Loans:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6. Other Cash Receipts
  (Please Describe)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7. Other Cash
  Disbursements (Please Describe)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8. Cash Distribution to
  Managing Member

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9. Cash Distribution to
  Investor Member

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10. Cash On Hand
  (include reserve balances) – Ending

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 





















 


Exhibit E


 


QUARTERLY FINANCIAL SUMMARY DETAIL


 


Company Name:        Hudson Leaseco LLC


 


Quarterly
Report:         1st           2nd            3rd           4th           


 


Date:                                 


 


1.                                       What was the average number of vacant
rooms during the quarter?


 


2.                                       How many of the vacant rooms were
unrentable? What was the cause?


 


3.                                       What, if any, change has occurred to
average room rates during the quarter?


 


4.                                       Were quarterly expenses in line with the
operating budget? If “no”, please describe.


 


5.                                       Were any unbudgeted capital improvements
made during the quarter? If “yes” what was the improvement, how much was spent,
and how was it funded?


 


6.                                       Is the company current with respect to its
obligations under the Lease and the Hotel Management Agreement? If “no” please
explain.


 


7.                                       Is the company current on all other
obligations (e.g., real estate taxes, trade payables, etc.)?  If “no” please explain.


 


8.                                       Is the company currently in full compliance
with all applicable requirements of the Code relating to the Historic Tax
Credit?


 


YES           NO           


 


If
no, please explain.


 


9.                                       Has any commercial tenant defaulted under
its lease?


 


YES           NO           


 


If yes, please
explain.


 


10.                                 Has any commercial lease terminated?


 


YES           NO           


 


If
yes, please explain.


 





















 


QUARTERLY CASH FLOW REPORT


 


INSTRUCTIONS


 


The following describes the information requested by
the cash flow report.


 


1.                                       The cash balance at the beginning of the
quarter.  This balance should be equal to
the prior quarter’s ending balance and includes all restricted and unrestricted
cash.


 


2.                                       Cash flow from operations is the
difference between the quarterly income and cash operating expenses. For
purposes of this report please exclude interest payments as well as any
payments made to the Managing Member and its affiliates from cash operating
expense (these items will be included below).


 


3.                                       Loan Payments include both principal and
interest paid during the quarter. A distinction is made between payments to the
Managing Member and unrelated lenders.


 


4.                                       List all payments made to the Managing
Member during the quarter.


 


5.                                       Company borrowings should include all
amounts borrowed by the Company during the quarter. This category should only
include new loans or increases to existing loans.


 


6.                                       Other cash receipts includes any cash
that came into the Company during the quarter that was not either from cash
flow or a loan (if any).


 


7.                                       Other cash disbursements are any payments
that are not associated with operating expense (e.g., capital improvements).


 


8.                                       Cash distributions to the Managing Member
during the quarter.


 


9.                                       Cash distributions to the Investor Member
during the quarter.


 


10.                                 Cash On Hand - Ending is the cash balance
at the end of the quarter (restricted and unrestricted).


 





















 


Exhibit F 


 


HTC Loan Agreement 


 





















 


Exhibit G 


 


Projections


 





















 


Exhibit H 


USE OF PROCEEDS OF CAPITAL CONTRIBUTIONS


 


I.                                         FIRST INSTALLMENT ($1,000,000 plus fees
payable to Accountants and Special Counsel)


 


•                    $1,000,000 for Company expenses, reserves
and pre-opening expenses


 


II.                                     SECOND INSTALLMENT  ($6,310,736)


 


•                    $5,500,000 – advance of HTC Loan


•                    $810,736 – Company reserves and
pre-opening expenses


 


III.                                 THIRD INSTALLMENT  ($1,499,639)


 


•                    $1,000,000 – advance of HTC Loan


•                    $499,639 – Company reserves and
pre-opening expenses


 





















 


Exhibit I 


 


LITIGATION


 


None.


 





















 


Exhibit J 


 


TITLE REPORT


 





















 


AMERICAN LAND TITLE ASSOCIATION


LOAN POLICY (10-17-92)


WTTH NEW YORK COVERAGE


ENDORSEMENT APPENDED


 


33   0105   107  
00003552


 


CHICAGO   TITLE   INSURANCE  
COMPANY


 


SUBJECT TO THE EXCLUSIONS FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE
CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS, CHICAGO TITLE
INSURANCE COMPANY, a Missouri corporation, herein called the Company, insures,
as of Date of Policy shown in Schedule A, against loss or damage, not
exceeding the Amount of Insurance stated in Schedule A, sustained or
incurred by the insured by reason of:


 


1.               Title to the
estate or interest described in Schedule A being vested other than as
stated therein;


 


2.               Any defect in
or lien or encumbrance on the title;


 


3.               Unmarketability
of the title;


 


4.               Lack of a right
of access to and from the land;


 


5.               The invalidity
or unenforceability of the lien of the insured mortgage upon the title;


 


6.               The priority of
any lien or encumbrance over the lien of the insured mortgage;


 


7.               Lack of
priority of the lien of the insured mortgage over any statutory lien for
services, labor or material:


 


(a)          arising from an
improvement or work related to the land which is contracted for or commenced
prior to Date of Policy; or


 


(b)         arising from an improvement
or work related to the land which is contracted for or commenced subsequent to
Date of Policy and which is financed in whole or in part by proceeds of the
indebtedness secured by the insured mortgage which at Date of Policy the
insured has advanced or is obligated to advance;


 


8.               The invalidity
or unenforceability of any assignment of the insured mortgage, provided the
assignment is shown in Schedule A, or the failure of the assignment shown
in Schedule A to vest title to the insured mortgage in the named insured
assignee free and clear of all liens.


 


The
Company will also pay the costs, attorneys’ fees and expenses incurred in
defense of the title or the lien of the insured mortgage, as insured, but only
to the extent provided in the Conditions and Stipulations.


 


In Witness Whereof, CHICAGO TITLE INSURANCE
COMPANY has caused this policy to be signed and sealed as of Date of Policy
shown in Schedule A, the policy to become valid when countersigned by an
authorized signatory.


 


 


	
  Issued by:

  	
  CHICAGO TITLE INSURANCE COMPANY

  
	
  TITLE ASSOCIATES INC.

  	
   

  	
  By:

  
	
  430 PARK AVENUE, 17TH
  FLOOR

  	
   

  	
   

  
	
  NEW YORK, NY 10022

  	
   

  	
  /s/

  
	
  (212) 758-0050

  	
   

  	
  President

  
	
  (212)
  758-3998

  	
   

  	
   

  	
   

  
	
  (212)
  758-8223 TELECOPIER

  	
  CHICAGO TITLE INSURANCE COMPANY

  	
   

  	
   

  
	
   

  	
  CORPORATE

  	
   

  	
  By:

  	
   

  
	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Thomas J. Adams

  
	
   

  	
   

  	
   

  	
   

  	
  Secretary

  
							



 


ALTA Loan Policy
(10-17-92)


 





















 


(c)   Amount of
Insurance.  The amount of insurance after
the acquisition or after the conveyance shall in neither event exceed the least
of:


 


(i) the Amount of
Insurance stated in Schedule A;


 


(ii) the amount of the
principal of the indebtedness secured by the insured mortgage as of Date of
Policy, interest thereon, expenses of foreclosure, amounts advanced pursuant to
the insured mortgage to assure compliance with laws or to protect the lien of
the insured mortgage prior to the time of acquisition of the estate or interest
in the land and secured thereby and reasonable amounts expended to prevent
deterioration of improvements, but reduced by the amount of all payments made;
or


 


(iii) the amount paid by
any governmental agency or governmental instrumentality, if the agency or
instrumentality is the insured claimant, in the acquisition of the estate or
interest in satisfaction of its insurance contract or guaranty.


 


3.     NOTICE OF CLAIM TO BE GIVEN BY INSURED
CLAIMANT


 


The insured shall notify
the Company promptly in writing (i) in case of any litigation as set forth
in Section 4(a) below, (ii) in case knowledge shall come to an
insured hereunder of any claim of title or interest which is adverse to the
title to the estate or interest or the lien of the insured mortgage, as
insured, and which might cause loss or damage for which the Company may be
liable by virtue of this policy, or (iii) if title to the estate or
interest or the lien of the insured mortgage, as insured, is rejected as
unmarketable.  If prompt notice shall not be given to the Company, then as
to the insured all liability of the Company shall terminate with regard to the
matter or matters for which prompt notice is required; provided, however, that
failure to notify the Company shall in no case prejudice the rights of any
insured under this policy unless the Company shall be prejudiced by the failure
and then only to the extent of the prejudice.


 


4.              DEFENSE AND PROSECUTION OF ACTIONS; DUTY OF INSURED CLAIMANT TO
COOPERATE


 


(a)   Upon written request by the insured and
subject to the options contained in Section 6 of these Conditions and
Stipulations, the Company, at its own cost and without unreasonable delay,
shall provide for the defense of an insured in litigation in which any third
party asserts a claim adverse to the title or interest as insured, but only as
to those stated causes of action alleging a defect, lien or encumbrance or
other matter insured against by this policy.  The Company shall have the
right to select counsel of its choice (subject to the right of the insured to
object for reasonable cause) to represent the insured as to those stated causes
of action and shall not be liable for and will not pay the fees of any other
counsel.  The Company will not pay any fees, costs or expenses incurred by
the insured in the defense of those causes of action which allege matters not
insured against by this policy.


 


(b)   The Company shall have the right, at its own
cost, to institute and prosecute any action or proceeding or to do any other
act which in its opinion may be necessary or desirable to establish the title
to the estate or interest or the lien of the insured mortgage, as insured, or
to prevent or reduce loss or damage to the insured.  The Company may take any appropriate action
under the terms of this policy, whether or not it shall be liable hereunder,
and shall not thereby concede liability or waive any provision of this policy.
If the Company shall exercise its rights under this paragraph, it shall do so
diligently.


 


(c)   Whenever the Company shall have brought an
action or interposed a defense as required or permitted by the provisions of
this policy, the Company may pursue any litigation to final determination by a
court of competent jurisdiction and expressly reserves the right, in its sole
discretion, to appeal from any adverse judgment or order.


 


(d)   In all cases where this policy permits or
requires the Company to prosecute or provide for the defense of any action or
proceeding, the insured shall secure to the Company the right to so prosecute
or provide defense in the action or proceeding, and all appeals therein, and
permit the Company to use, at its option, the name of the insured for this
purpose.  Whenever requested by the Company, the insured, at the Company’s
expense, shall give the Company all reasonable aid (i) in any action or
proceeding, securing evidence, obtaining witnesses, prosecuting or defending
the action or proceeding, or effecting settlement, and (ii) in any other
lawful act which in the opinion of the Company may be necessary or desirable to
establish the title to the estate or interest or the lien of the insured
mortgage, as insured.  If the Company is prejudiced by the failure of the
insured to furnish the required cooperation, the Company’s obligations to the
insured under the policy shall terminate, including any liability or obligation
to defend, prosecute, or continue any litigation, with regard to the matter or
matters requiring such cooperation.


 


5.     PROOF OF LOSS OR DAMAGE


 


In addition to and after
the notices required under Section 3 of these Conditions and Stipulations
have been provided the Company, a proof of loss or damage signed and sworn to
by the insured claimant shall be furnished to the Company within 90 days after
the insured claimant shall ascertain the facts giving rise to the loss or
damage.  The proof of loss or damage shall describe the defect in, or lien
or encumbrance on the title, or other matter insured against by this policy
which constitutes the basis of loss or damage and shall state, to the extent
possible, the basis of calculating the amount of the loss or damage.  If
the Company is prejudiced by the failure of the insured claimant to provide the
required proof of loss or damage, the Company’s obligations to the insured
under the policy shall terminate, including any liability or obligation to
defend, prosecute, or continue any litigation, with regard to the matter or
matters requiring such proof of loss or damage.


 


In addition, the insured
claimant may reasonably be required to submit to examination under oath by any
authorized representative of the Company and shall produce for examination,
inspection and copying, at such reasonable times and places as may be designated
by any authorized representative of the Company, all records, books, ledgers,
checks, correspondence and memoranda, whether bearing a date before or after
Date of Policy, which reasonably pertain to the loss or damage.  Further,
if requested by any authorized representative of the Company, the insured
claimant shall grant its permission, in writing, for any authorized
representative of the Company to examine, inspect and copy all records, books,
ledgers, checks, correspondence and memoranda in the custody or control of a
third party, which reasonably pertain to the loss or damage.  All information designated as confidential by
the insured claimant provided to the Company pursuant to this
Section shall not be disclosed to others unless, in the reasonable
judgment of the Company, it is necessary in the administration of the
claim.  Failure of the insured claimant
to submit for examination under oath, produce other reasonably requested
information or grant permission to secure reasonably necessary information from
third parties as required in this paragraph, unless prohibited by law or
governmental regulation, shall terminate any liability of the Company under
this policy as to that claim.


 


6.              OPTIONS TO PAY OR OTHERWISE
SETTLE CLAIMS; TERMINATION OF LIABILITY


 


In case of a claim under
this policy, the Company shall have the following additional options:


 


(a) To Pay or Tender
Payment of the Amount of Insurance or to Purchase the Indebtedness.


 


(i) to pay or tender
payment of the amount of insurance under this policy together with any costs,
attorneys’ fees and expenses incurred by the insured claimant, which were
authorized by the Company, up to the time of payment or tender of payment and
which the Company is obligated to pay; or


 


(ii) to purchase the indebtedness
secured by the insured mortgage for the amount owing thereon together with any
costs, attorneys’ fees and expenses incurred by the insured claimant which were
authorized by the Company up to the time of purchase and which the Company is
obligated to pay.


