Document:

Exhibit 10.18

 

Morgans
Hotel Portfolio

 

LOAN AND SECURITY AGREEMENT

(Junior Mezzanine Loan)

 

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

 

W  I
T
N
E
S
S
E
T
H:

 

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

 

WHEREAS, pursuant to that certain
limited liability company agreement (the “Operating Agreement”) of MMRDH
Intermediate Mezz Holding Company LLC, a Delaware limited liability company (“Intermediate
Mezz Borrower”), Borrower is the present owner and holder of one hundred
percent (100%) of the limited liability company interest in Intermediate Mezz
Borrower;

 

WHEREAS, pursuant to that
certain limited liability company agreement (the “Senior Agreement”) of
MMRDH Senior Mezz Holding Company LLC, a Delaware limited liability company (“Senior
Mezz Borrower”), Intermediate Mezz Borrower is the present owner and holder
of one hundred percent (100%) of the limited liability company interest in
Senior Mezz Borrower;

 

WHEREAS, Intermediate Mezz
Borrower delivered a promissory note (the “Intermediate Mezz Note”) to WACHOVIA
BANK, NATIONAL ASSOCIATION (the “Intermediate Mezz Lender”) which
evidences a loan (the “Intermediate Mezz Loan”) in the original
principal amount of THIRTY MILLION AND NO/100 DOLLARS ($30,000,000.00) which is
secured by a pledge of one hundred percent (100%) of the Intermediate Mezz
Borrower’s indirect limited liability company interests in Owner pursuant to
that certain loan and security agreement by and between Intermediate Mezz
Borrower and Intermediate Mezz Lender (the “Intermediate Mezz 

 

 

Loan Agreement”, and, together with the Intermediate Mezz
Note and all other documents executed and delivered in connection with the
making of the Intermediate Mezz Loan and/or evidencing, securing or
guaranteeing payment of the obligations evidenced by the Intermediate Mezz
Note, collectively, the “Intermediate Mezz Loan Documents”;

 

WHEREAS, Senior Mezz
Borrower delivered a promissory note (the “Senior Mezz Note”) to
Wachovia Bank, National Association (the “Senior Mezz Lender”) which
evidences a loan (the “Senior Mezz Loan”) in the original principal
amount of FIFTY-ONE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS
($51,250,000.00) which is secured by a pledge of one hundred percent (100%) of
the Senior Mezz Borrower’s direct limited liability company interests in Owner
pursuant to that certain loan and security agreement by and between Senior Mezz
Borrower and Senior Mezz Lender (the “Senior Mezz Loan Agreement”, and,
together with the Senior Mezz Note and all other documents executed and
delivered in connection with the making of the Senior Mezz Loan and/or
evidencing, securing or guaranteeing payment of the obligations evidenced by
the Senior Mezz Note, collectively, the “Senior Mezz Loan Documents”;

 

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

 

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

 

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

 

2

 

connection with the making of the Mortgage
Loan, collectively, the “Mortgage Loan Documents”) encumbering the Premises;

 

WHEREAS, Lender has agreed
to make a loan (the “Loan”) to Borrower, which Loan, together with
interest thereon, shall be evidenced by and payable in accordance with the
provisions of the promissory note issued by Borrower, as maker, to Lender, as
holder (the “Note”, and together with this Agreement and all other documents
executed and delivered in connection with the making of the Loan, collectively,
the “Loan Documents”) in the original principal amount of $25,000,000.00
(the “Loan Amount” and together with interest and all other sums which
may or shall become due under the Note or this Agreement or the other Loan
Documents being hereinafter collectively referred to as the “Debt”); and

 

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

 

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

 

ARTICLE I.  DEFINITIONS

 

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

 

ARTICLE II.  REPRESENTATIONS, COVENANTS AND 

WARRANTIES OF BORROWER

 

Section 2.01. 
Pledge of Collateral.  (a)  As security for the due and punctual payment
and performance of all of the Debt (whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, including, without
limitation, the payment of amounts that would become due but for the operation
of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U.S.C. §362(a), whether allowed or allowable as claims), Borrower hereby
(i) pledges, transfers, hypothecates and assigns to Lender the Collateral
in which Borrower now or hereafter has rights, and (ii) grants to Lender a
continuing first priority lien on and security interest in and to all of the
Borrower’s rights, whether now owned or hereafter acquired, in the Collateral.  The inclusion of Proceeds in the definition
of “Collateral” does not authorize Borrower to sell, dispose of or otherwise
use the Collateral in any manner not specifically authorized hereby.  Lender is hereby authorized:  (i) to transfer to the account of Lender
or its designee any Pledged Interests whether in the possession of, or
registered in the name of, The

 

3

 

