Document:

Exhibit
10.38

 

 

 

AMENDED AND RESTATED LOAN AGREEMENT

 

Dated as of October 20, 2010

 

Between

 

KAUAI COCONUT BEACH, LLC

as Borrower

 

And

 

WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE MORGAN STANLEY 

CAPITAL I INC. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES 

SERIES 2006-XLF 

as Lender

 

 

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
  1.

  	
  DEFINITIONS; PRINCIPLES OF CONSTRUCTION

  	
  1

  
	
   

  	
  1.1

  	
  Specific Definitions

  	
  1

  
	
   

  	
  1.2

  	
  Index of Other Definitions

  	
  14

  
	
   

  	
  1.3

  	
  Principles of Construction

  	
  16

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  GENERAL LOAN TERMS

  	
  17

  
	
   

  	
  2.1

  	
  The Loan

  	
  17

  
	
   

  	
  2.2

  	
  Interest; Monthly Payments

  	
  17

  
	
   

  	
   

  	
  2.2.1

  	
  Generally

  	
  17

  
	
   

  	
   

  	
  2.2.2

  	
  Default Rate

  	
  17

  
	
   

  	
   

  	
  2.2.3

  	
  Taxes

  	
  17

  
	
   

  	
   

  	
  2.2.4

  	
  Breakage Indemnity

  	
  17

  
	
   

  	
   

  	
  2.2.5

  	
  Intentionally Omitted

  	
  18

  
	
   

  	
  2.3

  	
  Loan Repayment

  	
  18

  
	
   

  	
   

  	
  2.3.1

  	
  Repayment

  	
  18

  
	
   

  	
   

  	
  2.3.2

  	
  Mandatory Prepayments: Casualty/Condemnation Prepayment

  	
  18

  
	
   

  	
   

  	
  2.3.3

  	
  Optional Prepayments

  	
  18

  
	
   

  	
  2.4

  	
  Release of Property

  	
  18

  
	
   

  	
  2.5

  	
  Payments and Computations

  	
  18

  
	
   

  	
   

  	
  2.5.1

  	
  Making of Payments

  	
  18

  
	
   

  	
   

  	
  2.5.2

  	
  Computations

  	
  19

  
	
   

  	
   

  	
  2.5.3

  	
  Late Payment Charge

  	
  19

  
	
   

  	
  2.6

  	
  Interest Rate Protection Agreements

  	
  19

  
	
   

  	
   

  	
  2.6.1

  	
  Interest Rate Protection Agreement

  	
  19

  
	
   

  	
   

  	
  2.6.2

  	
  Execution of Documents

  	
  21

  
	
   

  	
   

  	
  2.6.3

  	
  No Obligation of Lender

  	
  21

  
	
   

  	
   

  	
  2.6.4

  	
  Receipts from Interest Rate Protection Agreements

  	
  21

  
	
   

  	
  2.7

  	
  Intentionally Omitted

  	
  21

  
	
   

  	
  2.8

  	
  Extension Options

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  CASH MANAGEMENT AND RESERVES

  	
  22

  
	
   

  	
  3.1

  	
  Cash Management Arrangements

  	
  22

  
	
   

  	
  3.2

  	
  Intentionally Omitted

  	
  23

  
	
   

  	
  3.3

  	
  Taxes and Insurance

  	
  23

  
	
   

  	
  3.4

  	
  FF&E and Capital Expense Reserves

  	
  24

  
	
   

  	
   

  	
  3.4.1

  	
  FF&E Reserve

  	
  24

  
	
   

  	
   

  	
  3.4.2

  	
  Capital Expense Reserve

  	
  24

  
	
   

  	
  3.5

  	
  Intentionally Omitted

  	
  25

  
	
   

  	
  3.6

  	
  Operating Expenses and Carry Subaccounts

  	
  25

  
	
   

  	
   

  	
  3.6.1

  	
  Operating Expense Subaccount

  	
  25

  
	
   

  	
   

  	
  3.6.2

  	
  Carry Subaccount

  	
  26

  
	
   

  	
  3.7

  	
  Intentionally Omitted

  	
  26

  
	
   

  	
  3.8

  	
  Casualty/Condemnation Subaccount

  	
  26

  

 

i

 

	
   

  	
  3.9

  	
  Security Deposits

  	
  27

  
	
   

  	
  3.10

  	
  Cash Collateral Subaccount

  	
  27

  
	
   

  	
  3.11

  	
  Grant of Security Interest; Application of Funds

  	
  27

  
	
   

  	
  3.12

  	
  Property Cash Flow Allocation

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  REPRESENTATIONS AND WARRANTIES

  	
  29

  
	
   

  	
  4.1

  	
  Organization; Special Purpose

  	
  29

  
	
   

  	
  4.2

  	
  Proceedings; Enforceability

  	
  30

  
	
   

  	
  4.3

  	
  No Conflicts

  	
  30

  
	
   

  	
  4.4

  	
  Litigation

  	
  30

  
	
   

  	
  4.5

  	
  Agreements

  	
  30

  
	
   

  	
  4.6

  	
  Title

  	
  30

  
	
   

  	
  4.7

  	
  No Bankruptcy Filing

  	
  31

  
	
   

  	
  4.8

  	
  Full and Accurate Disclosure

  	
  31

  
	
   

  	
  4.9

  	
  Tax Filings

  	
  32

  
	
   

  	
  4.10

  	
  No Plan Assets

  	
  32

  
	
   

  	
  4.11

  	
  Compliance

  	
  32

  
	
   

  	
  4.12

  	
  Contracts

  	
  33

  
	
   

  	
  4.13

  	
  Federal Reserve Regulations; Investment Company Act

  	
  33

  
	
   

  	
  4.14

  	
  Easements; Utilities and Public Access

  	
  33

  
	
   

  	
  4.15

  	
  Physical Condition

  	
  33

  
	
   

  	
  4.16

  	
  Leases

  	
  34

  
	
   

  	
  4.17

  	
  Fraudulent Transfer

  	
  34

  
	
   

  	
  4.18

  	
  Ownership of Borrower and Operating Tenant

  	
  35

  
	
   

  	
  4.19

  	
  Purchase Options

  	
  35

  
	
   

  	
  4.20

  	
  Management Agreement

  	
  35

  
	
   

  	
  4.21

  	
  Hazardous Substances

  	
  35

  
	
   

  	
  4.22

  	
  Name; Principal Place of Business

  	
  36

  
	
   

  	
  4.23

  	
  Other Debt

  	
  36

  
	
   

  	
  4.24

  	
  Intentionally Omitted

  	
  36

  
	
   

  	
  4.25

  	
  Affiliate Lease

  	
  36

  
	
   

  	
   

  	
   

  
	
  5.

  	
  COVENANTS

  	
  37

  
	
   

  	
  5.1

  	
  Existence

  	
  37

  
	
   

  	
  5.2

  	
  Taxes and Other Charges

  	
  37

  
	
   

  	
  5.3

  	
  Access to Property

  	
  38

  
	
   

  	
  5.4

  	
  Repairs; Maintenance and Compliance; Alterations

  	
  38

  
	
   

  	
   

  	
  5.4.1

  	
  Repairs; Maintenance and Compliance

  	
  38

  
	
   

  	
   

  	
  5.4.2

  	
  Alterations

  	
  38

  
	
   

  	
  5.5

  	
  Performance of Other Agreements

  	
  39

  
	
   

  	
  5.6

  	
  Cooperate in Legal Proceedings

  	
  39

  
	
   

  	
  5.7

  	
  Further Assurances

  	
  39

  
	
   

  	
  5.8

  	
  Environmental Matters

  	
  40

  
	
   

  	
   

  	
  5.8.1

  	
  Hazardous Substances

  	
  40

  
	
   

  	
   

  	
  5.8.2

  	
  Environmental Monitoring

  	
  40

  
	
   

  	
   

  	
  5.8.3

  	
  O & M Program

  	
  43

  
	
   

  	
  5.9

  	
  Title to the Property

  	
  43

  

 

ii

 

	
   

  	
  5.10

  	
  Leases

  	
  43

  
	
   

  	
   

  	
  5.10.1

  	
  Generally

  	
  43

  
	
   

  	
   

  	
  5.10.2

  	
  Additional Covenants with respect to Leases

  	
  43

  
	
   

  	
  5.11

  	
  Estoppel Statement

  	
  43

  
	
   

  	
  5.12

  	
  Property Management

  	
  44

  
	
   

  	
   

  	
  5.12.1

  	
  Management Agreement

  	
  44

  
	
   

  	
   

  	
  5.12.2

  	
  Termination of Manager

  	
  44

  
	
   

  	
  5.13

  	
  Special Purpose Bankruptcy Remote Entity

  	
  45

  
	
   

  	
  5.14

  	
  Assumption in Non-Consolidation Opinion

  	
  45

  
	
   

  	
  5.15

  	
  Change in Business or Operation of Property

  	
  45

  
	
   

  	
  5.16

  	
  Debt Cancellation

  	
  45

  
	
   

  	
  5.17

  	
  Affiliate Transactions

  	
  45

  
	
   

  	
  5.18

  	
  Zoning

  	
  46

  
	
   

  	
  5.19

  	
  No Joint Assessment

  	
  46

  
	
   

  	
  5.20

  	
  Principal Place of Business

  	
  46

  
	
   

  	
  5.21

  	
  Change of Name, Identity or Structure

  	
  46

  
	
   

  	
  5.22

  	
  Indebtedness

  	
  46

  
	
   

  	
  5.23

  	
  Licenses

  	
  47

  
	
   

  	
  5.24

  	
  Compliance with Restrictive Covenants, Etc.

  	
  47

  
	
   

  	
  5.25

  	
  ERISA

  	
  47

  
	
   

  	
  5.26

  	
  Prohibited Transfers

  	
  48

  
	
   

  	
   

  	
  5.26.1

  	
  Generally

  	
  48

  
	
   

  	
   

  	
  5.26.2

  	
  Transfer and Assumption

  	
  48

  
	
   

  	
  5.27

  	
  Liens

  	
  50

  
	
   

  	
  5.28

  	
  Dissolution

  	
  50

  
	
   

  	
  5.29

  	
  Expenses

  	
  50

  
	
   

  	
  5.30

  	
  Indemnity

  	
  51

  
	
   

  	
  5.31

  	
  Patriot Act Compliance

  	
  52

  
	
   

  	
  5.32

  	
  Intentionally Omitted

  	
  53

  
	
   

  	
  5.33

  	
  Franchise Agreement

  	
  53

  
	
   

  	
  5.34

  	
  Hotel Operation

  	
  54

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  NOTICES AND REPORTING

  	
  54

  
	
   

  	
  6.1

  	
  Notices

  	
  54

  
	
   

  	
  6.2

  	
  Borrower Notices and Deliveries

  	
  55

  
	
   

  	
  6.3

  	
  Financial Reporting

  	
  55

  
	
   

  	
   

  	
  6.3.1

  	
  Bookkeeping

  	
  55

  
	
   

  	
   

  	
  6.3.2

  	
  Annual Reports

  	
  56

  
	
   

  	
   

  	
  6.3.3

  	
  Monthly/Quarterly Reports

  	
  56

  
	
   

  	
   

  	
  6.3.4

  	
  Other Reports

  	
  56

  
	
   

  	
   

  	
  6.3.5

  	
  Annual Budget

  	
  56

  
	
   

  	
   

  	
  6.3.6

  	
  Breach

  	
  57

  
	
   

  	
   

  	
  6.3.7

  	
  Hotel Accounting

  	
  57

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  INSURANCE; CASUALTY; AND CONDEMNATION

  	
  57

  
	
   

  	
  7.1

  	
  Insurance

  	
  57

  
	
   

  	
   

  	
  7.1.1

  	
  Coverage

  	
  57

  

 

iii

 

	
   

  	
   

  	
  7.1.2

  	
  Policies

  	
  60

  
	
   

  	
  7.2

  	
  Casualty

  	
  61

  
	
   

  	
   

  	
  7.2.1

  	
  Notice; Restoration

  	
  61

  
	
   

  	
   

  	
  7.2.2

  	
  Settlement of Proceeds

  	
  62

  
	
   

  	
  7.3

  	
  Condemnation

  	
  62

  
	
   

  	
   

  	
  7.3.1

  	
  Notice; Restoration

  	
  62

  
	
   

  	
   

  	
  7.3.2

  	
  Collection of Award

  	
  62

  
	
   

  	
  7.4

  	
  Application of Proceeds or Award

  	
  63

  
	
   

  	
   

  	
  7.4.1

  	
  Application to Restoration

  	
  63

  
	
   

  	
   

  	
  7.4.2

  	
  Application to Debt

  	
  64

  
	
   

  	
   

  	
  7.4.3

  	
  Procedure for Application to Restoration

  	
  64

  
	
   

  	
   

  	
  7.4.4

  	
  Intentionally Omitted

  	
  64

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  DEFAULTS

  	
  64

  
	
   

  	
  8.1

  	
  Events of Default

  	
  64

  
	
   

  	
  8.2

  	
  Remedies

  	
  66

  
	
   

  	
   

  	
  8.2.1

  	
  Acceleration

  	
  66

  
	
   

  	
   

  	
  8.2.2

  	
  Remedies Cumulative

  	
  67

  
	
   

  	
   

  	
  8.2.3

  	
  Severance

  	
  67

  
	
   

  	
   

  	
  8.2.4

  	
  Delay

  	
  67

  
	
   

  	
   

  	
  8.2.5

  	
  Lender’s Right to Perform

  	
  68

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  SPECIAL PROVISIONS

  	
  68

  
	
   

  	
  9.1

  	
  Sale of Note and Secondary Market Transaction

  	
  68

  
	
   

  	
   

  	
  9.1.1

  	
  General; Borrower Cooperation

  	
  68

  
	
   

  	
   

  	
  9.1.2

  	
  Use of Information

  	
  69

  
	
   

  	
   

  	
  9.1.3

  	
  Borrower Obligations Regarding Disclosure Documents

  	
  69

  
	
   

  	
   

  	
  9.1.4

  	
  Intentionally Omitted

  	
  69

  
	
   

  	
   

  	
  9.1.5

  	
  Intentionally Omitted

  	
  70

  
	
   

  	
   

  	
  9.1.6

  	
  Rating Surveillance

  	
  70

  
	
   

  	
   

  	
  9.1.7

  	
  Severance of Loan

  	
  70

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MISCELLANEOUS

  	
  70

  
	
   

  	
  10.1

  	
  Exculpation

  	
  70

  
	
   

  	
  10.2

  	
  Brokers and Financial Advisors

  	
  73

  
	
   

  	
  10.3

  	
  Retention of Servicer

  	
  73

  
	
   

  	
  10.4

  	
  Survival

  	
  73

  
	
   

  	
  10.5

  	
  Lender’s Discretion

  	
  73

  
	
   

  	
  10.6

  	
  Governing Law

  	
  74

  
	
   

  	
  10.7

  	
  Modification, Waiver in Writing

  	
  75

  
	
   

  	
  10.8

  	
  Trial by Jury

  	
  75

  
	
   

  	
  10.9

  	
  Headings/Exhibits

  	
  75

  
	
   

  	
  10.10

  	
  Severability

  	
  76

  
	
   

  	
  10.11

  	
  Preferences

  	
  76

  
	
   

  	
  10.12

  	
  Waiver of Notice

  	
  76

  
	
   

  	
  10.13

  	
  Remedies of Borrower

  	
  76

  
	
   

  	
  10.14

  	
  Prior Agreements

  	
  76

  

 

iv

 

	
   

  	
  10.15

  	
  Offsets, Counterclaims and Defenses

  	
  76

  
	
   

  	
  10.16

  	
  Publicity

  	
  77

  
	
   

  	
  10.17

  	
  No Usury

  	
  77

  
	
   

  	
  10.18

  	
  Conflict; Construction of Documents

  	
  78

  
	
   

  	
  10.19

  	
  No Third Party Beneficiaries

  	
  78

  
	
   

  	
  10.20

  	
  Intentionally Omitted

  	
  78

  
	
   

  	
  10.21

  	
  Assignment

  	
  78

  
	
   

  	
  10.22

  	
  Certain Additional Rights of Lender

  	
  78

  
	
   

  	
  10.23

  	
  Set-Off

  	
  79

  
	
   

  	
  10.24

  	
  Counterparts

  	
  79

  

 

	
  SCHEDULES

  
	
  Schedule 1

  	
  -

  	
  Intentionally
  Omitted

  
	
  Schedule 2

  	
  -

  	
  Exceptions
  to Representations and Warranties

  
	
  Schedule 3

  	
  -

  	
  Rent
  Roll

  
	
  Schedule 4

  	
  -

  	
  Organization
  of Borrower

  
	
  Schedule 5

  	
  -

  	
  Definition
  of Special Purpose Bankruptcy Remote Entity

  
	
  Schedule 6

  	
  -

  	
  Intentionally
  Omitted

  
	
  Schedule 7

  	
  -

  	
  Form of
  Operating Expense Certificate

  
	
  Schedule 8

  	
  -

  	
  Identified
  Capital Expenses

  

 

v

 

AMENDED AND RESTATED LOAN AGREEMENT

 

 

AMENDED AND RESTATED LOAN AGREEMENT dated as of
October 20, 2010 (“Effective Date”)] (as the same may be modified,
supplemented, amended or otherwise changed, this “Agreement”)
between KAUAI COCONUT BEACH, LLC, a Delaware
limited liability company (together with its permitted successors and assigns, “Borrower”), and WELLS FARGO
BANK, N.A., AS TRUSTEE FOR THE MORGAN STANLEY CAPITAL I INC. COMMERCIAL
MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2006-XLF (together with
its successors and assigns, “Lender”).

 

RECITALS

 

A.                                    Lender is the
owner and holder of a Loan Agreement dated as of June 20, 2006 (as amended
or modified, the “Original Loan Agreement”), by
and between Waipouli Owner, LLC, a Delaware limited liability company (“Original Borrower”) and Morgan
Stanley Mortgage Capital Inc. (“Original Lender”)
and an Amended and Restated Promissory Note dated as of August 15, 2006 in
the original principal amount of $43,200,000.00 (the “Original
Note”) from Original Borrower to Original Lender, evidencing a
Loan in the original principal amount of $43,200,000 (the “Original Loan”).

 

B.                                    As a condition
for Borrower agreeing to assume the Original Loan, Lender reduced the
outstanding principal balance of the Original Loan to $38,000,000 (the “Loan”) prior to Borrower’s
assumption of the Loan, and Borrower and Lender are amending and restating the
Original Loan Agreement in its entirety pursuant to the terms of this
Agreement.

 

NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Borrower and Lender
agree to amend and restate the Original Note in its entirety as follows:

 

1.                                      DEFINITIONS;
PRINCIPLES OF CONSTRUCTION

 

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

 

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

 

Affiliate Lease:  shall mean that certain Lease Agreement dated
as of the date hereof by the Borrower and the Operating Tenant with respect to
the Property.

 

Applicable Spread:  Ninety-five hundredths percent (0.95%).

 

Approved Capital Expenses:  the cost of Capital Expenses incurred by
Borrower or Operating Tenant, which Capital Expenses:  (i) shall be a Capital Expense item
described on Schedule 8 (the “Identified Capital
Expenses”), (ii) are otherwise set forth on an Approved
Annual Budget, or (iii) have been approved by Lender.

 

 

Approved FF&E Expenses:  the cost of FF&E Expenses incurred by
Borrower or Operating Tenant, which FF&E Expenses shall either (i) be
included in the Annual Budget for the current calendar year or (ii) are
approved by Lender.  Approved FF&E
Expenses shall not be duplicative of Approved Capital Expenses.

 

Approved Operating Expenses:  operating expenses incurred by Borrower or
Operating Tenant which (i) subject to clause (iii) below, are
included in the Approved Operating Budget for the current calendar month,
(ii) are for electric, gas, oil, water, sewer or other utility service to
the Property, (iii) are for payment of fees payable to Manager under the
Management Agreement; provided that (notwithstanding anything to the contrary
contained on the Approved Operating Budget) such fees under the Management
Agreement do not exceed the Approved Property Management Fee,  (iv) are fees payable to the franchisor
under a Franchise Agreement or (v)  have been approved by Lender,
which approval shall not be unreasonably withheld or delayed.

 

Approved Property Management Fee:  fees under the Management Agreement not to
exceed four and one-quarter percent (4.25%) of the Gross Revenue of the
Property, plus a $5,000 per month accounting fee.  Approved Operating Expenses shall not include
fees payable to the Manager under the Management Agreement in excess of the
Approved Property Management Fee; provided, however, that
Borrower or Operating Tenant, as applicable, shall be permitted to pay, from
its own funds, any such fees in excess of the Approved Property Management Fee
payable pursuant to the terms of the Management Agreement.  This definition of Approved Management Fee is
intended to encompass the following fees payable to Manager under the
Management Agreement:  Base Fee, Incentive
Fees and Accounting Fee.  This definition
(and the cap set forth in this definition) is not intended to limit the
reimbursement or payment by Borrower or Operating Tenant of any actual
out-of-pocket costs or expenses (as opposed to “fees”) of Manager payable to
Manager pursuant to the Management Agreement or otherwise included in the
Approved Budget.

 

Available Cash:  as of each Payment Date or any other
distribution date under Section 3.12(c), the amount of Rents, if any,
remaining in the Deposit Accounts after the application of all of the payments
required under clauses (i) through (vii) of Section 3.12(a).

 

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

 

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

 

Cash Trap Period:  shall commence if an Event of Default has
occurred and is continuing, and shall end if such Event of Default has been
cured and no other Event of Default has occurred and is continuing.

 

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

 

Commercial Lease:  a Lease for office or retail space at the
Property.

 

2

 

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

 

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

 

Debt Service:  with respect to any particular period, the
aggregate amount of scheduled Principal (if any) and interest payments due
under the Note.

 

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

 

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

 

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

 

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

 

Eligible Institution:
(i) First Hawaiian Bank as of the date of this Agreement and for so long
as it continues to satisfy the provisions of the immediately following clause
(ii), or (ii) a depository institution insured by the Federal Deposit
Insurance Corporation, the short term unsecured debt obligations or commercial
paper of which are rated at least A+ by S&P, P-1 by Moody’s and F-1 by
Fitch, in the case of accounts in which funds are held for thirty (30) days or
less or, in the case of accounts in which funds are held for more than thirty
(30) days, the long term unsecured debt obligations of which are rated at least
“AA” by Fitch and S&P and “Aa” by Moody’s.

 

Environmental Report: That certain
Phase I Environmental Site Assessment prepared by Blackstone Consulting
LLC dated June 10, 2010 (Project No. PONDTX 001.01).

 

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

 

3

 

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

 

FF&E:  All fixtures, furnishings, equipment,
furniture, and other items of tangible personal property now or hereafter
located in or on the Property or the Improvements (which are not owned by
tenants (other than Operating Tenant) under Leases or hotel guests) or used in
connection with the use, occupancy, operation and maintenance of all or any
part of the hotel located on the Property, other than stocks of food and other
supplies held for consumption in normal operation but including, without
limitation, appliances, machinery, equipment, signs, artwork, office
furnishings and equipment, guest room furnishings,  and specialized equipment for kitchens,
laundries, bars, restaurant, public rooms, health and recreational facilities,
linens, dishware, all partitions, screens, awnings, shades, blinds, floor
coverings, hall and lobby equipment, heating, lighting, plumbing, ventilating,
refrigerating, incinerating, elevators, escalators, air conditioning and
communication plants or systems with appurtenant fixtures, vacuum cleaning
systems, call or beeper systems, security systems, sprinkler systems and other
fire prevention and extinguishing apparatus and materials; reservation system
computer and related equipment; all equipment, manual, mechanical or motorized,
for the construction, maintenance, repair and cleaning of, parking areas, walks,
underground ways, truck ways, driveways, common areas, roadways, highways and
streets; and the Vehicles (as defined in the USALI).

 

FF&E Deposit Amount:  (a) with respect to each Payment Date
beginning February 9, 2011, through and including January 9, 2012, an
amount equal to one percent (1%) of actual Gross Revenue for the immediately
prior calendar month (e.g., the deposit due February 9, 2011 would be
based on Gross Revenue for January, 2011), (b) with respect to each
Payment Date beginning February 9, 2012, and continuing through and
including January 9, 2013, an amount equal to two percent (2%) of actual
Gross Revenue for the immediately prior calendar month, (c)  with respect
to each Payment Date beginning February 9, 2013, and continuing through
and including January 9, 2014, an amount equal to three percent (3%) of
actual Gross Revenue for the immediately prior calendar month, (d) with
respect to each Payment Date beginning February 9, 2014, and continuing
through and including January 9, 2016, an amount equal to four percent
(4%) of actual Gross Revenue for the immediately prior calendar month, and (e) with
respect to each Payment Date beginning February 9, 2016, and continuing
through and including the Maturity Date, an amount equal to five percent (5%)
of actual Gross Revenue for the immediately prior calendar month.

 

FF&E Borrower True-Up Amount:  an amount equal to the difference, only if it
is positive, between (A) the aggregate FF&E Deposit Amounts
transferred into the FF&E Reserve Subaccount during the preceding calendar
quarter less (B) the relevant amount that would have been deposited into
the FF&E Reserve Subaccount if the calculation of the required FF&E
Deposit Amount had been made based on actual Gross Revenue for such calendar
quarter (e.g., if the deposit paid on October 9, 2012 had been based on
actual Gross Revenue for October 2012).

 

4

 

FF&E Lender True-Up Amount:  an amount equal to the difference, only if it
is positive, between (A) the relevant amount that would have been
deposited into the FF&E Reserve Subaccount if the calculation of the
required FF&E Deposit Amount had been made based on actual Gross Revenue
for such calendar quarter (e.g., if the deposit paid on October 9, 2012
had been based on actual Gross Revenue for October 2012), less (B) the
aggregate FF&E Deposit Amounts transferred into the FF&E Reserve
Subaccount during the preceding calendar quarter.

 

Franchise Agreement:  any franchise agreement hereafter entered
into by Borrower or Operating Tenant as franchisee, pursuant to which Borrower
or Operating Tenant has the right to operate the hotel on the Property under a
name and hotel system controlled by the franchisor (but specifically excluding
the Management Agreement).

 

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

 

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

 

Gross Revenue:  shall mean any and all revenue and income of
any kind derived, directly or indirectly, from the operation of the Property,
including without limiting the generality of the foregoing, room revenue
generated through occupancy of the Property by guests, food and beverage
revenue, banquets and meetings revenue, travel desk, parking revenues, receipts
from concessionaires and tenants of retail/commercial space in the Property
(but not the revenues realized by
such concessionaires and tenants from the public), guest laundry income,
vending machine commissions and net income from in-room safes and movies, and
the proceeds of any use, occupancy, business interruption or other similar
insurance in respect of the Property to the extent actually received, but
excluding (i) all sales, excise, value added, transient accommodation and
other such taxes on sales for renting rooms or services (and any other taxes or
charges in the nature thereof) charged to guests, tenants or concessionaires on
behalf of any governmental entity or agency, and (ii) interest earned on
any bank accounts provided for in the Management Agreement or this Agreement.  Notwithstanding the foregoing, Gross Revenue
shall not include proceeds of insurance (other than business interruption
insurance), proceeds from the sale or refinancing of the Property or
condemnation proceeds. Except as may be otherwise specifically modified herein,
“Gross Revenue” shall be interpreted and defined in conformity with GAAP.

 

Guarantor:  collectively, Behringer Harvard Opportunity
REIT II, Inc., a Maryland corporation, and JMI Realty LLC, a Delaware
limited liability company.

 

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

 

5

 

marketing,
promotional services and outsourced services. 
Hotel Transactions shall not include services provided under the
Management Agreement.

 

Initial Maturity Date:  November 9, 2015, as the same may be
changed in accordance with Section 2.2.5 of this Agreement.

 

Interest Period: (i) the period from
the date hereof through the first day thereafter that is the 14th day of a
calendar month and (ii) each period thereafter from the 15th day of each
calendar month through the 14th day of the following calendar month; except
that the Interest Period, if any, that would otherwise commence before and end
after the Maturity Date shall end on the Maturity Date.

 

Interest Rate:  for any Interest Period, the Applicable
Spread plus LIBOR for such Interest Period (or, when applicable pursuant to
this Agreement or any other Loan Document, the Default Rate).

 

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

 

Key Principal:  Guarantor.

 

Leases:  the Affiliate Lease and all other leases and
other agreements or arrangements heretofore or hereafter entered into providing
for the use, enjoyment or occupancy of, or the conduct of any activity upon or
in, the Property or the Improvements, including any guarantees, extensions,
renewals, modifications or amendments thereof and all additional remainders,
reversions and other rights and estates appurtenant thereunder.  As used herein, the term “Leases” shall not
include Hotel Transactions.

 

Legal Requirements:  statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions of Governmental Authorities
affecting Borrower, Operating Tenant, any Loan Document or all or part of the
Property or the construction, ownership, use, alteration or operation thereof,
whether now or hereafter enacted and in force, and all permits, licenses and
authorizations and regulations relating thereto, and all covenants, agreements,
restrictions and encumbrances contained in any instrument, either of record or
known to Borrower or Operating Tenant, at any time in force affecting all or
part of the Property.

 

LIBOR:  with respect to any Interest Period, a
floating interest rate per annum (rounded upwards to the next 1/16 of 1%) equal
to the rate for U.S. dollar deposits with one month maturities which appears on
Telerate Page 3750 as of 11:00 am, London time on the related
Determination Date; provided, however, that if such rate does not
appear on Telerate Page 3750, “LIBOR” shall mean a rate per annum equal to
the rate at which U.S. dollar deposits in an amount approximately equal to the
Loan, and with one month maturities, are offered in immediately available funds
in the London Interbank Market to the London office of National Westminster
Bank, Plc by leading banks in the Eurodollar market at 11:00 a.m., London
time.  “Telerate
Page 3750” means the display designated as “Page 3750”
on the Associated Press-Dow Jones Telerate Service (or such other page as
may replace Page 3750 on the Associated Press-Dow Jones Telerate Service
or such other service as may be nominated by the British 

 

6

 

Bankers’
Association as the information vendor for the purpose of displaying British
Banker’s Association interest settlement rates for U.S. Dollar deposits).  Any LIBOR determined on the basis of the rate
displayed on Telerate Page 3750 in accordance with the provisions hereof
shall be subject to corrections, if any, made in such rate and displayed by the
Associated Press-Dow Jones Telerate Service within one (1) hour of the
time when such rate is first displayed by such Service.  For purposes hereof, (i) “Determination Date” shall mean, with
respect to any Interest Period, the date which is two Eurodollar Business Days
prior to the commencement of such Interest Period; and (ii) “Eurodollar Business Day” shall mean
any day other than a Saturday, Sunday or other day on which banks in the City
of London, England or New York, New York are closed for interbank or
foreign exchange transactions.

 

Lien:  any mortgage, deed of trust, lien (statutory
or otherwise), pledge, hypothecation, easement, restrictive covenant,
preference, assignment (intended as security), security interest or any other
encumbrance, charge, or any agreement to enter into or create any of the
foregoing, on or affecting all or any part of the Property or any interest
therein, or any direct or indirect interest in Borrower, Operating Tenant or
Sole Member, including any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement, and mechanic’s, materialmen’s
and other similar liens and encumbrances.