 


If the Company offers to
purchase the indebtedness as herein provided, the owner of the indebtedness
shall transfer, assign, and convey the indebtedness and the insured mortgage,
together with any collateral security, to the Company upon payment therefor.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs a(i) or (ii),
all liability and obligations to the insured under this policy, other than to
make the payment required in those paragraphs, shall terminate, including any
liability or obligation to defend, prosecute, or continue any litigation.


 


(b)   To Pay or Otherwise Settle With Parties Other
than the Insured or With the Insured Claimant.


 


(i) to pay or otherwise
settle with other parties for or in the name of an insured claimant any claim
insured against under this policy, together with any costs, attorneys’ fees and
expenses incurred by the insured claimant which were authorized by the Company
up to the time of payment and which the Company is obligated to pay; or


 


(ii) to pay or otherwise
settle with the insured claimant the loss or damage provided for under this
policy, together with any costs, attorneys’ fees and expenses incurred by the
insured claimant which were authorized by the Company up to the time of payment
and which the Company is obligated to pay.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs (b)(i) or
(ii), the Company’s obligations to the insured under this policy for the
claimed loss or damage, other than the payments required to be made, shall
terminate, including any liability or obligation to defend, prosecute or
continue any litigation.


 


7.     DETERMINATION AND EXTENT OF LIABILITY


 


This policy is a contract
of indemnity against actual monetary loss or damage sustained or incurred by
the insured claimant who has suffered loss or damage by reason of matters
insured against by this policy and only to the extent herein described.


 


(a) The liability of the
Company under this policy shall not exceed the least of:


 


(i) the Amount of
Insurance stated in Schedule A, or, if applicable, the amount of insurance
as defined in Section 2 (c) of these Conditions and Stipulations;


 


(ii) the amount of the
unpaid principal indebtedness secured by the insured mortgage as limited or
provided under Section 8 of these Conditions and Stipulations or as
reduced under Section 9 of these Conditions and Stipulations, at the time
the loss or damage insured against by this policy occurs, together with
interest thereon; or


 





















 


SCHEDULE A


 


	
  Office File Number

  	
   

  	
  Policy
  Number

  	
   

  	
  Date Of
  Policy

  	
   

  	
  Amount
  Of

  Insurance

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9901  105 
  00621

  	
   

  	
  33 0105 107 00003552

  	
   

  	
                        ,
  1999

  	
   

  	
  $

  	
  10,180,400

  	
   

  
									



 


	
  1.

  	
  Name of Insured:

  	
  Corus Bank, N.A., as
  agent for itself and one or more co-lenders, its successors and/or assigns

  
	
   

  	
   

  	
   

  
	
  2.

  	
  The estate or interest
  in the land which is encumbered by the insured mortgage is:

  
	
   

  	
   

  
	
   

  	
  Fee Simple as to
  Parcels I and II.

  
	
   

  	
   

  
	
   

  	
  Leasehold as to Parcels
  III and IV pursuant to Leases described in Exception 4 and 5, respectively,
  which leases are valid and subsisting leases for the unexpired terms thereof.

  
	
   

  	
   

  
	
  3.

  	
  The fee simple title to
  said land is at the date hereof vested in:

  
	
   

  	
   

  
	
   

  	
  Henry Hudson Holdings
  LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
  4.

  	
  The mortgage or deed of
  trust and assignments, if any, covered by this Policy are described as
  follows:

  
	
   

  	
   

  
	
   

  	
  Soft Cost Mortgage,
  Security Agreement, Assignment of Leases and Rents made by Henry Hudson
  Holdings LLC to Corus Bank, N.A.,
  dated                       , 1999,
  to be recorded in the New York County Register’s Office in the amount of
  $25,451,000.

  
	
   

  	
   

  
	
  5.

  	
  The land referred to in
  this Policy is described on the description sheet annexed.

  
	
   

  	
   

  
	
   

  	
  See Schedule A
  annexed hereto and made a part hereof.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Countersigned

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Authorized Signature

  
				



 


This Policy valid only if Schedule B is attached.


 


Schedule A


	
  Loan Form

  	
   

  	
  NOTE: Attached hereto

  	
   

  	
  added pages

  



 





















(Schedule B
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003552
  (Loan)

  
	
  Title Number:

  	
  9901 105
  00621

  



 


(k)                                  Metal flue pipe from chimney of 5-story
brick building on premises adjacent on the west enters the westerly wall and
connects to the chimney of the Building on the Land; and


 


(l)                                     Independent wall of 1-story brick
building on premises adjacent on the west encroaches up to 1 inch onto the
westerly portion of the Land.


 


As to the Units,
policy excepts any state of facts which an accurate survey and inspection of
the Units would show.  However, policy
insures that any encroachments by the Units upon adjoining condominium units or
upon the Common Elements may remain undisturbed so long as same may stand.


 


2.                                       Terms, covenants, conditions,
restrictions, regulations, rights and easements set forth in Declaration of
Condominium and By-Laws of 353 West 57th Street Condominium, dated April 11,
1985, recorded April 24, 1985 in Reel 902 page 1, as amended by First
Amendment to Declaration dated January 29, 1993, recorded May 11,
1993 in Reel 1969 page 2286, by Amended and Restated Declaration made by
Henry Hudson Holdings LLC, Irving Schatz, Adrienne Wechsler and Cheryl Hirsch
dated as of February 12, 1999, recorded on July 16, 1999 in Reel 2913
page 1753 and by First Amendment to Amended and Restated Declaration made
by Henry Hudson Holdings LLC, Irving Schatz, Adrienne Wechsler and Cheryl
Hirsch dated September 30, 1999, to be recorded in the New York County
Register’s Office but Policy insures against loss or damage occasioned by the
premises not being part of a condominium validly created pursuant to
Article 9-B of the Real Property Law.


 


3.                                       Restrictive covenants against nuisances
repeated in the following Deeds:


 


(a)                                  Deed of parts of Old Lots, 2, 3 61, 611/2,
62 and 64 and all of Old Lots 31/2 and 4 recorded in
Liber 656 cp 133.


 


(b)                                 Deed of Old Lots 2, 3, 31/2,
4 and 64 recorded in Liber 658 cp 127.


 


(c)                                  Deeds of Old Lots 5, 6, 7, 58 and 60
recorded in Liber 657 cp 80 and Liber 1643 cp 385.


 


(d)                                 Deeds of Old Lot 5 and the westerly portion of Old Lot 60
recorded in Liber 999 cp 239, Liber 1006 cp 40 and Liber 1613 cp 85.


 


(e)                                  Deed of Old Lot 6, the westerly portion
of Old Lot 58 and the easterly portion of Old Lot 60 recorded in Liber 1006 cp
45.


 


(f)                                    Deed of Old Lot 6 recorded in Liber 1037
cp 165.


 


(g)                                 Deed of Old Lots 6 and 7 recorded in
Liber 1069 cp 123.


 


(h)                                 Deed of Old Lots 6, 7, 58 and the
easterly portion of Old Lot 60 recorded in Liber 1609 cp 160.


 


(i)                                     Deed of Old Lot 7 and the easterly
portion of Old Lot 58 recorded in Liber 1006 cp 43.


 


(j)                                     Deed of Old Lot 7 recorded in Liber 1031 cp 428.


 





















 


(Schedule B
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003552
  (Loan)

  
	
  Title Number:

  	
  9901 105
  00621

  



 


6.                                       This Policy is issued contemporaneously
with Policy No. LT990219 of Lawyer’s Title Insurance Corporation in the
amount of $5,090,200 and No. 5412-1370742 of Fidelity National Title
Insurance Company of New York by National Land Tenure Company, LLC, its Agent
in the amount of $10,180,400.  At the
time liability for any loss shall have been fixed pursuant to the conditions of
this Policy, this Company shall not be liable to the insured for a greater
portion of the loss than the amount that this Policy bears to the whole amount
of insurance held by the insured as aforesaid.


 


7.                                       Pending disbursement of the full proceeds
of the loan secured by the insured mortgage, the amount insured under the Policy
equals only the amount actually disbursed but increases as each disbursement is
made in good faith and without knowledge of any defect in or objections to
title up to the face amount of the Policy. 
At the time of each disbursement of the proceeds of the loan, title must
be continued down to such time for possible liens or objections intervening
between the date hereof and the date of such disbursement.


 


If the Company is
supplied with an updated survey or if an inspection is performed, where
applicable, each report of continuation requested in connection with insurance
of future advances will include a
statement showing survey variations or encroachments, if any, since the date of
the preceding report. However, if no updated survey or inspection is supplied
or performed, then Policy will except any changes since the date of the last
survey or inspection.


 


8.                                       Hard Cost Mortgage in the amount of
$54,549,000 pursuant to that certain Consolidated, Amended, Restated Hard Cost
Mortgage, Security Agreement and Assignment of Leases and Rents made by and
between Henry Hudson Holdings LLC and Corus Bank, N.A., dated as
of                        ,
1999, to be recorded in the New York County Register’s Office.


 


9.                                       Policy affirmatively insures against any
monetary loss or damage incurred by reason of the subsequent imposition of
mortgage recording tax upon the mortgage insured herein.


 





















 


(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003552
  (Loan)

  
	
  Title Number:

  	
  9901 105
  00621

  



 


THENCE southerly parallel
with Ninth Avenue and part of the distance through a party wall, 100 feet 10
inches;


 


THENCE
westerly parallel more or less with 58th Street, 20 feet; and


 


THENCE southerly and part
of the way through another party wall, 100 feet to the northerly side of 57th Street,
the point or place of BEGINNING.


 


PARCEL
II


UNIT
LOT 1702


 


The
condominium unit (hereinafter referred to as “Unit Lot 1702”) known as Unit 2,
also known as Modified Hotel Unit, in the building (hereinafter referred to as
the “Building”) known as 353 West 57th Street Condominium and by the street
number 353 West 57th Street, New York, New York, said Unit being designated and
described in a certain declaration dated April 11, 1985 made by Irving
Schatz pursuant to Article 9-B of the Real Property Law of the State of
New York establishing a plan for condominium ownership of the Building and the
land (hereinafter referred to as the “Land”) upon which the Building is situate
(which Land is more particularly described below), which declaration was
recorded in the New York County Office of the Register of The City of New York
(the “City Register’s Office”) on April 24, 1985 in Reel 902 page 1
and amended by First Amendment to Declaration dated January 29, 1993 and
recorded May 11, 1993 in Reel 1969 page 2286, by Amended and Restated
Declaration made by Henry Hudson Holdings LLC, Irving Schatz, Adrienne Wechsler
and Cheryl Hirsch dated as of February 12, 1999, recorded on July 16,
1999 in Reel 2913 page 1753 and by First Amendment to Amended and Restated
Declaration made by Henry Hudson Holdings LLC, Irving Schatz, Adrienne Wechsler
and Cheryl Hirsch dated September 30, 1999 to be recorded in the New York
County Register’s Office (which declaration, as amended, is hereinafter
referred to as the “Declaration”).  Unit
Lot 1702 is also designated as Tax Lot 1702 in Block 1048 of Section 4 of
the Borough of Manhattan on the Tax Map of the Real Property Assessment
Department of the City of New York and on the Floor Plans of the Building,
certified by Butler Rogers Baskett, Architects, on March 27, 1985 and
filed in the Real Property Assessment Department of the City of New York on
April 22, 1985 as Condominium Plan No. 208 and also filed in the City
Register’s Office on April 24, 1985 as Condominium Map No. 4326, as
amended by Amended Floor Plans certified by Butler Rogers Baskett, Architects,
on December 14, 1992, which Amended Floor Plans were filed in the Real
Property Assessment Department of the City of New York on May 5, 1993 as
Condominium Plan No. 208A and also filed in the City Register’s Office on
May 11, 1993 as Condominium Map No. 5192.


 


TOGETHER
WITH an undivided 46.94011% interest in the Common Elements (as such term is
defined in the Declaration).


 


The Land upon which the
Building containing Unit Lot 1702 is situate is bounded and described as
follows:


 


ALL
that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, County of New York, City and State of New York, bounded
and described as follows:


 


BEGINNING at a point on
the northerly side of 57th Street, distant 20 feet easterly from the corner
formed by the intersection of the easterly side of Ninth Avenue with the
northerly side of 57th Street;


 





















 


(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003552
  (Loan)

  
	
  Title Number:

  	
  9901 105
  00621

  



 


TOGETHER WITH an
undivided 0.34577% interest in the Common Elements (as such term is defined in
the Declaration).


 


The Land upon which the
Building containing Unit Lot 1704 is situate is bounded and described as
follows:


 


ALL that certain plot,
piece or parcel of land, situate, lying and being in the Borough of Manhattan,
County of New York, City and State of New York, bounded and described as
follows:


 


BEGINNING at a point on
the northerly side of 57th Street, distant 20 feet easterly from the corner
formed by the intersection of the easterly side of Ninth Avenue with the
northerly side of 57th Street;


 


RUNNING THENCE easterly
along the said northerly side of 57th Street, 155 feet;


 


THENCE northerly parallel
with Ninth Avenue, 200 feet 10 inches to the southerly side of 58th Street;


 


THENCE westerly along the
said southerly side of 58th Street, 135 feet to a point distant 40 feet
easterly from the corner formed by the intersection of the southerly side
of 58th Street with the easterly side of Ninth Avenue;


 


THENCE southerly parallel
with Ninth Avenue and part of the distance through a party wall, 100 feet 10
inches;


 


THENCE westerly parallel
more or less with 58th Street, 20 feet; and


 


THENCE southerly and part
of the way through another party wall, 100 feet to the northerly side of 57th
Street, the point or place of BEGINNING.