Depository Trust Company (the “DTC”) or other
clearing corporation or held otherwise; (ii) to transfer to the account of
Lender or its designee with any Federal Reserve Bank any Pledged Interests held
in book entry form with any such Federal Reserve Bank; and (iii) to
exchange certificates representing or evidencing the Pledged Interests for
certificates of smaller or larger denominations.  To the extent that the Pledged Interests have
not already been transferred to Lender or its designee in a manner sufficient
to perfect Lender’s security interest therein, Borrower shall promptly deliver
or cause to be delivered to Lender all certificates or instruments evidencing
the Pledged Interests, together with duly executed transfer powers or other
appropriate endorsements.  With respect
to any Collateral in the possession of or registered in the name of a custodian
bank or nominee therefor, or any Collateral represented by entries on the books
of any securities intermediary, Borrower agrees to cause such custodian bank or
nominee either to enter into an agreement with Lender satisfactory to Lender in
form and content confirming that the Collateral is held for the account of
Lender, or at the discretion of Lender and subject to the written instructions
of Lender, deliver any such Collateral to Lender and/or cause any such
Collateral to be put in bearer form, registered in the name of Lender or its nominee,
or transferred to the account of Lender with any Federal Reserve Bank, DTC, or
other clearing corporation.  With respect
to any Collateral held in an account maintained by Lender as securities
intermediary, Borrower hereby gives notice to Lender of Lender’s security
interest in such Collateral.  In
addition, Borrower agrees that in the event that any Collateral is held by
Lender in a fiduciary capacity for or on behalf of Borrower as the beneficial
owner thereof, any agreements executed by Borrower in connection therewith are
hereby amended to authorize and direct the pledge, hypothecation and/or
transfer of such Collateral to Lender, as lender, by Lender, as fiduciary, in
accordance with the terms, covenants and conditions of this Agreement.  The rights granted to Lender pursuant to this
Agreement are in addition to the rights granted to Lender pursuant to any such
agreements.  In case of conflict between
the provisions of this Agreement and those of any other such agreement, the
provisions hereof shall prevail.  In the
event that Borrower purchases or otherwise acquires or obtains any additional
Equity Interests in any Corporation, LLC or Partnership, or any rights, or
options, subscriptions or warrants to acquire such Equity Interests, all such
Equity Interests, rights, options, subscriptions or warrants shall
automatically be deemed to be a part of the Collateral pledged by
Borrower.  If any such Equity Interests
are to be evidenced by a certificate, such additional certificates shall be
promptly delivered to Lender, together with Powers related thereto, or other
instruments appropriate to a certificate representing an Equity Interest, duly
executed in blank.  Borrower shall
deliver to Lender all subscriptions, warrants, options and all such other rights,
and upon delivery to Lender, Lender shall hold such subscriptions, warrants,
options and other rights as additional collateral pledged to secure the Debt;
provided, however, that if Lender determines, in its sole discretion, that the
value of any such subscriptions, warrants, options or other rights shall
terminate, expire or be materially reduced in value by holding the same as
Collateral, Lender shall have the right (but not the obligation), in its sole
discretion, to sell or exercise the same, and if exercised, then the monies
disbursed by Lender in connection therewith shall become part of the Debt and
all of the stock, securities, evidences of indebtedness and other items so
acquired shall be titled in the name of Borrower and shall become part of the
Collateral.

 

(b)           Borrower
hereby authorizes Lender to file any financing statements, and amendments to
financing statements, in any jurisdictions and with any filing offices as
Lender may determine, in its sole discretion, are necessary or advisable to
perfect the security interest granted to Lender hereunder. Such financing
statements may describe the collateral in the same

 

4

 

manner as described in this Agreement or may contain
an indication or description of collateral that describes such property in any
other manner Lender so chooses, including, without limitation, describing such
property as “all assets, whether now owned or hereafter acquired” or “all
personal property, whether now owned or hereafter acquired”.

 

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

 

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

 

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

 

(c)           Authorization of
Borrowing.  The execution, delivery
and performance of the Loan Documents to which Borrower is a party, the making
of the borrowings thereunder, the execution and delivery of the Note, the grant
of the lien and security interest on and in the Collateral pursuant to the Loan
Documents to which Borrower is a party and the consummation of the Loan are
within the powers of Borrower and have been duly authorized by Borrower and, if
applicable, the General Partners, by all requisite action (and Borrower hereby
represents that no approval or action of any member, limited partner or
shareholder, as applicable, of Borrower, which has not been received or taken,
is required to authorize any of the Loan Documents to which Borrower is a
party) and will constitute the legal, valid and binding obligation of Borrower,
enforceable against Borrower in accordance with their terms, except as
enforcement may be stayed or limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally and by general
principles of equity (whether considered in proceedings at law or in equity)
and will not (i) violate any provision of its Organizational Documents, or, to
its knowledge, any law, judgment, order, rule or regulation of any court,
arbitration panel or other Governmental Authority, domestic or foreign, or
other Person affecting or binding upon Borrower or the Collateral, or (ii)
violate any provision of any indenture, agreement, mortgage, deed of trust,
contract or other instrument to which Borrower or, if applicable, any General Partner
is a party or by which any of their respective property, assets or revenues are
bound, or be in conflict with, result in an acceleration of any obligation or a
breach of or constitute (with notice or lapse of time or both) a default or
require any payment or prepayment under, any such indenture, agreement,
mortgage, deed of trust, contract or other instrument, or (iii) result in the
creation or imposition of any lien, except those in favor of Lender as provided
in the Loan Documents to which it is a party.

 

5

 

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

 

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

 

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

 

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

 

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

 

(iii)          Borrower and, if applicable, each General Partner have done
or caused to be done and will do all things necessary to observe organizational
formalities and preserve their existence and Borrower and, if applicable, each
General Partner will not amend, modify or otherwise change the certificate and
agreement of partnership or certificate of incorporation and by-laws or
articles of organization, certificate of formation and operating agreement, as
applicable, or other organizational documents of Borrower and, if applicable,
each General Partner except for immaterial amendments which do not modify the
Single Purpose Entity provisions.