 

Loan Documents:  this Agreement and all other documents,
agreements and instruments now or hereafter evidencing, securing or delivered
to Lender in connection with the Loan, including the following:  (i) the Amended and Restated Promissory
Note between Borrower and Lender and dated as of the date hereof in the
aggregate principal amount equal to the Loan (the “Note”);
(ii) the Leasehold Mortgage, Assignment of Leases and Rents, Security
Agreement, Financing Statement and Fixture Filing, executed by Waipouli Owner,
LLC, the original borrower under the Loan (“Original
Borrower”), filed for record on June 20, 2006, as Land
Court Document No. 3442321 (collectively with the Spreader and the First
Mortgage Amendment (as defined herein), the “Mortgage”);
(iii) Assignment of Leases and Rents executed by Original Borrower and
filed for record on June 20, 2006, as Document No. 2006-113369;
(iv) Assignment of Agreements, Licenses, Permits and Contracts executed by
Borrower; (v) the Clearing Account Agreement (the “Clearing
Account Agreement”) among Borrower, Operating Tenant, Lender,
Manager and the Clearing Bank; (vi) the Cash Management Agreement (the “Cash Management Agreement”) among
Borrower, Operating Tenant, Lender, Manager and the Deposit Bank;
(vii) the Guaranty of Recourse Obligations made by Guarantor;
(viii) that certain Consent, Assumption, and Modification Agreement with
Release by and among, among others, Borrower and Lender, dated on the date
hereof (“Consent Agreement”);
(ix) that certain Spreader Agreement dated October 20, 2006 and filed
for record on October 20, 2006, as Land Court Document No. 3501709 (“Spreader”); (x) that certain
First Amendment of Mortgage and Assignment of Leases dated the date hereof
between Borrower and Lender and to be recorded in the Land Court (“First Mortgage Amendment”); (xi) First Amendment of
Assignment of Leases dated the date hereof between Borrower and Lender and to
be recorded; (xii) Assignment of Leases and Rents from Operating Tenant to
Lender; (xiii) Security Agreement from Operating Tenant to Lender; (xiv) Collateral
Assignment of Interest Rate Protection Agreement between Borrower and Lender;
and (xv) all other documents, instruments and agreements executed by
Borrower, Operating Tenant or Key Principal in connection with this Agreement, the
Loan or the Transfer and Assumption (as defined in the Consent Agreement 

 

7

 

for
use in this paragraph); as each of the foregoing may be (and each of the
foregoing defined terms shall refer to such documents as they may be) amended,
restated, replaced, severed, split, supplemented or otherwise modified from
time to time (including pursuant to Section 9.1.7).

 

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

 

Manager:  Davidson Hotel Management Company, or any
successor, assignee or replacement manager appointed by Borrower in accordance
with Section 5.12.2.

 

Material Alteration:  any alteration affecting structural elements
of the Improvements the cost of which exceeds $500,000; provided, however, that
in no event shall (i) any Identified Capital Expense, (ii) any tenant
improvement work performed pursuant to any Lease existing on the date hereof or
entered into hereafter in accordance with the provisions of this Agreement, or
(iii) alterations performed as part of a Restoration, constitute a
Material Alteration.

 

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

 

Net Operating Income:  for any period, the Gross Revenue of the
Property less the Approved Operating Expenses of the Property, excluding any
nonrecurring or extraordinary item of income or expense.

 

Officer’s Certificate:  a certificate delivered to Lender by Borrower
which is signed by an officer of Borrower and/or Operating Tenant, as
applicable.

 

Operating Tenant:  Kauai Coconut Beach Operator, LLC, a Delaware
limited liability company.

 

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

 

Payment Date:  the ninth (9th) day of each calendar
month during the term of the Loan or, if such day is not a Business Day, the
Payment Date shall be the first Business Day immediately preceding such day.

 

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

 

8

 

the
date hereof, all immaterial easements, rights-of-way, conditions, covenants or
restrictions and other similar nonmonetary encumbrances against the Property
which do not, individually or in the aggregate, materially and adversely affect
the value, use or operation of the Property.

 

Permitted Transfers:

 

(i)                                     any Leases
entered into prior to the date hereof, the Affiliate Lease and any new Lease
entered into in accordance with the Loan Documents; or

 

(ii)                                  Hotel
Transactions; or

 

(iii)                               a Permitted
Encumbrance; or

 

(iv)                              provided that
no Event of Default shall then exist and be continuing, (A) a Transfer by
a natural person to a revocable inter vivos trust having such natural person as
a trustor or trustee of such trust and one or more immediate family members of
such natural person as beneficiaries of such trust; or (B) a Transfer by
devise or descent or by operation of law upon the death of a natural person;
provided, however, (a) that there is no change in the Person who Controls
Borrower or Operating Tenant, (b) that in the case of such a Transfer
involving John C. Kratzer or John Jay Moores, Lender receives ten days prior
notice of such Transfer in the case of Clause (A) and notice within ten
days after such Transfer in the case of Clause (B), in each case together with
copies of all instruments effecting or relevant to such Transfer; and (c) Borrower
pays all of Lender’s out of pocket costs and expenses in connection with the
review and analysis of such Transfer.

 

(v)                                 a Transfer and
Assumption pursuant to Section 5.26.2; or

 

(vi)                              provided that
no Event of Default shall then exist and be continuing, Transfers of equity
interests in a publicly traded company or public company, so long as following
such Transfers such company remains public or publicly traded;

 

(vii)                           Transfers of
direct or indirect interests in Behringer Harvard Opportunity OP II, LP,
provided that Behringer Harvard Opportunity REIT II, Inc. Controls
Behringer Harvard Opportunity OP II, LP;

 

(viii)                        with respect to
any Transfer not addressed in the foregoing clauses (i) through (vii),
provided that no Event of Default shall then exist, a Transfer of a direct or
indirect interest in Borrower, Operating Tenant, Sole Borrower Member, or Sole
OT Member among any of direct or indirect owners of Borrower, Operating Tenant,
Sole Borrower Member, and Sole OT Member as of the date of this Agreement,
provided:

 

(A)                               at least one
Key Principal continues to Control Borrower, Operating Tenant, Sole Borrower
Member, and Sole OT Member;

 

(B)                               both Key
Principals continue to hold a direct or indirect ownership interest in each of
Borrower, Operating Tenant, Sole Borrower Member, or Sole OT Member; provided,
however, that any one Key Principal 

 

9

 

may cease to be a holder of
a direct or indirect ownership interest in each of Borrower, Operating Tenant,
Sole Borrower Member, or Sole OT Member if Lender receives a replacement
Guaranty (in substantially the same form as the guaranty of recourse
obligations delivered to Lender by Guarantor on the date hereof), from a Person
acceptable to Lender in its sole discretion, whereupon the non-owner Key
Principal shall be released from any further liability under the guaranty and
from and after the date of such Permitted Transfer, such replacement guarantor
shall be a “Guarantor” for all purposes set forth in this Agreement;

 

(C)                               in the case of
a Transfer resulting in ownership by Behringer Harvard Opportunity REIT II, Inc.
and its Affiliates of less than fifty-one percent (51%) in any of Borrower,
Operating Tenant, Sole Borrower Member, or Sole OT Member, Lender shall receive
ten (10) business days prior written notice;

 

(D)                               in the case of
a Transfer resulting in ownership by JMI Realty LLC and its Affiliates
exceeding forty-nine percent (49%) in any of Borrower, Operating Tenant, Sole
Borrower Member, or Sole OT Member, Lender shall receive fifteen (15) business
days prior written notice, and at or prior to the completion of such Transfer,
a nonconsolidation opinion satisfying Rating Agency guidelines, and
satisfactory to Lender; and

 

(E)                                each of
Borrower, Operating Tenant, Sole Borrower Member and Sole OT Member shall
continue to be a Special Purpose Bankruptcy Remote Entity.

 

(ix)                              with respect to
any Transfer not addressed in the foregoing clauses (i) through (viii),
provided that no Event of Default shall then exist, a Transfer of a direct or
indirect interest in Borrower, Operating Tenant, Sole Borrower Member, or Sole
OT Member to a Person who was not a direct or indirect owner of Borrower,
Operating Tenant, Sole Borrower Member, and Sole OT Member as of the date of
this Agreement, provided:

 

(A)                               at least one
Key Principal continues to Control Borrower, Operating Tenant, Sole Borrower
Member, and Sole OT Member;

 

(B)                               both Key
Principals continue to hold a direct or indirect ownership interest in each of
Borrower, Operating Tenant, Sole Borrower Member, or Sole OT Member; provided,
however, that any one Key Principal may cease to be a holder of a direct or
indirect ownership interest in each of Borrower, Operating Tenant, Sole
Borrower Member, or Sole OT Member if Lender receives a replacement Guaranty
(in substantially the same form as the guaranty of recourse obligations
delivered to Lender by Guarantor on the date hereof), from a Person acceptable
to Lender in its sole discretion, whereupon the non-owner Key Principal shall
be released from any further liability under the guaranty and from and after
the date of such Permitted Transfer, such replacement guarantor shall be a “Guarantor”
for all purposes set forth in this Agreement;

 

10

 

(C)                               in the case of
a Transfer resulting in ownership by Behringer Harvard Opportunity REIT II, Inc.
and its Affiliates of less than fifty-one percent (51%) in any of Borrower,
Operating Tenant, Sole Borrower Member, or Sole OT Member, Lender shall receive
ten (10) business days prior written notice;

 

(D)                               in the case of
a Transfer resulting in ownership by JMI Realty LLC and its Affiliates
exceeding forty-nine percent (49%) in any of Borrower, Operating Tenant, Sole
Borrower Member, or Sole OT Member, Lender shall receive fifteen (15) business
days prior written notice, and at or prior to the completion of such Transfer,
a nonconsolidation opinion satisfying Rating Agency guidelines, and
satisfactory to Lender;

 

(E)                                the transferee
together with its Affiliates does not acquire direct or indirect Control of
Borrower, Operating Tenant, Sole Borrower Member or Sole OT Member;

 

(F)                                 the transferee
together with its Affiliates does not acquire more than forty-nine percent
(49%) of the direct or indirect ownership of Borrower, Operating Tenant, Sole
Borrower Member or Sole OT Member; and

 

(G)                               each of
Borrower, Operating Tenant, Sole Borrower Member and Sole OT Member shall
continue to be a Special Purpose Bankruptcy Remote Entity.

 

(x)                                 A change of
Borrower’s or Operating Tenant’s name with no change in the form of Borrower or
Operating Tenant and no transfer of the Property so long as Borrower or
Operating Tenant, as applicable, delivers UCC financing statements and/or
amendments sufficient to continue the perfection of Lender’s security interest
are delivered to Lender.

 

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

 

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

 

Principal: the
outstanding principal balance of the Loan.

 

Property:  the parcel of real property and Improvements
thereon owned or leased by Borrower or Operating Tenant, as applicable, and in
all cases, encumbered by the Mortgage; together with all rights pertaining to
such real property and Improvements, and all other collateral for the Loan
owned or leased by Borrower or Operating Tenant.

 

11

 

Qualified Manager:  either: 
(A) a property management company owned and/or Controlled (in the
sense of clause (ii) of the defined term “Control”) by any Key Principal,
or (B) a property manager of the Property which (x) is a reputable,
nationally or regionally recognized management company having at least
five (5) years’ experience in the management of similar type
properties, (y) has, for at least five (5) years prior to its engagement
as property manager, managed hotel properties (other than the Property) having,
in the aggregate, at least 1,000 rooms which are at a quality level of at least
“three star” and (z) is not and has not been the subject of a bankruptcy
or similar insolvency proceeding.

 

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

 

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

 

Rents:  all rents, rent equivalents, moneys payable
as damages (including payments by reason of the rejection of a Lease in a
Bankruptcy Proceeding) or in lieu of rent or rent equivalents, royalties
(including all oil and gas or other mineral royalties and bonuses), income,
fees, receivables, receipts, revenues, deposits (including security, utility
and other deposits), accounts, cash, issues, profits, charges for services
rendered, and other payment and consideration of whatever form or nature
received by or paid to or for the account of or benefit of Borrower, Operating
Tenant, Manager or any of their agents or employees from any and all sources
arising from or attributable to the Property and the Improvements, including
all revenues and credit card receipts collected from guest rooms, restaurants,
bars, meeting rooms, banquet rooms and recreational facilities, parking
charges, all receivables, customer obligations, installment payment obligations
and other obligations now existing or hereafter arising or created out of the
sale, lease, sublease, license, concession or other grant of the right of the
use and occupancy of the Property or rendering of services by Borrower,
Operating Tenant, Manager or any of their agents or employees, or any operator
or manager of the hotel acquired from others (including, without limitation,
from the rental of any office space, retail space, guest rooms or other space,
halls, stores, and offices, and deposits securing reservations of such space),
license, lease, sublease and concession fees and rentals, health club
membership fees, food and beverage wholesale and retail sales, service charges,
vending machine sales, and proceeds, if any, from business interruption or
other loss of income insurance.  Rents
shall not include revenues of any sub-tenant of Operating Tenant unless and to
the extent paid to Borrower or Operating Tenant as percentage rent under such
subtenant’s Lease.

 

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

 

12

 

Significant Capital Expenses:  any Capital Expense which, under GAAP, is an
item depreciable on a schedule of fifteen (15) or more years.

 

Sole Borrower Member:  BH-JMIR
Kauai Fee Member, LLC, a Delaware limited liability company.

 

Sole Member:  collectively, Sole Borrower Member and Sole
OT Member.

 

Sole OT Member:  BH-JMIR Kauai Operator Member, LLC, a
Delaware limited liability company.

 

State:  the state in which the Property is located.

 

Stated Maturity Date:  the Initial Maturity Date, as the same may be
extended to the First Extended Maturity Date pursuant to Section 2.8 of
this Agreement.

 

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

 

Term:  the entire term of this Agreement, which
shall expire upon repayment in full of the Debt and full performance of each
and every obligation to be performed by Borrower and Operating Tenant pursuant
to the Loan Documents (other than surviving indemnity obligations with respect
to matters as to which no claim for indemnification is then pending).

 

Title Endorsement: such
endorsements to Lender’s Title Insurance Policy in such form as Lender may
require, including showing that the Borrower is the owner of the Property,
Operating Tenant is the lessee of the Property, changing the effective date of
such title policy to the date hereof, and showing that the Loan Documents are
in a first lien position.

 

Title Insurance Policy:  the ALTA mortgagee title insurance policy
issued by Chicago Title Insurance
Company as Policy No. 7210780-87262 issued with respect to the
Property and insuring the Lien of the Mortgage, including any subsequent
endorsements issued for the benefit of Lender (including the Title
Endorsement).

 

Transfer:  (i) any sale, conveyance, transfer,
Lease or assignment, or the entry into any agreement to sell, convey, transfer,
lease or assign, whether by law or otherwise, of, on, in or affecting
(x) all or part of the Property (including any legal or beneficial direct
or indirect interest therein), (y) any direct or indirect interest
(including any profit interest) in Borrower or Operating Tenant, or
(z) any direct or indirect interest in Sole Member or (ii) any change
of Control of Borrower, Operating Tenant or Sole Member.  For purposes hereof, a Transfer of an
interest in Borrower, Operating Tenant or Sole Member shall be deemed to
include (A) if Borrower, Operating Tenant or Sole Member or controlling shareholder
of Borrower, Operating Tenant or Sole Member is a corporation, the voluntary or
involuntary sale, conveyance or transfer of such corporation’s stock (or the
stock of any corporation directly or indirectly controlling such corporation by
operation of law or otherwise) or the creation or issuance of new stock in one
or a series of transactions by which an aggregate of more than 10% of such
corporation’s stock shall be vested in a party or parties who are not now
stockholders or any

 

13

 

change
in the control of such corporation and (B) if Borrower, Operating Tenant,
Sole Member or controlling shareholder of Borrower, Operating Tenant or Sole
Member is a limited or general partnership, joint venture or limited liability
company, the change, removal, resignation or addition of a general partner,
managing partner, limited partner, joint venturer or member or the transfer of
the partnership interest of any general partner, managing partner or limited
partner or the transfer of the interest of any joint venturer or member.

 

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

 

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

 

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

 

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

 

“Act” — Schedule 5

“Acceptable Counterparty” — 2.6.1

“Annual Budget” - 6.3.5

“Applicable Taxes” - 2.2.3

“Approved Annual Budget” - 6.3.5

“Approved Capital Budget” - 6.3.5

“Approved Operating Budget” - 6.3.5

“Award” - 7.3.2

“Bankruptcy Proceeding” - 4.7

“Borrower Cash Collateral Subaccount” — 3.10

“Borrower Deposit  Account” — 3.1

“Borrower Subaccounts” — 3.1

“Borrower’s Recourse Liabilities” - 10.1

“Broker” - 10.2

“Capital Reserve Funds- 3.4.2

“Capital
Reserve SubAccount” - 3.4.2

“Carry Subaccount” - 3.6.2

“Cash Management Accounts” - 3.11

“Cash Management Agreement” - 1.1 (Definition of Loan
Documents)

“Casualty” - 7.2.1

“Casualty/Condemnation Prepayment” - 2.3.2

“Casualty/Condemnation Subaccount” - 3.8

“Clearing Account” - 3.1

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

“Clearing Bank” - 3.1

“Condemnation” - 7.3.1

“Consent Agreement” - 1.1 (Definition of Loan Documents)

“Consumer Price Index” - 7.1.1

 

14

 

“Deposit Accounts” - 3.1

“Determination Date” - 1.1 (Definition of LIBOR)

“Disclosure Document” - 9.1.2

“Easements” - 4.14

“Endorsement” - 5.26.2

“Environmental Laws” - 4.21

“Equipment” - Mortgage

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

“Event of Default” - 8.1

“Exchange Act” - 9.1.2

“Extended Maturity Date - 2.8

“FF&E Reserve Subaccount” - 3.4.1

“First Extended Maturity Date” - 2.8

“First Mortgage Amendment” - (Definition of Loan Documents)

“Fitch” - 1.1 (Definition of Rating Agency)

“Government Lists” - 5.31

“Hazardous Substances” - 4.21

“Identified Capital Expenses” - 1.1 (Definition of Approved
Capital Expenses)

“Improvements” - Mortgage

“Indemnified Liabilities” - 5.30

“Indemnified Party” - 5.30

“Independent Director” - Schedule 5

“Insurance Premiums” - 7.1.2

“Insured Casualty” - 7.2.2

“Interest Rate Protection Agreement” - 2.6.1

“Late Payment Charge” - 2.5.3

“Lender’s Consultant” - 5.8.1

“Licenses” - 4.11

“Loan” - Recitals

“Loan Agreement” - Schedule 5

“Member Activities” - Schedule 5

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

“Mortgage” - 1.1 (Definition of Loan Documents)

“Note” - 1.1 (Definition of Loan Documents)

“Notice” - 6.1

“O & M Program” - 5.8.3

“OFAC” - 5.31

“Operating Expense Certificate” - 3.6.1

“Operating Expense Subaccount” - 3.6.1

“Original Borrower” - 1.1 (Definition of Loan Documents)

“Original Lender” - Recitals

“Original Loan” - Recitals

“Original Loan Agreement” - Recitals

“Original Note” - Recitals

“OT Cash Collateral Subaccount” - 3.10

“OT Deposit Account” - 3.1

 

15

 

“OT Subaccounts” - 3.1

“Patriot Act” - 5.31

“Permitted Equipment Financing” - 5.22

“Patriot Act Offense” - 5.31

“Permitted Indebtedness” - 5.22

“Permitted Investments” - Cash Management Agreement

“Policies” - 7.1.2

“Proceeds” - 7.2.2

“Property Ownership” - Schedule 5

“Provided Information” - 9.1.1

“Qualified Carrier” - 7.1.1

“Required Records” - 6.3.6

“Remedial Work” - 5.8.2

“Rent Roll” - 4.16

“Restoration” - 7.4.1

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

“Secondary Market Transaction” - 9.1.1

“Securities” - 9.1.1

“Securities Act” - 9.1.2

“Security Deposit Account” - 3.9

“Shortfall” - 3.6.2

“Significant Casualty” - 7.2.2

“Single Member Bankruptcy Remote LLC” - Schedule 5

“Sole Member” - Schedule 5

“Special Member” - Schedule 5

“Special Purpose Bankruptcy Remote Entity” - 5.13

“Spreader” - 1.1 (Definition of Loan Documents)

“Springing Recourse Event” - 10.1

“Subaccounts” - 3.1

“Subordinate Deposit Account” - Cash Management Agreement

“Survey” - 4.6

“Tax and Insurance Subaccount” - 3.3

“Telerate Page 3750” - LIBOR

“Terrorism Premium Cap” - 7.1.1

“Toxic Mold” - 4.21

“Transfer and Assumption” - 5.26.2

“Transferee Borrower” - 5.26.2

 

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

 

16

 

2.                                      GENERAL
LOAN TERMS

 

2.1                               The
Loan.  The
outstanding principal amount of the Loan is $38,000,000.00, which shall mature
on the Stated Maturity Date.  Borrower
acknowledges that the Loan has been fully funded and that no amount repaid in
respect of the Loan may be reborrowed.

 

2.2                               Interest;
Monthly Payments.

 

2.2.1                     Generally.  From and after the date hereof, interest on
the unpaid Principal shall accrue at the Interest Rate and be payable as
hereinafter provided.  On the date
hereof, Borrower shall pay interest on the unpaid Principal from the date
hereof through and including the last day of the Interest Period in which the
date hereof occurs.  On December 9,
2010 and each Payment Date thereafter through and including the Maturity Date,
the interest on the Principal at the Interest Rate shall be payable in monthly
installments for the Interest Period during which such Payment Date
occurs.  All accrued and unpaid interest
shall be due and payable on the Maturity Date. 
If the Loan is repaid on any date other than on a Payment Date (whether
prior to or after the Stated Maturity Date), Borrower shall also pay interest
that would have accrued on such repaid Principal through and including the end
of the then current Interest Period.

 

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

 

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

 

2.2.4                     Breakage
Indemnity.  Borrower
shall indemnify Lender against any loss or expense which Lender may actually
sustain or incur in liquidating or redeploying deposits from third parties
acquired to effect or maintain the Loan or any part thereof as a consequence of
(i) any payment or prepayment of the Loan or any portion thereof made on a
date other than a Payment Date (it being understood that any
Casualty/Condemnation Prepayment shall, in accordance with Section 2.3.2,
only be applied on a Payment Date and shall therefore not trigger 

 

17

 

the provisions of this Section 2.2.4) and
(ii) any default in payment or prepayment of the Principal or any part
thereof or interest accrued thereon, as and when due and payable (at the date
thereof or otherwise, and whether by acceleration or otherwise).  Lender shall deliver to Borrower a statement
for any such sums which it is entitled to receive pursuant to this
Section 2.2.4, which statement shall be binding and conclusive absent
manifest error.

 

2.2.5                     Intentionally
Omitted.

 

2.3                               Loan
Repayment.

 

2.3.1                     Repayment.  Borrower shall repay the entire outstanding
Principal balance of the Note in full on the Maturity Date, together with
interest thereon to (but excluding) the date of repayment and any other amounts
due and owing under the Loan Documents. 
Except during the continuance of an Event of Default, all proceeds of
any repayment, including prepayments of the Loan, shall be applied by Lender as
follows in the following order of priority: First, Taxes
and Insurance Premiums, to the extent of any shortfall; Second,
to fees charged by the Deposit Bank, to the extent owing; Third,
to the FF&E Deposit Amount, to the extent of any shortfall, Fourth, to Approved Operating Expenses; Fifth,
to accrued and unpaid interest at the Interest Rate; and Sixth,
to Principal.

 

2.3.2                     Mandatory
Prepayments: Casualty/Condemnation Prepayment.  The Loan is subject to mandatory prepayment
in certain instances of Insured Casualty or Condemnation (each a “Casualty/Condemnation Prepayment”),
in the manner and to the extent set forth in Section 7.4.2.  Each Casualty/Condemnation Prepayment, after
deducting Lender’s out of pocket costs and expenses (including reasonable
attorneys’ fees and expenses) in connection with the settlement or collection
of the Proceeds or Award, provided no Event of Default exists, shall be applied
by Lender in the same manner as repayments under Section 2.3.1.  During the continuance of an Event of Default
and Casualty/Condemnation Prepayment may be applied by Lender to the Debt, in
such order and in such manner as Lender shall elect in its sole and absolute
discretion.  If any Casualty/Condemnation
Prepayment is made on any date other than a Payment date, then such
Casualty/Condemnation Prepayment shall be deposited into the
Casualty/Condemnation Prepayment Subaccount and applied as a prepayment on the
next Payment Date.

 

2.3.3                     Optional
Prepayments.  Borrower
shall have the right to prepay the Loan in whole but not in part at any time,
or as provided in Section 2.3.2, without prepayment premium or
consideration.

 

2.4                               Release
of Property.  Lender
shall, upon the written request and at the expense of Borrower, upon payment in
full of the Debt in accordance herewith, release or, if requested by Borrower,
assign to Borrower’s designee (without any representation or warranty by and
without any recourse against Lender whatsoever) the Lien of the Loan Documents
if not theretofore released.

 

2.5                               Payments
and Computations.

 

2.5.1                     Making
of Payments.  Each
payment by Borrower shall be made in funds settled through the New York
Clearing House Interbank Payments System or other funds 

 

18

 

immediately available to Lender by 2:00 p.m.,
New York City time, on the date such payment is due, to Lender by deposit
to such account as Lender may designate by written notice to Borrower.  Whenever any such payment shall be stated to
be due on a day that is not a Business Day, such payment shall be made on the
immediately preceding Business Day.  All
such payments shall be made irrespective of, and without any deduction, set-off
or counterclaim whatsoever and are payable without relief from valuation and
appraisement laws and with all costs and charges incurred in the collection or
enforcement thereof, including attorneys’ fees and court costs.  Failure of Borrower to pay when due any
amount for which adequate funds are available in the applicable Subaccount on
the date such amount is due shall not be an Event of Default hereunder.

 

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

 

2.5.3                     Late
Payment Charge.  If any
Principal (other than the payment in full of the Note at maturity), interest or
other sum due under any Loan Document is not paid by Borrower on the date on which
it is due, Borrower shall pay to Lender upon demand an amount equal to the
lesser of 5% of such unpaid sum or the maximum amount permitted by applicable
law (the “Late Payment Charge”), in
order to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment.  No such Late Payment
Charge shall be due or payable if adequate funds are available in the
applicable Subaccount on such due date and/or Lender or Deposit Bank failed to
allocate such funds to the applicable Subaccount for such payment.  Such amount shall be secured by the Loan
Documents.

 

2.6                               Interest
Rate Protection Agreements.

 

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

 

(1)                                 the Interest Rate Protection
Agreement is with a financial institution having a long term, unsecured and
unsubordinated debt rating of at least “A+” by S&P and “A1” by Moody’s (an “Acceptable Counterparty”), provides
that the only obligation of Borrower thereunder is the making of a single
payment upon the execution and delivery thereof, and is an interest rate cap in
respect of a notional amount not less than the outstanding Principal amount of
the Loan that shall have the effect of capping LIBOR at (i) 5.50% per annum through the thirty-sixth (36th) scheduled full Payment
Date and (ii) 6.00% per annum
thereafter and during any extended term. 
The term of the initial Interest Rate Protection Agreement shall run
through the thirty-sixth (36th) scheduled full Payment Date. 
Each replacement Interest Rate Protection Agreement shall have a minimum
term of one (1) year, and shall be obtained at least eight (8) days
prior to the expiration of the Interest Rate Protection Agreement that it is
replacing.

 

19

 

(2)                                 Borrower’s interest in such
Interest Rate Protection Agreement has been assigned to Lender pursuant to
documentation satisfactory to Lender in form and substance, and the
counterparty to such Interest Rate Protection Agreement has executed and
delivered to Lender an acknowledgment of such assignment, which acknowledgment
includes such counterparty’s agreement to pay directly into the Clearing
Account all sums payable by such counterparty pursuant to the Interest Rate
Protection Agreement and shall otherwise be satisfactory to Lender in form and
substance.  At such time as the Loan is
repaid in full, all of Lender’s right, title and interest in the Interest Rate
Protection Agreement shall terminate and Lender shall promptly execute and
deliver at Borrower’s sole cost and expense, such documents as may be required
to evidence Lender’s release of Lender’s security interest in the Interest Rate
Protection Agreement and to notify the issuer of such release.  In connection with any repayment of the Debt
permitted pursuant to this Agreement and at all times after Borrower has
provided written notice to the Lender of its intention to repay the Debt,
Lender shall exercise commercially reasonable efforts to cooperate with
Borrower in any efforts initiated by Borrower to (i) assign the Collateral
Assignment of Interest Rate Protection Agreement to a new lender or credit
provider chosen by Borrower or (ii) terminate or assign Borrower’s rights
under the Interest Rate Protection Agreement and to use the proceeds from such
termination or assignment to repay the Loan, to purchase a new interest rate
cap for use in replacement financing or any other use desired by Borrower.  In furtherance of the foregoing, Lender
hereby agrees that it shall execute and deliver all documents and instruments
reasonably requested by Borrower to evidence the termination or assignment of
the Assignment of Interest Rate Protection Agreement prior to the repayment of
the Debt, with such documents and instruments to be held in escrow by all
relevant parties and with an escrow agent reasonably acceptable to Lender
pending payment in full of the Debt. 
Borrower shall be responsible for any and all out of pocket costs and
expenses incurred by Lender pursuant to the foregoing provisions and any such
costs and expenses shall be paid to Lender or as otherwise directed by Lender
prior to the release of any documents delivered in escrow by Lender pursuant to
the immediately preceding sentence, or at such other time as Lender may (in its
sole discretion) make written demand therefor.

 

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

 

20

 

Agreement,
and any other agreement which the issuer has executed and delivered pursuant
thereto, has been duly executed and delivered by the issuer and constitutes the
legal, valid and binding obligation of the issuer, enforceable against the
issuer in accordance with its terms, subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally, and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at law).

 

(4)                                 In the event of any
downgrade, withdrawal or qualification of the rating of the issuer of the
Interest Rate Protection Agreement below “A” by S&P and “A2” by Moody’s,
Borrower shall replace the Interest Rate Protection Agreement with a
replacement Interest Rate Protection Agreement from an Acceptable Counterparty
(with terms identical to the Interest Rate Protection Agreement being replaced
in all material respects, or otherwise approved by Lender in its reasonable
discretion and the Rating Agencies) not later than thirty (30) days following
receipt of notice from Lender or the Servicer of such downgrade, withdrawal or
qualification; provided however, that Borrower shall not be required to enter
into a replacement Interest Rate Protection Agreement from an Acceptable
Counterparty if, within thirty (30) days following notice of such downgrade,
withdrawal or qualification of the rating of such issuer, (a) such issuer
or an Affiliate thereof posts additional collateral acceptable to the Rating
Agencies from time to time securing its obligations under the Interest Rate
Protection Agreement, or (b) an Affiliate of such issuer that is an
Acceptable Counterparty delivers a guaranty acceptable to the Rating Agencies
guaranteeing such issuer’s obligations under the Interest Rate Protection
Agreement.

 

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

 

2.6.3                     No
Obligation of Lender. 
Borrower agrees that Lender shall not have any obligation, duty or
responsibility to Borrower or any other Person by reason of, or in connection
with, any Interest Rate Protection Agreement (including any duty to provide or
arrange any Interest Rate Protection Agreement, to consent to any mortgage or
pledge of the Property or any portion thereof as security for Borrower’s
performance of its obligations under any Interest Rate Protection Agreement, or
to provide any credit or financial support for the obligations of Borrower or
any other Person thereunder or with respect thereto).  No Interest Rate Protection Agreement shall
alter, impair, restrict, limit or modify in any respect the obligation of
Borrower to pay interest on the Loan as and when the same becomes due and
payable in accordance with the provisions of the Loan Documents.