 





















 


(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003552
  (Loan)

  
	
  Title Number:

  	
  9901 105
  00621

  



 


THENCE westerly along the
said southerly side of 58th Street, 135 feet to a point distant 40 feet
easterly from the corner formed by the intersection of the southerly side
of 58th Street with the easterly side of Ninth Avenue;


 


THENCE southerly parallel
with Ninth Avenue and part of the distance through a party wall, 100 feet 10
inches;


 


THENCE westerly parallel
more or less with 58th Street, 20 feet; and


 


THENCE southerly and part
of the way through another party wall, 100 feet to the northerly side of 57th
Street, the point or place of BEGINNING.


 


(Unit Lots 1701, 1702,
1704 and 1706 are collectively referred to as the “Units”.)


 


AS TO PARCELS
I, II, III AND IV


 


TOGETHER WITH the benefit
of that certain easement for light and air and restriction not to erect any
building more than five stories in height (the “Easement”) burdening the
premises adjacent to the insured premises on the west (the “Burdened Premises”)
described on the current tax map of the City of New York as Block 1048 Lot 63
and more particularly described on the annexed Schedule A-1 which Easement
was created and reserved in Deed made by American Woman’s Realty Corporation to
Rayon Holding Corporation, dated December 15, 1926, recorded
December 165, 1926 in Liber 3569 cp 439 for the benefit of the premises
insured herein.  Policy affirmatively insures
that the Easement is not presently violated, that said Easement restricts the
height of any building on the Burdened Premises to the lesser of five stories
or sixty-three feet, and that said restriction specifically benefits the
insured premises and may be enforced by any owner thereof including any
mortgagee as successor owner.


 





















 


CHICAGO TITLE INSURANCE COMPANY


ALTA ENDORSEMENT 9


 


(RESTRICTIONS, ENCROACHMENTS, MINERALS)


 


Attached
to and made a part of Policy Number 33 0105 106 00003552


 


The
Company insures the owner of the indebtedness secured by the insured mortgage
against loss or damage sustained by reason of:


 


1.                                       Any
incorrectness in the assurance that, at Date of Policy:


 


(a)                                  There are no
covenants, conditions or restrictions under which the lien of the mortgage
referred to in Schedule A can be divested, subordinated or extinguished,
or its validity, priority or enforceability impaired.


 


(b)                                 Unless
expressly excepted in Schedule B:


 


(1) There are no present violations on the land of any enforceable
covenants, conditions or restrictions, nor do any existing improvements on the
land violate any building setback lines shown on a plat of subdivision recorded
or filed in the public records.


 


(2) Any instrument referred to in Schedule B as containing covenants,
conditions or restrictions on the land does not, in addition,
(i) establish an easement on the land; (ii) provide a lien for
liquidated damages; (iii) provide for a private charge or assessment;
(iv) provide for an option to purchase, right of first refusal or the
prior approval of a future purchaser or occupant.


 


(3) There is no encroachment of existing improvements located on the
land onto adjoining land, nor any encroachment onto the land of existing
improvements located on adjoining land.


 


(4) There is no encroachment of existing improvements located on the
land onto that portion of the land subject to any easement excepted in
Schedule B.


 


(5) There are no notices of violation of covenants, conditions and
restrictions relating to environmental protection recorded or filed in the
public records.


 


2.                                       Any future
violation on the land of any existing covenants, conditions or restrictions
occurring prior to the acquisition of title to the estate or interest in the
land by the insured, provided the violation results in:


 


(a)                                  invalidity,
loss of priority, or unenforceability of the lien of the insured mortgage; or 


 


(b)                                 loss of title
to the estate or interest in the land if the insured shall acquire title in
satisfaction of the indebtedness secured by the insured mortgage.


 


3.                                       Damage to
existing improvements, including lawns, shrubbery or trees:


 


(a)                                  which are
located on or encroach upon that portion of the land subject to any easement
excepted in Schedule B, which damage results from the exercise of the
right to maintain the easement for the purpose for which it was granted or
reserved;


 


(b)                                 resulting from
the future exercise of any right to use the surface of the land for the
extraction or development of minerals excepted from the description of the land
or excepted in Schedule B.


 


4.                                       Any final court
order or judgment requiring the removal from any land adjoining the land of any
encroachment excepted in Schedule B.


 


5.                                       Any final court
order or judgment denying the right to maintain any existing improvements on
the land because of any violation of covenants, conditions or restrictions or
building setback lines shown on a plat of subdivision recorded or filed in the
public records.


 


Wherever
in this endorsement the words “covenants, conditions or restrictions” appear,
they shall not be deemed to refer to or include the terms, covenants,
conditions or limitations contained in an instrument creating a lease.


 


As
used in paragraphs 1(b)(1) and 5, the words “covenants, conditions or
restrictions” shall not be deemed to refer to or include any covenants,
conditions or restrictions relating to environmental protection.


 


This
endorsement is made a part of the policy and is subject to all of the terms and
provisions thereof and any prior endorsements thereto. Except to the extent
expressly stated, it neither modifies any of the terms and provisions of the
policy and any prior endorsements, nor does it extend the effective date of the
policy and any prior endorsements, nor does it increase the face amount
thereof.


 


	
  DATED:                         ,
  1999

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
  By:

  	
  Title Associates Inc., As Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Joseph DeCiutiis, Esq.

  	
   

  
					



 


ALTA ENDORSEMENT 9
(RESTRICTIONS, ENCROACHMENTS, MINERALS) (3/27/92) NY (8/1/93)


 





















 


CHICAGO TITLE INSURANCE COMPANY


 


LAND SAME AS SURVEY ENDORSEMENT


 


Attached to and made a
part of Policy Number 33 0105 107 00003552


 


The Company hereby
assures the Insured that said land is the same as that delineated on the survey
referenced in Exception One herein.


 


The Company hereby
insures said Insured against loss which said Insured shall sustain in the event
said assurances herein shall prove to be incorrect.


 


The total liability of
the Company under said policy and any endorsement therein shall not exceed, in
the aggregate, the face amount of said policy and costs which the Company is
obligated under the Conditions and Stipulations thereof to pay.


 


This endorsement is made
a part of the policy and is subject to all of the terms and provisions thereof
and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy and any prior endorsements, nor does it
extend the effective date of the policy and any prior endorsements, nor does it
increase the face amount thereof.


 


 


	
  DATED:                         ,
  1999

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
  By:

  	
  Title Associates Inc.,
  As Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Joseph
  DeCiutiis, Esq.

  	
   

  
					



 










 


 










 


	
   

  	
  ENDORSEMENT

  	
  OWNERS

  	
  o

  
	
   

  	
   

  	
  LOAN

  	
  o

  
	
   

  	
  Attached to and forming
  a part of

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Policy No. 33 0105
  107 00003552

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Issued by

  	
   

  
	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  	
   

  



 


 


ACCESS


ENDORSEMENT


 


The Company hereby insures the Insured against loss or damage which the
insured shall sustain by reason of any inaccuracy in the following assurance:


 


The Premises abut and have access to a physically open dedicated public
street known as West 57th Street.


 


This endorsement
is made a part of the policy or commitment and is subject to all the terms and
provisions thereof and of any prior endorsements thereto.  Except to the extent expressly stated, it
neither modifies any of the terms and provisions of the policy or commitment
and prior endorsements, if any, nor does it extend the effective date of the
policy or commitment and prior endorsements or increase the face amount
thereof.


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:                                                   ,
  1999

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  	
   

  	
   

  	
  /s/

  	
   

  
	
   

  	
  BY: TITLE ASSOCIATES
  INC., AS AGENT

  	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  	
   

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
  Secretary

  	
   

  
											



 





















 


	
  ENDORSEMENT

  
	
   

  
	
  Attached to and forming
  a part of

  
	
   

  
	
  Policy No. 330105
  107 00003552

  
	
   

  
	
  Issued by

  
	
  CHICAGO TITLE INSURANCE
  COMPANY

  



 


	
  CONDOMINIUM ENDORSEMENT

  
	
   

  
	
  -NEW YORK-

  



 


Attached to and
made a part of Policy Number  330105 107 00003552


 


The Company
insures the insured against loss or damage sustained by reason of:


 


1.               The
failure of the unit identified in Schedule A and its common elements to be
part of a condominium within the meaning of the condominium statutes of the
State of New York.


 


2.               The
failure of the documents required by the condominium statutes to comply with
the requirements of the statutes to the extent that such failure affects the
title to the unit and its common elements.


 


3.               Present
violations of any restrictive covenants which restrict the use of the unit and
its common elements and which are created by the condominium documents, except
violations relating to environmental protection unless a notice of a violation
thereof has been recorded or filed in the public record and is not excepted Schedule B.  The restrictive covenants do not contain any
provisions which will cause a forfeiture or reversion of title.


 


4.               The
priority of any lien for charges and assessments at Date of Policy provided for
in the condominium statutes and condominium documents over the lien of any
insured first mortgage identified in Schedule A.


 


5.               The
failure of the unit and its common elements to be entitled by law to be
assessed for real property taxes as a separate parcel.


 


6.               Any
obligation to remove any improvements which exist at Date of Policy because of
any present encroachments or because of any future unintentional encroachments
of the common elements upon any unit or of any unit upon the common elements or
another unit.


 


7.               The
failure of title by reason of a right of first refusal to purchase the unit and
its common elements which was exercised or could have been exercised at Date of
Policy.


 


This endorsement
is made a part of the policy and is subject to all the terms and provisions
thereof and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy and any prior endorsements, nor does it
extend the effective date of the policy and any prior endorsements, nor does it
increase the face amount of insurance.


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATED: 

  	
  August        ,
  1999

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  	
  President

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
  TIRSA ENDORSEMENT (CONDOMINIUM (8:1:93)

  Reorder Form No. 8064

  	
   

  	
   

  	
   

  
										



 


 





















 


INSIDE NEW YORK CITY


 


ENDORSEMENT


 


Attached to Policy No. 33 0105 107 00003552


 


Issued by


CHICAGO TITLE INSURANCE COMPANY


 


The insurance afforded by this endorsement is only effective if the
land is used or is to be used primarily for residential purposes.


 


The Company insures the insured against loss or damage sustained by
reason of lack of priority of the lien of the insurance mortgage over:


 


(a)          any
environmental protection lien which, at Date of Policy, is recorded in those
records established under state statutes at Date of Policy for the purpose of
imparting constructive notice of matters relating to real property to
purchasers for value and without knowledge, or filed in the records of the
clerk of the United States district court for the district in which the land is
located, except as set forth in Schedule B; or


 


(b)         any
environmental protection lien provided for by any state statute in effect at
Date of Policy, except environmental protection liens provided for by the
following state statutes:


 


Administrative Code of the City of New York, Section 17-151.


 


This endorsement is made a part of the policy and is subject to all of
the terms and provisions thereof and of any prior endorsements thereto.  Except to the extent expressly stated, it
neither modifies any of the terms and provisions of the policy and any prior
endorsements, nor does it extend the effective date of the policy and any prior
endorsements, nor does it increase the face amount thereof.


 


 


	
  (Witness clause
  optional)

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note : This endorsement shall not be valid or binding
  until

  	
   

  	
  /s/ Thomas J. Adams

  
	
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  
									



 


 


F. 10980





















 


AMERICAN LAND TITLE ASSOCIATION


LOAN POLICY
(10-17-92)


WITH  NEW YORK COVERAGE


ENDORSEMENT APPENDED


 


33 0105 107 00003553


 


CHICAGO TITLE INSURANCE COMPANY


 


SUBJECT TO THE EXCLUSIONS
FROM COVERAGE,  THE EXCEPTIONS FROM
COVERAGE CONTAINED IN SCHEDULE B AND THE CONDITIONS AND STIPULATIONS,  CHICAGO TITLE INSURANCE COMPANY, a Missouri
corporation, herein called the Company, insures, as of Date of Policy shown in Schedule A,
against loss or damage, not exceeding the Amount of Insurance stated in Schedule A,
sustained or incurred by the insured by reason of:


 


1.               Title to the estate or interest described in Schedule A
being vested other than as stated therein;


2.               Any defect in or lien or encumbrance on the
title;


3.               Unmarketability of the title;


4.               Lack of a right of access to and from the
land;


5.               The invalidity or unenforceability of the
lien of the insured mortgage upon the title;


6.               The priority of any lien or encumbrance over
the lien of the insured mortgage;


7.               Lack of priority of the lien of the insured
mortgage over any statutory lien for services, labor or material:


(a)          arising from an improvement or work related
to the land which is contracted for or commenced prior to Date of Policy; or


(b)         arising from an improvement or work related
to the land which is contracted for or commenced subsequent to Date of Policy
and which is financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at
Date of Policy the insured has advanced or is obligated to advance;


8.               The invalidity or unenforceability of any
assignment of the insured mortgage, provided the assignment is shown in Schedule A,
or the failure of the assignment shown in Schedule A to vest title to the
insured mortgage in the named insured assignee free and clear of all liens.