 

(iv)          Borrower and, if applicable, each General Partner, have at
all times accurately maintained, and will continue to accurately maintain,
their respective financial statements, accounting records and other partnership,
company or corporate documents separate from those of any other Person and
Borrower will file its own tax returns or, if Borrower and/or, if applicable,
General Partner is part of a consolidated group for purposes of filing tax
returns, Borrower and General Partner, as applicable will be shown

 

6

 

as separate members of such
group.  Borrower and, if applicable, each
General Partner have not at any time since their formation commingled, and will
not commingle, their respective assets with those of any other Person and will
maintain their assets in such a manner such that it will not be costly or
difficult to segregate, ascertain or identify their individual assets from
those of any other Person.  Borrower and,
if applicable, each General Partner will not permit any Affiliate independent
access to their bank accounts.  Borrower and,
if applicable, each General Partner have at all times since their formation
accurately maintained and utilized, and will continue to accurately maintain
and utilize, their own separate bank accounts, payroll and separate books of
account, stationery, invoices and checks.

 

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

 

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

 

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

 

(viii)        Borrower and, if applicable, each
General Partner, (A) have not owned, do not own and will not own any assets or
property other than the Collateral, and, with respect to General Partner, if
applicable, its interest in Borrower, (B) have not engaged and will not engage in
any business other than the ownership, management and operation of the Collateral,
or with respect to General Partner, if applicable, its interest in Borrower,
(C) have not incurred and will not incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation), other than in connection
with the Loan, (D) have not pledged (other than pledges in connection with
loans which have been paid in full prior to entering into the Loan) and will
not pledge their assets for the benefit of any other Person, and (E) have not
made and will not make any loans or advances to any Person (including any
Affiliate).

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

(xvi)        Borrower shall at all times cause there to be at least two
(2) duly appointed members of Borrower’s board of directors or board of
managers or other governing board or body, as applicable (each an “Independent
Director”), of, if Borrower is a corporation, Borrower, if Borrower is a
limited partnership, of the General Partner, and if Borrower is a limited
liability company, of the General Partner or of Borrower, reasonably
satisfactory to Lender who shall not have been at the time of such individual’s

 

8

 

appointment, and may not be
or have been at any time (A) a shareholder, officer, director, attorney,
counsel, partner, member or employee of Borrower or any of the foregoing
Persons or Affiliates thereof, (B) a customer or creditor of, or supplier or
service provider to Borrower or any of its shareholders, partners, members or
their Affiliates, (C) a member of the immediate family of any Person referred
to in (A) or (B) above or (D) a Person Controlling, Controlled by or under
common Control with any Person referred to in (A) through (C) above.  A natural person who otherwise satisfies the
foregoing definition except for being the Independent Director of a Single
Purpose Entity Affiliated with Borrower or General Partner shall not be
disqualified from serving as an Independent Director if such individual is at
the time of initial appointment, or at any time while serving as the
Independent Director, an Independent Director of a Single Purpose Entity
Affiliated with Borrower or General Partner if such individual is an
Independent Director provided by a nationally-recognized company that provides
professional independent directors.

 

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

 

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

 

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

 

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

 

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

 

(i)            Consents and
Approvals.  Borrower and, if applicable,
each General Partner, have obtained or made all necessary (i) consents,
approvals and authorizations, and registrations and filings of or with all
Governmental Authorities and (ii) consents, approvals, waivers and

 

9

 

notifications of partners, stockholders, members, creditors, lessors
and other nongovernmental Persons, in each case, which are required to be
obtained or made by Borrower or, if applicable, the General Partner, in
connection with the execution and delivery of, and the performance by Borrower
of its obligations under, the Loan Documents.

 

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

 

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

 

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

 

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

 

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

 

(o)           Solvency; No
Bankruptcy.  Borrower and, if
applicable, the General Partner, (i) is and has at all times been Solvent and
will remain Solvent immediately upon the consummation of the transactions
contemplated by the Loan Documents and (ii) is free from bankruptcy,
reorganization or arrangement proceedings or a general assignment for the
benefit of creditors and is not contemplating the filing of a petition under
any state or federal bankruptcy or insolvency laws or the liquidation of all or
a major portion of such Person’s assets or property and Borrower has no
knowledge of any Person contemplating the filing of any such petition against
it or, if applicable, the General Partner. 
None of the transactions contemplated hereby will be or have been made
with an intent to hinder, delay or defraud any present or future

 

10

 

creditors of Borrower and Borrower has received reasonably equivalent
value in exchange for its obligations under the Loan Documents.  Borrower’s assets do not, and immediately
upon consummation of the transaction contemplated in the Loan Documents will
not, constitute unreasonably small capital to carry out its business as
presently conducted or as proposed to be conducted.  Borrower does not intend to, nor believes
that it will, incur debts and liabilities beyond its ability to pay such debts
as they may mature.