 

2.6.4                     Receipts
from Interest Rate Protection Agreements.  All payments made by the counterparty to the
Interest Rate Protection Agreement shall be deposited into the Borrower Deposit
Account and applied in the same manner as Rents are applied under
Section 3.12.

 

2.7                               Intentionally
Omitted.

 

2.8                               Extension
Options.  Borrower
shall have the right, at its option, to extend the Term until April 9,
2017 (the “First Extended Maturity Date”)
by giving written notice of such 

 

21

 

extension to Lender at least
fifteen (15) days prior to the Initial Maturity Date and delivering to Lender
therewith a deposit for Lender’s costs and expenses in the amount of
$12,500.  Upon receipt of such request to
extend the Term until the First Extended Maturity Date, and upon satisfaction
of the following conditions, Lender shall extend the Term as requested:

 

(a)                                 no Event of
Default exists at the time such request is made and on the Initial Maturity
date;

 

(b)                                 Borrower and
Lender enter into a loan extension agreement on the form typically used by
Servicer for loan extensions, with acknowledgment by Guarantor and Operating
Tenant;

 

(c)                                  Borrower has
reimbursed Lender for all costs and expenses incurred by Lender in connection
with such extension (including attorney’s fees and Servicer’s standard
processing fee for loan extensions, not to exceed $5,000; provided, however,
Borrower’s obligation pursuant to this Section 2.8(c) shall not
exceed $25,000.00;

 

(d)                                 Borrower pays
to Lender an extension fee in an amount equal to Twenty-Five Hundredths Percent
(0.25%) of the then-outstanding Principal; and

 

(e)                                  Borrower has
obtained one or more Interest Rate Protection Agreements effective through the
First Extended Maturity Date that satisfy the requirements of Section 2.6
of this Agreement, including the delivery of the required assignment thereof.

 

If
Borrower is unable to satisfy all of the foregoing conditions within the
applicable time frames for each, Lender shall have no obligation to extend the
Stated Maturity Date hereunder, and Borrower shall reimburse Lender all of its
costs and expenses as provided in this Section 2.8, subject to the
limitation on reimbursement contained herein. 
If the deposit paid to Lender exceeds Lender’s actual costs and
expenses, Lender shall refund the difference to Borrower.

 

3.                                      CASH
MANAGEMENT AND RESERVES

 

3.1                               Cash
Management Arrangements.  Borrower shall cause all Rents in the nature
of sums payable by issuers of credit cards accepted at the Property to be
transmitted directly into an Eligible Account (the “Clearing
Account”) maintained by Borrower or Operating Tenant at a local
bank selected by Borrower or Operating Tenant, which shall at all times be an
Eligible Institution (the “Clearing Bank”)
as more fully described in the Clearing Account Agreement.  Without in any way limiting the foregoing,
all Rents received by Borrower, Operating Tenant or Manager (including Rents
received from tenants under Leases) shall be deposited into the Clearing
Account within four (4) Business Days of receipt.  Funds deposited into the Clearing Account
shall be swept by the Clearing Bank into an Eligible Account for the deposit of
Operating Tenant’s funds at the Deposit Bank controlled by Lender (the “OT Deposit Account”) on each of the
following:  (i) each week, the last
weekday that is not a federal banking holiday, and (ii) each month, the
last weekday before the ninth (9th) day of the month that is not a federal banking
holiday.  Funds transferred from the
Clearing Account to the OT Deposit Account shall be applied and disbursed in
accordance with this Agreement and the Cash Management Agreement.  Lender will establish a separate Eligible
Account for the deposit of Borrower’s funds at the Deposit Bank controlled by
Lender (the “Borrower Deposit 

 

22

 

Account”, and together
with the OT Deposit Account, the “Deposit Accounts”)
into which certain funds shall be transferred and disbursed in accordance with
this Agreement and the Cash Management Agreement. Lender will also establish
subaccounts of the OT Deposit Account and the Borrower Deposit Account which
shall at all times be Eligible Accounts (and may be ledger or book entry
accounts and not actual accounts) (such subaccounts are referred to herein as “OT Subaccounts” or “Borrower Subaccounts”, as
applicable, or collectively as the “Subaccounts”)
as provided in this Agreement and the Cash Management Agreement. Except as
provided herein, funds in the Deposit Accounts shall be invested only in
Permitted Investments selected by Lender. The Deposit Accounts and any
Subaccounts will be under the sole control and dominion of Lender, and neither
Borrower nor Operating Tenant shall have any right of withdrawal
therefrom.  Borrower shall pay (or cause
Operating Tenant to pay) for all expenses of opening and maintaining all of the
above accounts as set forth in the Clearing Account Agreement and Cash
Management Agreement.

 

3.2                               Intentionally
Omitted.

 

3.3                               Taxes
and Insurance.  On each
Payment Date a portion of the Rents that have been deposited into the OT
Deposit Account during the immediately preceding Interest Period in an amount
equal to (i) one-twelfth of the Taxes that Lender estimates (based on
information provided by Borrower or Operating Tenant and the taxing authority)
will be payable during the next 12 months in order to accumulate with Lender
sufficient funds to pay all such Taxes at least 30 days prior to the
delinquency dates and (ii) one-twelfth of the Insurance Premiums that
Lender estimates (based on information provided by Borrower) will be payable
for the renewal of the coverage afforded by the Policies upon the expiration
thereof in order to accumulate with Lender sufficient funds to pay all such
Insurance Premiums at least 30 days prior to the expiration of the Policies,
shall be transferred by Lender to a Subaccount of the OT Deposit Account (the “Tax and Insurance Subaccount”).  Provided that no Event of Default has
occurred and is continuing, Lender will (a) apply funds in the Tax and
Insurance Subaccount to payments of Taxes and Insurance Premiums required to be
made by Borrower pursuant to Sections 5.2 and 7.1, provided that Borrower
or Operating Tenant has promptly supplied Lender with notices of all Taxes and
Insurance Premiums due, or (b) reimburse Borrower or Operating Tenant for
such amounts upon presentation of evidence of payment; subject, however, to
Borrower’s or Operating Tenant’s right to contest Taxes in accordance with
Section 5.2.  In making any payment
relating to Taxes and Insurance Premiums, Lender may do so according to any
bill, statement or estimate procured from the appropriate public office (with
respect to Taxes) or insurer or agent (with respect to Insurance Premiums),
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax, assessment, sale, forfeiture, tax lien or title or
claim thereof.  If Lender determines in
its reasonable judgment that the funds in the Tax and Insurance Subaccount will
be insufficient to pay (or in excess of) the Taxes or Insurance Premiums next
coming due, Lender may increase (or decrease) the monthly contribution required
to be made by Borrower and Operating Tenant to the Tax and Insurance
Subaccount.

 

23

 

3.4          FF&E and Capital Expense
Reserves.

 

3.4.1       FF&E Reserve.

 

(a)           On each Payment Date
beginning December 9, 2010, a portion of the Rents that have been
deposited into the Borrower Deposit Account during the immediately preceding
Interest Period in an amount equal to the FF&E Deposit Amount shall be
transferred by Lender into a Subaccount (the “FF&E
Reserve Subaccount”).

 

(b)           In addition, commencing with
the February 2011 Payment Date and on each Payment Date thereafter
occurring in February, May, August and November, either (i) the
FF&E Lender True-Up Amount shall be transferred by Lender into the FF&E
Reserve Subaccount from the Rents that have been deposited into the Deposit
Account during the immediately preceding Interest Period or (ii) the
FF&E Borrower True-Up Amount shall be transferred by Lender to the Borrower
from the FF&E Reserve Subaccount.

 

(c)           Provided that no Event of
Default has occurred and is continuing, Lender shall disburse funds held in the
FF&E Reserve Subaccount to
Borrower, within five (5) Business Days after the delivery by Borrower to
Lender of a request therefor (but not more often than twice per month), in
increments of at least $5,000 provided that (i) such disbursement is for
an Approved FF&E Expense or an Approved Capital Expense (other than
Identified Capital Expenses) and (ii) the request for disbursement is
accompanied by an Officer’s Certificate certifying (1) that such funds
will be used to pay or reimburse Borrower for Approved FF&E Expenses or
Approved Capital Expenses (other than Identified Capital Expenses) and a
description thereof, (2)  with respect to disbursements for Approved
Capital Expenses (other than Identified Capital Expenses), that no material
outstanding trade payables (other than those to be paid from the requested
disbursement or those constituting Permitted Indebtedness) are delinquent, (3) that
the same has not been the subject of a previous disbursement, and (4) that
all previous disbursements have been used to pay the previously identified
Approved FF&E Expenses or Approved Capital Expenses (other than Identified
Capital Expenses), as applicable.  During
a Cash Trap Period, any such disbursement of more than $10,000 to pay (rather
than reimburse) Approved FF&E Expenses or Approved Capital Expenses (other than
Identified Capital Expenses) may, at Lender’s option, be made by joint check
payable to Borrower and the payee on such Approved FF&E Expenses or
Approved Capital Expenses.

 

3.4.2       Capital Expense Reserve.  On the date
hereof, Borrower shall deposit $7,500,000 (the
“Capital Reserve Funds”) into a
Subaccount of the Borrower Deposit Account (the “Capital
Reserve Subaccount”).  The
deposit required herein will be in addition to any amounts currently on deposit
in the Capital Reserve Subaccount. 
Borrower has not pledged, transferred, assigned and/or granted any
security interest in the Capital Reserve Subaccount or the Capital Reserve
Funds, therein, to any Person other than Lender.  No portion of the Capital Reserve Funds shall
be withdrawn from the Capital Reserve Funds Account except to pay for Approved
Capital Expenses incurred by Borrower in accordance with the terms and
conditions of the Approved Capital Budget and this Agreement, except otherwise
expressly provided herein.  The Capital
Reserve Funds may be invested in Permitted Investments so long as any interest
earned in connection therewith is added to and becomes part of the Capital
Reserve Funds.

 

24

 

(b)           Provided that no Event of
Default has occurred and is continuing, Lender shall disburse funds held in the
Capital Reserve Subaccount to
Borrower, within five (5) Business Days after the delivery by Borrower to
Lender of a request therefor (but not more often than twice per month), in
increments of at least $5,000 provided that (i) such disbursement is for
an Identified Capital Expense; (ii) if
such disbursement is for an Identified Capital Expense that is a Significant
Capital Expenses and is in excess of $50,000, Lender shall have (if it
reasonably desires) verified (by a non-invasive inspection conducted at
Borrower’s expense) performance of the work associated with such Significant
Capital Expenses; and (iii)  the request for disbursement is accompanied
by (A) an Officer’s Certificate certifying (1) that such funds will
be used to pay or reimburse Borrower for Identified Capital Expenses and a description thereof, and (2) that no
material outstanding trade payables (other than those to be paid from the
requested disbursement or those constituting Permitted Indebtedness) are
delinquent, and (B) lien waivers (for Significant Capital Expenses in
excess of $50,000 only) or other evidence of payment satisfactory to Lender,
and (C) if such disbursement is for Significant Capital Expenses and is in
excess of $50,000, at Lender’s option, a title search for the Property
indicating that the Property is free from all Liens, claims and other
encumbrances not previously approved by Lender. 
Any such disbursement of more than $10,000 to pay (rather than reimburse)
Identified Capital Expenses may,
at Lender’s option, be made by joint check payable to Borrower and the payee on
such Identified Capital Expenses.

 

(c)           Borrower shall, no later
than thirty-six months from the date hereof, (i) complete those
improvements and repairs itemized as Identified Capital Expenses and (ii) expend
not less than $7,500,000.00 on Approved Capital Expenses. Notwithstanding the
foregoing, the thirty-six month period will be extended for a period of time
equal to the time lost due to any cause beyond Borrower’s reasonable control,
including without limitation, acts of God, natural disasters (earthquake,
hurricane, tsunami), terrorism, governmental delays related to permitting or
other approvals, and the failure of suppliers, contractors, sub-contractors or
other third-parties involved in the construction of the improvements or repairs
to perform in a timely manner. Borrower shall give prompt written notice to
Lender of the occurrence of any such delay and shall identify with reasonable specificity
the cause relied upon and the duration of such delay.

 

3.5          Intentionally Omitted.

 

3.6          Operating Expenses and Carry
Subaccounts.

 

3.6.1       Operating Expense Subaccount.  A portion of the Rents that have been
deposited into the OT Deposit Account during any Interest Period, in an amount
equal to the monthly amount set forth in the Approved Operating Budget for the
following month as being necessary for payment of Approved Operating Expenses
at the Property for such month, shall be transferred into a Subaccount of the
OT Deposit Account (the “Operating Expense
Subaccount”) so that they may be disbursed pursuant to the
succeeding sentence.  Provided no Event
of Default has occurred and is continuing, Lender shall disburse to Operating
Tenant the funds transferred into the Operating Expense Subaccount on a daily
basis in accordance with Section 3.12 for the payment of Approved
Operating Expenses.  In addition to the
Approved 

 

25

 

Operating Expenses which are included in the
Approved Operating Budget and provided no Event of Default is continuing,
Borrower or Operating Tenant may request that Lender approve and disburse
amounts with respect to such additional operating expenses as are incurred by
or on behalf of Operating Tenant or Borrower but which are not included in the
Approved Operating Budget.  Operating
Tenant or Borrower may make such approval requests from time to time (but not
more often than weekly) provided such disbursement is accompanied by (A) an
Officer’s Certificate in the form attached hereto as Schedule 7 (an
“Operating Expense Certificate”) and (B) reasonably
detailed documentation satisfactory to Lender as to the amount and purpose
therefor.  Lender’s approval under this
Section 3.6.1 shall not be unreasonably withheld, conditioned or delayed
(and once approved, such operating expenses shall be Approved Operating
Expenses).  Disbursement by Lender of
Approved Operating Expenses pursuant to this Section 3.6.1 shall not be
unreasonably delayed.

 

3.6.2       Carry Subaccount.

 

(a)           On the date hereof, Borrower
shall deposit with Lender the aggregate amount of $1,000,000
for the purpose of creating a reserve for certain shortfalls in payments due
hereunder.  Lender shall cause such
amount to be transferred to a Subaccount of the Borrower Deposit Account (the “Carry Subaccount”).  The deposit required herein will be in
addition to any amounts currently on deposit in the Capital Reserve
Subaccount.  Provided no Event of Default
is continuing, Lender shall, if requested by Borrower at least five
(5) days prior to any Payment Date, and otherwise may, at Lender’s
election, disburse to itself funds held in the Carry Subaccount to pay Borrower’s
or Operating Tenant’s payment obligations under clauses (i) through (v) of
Section 3.12(a), to the extent that a shortfall with respect to Borrower’s
or Operating Tenant’s payment obligations with respect to any of the foregoing
exists on any Payment Date (a “Shortfall”)
and such disbursement shall be credited towards such payment obligation.  Provided that funds on deposit in the Carry
Subaccount are adequate to cover such Shortfall, no Event of Default (if such
Shortfall would otherwise result in an Event of Default) shall be deemed to
have occurred as a result of such Shortfall. 
If Lender elects or is requested to disburse funds to itself in
accordance with this Section 3.6.2(a), Lender shall, concurrently
therewith, provide Borrower with written notice of such disbursement and the
amount of such Shortfall.

 

(b)           Provided no Event of Default
is continuing on October 9, 2012, any funds remaining in the Carry
Subaccount shall be disbursed to the Borrower.

 

(c)           Funds from the Carry
Subaccount shall not be used to pay Operating Tenant’s rent obligations to
Borrower under the Affiliate Lease.

 

3.7          Intentionally Omitted.

 

3.8          Casualty/Condemnation Subaccount.  Borrower shall pay, or cause to be paid, to
Lender all Proceeds or Awards due to any Casualty or Condemnation to be
transferred to a Subaccount of the Borrower Deposit Account (the “Casualty/Condemnation Subaccount”)
in accordance with the provisions of Section 7.  All amounts in the Casualty/Condemnation
Subaccount shall be disbursed in accordance with the provisions of
Section 7 and Section 2.3.2.

 

26

 

3.9          Security Deposits.  Borrower and Operating Tenant shall keep and
hold all security deposits under Leases in accordance with applicable Legal
Requirements and at a separately designated account under Borrower’s or
Operating Tenant’s control at the Clearing Bank (and in the case of a letter of
credit, assigned with full power of attorney and executed sight drafts to
Lender) so that the security deposits shall not be commingled with any other
funds of Borrower or Operating Tenant (such account, the “Security
Deposit Account”).  Any
letter of credit or other instrument that Borrower or Operating Tenant receives
in lieu of a cash security deposit under any Lease entered into after the date
hereof shall (i) be maintained in full force and effect in the full amount
unless drawn upon pursuant to Borrower’s or Operating Tenant’s rights under the
applicable Lease or replaced by a cash deposit as hereinabove described and
(ii) if permitted pursuant to any Legal Requirements, name Lender as payee
or mortgagee thereunder (or at Lender’s option, be fully assignable to Lender).

 

3.10        Cash Collateral Subaccount.  If a Cash Trap Period shall have commenced,
then on the immediately succeeding Payment Date and on each Payment Date
thereafter during the continuance of such Cash Trap Period, all Available Cash
shall be paid to Lender, which amounts shall be transferred by Lender either
from the funds of Operating Tenant into a Subaccount of the OT Deposit Account
(the “OT  Cash
Collateral Subaccount”), or from the funds of Borrower into a
Subaccount of the Borrower Deposit Account (the “Borrower
Cash Collateral Subaccount”), both
constituting cash collateral for the Debt. 
Any funds in the Borrower Cash Collateral Account and not previously
disbursed or applied shall be disbursed to Borrower upon the termination of
such Cash Trap Period.  Any funds in the
OT Cash Collateral Subaccount and not previously disbursed or applied shall be
disbursed to Operating Tenant upon the termination of such Cash Trap Period.  Lender shall have the right, but not the
obligation, at any time during the continuance of an Event of Default to apply
all sums then on deposit in the Borrower Cash Collateral Subaccount and the OT
Cash Collateral Account to the Debt, in such order and in such manner as Lender
shall elect in its sole and absolute discretion, including to make a prepayment
of Principal.

 

3.11        Grant of Security Interest;
Application of Funds.  As
security for payment of the Debt and the performance by Borrower and Operating
Tenant of all other terms, conditions and provisions of the Loan Documents,
Borrower hereby pledges and assigns to Lender, and grants to Lender a security
interest in, all Borrower’s right, title and interest in and to all Rents and
in and to all payments to or monies held in the Clearing Account, the Deposit
Account, all Subaccounts created pursuant to this Agreement or the Cash
Management Agreement (collectively, the “Cash Management Accounts”).  Borrower hereby grants to Lender a continuing
security interest in, and agrees to hold in trust for the benefit of Lender,
all Rents in its possession prior to the (i) payment of such Rents to
Lender or (ii) deposit of such Rents into the Borrower Deposit Account or
the OT Deposit Account. Borrower shall not, without obtaining the prior written
consent of Lender, further pledge, assign or grant any security interest in any
Cash Management Accounts, or permit any Lien to attach thereto, or any levy to
be made thereon, or any UCC Financing Statements, except those naming Lender as
the secured party, to be filed with respect thereto.  This Agreement is, among other things,
intended by the parties to be a security agreement for purposes of the UCC.  Upon the occurrence and during the
continuance of an Event of Default, Lender may apply any sums in any Cash
Management Accounts in any order and in any manner as Lender shall elect in
Lender’s discretion without seeking the appointment of a receiver and without
adversely affecting the rights of Lender to 

 

27

 

foreclose the Lien of the Mortgage or exercise its
other rights under the Loan Documents. 
Cash Management Accounts shall not constitute trust funds and may be
commingled with other monies held by Lender. 
All interest which accrues on the funds in any Cash Management Account
or the OT Deposit Account (other than the Tax and Insurance Subaccount) shall
accrue for the benefit of Borrower and shall be taxable to Borrower or
Operating Tenant, as applicable, and shall be added to and disbursed in the
same manner and under the same conditions as the principal sum on which said
interest accrued.  Upon repayment in full
of the Debt, all remaining funds in the Borrower Subaccounts, if any, shall be
promptly disbursed to Borrower and all remaining funds in the OT Subaccounts,
if any, shall be promptly disbursed to Operating Tenant.

 

3.12        Property Cash Flow Allocation.

 

(a)           All Rents and any other
funds deposited into the OT Deposit Account or the Borrower Deposit Account
during the current Interest Period or any prior Interest Periods as required by
this Agreement and as may be transferred into various Subaccounts in accordance
with this Agreement and the Cash Management Agreement, shall be applied on each
Payment Date as follows in the following order of priority:

 

(i)            First, from the OT Deposit
Account (or from the Borrower Deposit Account if or to the extent there are
insufficient funds in the OT Deposit Account to make such payment) to make
payments into the Tax and Insurance Subaccount as required under
Section 3.3;

 

(ii)           Second, from the OT Deposit
Account (or from the Borrower Deposit Account if or to the extent there are
insufficient funds in the OT Deposit Account to make such payment) to pay the
monthly portion of the fees charged by the Deposit Bank in accordance with the
Cash Management Agreement;

 

(iii)          Third, from the OT Deposit
Account (or from the Borrower Deposit Account if or to the extent there are
insufficient funds in the OT Deposit Account to make such payment) to pay the
amount required under Section 3.4.1 for the FF&E Reserve Subaccount;

 

(iv)          Fourth, from the OT Deposit
Account (or from the Borrower Deposit Account if or to the extent there are
insufficient funds in the OT Deposit Account to make such payment) to pay the
amount required under Section 3.6.1 for the Operating Expense Subaccount;

 

(v)           Fifth, from the OT Deposit
Account to pay to the Borrower Deposit Account the monthly payment owed by
Operating Tenant to Borrower under the Affiliate Lease;

 

(vi)          Sixth, from the Borrower
Deposit Account (or from the OT Deposit Account if or to the extent there are
insufficient funds in the Borrower Deposit Account to make such payment) to pay
the amount required to pay the interest due on such Payment Date plus, if
applicable, interest at the Default Rate and all other amounts then due to
Lender under the Loan Documents (excluding those amounts described under other
clauses of this Section 3.12(a) and outstanding Principal with
respect the Loan) and 

 

28

 

to pay the monthly portion
of the fees charged by the Deposit Bank in accordance with the Cash Management
Agreement; and

 

(vii)         Lastly, to make payments in
an amount equal to (A) all Available Cash in the Borrower Deposit Account
on such Payment Date (I) to Borrower provided no Cash Trap Period is
continuing, or (II) into the Borrower Cash Collateral Subaccount in
accordance with Section 3.10, and (B) all Available Cash in the OT
Deposit Account on such Payment Date (I) to Operating Tenant provided no
Cash Trap Period is continuing, or (II) into the OT Cash Collateral
Subaccount in accordance with Section 3.10.

 

(b)           The failure of Borrower or
Operating Tenant to make all of the payments required under clauses (i) through
(vi) of Section 3.12(a) in full on each Payment Date shall
constitute an Event of Default under this Agreement; provided, however, if
adequate funds are available in the OT Deposit Account and the Borrower Deposit
Account (including the Carry Subaccount) for such payments, the failure by the
Deposit Bank to allocate such funds into the appropriate Subaccounts shall not
constitute an Event of Default.

 

(c)           Notwithstanding anything to
the contrary contained in this Section 3.12 or elsewhere in this Agreement,
provided (i) no Event of Default is continuing and sufficient funds have
accumulated in the OT Deposit Account and the Borrower Deposit Account in the
given Interest Period to make payment on the next Payment Date of all amounts
referred to in clauses (i), (ii) and (iii) of
Section 3.12(a), then the Approved Operating Expense payments to Borrower
under clause (iv) of Section 3.12(a) shall be made to Operating
Tenant on a daily basis and (ii) no Event of Default is continuing and
sufficient funds have accumulated in the OT Deposit Account and the Borrower
Deposit Account in the given Interest Period to make payment on the next
Payment Date of all amounts referred to in clauses (i) through (vi) of
Section 3.12(a), then the Available Cash shall be paid to Borrower or
Operating Tenant, as applicable, under clause (vii) of Section 
3.12(a) on a daily basis.

 

4.             REPRESENTATIONS
AND WARRANTIES

 

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

 

4.1          Organization; Special Purpose.  Each of Borrower, Operating Tenant and Sole
Member has been duly organized and is validly existing and in good standing
under the laws of the state of its formation, with requisite power and
authority, and all rights, licenses, permits and authorizations, governmental
or otherwise, necessary to own its properties and to transact the business in
which it is now engaged.  Each of
Borrower, Operating Tenant and Sole Member is duly qualified to do business and
is in good standing in each jurisdiction where it is required to be so
qualified in connection with its properties, business and operations.  Each of Borrower, Operating Tenant and Sole
Member is a Special Purpose Bankruptcy Remote Entity.

 

29

 

4.2          Proceedings; Enforceability.  Borrower and Operating Tenant has taken all
necessary action to authorize the execution, delivery and performance of the
Loan Documents to which it is a party. 
The Loan Documents to which each of Borrower and Operating Tenant is a
party have been duly executed and delivered by Borrower or Leasehold Tenant, as
applicable.  The Loan Documents
constitute legal, valid and binding obligations of Borrower and Operating
Tenant enforceable against Borrower and Operating Tenant Tenant, as applicable,
in accordance with their respective terms, subject to applicable bankruptcy,
insolvency and similar laws affecting rights of creditors generally, and general
principles of equity.  The Loan Documents
are not subject to, and neither Borrower nor Operating Tenant has asserted, any
right of rescission, set-off, counterclaim or defense, including the defense of
usury.

 

4.3          No Conflicts.  The execution, delivery and performance of
the Loan Documents by Borrower and Operating Tenant and the transactions
contemplated hereby will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, or result in the
creation or imposition of any Lien (other than pursuant to the Loan Documents)
upon any of the property of Borrower or the Operating Tenant pursuant to the
terms of, any agreement or instrument to which Borrower or the Operating Tenant
is a party or by which its property is subject, nor, to the best of Borrower’s
knowledge, will such action result in any violation of the provisions of any
statute or any order, rule or regulation of any Governmental Authority
having jurisdiction over Borrower or any of its properties.  Borrower’s and Operating Tenant’s rights
under the Licenses will not be adversely affected by the execution and delivery
of the Loan Documents, Borrower’s and Operating Tenant’s performance thereunder
or the recordation of the Mortgage.  Any
consent, approval, authorization, order, registration or qualification of or
with any Governmental Authority required for the execution, delivery and
performance by Borrower and Operating Tenant of the Loan Documents has been
obtained and is in full force and effect.

 

4.4          Litigation.  Except as set forth on Schedule 2,
there are no actions, suits or other proceedings at law or in equity by or
before any Governmental Authority now pending or, to Borrower’s knowledge,
threatened against or affecting Borrower, Operating Tenant or Sole Member,
which, if adversely determined, might materially adversely affect the condition
(financial or otherwise) or business of Borrower or Operating Tenant (including
the ability to carry out their respective obligations under the Loan Documents),
Sole Member or the use, value, condition or ownership of the Property.

 

4.5          Agreements.  Neither Borrower nor Operating Tenant is a
party to any agreement or instrument or, to Borrower’s knowledge, subject to
any restriction which might adversely affect Borrower, Operating Tenant or the
Property, or Borrower’s or Operating Tenant’s business, properties, operations
or condition, financial or otherwise. 
Neither Borrower nor Operating Tenant is in default in any material
respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Permitted Encumbrance or
any other agreement or instrument to which it is a party or by which it or the
Property is bound.

 

4.6          Title.  As of the Effective Date of this Agreement,
Borrower will have good and marketable title to the Property, free and clear of
all Liens except the Permitted Encumbrances. 
All transfer taxes, deed stamps, intangible taxes or other amounts in
the nature 

 

30

 

of transfer taxes required to be paid by any Person
under applicable Legal Requirements in connection with the transfer of the
Property to Borrower have been paid.  The
Loan Documents create (i) a valid, perfected first priority lien on the
Borrower’s and Operating Tenant’s interests in the Property and (ii) valid
and perfected first priority security interests in and to, and perfected
collateral assignments of, all personalty owned by Borrower and Operating
Tenant (including the Leases) which is capable of perfection by such recording,
all in accordance with the terms thereof, in each case subject only to any
applicable Permitted Encumbrances.  All
mortgage, recording, stamp, intangible or other similar taxes required to be
paid by any Person under applicable Legal Requirements in connection with the
execution, delivery, recordation, filing, registration, perfection or
enforcement of any of the Loan Documents have been (or will, contemporaneously
with such recordation or filing, be) paid by Borrower or Operating Tenant.  The Permitted Encumbrances do not materially
adversely affect the value, operation or use of the Property, or Borrower’s
ability to repay the Loan.  To Borrower’s
knowledge, no Condemnation or other proceeding has been commenced or is
contemplated with respect to all or part of the Property or for the relocation
of roadways providing access to the Property. 
To Borrower’s knowledge, there are no claims for payment for work, labor
or materials affecting the Property which are or may become a Lien prior to, or
of equal priority with, the Liens created by the Loan Documents.  To Borrower’s knowledge, there are no
outstanding options to purchase or rights of first refusal affecting all or any
portion of the Property.  To Borrower’s
knowledge, the survey for the Property delivered to Lender (the “Survey”) does not fail to reflect
any material matter affecting the Property or the title thereto.  To Borrower’s knowledge, all of the
Improvements included in determining the appraised value of the Property lie
wholly within the boundaries and building restriction lines of the Property,
and except as set forth on the Survey, no improvement on an adjoining property
encroaches upon the Property, and no easement or other encumbrance upon the
Property encroaches upon any of the Improvements, except those insured against
by the Title Insurance Policy.  To
Borrower’s knowledge, each parcel comprising the Property is a separate tax lot
and is not a portion of any other tax lot that is not a part of the
Property.  To Borrower’s knowledge, there
are no pending or proposed special or other assessments for public improvements
or otherwise affecting the Property, or any contemplated improvements to the
Property that may result in such special or other assessments.  With respect to the Title Insurance Policy,
the premium with respect thereto has been paid in full (or will be paid in full
as of the Effective Date).

 

4.7          No Bankruptcy Filing.  Borrower is not contemplating either the
filing of a petition by it under any state or federal bankruptcy or insolvency
law or the liquidation of all or a major portion of its property (a “Bankruptcy Proceeding”), and
Borrower has no knowledge of any Person contemplating the filing of any such
petition against it.  In addition, none
of Borrower, Operating Tenant or Guarantor has been a party to, or the subject
of a Bankruptcy Proceeding for the past ten years.  In addition, Borrower does not have any
intention to do any of the following within the 180 days of the date hereof: (i) seek
consent to or not contest the appointment of a receiver or trustee for itself
or for all or any part of its property, or (ii) make a general assignment
for the benefit of its creditors.

 

4.8          Full and Accurate Disclosure.  No statement of fact made by Borrower or
Operating Tenant in any Loan Documents contains any untrue statement of a
material fact or omits to state any material fact necessary to make statements
contained therein not misleading.  There
is no material fact presently known to Borrower that has not been disclosed to
Lender 

 

31

 

which materially adversely affects, or, as far as
Borrower can foresee, is reasonably likely to materially adversely affect, the
Property or the business, operations or condition (financial or otherwise) of
Borrower or Operating Tenant.  All
financial data, including the statements of cash flow and income and operating
expense, that have been delivered to Lender in respect of Borrower and
Operating Tenant and, to Borrower’s knowledge, the Property (i) are true,
complete and correct in all material respects, (ii) accurately represent
the financial condition of  Borrower,
Operating Tenant and the Property as of the date of such reports, and
(iii) to the extent prepared by an independent certified public accounting
firm, have been prepared in conformity with GAAP consistently applied
throughout the periods covered, except as disclosed therein.  Neither Borrower nor Operating Tenant have
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments, unrealized or anticipated losses from any unfavorable commitments
that are known to Borrower or any liabilities or obligations not expressly
permitted by this Agreement.  Since the
date of such financial statements, there has been no materially adverse change
in the financial condition, operations or business of Borrower, Operating
Tenant or the Property from that set forth in said financial statements.