 


The
Company will also pay the costs, attorneys’ fees and expenses incurred in
defense of the title or the lien of the insured mortgage, as insured, but only
to the extent provided in the Conditions and Stipulations.


 


In Witness Whereof, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be signed and
sealed as of Date of Policy shown in Schedule A, the policy to become
valid when countersigned by an authorized signatory.


 


 


	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
  Issued by:

  	
   

  	
   

  	
  /s/

  
	
  TITLE ASSOCIATES
  INC.

  	
   

  	
   

  	
  President

  
	
  430 PARK AVENUE,
  17TH FLOOR

  	
   

  	
   

  	
   

  
	
  NEW YORK, NY
  10022

  	
   

  	
   

  	
   

  
	
  (212) 758-0050

  	
   

  	
   

  	
   

  
	
  (212) 758-3998

  	
   

  	
   

  	
  By:

  	
   

  
	
  (212) 758-8223
  TELECOPIER

  	
    [SEAL]

  	
   

  	
   

  	
  Thomas J Adams

  
	
   

  	
   

  	
   

  	
  Secretary

  
							



 


ALTA Loan Policy (10-17-92)


 





















 


(c)   Amount of Insurance. 
The amount of insurance after the acquisition or after the conveyance
shall in neither event exceed the least of:


 


(i)    the Amount
of Insurance stated in Schedule A.


 


(ii)   the amount
of the principal of the indebtedness secured by the insured mortgage as of Date
of Policy, interest thereon, expenses of foreclosure, amounts advanced pursuant
to the insured mortgage to assure compliance with laws or to protect the lien
of the insured mortgage prior to the time of acquisition of the estate or
interest in the land and secured thereby and reasonable amounts expended to
prevent deterioration of improvements, but reduced by the amount of all
payments made; or


 


(iii)  the amount
paid by any governmental agency or governmental instrumentality, if the agency
or instrumentality is the insured claimant, in the acquisition of the estate or
interest in satisfaction of its insurance contract or guaranty.


 


3.     NOTICE OF CLAIM TO BE GIVEN BY INSURED
CLAIMANT


 


The insured shall notify
the Company promptly in writing (i) in case of any litigation as set forth
in Section 4(a) below, (ii) in case knowledge shall come to an
insured hereunder of any claim of title or interest which is adverse to the
title to the estate or interest or the lien of the insured mortgage, as
insured, and which might cause loss or damage for which the Company may be
liable by virtue of this policy, or (iii) if title to the estate or
interest or the lien of the insured mortgage, as insured, is rejected as
unmarketable.  If prompt notice shall not be given to the Company, then as
to the insured all liability of the Company shall terminate with regard to the
matter or matters for which prompt notice is required; provided, however, that
failure to notify the Company shall in no case prejudice the rights of any
insured under this policy unless the Company shall be prejudiced by the failure
and then only to the extent of the prejudice.


 


4.              DEFENSE AND PROSECUTION OF
ACTIONS; DUTY OF INSURED CLAIMANT TO COOPERATE


 


(a)   Upon written request by the insured and
subject to the options contained in Section 6 of these Conditions and
Stipulations, the Company, at its own cost and without unreasonable delay,
shall provide for the defense of an insured in litigation in which any third
party asserts a claim adverse to the title or interest as insured, but only as
to those stated causes of action alleging a defect, lien or encumbrance or
other matter insured against by this policy.  The Company shall have the
right to select counsel of its choice (subject to the right of the insured to
object for reasonable cause) to represent the insured as to those stated causes
of action and shall not be liable for and will not pay the fees of any other
counsel.  The Company will not pay any fees, costs or expenses incurred by
the insured in the defense of those causes of action which allege matters not
insured against by this policy.


 


(b)   The Company shall have the right, at its own
cost, to institute and prosecute any action or proceeding or to do any other
act which in its opinion may be necessary or desirable to establish the title
to the estate or interest or the lien of the insured mortgage, as insured, or
to prevent or reduce loss or damage to the insured.  The Company may take any appropriate action
under the terms of this policy, whether or not it shall be liable hereunder,
and shall not thereby concede liability or waive any provision of this
policy.  If the Company shall exercise
its rights under this paragraph, it shall do so diligently.


 


(c)   Whenever the Company shall have brought an
action or interposed a defense as required or permitted by the provisions of
this policy, the Company may pursue any litigation to final determination by a
court of competent jurisdiction and expressly reserves the right, in its sole
discretion, to appeal from any adverse judgment or order.


 


(d)   In all cases where this policy permits or
requires the Company to prosecute or provide for the defense of any action or
proceeding, the insured shall secure to the Company the right to so prosecute
or provide defense in the action or proceeding, and all appeals therein, and
permit the Company to use, at its option, the name of the insured for this
purpose.  Whenever requested by the Company, the insured, at the Company’s
expense, shall give the Company all reasonable aid (i) in any action or
proceeding, securing evidence, obtaining witnesses, prosecuting or defending
the action or proceeding, or effecting settlement, and (ii) in any other
lawful act which in the opinion of the Company may be necessary or desirable to
establish the title to the estate or interest or the lien of the insured
mortgage, as insured.  If the Company is prejudiced by the failure of the
insured to furnish the required cooperation, the Company’s obligations to the
insured under the policy shall terminate, including any liability or obligation
to defend, prosecute, or continue any litigation, with regard to the matter or
matters requiring such cooperation.


 


5.     PROOF OF LOSS OR DAMAGE


 


In addition to and after
the notices required under Section 3 of these Conditions and Stipulations
have been provided the Company, a proof of loss or damage signed and sworn to
by the insured claimant shall be furnished to the Company within 90 days after
the insured claimant shall ascertain the facts giving rise to the loss or
damage.  The proof of loss or damage shall describe the defect in, or lien
or encumbrance on the title, or other matter insured against by this policy
which constitutes the basis of loss or damage and shall state, to the extent
possible, the basis of calculating the amount of the loss or damage.  If
the Company is prejudiced by the failure of the insured claimant to provide the
required proof of loss or damage, the Company’s obligations to the insured
under the policy shall terminate, including any liability or obligation to
defend, prosecute, or continue any litigation, with regard to the matter or
matters requiring such proof of loss or damage.


 


In addition, the insured
claimant may reasonably be required to submit to examination under oath by any
authorized representative of the Company and shall produce for examination,
inspection and copying, at such reasonable times and places as may be
designated by any authorized representative of the Company, all records, books,
ledgers, checks, correspondence and memoranda, whether bearing a date before or
after Date of Policy, which reasonably pertain to the loss or damage. 
Further, if requested by any authorized representative of the Company, the
insured claimant shall grant its permission, in writing, for any authorized
representative of the Company to examine, inspect and copy all records, books,
ledgers, checks, correspondence and memoranda in the custody or control of a
third party, which reasonably pertain to the loss or damage.  All information designated as confidential by
the insured claimant provided to the Company pursuant to this Section shall
not be disclosed to others unless, in the reasonable judgment of the Company,
it is necessary in the administration of the claim.  Failure of the insured claimant to submit for
examination under oath, produce other reasonably requested information or grant
permission to secure reasonably necessary information from third parties as
required in this paragraph, unless prohibited by law or governmental
regulation, shall terminate any liability of the Company under this policy as
to that claim.


 


6.              OPTIONS
TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY


 


In case of a claim under
this policy, the Company shall have the following additional options:


 


(a)   To Pay or Tender Payment of the Amount of
Insurance or to Purchase the Indebtedness.


 


(i) to pay or tender
payment of the amount of insurance under this policy together with any costs,
attorneys’ fees and expenses incurred by the insured claimant, which were
authorized by the Company, up to the time of payment or tender of payment and
which the Company is obligated to pay; or


 


(ii) to purchase the
indebtedness secured by the insured mortgage for the amount owing thereon
together with any costs, attorneys’ fees and expenses incurred by the insured
claimant which were authorized by the Company up to the time of purchase and
which the Company is obligated to pay.


 


If the Company offers to
purchase the indebtedness as herein provided, the owner of the indebtedness
shall transfer, assign, and convey the indebtedness and the insured mortgage,
together with any collateral security, to the Company upon payment therefor.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs a(i) or (ii),
all liability and obligations to the insured under this policy, other than to
make the payment required in those paragraphs, shall terminate, including any
liability or obligation to defend, prosecute, or continue any litigation, and
the policy shall be surrendered to the Company for cancellation.


 


(b)   To Pay or Otherwise Settle With Parties Other
than the Insured or With the Insured Claimant.


 


(i) to pay or otherwise
settle with other parties for or in the name of an insured claimant any claim
insured against under this policy, together with any costs, attorneys’ fees and
expenses incurred by the insured claimant which were authorized by the Company
up to the time of payment and which the Company is obligated to pay; or


 


(ii) to pay or otherwise
settle with the insured claimant the loss or damage provided for under this policy,
together with any costs, attorneys’ fees and expenses incurred by the insured
claimant which were authorized by the Company up to the time of payment and
which the Company is obligated to pay.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs b(i) or (ii),
the Company’s obligations to the insured under this policy for the claimed loss
or damage, other than the payments required to be made, shall terminate,
including any liability or obligation to defend, prosecute or continue any
litigation.


 


7.     DETERMINATION AND EXTENT OF LIABILITY


 


This policy is a contract
of indemnity against actual monetary loss or damage sustained or incurred by
the insured claimant who has suffered loss or damage by reason of matters
insured against by this policy and only to the extent herein described.


 


(a)   The liability of the Company under this
policy shall not exceed the least of:


 


(i) the Amount of
Insurance stated in Schedule A, or, if applicable, the amount of insurance
as defined in Section 2 (c) of these Conditions and Stipulations;


 


(ii) the amount of the
unpaid principal indebtedness secured by the insured mortgage as limited or
provided under Section 8 of these Conditions and Stipulations or as
reduced under Section 9 of these Conditions and Stipulations, at the time
the loss or damage insured against by this policy occurs, together with
interest thereon; or


 





















 


SCHEDULE A


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Amount of

  
	
  Office File Number

  	
   

  	
     Policy
  Number

  	
   

  	
  Date Of Policy

  	
   

  	
  Insurance

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9901 105 00621

  	
   

  	
  33 0105 107 00003553

  	
   

  	
                      , 1999

  	
   

  	
  $12,000,000

  



 


1.                                       Name
of Insured:                  Starwood
Financial Trust, its successors and/or assigns


 


2.                                      The
estate or interest in the land which is encumbered by the insured mortgage is:


 


Fee Simple as to Parcels I and II.


 


Leasehold as to Parcels III and IV pursuant to Leases described in
Exception 4 and 5, respectively, which leases are valid and subsisting leases
for the unexpired terms thereof.


 


3.                                       The
fee simple title to said land is at the date hereof vested in: 


 


Henry Hudson Holdings LLC, a Delaware limited liability company


 


4.                                       The
mortgage or deed of trust and assignments, if any, covered by this Policy are described
as follows:


 


Consolidated mortgage in the amount of $30,000,000 pursuant to that
certain Mortgage Modification, Consolidation and Extension Agreement made by
and between Henry Hudson Holdings LLC and Starwood Financial Trust, dated as
of                     ,
1999, to be recorded in the New York County Register’s Office subject to the terms,
conditions and provisions contained therein, which consolidates the Mortgages
set forth on Schedule C herein.


 


5.                                      The
land referred to in this Policy is described on the description sheet annexed.


 


See Schedule A annexed hereto and made a part hereof.


 


 


Countersigned


 


 


	
   

  	
   

  
	
  Authorized
  Signature

  	
   

  



 


This Policy valid only if Schedule B is attached.


 


	
  Schedule A

  	
   

  	
   

  	
   

  
	
  Loan Form

  	
   

  	
  NOTE: Attached
  hereto

  	
  added pages 

  



 





















(Schedule B
Continued)


 


	
  Policy Number:

  	
   

  	
  33 0105 107 00003553 (Loan)

  
	
  Title Number:

  	
   

  	
  9901 105 00621

  



 


6.                                       This
Policy is issued contemporaneously with Policy No. LT990219 of Lawyer’s Title
Insurance Corporation in the amount of $12,000,000 and No. 5412-1370742 of Fidelity
National Title Insurance Company of New York by National Land Tenure Company,
LLC, its Agent in the amount of $6,000,000. 
At the time liability for any loss shall have been fixed pursuant to the
conditions of this Policy, this Company shall not be liable to the insured for
a greater portion of the loss than the amount that this Policy bears to the
whole amount of insurance held by the insured as aforesaid.


 


7.                                       Hard
Cost Mortgage in the amount of $54,549,000 pursuant to that certain Consolidated,
Amended, Restated Hard Cost Mortgage, Security Agreement and Assignment of
Leases and Rents made by and between Henry Hudson Holdings LLC and Corus Bank, N.A.,
dated as of
                  
       , 1999, to be recorded in the New York
County Register’s Office.


 


8.                                       Soft
Cost Mortgage made by Henry Hudson Holdings LLC to Corus Bank, N.A., dated                       
        , 1999, to be recorded in the
New York County Register’s Office in the amount of $25,451,000.


 


SCHEDULE B 


Loan Form


 





















 


(Schedule A
Continued)


 


	
  Policy Number:

  	
   

  	
  33 0105 107 00003553 (Loan)

  
	
  Title Number:

  	
   

  	
  9901 105 00621

  



 


THENCE southerly
parallel with Ninth Avenue and part of the distance through a party wall, 100
feet 10 inches;


 


THENCE westerly
parallel more or less with 58th Street, 20 feet; and


 


THENCE southerly
and part of the way through another party wall, 100 feet to the northerly side
of 57th Street, the point or place of BEGINNING.