 

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

 

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

 

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

 

(s)           ERISA.  (i) The assets of
Borrower are not and will not become treated as “plan assets”, whether by
operation of law or under regulations promulgated under ERISA.  Each Plan and Welfare Plan, and, to the
knowledge of Borrower, each Multiemployer Plan, is in compliance in all
material respects with, and has been administered in all material respects in compliance
with, its terms and the applicable provisions of ERISA, the Code and any other
applicable Legal Requirement, and no event or condition has occurred and is
continuing as to which Borrower would be under an obligation to furnish a
report to Lender under clause (ii)(A) of this Section.  Other than an application for a favorable
determination letter with respect to a Plan, there are no pending issues or
claims before the Internal Revenue Service, the United States Department of
Labor or any court of competent jurisdiction related to any Plan or Welfare
Plan under which Borrower or any ERISA Affiliate, directly or indirectly
(through an indemnification agreement or otherwise), could be subject to any
material risk of liability under Section 409 or 502(i) of ERISA or Section 4975
of the Code.  No Welfare Plan, other than
a Multiemployer Plan, provides or will provide benefits, including, without
limitation, death or medical benefits (whether or not insured) with respect to
any current or former employee of Borrower or any ERISA Affiliate beyond his or
her retirement or other termination of service other than (A) coverage mandated
by applicable law, (B) death or disability benefits that have been fully
provided for by fully paid up insurance or (C) severance benefits.

 

(ii)           Borrower will furnish to Lender as soon as possible, and
in any event within ten (10) days after Borrower knows or has reason to believe
that any of the events or conditions specified below with respect to any Plan,
Welfare Plan or Multiemployer Plan has occurred or exists, an Officer’s
Certificate setting forth details respecting such

 

11

 

event or condition and the
action, if any, that Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with
or given to the PBGC (or any other relevant Governmental Authority)) by
Borrower or an ERISA Affiliate with respect to such event or condition, if such
report or notice is required to be filed with the PBGC or any other relevant
Governmental Authority:

 

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

 

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

 

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

 

(D)          the complete or partial withdrawal
from a Multiemployer Plan (or other employee benefit plan) by Borrower or any
ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by Borrower or any ERISA Affiliate of notice
from a Multiemployer Plan that it is in reorganization or insolvency pursuant
to Section 4241 or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;

 

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

 

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

 

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

 

12

 

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

 

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

 

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

 

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

 

(v)           Owner’s
Legal Status.  (A)(i) The owner of
the Premises and the maker of the Mortgage Note is and shall be Owner, (ii)
there are no defaults existing under the Mortgage

 

13

 

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

 

(B)(i)  there are no defaults existing under the
Senior Mezz Note, the Intermediate Mezz Note, the Senior Mezz Loan Agreement,
the Intermediate Mezz Loan Agreement or the other Senior Mezz Loan Documents or
the other Intermediate Mezz Loan Documents, and, to the best of Borrower’s
knowledge, there is no event which, but for the passage of time or the giving
of notice, or both, would constitute an event of default under the Senior Mezz
Loan Documents and the Intermediate Mezz Loan Documents, (ii) the Senior Mezz
Loan Documents and the Intermediate Mezz Loan Documents and the provisions
thereof have not been amended, modified or altered in any manner whatsoever, (iii)
Borrower knows of no fact or circumstance which would affect the
enforceability, validity or priority of the Senior Mezz Loan Documents or the Intermediate
Mezz Loan Documents, or which would affect the ability or willingness of Senior
Mezz Borrower or Intermediate Mezz Borrower and any other Person liable under
the Senior Mezz Loan Documents or the Intermediate Mezz Loan Documents to
continue to perform and observe the terms, covenants and provisions of the
Senior Mezz Loan Documents or the Intermediate Mezz Loan Documents, (iv) the
unpaid principal balance of the Senior Mezz Note as of the date of this
Agreement is as set forth on Exhibit B attached hereto.

 

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

 

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

 

14

 

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

 

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

 

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

 

(aa)         Representations
and Warranties of Owner.  (i)  All of the representations and warranties of
Owner or any Affiliate of Owner under the Mortgage Loan Documents are true,
complete and correct in all material respects, (ii) all of the representations
and warranties of Intermediate Mezz Borrower or any Affiliate of Intermediate Mezz
Borrower under the Intermediate Mezz Loan Documents are true, complete and
correct in all material respects and (iii) all of the representations and
warranties of Senior Mezz Borrower or any Affiliates of the Senior Mezz
Borrower under the Senior Mezz Loan Documents are true, complete and correct in
all material respects.

 

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

 

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

 

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

 

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

 

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

 

15

 

or possible future lien on, or security interest or
security title in the interest in the Premises or any of the Collateral.

 

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

 

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

 

(ii)           Lockbox
Account.

 

(i)            Pursuant
to the irrevocable direction letter delivered by Borrower to Intermediate Mezz
Borrower on the Closing Date, Borrower shall direct Intermediate Mezz Borrower to
cause all Remaining Rents after payments due under the Intermediate Mezz Loan Documents
have been paid to be deposited into the Lockbox Account;

 

(ii)           neither
Borrower nor Owner nor any other Person other than Senior Mezz Lender and
Intermediate Mezz Lender shall have any right, title or interest in or to any
Remaining Rents from and after the time such Remaining Rents are transferred to
the Lockbox Account;

 

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

 

(iv)          so
long as any of the Debt shall be outstanding, neither Borrower, Owner

 

16

 

nor any other Person shall open any other accounts
with respect to the collection of rents, revenues, proceeds or other income
from the Premises or for the collection of Rents.