 

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

 

4.10        No Plan Assets.  Except as set forth on Schedule 2,
as of the date hereof and throughout the Term (i) neither Borrower nor Operating
Tenant is nor will either be an “employee benefit plan,” as defined in
Section 3(3) of ERISA, (ii) none of the assets of Borrower or
Operating Tenant constitutes or will constitute “plan assets” of one or more
such plans within the meaning of 29 C.F.R. Section 2510.3-101,
(iii) neither Borrower nor Operating Tenant is nor will either be a “governmental
plan” within the meaning of Section 3(32) of ERISA, and
(iv) transactions by or with Borrower and Operating Tenant are not and
will not be subject to state statutes regulating investment of, and fiduciary
obligations with respect to, governmental plans.  As of the date hereof, neither Borrower,
Operating Tenant nor any member of a “controlled group of corporations” (within
the meaning of Section 414 of the Code) maintains, sponsors or contributes
to a “defined benefit plan” (within the meaning of Section 3(35) of ERISA)
or a “multiemployer pension plan” (within the meaning of Section 3(37)(A) of
ERISA).

 

4.11        Compliance.  Except as set forth on Schedule 2,
Borrower and Operating Tenant and, to Borrower’s knowledge, the Property and
the use thereof comply in all material respects with all applicable Legal
Requirements (including with respect to parking and applicable zoning and land
use laws, regulations and ordinances). 
Borrower and Operating Tenant are not in default or violation of any
order, writ, injunction, decree or demand of any Governmental Authority, the
violation of which might materially adversely affect the condition (financial
or otherwise) or business of Borrower or Operating Tenant.  The Property is used exclusively for hotel
and ancillary retail use and other appurtenant and related uses.  To Borrower’s knowledge, except as set forth
on Schedule 2, in the event that all or any part of the 

 

32

 

Improvements are destroyed or damaged, said
Improvements can be legally reconstructed to substantially the same condition
as prior to such damage or destruction, and thereafter exist for the same use
without violating any zoning or other ordinances applicable thereto and without
the necessity of obtaining any variances or special permits.  To Borrower’s knowledge, no legal proceedings
are pending or threatened with respect to the zoning of the Property.  To Borrower’s knowledge and except as
disclosed in the Title Policy, neither the zoning nor any other right to
construct, use or operate the Property is in any way dependent upon or related
to any property other than the Property. 
To Borrower’s knowledge, except as set forth on Schedule 2,
all certifications, permits, licenses and approvals, including certificates of
completion and occupancy permits required for the legal use, occupancy and
operation of the Property (collectively, the “Licenses”),
have been obtained and are in full force and effect.  To Borrower’s knowledge, the use being made
of the Property is in conformity with the certificate of occupancy issued for
the Property and all other restrictions, covenants and conditions affecting the
Property.

 

4.12        Contracts.  To Borrower’s knowledge, other than the
Management Agreement, there are no material service, maintenance or repair
contracts affecting the Property that are not terminable on one month’s notice
or less without cause and without penalty or premium.  To Borrower’s knowledge, all service,
maintenance or repair contracts affecting the Property have been entered into
at arms-length in the ordinary course of Borrower’s or Operating Tenant’s
business (or that of its predecessor in interest) and provide for the payment
of fees in amounts and upon terms comparable to existing market rates.

 

4.13        Federal Reserve Regulations;
Investment Company Act.  Neither Borrower nor Operating Tenant is
(i) an “investment company” or a company “controlled” by an “investment
company,” within the meaning of the Investment Company Act of 1940, as amended;
or (ii) a “holding company” or a “subsidiary company” of a “holding
company” or an “affiliate” of either a “holding company” or a “subsidiary
company” within the meaning of the Public Utility Holding Company Act of 1935,
as amended.

 

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

 

4.15        Physical Condition.  To Borrower’s knowledge, except as set forth
in Schedule 2, the Property, including all Improvements, parking facilities and
systems are in good condition, order and repair in all material respects; there
exists no structural or other material defect or damages to the Property,
whether latent or otherwise.  Neither
Borrower nor Operating Tenant has received written notice from any insurance
company or bonding company of any defect or inadequacy in the Property, or any
part thereof, which would adversely affect its insurability or cause the
imposition of extraordinary premiums or charges thereon or any

 

33

 

termination of any policy of insurance or bond.  To Borrower’s knowledge, no portion of the
Improvements is located in an area as identified by the Federal Emergency
Management Agency as an area having special flood hazards.  To Borrower’s knowledge, except as set forth
in Schedule 2 or contemplated by Schedule 8, the
Improvements have suffered no material casualty or damage which has not been
fully repaired and the cost thereof fully paid.

 

4.16        Leases.  To Borrower’s knowledge, the rent roll
attached hereto as Schedule 3 (the “Rent
Roll”) is true, complete and correct in all material respects
and the Property is not subject to any Leases other than the Leases described
in the Rent Roll.  To Borrower’s
knowledge, except as set forth on the Rent Roll:  (i) each Lease is in full force and
effect; (ii) the tenants under the Leases have accepted possession of and
are in occupancy of all of their respective demised premises, have commenced
the payment of rent under the Leases, and, to Borrower’s knowledge, there are
no offsets, claims or defenses to the enforcement thereof; (iii) all rents
due and payable under the Leases have been paid and no portion thereof has been
paid for any period more than 30 days in advance; (iv) the rent payable
under each Lease is the amount of fixed rent set forth in the Rent Roll, and,
to Borrower’s knowledge, there is no claim or basis for a claim by the tenant
thereunder for an adjustment to the rent; (v) no tenant has made any claim
against the landlord under any Lease which remains outstanding, there are no
defaults on the part of the landlord under any Lease, and no event has occurred
which, with the giving of notice or passage of time, or both, would constitute
such a default; (vi) there is no present material default by the tenant
under any Lease; (vii) all security deposits under Leases are as set forth
on the Rent Roll and are held consistent with Section 3.9;
(viii) Borrower or Operating Tenant is the sole owner of the entire lessor’s
interest in each Lease; (ix) each Lease is the valid, binding and
enforceable obligation of the Borrower and Operating Tenant, as applicable; and
(x) no Person has any possessory interest in, or right to occupy, the
Property except under the terms of the Lease (other than in connection with
Hotel Transactions).  None of the Leases
contains any option to purchase or right of first refusal to purchase the
Property or any part thereof.  To
Borrower’s knowledge, neither the Leases nor the Rents have been assigned or
pledged except to Lender, and no other Person has any interest therein except
the tenants thereunder and Borrower.

 

4.17        Fraudulent Transfer.  Borrower has not entered into the Transfer
and Assumption (as defined in the Consent Agreement for use in this paragraph),
and neither Borrower nor the Operating Tenant have entered into any Loan
Document, with the actual intent to hinder, delay, or defraud any creditor, and
Borrower and Operating Tenant have received reasonably equivalent value in
exchange for its obligations under the Loan Documents.  Giving effect to the transactions
contemplated by the Loan Documents, the fair saleable value of Borrower’s and
Operating Tenant’s respective assets exceed and will, immediately following the
execution and delivery of the Loan Documents, exceed Borrower’s and Operating
Tenant’s respective total probable liabilities, including subordinated,
unliquidated, disputed or contingent liabilities, including the maximum amount
of its contingent liabilities or its debts as such debts become absolute and
matured.  Neither Borrower’s nor
Operating Tenant’s assets currently, or immediately following the execution and
delivery of the Loan Documents, constitute unreasonably small capital to carry
out its business as conducted or as proposed to be conducted.  Neither Borrower nor Operating Tenant intend
to, and do not believe that either will, incur debts and liabilities (including
contingent liabilities and other commitments) beyond their respective 

 

34

 

ability to pay such debts as they mature (taking
into account the timing and amounts to be payable on or in respect of
obligations of Borrower and Operating Tenant).

 

4.18        Ownership of Borrower and
Operating Tenant.  The sole
member of Borrower is the Sole Borrower Member. 
The sole member of Operating Tenant is Sole OT Member.  The membership interests in Borrower,
Operating Tenant, Sole Borrower Member, and Sole OT Member are owned free and
clear of all Liens, warrants, options and rights to purchase.  Neither Borrower nor Operating Tenant has any
obligation to any Person to purchase, repurchase or issue any ownership
interest in it.  The organizational chart
attached hereto as Schedule 4 is complete and accurate.

 

4.19        Purchase Options.  Neither Borrower nor Operating Tenant has
granted any purchase options or other similar rights in favor of third parties
with respect to the Property or any part thereof.

 

4.20        Management Agreement.  The Management Agreement is in full force and
effect.  There is no default, breach or
violation existing thereunder, and no event has occurred (other than payments
due but not yet delinquent) that, with the passage of time or the giving of
notice, or both, would constitute a default, breach or violation thereunder, by
Borrower or Operating Tenant, or to Borrower’s knowledge, the Manager.

 

4.21        Hazardous Substances.  To Borrower’s knowledge, except as may
otherwise be set forth in the Environmental Report, (i) the Property is
not in violation in any material respect of any Legal Requirement pertaining to
or imposing liability or standards of conduct concerning environmental
regulation, contamination or clean-up, including the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Emergency Planning and Community
Right-to-Know Act of 1986, the Hazardous Substances Transportation Act, the
Solid Waste Disposal Act, the Clean Water Act, the Clean Air Act, the Toxic
Substance Control Act, the Safe Drinking Water Act, the Occupational Safety and
Health Act, any state super-lien and environmental clean-up statutes (including
with respect to Toxic Mold), any local law requiring related permits and
licenses and all amendments to and regulations in respect of the foregoing laws
(collectively, “Environmental Laws”);
(ii) the Property is not subject to any private or governmental Lien  nor has Borrower or Operating Tenant received
written notice of a judicial or administrative notice or action or, to Borrower’s
knowledge, inquiry, investigation or claim relating to hazardous or toxic
substances, or toxic mold or fungus of a type that may pose a risk to human
health or the environment or which requires remediation pursuant to applicable
law (“Toxic Mold”) or any other
substances or materials which are defined as hazardous or toxic under or
regulated by Environmental Laws (collectively, “Hazardous
Substances”; provided, however, that Hazardous Substances shall
not include de minimis quantities of such substances commonly used in the
ordinary course of business of, or day-to-day operation and maintenance of the
Property by, Borrower, Operating Tenant, Manager, any guest or any tenant at
the Property ); (iii) no Hazardous Substances are or have been (including
the period prior to Borrower’s acquisition of the Property), discharged,
generated, treated, disposed of or stored on, incorporated in, or removed or
transported from the Property other than in compliance in all material respects
with all Environmental Laws; (iv) no Hazardous Substances are present in,
on or under any nearby real property which are reasonably likely to migrate on
to or from the Property and require 

 

35

 

remediation by Borrower or Operating Tenant pursuant
to applicable law; (v) no Toxic Mold is on or about the Property which
requires remediation pursuant to applicable law; (vi) no underground
storage tanks exist on the Property and the Property has never been used as a
landfill; and (vii) there have been no written environmental investigations,
studies, audits, reviews or similar analyses conducted by or on behalf of
Borrower or Operating Tenant which have not been provided to Lender.

 

4.22        Name; Principal Place of Business.  Subject to the terms of the Franchise
Agreement, the hotel is operated under the name “Courtyard by Marriott Kauai at
Coconut Beach”.  Neither Borrower nor
Operating Tenant has done business, nor will either do business, under any name
other than such hotel name or its actual name set forth herein.  The principal place of business of Borrower
is its primary address for notices as set forth in Section 6.1, and
Borrower has no other place of business.

 

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

 

4.24        Intentionally Omitted.

 

4.25        Affiliate Lease.  Borrower hereby represents and warrants to
Lender the following with respect to the Affiliate Lease:

 

(a)           The Affiliate
Lease may not be canceled, terminated, surrendered or amended without the prior
written consent of Lender, which consent shall be reasonable with respect to
amendments, but otherwise may be withheld in Lender’s sole discretion;
provided, however, that Lender’s consent shall not be required for increases in
the amount of rent paid under the Affiliate Lease.

 

(b)           Operating
Tenant’s interest in the Affiliate Lease is not subject to any Liens or
encumbrances superior to, or of equal priority with, the assignment of the
Affiliate Lease by Operating Tenant to Lender.

 

(c)           Operating
Tenant’s interest in the Affiliate Lease is assignable to Lender without the
notice or consent of Borrower.  The Affiliate
Lease is further assignable by Lender, its successors and assigns without the
consent of Borrower or Operating Tenant.

 

(d)           As of the date
hereof, the Affiliate Lease is in full force and effect and no default has
occurred under the Affiliate Lease and there is no existing condition which,
but for the passage of time or the giving of notice, could result in a default
under the terms of the Affiliate Lease.

 

(e)           The Affiliate
Lease requires the landlord thereunder to give notice of any default by Operating
Tenant to Lender.  The Affiliate Lease
further provides that notice of termination given under the Affiliate Lease is
not effective against Lender unless a copy of the notice has been delivered to
Lender in the manner described in the Affiliate Lease.

 

36

 

(f)            Lender is
permitted the opportunity (including, where necessary, sufficient time to gain
possession of the interest of Operating Tenant under the Affiliate Lease) to
cure any default under the Affiliate Lease, which is curable after the receipt
of notice of any of the default before the landlord may terminate the Affiliate
Lease.

 

(g)           The Affiliate
Lease has a term of not less than seven and one-half years.

 

(h)           The Affiliate
Lease requires the landlord thereunder to enter into a new lease with Lender
upon termination of the Affiliate Lease for any reason, including rejection of
the Affiliate Lease in a bankruptcy proceeding.

 

(i)            Under the terms
of the Affiliate Lease, any insurance and condemnation proceeds will be applied
in accordance with this Agreement.

 

(j)            The Affiliate
Lease does not impose any restrictions on subleasing.

 

(k)           The Affiliate
Lease is subject and subordinate to the Lien of the Liens created by the
Mortgage.

 

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

 

5.             COVENANTS

 

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

 

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

 

5.2          Taxes and Other Charges.  Borrower or Operating Tenant shall pay all
Taxes and Other Charges prior to delinquency, and deliver to Lender receipts
for payment or other evidence satisfactory to Lender that the Taxes and Other
Charges have been so paid no later than 30 days before they would be delinquent
if not paid (provided, however, that Borrower and Operating Tenant need not pay
such Taxes nor furnish such receipts for payment of Taxes paid by Lender
pursuant to Section 3.3).  Borrower
and Operating Tenant shall not suffer and shall promptly cause to be paid and
discharged any Lien against the Property, and shall promptly pay for all
utility services provided to the Property. 
After prior notice to Lender, Borrower or Operating Tenant, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application of any Taxes or Other Charges, provided that (i) no Event of
Default has occurred and is continuing, (ii) such proceeding shall suspend
the collection of the Taxes or such Other 

 

37

 

Charges, (iii) such proceeding shall be
permitted under and be conducted in accordance with the provisions of any other
instrument to which Borrower or Operating Tenant is subject and shall not
constitute a default thereunder, (iv) no part of or interest in the
Property will be in danger of being sold, forfeited, terminated, canceled or
lost, (v) Borrower or Operating Tenant, as applicable, shall have
furnished such security as may be required in the proceeding, or as may be
requested by Lender, to insure the payment of any such Taxes or Other Charges,
together with all interest and penalties thereon, which shall not be less than
125% of the Taxes and Other Charges being contested (less amounts then being
retained in the Taxes and Insurance Subaccount to pay such Taxes so contested),
and (vi) Borrower or Operating Tenant, as applicable, shall promptly upon
final determination thereof pay the amount of such Taxes or Other Charges,
together with all costs, interest and penalties and Borrower or Operating
Tenant, as applicable, shall be permitted to use such security to make such
payment.  Lender may, with the prior
written approval of Borrower or Operating Tenant (not to be unreasonably
withheld), pay over any such security or part thereof held by Lender to the
claimant entitled thereto at any time when, the entitlement of such claimant is
established by a court of competent jurisdiction.  Provided no Default or Event of Default shall
have occurred and be continuing, upon delivery of evidence reasonably
satisfactory to Lender that such Taxes or Other Charges have been paid in full
or are otherwise no longer due and payable, any unused portion of any security
deposited with Lender pursuant to this Section 5.2 shall promptly be
released to Borrower or Operating Tenant, as applicable.

 

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

 

5.4          Repairs; Maintenance and
Compliance; Alterations.

 

5.4.1       Repairs; Maintenance and
Compliance.  Borrower
and Operating Tenant shall at all times maintain, preserve and protect all
franchises and trade names, and Borrower and Operating Tenant shall cause the
Property to be maintained in a good and safe condition and repair and shall not
remove, demolish or alter the Improvements or Equipment (except for Approved
FF&E Expenses, Approved Capital Expenses and alterations performed in
accordance with Section 5.4.2 and normal replacement of Equipment with
Equipment of equivalent value and functionality).  Borrower and Operating Tenant shall promptly
comply with all Legal Requirements and immediately commence, and shall
diligently pursue and obtain, the proper cure of any violation of a Legal
Requirement.  Borrower shall notify
Lender in writing within five Business Days after Borrower or Operating Tenant
first receives notice of any such non-compliance.  Borrower or Operating Tenant shall promptly
repair, replace or rebuild any part of the Property that becomes damaged, worn
or dilapidated and shall complete and pay for any Improvements at any time in
the process of construction or repair.

 

5.4.2       Alterations.  Borrower and Operating Tenant may, without
Lender’s consent, perform alterations to the Improvements and Equipment which
do not constitute a Material Alteration. 
Except for Approved Capital Expenditures, neither Borrower nor Operating
Tenant shall perform any Material Alteration without Lender’s prior written
consent, which consent shall not be unreasonably withheld or delayed; provided,
however, that Lender may, in 

 

38

 

its sole and absolute discretion, withhold consent
to any alteration the cost of which is reasonably estimated to exceed
$1,000,000.  Lender may, as a condition
to giving its consent to a Material Alteration, require that Borrower or
Operating Tenant deliver to Lender security for payment of the cost of such
Material Alteration in an amount equal to 125% of the cost of the Material
Alteration as estimated by Lender, which amount shall be periodically disbursed
to Borrower or Operating Tenant during the course of such Material Alteration
in accordance with procedures and requirements set forth in clauses
(i)-(iv) of Section 3.4.2(b) relating to disbursement of funds
from the Capital Reserve Subaccount. 
Upon substantial completion of the Material Alteration, Borrower or
Operating Tenant shall provide evidence satisfactory to Lender that
(i) the Material Alteration was constructed in accordance with applicable
Legal Requirements and substantially in accordance with plans and
specifications approved by Lender (which approval shall not be unreasonably
withheld or delayed), (ii) all contractors, subcontractors, materialmen
and professionals who provided work, materials or services in connection with
the Material Alteration have been paid in full and have delivered unconditional
releases of lien and (iii) all material Licenses necessary for the use,
operation and occupancy of the Material Alteration (other than those which
depend on the performance of tenant improvement work) have been issued.  Upon satisfaction of the foregoing
conditions, any unused security posted by Borrower or Operating Tenant shall be
returned to Borrower or Operating Tenant, as applicable.  Borrower shall reimburse Lender upon demand
for all reasonable out-of-pocket costs and expenses (including the reasonable
fees of any architect, engineer or other professional engaged by Lender)
incurred by Lender in reviewing plans and specifications or in making any
determinations necessary to implement the provisions of this
Section 5.4.2.  Provided that no
Event of Default is continuing, if Borrower or Operating Tenant provides Lender
with a written request for approval pursuant to this Section 5.4.2 (which
written request shall specifically refer to this Section 5.4.2 and shall
explicitly state that failure by Lender to approve or disapprove within twenty
(20) Business Days will constitute a deemed approval) and Lender fails to
reject the request in writing delivered to Borrower or Operating Tenant within
twenty (20) Business Days after receipt by Lender of the request, then such
Material Alteration shall be deemed approved by Lender.  If Lender rejects any proposed Material
Alteration (or any plans or specifications relating thereto), Lender shall,
together with such rejection, provide a reasonable description of the basis for
such rejection.

 

5.5          Performance of Other Agreements.  Borrower shall (and shall cause Operating
Tenant  to) observe and perform in all
material respects each and every term to be observed or performed by it
pursuant to the terms of any agreement or instrument affecting or pertaining to
the Property.

 

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

 

5.7          Further Assurances.  Borrower shall (and shall cause Operating
Tenant to), at Borrower’s or Operating Tenant’s sole cost and expense, as
applicable, (i) execute and deliver to Lender such documents, instruments,
certificates, assignments and other writings, and do such other acts necessary
or desirable, to evidence, preserve and/or protect the collateral at any time
securing or intended to secure the Debt and/or for the better and more
effective carrying out of 

 

39

 

the intents and purposes of the Loan Documents, as
Lender may reasonably require from time to time; and (ii) upon Lender’s
request therefor given from time to time during the continuance of any Event of
Default pay for (a) reports of UCC, federal tax lien, state tax lien,
judgment and pending litigation searches with respect to Borrower and Operating
Tenant and (b) searches of title to the Property, each such search to be
conducted by search firms reasonably designated by Lender in each of the
locations reasonably designated by Lender.

 

5.8          Environmental Matters.

 

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

 

5.8.2       Environmental Monitoring.

 

(a)           Borrower shall (and shall
cause Operating Tenant to) give prompt written notice to Lender of (i) any
proceeding or written inquiry by any party (including any Governmental
Authority) with respect to the presence of any Hazardous Substance on, under,
from or about the Property, (ii) all claims made or threatened in writing
by any third party (including any Governmental Authority) against Borrower,
Operating Tenant or the Property or any party occupying the Property relating
to any loss or injury resulting from any Hazardous Substance, and
(iii) Borrower’s or Operating Tenant’s discovery of any occurrence or
condition on any real property adjoining or in the vicinity of the Property that
would be likely to cause the Property to be subject to any investigation or
cleanup pursuant to any Environmental Law. 
Upon becoming aware of the presence of Toxic Mold or mold or fungus at
the Property in violation of any Environmental Laws, Borrower shall (or shall
cause Operating Tenant to) (i) undertake an investigation to identify the
source(s) of such mold or fungus and shall develop and implement an
appropriate remediation plan to eliminate the presence of any Toxic Mold,
(ii) perform or cause to be performed all acts reasonably necessary for
the remediation of any Toxic Mold (including taking any action necessary to
clean and disinfect any portions of the Property affected by Toxic Mold,
including providing any necessary moisture control systems at the Property),
and (iii) provide evidence reasonably satisfactory to Lender of 

 

40

 

the foregoing.  Borrower shall (and shall cause Operating
Tenant to) permit Lender to join and participate in, as a party if it so
elects, any legal or administrative proceedings or other actions initiated with
respect to the Property in connection with any Environmental Law or Hazardous
Substance, and Borrower or Operating Tenant shall pay all reasonable attorneys’
fees and disbursements incurred by Lender in connection therewith.

 

(b)           Upon Lender’s request, at
any time and from time to time but so long as no Event of Default is
continuing, no more often than once per year unless Lender in its reasonable
good faith judgment has reason to believe that there is a material
environmental contamination or violation of Environmental Law; in each case
only after reasonable prior notice (unless exigent circumstances exist),
Borrower shall (or shall cause Operating Tenant to) provide an inspection or
audit of the Property prepared by a licensed hydrogeologist, licensed
environmental engineer or qualified environmental consulting firm approved by
Lender assessing the presence or likely presence of Hazardous Substances on, in
or from the Property, and if Lender in its good faith judgment determines that
reasonable cause exists for the performance of such environmental inspection or
audit, then the cost and expense of such audit or inspection shall be paid by
Borrower or Operating Tenant. Such inspections and audit may include soil
borings and ground water monitoring if reasonably necessary to confirm the
presence or likely presence of Hazardous Substances or delineate the extent
thereof.  If Borrower or Operating Tenant
fails to provide any such inspection or audit within 30 days after such
request, Lender may order same, and Borrower hereby grants (and shall cause
Operating Tenant to grant) to Lender and its employees and agents reasonable
access to the Property, and upon prior written notice to Borrower, and a
license to undertake such inspection or audit subject to the rights of tenants
under the Leases and hotel guests.

 

(c)           If any environmental site
assessment report prepared in connection with such inspection or audit
reasonably recommends that an operations and maintenance plan be implemented
for any Hazardous Substance, whether such Hazardous Substance existed prior to
the ownership of the Property by Borrower, or presently exists or is reasonably
suspected of existing, Borrower shall (or shall cause Operating Tenant to)
cause such operations and maintenance plan to be prepared and implemented at
its expense upon reasonable request of Lender, and with respect to any Toxic
Mold, Borrower shall (or shall cause Operating Tenant to) take all action
necessary to clean and disinfect any portions of the Improvements affected by
Toxic Mold in or about the Improvements, including providing any necessary
moisture control systems at the Property. 
If any investigation, site monitoring, containment, cleanup, removal,
restoration or other response work of any kind is reasonably necessary to be
undertaken by Borrower or Operating Tenant under an applicable Environmental
Law (“Remedial Work”), Borrower
shall (or shall cause Operating Tenant to) commence all such Remedial Work
within 30 days after written demand by Lender and thereafter diligently
prosecute to completion all such Remedial Work within such period of time as
may be required under applicable law. 
All Remedial Work shall be performed by licensed contractors reasonably
approved in advance by Lender and under the supervision of a consulting
engineer reasonably approved by Lender. 
All costs of such Remedial Work shall be paid by Borrower or Operating
Tenant, including Lender’s reasonable attorneys’ fees and disbursements
incurred in connection with the monitoring or review of such 

 

41

 

Remedial Work.  If either Borrower or Operating Tenant does
not timely commence and diligently prosecute to completion the Remedial Work,
Lender may (but shall not be obligated to) cause such Remedial Work to be
performed at Borrower’s expense. 
Notwithstanding the foregoing, Borrower and Operating Tenant shall not
be required to commence such Remedial Work within the above specified time
period:  (x) if prevented from doing
so by any Governmental Authority, (y) if commencing such Remedial Work
within such time period would result in Borrower, Operating Tenant or such
Remedial Work violating any Environmental Law, or (z) if Borrower or
Operating Tenant, at its expense and after prior written notice to Lender, is
contesting by appropriate legal, administrative or other proceedings, conducted
in good faith and with due diligence, the need to perform Remedial Work.  Borrower and Operating Tenant shall have the
right to contest the need to perform such Remedial Work, provided that,
(1) Borrower or Operating Tenant, as applicable, is permitted by the
applicable Environmental Laws to delay performance of the Remedial Work pending
such proceedings, (2) neither the Property nor any part thereof or
interest therein will be sold, forfeited or lost if Borrower or Operating
Tenant fail to promptly perform the Remedial Work being contested, and if
Borrower and Operating Tenant fail to prevail in contest, Borrower or Operating
Tenant, as applicable, would thereafter have the opportunity to perform such
Remedial Work, (3) Lender would not, by virtue of such permitted contest,
be exposed to any risk of any civil liability for which Borrower or Operating
Tenant, as applicable, has not furnished additional security as provided in
clause (4) below, or to any risk of criminal liability, and neither the
Property nor any interest therein would be subject to the imposition of any
Lien for which Borrower or Operating Tenant has not furnished additional
security as provided in clause (4) below, as a result of the failure to
perform such Remedial Work and (4) Borrower or Operating Tenant, as
applicable, shall have furnished to Lender additional security in respect of
the Remedial Work being contested and the loss or damage that may result from
Borrower’s or Operating Tenant’s failure to prevail in such contest in such
amount as may be reasonably requested by Lender but in no event less than one
hundred twenty-five percent (125%) of the cost of such Remedial Work as
estimated by Lender or Lender’s Consultant and any loss or damage that may
result from Borrower’s or Operating Tenant’s failure to prevail in such
contest, which amount shall periodically be disbursed to Borrower or Operating
Tenant during the course of such Remedial Work, within 10 days after the
delivery by Borrower or Operating Tenant to Lender of a request therefor.

 

(d)           Neither Borrower nor
Operating Tenant shall install or permit to be installed on the Property any
underground storage tank.

 

(e)           Notwithstanding anything to
the contrary stated in this Section 5.8, neither Borrower nor Operating
Tenant shall have any obligation to perform any Remedial Work, and neither
shall have any payment obligation or other liability or obligation arising
from, relating to, or in connection with the presence, storage, release,
disposal, transport or other use of Hazardous Substances in, on, under, above,
under, about or from the Property except to the extent such presence, storage,
release, disposal, transport or other use violates applicable Environmental
Laws.

 

42

 

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

 

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

 

5.10        Leases.

 

5.10.1     Generally.  Upon request, Borrower shall (and shall cause
Operating Tenant to) furnish Lender with executed copies of all Leases then in
effect.  All renewals of Leases and all
proposed leases shall provide for rental rates and terms comparable to existing
local market rates and shall be arm’s length transactions with bona fide,
independent third-party tenants.

 

5.10.2     Additional Covenants with respect
to Leases.  Borrower
shall (and cause Operating Tenant  to)
(i) observe and perform the material obligations imposed upon the lessor
under the Leases and shall not do or permit anything to impair the value of the
Leases as security for the Debt; (ii) promptly send copies to Lender of
all notices of default that Borrower or Operating Tenant, as applicable, shall
send or receive under any Lease; (iii) enforce, in accordance with
commercially reasonable practices for properties similar to the Property, the
terms, covenants and conditions in the Leases to be observed or performed by
the lessees, short of termination thereof; (iv) not collect any of the
Rents more than one month in advance (other than security deposits);
(v) not execute any other assignment of lessor’s interest in the Leases or
the Rents (except as contemplated by the Loan Documents); (vi) not modify
any Lease in a manner inconsistent with the Loan Documents; (vii) not
consent to any assignment of or subletting under any Commercial Lease in excess
of five hundred (500) square feet unless required in accordance with its terms
without the prior consent of Lender, which, with respect to a subletting, may
not, so long as no Event of Default is continuing, be unreasonably withheld or
delayed; and (viii) not cancel or terminate any Commercial Lease of five
hundred (500) square feet or accept a surrender thereof without the prior
consent of Lender, which consent shall not, so long as no Event of Default is
continuing, be  unreasonably withheld or
delayed.

 

5.11        Estoppel Statement.  After request by Lender, Borrower shall
within ten Business Days furnish Lender with a statement addressed to Lender,
its successors and assigns, duly acknowledged and certified, setting forth
(i) the unpaid Principal, (ii) the Interest Rate, (iii) the date
installments of interest and/or Principal were last paid, (iv) any offsets
or defenses to the payment of the Debt, and (v) that the Loan Documents
are valid, legal and binding obligations of Borrower and have not been modified
or if modified, giving particulars of such modification.  Similarly, Lender, within 15 Business Days of
a receipt of a request by Borrower, shall furnish Borrower a written statement
addressed to Borrower setting forth (i) the unpaid

 

43

 

Principal, (ii) the Interest Rate,
(iii) the date installments of interest and/or Principal were last paid
and (iv) stating whether or not, to Lender’s knowledge, any Event of
Default exists under the Loan Documents.