 


PARCEL II


 


UNIT LOT 1702


 


The condominium
unit (hereinafter referred to as “Unit Lot 1702”) known as Unit 2, also known
as Modified Hotel Unit, in the building (hereinafter referred to as the “Building”)
known as 353 West 57th Street Condominium and by the street number 353 West 57th
Street, New York, New York, said Unit being designated and described in a
certain declaration dated April 11, 1985 made by Irving Schatz pursuant to
Article 9-B of the Real Property Law of the State of New York establishing
a plan for condominium ownership of the Building and the land (hereinafter
referred to as the “Land”) upon which the Building is situate (which Land is
more particularly described below), which declaration was recorded in the New
York County Office of the Register of The City of New York (the “City Register’s
Office”) on April 24, 1985 in Reel 902 page 1 and amended by First
Amendment to Declaration dated January 29, 1993 and recorded May 11, 1993
in Reel 1969 page 2286, by Amended and Restated Declaration made by Henry
Hudson Holdings LLC,  Irving Schatz,
Adrienne Wechsler and Cheryl Hirsch dated as of February 12, 1999, recorded
on July 16, 1999 in Reel 2913 page 1753 and by First Amendment to Amended
and Restated Declaration made by Henry Hudson Holdings LLC, Irving Schatz, Adrienne
Wechsler and Cheryl Hirsch dated September 30, 1999 to be recorded in the
New York County Register’s Office (which declaration, as amended, is
hereinafter referred to as the “Declaration”). 
Unit Lot 1702 is also designated as Tax Lot 1702 in Block 1048 of Section 4
of the Borough of Manhattan on the Tax Map of the Real Property Assessment
Department of the City of New York and on the Floor Plans of the Building, certified
by Butler Rogers Baskett, Architects, on March 27, 1985 and filed in the
Real Property Assessment Department of the City of New York on April 22, 1985
as Condominium Plan No. 208 and also filed in the City Register’s Office on April 24,
1985 as Condominium Map No. 4326, as amended by Amended Floor Plans certified
by Butler Rogers Baskett, Architects, on December 14, 1992, which Amended
Floor Plans were filed in the Real Property Assessment Department of the City
of New York on May 5, 1993 as Condominium Plan No. 208A and also filed in
the City Register’s Office on May 11, 1993 as Condominium Map No. 5192.


 


TOGETHER WITH an
undivided 46.94011% interest in the Common Elements (as such term is defined in
the Declaration).


 


The Land upon
which the Building containing Unit Lot 1702 is situate is bounded and described
as follows:


 


ALL that certain
plot, piece or parcel of land, situate, lying and being in the Borough of
Manhattan, County of New York, City and State of New York, bounded and
described as follows:


 


BEGINNING at a
point on the northerly side of 57th Street, distant 20 feet easterly from the corner formed by the intersection of
the easterly side of Ninth Avenue with the northerly side of 57th Street;


 





















(Schedule A
Continued)


 


	
  Policy Number:

  	
   

  	
  33 0105 107 00003553 (Loan)

  
	
  Title Number:

  	
   

  	
  9901 105 00621

  



 


TOGETHER WITH an
undivided 0.34577% interest in the Common Elements (as such term is defined in
the Declaration).


 


The Land upon
which the Building containing Unit Lot 1704 is situate is bounded and described
as follows:


 


ALL that certain
plot, piece or parcel of land, situate, lying and being in the Borough of
Manhattan, County of New York, City and State of New York, bounded and
described as follows:


 


BEGINNING at a
point on the northerly side of 57th Street, distant 20 feet easterly from the
corner formed by the intersection of the easterly side of Ninth Avenue
with the northerly side of 57th Street;


 


RUNNING THENCE
easterly along the said northerly side of 57th Street, 155 feet;


 


THENCE northerly
parallel with Ninth Avenue, 200 feet 10 inches to the southerly side of 58th
Street;


 


THENCE westerly
along the said southerly side of 58th Street, 135 feet to a point distant 40
feet easterly from the corner formed by the intersection of the southerly side
of 58th Street with the easterly side of Ninth Avenue;


 


THENCE southerly
parallel with Ninth Avenue and part of the distance through a party wall, 100
feet 10 inches;


 


THENCE westerly
parallel more or less with 58th Street, 20 feet; and


 


THENCE southerly
and part of the way through another party wall, 100 feet to the northerly side
of 57th Street, the point or place of BEGINNING.


 


















 


SCHEDULE A-1


 


	
  Policy Number:

  	
   

  	
  33 0105 107 00003553
  (Loan)

  
	
  Title Number: 

  	
   

  	
  9901 105 00621

  



 


 


ALL that certain
plot, piece or parcel of land, situate, lying and being in the Borough of
Manhattan, City, County and State of New York, bounded and described as
follows:


 


BEGINNING at the
corner formed by the intersection of the southerly side of West 58th Street
with the easterly side of Ninth Avenue;


 


RUNNING THENCE
easterly along the southerly side of West 58th Street, 40 feet;


 


RUNNING THENCE
southerly parallel with Ninth Avenue and part of the way through a party wall
100 feet 10 inches;


 


RUNNING THENCE
westerly and parallel with 58th Street, 40 feet to the easterly side of Ninth
Avenue; and


 


RUNNING THENCE
northerly along the easterly side of Ninth Avenue, 100 feet 10 inches to the
southerly side of West 58th Street at the point or place of BEGINNING.


 





















 


SCHEDULE C


 


	
  Policy Number:

  	
   

  	
  33 0105 107 00003553
  (Loan)

  
	
  Title Number: 

  	
   

  	
  9901 105 00621

  



 


1.                                       Substitute
Mortgage (Senior Mortgage) made by Henry Hudson Holdings LLC to Northstar
Hospitality LLC, dated as of February 12, 1999, recorded March 23,
1999 in Reel 2841 page 1928.


 


(a)                                  Assignment
of Mortgage made by Northstar Hospitality LLC to Fremont Investment &
Loan dated as of February 12, 1999, recorded March 23, 1999 in Reel
2841 page 1946.


 


2.                                       Mortgage
(and Security Agreement) made by The St. Luke’s-Roosevelt Hospital Center to
Irving Schatz, dated as of June 23, 1993, recorded July 26, 1993, in Reel
1992 page 604.


 


(a)                                  Assignment
of Mortgage made by Irving Schatz to Napis Funding LLC dated as of August 21,
1997, recorded December 30, 1997 in Reel 2526 page 2145.


 


(b)                                 Assignment
of Mortgage made by Napis Funding LLC to Northstar Hospitality LLC dated as of February 12,
1999 (effective as of February 13, 1998), recorded March 23, 1999 in
Reel 2841 page 1901.


 


(c)                                  Assignment
of Mortgage made by Northstar Hospitality LLC to Fremont Investment &
Loan dated as of February 12, 1999 (effective as of February 13, 1998),
recorded March 23, 1999 in Reel 2841 page 1909.


 


(d)                                 Consolidated,
Amended and Restated Mortgage, Leasehold Mortgage, Spreader Agreement and
Fixture Filing made by and between Henry Hudson Holdings LLC, as Mortgagor, and
Fremont Investment & Loan, as Mortgagee, dated as of February 12,
1999, recorded March 23, 1999 in Reel 2841 page 1954. Consolidates
mortgages (1) and (2) into a single lien.


 


(e)                                  Assignment
of Mortgage made by Fremont Investment & Loan to Starwood Financial
Trust, dated                      ,
1999, to be recorded in the New York County Register’s Office.  Assigns mortgages (1) and (2), as previously
consolidated.


 


3.                                       Mortgage
Spreader and Amendment Agreement made by and between Starwood Financial Trust
and Henry Hudson Holdings LLC, dated
                     
        , 1999, to be recorded in the New
York County Register’s Office.


 


4.                                       Amended
and Restated Mortgage, Leasehold Mortgage, Security Agreement and Assignment of
Leases and Rents made by and between Henry Hudson Holdings LLC and Starwood
Financial Trust, dated               
   , 1999, to be recorded in the New York County Register’s
Office.


 


5.                                       Split
Mortgage made by Henry Hudson Holdings LLC to Northstar Hospitality LLC, dated
            
     , 1999, to be recorded in the New York County
Register’s Office in the amount of $3,150,000.


 


(a)                                  Assignment
of Mortgage made by Northstar Hospitality, LLC to Starwood Financial Trust,
dated           
       , 1999, to be recorded in the New York
County Register’s Office.


 





















 


CHICAGO TITLE INSURANCE COMPANY


ALTA ENDORSEMENT 9


 


(RESTRICTIONS, ENCROACHMENTS, MINERALS)


 


Attached to and made a part of Policy Number 33 0105 106 00003553


 


The Company insures the owner of the indebtedness secured by the insured
mortgage against loss or damage sustained by reason of:


 


1.                                       Any incorrectness in the assurance that, at
Date of Policy:


 


(a)                                  There are no covenants, conditions or
restrictions under which the lien of the mortgage referred to in Schedule A
can be divested, subordinated or extinguished, or its validity, priority or
enforceability impaired.


 


(b)                                 Unless expressly excepted in Schedule B:


 


(1) There are no present violations on
the land of any enforceable covenants, conditions or restrictions, nor do any
existing improvements on the land violate any building setback lines shown on a
plat of subdivision recorded or filed in the public records.


 


(2) Any instrument referred to in Schedule B
as containing covenants, conditions or restrictions on the land does not, in addition,
(i) establish an easement on the land; (ii) provide a lien for
liquidated damages; (iii) provide for a private charge or assessment; (iv) provide
for an option to purchase, right of first refusal or the prior approval of a
future purchaser or occupant.


 


(3) There is no encroachment of existing improvements located on
the land onto adjoining land, nor any encroachment onto the land of existing
improvements located on adjoining land.


 


(4) There is no encroachment of existing
improvements located on the land onto that portion of the land subject to any easement
excepted in Schedule B.


 


(5) There are no notices of violation of
covenants, conditions and restrictions relating to environmental protection
recorded or filed in the public records.


 


2.                                       Any future violation on the land of any
existing covenants, conditions or restrictions occurring prior to the
acquisition of title to the estate or interest in the land by the insured,
provided the violation results in:


 


(a)                                  invalidity, loss of priority, or
unenforceability of the lien of the insured mortgage; or


 


(b)                                 loss of title to the estate or interest in
the land if the insured shall acquire title in satisfaction of the indebtedness
secured by the insured mortgage.


 


3.                                       Damage to existing improvements, including
lawns, shrubbery or trees:


 


(a)                                  which are located on or encroach upon that
portion of the land subject to any easement excepted in Schedule B, which damage
results from the exercise of the right to maintain the easement for the purpose
for which it was granted or reserved;


 


(b)                                 resulting from the future exercise of any
right to use the surface of the land for the extraction or development of
minerals excepted from the description of the land or excepted in Schedule B.


 


4.                                       Any final court order or judgment requiring
the removal from any land adjoining the land of any encroachment excepted in
Schedule B.


 


5.                                       Any final court order or judgment denying the
right to maintain any existing improvements on the land because of any
violation of covenants, conditions or restrictions or building setback lines
shown on a plat of subdivision recorded or filed in the public records.


 


Wherever in this endorsement the words “covenants, conditions or
restrictions” appear, they shall not be deemed to refer to or include the terms,
covenants, conditions or limitations contained in an instrument creating a
lease.


 


As used in paragraphs l(b)(l) and 5, the words “covenants, conditions or
restrictions” shall not be deemed to refer to or include any covenants,
conditions or restrictions relating to environmental protection.


 


This endorsement is made a part of the policy and is subject to all of the terms and provisions thereof
and any prior endorsements thereto. Except to the extent expressly stated, it
neither modifies any of the terms and provisions of the policy and any prior
endorsements, not does it extend the effective date of the policy and any prior
endorsements, nor does it increase the face amount thereof.


 


	
  DATED:                      
     , 1999

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
  By:

  	
  Title Associates Inc., As Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Joseph DeCiutiis, Esq.

  
							



 


 


ALTA ENDORSEMENT 9 (RESTRICTIONS, ENCROACHMENTS, MINERALS) (3/27/92) NY
(8/1/93)


 





















 


CHICAGO TITLE INSURANCE
COMPANY


 


LAND SAME AS SURVEY
ENDORSEMENT


 


Attached to and made a part of Policy Number 33 0105
107 00003553


 


The Company hereby
assures the Insured that said land is the same as that delineated on the survey
referenced in Exception One herein.


 


The Company hereby
insures said Insured against loss which said Insured shall sustain in the event
said assurances herein shall prove to be incorrect.


 


The total
liability of the Company under said policy and any endorsement therein shall
not exceed, in the aggregate, the face amount of said policy and costs which
the Company is obligated under the Conditions and Stipulations thereof to pay.


 


This endorsement
is made a part of the policy and is subject to all of the terms and provisions
thereof and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy and any prior endorsements, nor does it
extend the effective date of the policy and any prior endorsements, nor does it
increase the face amount thereof.


 


 


	
  DATED:                      
     , 1999

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
  By:

  	
  Title Associates Inc., As Agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Joseph DeCiutiis, Esq.