 

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

 

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

 

Section 2.03. 
Further Acts, Etc. 
Borrower will, at the cost of Borrower, and without expense to Lender,
do, execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, assignments, notices of assignments, transfers and assurances as
Lender shall, from time to time, reasonably require for the better assuring,
conveying, assigning, transferring, and confirming unto Lender the property,
security interest and rights hereby given, granted, bargained, sold, alienated,
enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated, or which
Borrower may be or may hereafter become bound to convey or assign to Lender, or
for carrying out or facilitating the performance of the terms of this Agreement
or for filing, registering or recording this Agreement and, within five (5)
Business Days of written demand, will execute and deliver and hereby authorizes
Lender to execute in the name of Borrower or without the signature of Borrower
to the extent Lender may lawfully do so, one or more financing statements,
chattel mortgages or comparable security instruments to evidence more
effectively the lien hereof upon the Collateral.  Without limiting the generality of the
foregoing, Borrower will:  (i) if any
Collateral shall be evidenced by a promissory note or other instrument or
chattel paper, deliver and pledge to Lender hereunder such note or instrument
or chattel paper duly indorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Lender; (ii)
execute or authenticate and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable and as Lender may request, in order to perfect and preserve the
security interest granted or purported to be granted by Borrower hereunder;
(iii) take all action necessary to ensure that Lender has control of any
Collateral consisting of deposit accounts, electronic chattel paper, investment
property and letter-of-credit rights as provided in Sections 9-104, 9-105,
9-106 and 9-107 of the UCC; and (iv) deliver to Lender evidence that all other
action that

 

17

 

Lender may reasonably deem necessary or desirable in
order to perfect and protect the security interest granted or purported to be
granted by Borrower under this Agreement has been taken.  Borrower grants to Lender an irrevocable
power of attorney coupled with an interest for the purpose of protecting,
perfecting, preserving and realizing upon the interests granted pursuant to
this Agreement and to effect the intent hereof, all as fully and effectually as
Borrower might or could do; and Borrower hereby ratifies all that Lender shall
lawfully do or cause to be done by virtue hereof.  Upon receipt of an affidavit of an officer of
Lender as to the loss, theft, destruction or mutilation of the Note or any
other Loan Document which is not of public record, and, in the case of any such
mutilation, upon surrender and cancellation of such Note or other applicable
Loan Document, Borrower will issue, in lieu thereof, a replacement Note or
other applicable Loan Document, dated the date of such lost, stolen, destroyed
or mutilated Note or other Loan Document in the same principal amount thereof
and otherwise of like tenor.

 

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

 

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

 

Section 2.06. 
Financial Reports. 
Borrower shall keep accurate and complete books, records and accounts in
accordance with generally accepted accounting principles (“GAAP”), the
Uniform System of Accountants (or such other accounting basis reasonably
acceptable to Lender) consistently applied with respect to the financial
affairs of Borrower, including, but not limited to, the financial affairs of
Borrower which relate to the Collateral and all sums due or which may become
due thereunder.  Borrower shall, within ten
(10) Business Days after request and at its sole cost and expense, deliver to
Lender any of such books and records as may be requested by Lender.  Lender shall have the right from time to time
at all times during normal

 

18

 

business hours to examine such books, records and
accounts at the office of Borrower or other Person maintaining such books,
records and accounts and to make copies or extracts thereof as Lender shall
desire.  Borrower shall, from time to
time, within thirty (30) days after request and at its sole cost and expense,
deliver to Lender such information, reports and additional financial
information with respect to the financial affairs of Borrower as Lender shall
reasonably request.  Borrower will furnish
Lender annually, within one hundred twenty (120) days following the end of each
Fiscal Year of Borrower, with a complete copy of Borrower’s financial statement
audited by an Independent certified public accountant that is acceptable to
Lender in accordance with GAAP, the Uniform System of Accountants (or such
other accounting basis reasonably acceptable to Lender) consistently applied
covering (i) all of the financial affairs of Borrower for such Fiscal Year and
containing a statement of revenues and expenses, a statement of assets and
liabilities and a statement of Borrower’s equity.  Together with Borrower’s annual financial
statements, Borrower shall furnish to Lender an Officer’s Certificate
certifying as of the date thereof (i) that the annual financial statements
accurately represent the results of operations and financial condition of
Borrower all in accordance with GAAP, the Uniform System of Accountants (or
such other accounting basis reasonably acceptable to Lender) consistently
applied, and (ii) whether there exists an event or circumstance which
constitutes, or which upon notice or lapse of time or both would constitute, a
Default under the Note or any other Loan Document executed and delivered by
Borrower, and if such event or circumstance exists, the nature thereof, the
period of time it has existed and the action then being taken to remedy such
event or circumstance.  Borrower shall at
all times, whether or not the Mortgage Loan is outstanding, deliver or shall
cause Owner to deliver to Lender (x) a copy of all financial statements,
reports, books, records and accounts required to be delivered to Mortgage
Lender pursuant to the terms of the Mortgage Loan Documents within the time
frames set forth in the Mortgage Loan Documents for the delivery of such
financial statements, reports, books, records and accounts (and, with each
monthly statement of revenues and expenses delivered or required to be
delivered under the Mortgage Loan Documents, a comparison of such revenues and
expenses to the Annual Budget) and (y) annually, within thirty (30) days
following the end of each calendar year, and within thirty (30) days after
Lender’s request therefor, a true, complete and correct rent roll for the
Premises, including a list of which tenants are in default under their
respective leases, dated as of the end of the preceding month, identifying each
tenant, the monthly rent and additional rent, if any, payable by such tenant,
the expiration date of such tenant’s Lease, the security deposit, if any, held
by Owner under the Lease, the space covered by the Lease, each tenant that has
filed a bankruptcy, insolvency, or reorganization proceeding since delivery of
the last such rent roll, and the
arrearages for such tenant, if any, and such rent roll shall be accompanied by
an Officer’s Certificate, dated as of the date of the delivery of such rent
roll, certifying that such rent roll is true, correct and complete in all
material respects as of its date. 
Borrower shall furnish to Lender, within thirty (30) days after Lender’s
request therefor, such further detailed information with respect to the
operation of the Premises and the financial affairs of Borrower as may be
reasonably requested by Lender.  Borrower
acknowledges that notwithstanding anything to the contrary contained herein or
in the Note, all extension fees and exit fees will be treated as additional
interest.