 

5.12        Property Management.

 

5.12.1     Management Agreement.  Borrower shall (or shall cause Operating
Tenant to) (i) cause the Property to be managed pursuant to the Management
Agreement; (ii) promptly perform and observe in all material respects all
of the covenants required to be performed and observed by it under the
Management Agreement and do all things necessary to preserve and to keep
unimpaired its rights thereunder; (iii) promptly notify Lender of any
material default under the Management Agreement of which it is aware;
(iv) promptly deliver to Lender a copy of each financial statement,
business plan, capital expenditure plan, and property improvement plan and any
other material written notice, report and estimate received by Borrower or
Operating Tenant under the Management Agreement; and (v) promptly enforce
the performance and observance by Manager of all of the covenants required to
be performed and observed by Manager under the Management Agreement.  Without Lender’s prior written consent (which
shall not be unreasonably withheld, conditioned or delayed), neither Borrower
nor Operating Tenant shall (a) surrender, terminate, cancel, extend or
renew the Management Agreement (other than
extensions or renewals pursuant to the express renewal/extension provisions set
forth in the Management Agreement on the same terms and conditions set forth
therein (as in effect on the date hereof, or as hereinafter amended or modified
in accordance with the terms and conditions set forth in this Agreement)) or
otherwise replace the Manager or enter into any other management agreement
(except pursuant to Section 5.12.2); (b) reduce or consent to the
reduction of the term of the Management Agreement; (c) increase or consent
to the increase of the amount of any charges under the Management Agreement;
(d) otherwise modify, change, supplement, alter or amend in any material
respect, or waive or release any of its material rights and remedies under, the
Management Agreement; or (e) suffer or permit the occurrence and
continuance of a default by Borrower or Operating Tenant beyond any applicable
cure period under the Management Agreement (or any successor management
agreement) if such default permits the Manager to terminate the Management
Agreement (or such successor management agreement).

 

5.12.2     Termination of Manager.  If an Event of Default shall be continuing,
then upon (i) Manager’s failure (beyond any applicable notice or cure
periods) to meet the performance standards set forth in the Management
Agreement, or (ii) Manager’s default (beyond any notice and cure periods)
under any other provision of the Management Agreement, Borrower shall (or shall
cause Operating Tenant to), at the written request of Lender, terminate the
Management Agreement and replace Manager with a replacement manager acceptable
to Lender in Lender’s discretion and the applicable Rating Agencies on terms
and conditions reasonably satisfactory to Lender and the applicable Rating
Agencies.  Borrower’s or Operating Tenant’s
failure to appoint an acceptable manager within ninety (90) days after
Lender’s written request of Borrower to terminate the Management Agreement
shall constitute an immediate Event of Default. 
Borrower or Operating Tenant may from time to time appoint a successor
manager to manage the Property, provided that such successor manager and
Management Agreement shall be approved in writing by Lender in Lender’s
discretion and the applicable Rating Agencies (and Lender’s approval may be
conditioned upon Borrower delivering a Rating 

 

44

 

Comfort Letter as to such successor manager and
Management Agreement).  Notwithstanding
the foregoing, however, the approval of Lender and the Rating Agencies shall
not be required with respect to the appointment of a Qualified Manager.  If at any time Lender consents to the
appointment of a new manager or a Qualified Manager is appointed, such new
manager (including a Qualified Manager) and Borrower or Operating Tenant, as
applicable, shall, as a condition of Lender’s consent, execute a manager comfort
agreement substantially in the form of the manager comfort letter of even date
between Manager and Lender.

 

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

 

5.14        Assumption in Non-Consolidation
Opinion.  Borrower,
Operating Tenant and Sole Member shall each conduct its business so that the
assumptions (with respect to each Person) made in that certain substantive
non-consolidation opinion letter dated the date hereof delivered by Borrower’s
counsel in connection with the Loan, shall be true and correct in all respects
unless caused by a change in Borrower’s organizational structure due to a
Permitted Transfer or that is otherwise approved by Lender in accordance with
the terms and conditions of this Agreement and, to the extent required by this
Agreement, a new non-consolidation opinion is delivered to Lender.

 

5.15        Change in Business or Operation
of Property.  Neither
Borrower nor Operating Tenant shall purchase, lease or own any real property
other than the Property and shall not enter into any line of business other
than the ownership, lease and operation of the Property, or make any material
change in the scope or nature of their business objectives, purposes or
operations, or undertake or participate in activities other than the
continuance of its present business or otherwise cease to operate or lease the
Property for use as a hotel and ancillary retail use and other appurtenant and
related uses or terminate such business for any reason whatsoever (other than
temporary cessation in connection with renovations to the Property or relating
to any Casualty or Condemnation).

 

5.16        Debt Cancellation.  Neither Borrower nor Operating Tenant shall
cancel or otherwise forgive or release any claim or debt (other than
termination of Leases in accordance herewith) owed to Borrower or Operating
Tenant by any Person, except for adequate consideration or in the ordinary
course of Borrower’s or Operating Tenant’s business.

 

5.17        Affiliate Transactions.  Except for the Affiliate Lease, neither
Borrower nor Operating Tenant shall enter into, or be a party to, any
transaction with an Affiliate of Borrower or Operating Tenant or any of the
members of Borrower or Operating Tenant except in the ordinary course of
business and on terms which are fully disclosed to Lender in advance and are no
less favorable to Borrower or Operating Tenant or such Affiliate than would be
obtained in a comparable arm’s length transaction with an unrelated third
party.

 

45

 

5.18        Zoning.  Neither Borrower nor Operating Tenant shall
initiate or consent to any zoning reclassification of any portion of the
Property or seek any variance under any existing zoning ordinance or use or
permit the use of any portion of the Property in any manner that could result
in such use becoming a non conforming use under any zoning ordinance or any
other applicable land use law, rule or regulation, without the prior
consent of Lender.

 

5.19        No Joint Assessment.  Neither Borrower nor Operating Tenant shall
suffer, permit or initiate the joint assessment of the Property (i) with
any other real property constituting a tax lot separate from the Property, and
(ii) with any portion of the Property which may be deemed to constitute
personal property, or any other procedure whereby the lien of any taxes which
may be levied against such personal property shall be assessed or levied or
charged to the Property.

 

5.20        Principal Place of Business.  Neither Borrower nor Operating Tenant shall
change its principal place of business or chief executive office without first
giving Lender 30 days’ prior notice.

 

5.21        Change of Name, Identity or
Structure.  Neither
Borrower nor Operating Tenant shall change its name, identity (including its
trade name or names) or entity type without notifying Lender of such change in
writing at least ten (10) business days prior to the effective date of
such change, and in the case of a change in Borrower’s or Operating Tenant’s
entity type, without first obtaining the prior written consent of Lender as to
such change in entity-type.  Borrower or
Operating Tenant, as applicable, shall execute and deliver to Lender, prior to
or contemporaneously with the effective date of any such change, any financing
statement or financing statement change required by Lender to establish or
maintain the validity, perfection and priority of the security interest granted
herein.  At the request of Lender,
Borrower shall (and shall cause Operating Tenant to) execute a certificate in
form satisfactory to Lender listing the trade names under which Borrower or
Operating Tenant, as applicable, intends to operate the Property, and
representing and warranting that Borrower and Operating Tenant do business
under no other trade name with respect to the Property.

 

5.22        Indebtedness.  Neither Borrower nor Operating Tenant shall
create, incur or assume any indebtedness other than (i) the Debt,
(ii) unsecured trade payables incurred in the ordinary course of business
relating to the ownership and operation of the Property which (A) are not
evidenced by a note, (B) together with Permitted Equipment Financing
(hereinafter defined)), do not exceed, at any time, a maximum aggregate amount
of five percent (5%) of the original amount of the Principal and
(C) are paid within ninety (90) days of the date incurred and
(iii) Permitted Equipment Financing which, together with unsecured
payables permitted pursuant to the preceding clause (ii), does not
exceed, at any time, a maximum aggregate amount of five percent (5%) of
the original amount of the Principal (collectively, “Permitted
Indebtedness”).  As used
herein, “Permitted Equipment Financing”
means equipment financing that is (i) entered into in the ordinary course
of Borrower’s or Operating Tenant’s business, (ii) for equipment related
to the ownership and operation of the Property whose removal would not
materially damage or impair the value of the Property, and (iii) which is
secured only by the financed equipment. 
Notwithstanding the foregoing, Identified Capital Expenses, any
amounts payable from any other reserves established under this Agreement and
any asset management or property management fees paid in connection with the
Property shall not be taken into account 

 

46

 

when calculating the five percent (5%) maximum
set forth in this Section 5.22, but (to the extent such expenses
constitute unsecured trade payables) such expenses shall be subject to the
ninety (90) day limit set forth in clause (ii)(C) above.  Notwithstanding anything to the contrary
contained above in this Section 5.22, unsecured trade payables that are
not Permitted Equipment Financing shall not at any time exceed three percent
(3%) of the original amount of Principal. 
Borrower or Operating Tenant may, after prior notice to Lender, at its
own expense, contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity of any
such Permitted Indebtedness (during which time such 90-day period shall be
tolled), provided that if Borrower or Operating Tenant desires to withhold
payment of such Permitted Indebtedness during the pendency of the contest,
(i) no Event of Default has occurred and is continuing, (ii) no part
of or interest in the Property will be in imminent danger of being sold, forfeited,
terminated, canceled or lost, (iii) Borrower or Operating Tenant shall
have furnished such security as may be required in the proceeding, or as may be
reasonably requested by Lender, to insure the payment of any such Permitted
Indebtedness, together with all interest and penalties thereon, and
(iv) Borrower shall (or shall cause Operating Tenant to) promptly upon
final determination thereof pay the amount of such Permitted Indebtedness,
together with all costs, interest and penalties and Borrower and Operating
Tenant shall be permitted to use such security to make such payment.

 

5.23        Licenses.  Neither Borrower nor Operating Tenant shall
Transfer any License required for the operation of the Property (other than in
connection with a Permitted Transfer).

 

5.24        Compliance with Restrictive
Covenants, Etc. 
Neither Borrower nor Operating Tenant will enter into, modify, waive in
any material adverse respect or release any Easements or restrictive covenants
other than Permitted Encumbrances, or suffer, consent to or permit the
foregoing, without Lender’s prior written consent, which consent may be granted
or denied in Lender’s sole discretion.

 

5.25        ERISA.

 

(1)           Except as set forth on Schedule 2,
neither Borrower nor Operating Tenant shall engage in any transaction which
would cause any obligation, or action taken or to be taken, hereunder (or the
exercise by Lender of any of its rights under the Note, this Agreement or the
other Loan Documents) to be a non-exempt (under a statutory or administrative
class exemption) prohibited transaction under ERISA.

 

(2)           Except as set forth on Schedule 2,
neither Borrower nor Operating Tenant shall maintain, sponsor, contribute to or
become obligated to contribute to, or suffer or permit any ERISA Affiliate of
Borrower or Operating Tenant to, maintain, sponsor, contribute to or become
obligated to contribute to, any Plan or any Welfare Plan or permit the assets
of Borrower or Operating Tenant to become “plan assets,” whether by operation
of law or under regulations promulgated under ERISA.

 

(3)           Borrower shall (and shall
cause Operating Tenant to) deliver to Lender such certifications or other
evidence from time to time throughout the Term, as requested by Lender in its
sole discretion, that (A) Borrower and Operating Tenant are not and do not
maintain an “employee benefit plan” as defined in Section 3(3) of
ERISA, which is subject to 

 

47

 

Title I of ERISA, or a “governmental plan” within
the meaning of Section 3(32) of ERISA; (B) Borrower and Operating
Tenant are not subject to state statutes regulating investments and fiduciary
obligations with respect to governmental plans; and (C) the assets of
Borrower and Operating Tenant do not constitute “plan assets” within the
meaning of 29 C.F.R. Section 2510.3-101.

 

5.26        Prohibited Transfers.

 

5.26.1     Generally.  Neither Borrower nor Operating Tenant shall
directly or indirectly make, suffer or permit the occurrence of any Transfer
other than a Permitted Transfer without the consent of Lender.

 

5.26.2     Transfer and Assumption.

 

(a)           Subject to obtaining Lender’s
prior written consent, which may be withheld in Lender’s reasonable discretion,
and subject to the terms and satisfaction of all of the conditions precedent
set forth in this Section 5.26.2, Borrower shall have a one-time right to
Transfer all (but not less than all) of the Property to another party (the “Transferee Borrower”) and have the
Transferee Borrower assume all of Borrower’s obligations under the Loan
Documents, and have replacement guarantors and indemnitors assume all of the
obligations of the indemnitors and guarantors of the Loan Documents
(collectively, a “Transfer and Assumption”).  Borrower may make a written application to
Lender for Lender’s consent to the Transfer and Assumption, subject to the
conditions set forth in paragraphs (b) and (c) of this
Section 5.26.2.  Borrower also shall
pay, in accordance with clause (b)(6) below, on demand all of the reasonable
out-of-pocket costs and expenses incurred by Lender, including reasonable
attorneys’ fees and expenses, and including the fees and expenses of Rating
Agencies and other outside entities, in connection with considering any
proposed Transfer and Assumption, whether or not the same is permitted or
occurs.

 

(b)           Lender’s consent, which may
be withheld in Lender’s reasonable discretion, to a Transfer and Assumption
shall be subject to the following conditions:

 

(1)           No Event of Default has
occurred and is continuing;

 

(2)           Borrower has submitted to
Lender true, correct and complete copies of any and all information and
documents of any kind requested by Lender concerning the Property, Transferee
Borrower and replacement guarantors and indemnitors;

 

(3)           Evidence satisfactory to
Lender has been provided showing that the Transferee Borrower and such of its
Affiliates as shall be designated by Lender comply and will comply with
Section 5.13 hereof, as those provisions may be modified by Lender taking
into account the ownership structure of Transferee Borrower and its Affiliates;

 

48

 

(4)           If the Loan, by itself or
together with other loans, has been the subject of a Secondary Market
Transaction, then Lender shall have received a Rating Comfort Letter from the
applicable Rating Agencies;

 

(5)           Intentionally omitted;

 

(6)           Borrower shall have paid all
of Lender’s reasonable out-of-pocket costs and expenses in connection with
considering the Transfer and Assumption, and shall have paid the amount
requested by Lender as a deposit against Lender’s costs and expenses in
connection with the effecting the Transfer and Assumption;

 

(7)           Borrower, the Transferee
Borrower, and the replacement guarantors and indemnitors shall have indicated
in writing in form and substance reasonably satisfactory to Lender their
readiness and ability to satisfy the conditions set forth in
subsection (c) below; and

 

(8)           The identity, experience,
financial condition and creditworthiness of the Transferee Borrower and the
replacement guarantors and indemnitors shall be satisfactory to Lender; and

 

(9)           The proposed property
manager shall be a Qualified Manager and the proposed Management Agreement
shall be satisfactory to Lender and, following a Secondary Market Transaction,
the applicable Rating Agencies.

 

(c)           If Lender consents to the
Transfer and Assumption, the Transferee Borrower and/or Borrower as the case
may be, shall immediately (unless otherwise specified below) deliver the
following to Lender:

 

(1)           Borrower shall deliver to
Lender an assumption fee in the amount of 1.00% of the then unpaid Principal
(which fee shall be payable concurrently with, and not prior to, closing the
Transfer and Assumption);

 

(2)           Borrower, Transferee
Borrower and the original and replacement guarantors and indemnitors shall
execute and deliver to Lender any and all documents required by Lender, in form
and substance reasonably required by Lender to effectuate the assignment and
assumption of the Debt and the Loan Documents by Transferee Borrower and the
replacement guarantors;

 

(3)           Counsel to the Transferee
Borrower and replacement guarantors and indemnitors shall deliver to Lender
opinions in form and substance satisfactory to Lender as to substantially the
same matters as were required in connection with the origination of the Loan
(including a new substantive non-consolidation opinion with respect to the
Transferee Borrower);

 

(4)           Intentionally Omitted;

 

(5)           Borrower shall cause to be
delivered to Lender, an endorsement (relating to the change in the identity of
the vestee and execution and delivery of the 

 

49

 

Transfer and Assumption
documents) to the Title Insurance Policy in form and substance acceptable to
Lender, in Lender’s reasonable discretion (the “Endorsement”);
and

 

(6)           Borrower shall deliver to
Lender a payment in the amount of all remaining unpaid costs incurred by Lender
in connection with the Transfer and Assumption, including but not limited to,
Lender’s reasonable attorneys fees and expenses, all recording fees, and all
fees payable to the title company for the delivery to Lender of the
Endorsement.

 

(d)           In addition to the
foregoing: (i) Borrower shall cause Operating Tenant to satisfy all
requirements of Lender relating to a Transfer and Assumption, and
(ii) Transferee Borrower shall satisfy all of Lender’s requirements
relating to the maintenance or elimination of the operating tenant ownership
structure (as selected by Transferee Borrower), as applicable.

 

5.27        Liens.  Without Lender’s prior written consent,
neither Borrower nor Operating Tenant shall create, incur, assume, permit or
suffer to exist any Lien on all or any portion of the Property or any legal or
beneficial ownership interest in Borrower or Operating Tenant, except Liens in
favor of Lender, Permitted Encumbrances and Permitted Transfers, unless such
Lien is bonded or discharged within 30 days after Borrower or Operating Tenant
first receives written notice of such Lien (or such longer period as is
permitted under this Agreement in the event and to the extent the Lien is of a
nature which may be contested by Borrower or Operating Tenant under the
provisions of this Agreement and Borrower or Operating Tenant is in fact
contesting such Lien in accordance with the express provisions and conditions
set forth in this Agreement).

 

5.28        Dissolution.  Neither Borrower nor Operating Tenant shall
(i) engage in any dissolution, liquidation or consolidation or merger with
or into any other business entity, (ii) engage in any business activity
not related to the ownership and operation of the Property or
(iii) transfer, lease or sell, in one transaction or any combination of
transactions, all or substantially all of the property or assets of Borrower or
Operating Tenant except to the extent expressly permitted by the Loan Documents.

 

5.29        Expenses.  Borrower shall reimburse Lender upon receipt
of notice for all reasonable out-of-pocket costs and expenses (including
reasonable attorneys’ fees and disbursements) incurred by Lender in connection
with the Loan, including (i) the preparation, negotiation, execution and
delivery of the Loan Documents and the consummation of the transactions
contemplated thereby and all the costs of furnishing all opinions by counsel
for Borrower; (ii) Borrower’s, Operating Tenant’s and Lender’s ongoing performance
under and compliance with the Loan Documents, including confirming compliance
with environmental and insurance requirements; (iii) the negotiation,
preparation, execution, delivery and administration of any consents,
amendments, waivers or other modifications of or under any Loan Document and
any other documents or matters requested by Borrower or Operating Tenant;
(iv) filing and recording of any Loan Documents; (v) title insurance,
surveys, inspections and appraisals; (vi) the creation, perfection or
protection of Lender’s Liens in the Property and the Cash Management Accounts
(including fees and expenses for title and lien searches, intangibles taxes,
personal property taxes, mortgage recording taxes, due diligence expenses,
travel expenses, 

 

50

 

accounting firm fees, costs of appraisals,
environmental reports and Lender’s Consultant, surveys and engineering
reports); (vii) enforcing or preserving any rights in response to third
party claims or the prosecuting or defending of any action or proceeding or
other litigation, in each case against, under or affecting Borrower, Operating
Tenant, the Loan Documents, the Property, or any other security given for the
Loan; (viii) except to the extent limited by Section 9.1.1(b) (i.e., in connection with a Secondary Market Transaction) and
Section 10.3, fees charged by Servicer or the Rating Agencies in
connection with the Loan or any modification thereof and (ix) enforcing
any obligations of or collecting any payments due from Borrower or Operating
Tenant under any Loan Document or with respect to the Property or in connection
with any refinancing or restructuring of the Loan in the nature of a “work-out”,
or any insolvency or bankruptcy proceedings (but specifically excluding, after
a Secondary Market Transaction, any fee charged by any Servicer in connection
with any “work-out”, “liquidation” or similar proceeding).  Any costs and expenses due and payable by
Borrower or Operating Tenant hereunder which are not paid by Borrower or
Operating Tenant within ten Business Days after demand may be paid from any
amounts in the Deposit Account, with notice thereof to Borrower.  The obligations and liabilities of Borrower
under this Section 5.29 shall survive the Term and the exercise by Lender
of any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.  Additionally, Borrower
shall cause Chicago Title Insurance Company to issue the Title Endorsement and
shall pay the cost of the Title Endorsement, any escrow, filing or recording
fees applicable to Transfer and Assumption (as defined in the Consent Agreement
for use in this paragraph), and Lender’s costs and expenses incurred in
connection with this Agreement, the Consent Agreement, or the Transfer and
Assumption, including Lender’s attorneys’ fees, if any, incurred in connection
with this Agreement or this transaction.

 

5.30        Indemnity.  Borrower shall defend, indemnify and hold harmless
Lender and each of its Affiliates and their respective successors and assigns,
including the directors, officers, partners, members, shareholders,
participants, employees, professionals and agents of any of the foregoing
(including any Servicer subject to the limitations in Section 5.29 above)
and each other Person, if any, who Controls Lender, its Affiliates or any of
the foregoing (each, an “Indemnified Party”),
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
of any kind or nature whatsoever (including the reasonable fees and
disbursements of counsel for an Indemnified Party in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not Lender shall be designated a party thereto, court costs and
costs of appeal at all appellate levels, investigation and laboratory fees,
consultant fees and litigation expenses), that may be imposed on, incurred by,
or asserted against any Indemnified Party (collectively, the “Indemnified Liabilities”) in any
manner, relating to or arising out of or by reason of the Loan from and after
the Effective Date, including: 
(i) any breach by Borrower or Operating Tenant of their obligations
under, or any misrepresentation by Borrower or 
Operating Tenant contained in, any Loan Document;
(ii) intentionally omitted; (iii) any information provided by or on
behalf of Borrower or Operating Tenant, or contained in any documentation
approved by Borrower or Operating Tenant; (iv) ownership of the Mortgage,
the Property or any interest therein, or receipt of any Rents; (v) any
accident, injury to or death of persons or loss of or damage to property
occurring in, on or about the Property or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (vi) any
use, nonuse or condition in, on or about the Property or on adjoining
sidewalks, curbs, adjacent 

 

51

 

property or adjacent parking areas, streets or ways;
(vii) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property; (viii) the
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release, or threatened release of any Hazardous Substance on, from or affecting
the Property; (ix) any personal injury (including wrongful death) or
property damage (real or personal) arising out of or related to such Hazardous
Substance; (x) any lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substance; (xi) any violation
of the Environmental Laws which is based upon or in any way related to such
Hazardous Substance, including the costs and expenses of any Remedial Work;
(xii) any failure of the Property to comply with any Legal Requirement;
(xiii) any claim by brokers, finders or similar persons claiming to be
entitled to a commission in connection with any Lease or other transaction involving
the Property or any part thereof, or any liability asserted against Lender with
respect thereto; and (xiv) the claims of any lessee of any portion of the
Property or any Person acting through or under any lessee or otherwise arising
under or as a consequence of any Lease; provided, however, that Borrower shall
not have any obligation to any Indemnified Party hereunder (A) to the
extent that it is finally judicially determined that such Indemnified
Liabilities arise from the gross negligence, illegal acts, fraud or willful
misconduct of such Indemnified Party or (B) for any event or condition
specified in clauses (iv) - (vii) and (xii) - (xiv) that
first arises on or after the date on which Lender, any Affiliate thereof or any
other Person acquires title or control of the Property (whether at foreclosure
sale, a transfer in lieu of foreclosure or any other transfer) or after a
receiver has been appointed for the Property; provided
that Borrower’s obligation to indemnify the Indemnified Parties with
respect to an event or condition specified in clauses (viii) through
(xi) above (relating to Hazardous Substances) shall continue in perpetuity
after Lender (or its transferee) acquires title or control of the Property
unless a court of competent jurisdiction determines in a final unappealable
judgment (but shall be stayed during any appeal diligently pursued by Borrower
or Operating Tenant) that such specified event or condition occurred during
Lender’s period of ownership and apart from any act or omission by or on behalf
of Borrower or Operating Tenant, and provided that Borrower or Operating Tenant
shall bear the burden of proving that such specified event or condition
occurred during Lender’s period of ownership and apart from any act or omission
by or on behalf of Borrower or Operating Tenant.  Any amounts payable to any Indemnified Party
by reason of the application of this paragraph shall be payable on demand
and shall bear interest at the Default Rate from the date loss or damage is
sustained by any Indemnified Party until paid. 
Except as set forth above, the obligations and liabilities of Borrower
under this Section 5.30 shall survive the Term (with respect to any matter
occurring or in existence prior to the end of the Term, and thereafter with
respect to third party claims, suits and actions) and the exercise by Lender of
any of its rights or remedies under the Loan Documents, including the
acquisition of the Property by foreclosure or a conveyance in lieu of
foreclosure.

 

5.31        Patriot Act Compliance.  Borrower will use its good faith and
commercially reasonable efforts to comply (and to cause Operating Tenant to
comply) with the Patriot Act (as defined below) and all applicable requirements
of governmental authorities having jurisdiction over Borrower, Operating Tenant
and the Property, including those relating to money laundering and
terrorism.  Lender shall have the right
to audit Borrower’s and Operating Tenant’s compliance with the Patriot Act and
all applicable requirements of governmental authorities having jurisdiction
over Borrower, Operating Tenant and the Property, including those relating to
money laundering and terrorism.  In the
event that Borrower or Operating Tenant fails to comply 

 

52

 

with the Patriot Act or any such requirements of
governmental authorities, then Lender may, at its option, cause Borrower and
Operating Tenant to comply therewith and any and all reasonable costs and
expenses incurred by Lender in connection therewith shall be secured by the
Mortgage and the other Loan Documents and shall be immediately due and
payable.  For purposes hereof, the term “Patriot Act” means the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended
from time to time, and corresponding provisions of future laws.

 

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

 

5.32        Intentionally Omitted.

 

5.33        Franchise Agreement.

 

(a)           Neither Borrower nor
Operating Tenant shall enter into any Franchise Agreement without the prior
written consent of Lender, which consent may be conditioned upon (i) the
receipt by Lender of a comfort letter from the franchisor in form

 

53

 

and substance reasonably
acceptable to Lender and (ii) after the occurrence of Secondary Market
Transaction, the delivery by Borrower of a Rating Comfort Letter.

 

(b)           If Lender consents to any
such Franchise Agreement and Borrower or Operating Tenant enters into any such
Franchise Agreement:

 

(i)            Borrower shall (or shall
cause Operating Tenant to) (A) cause the hotel located on the Property to
be operated pursuant to the Franchise Agreement; (B) promptly perform and
observe in all material respects all of the covenants required to be performed
and observed by it under the Franchise Agreement and do all things reasonably
necessary to preserve and to keep unimpaired its material rights thereunder; (C) promptly
notify Lender of any material default under the Franchise Agreement of which it
is aware; (D) promptly deliver to Lender a copy of each material financial
statement, business plan, capital expenditures plan, notice, report and
estimate received  by it under the
Franchise Agreement; and (E) promptly enforce in a commercially reasonable
manner the performance and observance of all of the material covenants required
to be performed and observed by the franchisor under the Franchise Agreement.

 

(ii)           Neither Borrower nor
Operating Tenant shall without the consent of Lender (A) surrender,
terminate or cancel the Franchise Agreement; (B) reduce or consent to the
reduction of the term of the Franchise Agreement; (C) increase or consent
to the increase of the aggregate amount of any fees under any Franchise Agreement;
(D) otherwise modify, change, supplement, alter or amend, or waive or
release any of its rights and remedies under, any Franchise Agreement or
(E) suffer or permit the occurrence of continuance a default beyond any
applicable cure period under any Franchise Agreement.

 

5.34        Hotel Operation.  Without in any way limiting the covenants set
forth in Section 5.8 or elsewhere in the Loan Documents, Borrower shall
(and shall cause Operating Tenant to): 
(i) cause the hotel located on the Property to be operated,
repaired and maintained as a well-maintained “first-class hotel” which shall
mean a hotel providing amenities, services and facilities substantially
equivalent or superior to hotels of similar average room rate and targeted
market segment from time to time operating on Kauai, taking into consideration
the age and location of the hotel located on the Property and
(ii) maintain Inventory in amounts sufficient to meet the hotel industry
standard for hotels comparable to the hotel located on the Property and at
levels sufficient for the operation of the hotel located on the Property at
full occupancy levels.  Notwithstanding
the foregoing, the operating standard set forth in clause (i) above shall
be deemed to be complied with if the Manager is complying with the standards
set forth in the Management Agreement.

 

6.             NOTICES
AND REPORTING

 

6.1          Notices.  All notices, consents, approvals and requests
required or permitted hereunder or under any other Loan Document (a “Notice”) shall be given in writing
and shall be effective for all purposes if either hand delivered with receipt
acknowledged, or by a nationally recognized overnight delivery service (such as
Federal Express), by certified or registered United States mail, return receipt
requested, postage prepaid, or by facsimile and confirmed by facsimile 

 

54

 

answer back, or by e-mail (with delivery receipt) in
each case addressed as follows (or to such other address or Person as a party
shall designate from time to time by notice to the other party).  If to Lender, c/o Midland Loan Services, Inc.,
10851 Mastin, Suite 300, Overland Park, Kansas 66210; if to Borrower or
Operating Tenant, c/o Behringer Harvard Kauai Hotel, LLC, 15601 Dallas Parkway,
Suite 600, Addison Texas 75001, Attention: 
Chief Legal Officer, Facsimile: (214) 655-1610, with copies to
111 Congress Ave., Suite 2600, Austin, Texas 78701, Attn:  C. Brian Strickland, CFO.  A notice shall be deemed to have been
given:  in the case of hand delivery, at the
time of delivery; in the case of registered or certified mail, when delivered
or the first attempted delivery on a Business Day; in the case of overnight
delivery, upon the first attempted delivery on a Business Day; or in the case
of facsimile, upon the confirmation of such facsimile transmission or in the
case of e-mail, at the time of electronic delivery (as confirmed by electronic
delivery receipt), or, if such delivery is not during normal business hours
(between 9:00 a.m. and 5:00 p.m. New York City time) or on a
Business Day, on the first Business Day thereafter.

 

6.2          Borrower Notices and Deliveries.  Borrower shall (and shall cause Operating
Tenant to) (a) give prompt written notice to Lender of:  (i) any litigation, governmental
proceedings or claims or investigations pending or to Borrower’s knowledge,
threatened against Borrower, Operating Tenant or Sole Member which might
materially adversely affect Borrower’s, Operating Tenant’s or Sole Member’s
condition (financial or otherwise) or business or the Property; (ii) any
material adverse change in Borrower’s, Operating Tenant’s or Sole Member’s
condition, financial or otherwise, or of the occurrence of any Event of Default
of which Borrower or Operating Tenant has knowledge; and (b) furnish and
provide to Lender any filings by Borrower, Operating Tenant, Sole Borrower
Member, Sole OT Member, Manager or
any Guarantor, within two (2) Business Days of such filing, if such filing
is a quarterly 10Q (or its equivalent) filed with the Securities and Exchange
Commission, or a public filing that relates to a material adverse effect on any
of said parties.  In addition, after
request by Lender (but no more frequently than twice in any year), Borrower
shall furnish to Lender within 30 Business Days, tenant estoppel certificates
addressed to Lender, its successors and assigns from each tenant under a
Commercial Lease in form and substance reasonably satisfactory to Lender to the
extent that such Tenant is required to provide the same under its Lease.