  
							



 


 





















 


	
   

  	
  ENDORSEMENT

  	
  OWNERS

  	
  o

  
	
   

  	
   

  	
  LOAN

  	
  o

  
	
   

  	
  Attached to and forming
  a part of

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Policy No. 33 0105
  107 00003553

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Issued by

  	
   

  
	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  	
   

  



 


ACCESS


ENDORSEMENT


 


The Company hereby insures the Insured against loss or damage which the
insured shall sustain by reason of any inaccuracy in the following assurance:


 


The Premises abut and have access to a physically open dedicated public
street known as West 57th Street.


 


This endorsement
is made a part of the policy or commitment and is subject to all the terms and
provisions thereof and of any prior endorsements thereto.  Except to the extent expressly stated, it
neither modifies any of the terms and provisions of the policy or commitment
and prior endorsements, if any, nor does it extend the effective date of the
policy or commitment and prior endorsements or increase the face amount
thereof.


 


	
   

  	
   

  	
   

  	
   

  	
        CHICAGO
  TITLE INSURANCE COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:                                                   ,
  1999

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  	
   

  	
   

  	
  /s/

  	
   

  
	
   

  	
  BY:   TITLE ASSOCIATES INC., AS AGENT

  	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  	
   

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
  Secretary

  	
   

  
												



 





















 


CHICAGO TITLE INSURANCE
COMPANY


 


WAIVER OF ARBITRATION
ENDORSEMENT


 


(LOAN
POLICY)


 


ENDORSEMENT TO BE
ATTACHED TO AND MADE A PART OF LOAN


 


POLICY OF TITLE
INSURANCE NUMBER 33 0105 107 00003553


 


This policy is amended by deleting therefrom Condition
and Stipulation Section 13.


 


Nothing herein
contained shall be construed as extending or changing the effective date of
said policy, unless otherwise expressly stated.


 


This endorsement,
when countersigned below by a validating signatory, is made a part of said
policy and is subject to the Exclusions from Coverage, schedules, conditions
and stipulations therein, except as modified by the provisions hereof.


 


 


Dated: August           ,
1999


 


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
  President

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph DeCiutiis, Esq.

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  
									



 


 


	
  TIRSA WAIVER OF
  ARBITRATION ENDORSEMENT 

  
	
  LOAN POLICY

  
	
  Reorder Form No 10989

  	
   

  	
   

  



 





















 


ENDORSEMENT


 


Attached
to and forming a part of


 


Policy
No. 330105 107 00003553


 


Issued
by


CHICAGO
TITLE INSURANCE COMPANY


 


STANDARD
NEW YORK ENDORSEMENT (LOAN POLICY)


 


1.                                       Insuring provision Number 7 is deleted and
the following is substituted:


 


“7.                   Any statutory lien for services, labor or
materials furnished prior to the date hereof, and which has now gained or which
may hereafter gain priority over the estate or interest of the insured as shown
in Schedule A of this policy.”


 


2.                                       Paragraph number 6 of the Exclusions From
Coverage is deleted.


 


3.                                       The following is added to Paragraph 7 of the
Conditions and Stipulations of this policy:


 


“(d)             If the recording date of the instruments
creating the insured interest is later than the policy date, such policy shall
also cover intervening liens or encumbrances, except real estate taxes,
assessments, water charges and sewer rents.”


 


Nothing herein contained shall be construed as extending or changing the
effective date of said policy, unless otherwise expressly stated.  


 


This endorsement, when countersigned below by a validating signatory, is
made a part of said policy and
is subject to the Exclusions from Coverage, Schedules, Conditions and
Stipulations therein, except as modified by the provisions hereof.


 


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATED: 

  	
  August       ,
  1999

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  	
  President

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  
									



 


 


	
  Standard New York Endorsement (8/1/93)

  	
   

  	
   

  
	
  For use with ALTA Loan Policy (10-17-92)

  	
   

  	
   

  
	
  Reorder Form No. 10991

  	
   

  	
   

  



 





















 


AMERICAN LAND TITLE ASSOCIATION


LOAN POLICY
(10-17-92)


WITH NEW
YORK COVERAGE


ENDORSEMENT APPENDED


 


33  0105  107  00003551


 


CHICAGO TITLE INSURANCE COMPANY


 


SUBJECT TO THE EXCLUSIONS
FROM COVERAGE, THE EXCEPTIONS FROM COVERAGE CONTAINED IN SCHEDULE B AND THE
CONDITIONS AND STIPULATIONS, CHICAGO TITLE INSURANCE COMPANY, a Missouri
corporation, herein called the Company, insures, as of Date of Policy shown in
Schedule A, against loss or damage, not exceeding the Amount of Insurance
stated in Schedule A, sustained or incurred by the insured by reason of:


 


1.               Title to the estate or interest described in
Schedule A being vested other than as stated therein;


2.               Any defect in or lien or encumbrance on the
title;


3.               Unmarketability of the title;


4.               Lack of a right of access to and from the
land;


5.               The invalidity or unenforceability of the
lien of the insured mortgage upon the title;


6.               The priority of any lien or encumbrance over
the lien of the insured mortgage;


7.               Lack of priority of the lien of the insured
mortgage over any statutory lien for services, labor or material:


(a)          arising from an improvement or work related
to the land which is contracted for or commenced prior to Date of Policy; or


(b)         arising from an improvement or work related
to the land which is contracted for or commenced subsequent to Date of Policy
and which is financed in whole or in part by proceeds of the indebtedness secured by the insured mortgage which at
Date of Policy the insured has advanced or is obligated to advance;


8.               The invalidity or unenforceability of any
assignment of the insured mortgage, provided the assignment is shown in
Schedule A, or the failure of the assignment shown in Schedule A to
vest title to the insured mortgage in the named insured assignee free and clear
of all liens.


 


The
Company will also pay the costs, attorneys’ fees and expenses incurred in
defense of the title or the lien of the insured mortgage, as insured, but only
to the extent provided in the Conditions and Stipulations.


 


In Witness Whereof, CHICAGO TITLE INSURANCE COMPANY has caused this policy to be signed and
sealed as of Date of Policy shown in Schedule A, the policy to become
valid when countersigned by an authorized signatory.


 


 


	
  Issued by:

  	
  CHICAGO TITLE
  INSURANCE COMPANY

  
	
  TITLE ASSOCIATES INC.

  	
   

  	
   

  
	
  430 PARK AVENUE, 17TH
  FLOOR

  	
  By:

  	
   

  
	
  NEW YORK, NY 10022

  	
   

  	
  /s/

  
	
  (212) 758-0050

  	
   

  	
  President

  
	
  (212) 758-3998

  	
   

  	
   

  
	
  (212) 758-8223
  TELECOPIER

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  /s/ Thomas J. Adams

  
	
   

  	
   

  	
  Secretary

  
					



 


ALTA Loan Policy (10-17-92)


 





















 


(c)   Amount of Insurance. 
The amount of insurance after the acquisition or after the conveyance
shall in neither event exceed the least of:


 


(i)    the Amount of
Insurance stated in Schedule A.


 


(ii)   the amount
of the principal of the indebtedness secured by the insured mortgage as of Date
of Policy, interest thereon, expenses of foreclosure, amounts advanced pursuant
to the insured mortgage to assure compliance with laws or to protect the lien
of the insured mortgage prior to the time of acquisition of the estate or
interest in the land and secured thereby and reasonable amounts expended to
prevent deterioration of improvements, but reduced by the amount of all
payments made; or


 


(iii)  the amount
paid by any governmental agency or governmental instrumentality, if the agency
or instrumentality is the insured claimant, in the acquisition of the estate or
interest in satisfaction of its insurance contract or guaranty


 


3.     NOTICE
OF CLAIM TO BE GIVEN BY INSURED CLAIMANT


 


The insured shall notify
the Company promptly in writing (i) in case of any litigation as set forth
in Section 4(a) below, (ii) in case knowledge shall come to an
insured hereunder of any claim of title or interest which is adverse to the
title to the estate or interest or the lien of the insured mortgage, as
insured, and which might cause loss or damage for which the Company may be
liable by virtue of this policy, or (iii) if title to the estate or
interest or the lien of the insured mortgage, as insured, is rejected as
unmarketable.  If prompt notice shall not be given to the Company, then as
to the insured all liability of the Company shall terminate with regard to the
matter or matters for which prompt notice is required; provided, however, that
failure to notify the Company shall in no case prejudice the rights of any
insured under this policy unless the Company shall be prejudiced by the failure
and then only to the extent of the prejudice.


 


4.              DEFENSE
AND PROSECUTION OF ACTIONS: DUTY OF INSURED CLAIMANT TO COOPERATE


 


(a)   Upon
written request by the insured and subject to the options contained in
Section 6 of these Conditions and Stipulations, the Company, at its own
cost and without unreasonable delay, shall provide for the defense of an
insured in litigation in which any third party asserts a claim adverse to the
title or interest as insured, but only as to those stated causes of action
alleging a defect, lien or encumbrance or other matter insured against by this
policy.  The Company shall have the right to select counsel of its choice
(subject to the right of the insured to object for reasonable cause) to
represent the insured as to those stated causes of action and shall not be
liable for and will not pay the fees of any other counsel.  The Company
will not pay any fees, costs or expenses incurred by the insured in the defense
of those causes of action which allege matters not insured against by this
policy.


 


(b)   The
Company shall have the right, at its own cost, to institute and prosecute any
action or proceeding or to do any other act which in its opinion may be
necessary or desirable to establish the title to the estate or interest or the
lien of the insured mortgage, as insured, or to prevent or reduce loss or
damage to the insured.  The Company may
take any appropriate action under the terms of this policy, whether or not it
shall be liable hereunder, and shall not thereby concede liability or waive any
provision of this policy.  If the Company
shall exercise its rights under this paragraph, it shall do so diligently.


 


(c)   Whenever
the Company shall have brought an action or interposed a defense as required or
permitted by the provisions of this policy, the Company may pursue any
litigation to final determination by a court of competent jurisdiction and
expressly reserves the right, in its sole discretion, to appeal from any adverse
judgment or order.


 


(d)   In
all cases where this policy permits or requires the Company to prosecute or
provide for the defense of any action or proceeding, the insured shall secure
to the Company the right to so prosecute or provide defense in the action or
proceeding, and all appeals therein, and permit the Company to use, at its
option, the name of the insured for this purpose.  Whenever requested by
the Company, the insured, at the Company’s expense, shall give the Company all
reasonable aid (i) in any action or proceeding, securing evidence,
obtaining witnesses, prosecuting or defending the action or proceeding, or
effecting settlement, and (ii) in any other lawful act which in the
opinion of the Company may be necessary or desirable to establish the title to
the estate or interest or the lien of the insured mortgage, as insured. 
If the Company is prejudiced by the failure of the insured to furnish the
required cooperation, the Company’s obligations to the insured under the policy
shall terminate, including any liability or obligation to defend, prosecute, or
continue any litigation, with regard to the matter or matters requiring such
cooperation.


 


5.     PROOF
OF LOSS OR DAMAGE


 


In addition to and after
the notices required under Section 3 of these Conditions and Stipulations
have been provided the Company, a proof of loss or damage signed and sworn to
by the insured claimant shall be furnished to the Company within 90 days after
the insured claimant shall ascertain the facts giving rise to the loss or damage. 
The proof of loss or damage shall describe the defect in, or lien or
encumbrance on the title, or other matter insured against by this policy which
constitutes the basis of loss or damage and shall state, to the extent
possible, the basis of calculating the amount of the loss or damage.  If
the Company is prejudiced by the failure of the insured claimant to provide the
required proof of loss or damage, the Company’s obligations to the insured
under the policy shall terminate, including any liability or obligation to
defend, prosecute, or continue any litigation, with regard to the matter or
matters requiring such proof of loss or damage.


 


In addition, the insured
claimant may reasonably be required to submit to examination under oath by any
authorized representative of the Company and shall produce for examination,
inspection and copying, at such reasonable times and places as may be
designated by any authorized representative of the Company, all records, books,
ledgers, checks, correspondence and memoranda, whether bearing a date before or
after Date of Policy, which reasonably pertain to the loss or damage. 
Further, if requested by any authorized representative of the Company, the
insured claimant shall grant its permission, in writing, for any authorized
representative of the Company to examine, inspect and copy all records, books,
ledgers, checks, correspondence and memoranda in the custody or control of a
third party, which reasonably pertain to the loss or damage.  All information designated as confidential by
the insured claimant provided to the Company pursuant to this
Section shall not be disclosed to others unless, in the reasonable
judgment of the Company, it is necessary in the administration of the
claim.  Failure of the insured claimant
to submit for examination under oath, produce other reasonably requested
information or grant permission to secure reasonably necessary information from
third parties as required in this paragraph, unless prohibited by law or
governmental regulation, shall terminate any liability of the Company under
this policy as to that claim.


 


6.              OPTIONS
TO PAY OR OTHERWISE SETTLE CLAIMS; TERMINATION OF LIABILITY


 


In case of a claim under
this policy, the Company shall have the following additional options:


 


(a)   To
Pay or Tender Payment of the Amount of Insurance or to Purchase the
Indebtedness.


 


(i) to pay or tender
payment of the amount of insurance under this policy together with any costs,
attorneys’ fees and expenses incurred by the insured claimant, which were
authorized by the Company, up to the time of payment or tender of payment and
which the Company is obligated to pay; or


 


(ii) to purchase the
indebtedness secured by the insured mortgage for the amount owing thereon
together with any costs, attorneys’ fees and expenses incurred by the insured
claimant which were authorized by the Company up to the time of purchase and
which the Company is obligated to pay.