 

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

 

19

 

Section 2.08. 
Estoppel Certificates. 
Borrower (a) shall, or shall cause Owner to, from time to time, request
from Mortgage Lender such certificates of estoppel with respect to compliance
by Owner with the terms of the Mortgage Loan Documents as may be requested by
Lender and required to be given by Mortgage Lender pursuant to the Mortgage
Loan Documents; and (b) shall, or shall cause Intermediate Mezz Borrower to,
from time to time, request from Intermediate Mezz Lender such certificates of
estoppel with respect to compliance by Intermediate Mezz Borrower with the
terms of the Intermediate Mezz Loan Documents as may be reasonably requested by
Lender and required to be given by Intermediate Mezz Lender pursuant to the Intermediate
Mezz Loan Documents and (c) shall, or shall cause Senior Mezz Borrower to,
from time to time, request from Senior Mezz Lender, such certificates of estoppel
with respect to compliance by Senior Mezz Borrower with the terms of the Senior
Mezz Loan Documents as may be reasonably requested by Lender and required to be
given by Senior Mezz Lender pursuant to the Senior Mezz Loan Documents.

 

Section 2.09. 
Budget.  Borrower shall
submit to Lender for Lender’s written approval an annual budget (the “Annual
Budget”) not later than fifteen (15) days prior to the commencement of such
Fiscal Year, in form reasonably satisfactory to Lender setting forth in
reasonable detail budgeted monthly operating income and monthly operating
capital and other expenses for the Premises. 
Each Annual Budget shall contain, among other things, management fees,
third party service fees, and other expenses as Borrower may reasonably
determine.  Lender shall have the right
to approve such Annual Budget which approval shall not be unreasonably
withheld, and in the event that Lender objects to the proposed Annual Budget
submitted by Borrower, Lender shall advise Borrower of such objections within
fifteen (15) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall, within ten (10)
days after receipt of notice of any such objections, revise such Annual Budget
and resubmit the same to Lender.  Lender
shall advise Borrower of any objections to such revised Annual Budget within
ten (10) days after receipt thereof (and deliver to Borrower a reasonably
detailed description of such objections) and Borrower shall revise the same in
accordance with the process described herein until Lender approves an Annual
Budget, provided, however, that if Lender shall not advise Borrower of its
objections to any proposed Annual Budget within the applicable time period set
forth in this Section, then such proposed Annual Budget shall be deemed
approved by Lender.  Until such time that
Lender approves a proposed Annual Budget, the most recently Approved Annual
Budget shall apply; provided that, such Approved Annual Budget shall be
adjusted to reflect actual increases in Basic Carrying Costs (as defined in the
Mortgage) and utilities expenses.  In the
event that Owner must incur an Extraordinary Expense (as defined in the
Mortgage), then Borrower shall promptly deliver to Lender a reasonably detailed
explanation of such proposed Extraordinary Expense for Lender’s approval, which
approval may be granted or denied in Lender’s sole and absolute discretion.

 

Section 2.10. 
Intentionally Omitted. 

 

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

 

20

 

the interests of Lender in the Collateral or any
portion thereof or any interest therein.

 

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

 

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

 

(ii)           Lender shall have,
in its sole and absolute discretion, consented to the Proposed Loan Assumption;
provided, however, in connection with an IPO with respect to which not less
than $50,000,000 in proceeds have been used to prepay first, the Loan, second,
the Intermediate Mezz Loan and third, the Senior Mezz Loan until an amount of
not less than $50,000,000 in the aggregate has been applied to such
indebtedness, no such consent shall be required;

 

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

 

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

 

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

 

(vi)          In the event the
applicable Transfer will result in a New Borrower owning the Collateral, Borrower
and New Borrower execute, without any cost or expense to Lender, new

 

21

 

financing statements or financing statement amendments and any
additional documents reasonably requested by Lender and New Borrower delivers
certificated securities to Lender representing 100% of the equity ownership
interests in Intermediate Mezz Borrower (such interests, along with any other
collateral securing the Loan, the “New Collateral”) and grants Lender a
perfected first priority lien in such New Collateral;

 

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

 

(viii)        In the event the
applicable Transfer will result in a New Borrower owning the Collateral, Borrower
executes and delivers to Lender, without any cost or expense to Lender, a
release of Lender, its officers, directors, employees and agents, from all
claims and liability relating to the transactions evidenced by the Loan
Documents, through and including the date of the closing of the Proposed Loan
Assumption, which agreement shall be in form and substance satisfactory to
Lender and shall be binding upon New Borrower;

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

(b)           Borrower shall cause Senior Mezz Borrower to comply with
all of the terms, covenants and conditions set forth in the Senior Mezz Loan
Documents, notwithstanding any waiver or future amendment of such covenants by
Senior Mezz Lender.  Borrower
acknowledges that the obligation to comply with such covenants is separate from,
and may be enforced independently from, the obligations of the Senior Mezz
Borrower under the Senior Mezz Loan Documents.