 

6.3          Financial Reporting.

 

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

 

55

 

6.3.2       Annual Reports.  Borrower shall furnish to Lender annually,
within 120 days after each calendar year, a complete copy of Borrower’s and
Operating Tenant’s annual financial statements audited by
Ernst & Young or another “big four” accounting firm or another
independent certified public accountant reasonably acceptable to Lender, each
in conformity with GAAP and containing balance sheets and statements of profit
and loss for Borrower, Operating Tenant, and the Property in such detail as
Lender may reasonably request.  Each such
statement (x) shall be in form and substance satisfactory to Lender,
(y) shall set forth the financial condition and the income and expenses
for the Property for the immediately preceding calendar year, as well as a list
of tenants under Commercial Leases, and (z) shall be accompanied by an
Officer’s Certificate certifying that to such officer’s knowledge (1) such
statement is true, correct, complete and accurate and presents fairly the
financial condition of the Property and has been prepared in conformity with
GAAP and (2) whether there exists an Event of Default, and if so, the
nature thereof, the period of time it has existed and the action then being taken
to remedy it.  If audited financial
statements are in process but unavailable within the period prescribed above,
Borrower shall provide unaudited statements within such time period, and shall
be entitled to request an extension of the due date for audited statements for
such time period as may be reasonably necessary to provide audited statements,
not to exceed an additional sixty (60) days.

 

6.3.3       Monthly/Quarterly Reports.  Borrower shall furnish to Lender within 60
days after the end of each calendar month or calendar quarter (as indicated
below) the following items: 
(i) monthly and year-to-date operating statements, noting Net
Operating Income and other information necessary and sufficient under GAAP or other
consistently applied method to fairly represent the financial position and
results of operation of the Property by Borrower and Operating Tenant during
such calendar month, all in form satisfactory to Lender;
(ii) intentionally omitted; (iii) a comparison of the budgeted income
and expenses and the actual income and expenses for each month and year-to-date
for the Property, together with a detailed explanation of any aggregate
variance of 10% or more between total budgeted and total actual expenses for
such period and year-to-date; (iv) a statement of the actual Capital
Expenses made by Borrower and Operating Tenant during each calendar quarter as
of the last day of such calendar quarter; (v) a statement that neither
Borrower nor Operating Tenant has incurred any indebtedness other than indebtedness
permitted hereunder; and (vi) an aged receivables report.  Each such statement shall be accompanied by
an Officer’s Certificate certifying that to such officer’s knowledge
(1) such items are true, correct, accurate, and complete and fairly
present the financial condition and results of the operations of Borrower,
Operating Tenant and the Property and have, to such party’s knowledge, been
prepared in conformity with GAAP (subject to normal year-end adjustments and
the lack of certain GAAP disclosures prior to year-end) and (2) whether
there exists an Event of Default, and if so, the nature thereof, the period of
time it has existed and the action then being taken to remedy it.

 

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

 

6.3.5       Annual Budget.  Borrower shall (or shall cause Operating
Tenant to) prepare and submit (or shall cause Manager to prepare and submit) to
Lender by December 1st of 

 

56

 

each year during the Term, a pro forma budget for
the Property for the succeeding calendar year (the “Annual
Budget”), and, promptly after preparation thereof, any revisions
to such Annual Budget.  Upon the
occurrence and during the continuance of a Cash Trap Period, such Annual Budget
shall be subject to approval by Lender, which approval shall not be
unreasonably withheld or delayed.  Each
Annual Budget (and any revisions to such Annual Budget) (i) that is
delivered to Lender (for so long as no Cash Trap Period is continuing) and
(ii) that is approved or deemed approved pursuant to the terms of this
Section 6.3.5 by Lender (during the continuance of a Cash Trap Period), is
referred to herein as the “Approved Annual Budget”.  If Lender’s approval is required, Lender’s
failure to approve or disapprove any Annual Budget or revision within twenty
(20) days after Lender’s receipt thereof shall be deemed to constitute Lender’s
approval thereof.  The Annual Budget
shall consist of (i) an operating expense budget showing, on a
month-by-month basis, in reasonable detail, each line item of the Borrower’s
and Operating Tenant’s anticipated operating income and operating expenses (on
a cash and accrual basis), including amounts required to establish, maintain
and/or increase any monthly payments required hereunder (and once such Annual
Budget has been delivered to Lender, approved or deemed approved pursuant to
the terms of this Section 6.3.5 by Lender (as applicable), such operating
expense budget shall be referred to herein as the “Approved
Operating Budget”), and (ii) a Capital Expense budget
showing, on a month-by-month basis, in reasonable detail, each line item of
anticipated Capital Expenses (and once such Annual Budget has been delivered to
Lender or approved or deemed approved pursuant to the terms of this
Section 6.3.5 by Lender (as applicable), such Capital Expense budget shall
be referred to herein as the “Approved Capital Budget”).  Until such time that any Annual Budget has
been delivered to Lender or approved or deemed approved pursuant to the terms
of this Section 6.3.5 by Lender (as applicable), the prior Approved Annual
Budget shall apply for all purposes hereunder (with such adjustments as
reasonably determined by Lender, if Lender approval is required due to the
continuance of a Cash Trap Period (including increases for any
non-discretionary expenses)).  Lender
acknowledges that the Annual Budget for the remainder of 2010 has been
delivered to Lender and is the Approved Annual Budget for 2010.

 

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

 

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

 

7.             INSURANCE;
CASUALTY; AND CONDEMNATION

 

7.1          Insurance.

 

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

 

57

 

(a)           Property insurance insuring
against loss or damage customarily included under so called “all risk” or “special
form” policies including fire, lightning, vandalism, and malicious mischief, boiler
and machinery and, subject to subsection (j) below, coverage for
damage or destruction caused by the acts of “Terrorists” (or such policies
shall have no exclusion from coverage with respect thereto) and such other
insurable hazards as, under good insurance practices, from time to time are
insured against for other property and buildings similar to the premises in
nature, use, location, height, and type of construction.  Such insurance policy shall also insure for
ordinance of law coverage, costs of demolition and increased cost of
construction in amounts satisfactory to Lender (which amount shall not be less
than $5,000,000).  Each such insurance
policy shall (i) be in an amount equal to 100% of the then replacement
cost of the Improvements without deduction for physical depreciation,
(ii) have deductibles no greater than $100,000 per occurrence (or, if such
coverage is a part of a blanket policy, such higher deductible amount as is
approved by Lender in its reasonable discretion taking into account the size of
such blanket policy (provided that any such blanket policy shall specifically
allocate to the Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a separate
Insurance Policy insuring only the Property in compliance with the applicable
provisions of this Section 7.1.1)), except for the perils of windstorm,
flood and earthquake which deductible shall not exceed  5% of the insurable value per loss,
(iii) be paid annually in advance and (iv) be on a replacement cost
basis and contain either no coinsurance or, if coinsurance, an agreed amount
endorsement, and shall cover, without limitation, all tenant improvements and
betterments that Borrower and Operating Tenant are required to insure on a
replacement cost basis.  Lender shall be
named Mortgagee and Loss Payee on a Standard Mortgagee Endorsement.

 

(b)           Flood insurance if any part
of the Improvements or the paved parking area or parking garage included in the
Property is located in an area now or hereafter designated by the Federal
Emergency Management Agency as a Zone “A” & “V” Special Hazard Area,
or such other Special Hazard Area if Lender so requires in its sole
discretion.  Such policy shall be in the
amount of at least $10,000,000 (provided that such coverage is commercially
obtainable).

 

(c)           Liability insurance,
including (i) “Commercial General Liability Insurance”, (ii) “Owned”
(but only during such times (if any) that Borrower or Operating Tenant is the
owner of any vehicle(s)), “Hired” and “Non Owned” Commercial Auto Liability;
and (iii) umbrella liability coverage for personal and advertising injury,
bodily injury, death, accident and property damage, such insurance providing in
combination no less than containing minimum limits per occurrence of $1,000,000
and $2,000,000 general aggregate for any policy year with a deductible or self
insured retention in an amount of not more than $100,000 (or, if such coverage
is a part of a blanket policy, such higher deductible amount as is approved by
Lender in its reasonable discretion taking into account the size of such
blanket policy (provided that any such blanket policy shall specifically
allocate to the Property the amount of coverage from time to time required
hereunder and shall otherwise provide the same protection as would a separate
Insurance Policy insuring only the Property in compliance with the applicable
provisions of this Section 7.1.1)); together with at least $25,000,000 per
occurrence and general aggregate 

 

58

 

excess and/or umbrella
liability insurance for any and all claims, subject to policy provisions,
conditions and exclusions.  The policies
described in this subsection shall also include coverage for elevators, escalators,
“Contractual Liability” (covering, to the maximum extent permitted by law or
applicable insurance coverages, Borrower’s obligation to indemnify Lender as
required under this Agreement and the other Loan Documents), “Products” and “Completed
Operations Liability” coverage.

 

(d)           Business interruption
insurance (i) with Lender being named as “Lender Loss Payee”, (ii) in
an amount sufficient to compensate Borrower and Operating Tenant for one
hundred percent (100%) of projected Net Operating Income for the period of
restoration from the date the Property is either damaged or destroyed and
containing an extended period of indemnity endorsement of at least thirty (30)
days from the date that such Property is repaired or replaced and operations
are resumed (notwithstanding that the policy may expire prior to the end of
such period).

 

(e)           Comprehensive boiler and
machinery insurance covering all mechanical and electrical equipment against
physical damage, rent loss and improvements loss and covering, without
limitation, all tenant improvements and betterments that Borrower and Operating
Tenant are required to insure pursuant to the lease on a replacement cost basis
and in an amount equal to one hundred percent (100%) of the full replacement
cost of the Improvements on such Property (without any deduction for
depreciation) plus the business income limit.

 

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

 

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

 

(h)           Coverage to compensate for
ordinance of law the cost of demolition and the increased cost of construction
in an amount satisfactory to Lender.

 

(i)            Such other insurance
(including environmental liability insurance, earthquake insurance, mine
subsidence insurance and windstorm insurance) as may from time to time be
reasonably required by Lender in order to protect its interests, provided that such
coverage is then commercially obtainable and customarily required by
institutional lenders originating first mortgage loans for the securitization
market for comparable properties in Hawaii.

 

(j)            Notwithstanding anything in
subsection (a) above to the contrary, Borrower and Operating Tenant
shall be required to obtain and maintain coverage in its property insurance
Policy (or by a separate Policy) against loss or damage by terrorist acts in an
amount equal to 100% of the “Full Replacement Cost” of the Property; provided
that such coverage is available.  In the
event that such coverage with respect to 

 

59

 

terrorist acts is not
included as part of the “all risk” property policy required by
subsection (a) above, Borrower and Operating Tenant shall,
nevertheless be required to obtain coverage for terrorism (as stand alone
coverage) in an amount equal to 100% of the “Full Replacement Cost” of the
Property; provided that such coverage is available.  Notwithstanding the foregoing, with respect
to any such stand-alone policy covering terrorist acts, neither Borrower nor
Operating Tenant shall be required to pay any Insurance Premiums solely with
respect to such terrorism coverage in excess of the Terrorism Premium Cap
(hereinafter defined); provided that if the Insurance Premiums payable with
respect to such terrorism coverage exceeds the Terrorism Premium Cap, Lender
may, at its option (1) purchase such stand-alone terrorism Policy, with
Borrower or Operating Tenant paying such portion of the Insurance Premiums with
respect thereto equal to the Terrorism Premium Cap and the Lender paying such
portion of the Insurance Premiums in excess of the Terrorism Premium Cap or
(2) modify the deductible amounts, policy limits and other required policy
terms to reduce the Insurance Premiums payable with respect to such stand-alone
terrorism Policy to the Terrorism Premium Cap. 
As used herein, (i) “Terrorism Premium Cap”
means an amount equal to $67,000, adjusted annually by a percentage equal to
the increase in the Consumer Price Index (hereinafter defined) and (ii) “Consumer Price Index” means the
Consumer Price Index for All Urban Consumers published by the Bureau of Labor
Statistics of the United States Department of Labor, New York Metropolitan
Statistical Area, All Items (1982-84 = 100), or any successor index thereto,
approximately adjusted, and in the event that the Consumer Price Index is
converted to a different standard reference base or otherwise revised, the determination
of adjustments provided for herein shall be made with the use of such
conversion factor, formula or table for converting the Consumer Price Index as
may be published by the Bureau of Labor Statistics or, if said Bureau shall not
publish the same, then with the use of such conversion factor, formula or table
as may be published by Prentice-Hall, Inc., or any other nationally
recognized publisher of similar statistical information; and if the Consumer
Price Index ceases to be published, and there is no successor thereto
(i) such other index as Lender and Borrower shall agree upon in writing or
(ii) if Lender and Borrower cannot agree on a substitute index, such other
index, as reasonably selected by Lender. 
Borrower and Operating Tenant shall obtain the coverage required under
this subsection (j) from a carrier which otherwise satisfies the
rating criteria specified in Section 7.1.2 (a “Qualified
Carrier”) or in the event that such coverage is not available
from a Qualified Carrier, Borrower and Operating Tenant shall obtain such
coverage from the highest rated insurance company providing such coverage.

 

7.1.2       Policies.  All policies of insurance (the “Policies”) required pursuant to
Section 7.1.1 shall (i) be issued by companies approved by Lender and
authorized to do business in the State, with a claims paying ability rating of “BBB”
or better by S&P (or the equivalent by any other Rating Agency) (provided that coverage may be obtained from Hartford Steam
Boiler, which is rated A ++ IX in the current Best’s Key Rating Guide and from
the Essex Insurance Company which is rated A by Fitch); (ii) name Lender
and its successors and/or assigns as their interest may appear as the mortgagee
(in the case of property insurance), loss payee (in the case of business interruption/loss
of rents coverage) and an additional insured (in the case of liability
insurance); (iii) contain (in the case of property insurance) a
Non-Contributory Standard Mortgagee Clause and a Lender’s Loss Payable
Endorsement, or their equivalents, naming Lender as the person to which all
payments made by such insurance company shall be paid; 

 

60

 

(iv) contain a waiver of subrogation against
Lender; (v) be assigned and the originals thereof delivered to Lender, or
in lieu of delivering originals of the Policies, Borrower and Operating Tenant
may, on an annual basis, deliver Acord evidences of coverages or the
equivalent, as adequate proof of coverage; (vi) contain such provisions as
Lender deems reasonably necessary or desirable to protect its interest,
including (A) endorsements providing that neither Borrower, Operating
Tenant, Lender nor any other party shall be a co-insurer under the Policies, (B) that
Lender shall receive at least 30 days’ prior written notice of any
modification, reduction, cancellation or non-renewal of any of the Policies, (C) an
agreement whereby the insurer waives any right to claim any premiums and
commissions against Lender, provided that the policy need not waive the requirement
that the premium be paid in order for a claim to be paid to the insured and (D) providing
that Lender is permitted to make payments to effect the continuation of such
policy upon notice of cancellation due to non-payment of premiums;
(vii) in the event any insurance policy (except for commercial general
liability and other liability and workers compensation insurance) shall contain
separation of insureds provisions, such policy shall provide that with respect
to the interest of Lender, such insurance policy shall not be invalidated by
and shall insure Lender regardless of (A) any act, failure to act or
negligence of or violation of warranties, declarations or conditions contained
in such policy by any named insured, (B) the occupancy or use of the premises
for purposes more hazardous than permitted by the terms thereof, or (C) any
foreclosure or other action or proceeding taken by Lender pursuant to any
provision of the Loan Documents; and (viii) be satisfactory in form and
substance to Lender and approved by Lender as to amounts, form, risk coverage,
deductibles, loss payees and insureds. 
Borrower or Operating Tenant shall pay the premiums for such Policies
(the “Insurance Premiums”) as the
same become due and payable and furnish to Lender evidence of the renewal of
each of the Policies together with (unless such Insurance Premiums have been
paid by Lender pursuant to Section 3.3) receipts for or other evidence of
the payment of the Insurance Premiums reasonably satisfactory to Lender.  If Borrower or Operating Tenant does not
furnish such evidence and receipts at least thirty days prior to the expiration
of any expiring Policy, then Lender may, but shall not be obligated to, procure
such insurance and pay the Insurance Premiums therefor, and Borrower shall
reimburse Lender for the cost of such Insurance Premiums promptly on demand,
with interest accruing at the Default Rate. 
Borrower shall (and shall cause Operating Tenant to) deliver to Lender a
certified copy of each Policy within 10 days after written request therefore by
Lender (subject to timely policy issuance by the applicable carrier).  Within 30 days after request by Lender,
Borrower shall (and shall cause Operating Tenant to) obtain such increases in
the amounts of coverage required hereunder as may be reasonably requested by
Lender, taking into consideration changes in the value of money over time,
changes in liability laws, changes in prudent customs and practices, and the
like.

 

7.2          Casualty.

 

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

 

61

 

7.2.2       Settlement of Proceeds.  If a Casualty covered by any of the Policies
(an “Insured Casualty”) occurs where the loss does not
exceed $750,000, provided no Event of Default has occurred and is continuing,
Borrower or Operating Tenant may settle and adjust any claim without the prior
consent of Lender; provided such adjustment is carried out in a competent and
timely manner, and Borrower and Operating Tenant are hereby authorized to
collect and receipt for the insurance proceeds (the “Proceeds”).  In the event of an Insured Casualty where the
loss equals or exceeds $750,000 (a “Significant
Casualty”),
Borrower or Operating Tenant may settle and adjust any claim with prior consent
of Lender (which shall not be unreasonably withheld or delayed) unless Event of
Default has occurred and is continuing in which event Lender may, in its sole
discretion, settle and adjust any claim without the consent of Borrower or
Operating Tenant and agree with the insurer(s) on the amount to be paid on
the loss, and the Proceeds shall be due and payable solely to Lender and held
by Lender in the Casualty/Condemnation Subaccount and disbursed in accordance
herewith.  If Borrower, Operating Tenant
or any party other than Lender is a payee on any check representing Proceeds
with respect to a Significant Casualty, Borrower or Operating Tenant, as
applicable, shall immediately endorse, and cause all such third parties to
endorse, such check payable to the order of Lender.  Borrower hereby irrevocably appoints Lender
as its attorney-in-fact, coupled with an interest, to endorse such check
payable to the order of Lender.  The
expenses incurred by Lender in the settlement, adjustment and collection of the
Proceeds shall become part of the Debt and shall be reimbursed by Borrower to
Lender upon demand.  Notwithstanding
anything to the contrary contained herein, if in connection with a Casualty any
insurance carrier makes a payment under a property insurance Policy that
Borrower or Operating Tenant proposes be treated as business or rental
interruption insurance, then, notwithstanding any designation (or lack of
designation) by the insurance carrier as to the purpose of such payment, as
between Lender and Borrower or Operating Tenant, such payment shall not be
treated as business or rental interruption insurance proceeds unless Borrower
or Operating Tenant has demonstrated to Lender’s satisfaction that the
remaining net Proceeds that will be received from the property insurance
carriers are sufficient to pay 100% of the cost of fully restoring the
Improvements or, if such net Proceeds are to be applied to repay the Debt in
accordance with the terms hereof, that such remaining net Proceeds will be
sufficient to pay the Debt in full.

 

7.3          Condemnation.

 

7.3.1       Notice; Restoration.  Borrower shall (and shall cause Operating
Tenant  to) promptly give Lender notice
of the actual or threatened commencement of any condemnation or eminent domain
proceeding affecting the Property (a “Condemnation”)
and shall deliver to Lender copies of any and all papers served in connection
with such Condemnation.  Following the
occurrence of a Condemnation, Borrower, regardless of whether an Award is
available (unless Lender has breached its obligation (if any) to make such
Award available pursuant to Section 7.4.1), shall promptly proceed to
restore, repair, replace or rebuild the Property in accordance with Legal Requirements
to the extent practicable to be of at least equal value and of substantially
the same character (and to have the same utility) as prior to such
Condemnation.

 

7.3.2       Collection of Award.  If a Condemnation occurs where the award or
payment to Borrower or Operating Tenant in respect thereof (an “Award”) is not expected to be in
excess of $750,000, provided no Event of Default has occurred and is
continuing, Borrower or Operating Tenant may make any compromise, adjustment or
settlement in connection with such 

 

62

 

Condemnation without the prior consent of Lender;
provided such adjustment is carried out in a diligent and timely manner, and
Borrower and Operating Tenant are hereby authorized to collect and receive the
Award.  In the event of a Condemnation
where the Award payable to Borrower or Operating Tenant is expected to be in
excess of $750,000, Borrower and Operating Tenant may settle and adjust any
claim with the prior consent of Lender (which consent shall not be unreasonably
withheld or delayed), unless an Event of Default has occurred and is
continuing, in which case Lender is hereby irrevocably appointed as Borrower’s
and Operating Tenant’s attorney-in-fact, coupled with an interest, with
exclusive power to collect, receive and, subject to the terms of the Loan
Documents, retain any Award to be applied to amounts due under the Loan and to
make any compromise, adjustment or settlement in connection with such
Condemnation.  Notwithstanding any
Condemnation (or any transfer made in lieu of or in anticipation of such
Condemnation), Borrower shall continue to pay the Debt at the time and in the
manner provided for in the Loan Documents, and the Debt shall not be reduced
unless and until any Award shall have been actually received and applied by
Lender to expenses of collecting the Award and to discharge of the Debt. Lender
shall not be limited to the interest paid on the Award by the condemning
authority but shall be entitled to receive out of the Award interest at the
rate or rates provided in the Note.  If
the Property is sold, through foreclosure or otherwise, prior to the receipt by
Lender of such Award, Lender shall have the right, whether or not a deficiency
judgment on the Note shall be recoverable or shall have been sought, recovered
or denied, to receive all or a portion of the Award sufficient to pay the
Debt.  Borrower shall (and shall cause
Operating Tenant to) cause any Award that is payable to Borrower to be paid
directly to Lender.  Lender shall hold
such Award in the Casualty/Condemnation Subaccount and disburse such Award in
accordance with the terms hereof.

 

7.4          Application of Proceeds or Award.

 

7.4.1       Application to Restoration.  If an Insured Casualty or Condemnation occurs
where (i) the loss is in an aggregate amount less than the 30% of the
unpaid Principal, (ii) in the reasonable judgment of Lender, the Property
can be restored within twelve months, and prior to six months before the Stated
Maturity Date and prior to the expiration of the rental or business
interruption insurance with respect thereto, to the Property’s pre-existing
condition and utility substantially as existed immediately prior to such
Insured Casualty or to as nearly as possible the pre-existing condition and
utility prior to a Condemnation, and after such restoration will adequately
secure the Debt and (iii) less than (x) 30%, in the case of an
Insured Casualty or (y) 15%, in the case of a Condemnation, of the total
floor area of the Improvements has been damaged, destroyed or rendered unusable
as a result of such Insured Casualty or Condemnation; and (iv) no Event of
Default shall have occurred and be then continuing, then the Proceeds or the
Award, as the case may be (after reimbursement of any expenses incurred by
Lender), shall be applied to pay or reimburse Borrower and Operating Tenant for
the cost of restoring, repairing, replacing or rebuilding the Property (the “Restoration”), in the manner set
forth herein.  Borrower and Operating
Tenant shall commence and diligently prosecute such Restoration.  Notwithstanding the foregoing, in no event
shall Lender be obligated to apply the Proceeds or Award to reimburse Borrower
or Operating Tenant for the cost of Restoration unless, in addition to
satisfaction of the foregoing conditions, both (x) Borrower or Operating
Tenant shall pay (and if required by Lender, Borrower or Operating Tenant shall
deposit with Lender in advance) all costs of such Restoration in excess of the
net amount of the Proceeds or the Award made available pursuant to the terms
hereof; and (y) Lender shall have received evidence reasonably

 

63

 

satisfactory to it that during the period of the
Restoration, any operating deficits, and all payments required under this
Agreement (including reserves) will be payable from Rents, business
interruption insurance or from other funds of Borrower or Operating Tenant.

 

7.4.2       Application to Debt.  Except as provided in Section 7.4.1, any
Proceeds and/or Award may, at the option of Lender in its discretion, be
applied as set forth in Section 2.3.2 or applied to pay or reimburse
Borrower or Operating Tenant for the cost of any Restoration, in the manner set
forth in Section 7.4.3.

 

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

 

7.4.4       Intentionally Omitted.

 

8.             DEFAULTS

 

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

 

(a)           any portion of the Debt is
not paid when due or any other amount under clauses (i) through
(vi) of Section 3.12(a) is not paid in full on each Payment
Date, unless 

 

64

 

adequate funds are available
in the Deposit Account or the applicable Subaccount for such payments;

 

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

 

(c)           the Policies are not kept in
full force and effect, or certificates evidencing the same are not delivered to
Lender;

 

(d)           a Transfer other than a
Permitted Transfer occurs without Lender’s consent, which consent may be
withheld in Lender’s sole and absolute discretion;

 

(e)           any material representation
or warranty made by Borrower, Operating Tenant or Guarantor in any Loan
Document on or after the date hereof, or in any report, certificate, financial
statement or other instrument, agreement or document prepared and furnished by
Borrower, Operating Tenant or Guarantor in connection with any Loan Document,
shall be false or misleading in any material respect as of the date the
representation or warranty was made;

 

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

 

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

 

(h)           Borrower or Operating
Tenant, as applicable, breaches any covenant contained in Sections 5.12.1
(a) - (c) and (e), 5.13, 5.15, 5.22, 5.25 or 5.28;

 

(i)            except as expressly
permitted hereunder, the alteration, improvement, demolition or removal by or
on behalf of Borrower or Operating Tenant of all or any portion of the
Improvements (or a threat from Borrower or Operating Tenant to effect the same)
without the prior written consent of Lender (if such consent is required
pursuant to the terms of this Agreement);

 

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

 

65

 

of the Debt under such other
Loan Documents, provided Borrower receives any notice and grace or cure period
required for such event or condition;

 

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

 

(l)            any of the assumptions
contained in any substantive non-consolidation opinion, delivered to Lender by
Borrower’s counsel in connection with the Loan or otherwise hereunder, were not
true and correct as of the date of such opinion or thereafter became untrue or
incorrect in any material respect unless caused by a change in Borrower’s
organizational structure due to a Permitted Transfer or that is otherwise
approved by Lender in accordance with the terms and conditions of this
Agreement and, to the extent required by this Agreement, a new
non-consolidation opinion is delivered to Lender;

 

(m)          Intentionally Omitted; or

 

(n)           a default shall be
continuing under any of the other terms, covenants or conditions of this
Agreement or any other Loan Document not otherwise specified in this
Section 8.1, for ten days after notice to Borrower (and Guarantor, if
applicable) from Lender, in the case of any default which can be cured by the
payment of a sum of money, or for 30 days after notice from Lender in the case
of any other default; provided, however, that if such non-monetary default is
susceptible of cure but cannot reasonably be cured within such 30-day period,
and Borrower (or Operating Tenant or Guarantor, if applicable) shall have
commenced to cure such default within such 30-day period and thereafter
diligently and expeditiously proceeds to cure the same, such 30-day period
shall be extended for an additional period of time as is reasonably necessary
for Borrower (or Operating Tenant or Guarantor, if applicable) in the exercise
of due diligence to cure such default, such additional period not to exceed 90
days.

 

8.2          Remedies.

 

8.2.1       Acceleration.  During the continuance of an Event of Default
(other than an Event of Default described in paragraph (f) or
(g) of Section 8.1) and at any time and from time to time thereafter
for so long as such Event of Default is continuing, in addition to any other
rights or remedies available to it pursuant to the Loan Documents or at law or
in equity, Lender may take such action, without notice or demand, that Lender
deems advisable to protect and enforce its rights against Borrower, Operating
Tenant and in and to the Property; including declaring the Debt to be
immediately due and payable (including unpaid interest, Default Rate interest,
Late Payment Charges, and any other amounts owing by Borrower), without notice
or demand; and upon any Event of Default described in
paragraph (f) or (g) of Section 8.1, the Debt (including
unpaid interest, Default Rate interest, Late Payment Charges, and any other
amounts owing by Borrower) shall immediately and automatically become due and
payable, without notice or demand, and Borrower hereby expressly waives any
such notice or demand, anything contained in any Loan Document to the contrary
notwithstanding.

 

66

 

8.2.2       Remedies Cumulative.  During the continuance of an Event of
Default, all or any one or more of the rights, powers, privileges and other remedies
available to Lender against Borrower or Operating Tenant under the Loan
Documents or at law or in equity may be exercised by Lender at any time and
from time to time, whether or not all or any of the Debt shall be declared, or
be automatically, due and payable, and whether or not Lender shall have
commenced any foreclosure proceeding or other action for the enforcement of its
rights and remedies under any of the Loan Documents.  Any such actions taken by Lender shall be
cumulative and concurrent and may be pursued independently, singly,
successively, together or otherwise, at such time and in such order as Lender
may determine in its discretion, to the fullest extent permitted by law,
without impairing or otherwise affecting the other rights and remedies of
Lender permitted by law, equity or contract or as set forth in the Loan
Documents.  Without limiting the
generality of the foregoing, Borrower agrees that if an Event of Default is
continuing, (i) to the extent permitted by applicable law, Lender is not
subject to any “one action” or “election of remedies” law or rule, and
(ii) all Liens and other rights, remedies or privileges provided to Lender
shall remain in full force and effect until Lender has exhausted all of its
remedies against the Property, the Mortgage has been foreclosed, the Property
has been sold and/or otherwise realized upon in satisfaction of the Debt or the
Debt has been paid in full.  To the
extent permitted by applicable law, nothing contained in any Loan Document
shall be construed as requiring Lender to resort to any portion of the Property
for the satisfaction of any of the Debt in preference or priority to any other
portion, and Lender may seek satisfaction out of the entire Property or any
part thereof, in its discretion.

 

8.2.3       Severance.  During the continuance of an Event of
Default, Lender shall have the right from time to time to sever the Note and
the other Loan Documents into one or more separate notes, mortgages and other
security documents in such denominations and priorities of payment and liens as
Lender shall determine in its discretion for purposes of evidencing and
enforcing its rights and remedies. 
Borrower shall (and shall cause Operating Tenant to) execute and deliver
to Lender from time to time, promptly after the request of Lender, a severance
agreement and such other documents as Lender shall request in order to effect
the severance described in the preceding sentence, all in form and substance
reasonably satisfactory to Lender. 
Borrower hereby absolutely and irrevocably appoints Lender as its true
and lawful attorney, coupled with an interest, in its name and stead to make
and execute all documents necessary or desirable to effect such severance,
Borrower ratifying all that such attorney shall do by virtue thereof; provided,
however, that no such severance shall change the aggregate principal amount of
the Debt, the interest rate thereon or any other financial term and there shall
be no representations, warranties or covenants not contained in the original Loan
Documents and any such representations and warranties shall only be deemed
given as of the date hereof.