 


If the Company offers to
purchase the indebtedness as herein provided, the owner of the indebtedness
shall transfer, assign, and convey the indebtedness and the insured mortgage,
together with any collateral security, to the Company upon payment therefor.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs a(i) or (ii),
all liability and obligations to the insured under this policy, other than to
make the payment required in those paragraphs, shall terminate, including any
liability or obligation to defend, prosecute, or continue any litigation and
the policy shall be surrendered to the Company for cancellation.


 


(b)   To
Pay or Otherwise Settle With Parties Other than the Insured or With the Insured
Claimant.


 


(i) to pay or otherwise
settle with other parties for or in the name of an insured claimant any claim
insured against under this policy, together with any costs, attorneys’ fees and
expenses incurred by the insured claimant which were authorized by the Company
up to the time of payment and which the Company is obligated to pay; or


 


(ii) to pay or otherwise
settle with the insured claimant the loss or damage provided for under this
policy, together with any costs, attorneys’ fees and expenses incurred by the
insured claimant which were authorized by the Company up to the time of payment
and which the Company is obligated to pay.


 


Upon the exercise by the
Company of either of the options provided for in paragraphs (b)(i) or
(ii), the Company’s obligations to the insured under this policy for the
claimed loss or damage, other than the payments required to be made, shall
terminate, including any liability or obligation to defend, prosecute or
continue any litigation.


 


7.     DETERMINATION
AND EXTENT OF LIABILITY


 


This policy is a contract
of indemnity against actual monetary loss or damage sustained or incurred by
the insured claimant who has suffered loss or damage by reason of matters
insured against by this policy and only to the extent herein described.


 


(a)   The
liability of the Company under this policy shall not exceed the least of:


 


(i) the Amount of
Insurance stated in Schedule A, or, if applicable, the amount of insurance
as defined in Section 2 (c) of these Conditions and Stipulations;


 


(ii) the amount of the
unpaid principal indebtedness secured by the insured mortgage as limited or
provided under Section 8 of these Conditions and Stipulations or as
reduced under Section 9 of these Conditions and Stipulations, at the time
the loss or damage insured against by this policy occurs, together with
interest thereon or


 





















 


SCHEDULE A


 


	
   

  	
  Amount Of

  
	
  Office File Number 

  	
    Policy Number 

  	
  Date Of Policy 

  	
   

  	
  Insurance

  
	
   

  	
   

  	
   

  	
   

  
	
  9901 105 00621

  	
  33 0105 107 00003551

  	
   

  	
   , 1999

  	
   

  	
  $21,819,600

  
						



 


	
  1.

  	
  Name of Insured:

  	
  Corus Bank, N.A., as
  agent for itself and one or more co-lenders, its successors and/or 

  
	
   

  	
   

  	
  assigns

  
	
   

  	
   

  	
   

  
	
  2.

  	
  The estate or interest in the land which is
  encumbered by the insured mortgage is:

  
	
   

  	
   

  
	
   

  	
  Fee Simple as to Parcels I and III.

  
	
   

  	
   

  
	
   

  	
  Leasehold as to Parcels III and IV pursuant to
  Leases described in Exception 4 and 5, respectively, which leases are valid
  and subsisting leases for the unexpired terms thereof.

  
	
   

  	
   

  
	
  3.

  	
  The fee simple title to said land is at the date
  hereof vested in: 

  
	
   

  	
   

  
	
   

  	
  Henry Hudson Holdings LLC, a Delaware limited
  liability company

  
	
   

  	
   

  
	
  4.

  	
  The mortgage or deed of trust and assignments, if
  any, covered by this Policy are described as follows:

  
	
   

  	
   

  
	
   

  	
  Building Loan Mortgage in the amount of $54,549,000
  pursuant to that certain Consolidated, Amended, Restated Hard Cost Mortgage,
  Security Agreement and Assignment of Leases and Rents made by and between
  Henry Hudson Holdings LLC and Corus Bank, N.A., dated as
  of                           ,
  1999, to be recorded in the New York County Register’s Office subject to the
  terms, conditions and provisions contained therein, which consolidates the
  Mortgages set forth on Schedule C herein.

  
	
   

  	
   

  
	
  5.

  	
  The land referred to in this Policy is described on
  the description sheet annexed.

  
	
   

  	
   

  
	
   

  	
  See Schedule A annexed hereto and made a part
  hereof.

  



 


 


	
  Countersigned

  
	
   

  
	
   

  	
   

  
	
  Authorized
  Signature

  	
   

  
	
   

  
	
  This Policy
  valid only if Schedule B is attached.

  
	
   

  
	
  Schedule A

  	
   

  
	
  Loan Form

  	
   

  	
  NOTE:   Attached
  hereto 

  	
  added pages

  
					



 


















 


(Schedule B
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003551
  (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


(k)                                  Metal
flue pipe from chimney of 5-story brick building on premises adjacent on the
west enters the westerly wall and connects to the chimney of the Building on
the Land; and


 


(l)                                     Independent
wall of 1-story brick building on premises adjacent on the west encroaches up
to 1 inch onto the westerly portion of the Land.


 


As to the Units, policy excepts any state of facts which an accurate
survey and inspection of the Units would show. 
However, policy insures that any encroachments by the Units upon
adjoining condominium units or upon the Common Elements may remain undisturbed
so long as same may stand.


 


2.                                       Terms,
covenants, conditions, restrictions, regulations, rights and easements set
forth in Declaration of Condominium and By-Laws of 353 West 57th Street
Condominium, dated April 11, 1985, recorded April 24, 1985 in Reel
902 page 1, as amended by First Amendment to Declaration dated
January 29, 1993, recorded May 11, 1993 in Reel 1969 page 2286,
by Amended and Restated Declaration made by Henry Hudson Holdings LLC, Irving
Schatz, Adrienne Wechsler and Cheryl Hirsch dated as of February 12, 1999,
recorded on July 16, 1999 in Reel 2913 page 1753 and by First Amendment
to Amended and Restated Declaration, made by Henry Hudson Holdings LLC, Irving
Schatz, Adrienne Wechsler and Cheryl Hirsch dated September 30, 1999, to
be recorded in the New York County Register’s Office but Policy insures against
loss or damage occasioned by the premises not being part of a condominium
validly created pursuant to Article 9-B of the Real Property Law.


 


3.                                       Restrictive
covenants against nuisances repeated in the following Deeds:


 


(a)                                  Deed
of parts of Old Lots, 2, 3 61, 611/2, 62 and 64 and all
of Old Lots 31/2 and 4 recorded in Liber 656 cp 133.


 


(b)                                 Deed
of Old Lots 2, 3, 31/2, 4 and 64 recorded in Liber 658 cp
127.


 


(c)                                  Deeds
of Old Lots 5, 6, 7, 58 and 60 recorded in Liber 657 cp 80 and Liber 1643 cp
385.


 


(d)                                 Deeds
of Old Lot 5 and the westerly portion of Old Lot 60 recorded in Liber 999 cp
239, Liber 1006 cp 40 and Liber 1613 cp 85.


 


(e)                                  Deed
of Old Lot 6, the westerly portion of Old Lot 58
and the easterly portion of Old Lot 60 recorded in Liber 1006 cp 45.


 


(f)                                    Deed
of Old Lot 6 recorded in Liber 1037 cp 165.


 


(g)                                 Deed
of Old Lots 6 and 7 recorded in Liber 1069 cp 123.


 


(h)                                 Deed
of Old Lots 6, 7, 58 and the easterly portion of Old Lot 60 recorded in Liber
1609 cp 160.


 


(i)                                     Deed
of Old Lot 7 and the easterly portion of Old Lot 58 recorded in Liber 1006 cp
43.


 


(j)                                     Deed
of Old Lot 7 recorded in Liber 1031 cp 428.


 





















(Schedule B
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003551
  (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


6.                                       This
Policy is issued contemporaneously with Policy No. LT990219 of Lawyers
Title Insurance Corporation in the amount of $21,819,600 and No. 5412-1370742
of Fidelity National Title Insurance Company of New York by National Land
Tenure Company, LLC, its Agent in the amount of $10,909,800.  At the time liability for any loss shall have
been fixed pursuant to the conditions of this Policy, this Company shall not be
liable to the insured for a greater portion of the loss than the amount that
this Policy bears to the whole amount of insurance held by the insured as
aforesaid.


 


7.                                       Pending
disbursement of the full proceeds of the loan secured by the insured mortgage,
the amount insured under the Policy equals only the amount actually disbursed
but increases as each disbursement is made in good faith and without knowledge
of any defect in or objections to title up to the face amount of the
Policy.  At the time of each disbursement
of the proceeds of the loan, title must be continued down to such time for
possible liens or objections intervening between the date hereof and the date of
such disbursement.


 


If the Company is
supplied with an updated survey or if an inspection is performed, where
applicable, each report of continuation requested in connection with insurance
of future advances will include a statement showing survey variations or
encroachments, if any, since the date of the preceding report. However, if no
updated survey or inspection is supplied or performed, then Policy will except
any changes since the date of the last survey or inspection.


 


8.                                       Policy
affirmatively insures against any monetary loss or damage incurred by reason of
the subsequent imposition of mortgage recording tax upon the mortgage insured
herein.


 


SCHEDULE B


Loan Form


 





















(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003551
  (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


THENCE southerly
parallel with Ninth Avenue and part of the distance through a party wall, 100
feet 10 inches;


 


THENCE westerly
parallel more or less with 58th Street, 20 feet; and


 


THENCE southerly
and part of the way through another party wall, 100 feet to the northerly side
of 57th Street, the point or place of BEGINNING.


 


PARCEL II


UNIT
LOT 1702


 


The condominium unit (hereinafter referred to as “Unit
Lot 1702”) known as Unit 2, also known as Modified Hotel Unit, in the building
(hereinafter referred to as the “Building”) known as 353 West 57th Street
Condominium and by the street number 353 West 57th Street, New York, New York,
said Unit being designated and described in a certain declaration dated
April 11, 1985 made by Irving Schatz pursuant to Article 9-B of the
Real Property Law of the State of New York establishing a plan for condominium
ownership of the Building and the land (hereinafter referred to as the “Land”)
upon which the Building is situate (which Land is more particularly described
below), which declaration was recorded in the New York County Office of the
Register of The City of New York (the “City Register’s Office”) on
April 24, 1985 in Reel 902 page 1 and amended by First Amendment to
Declaration dated January 29, 1993 and recorded May 11, 1993 in Reel
1969 page 2286, by Amended and Restated Declaration made by Henry Hudson
Holdings LLC, Irving Schatz, Adrienne Wechsler and Cheryl Hirsch dated as of
February 12, 1999, recorded on July 16, 1999 in Reel 2913
page 1753 and by First Amendment to Amended and Restated Declaration made
by Henry Hudson Holdings LLC, Irving Schatz, Adrienne Wechsler and Cheryl
Hirsch dated September 30, 1999 to be recorded in the New York County
Register’s Office (which declaration, as amended, is hereinafter referred to as
the “Declaration”).  Unit Lot 1702 is
also designated as Tax Lot 1702 in Block 1048 of Section 4 of the Borough
of Manhattan on the Tax Map of the Real Property Assessment Department of the
City of New York and on the Floor Plans of the Building, certified by Butler
Rogers Baskett, Architects, on March 27, 1985 and filed in the Real
Property Assessment Department of the City of New York on April 22, 1985
as Condominium Plan No. 208 and also filed in the City Register’s Office
on April 24, 1985 as Condominium Map No. 4326, as amended by Amended
Floor Plans certified by Butler Rogers Baskett, Architects, on
December 14, 1992, which Amended Floor Plans were filed in the Real
Property Assessment Department of the City of New York on May 5, 1993 as
Condominium Plan No. 208A and also filed in the City Register’s Office on
May 11, 1993 as Condominium Map No. 5192.


 


TOGETHER WITH an undivided 46.94011% interest in the
Common Elements (as such term is defined in the Declaration).


 


The Land upon which the Building containing Unit Lot
1702 is situate is bounded and described as follows:


 


ALL that certain plot, piece or parcel of land,
situate, lying and being in the Borough of Manhattan, County of New York, City
and State of New York, bounded and described as follows:


 


BEGINNING at a point on the northerly side of 57th
Street, distant 20 feet easterly from the corner formed by the
intersection of the easterly side of Ninth Avenue with the northerly side
of 57th Street;


 





















 


(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003551
  (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


TOGETHER WITH an undivided 0.34577% interest in the
Common Elements (as such term is defined in the Declaration).


 


The Land upon which the Building containing Unit Lot
1704 is situate is bounded and described as follows:


 


ALL that certain plot, piece
or parcel of land, situate, lying and being in the Borough of Manhattan, County
of New York, City and State of New York, bounded and described as follows:


 


BEGINNING at a point on the northerly side of 57th
Street, distant 20 feet easterly from the corner formed by the
intersection of the easterly side of Ninth Avenue with the northerly side
of 57th Street;


 


RUNNING THENCE easterly along the said northerly side
of 57th Street, 155 feet;


 


THENCE northerly parallel with Ninth Avenue, 200 feet
10 inches to the southerly side of 58th Street;


 


THENCE westerly along the
said southerly side of 58th Street, 135 feet to a point distant 40 feet
easterly from the corner formed by the intersection of the southerly side
of 58th Street with the easterly side of Ninth Avenue;


 


THENCE southerly parallel with Ninth Avenue and part
of the distance through a party wall, 100 feet 10 inches;


 


THENCE westerly parallel more or less with 58th
Street, 20 feet; and


 


THENCE southerly and part of the way through another
party wall, 100 feet to the northerly side of 57th Street, the point or place
of BEGINNING.