 

(c)           Borrower shall cause Intermediate Mezz Borrower to comply
with all of the terms, covenants and conditions set forth in the Intermediate
Mezz Loan Documents, notwithstanding any waiver or future amendment of such
covenants by Intermediate Mezz Lender. 
Borrower acknowledges that the obligation to comply with such covenants
is separate from, and may be enforced independently from, the obligations of
the Intermediate Mezz Borrower under the Intermediate Mezz Loan Documents.

 

Section 2.15.  No Change of Accounts. 
Borrower shall not permit (a) Owner to change the Rent Accounts or the
Central Account (as such terms are defined in the Mortgage), without the prior
written consent of Lender and Mortgage Lender, (b) Senior Mezz Borrower to
change the lockbox account established pursuant to the Senior Mezz Loan
Agreement without the prior written consent of Lender, not to be unreasonably
withheld, and Intermediate Mezz Lender or (c) Intermediate Mezz Borrower
to change the lockbox account established pursuant the Intermediate Mezz Loan
Agreement without the prior written consent of Lender, not to be unreasonably
withheld, and Intermediate Mezz Lender.

 

23

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Section 2.18. 
Conduct of Operations.  To
the extent that such matters are within the control of Borrower pursuant to the
terms of the Organizational Documents and applicable laws, Borrower shall cause
the Corporations, LLCs and Partnerships to conduct their operations and to
manage, protect and preserve their assets and to act in a commercially
reasonable manner to preserve the value of the Collateral.

 

Section 2.19. 
Voting Rights; Etc.  (a) So
long as an Event of Default shall not have occurred and be continuing, Borrower
shall be permitted (i) to receive any and all regular Distributions and
dividends paid in cash and in the ordinary course of business of the
Partnerships, the LLCs and the Corporations with respect to the Equity
Interests and (ii) to exercise all voting and other rights with respect to the
Equity Interests as long as no vote shall be 

 

24

 

cast, or right exercised or other action taken which
would, directly or indirectly, materially impair the value of any Collateral or
which would be inconsistent with or result in a default under this Agreement or
any of the other Loan Documents.  Upon
the receipt of a written request from Borrower, Lender shall execute and
deliver (or cause to be executed and delivered) to Borrower all such proxies
and other instruments as Borrower may reasonably request for the purpose of
enabling Borrower to exercise the voting and other rights which it is entitled
to exercise and to receive the dividends or interest payments which it is
authorized to receive and retain pursuant to this Agreement.  Upon the occurrence and during the
continuance of an Event of Default, the aforesaid rights shall immediately and
automatically vest in Lender.

 

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

 

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

 

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

 

Section 2.22. 
Admission of Lender As Shareholder, Member, Partner.  In the event that Lender forecloses on the
Collateral, notwithstanding anything to the contrary in the Organizational Documents,
Lender shall automatically be admitted as a shareholder, member or partner of
the Corporations, LLCs or Partnerships, respectively, and shall be entitled to
receive all benefits and exercise all rights in connection therewith pursuant
to the Organizational Documents; provided, however, that Lender shall have no
liability for matters in connection with the Equity Interests arising or
occurring, directly or indirectly, prior to Lender’s becoming a shareholder,
member or partner of the Corporations, LLCs or Partnerships.

 

Section 2.23. 
Purchase of Mortgage Loan, Etc. 
(a)  Neither Borrower nor any
Affiliate thereof or any other Person acting upon their direction or request
shall, directly or indirectly, 

 

25

 

acquire or agree to acquire, obtain, purchase or
control the Mortgage Loan, or any portion thereof or any interest therein, or
any direct or indirect ownership interest in the holder of, or participant in,
the Mortgage Loan in any manner whatsoever. 
If, solely by operation of applicable subrogation law, Borrower or any
Affiliate thereof shall be in breach of or fail to comply with the foregoing,
then such breach or failure shall not be an Event of Default provided
that Borrower (a) shall immediately upon obtaining knowledge thereof notify
Lender of such failure or breach, and (b) shall cause Borrower and Affiliates
thereof acquiring any interest in the Mortgage Loan Documents (i) not to
enforce the Mortgage Loan Documents, and (ii) upon the request of Lender, to
the extent any Borrower or such Affiliate has the power or authority to do so,
to promptly (A) cancel, reconvey and release its interest in the Mortgage Loan
Documents, (B) discontinue and terminate any enforcement proceeding(s) under
the Mortgage Loan Documents and (C) assign and transfer its interest in the
Mortgage Loan Documents to Lender.

 

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

 

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

 

Section 2.24. 
Deed-In-Lieu, etc.  Without
the prior written consent of Lender, Borrower

 

26

 

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

 

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

 

Section 2.26. 
Payment of Impositions. 
Borrower shall pay and discharge all taxes now or hereafter imposed on
it, or its income or profits, on any of its property or upon the liens provided
for herein prior to the date on which penalties attach thereto; provided that
Borrower shall have the right to contest the validity or amount of any such tax
in good faith and by proper proceedings. 
Borrower shall promptly pay any valid, final judgment enforcing any such
tax and cause the same to be satisfied of record.