 

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

 

67

 

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

 

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

 

9.             SPECIAL
PROVISIONS

 

9.1          Sale of Note and Secondary Market
Transaction.

 

9.1.1       General; Borrower Cooperation.

 

(a)           Lender shall have the right
at any time and from time to time (i) to sell or otherwise transfer the
Loan or any portion thereof or the Loan Documents or any interest therein to
one or more investors, (ii) to sell participation interests in the Loan to
one or more investors or (iii) to securitize the Loan or any portion
thereof in a single asset securitization or a pooled loan securitization of
rated single or multi-class securities (the “Securities”)
secured by or evidencing ownership interests in the Note and the Mortgage (each
such sale, assignment, participation and/or securitization is referred to
herein as a “Secondary Market Transaction”).  In connection with any Secondary Market
Transaction, Borrower shall (and shall cause Operating Tenant to), at no cost
to Borrower or Operating Tenant, use all reasonable efforts and reasonably
cooperate with Lender and otherwise assist Lender in satisfying the market
standards to which Lender customarily adheres or which may be reasonably
required in the marketplace or by the Rating Agencies in connection with any
such Secondary Market Transactions, including: 
(a) to (i) provide reasonably requested, non-confidential
financial and other information with respect to the Property, Borrower,
Operating Tenant, Guarantor, Manager and any tenants of the Property,
(ii) provide business plans and budgets relating to the Property and
(iii) permit or cause to be permitted such site inspection, appraisals,
surveys, market studies, non-invasive environmental reviews and reports,
engineering reports and other non-invasive due diligence investigations of the
Property, as may be reasonably requested from time to time by Lender or the
Rating Agencies or as may be necessary or appropriate in connection with a
Secondary Market Transaction or Exchange Act requirements (the items provided
to Lender pursuant to this paragraph (a) being called the “Provided Information”), together, if
customary, with appropriate verification of and/or consents to the Provided
Information through letters of auditors or opinions of counsel of 

 

68

 

independent attorneys
acceptable to Lender and the Rating Agencies; (b) cause counsel to render
opinions as to non-consolidation and any other opinion customary in
securitization transactions with respect to the Property, Borrower and any
Guarantor, which counsel and opinions shall be reasonably satisfactory to
Lender and the Rating Agencies; (c) provide current certificates of good
standing and qualification with respect to Borrower, Operating Tenant and Sole
Member from appropriate Governmental Authorities; and (d) execute such
amendments to the Loan Documents and Borrower’s and Operating Tenant’s
organizational documents, as may be requested by Lender or the Rating Agencies
or otherwise to effect a Secondary Market Transaction, provided that nothing
contained in this subsection (d) shall require Borrower to amend the
Principal amount, interest rate (based on the weighted average thereof),
maturity dates or any other material economic or non-economic term.  Borrower’s and Operating Tenant’s cooperation
obligations set forth herein shall continue until the Loan has been paid in
full.

 

(b)           Notwithstanding anything to
the contrary in this Article 9 or elsewhere in the Loan Documents, neither
Borrower nor Operating Tenant shall be required to incur any out-of-pocket cost
or expense in connection with a Secondary Market Transaction and Lender shall
pay or reimburse Borrower or Operating Tenant for any and all reasonable out of
pocket costs incurred by Borrower or Operating Tenant in complying with the
terms of this Article 9.

 

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

 

9.1.3       Borrower Obligations Regarding
Disclosure Documents.  In
connection with a Disclosure Document, Borrower shall (and shall cause
Operating Tenant to): if requested by Lender, certify in writing that Borrower
and Operating Tenant have carefully examined those portions of such Disclosure
Document pertaining to Borrower, Operating Tenant, the Property, Manager and
the Loan, and that such portions do not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were made,
not misleading.

 

9.1.4       Intentionally Omitted.

 

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9.1.5       Intentionally Omitted.

 

9.1.6       Rating Surveillance.  Lender, at Lender’s expense, will retain the
Rating Agencies to provide rating surveillance services on Securities.

 

9.1.7       Severance of Loan.  Lender shall have the right, at no expense to
Borrower or Operating Tenant, at any time (whether prior to, in connection
with, or after any Secondary Market Transaction), with respect to all or any
portion of the Loan, to modify, split and/or sever all or any portion of the
Loan as hereinafter provided.  Without
limiting the foregoing, Lender may (i) cause the Note and the Mortgage to
be split into a first and second mortgage loan, (ii) create one more
senior and subordinate notes (i.e., an A/B or A/B/C structure),
(iii) create multiple components of the Note or Notes (and allocate or
reallocate the principal balance of the Loan among such components) or
(iv) otherwise sever the Loan into two or more loans secured by mortgages,
in each such case, in whatever proportion and whatever priority Lender
determines; provided, however, in each such instance (A) the outstanding
principal balance of all the Notes evidencing the Loan (or components of such
Notes) immediately after the effective date of such modification equals the
outstanding principal balance of the Loan immediately prior to such
modification and the weighted average of the interest rates for all such Notes
(or components of such Notes) immediately after the effective date of such
modification equals the interest rate of the original Note immediately prior to
such modification and (B) provided no Event of Default is continuing,
Borrower shall have the option to require that the components of the Loan be
structured such that permitted prepayments (voluntary or involuntary) shall not
result in any “rate creep”.  If requested
by Lender, Borrower, Operating Tenant (and Borrower’s and Operating Tenant’s
constituent members, if applicable,) and Guarantor shall at no expense to
Borrower or Operating Tenant execute within seven (7) Business Days
after such request, such documentation as Lender may reasonably request to
evidence and/or effectuate any such modification or severance.

 

10.          MISCELLANEOUS

 

10.1        Exculpation.  Subject to the qualifications below, Lender
shall not enforce the liability and obligation of Borrower to perform and
observe the obligations contained in the Loan Documents by any action or
proceeding wherein a money judgment shall be sought against Borrower, Operating
Tenant, Guarantor, any Affiliate of Borrower, Operating Tenant or Guarantor,
any Person owning, directly or indirectly, any legal or beneficial ownership
interest in Borrower, Guarantor or Operating Tenant, or any director, officer,
member, partner, shareholder, employee or agent of any of the foregoing, except
that Lender may bring a foreclosure action, an action for specific performance
or any other appropriate action or proceeding to enable Lender to enforce and
realize upon its interest and rights under the Loan Documents, or in the
Property, the Rents or any other collateral given to Lender pursuant to the
Loan Documents; provided, however, that, except as specifically provided
herein, any judgment in any such action or proceeding shall be enforceable
against Borrower only to the extent of Borrower’s interest in the Property, in
the Rents and in any other collateral given to Lender, and Lender shall not sue
for, seek or demand any deficiency judgment against Borrower in any such action
or proceeding under or by reason of or under or in connection with any Loan
Document.  The provisions of this
Section shall not, however, (i) constitute a waiver, release or
impairment of any obligation evidenced or secured by any Loan Document;
(ii) impair the right of Lender to name Borrower 

 

70

 

as a party defendant in any
action or suit for foreclosure and sale under the Mortgage; (iii) affect
the validity or enforceability of any of the Loan Documents or any guaranty
made in connection with the Loan or any of the rights and remedies of Lender
thereunder; (iv) impair the right of Lender to obtain the appointment of a
receiver; (v) impair the enforcement of the Assignment of Leases;
(vi) constitute a prohibition against Lender to commence any other
appropriate action or proceeding in order for Lender to fully realize the
security granted by the Mortgage or to exercise its remedies against the
Property; or (vii) constitute a waiver of the right of Lender to enforce
the liability and obligation of Borrower, by money judgment or otherwise, to
the extent of any loss, damage, cost, expense, liability, claim or other
obligation incurred by Lender (including attorneys’ fees and costs reasonably
incurred) arising out of or in connection with the following (all such
liability and obligation of Borrower for any or all of the following being
referred to herein as “Borrower’s
Recourse Liabilities”):

 

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

 

(b)           physical waste of the
Property or any portion thereof by or on behalf of Borrower, Operating Tenant,
Sole Borrower Member, Sole OT Member or Guarantor, or during the continuance of
an Event of Default the removal or disposal of any portion of the Property by
or on behalf of Borrower, Operating Tenant, Sole Borrower Member, Sole OT
Member or Guarantor;

 

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

 

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

 

(e)           misappropriation of tenant
security deposits and Rents collected in advance, including the failure to
deliver such amounts to Lender upon foreclosure or a deed in lieu thereof,
except to the extent that the same were applied in accordance with the
provisions of the applicable Lease prior to the date of such foreclosure or
deed in lieu thereof;

 

(f)            the failure to pay Taxes,
provided Borrower shall not be liable to the extent funds to pay such amounts
are available in the Deposit Account;

 

71

 

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

 

(h)           a breach of the covenants
set forth in Section 5.13 (other than a breach of any of the covenants
described in clauses (ix)(D), (x) and (xxi) set forth in the
definition of “Special Purpose Bankruptcy Remote Entity” on Schedule 5);
or

 

(i)            an involuntary Transfer
other than a Permitted Transfer shall have occurred.

 

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

 

(i)    a
voluntary Transfer other than a Permitted Transfer shall have occurred (other
than with respect to the entering into of Leases, easements, restrictive
covenants, licenses or occupancy agreements not permitted pursuant to the terms
of the Loan Documents); or

 

(ii)    a
breach of the covenants set forth in Section 5.13, other than the
covenants set forth in clauses (ix)(D), (x) and (xxi) in the
definition of “Special Purpose Bankruptcy Remote Entity” on Schedule 5
(provided, however, with respect to a breach of any of the covenants described
in clauses (xi) - (xx), clause (xxiv), clause (xxvi), clause (xxvii),
clause (xxix) and clause (xxxii) set forth in the definition of “Special
Purpose Bankruptcy Remote Entity” on Schedule 5, and clause (ii) in
the definition of “Single Member Bankruptcy Remote LLC” on Schedule 5,
the foregoing recourse shall only be triggered if in connection with a pending
bankruptcy proceeding a court of competent jurisdiction has ordered the
substantive consolidation of the assets and liabilities of either Borrower or
Operating Tenant with any other Person; or

 

(iii)    the
occurrence of any condition or event described in either Section 8.1(f)(i) (with
respect to Borrower or Operating Tenant only) or Section 8.1(g) (with
respect to Borrower or Operating Tenant only) and, with respect to such condition
or event described in Section 8.1(g), either Borrower, Operating Tenant,
Sole Borrower Member, Sole OT Member, Guarantor or any Person owning an
interest (directly or indirectly) in Borrower, Operating Tenant, Sole
Borrower Member, Sole OT Member or Guarantor (other than shareholders of
Guarantor so long as Guarantor is a public company) knowingly aids, solicits,
supports, or otherwise cooperates or colludes to cause such condition or event
or knowingly fails to contest such condition or event.

 

72

 

10.2        Brokers and Financial Advisors.

 

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

 

(b)           Notwithstanding anything in
Section 10.2(a) above to the contrary, Borrower hereby acknowledges
that (i) at Lender’s sole discretion, a Broker may receive further
consideration from Lender relating to the Loan or any other matter for which
Lender may elect to compensate such Broker pursuant to a separate agreement
between Lender and such Broker and (ii) Lender shall have no obligation to
disclose to Borrower the existence of any such agreement or the amount of any
such additional consideration paid or to be paid to such Broker whether in
connection with the Loan or otherwise.

 

10.3        Retention of Servicer.  Lender reserves the right to retain the
Servicer to act as its agent hereunder with such powers as are specifically
delegated to the Servicer by Lender, whether pursuant to the terms of this
Agreement, any pooling and servicing agreement or similar agreement entered
into as a result of a Secondary Market Transaction, the Cash Management
Agreement or otherwise, together with such other powers as are reasonably
incidental thereto.  Borrower shall pay
any reasonable fees and expenses of the Servicer (i) in connection with a
release of the Property (or any portion thereof), (ii) from and after a
transfer of the Loan to any “master servicer” or “special servicer” for any
reason, including without limitation, as a result of a decline in the occupancy
level of the Property, (iii) in connection with an assumption or
modification of the Loan requested by Borrower, (iv) in connection with
the enforcement of the Loan Documents or (v) in connection with any other
action or approval taken by Servicer hereunder on behalf of Lender (which shall
not include ongoing regular servicing fees relating to the day-to-day servicing
of the Loan including approvals of Commercial Leases, Annual Budget approvals
or disbursements from reserve accounts, for which Borrower shall not be
charged).

 

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

 

10.5        Lender’s Discretion.  Whenever pursuant to this Agreement or any
other Loan Document, Lender exercises any right given to it to approve or
disapprove, or consent or withhold consent, or any arrangement or term is to be
satisfactory to Lender or is to be in Lender’s discretion, the decision of
Lender to approve or disapprove, to consent or withhold

 

73

 

consent, or to decide whether arrangements or terms
are satisfactory or not satisfactory, or acceptable or unacceptable or in
Lender’s discretion shall (except as is otherwise specifically herein provided)
be in the sole discretion of Lender and shall be final and conclusive.

 

10.6        Governing Law.

 

(a)           THE PROCEEDS OF THE NOTE
DELIVERED PURSUANT HERETO WERE DISBURSED FROM THE STATE OF NEW YORK, WHICH
STATE THE PARTIES AGREE HAS A SUBSTANTIAL RELATIONSHIP TO THE PARTIES AND TO
THE UNDERLYING TRANSACTION EMBODIED HEREBY, AND IN ALL RESPECTS, INCLUDING
MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE
OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE AND ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA,
EXCEPT THAT AT ALL TIMES THE PROVISIONS FOR THE CREATION, PERFECTION, AND
ENFORCEMENT OF THE LIENS CREATED PURSUANT TO THE LOAN DOCUMENTS SHALL BE
GOVERNED BY AND CONSTRUED ACCORDING TO THE LAW OF THE STATE IN WHICH THE
PROPERTY IS LOCATED, IT BEING UNDERSTOOD THAT, TO THE FULLEST EXTENT
PERMITTED BY THE LAW OF SUCH STATE, THE LAW OF THE STATE OF NEW YORK SHALL
GOVERN THE VALIDITY AND THE ENFORCEABILITY OF ALL LOAN DOCUMENTS AND THE
DEBT.  TO THE FULLEST EXTENT PERMITTED BY
LAW, BORROWER HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVES ANY CLAIM TO ASSERT
THAT THE LAW OF ANY OTHER JURISDICTION GOVERNS THIS AGREEMENT AND THE NOTE, AND
THIS AGREEMENT AND THE NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK PURSUANT TO § 5-1401 OF THE NEW
YORK GENERAL OBLIGATIONS LAW.

 

(b)           ANY LEGAL SUIT, ACTION OR
PROCEEDING AGAINST LENDER OR BORROWER ARISING OUT OF OR RELATING TO THIS
AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK COUNTY,
NEW YORK  AND BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING.  BORROWER DOES HEREBY DESIGNATE AND APPOINT CORPORATION SERVICE COMPANY AT 80 STATE STREET, 6TH FLOOR, ALBANY, NEW
YORK 12207, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS
BEHALF SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH
SUIT, ACTION OR PROCEEDING IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK,
AND AGREES THAT SERVICE OF PROCESS UPON SAID AGENT AT SAID ADDRESS AND WRITTEN
NOTICE OF SAID SERVICE OF BORROWER MAILED OR DELIVERED TO BORROWER IN THE
MANNER PROVIDED 

 

74

 

HEREIN SHALL BE DEEMED IN
EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER (UNLESS LOCAL LAW
REQUIRES ANOTHER METHOD OF SERVICE), IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN THE STATE OF NEW YORK. 
BORROWER (i) SHALL GIVE PROMPT NOTICE TO LENDER OF ANY CHANGED
ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (ii) MAY AT ANY TIME AND
FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT WITH AN OFFICE IN NEW
YORK, NEW YORK (WHICH OFFICE SHALL BE DESIGNATED AS THE ADDRESS FOR SERVICE OF
PROCESS), AND (iii) SHALL PROMPTLY DESIGNATE SUCH A SUBSTITUTE IF ITS
AUTHORIZED AGENT CEASES TO HAVE AN OFFICE IN NEW YORK, NEW YORK OR IS DISSOLVED
WITHOUT LEAVING A SUCCESSOR.

 

10.7        Modification, Waiver in Writing.  No modification, amendment, extension,
discharge, termination or waiver of any provision of this Agreement or of any
other Loan Document, nor consent to any departure by Borrower therefrom, shall
in any event be effective unless the same shall be in a writing signed by the
party against whom enforcement is sought, and then such waiver or consent shall
be effective only in the specific instance, and for the purpose, for which
given.  Except as otherwise expressly
provided herein, no notice to or demand on Borrower shall entitle Borrower to
any other or future notice or demand in the same, similar or other
circumstances.  Neither any failure nor
any delay on the part of Lender in insisting upon strict performance of any
term, condition, covenant or agreement, or exercising any right, power, remedy
or privilege hereunder, or under any other Loan Document, shall operate as or
constitute a waiver thereof, nor shall a single or partial exercise thereof
preclude any other future exercise, or the exercise of any other right, power,
remedy or privilege.  In particular, and
not by way of limitation, by accepting payment after the due date of any amount
payable under any Loan Document, Lender shall not be deemed to have waived any
right either to require prompt payment when due of all other amounts due under
the Loan Documents, or to declare an Event of Default for failure to effect
prompt payment of any such other amount.

 

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

 

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

 

75

 

10.10      Severability.  Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.

 

10.11      Preferences.  Upon the occurrence and continuance of an
Event of Default, Lender shall have the continuing and exclusive right to apply
or reverse and reapply any and all payments by Borrower or Operating Tenant to
any portion of the Debt.  To the extent
Borrower or Operating Tenant makes a payment to Lender, or Lender receives
proceeds of any collateral, which is in whole or part subsequently invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid
to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such payment
or proceeds received, the Debt or part thereof intended to be satisfied shall
be revived and continue in full force and effect, as if such payment or
proceeds had not been received by Lender. 
This provision shall survive the expiration or termination of this
Agreement and the repayment of the Debt.

 

10.12      Waiver of Notice.  Borrower shall not be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Agreement or any other Loan Document specifically and expressly requires
the giving of notice by Lender to Borrower and except with respect to matters
for which Borrower is not, pursuant to applicable Legal Requirements, permitted
to waive the giving of notice.  Borrower
hereby expressly waives the right to receive any notice from Lender with
respect to any matter for which no Loan Document specifically and expressly
requires the giving of notice by Lender to Borrower.

 

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

 

10.14      Prior Agreements.  This Agreement and the other Loan Documents
contain the entire agreement of the parties hereto and thereto in respect of
the transactions contemplated hereby and thereby, and all prior agreements,
understandings and negotiations among or between such parties, whether oral or
written, are superseded by the terms of this Agreement and the other Loan
Documents.

 

10.15      Offsets, Counterclaims and
Defenses.  Borrower
hereby waives the right to assert a counterclaim, other than a compulsory counterclaim,
in any action or proceeding brought against it by Lender or its agents,
including Servicer, or otherwise offset any obligations to make 

 

76

 

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

 

10.16      Publicity.  All news releases, publicity or advertising
by Borrower or its Affiliates through any media intended to reach the general
public, which refers to the Loan Documents, the Loan, Lender, a Loan purchaser,
the Servicer or the trustee in a Secondary Market Transaction, shall be subject
to the prior written approval of Lender not to be unreasonably withheld or
denied; provided however, that Lender’s consent shall not be required by
Borrower, Borrower’s Affiliates, or any broker dealer or investor
representative related to the marketing or sale of any investment fund or
investment trust managed by Borrower’s Affiliates which disclosure is required
under the Securities Act of 1933 or 1934 or to any potential purchaser of an
interest in the Property.  Additionally,
Lender shall not have the right to issue any of the foregoing (other than as
permitted under Section 9.1.2) without Borrower’s approval.  Nothing in this Section 10.16 shall
prohibit any Affiliate of Borrower that is a public company from including
information regarding the Loan or the Loan Documents in any public reports or
filings required under the Securities Act of 1933 or 1934, or in any investor
presentations, earnings releases or other similar types of disclosures, and
Borrower shall not be required to obtain Lender’s prior consent or approval
with respect to any such use or disclosure of such information.

 

10.17      No Usury.  Borrower and Lender intend at all times to
comply with applicable state law or applicable United States federal law (to
the extent that it permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under state law) and that this
Section 10.17 shall control every other agreement in the Loan Documents.  If the applicable law (state or federal) is
ever judicially interpreted so as to render usurious any amount called for
under the Note or any other Loan Document, or contracted for, charged, taken,
reserved or received with respect to the Debt, or if Lender’s exercise of the
option to accelerate the maturity of the Loan or any prepayment by Borrower
results in Borrower having paid any interest in excess of that permitted by
applicable law, then it is Borrower’s and Lender’s express intent that all
excess amounts theretofore collected by Lender shall be credited against the
unpaid Principal and all other Debt (or, if the Debt has been or would thereby
be paid in full, refunded to Borrower), and the provisions of the Loan
Documents immediately be deemed reformed and the amounts thereafter collectible
thereunder reduced, without the necessity of the execution of any new document,
so as to comply with applicable law, but so as to permit the recovery of the
fullest amount otherwise called for thereunder. 
All sums paid or agreed to be paid to Lender for the use, forbearance or
detention of the Loan shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Loan until payment in full so that the rate or amount of interest on
account of the Debt does not exceed the maximum lawful rate from time to time
in effect and applicable to the Debt for so long as the Debt is
outstanding.  Notwithstanding anything to
the contrary contained in any Loan Document, it is not the intention of Lender
to accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such
acceleration.

 

77

 

10.18      Conflict; Construction of
Documents.  In the
event of any conflict between the provisions of this Agreement and any of the
other Loan Documents, the provisions of this Agreement shall control.  The parties hereto acknowledge that each is
represented by separate counsel in connection with the negotiation and drafting
of the Loan Documents and that the Loan Documents shall not be subject to the
principle of construing their meaning against the party that drafted them.

 

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

 

10.20      Intentionally Omitted.

 

10.21      Assignment.  The Loan, the Note, the Loan Documents and/or
Lender’s rights, title, obligations and interests therein may be assigned by
Lender and any of its successors and assigns to any Person at any time in its
discretion, in whole or in part, whether by operation of law (pursuant to a
merger or other successor in interest) or otherwise.  Upon such assignment, all references to
Lender in this Amended and Restated Loan Agreement and in any Loan Document
shall be deemed to refer to such assignee or successor in interest and such
assignee or successor in interest shall thereafter stand in the place of
Lender.  Borrower may not assign its
rights, title, interests or obligations under this Agreement or under any of
the Loan Documents.

 

10.22      Certain Additional Rights of
Lender.  As and to
the extent set forth in this Agreement, Lender shall have:

 

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

 

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

 

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

 

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

 

78

 

(v)           the right to restrict, upon
the occurrence of an Event of Default, Borrower’s and Operating Tenant’s
payments of management, consulting, director or similar fees to Affiliates of
Borrower or Operating Tenant from the Rents in accordance with the
subordination of the comfort letter agreement delivered by Manager;

 

(vi)          the right to approve any
operating budget and/or capital budget of Borrower and Operating Tenant, in
accordance with the terms of this Agreement;

 

(vii)         the right to approve any
acquisition by Borrower or Operating Tenant of any other significant property
(other than personal property or other assets required for the management and
operation of Property); and

 

(viii)        the right to restrict the
transfer of interests in Borrower and Operating Tenant held by their members,
and the right to restrict the transfer of interests in such member, except for
any transfer that is a Permitted Transfer.

 

The
rights described above may be exercised directly or indirectly by any Person
that owns substantially all of the ownership interests in Lender.  The provisions of this Section are
intended to satisfy the requirement of management rights for purposes of the
Department of Labor “plan assets” regulation 29 C.F.R.,
Section 2510.3-101.

 

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

 

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

 

79

 

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

 

	
   

  	
  BORROWER:  

  
	
   

  	
   

  
	
   

  	
  KAUAI
  COCONUT BEACH, LLC, 

  
	
   

  	
  a
  Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gary S. Bresky

  
	
   

  	
  Name:

  	
  Gary
  S. Bresky

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Chief Financial

  
	
   

  	
   

  	
  Officer
  and Treasurer

  

 

[Signatures continue on next page]

 

 

	
   

  	
  LENDER:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK, N.A., AS TRUSTEE FOR 

  
	
   

  	
  THE
  MORGAN STANLEY CAPITAL I INC.

  
	
   

  	
  COMMERCIAL
  MORTGAGE PASS-THROUGH 

  
	
   

  	
  CERTIFICATES
  SERIES 2006-XLF

  
	
   

  	
   

  
	
   

  	
  By

  	
  Midland
  Loan Services, Inc.,

  
	
   

  	
   

  	
  a
  Delaware corporation,

  
	
   

  	
   

  	
  Its
  Attorney-In-Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Bradley J. Hauger

  
	
   

  	
   

  	
   

  	
  Bradley
  J. Hauger

  
	
   

  	
   

  	
   

  	
  Senior
  Vice President

  
	
   

  	
   

  	
   

  	
  Servicing
  Officer

  

 

 

Schedule 1

 

Intentionally Omitted

 

1

 

Schedule 2

 

Exceptions to Representations and Warranties

 

[TO BE PROVIDED]

 

1

 

Schedule 3

 

Rent Roll

 

(Attached)

 

1

 

Schedule 4

 

Organization of Borrower

 

(Attached)

 

1

 

Schedule 5

 

Definition of Special Purpose Bankruptcy Remote Entity

 

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

 

(i)                    was and will be organized
solely for the purpose of:

 

(A)            (1) directly or
indirectly, acquiring, leasing, developing, redeveloping, holding, operating,
managing, financing, refinancing, selling, disposing of, or otherwise dealing
with the Property; and (2) entering into the Loan; and (3) engaging
in any lawful act or activity and to exercise any powers permitted to entities
organized under the laws of the state of such entity’s formation that are
related or incidental to and necessary, convenient or advisable for the
accomplishment of the preceding purposes (including the entering into of
interest rate or basis swap, cap, floor or collar agreements, currency exchange
agreements or similar hedging transactions and referral, management, servicing
and administration agreements) (the “Property Ownership”);
or

 

(B)             acting as a general partner
of the limited partnership that owns the Property; or

 

(C)             (1) acquiring, owning,
holding, operating, financing, refinancing, encumbering, selling, exchanging
and otherwise dealing with and disposing of all or any portion of the limited
liability company interests in the limited liability company that owns the
Property and serving as a member of the limited liability company that owns the
Property; and (2) executing, delivering and performing its obligations
under the limited liability company agreement of the limited liability company
that owns the Property; and (3) intentionally omitted; and
(4) engaging in any lawful act or activity and exercising any powers
permitted to limited liability companies organized under the laws of the state
of such entity’s formation that are related or incidental to and necessary,
convenient or advisable for the accomplishment of the above mentioned purposes
(including the entering into of interest rate or basis swap, cap, floor or
collar agreements, currency exchange agreements or similar hedging transactions
and referral, management, servicing and administration agreements) (the “Member Activities);

 

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

 

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

 

(iv)                  has not engaged, sought or
consented to and will not engage in, seek or consent to any dissolution,
winding up, liquidation, consolidation, merger, asset sale

 

1

 

(except as expressly
permitted by this Agreement), transfer of partnership or membership interests
or the like, or amendment of its limited partnership agreement, articles of
incorporation, articles of organization, certificate of formation or operating
agreement (as applicable);

 

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

 

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

 

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

 

(viii)                if such entity is a limited
liability company with more than one member, has and will have articles of
organization, a certificate of formation and/or an operating agreement, as
applicable, providing that (A) such entity will dissolve only upon the
bankruptcy of the managing member, (B) the vote of a majority-in-interest
of the remaining members is sufficient to continue the life of the limited
liability company in the event of such bankruptcy of the managing member and (C) if
the vote of a majority-in-interest of the remaining members to continue the
life of the limited liability company following the bankruptcy of the managing
member is not obtained, the limited liability company may not liquidate the
Property without the consent of the applicable Rating Agencies for as long as
the Loan is outstanding;

 

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

 

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

 

2

 

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

 

(xii)                  has maintained and will
maintain its accounts, books and records separate from any other Person;
provided, however, that the financial statements of such Person may be included
in the consolidated financial statements of another Person in accordance with
GAAP, provided that in each case, such financial statements identify such
Person as a separate member of such consolidated group and include an express
statement to the effect that the assets of such Person are not available to
satisfy the claims of creditors of such other Person, and will file its own tax
returns, if any, as may be required under applicable law, to the extent (A) not
part of a consolidated group filing a consolidated return or returns or (B) not
treated as a division for tax purposes of another taxpayer, and pay any taxes
so required to be paid under applicable law;

 

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

 

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

 

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

 

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

 

(xvii)               subject to the proviso in
clause (xii) above, has maintained and will maintain its financial
statements, accounting records and other entity documents separate from any
other Person;

 

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

 

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

 

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

 

(xxi)                 (a) if such entity owns
or leases the Property, has and will have no indebtedness other than Permitted
Indebtedness, or (b) if such entity acts as the general partner of a
limited partnership which owns or leases the Property, has and will have no
indebtedness other than the liability it has by virtue of its status as general
partner and unsecured trade payables in the ordinary course of business
relating to acting as general partner of the limited partnership which owns the
Property which (1) do not exceed, at any time, $50,000 and (2) are
paid within sixty (60) days of the date incurred, or (c) if such entity
acts as a managing member of a limited liability

 

3

 

company which owns the
Property, has and will have no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as a member of the
limited liability company which owns the Property which (1) do not exceed,
at any time, $50,000 and (2) are paid within sixty (60) days of the date
incurred;

 

(xxii)                except, if applicable, by
virtue of its status as a general partner, has not and will not assume or
guarantee or become obligated for the debts of any other Person or hold out its
credit as being available to satisfy the obligations of any other Person except
for the Loan;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Independent Director” means whether
acting as an independent director or an independent manager:  (x) in the case of a Single Member
Bankruptcy Remote LLC:  a natural person

 

4

 

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

 

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

 

5

 

and
records separate from any other person; (iii) has and will have an
operating agreement which provides that the business and affairs of Borrower or
Operating Tenant shall be managed by or under the direction of one or more
managers designated by its sole member (the “Sole
Member”) (or by the Sole Member), and at all times there shall
be at least two duly appointed Independent Directors, and the managers (or the
Sole Member) will not, without the written consent of all Independent
Directors: (1) take any action affecting its status as a “Special Purpose
Bankruptcy Remote Entity” (as set forth in this Schedule 5) or
(2) take any other “Material Action” (which for purposes hereof means any
action to institute proceedings to have the Borrower or Operating Tenant be
adjudicated bankrupt or insolvent, or consent to the institution of bankruptcy
or insolvency proceedings against the Borrower or Operating Tenant or file a
petition seeking, or consent to, reorganization or relief with respect to the
Borrower or Operating Tenant under any applicable federal or state law relating
to bankruptcy, or consent to the appointment of a receiver, liquidator,
assignee, trustee, sequestrator (or other similar official) of the Borrower or
Operating Tenant or a substantial part of their property, or make any
assignment for the benefit of creditors of the Borrower or Operating Tenant, or
admit in writing the Borrower’s or Operating Tenant’s inability to pay their
debts generally as they become due, or take action in furtherance of any such
action); (iv)  has and will have an operating agreement which provides
that, as long as any portion of the Debt remains outstanding, (A) upon the
occurrence of any event that causes Sole Member to cease to be a member of
Borrower or Operating Tenant (other than (x) upon an assignment by Sole
Member of all of its limited liability company interest in Borrower or
Operating Tenant and the admission of the transferee, if permitted pursuant to
the organizational documents of Borrower or Operating Tenant and the Loan
Documents, or (y) the resignation of Sole Member and the admission of an
additional member of Borrower or Operating Tenant, if permitted pursuant to the
organizational documents of Borrower or Operating Tenant and the Loan
Documents), the person acting as an Independent Director of Borrower or
Operating Tenant shall, without any action of any Person and simultaneously
with Sole Member ceasing to be a member of Borrower or Operating Tenant,
automatically be admitted as the sole member of Borrower or Operating Tenant
(the “Special Member”) and shall
preserve and continue the existence of Borrower or Operating Tenant without
dissolution, (B) no Special Member may resign or transfer its rights as
Special Member unless (x) a successor Special Member has been admitted to
Borrower or Operating Tenant as a Special Member, and (y) such successor
Special Member has also accepted its appointment as an Independent Director and
(C) except as expressly permitted pursuant to the terms of this Agreement,
Sole Member may not resign and no additional member shall be admitted to
Borrower or Operating Tenant; (v) has and will have an operating agreement
which provides that, as long as any portion of the Debt remains outstanding, (A) Borrower
or Operating Tenant shall be dissolved, and its affairs shall be wound up only
upon the first to occur of the following: (x) the termination of the legal
existence of the last remaining member of Borrower or Operating Tenant or the
occurrence of any other event which terminates the continued membership of the
last remaining member of Borrower or Operating Tenant in Borrower or Operating
Tenant unless the business of Borrower or Operating Tenant is continued in a
manner permitted by its operating agreement or the Delaware Limited Liability
Company Act (the “Act”) or (y) the entry
of a decree of judicial dissolution under Section 18-802 of the Act; (B) upon
the occurrence of any event that causes the last remaining member of Borrower
or Operating Tenant to cease to be a member of Borrower or Operating Tenant or
that causes Sole Member to cease to be a member of Borrower or Operating Tenant
(other than (x) upon an assignment by Sole Member of all of its limited
liability company

 

6

 

interest
in Borrower or Operating Tenant and the admission of the transferee, if
permitted pursuant to the organizational documents of Borrower or Operating
Tenant and the Loan Documents, or (y) the resignation of Sole Member and
the admission of an additional member of Borrower or Operating Tenant, if
permitted pursuant to the organizational documents of Borrower or Operating
Tenant and the Loan Documents), to the fullest extent permitted by law, the
personal representative of such member shall be authorized to, and shall,
within 90 days after the occurrence of the event that terminated the continued
membership of such member in Borrower or Operating Tenant, agree in writing to
continue the existence of Borrower or Operating Tenant and to the admission of
the personal representative or its nominee or designee, as the case may be, as
a substitute member of Borrower or Operating Tenant, effective as of the occurrence
of the event that terminated the continued membership of such member in
Borrower or Operating Tenant; (C) the bankruptcy of Sole Member or a
Special Member shall not cause such member or Special Member, respectively, to
cease to be a member of Borrower or Operating Tenant and upon the occurrence of
such an event, the business of Borrower or Operating Tenant shall continue
without dissolution; (D) in the event of dissolution of Borrower or
Operating Tenant, Borrower or Operating Tenant shall conduct only such
activities as are necessary to wind up its affairs (including the sale of the
assets of Borrower or Operating Tenant in an orderly manner), and the assets of
Borrower or Operating Tenant shall be applied in the manner, and in the order
of priority, set forth in Section 18-804 of the Act; and (E) to the
fullest extent permitted by law, each of Sole Member and the Special Members
shall irrevocably waive any right or power that they might have to cause
Borrower, Operating Tenant or any of its assets to be partitioned, to cause the
appointment of a receiver for all or any portion of the assets of Borrower or
Operating Tenant, to compel any sale of all or any portion of the assets of
Borrower or Operating Tenant pursuant to any applicable law or to file a
complaint or to institute any proceeding at law or in equity to cause the
dissolution, liquidation, winding up or termination of Borrower or Operating
Tenant.