 





















(Schedule A
Continued)


 


	
  Policy Number:

  	
  33 0105 107 00003551
  (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


THENCE westerly along the said southerly side of 58th
Street, 135 feet to a point distant 40 feet easterly from the corner formed by
the intersection of the southerly side of 58th Street with the easterly
side of Ninth Avenue;


 


THENCE southerly parallel with Ninth Avenue and part
of the distance through a party wall, 100 feet 10 inches;


 


THENCE westerly parallel more or less with 58th
Street, 20 feet; and


 


THENCE southerly and part of the way through another
party wall, 100 feet to the northerly side of 57th Street, the point or place
of BEGINNING.


 


(Unit Lots 1701, 1702, 1704 and 1706 are collectively
referred to as the “Units”.)


 


AS TO PARCELS
I, II, III AND IV


 


TOGETHER WITH the benefit of that certain easement for
light and air and restriction not to erect any building more than five stories
in height (the “Easement”) burdening the premises adjacent to the insured
premises on the west (the “Burdened Premises”) described on the current tax map
of the City of New York as Block 1048 Lot 63 and more particularly described on
the annexed Schedule A-1 which Easement was created and reserved in Deed
made by American Woman’s Realty Corporation to Rayon Holding Corporation, dated
December 15, 1926, recorded December 165, 1926 in Liber 3569 cp 439
for the benefit of the premises insured herein. 
Policy affirmatively insures that the Easement is not presently
violated, that said Easement restricts the height of any building on the
Burdened Premises to the lesser of five stories or sixty-three feet, and that
said restriction specifically benefits the insured premises and may be enforced
by any owner thereof including any mortgagee as successor owner.


 





















 


SCHEDULE C


 


	
  Policy Number:

  	
  33 0105 107 00003551 (Loan)

  
	
  Title Number:

  	
  9901 105 00621

  



 


1.             Split mortgage made by Henry Hudson
Holdings LLC to Northstar Hospitality LLC, dated           ,
1999, to be recorded in the New York County Register’s Office in the amount of $4,457,906.73.


 


(a)           Assignment
of Mortgage made by Northstar Hospitality, LLC to Corus Bank, N.A., dated            ,
1999, to be recorded in the New York County Register’s Office.


 


2.             Hard
Cost Mortgage made by Henry Hudson Holdings LLC to Corus Bank, N.A., dated               , 1999, to be recorded in the New York County
Register’s Office in the amount of $50,092,093.27.


 


3.             The
aforesaid mortgages are combined with and by that certain Consolidated, Amended,
Restated Hard Cost Mortgage, Security Agreement and Assignment of Leases and
Rents made by and between Henry Hudson Holdings LLC and Corus Bank, N.A., dated as of                ,
1999, to be recorded in the New York County Register’s Office to form a
single consolidated lien in the amount of $54,549,000.


 





















 


CHICAGO TITLE INSURANCE
COMPANY


 


LEASEHOLD ENDORSEMENT


 


(LOAN POLICY)


 


Attached to and made a part of Policy Number 33 0105
107 00003551


 


The Conditions and
Stipulations of said policy are
hereby amended in the following particulars:


 


Section 1 of said
Conditions and Stipulations is hereby amended by adding subparagraph
(h) thereto to read as follows:


 


(h)           “leasehold estate”: the right of possession
for the term or terms described in Schedule A hereof subject to any
provisions contained in the Lease which
limit the right of possession.


 


Sections 13, 14, 15 and 16 of said Conditions and
Stipulations are hereby renumbered 15, 16, 17 and 18 respectively and the
following new Sections 13 and 14 are inserted into said Conditions and
Stipulations:


 


13.   VALUATION OF ESTATE OR INTEREST INSURED


If,
in computing loss or damage incurred by the insured, it becomes necessary to
determine the value of the estate or interest insured by this policy, the value
shall consist of the then present worth of the excess, if any, of the fair
market rental value of the estate or interest, undiminished by any matters for
which claim is made, for that part of the term stated in Schedule A then
remaining plus any renewal or extended term for which a valid option to renew
or extend is contained in the Lease, over
the value of the rent and other consideration required to be paid under the
Lease for the same period.


 


14.   MISCELLANEOUS ITEMS OF LOSS


In
the event the insured acquires all or any part of the estate or interest in the
land described in the applicable Schedule in accordance with the
provisions of Section 2(a) of these Conditions and stipulations and
thereafter is evicted from possession of all or a part of the land by reason of
any matters insured against by this policy, the following, if applicable, shall
be included in computing loss or damage incurred by the insured, but not to the
extent that the same are included in the valuation of the estate or interest
insured by this policy.


 


(a)           The reasonable cost of removing and
relocating any personal property which the insured has the right to remove and
relocate, situated on the land at the time of eviction, the cost of
transportation of that personal property, for the initial twenty-five miles
incurred in connection with the relocation, and the reasonable cost of
repairing the personal property damaged by reason of the removal and relocation.  The costs referred to above shall not exceed
in the aggregate the value of the personal property prior to its removal and
relocation.  “Personal property”, above
referred to, shall mean chattels and property which because of its character
and manner of affixation to the land, can be severed therefrom without causing
appreciable damage to the property severed or to the land to which the property
is affixed.


 


(b)           Rent or damages for use and occupancy of the
land prior to the eviction which the insured as owner of the leasehold estate
may be obligated to pay to any person having paramount title to that of the
lessor in the Lease.


 


(c)           The amount of rent which, by the terms of the
Lease, the insured must continue to pay to the lessor after eviction, for the
land or part thereof from which the insured has been evicted.


 


(d)           The fair market value, at the time of the
eviction, of the estate or interest of the insured in any sublease of all or
part of the land existing at the date of the eviction.


 


(e)           Damages which the insured may be obligated to
pay to any sublessee on account of the breach of any sublease of all or part of
the land caused by the eviction.


 


This endorsement is made a
part of the policy and is subject to all of the terms and provisions thereof and
of any prior endorsements thereto. Except to the extent expressly stated, it
neither modifies any of the terms and provisions of the policy and any prior
endorsements, nor does it extend the effective date of the policy and any prior
endorsements, nor does it increase the amount of insurance.


 


	
  DATED:                    ,
  1999

  	
  CHICAGO TITLE INSURANCE COMPANY

  
	
   

  	
  By:   Title
  Associates Inc., As Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Joseph DeCiutiis, Esq.

  



 


 


TIRSA LEASEHOLD ENDORSEMENT LOAN POLICY (8/1/93).


FOR USE WITH ALTA LOAN POLICY ONLY


 





















 


	
   

  	
  ENDORSEMENT

  	
  OWNERS

  	
  o

  
	
   

  	
   

  	
  LOAN

  	
  o

  
	
   

  	
  Attached to and
  forming a part of

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Policy No. 33 0105 107
  00003551

  	
   

  



 


Issued by


CHICAGO TITLE
INSURANCE COMPANY


 


TAX LOT


ENDORSEMENT


 


The Company hereby insures the Insured against loss or
damage which the insured shall sustain by reason of any inaccuracy in the
following assurance:


 


That the Premises described in Schedule A is
assessed and taxed in such a way as no other realty is assessed and taxed along
with said Premises.


 


This endorsement is made a
part of the policy or commitment and is subject to all the terms and provisions
thereof and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy or commitment and prior endorsements, if
any, nor does it extend the effective date of the policy or commitment and
prior endorsements or increase the face amount thereof.


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated: 

  	
                ,
  1999

  	
   

  	
   

  	
  By:  

  	
  /s/

  
	
    CHICAGO TITLE INSURANCE COMPANY

  	
   

  	
   

  	
   

  	
  President

  
	
    BY:    TITLE
  ASSOCIATES INC., AS AGENT

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
  By: 

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  



 





















 


ENDORSEMENT


 


Attached to and forming
a part of


 


Policy No. 330105 107
00003551


 


Issued by


CHICAGO TITLE
INSURANCE COMPANY


 


CONDOMINIUM
ENDORSEMENT


 


- NEW YORK -


 


Attached to and made a part of Policy Number 330105 107 00003551


 


The Company insures the insured against loss or damage sustained by
reason of:


 


1.       The
failure of the unit identified in Schedule A and its common elements to be
part of a condominium within the meaning of the condominium statutes of the
State of New York.


 


2.       The
failure of the documents required by the condominium statutes to comply with
the requirements of the statutes to the extent that such failure affects the
title to the unit and its common elements.


 


3.       Present
violations of any restrictive covenants which restrict the use of the unit and
its common elements and which are created by the condominium documents, except
violations relating to environmental protection unless a notice of a violation
thereof has been recorded or filed in the public record and is not excepted
Schedule B.  The restrictive
covenants do not contain any provisions which will cause a forfeiture or
reversion of title.


 


4.       The
priority of any lien for charges and assessments at Date of Policy provided for
in the condominium statutes and condominium documents over the lien of any
insured first mortgage identified in Schedule A.


 


5.       The
failure of the unit and its common elements to be entitled by law to be
assessed for real property taxes as a separate parcel.


 


6.       Any
obligation to remove any improvements which exist at Date of Policy because of
any present encroachments or because of any future unintentional encroachments
of the common elements upon any unit or of any unit upon the common elements or
another unit.


 


7.       The
failure of title by reason of a right of first refusal to purchase the unit and
its common elements which was exercised or could have been exercised at Date of
Policy.


 


This endorsement is made a part of the policy and is
subject to all the terms and provisions thereof and of any prior endorsements
thereto.  Except to the extent expressly
stated, it neither modifies any of the terms and provisions of the policy and
any prior endorsements, nor does it extend the effective date of the policy and
any prior endorsements, nor does it increase the face amount of insurance.


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATED: 

  	
  August      , 1999

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  /s/

  
	
   

  	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  	
  President

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
  By:

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
   

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory

  	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
  TIRSA ENDORSEMENT CONDOMINIUM (8:1:93)

  Reorder Form No. 8064

  	
   

  	
   

  	
   

  
									



 





















 


INSIDE NEW YORK
CITY


 


ENDORSEMENT


 


Attached to Policy
No. 33 0105 107 00003551


 


Issued by


CHICAGO TITLE INSURANCE COMPANY


 


The insurance afforded by this endorsement is only
effective if the land is used or is to be used primarily for residential
purposes.


 


The Company insures the
insured against loss or damage sustained by reason of lack of priority of the
lien of the insurance mortgage over:


 


(a)   any
environmental protection lien which, at Date of Policy, is recorded in those
records established under state statutes at Date of Policy for the purpose of
imparting constructive notice of matters relating to real property to
purchasers for value and without knowledge, or filed in the records of the
clerk of the United States district court for the district in which the land is
located, except as set forth in Schedule B; or


 


(b)   any
environmental protection lien provided for by any state statute in effect at
Date of Policy, except environmental protection liens provided for by the
following state statutes:


 


Administrative Code of
the City of New York, Section 17-151.


 


This endorsement
is made a part of the policy and is subject to all of the terms and provisions
thereof and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy and any prior endorsements, nor does it
extend the effective date of the policy and any prior endorsements, nor does it
increase the face amount thereof.


 


 


(Witness clause optional)


 


	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/

  
	
   

  	
   

  	
   

  	
   

  	
  President

  
	
   

  	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
  By:

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary

  



 


F.10980





















 


	
   

  	
  ENDORSEMENT

  	
  OWNERS

  	
  o

  
	
   

  	
   

  	
  LOAN

  	
  o

  
	
   

  	
  Attached to and
  forming a part of

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Policy No. 33 0105 107
  00003551

  	
   

  	
   

  
					



 


Issued by


CHICAGO TITLE INSURANCE COMPANY


 


The total amount advanced and insured through the date of                     pursuant
to that captioned Policy is $                 .  This Policy is issued contemporaneously with
Policy No. LT990219 of Lawyers Title Insurance Corporation insuring advances
through said date in the amount of $                              and
Policy No. 5412-1370742 of Fidelity National Title Insurance Company of New
York by National Land Tenure Company, LLC, its Agent, insuring for any loss
shall have been fixed pursuant to the conditions of this Policy, this Company
shall not be liable to the insured for a greater portion of the loss than the
amount the this Policy bears to the whole amount of insurance held by the
insured as aforesaid.


 


This endorsement is made a
part of the policy or commitment and is subject to all the terms and provisions
thereof and of any prior endorsements thereto. 
Except to the extent expressly stated, it neither modifies any of the
terms and provisions of the policy or commitment and prior endorsements, if
any, nor does it extend the effective date of the policy or commitment and
prior endorsements or increase the face amount thereof.


 


	
   

  	
   

  	
   

  	
   

  	
  CHICAGO TITLE INSURANCE
  COMPANY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATED: 

  	
                        ,
  1999

  	
   

  	
   

  	
  By:

  	
  /s/

  
	
    CHICAGO TITLE INSURANCE COMPANY

  	
   

  	
   

  	
   

  	
  President

  
	
    BY:    TITLE
  ASSOCIATES INC., AS AGENT

  	
  [SEAL]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  	
   

  
	
  Joseph
  DeCiutiis, Esq.

  	
   

  	
   

  
	
  Note:
  This endorsement shall not be valid or binding

  	
  By:

  	
  /s/ Thomas J. Adams

  
	
  until
  countersigned by an authorized signatory.

  	
   

  	
   

  	
  Secretary