 

The
references in this Schedule 5 to “Borrower or Operating Tenant” and
similar references are intended to make the provisions of this Schedule 5
apply independently to Borrower and Operating Tenant to the extent they are
applicable, as if the provisions were set forth in duplicate with the first set
applicable to Borrower only and the second set applicable to Operating Tenant
only.

 

7

 

Schedule 6

 

Intentionally Omitted.

 

1

 

Schedule 7

 

Form of Operating Expense Certificate(1)

 

Officer’s Certificate

 

Reference
is made to that certain Amended and Restated Loan Agreement dated as of October 20,
2010 between WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE MORGAN STANLEY CAPITAL
I INC. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2006-XLF, as
lender, and KAUAI COCONUT BEACH, LLC, as borrower (the “Loan
Agreement”).  Capitalized
terms used herein shall have the meanings set forth in the Loan Agreement.

 

In
connection with Section 3.6.1 of the Loan Agreement, Borrower hereby
requests approval for the operating expense(s) described on, or evidenced
by the invoices attached as, Exhibit A in the amount of
$              .  Borrower requests that, in accordance with
Section 3.6.1 of the Loan Agreement, such amount be disbursed to
Borrower.  In connection with this
requested approval and disbursement, the undersigned officer of Borrower hereby
certifies to Lender (1) that such funds will be used to pay (or reimburse
Borrower its operating tenant for) such operating expenses, (2) that no
material outstanding trade payables (other than those to be paid from the
requested disbursement of those constituting Permitted Indebtedness) are
delinquent, (3) that the same has not been the subject of a previous
disbursement, and (4) that all previous disbursements made to Borrower or
its operating tenant pursuant to Section 3.6.1 of the Loan Agreement have
been or will be used to pay (or reimburse Borrower or its operating tenant for)
previously identified or budgeted Approved Operating Expenses.

 

	
   

  	
  Sincerely,

  
	
   

  	
   

  
	
   

  	
  (2)

  

 

(1)                                  For months in which
operating expenses in excess of budgeted amounts are requested.

 

(2)                                  May be signed by any
authorized party, including property manager.

 

1

 

Schedule 8

 

Identified Capital Expenses

 

[TO BE PROVIDED]Exhibit 10.39

 

GUARANTY OF RECOURSE OBLIGATIONS

 

made by

 

JMI REALTY LLC and

BEHRINGER HARVARD OPPORTUNITY REIT II, INC.,

as Guarantor

 

In favor of

 

WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE MORGAN
STANLEY

CAPITAL I INC. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES

SERIES 2006-XLF

as Lender

 

Dated as of October 20, 2010

 

 

Loan No. 03-0258351

 

GUARANTY OF RECOURSE OBLIGATIONS

 

This
GUARANTY (this “Guaranty”), dated as of October 20, 2010, made by
JMI REALTY LLC, a Delaware limited liability company (“JMI”), having an
address of 111 Congress Avenue, Suite 2600, Austin, Texas 78701, and
BEHRINGER HARVARD OPPORTUNITY REIT II, INC. (“Behringer”, and
together with JMI, “Guarantor”), having an address of c/o Behringer
Harvard Kauai Hotel, LLC, 15601 Dallas Parkway, Suite 600, Addison Texas
75001, in favor of WELLS FARGO BANK, N.A., AS TRUSTEE FOR THE MORGAN STANLEY
CAPITAL I INC. COMMERCIAL MORTGAGE PASS-THROUGH CERTIFICATES SERIES 2006-XLF
(together with its successors and assigns, hereinafter referred to as “Lender”),
having an address at c/o Midland Loan Services, Inc., 10851 Mastin, Suite 300,
Overland Park, Kansas 66210.

 

RECITALS:

 

A.            Lender is the owner and
holder of a loan to Waipouli Owner LLC, a Delaware limited liability company (“Original
Borrower”) in the current principal amount of $43,200,000.00 (the “Loan”), which Loan is evidenced
and secured by, among other security: (i)  an Amended and Restated
Promissory Note (“Original Note”) dated August 15, 2006 executed by
Original Borrower to the order of Morgan Stanley Mortgage Capital, Inc., a
New York corporation (“Original Lender”) in the original principal
amount of $52,000,000.00; (ii) the Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement, Financing Statement and Fixture Filing, dated
June 20, 2006 (together with that certain Spreader Agreement by and
between Original Borrower and Original Lender dated October 20, 2006 and
filed for record on October 20, 2006, as Land Court Document No. 3501709,
and the First Amendment of Mortgage and Assignment of Leases of even date
herewith, the “Security Instrument”), which Security Instrument
encumbers the property (real and personal) described in the Security Instrument
(herein collectively referred to as the “Property”); (iii) that
certain Loan Agreement dated June 20, 2006 between Original Borrower and
Original Lender, as amended by that certain letter agreement dated August 15,
2006 by and among Original Borrower, Original Lender, Waipouli Senior
Mezzanine, LLC and Waipouli Junior Mezzanine, LLC (as amended, the “Original Loan Agreement”); and (iv) certain
other agreements, instruments and documents evidencing and securing the Loan.

 

B.            Lender has agreed to consent
to a transfer of the Property from Original Borrower to Kauai Coconut Beach, LLC,
a Delaware limited liability company, (“Borrower”) and the assumption of
the Loan by Borrower (collectively hereinafter the “Transfer and Assumption”) under the terms of the following:
(collectively, the “Loan Documents”): 
(i) that certain Consent, Assumption, and Modification Agreement
with Release dated the date hereof by and among Borrower, Original Borrower,
Lender and other parties (“Consent Agreement”); (ii) that certain
Amended and Restated Promissory Note dated the date hereof in the original principal
amount of $38,000,000.00, by and between Borrower and Lender (“Note”); (iii) that
certain Amended and Restated Loan Agreement dated the date hereof by and
between Borrower and Lender (“Loan Agreement”); and (iv) the other
agreements, instruments and documents described on Exhibit B of the
Consent Agreement.  All terms capitalized
herein and not otherwise defined herein shall 

 

 

have
the meaning set forth in the Loan Agreement, and if not defined in the Loan
Agreement, the meaning set forth in the other Loan Documents.

 

C.            As a condition to Lender’s
approval of the Transfer and Assumption, Lender is requiring that Guarantor
execute and deliver to Lender this Guaranty.

 

D.            Guarantor hereby
acknowledges that Guarantor will materially benefit from Lender’s approval of
the Transfer and Assumption.

 

NOW
THEREFORE, in consideration of the promises set forth herein and as an
inducement for and in consideration of Lender’s approval of the Transfer and
Assumption pursuant to the Assumption Documents, Guarantor hereby agrees,
covenants, represents and warrants to Lender as follows:

 

1.             Definitions.

 

(a)           All capitalized terms used and not defined herein
shall have the respective meanings given such terms in the Loan Agreement.

 

(b)           The term “Guaranteed Obligations” means
(i) Borrower’s Recourse Liabilities, and (ii) from and after the date
that any Springing Recourse Event occurs, payment of all the Debt (as defined
in the Loan Agreement) as and when the same is due in accordance with the Loan
Documents (and whether accrual prior to, on or after such date).

 

2.             Guaranty.

 

(a)           Guarantor hereby irrevocably, absolutely and
unconditionally guarantees to Lender the full, prompt and complete payment when
due of the Guaranteed Obligations.

 

(b)           All sums payable to Lender under this Guaranty shall
be payable on demand and without reduction for any offset, claim, counterclaim
or defense.

 

(c)           Guarantor hereby agrees to indemnify, defend and
save harmless Lender from and against any and all costs, losses, liabilities,
claims, causes of action, expenses and damages, including reasonable attorneys’
fees and disbursements, which Lender may suffer or which otherwise may arise by
reason of Borrower’s failure to pay any of the Guaranteed Obligations when due,
irrespective of whether such costs, losses, liabilities, claims, causes of
action, expenses or damages are incurred by Lender prior or subsequent to
(i) Lender’s declaring the Principal, interest and other sums evidenced or
secured by the Loan Documents to be due and payable or (ii) the
commencement of a judicial or non-judicial foreclosure of the Mortgage (but not
after completion of any foreclosure sale or deed-in-lieu thereof).

 

(d)           Guarantor agrees that no portion of any sums applied
(other than sums received from Guarantor in full or partial satisfaction of its
obligations hereunder), from time to time, in reduction of the Debt shall be
deemed to have been applied in reduction of the Guaranteed Obligations until
such time as the Debt has been paid in full, or Guarantor shall have made the
full payment required hereunder, it being the intention hereof that the
Guaranteed Obligations shall be the last portion of the Debt to be deemed
satisfied.

 

2

 

3.             Representations and Warranties.  Behringer hereby represents
and warrants to Lender as follows (which representations and warranties shall
be given as of the date hereof and shall survive the execution and delivery of
this Guaranty):

 

(a)           Organization, Authority and Execution.  Behringer is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland,
and has all necessary power and authority to own its properties and to conduct
its business as presently conducted or proposed to be conducted and to enter
into and perform this Guaranty, the Consent Agreement,  and all other agreements and instruments to
be executed by it in connection herewith. 
This Guaranty has been duly executed and delivered by Behringer.

 

(b)           Enforceability.  This Guaranty and the Consent Agreement each
constitutes a legal, valid and binding obligation of Behringer, enforceable
against Behringer in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors’ rights generally.

 

(c)           No Violation.  The execution, delivery and performance by
Behringer of its obligations under this Guaranty and the Consent Agreement have
been duly authorized by all necessary action, and does not and will not violate
any law, regulation, order, writ, injunction or decree of any court or
governmental body, agency or other instrumentality applicable to Behringer, or
result in a breach of any of the terms, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any
mortgage lien, charge or encumbrance of any nature whatsoever upon any of the
assets of Behringer pursuant to the terms of any mortgage, indenture, agreement
or instrument to which Behringer is a party or by which it or any of its
properties is bound.

 

(d)           No Litigation.  There are no actions, suits or proceedings at
law or at equity, pending or, to Behringer’s best knowledge, threatened against
or affecting Behringer or which involve or might involve the validity or
enforceability of this Guaranty or the Consent Agreement or which might
materially adversely affect the financial condition of Behringer or the ability
of Behringer to perform any of its obligations under this Guaranty and the
Consent Agreement.  Behringer is not in
material default beyond any applicable grace or cure period with respect to any
order, writ, injunction, decree or demand of any Governmental Authority which
might materially adversely affect the financial condition of Behringer or the
ability of Behringer to perform any of its obligations under this Guaranty and
the Consent Agreement. There is no bankruptcy, receivership or insolvency
proceeding pending or threatened against Behringer.

 

(e)           Consents.  No consents, approvals, orders or
authorizations of, or registrations, declaration or filings with, all
Governmental Authorities (collectively, the “Consents”) are required in
connection with the valid execution, delivery and performance by Behringer of
this Guaranty and the Consent Agreement except those that have been obtained or
where the failure to obtain the same would not have a material adverse effect
on Behringer’s performance hereunder.

 

(f)            Financial Statements and Other Information.  All financial statements of Behringer
heretofore delivered to Lender are true and correct in all material respects
and fairly 

 

3

 

present
the financial condition of Behringer as of the respective dates thereof, and no
materially adverse change has occurred in the financial conditions reflected
therein since the respective dates thereof. 
None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of Behringer in connection with
the transactions contemplated hereby, and none of the representations and
warranties in this Guaranty and the Consent Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.  Behringer is not insolvent and has assets
which exceed its obligations, liabilities and debts and the execution, delivery
and performance of this Guaranty and the Consent Agreement will not render
Behringer insolvent.

 

(g)           Consideration.  Behringer is the owner, directly or
indirectly, of certain legal and beneficial equity interests of Borrower.

 

(h)           Behringer does not have any intention to do any of
the following within 180 days following the date hereof:  (i) seek entry of any order for relief
as debtor and a proceeding under the Bankruptcy Code (as hereinafter defined), (ii) seek
consent to or not contest the appointment of a receiver or trustee for itself
or for all or any part of its property, (iii) file a petition seeking
relief under any bankruptcy, arrangement, reorganization or other debtor relief
laws, or (iv) make a general assignment for the benefit of its creditors.

 

(i)            All representations and warranties referred to
herein or in the Consent Agreement shall be true as of the date of this
Guaranty and shall survive the closing of the Transfer and Assumption.

 

Lender
is entitled to rely, and has relied, upon these representations and warranties
in the execution and delivery of this Guaranty, the Consent Agreement and all
other documents and instruments executed and delivered by Lender in connection
with the Transfer and Assumption.

 

4.             Representations and
Warranties.  JMI hereby
represents and warrants to Lender as follows (which representations and
warranties shall be given as of the date hereof and shall survive the execution
and delivery of this Guaranty):

 

(a)           Organization, Authority and Execution.  JMI is a limited liability company duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has all necessary power and authority to own its properties and
to conduct its business as presently conducted or proposed to be conducted and
to enter into and perform this Guaranty, the Consent Agreement,  and all other agreements and instruments to
be executed by it in connection herewith. 
This Guaranty has been duly executed and delivered by JMI.

 

(b)           Enforceability.  This Guaranty and the Consent Agreement each
constitutes a legal, valid and binding obligation of JMI, enforceable against
JMI in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors’ rights generally.

 

(c)           No Violation.  The execution, delivery and performance by
JMI of its obligations under this Guaranty and the Consent Agreement have been
duly authorized by all 

 

4

 

necessary
action, and does not and will not violate any law, regulation, order, writ,
injunction or decree of any court or governmental body, agency or other
instrumentality applicable to JMI, or result in a breach of any of the terms,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of any mortgage lien, charge or encumbrance of any
nature whatsoever upon any of the assets of JMI pursuant to the terms of any
mortgage, indenture, agreement or instrument to which JMI is a party or by
which it or any of its properties is bound.

 

(d)           No Litigation.  There are no actions, suits or proceedings at
law or at equity, pending or, to JMI’s best knowledge, threatened against or
affecting JMI or which involve or might involve the validity or enforceability
of this Guaranty or the Consent Agreement or which might materially adversely
affect the financial condition of JMI or the ability of JMI to perform any of
its obligations under this Guaranty and the Consent Agreement.  JMI is not in material default beyond any
applicable grace or cure period with respect to any order, writ, injunction,
decree or demand of any Governmental Authority which might materially adversely
affect the financial condition of JMI or the ability of JMI to perform any of
its obligations under this Guaranty and the Consent Agreement. There is no
bankruptcy, receivership or insolvency proceeding pending or threatened against
JMI.

 

(e)           Consents.  No consents, approvals, orders or
authorizations of, or registrations, declaration or filings with, all Governmental
Authorities (collectively, the “Consents”) are required in connection
with the valid execution, delivery and performance by JMI of this Guaranty and
the Consent Agreement except those that have been obtained or where the failure
to obtain the same would not have a material adverse effect on JMI’s
performance hereunder.

 

(f)            Financial Statements and Other Information.  All financial statements of JMI heretofore
delivered to Lender are true and correct in all material respects and fairly
present the financial condition of JMI as of the respective dates thereof, and
no materially adverse change has occurred in the financial conditions reflected
therein since the respective dates thereof. 
None of the aforesaid financial statements or any certificate or
statement furnished to Lender by or on behalf of JMI in connection with the
transactions contemplated hereby, and none of the representations and
warranties in this Guaranty and the Consent Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein or herein not misleading.

 

(g)           Consideration.  JMI is the owner, directly or indirectly, of
certain legal and beneficial equity interests of Borrower.

 

(h)           JMI does not have any intention to do any of the
following within 180 days following the date hereof:  (i) seek entry of any order for relief
as debtor and a proceeding under the Bankruptcy Code (as hereinafter defined), (ii) seek
consent to or not contest the appointment of a receiver or trustee for itself
or for all or any part of its property, (iii) file a petition seeking
relief under any bankruptcy, arrangement, reorganization or other debtor relief
laws, or (iv) make a general assignment for the benefit of its creditors.

 

5

 

(i)            All representations and warranties referred to
herein or in the Consent Agreement shall be true as of the date of this
Guaranty and shall survive the closing of the Transfer and Assumption.

 

Lender
is entitled to rely, and has relied, upon these representations and warranties
in the execution and delivery of this Guaranty, the Consent Agreement and all
other documents and instruments executed and delivered by Lender in connection
with the Transfer and Assumption.

 

5.             Financial Statements.  From time to time during the
continuance of a Cash Trap Period (but no more often than once per calendar
quarter), each Guarantor shall deliver to Lender, within twenty (20) days after
request by Lender, a certificate of such Guarantor setting forth the Net Worth
(as hereafter defined) of such Guarantor. 
As used in the preceding sentence, “Net Worth” shall mean, as of
a given date (x) the total assets of such Guarantor as of such date less (y) such
Guarantor’s total liabilities as of such date, determined in conformity with
GAAP.

 

6.             Unconditional Character of
Obligations of Guarantor.

 

(a)           The obligations of Guarantor hereunder shall be
irrevocable, absolute and unconditional, irrespective of the validity, regularity
or enforceability, in whole or in part, of the other Loan Documents or any
provision thereof, or the absence of any action to enforce the same, any waiver
or consent with respect to any provision thereof, the recovery of any judgment
against Borrower, Guarantor or any other Person or any action to enforce the
same, any failure or delay in the enforcement of the obligations of Borrower
under the other Loan Documents or Guarantor under this Guaranty, or any setoff,
counterclaim, and irrespective of any other circumstances which might otherwise
limit recourse against Guarantor by Lender or constitute a legal or equitable
discharge or defense of a guarantor or surety. 
Lender may enforce the obligations of Guarantor under this Guaranty by a
proceeding at law, in equity or otherwise, independent of any loan foreclosure
or similar proceeding or any deficiency action against Borrower or any other
Person at any time, either before or after an action against the Property or
any part thereof, Borrower or any other Person. 
This Guaranty is a guaranty of payment and performance and not merely
a guaranty of collection.  Guarantor
waives diligence, notice of acceptance of this Guaranty, filing of claims with
any court, any proceeding to enforce any provision of any other Loan Document,
against Guarantor, Borrower or any other Person, any right to require a
proceeding first against Borrower or any other Person, or to exhaust any
security (including, without limitation, the Property) for the performance of
the Guaranteed Obligations or any other obligations of Borrower or any other
Person, or any protest, presentment, notice of default or other notice or
demand whatsoever (except to the extent expressly provided to the contrary in
this Guaranty).

 

(b)           The obligations of Guarantor under this Guaranty,
and the rights of Lender to enforce the same by proceedings, whether by action
at law, suit in equity or otherwise, shall not be in any way affected by any of
the following:

 

(i)            any insolvency, bankruptcy,
liquidation, reorganization, readjustment, composition, dissolution,
receivership, conservatorship, winding up or other similar proceeding involving
or affecting Borrower, the Property or any part thereof, Guarantor or any other
Person;

 

6

 

(ii)           any failure by Lender or any
other Person, whether or not without fault on its part, to perform or comply
with any of the terms of the Loan Agreement, or any other Loan Documents, or
any document or instrument relating thereto;

 

(iii)          the sale, transfer or
conveyance of the Property or any interest therein to any Person, whether now
or hereafter having or acquiring an interest in the Property or any interest
therein and whether or not pursuant to any foreclosure, trustee sale or similar
proceedings against Borrower or the Property or any interest therein;

 

(iv)          the conveyance to Lender,
any Affiliate of Lender or Lender’s nominee of the Property or any interest
therein by a deed-in-lieu of foreclosure;

 

(v)           the release of Borrower or
any other Person from the performance or observance of any of the agreements,
covenants, terms or conditions contained in any of the Loan Documents by
operation of law or otherwise; or

 

(vi)          the release in whole or in
part of any collateral for any or all Guaranteed Obligations or for the Loan or
any portion thereof

 

(c)           Except as otherwise specifically provided in this
Guaranty, Guarantor hereby expressly and irrevocably waives all defenses in an
action brought by Lender to enforce this Guaranty based on claims of waiver,
release, surrender, alteration or compromise and all setoffs, reductions, or
impairments, whether arising hereunder or otherwise.

 

(d)           Lender may deal with Borrower and Affiliates of
Borrower in the same manner and as freely as if this Guaranty did not exist and
shall be entitled, among other things, to grant Borrower or any other Person
such extension or extensions of time to perform any act or acts as may be
deemed advisable by Lender, at any time and from time to time, without terminating,
affecting or impairing the validity of this Guaranty or the obligations of
Guarantor hereunder.

 

(e)           No compromise, alteration, amendment, modification,
extension, renewal, release or other change of, or waiver, consent, delay,
omission, failure to act or other action with respect to, any liability or
obligation under or with respect to, or of any of the terms, covenants or
conditions of, the Loan Documents shall in any way alter, impair or affect any
of the obligations of Guarantor hereunder, and Guarantor agrees that if any
Loan Document is modified with Lender’s consent, the Guaranteed Obligations
shall automatically be deemed modified to include such modifications.

 

(f)            Lender may proceed to protect and enforce any or all
of its rights under this Guaranty by suit in equity or action at law, whether
for the specific performance of any covenants or agreements contained in this
Guaranty or otherwise, or to take any action authorized or permitted under
applicable law, and shall be entitled to require and enforce the performance of
all acts and things required to be performed hereunder by Guarantor.  Each and every remedy of Lender shall, to the
extent permitted by law, be cumulative and shall be in addition to any other
remedy given hereunder or now or hereafter existing at law or in equity.

 

7

 

(g)           No waiver shall be deemed to have been made by
Lender of any rights hereunder unless the same shall be in writing and signed
by Lender, and any such waiver shall be a waiver only with respect to the
specific matter involved and shall in no way impair the rights of Lender or the
obligations of Guarantor to Lender in any other respect or at any other time.

 

(h)           At the option of Lender, Guarantor may be joined in
any action or proceeding commenced by Lender against Borrower in connection
with or based upon any other Loan Documents and recovery may be had against
Guarantor in such action or proceedings or in any independent action or
proceeding against Guarantor to the extent of Guarantor’s liability hereunder,
without any requirement that Lender first assert, prosecute or exhaust any
remedy or claim against Borrower or any other Person, or any security for the
obligations of Borrower or any other Person.

 

(i)            Guarantor agrees that this Guaranty shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment is made by Borrower or Guarantor to Lender and such payment is
rescinded or must otherwise be returned by Lender (as determined by Lender in
its sole and absolute discretion) upon insolvency, bankruptcy, liquidation,
reorganization, readjustment, composition, dissolution, receivership,
conservatorship, winding up or other similar proceeding involving or affecting
Borrower or Guarantor, all as though such payment had not been made.

 

(j)            In the event that Guarantor shall advance or become
obligated to pay any sums under this Guaranty or in connection with the
Guaranteed Obligations or in the event that for any reason whatsoever Borrower
or any subsequent owner of the Property or any part thereof is now, or shall
hereafter become, indebted to Guarantor, Guarantor agrees that (i) the
amount of such sums and of such indebtedness and all interest thereon shall at
all times be subordinate as to lien, the time of payment and in all other
respects to all sums, including principal and interest and other amounts, at
any time owed to Lender under the Loan Documents, and (ii) Guarantor shall
not be entitled to enforce or receive payment thereof until all principal,
interest and other sums due pursuant to the Loan Documents have been paid in
full.  Nothing herein contained is
intended or shall be construed to give Guarantor any right of subrogation in or
under the Loan Documents or any right to participate in any way therein, or in
the right, title or interest of Lender in or to any collateral for the Loan,
notwithstanding any payments made by Guarantor under this Guaranty, until the
actual and irrevocable receipt by Lender of payment in full of all principal,
interest and other sums due with respect to the Loan or otherwise payable under
the Loan Documents.  If any amount shall
be paid to Guarantor on account of such subrogation rights at any time when any
such sums due and owing to Lender shall not have been fully paid, such amount
shall be paid by Guarantor to Lender for credit and application against such
sums due and owing to Lender.

 

(k)           Guarantor’s obligations hereunder shall survive a
foreclosure, deed-in-lieu of foreclosure or similar proceeding involving the
Property and the exercise by Lender of any of all of its remedies pursuant to
the Loan Documents.

 

7.             Entire Agreement/Amendments.  This instrument represents the entire
agreement between the parties with respect to the subject matter hereof.  The terms of this Guaranty shall 

 

8

 

not be waived, altered, modified, amended,
supplemented or terminated in any manner whatsoever except by written
instrument signed by Lender and Guarantor.

 

8.             Successors and Assigns.  This Guaranty shall be binding upon
Guarantor, and Guarantor’s estate, heirs, personal representatives, successors
and assigns, may not be assigned or delegated by Guarantor and shall inure to
the benefit of Lender and its successors and assigns.

 

9.             Applicable Law and Consent
to Jurisdiction.  This Guaranty
shall be governed by, and construed in accordance with, the substantive laws of
the State of New York.  Guarantor
irrevocably (a) agrees that any suit, action or other legal proceeding
arising out of or relating to this Guaranty may be brought in a court of record
in the City and County of New York or in the Courts of the United States of
America located in the City and County of New York, (b) consents to the
jurisdiction of each such court in any such suit, action or proceeding and
(c) waives any objection which it may have to the laying of venue of any
such suit, action or proceeding in any of such courts and any claim that any
such suit, action or proceeding has been brought in an inconvenient forum.  Guarantor irrevocably consents to the service
of any and all process in any such suit, action or proceeding by service of
copies of such process to Guarantor at its address provided in Section 13
hereof.  Nothing in this Section 9,
however, shall affect the right of Lender to serve legal process in any other
manner permitted by law or affect the right of Lender to bring any suit, action
or proceeding against Guarantor or its property in the courts of any other
jurisdictions.

 

10.           Section Headings.  The headings of the sections
and paragraphs of this Guaranty have been inserted for convenience of reference
only and shall in no way define, modify, limit or amplify any of the terms or
provisions hereof.

 

11.           Severability.  Any provision of this
Guaranty which may be determined by any competent authority to be prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent permitted by applicable law,
Guarantor hereby waives any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.

 

12.           WAIVER OF TRIAL BY JURY.  GUARANTOR HEREBY WAIVES THE
RIGHT OF TRIAL BY JURY IN ANY LITIGATION, ACTION OR PROCEEDING ARISING HREUDNER
OR IN CONNECTION THEREWITH.

 

13.           Notices.  All notices, consents, approvals and requests
required or permitted hereunder (a “Notice”) shall be given in writing
and shall be effective for all purposes if either hand delivered with receipt
acknowledged, or by a nationally recognized overnight delivery service (such as
Federal Express), or by certified or registered United States mail, return
receipt requested, postage prepaid, or by facsimile and confirmed by facsimile
answer back, in each case addressed as follows (or to such other address or Person
as a party shall designate from to time by notice to the other party):  If to Lender: to the address first above
written or by telecopy to Asset Management, (913) 253-9001; if to JMI:  to the address first above written or by
telecopy to (512) 539-3601, Attention: C. Brian Strickland, CFO; and if to
Behringer:  to the address first 

 

9

 

above written or by telecopy to (214 655-1610,
Attention: Chief Legal Officer.  A notice
shall be deemed to have been given in the case of hand delivery, at the time of
delivery, in the case of registered or certified mail, when delivered or the
first attempted delivery on a Business Day; or in the case of overnight
delivery, upon the first attempted delivery on a Business Day.

 

14.           Guarantor’s Receipt of Loan
Documents.  Guarantor by
its execution hereof acknowledges receipt of true copies of all of the Loan
Documents, the terms and conditions of which are hereby incorporated herein by
reference.

 

15.           Interest; Expenses.

 

(a)           If Guarantor fails to pay all or any sums due
hereunder upon written demand by Lender, the amount of such sums payable by
Guarantor to Lender shall bear interest from the date of demand until paid at
the Default Rate in effect from time to time.

 

(b)           Guarantor hereby agrees to pay all actual costs,
charges and expenses, including reasonable attorneys’ fees and disbursements,
that may be incurred by Lender in enforcing the covenants, agreements,
obligations and liabilities of Guarantor under this Guaranty.

 

16.           Joint and Several
Obligations.  If Guarantor
consists of more than one Person, each such Person shall have joint and several
liability for the obligations of Guarantor hereunder.

 

[Remainder of Page Intentionally left Blank]

 

10

 

IN
WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first
above written.

 

 

	
   

  	
  JMI
  REALTY LLC,

  
	
   

  	
  A
  Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  C. Brian Strickland

  
	
   

  	
  Name:

  	
  C.
  Brian Strickland

  
	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  BEHRINGER
  HARVARD OPPORTUNITY REIT II, INC., A Maryland corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Gary S. Bresky

  
	
   

  	
  Name:

  	
  Gary
  S. Bresky

  
	
   

  	
  Title:

  	
  Executive
  Vice President, Chief Financial 

  
	
   

  	
   

  	
  Officer
  and Treasurer

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