 

Section 2.27. 
Central Cash Management.  (a)  All amounts paid by the issuer of the Rate
Cap Agreement (the “Counterparty”) to Borrower or Lender, together with
all rents, issues, profits, insurance proceeds, condemnation proceeds, refinancing
proceeds and all other sums received with respect to the Premises after all
sums which are then due and payable have been paid to Mortgage Lender pursuant
to the terms of the Mortgage Loan Documents, to Senior Mezz Lender pursuant to
the terms of the Senior Mezz Loan Agreement and to Intermediate Mezz Lender pursuant
to the terms of the Intermediate Mezz Loan Documents (collectively, “Remaining
Rents”), shall be paid by federal wire transfer or automatic clearing house
funds (“ACH”) to Lender and shall be deposited immediately into the
Lockbox Account (as defined below). 
Lender has established the Lockbox Account in the name of Lender as
secured party.  The Lockbox Account shall
be under the sole dominion and control of Lender.  The Lockbox Account shall have a sub-account
on a ledger basis entitled the “Debt Service Payment Account” (the “Debt
Service Sub-Account” and together with the other accounts now or hereafter
required to be established pursuant to this Section 2.27, collectively, the “Accounts”)
to which certain funds shall be allocated and from which disbursements shall be
made pursuant to the terms of the Lockbox Agreement.  Borrower hereby irrevocably directs and
authorizes Lender to withdraw funds from the Lockbox Account, all in accordance
with the terms and conditions of the 

 

27

 

Lockbox Agreement. 
Borrower shall have no right of withdrawal in respect of the Lockbox
Account.  Each transfer of funds to be
made hereunder shall be made only to the extent that funds are on deposit in
the Lockbox Account, and Lender shall have no responsibility to make additional
funds available in the event that funds on deposit are insufficient.  Borrower shall enter into or shall cause
Owner to enter into a substitute cash management agreement and related lockbox
agreement (collectively, the “Substitute CMA Agreements”) with
substantially the same terms as the agreements entered into as of the date
hereof in connection with the Mortgage Loan as a condition to the satisfaction
of the Mortgage Loan or if Mortgage Lender is not requiring that sums be
deposited into any Sub-Accounts or Escrow Accounts (each as defined in the Mortgage).  Such substitute agreements shall provide that
all Remaining Rents shall be deposited into the Lockbox Account for
disbursement in accordance with the terms of the Substitute CMA Agreements, the
Lockbox Agreement (as amended to conform with the Substitute CMA Agreements)
and this Agreement.  Additionally, on or
before the Closing Date, Borrower shall establish or cause Owner to establish
such escrow and reserve accounts and deposit such amounts into such accounts as
required pursuant to the terms of the Mortgage Loan Documents.  After the occurrence and during the
continuance of an Event of Default, the funds on deposit in the Lockbox
Account, and all other funds received by Lender in respect of the Loan, shall
be disbursed and applied in such order and such manner as Lender shall elect in
its sole discretion.  If Borrower shall
receive any Remaining Rents other than in accordance with this Agreement,
Borrower shall hold all such payments in trust for Lender, will not co-mingle
such payments with other funds of Borrower, and will immediately pay and
deliver in kind, all such payments directly to Lender for application by Lender
in accordance with this Agreement.

 

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

 

28

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

(b)           placing
or permitting to attach any additional liens or encumbrances on the Premises
(except for liens and encumbrances permitted under the Mortgage Loan Documents,
the Intermediate Mezz Loan Documents or the Senior Mezz Loan Documents (as in
effect on the Closing Date or as amended with Lender’s approval) not requiring
the consent of Mortgage Lender, Intermediate Mezz Lender or the Senior Mezz
Lender); or

 

(c)           any
modification, amendment, consolidation, spread, restatement or waiver of any
provision of the Mortgage Loan Documents, Senior Mezz Loan Documents and/or
Intermediate Mezz Loan Documents.

 

Section 2.30. 
Insurance.  (a) The
insurance described in Section 3.01 of the Mortgage and Section 2.30(c) hereof
(except policies for worker’s compensation) shall be in the form (other than
with respect to Sections 3.01(a)(vi) and (vii) of the Mortgage when insurance
in those two sub-sections is placed with a governmental agency or
instrumentality on such agency’s forms) and amount and with deductibles as,
from time to time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers authorized to
do business in the State where the Premises is located, with a general
policyholder’s service rating of not less than “A” and a financial rating of
not less than XIII as rated in the most currently available Best’s Insurance
Reports (or the equivalent, if such rating 

 

30

 

system shall hereafter be altered or replaced) and
shall have a claims paying ability rating and/or financial strength rating, as
applicable, of not less than “A” (or its equivalent), or such lower claims paying
ability rating and/or financial strength rating, as applicable, as Lender
shall, in its reasonable discretion (taking into account then current Rating
Agency guidelines), consent to, from a Rating Agency (one of which after a
Securitization in which Standard & Poor’s rates any securities issued in
connection with such Securitization, shall be Standard & Poor’s) or by a
syndicate of insurers through which at least 90% of the coverage is with
carriers having claims-paying ability or financial strength ratings of “A” (or
its equivalent) from the Ratings Agencies, provided that all members of the
syndicate shall have claims-paying ability ratings and/or financial strength
ratings, as applicable, of not less than “A-” (or its equivalent) from the
Ratings Agencies and Borrower shall cause Owner to carry all such insurance
(whether or not the Mortgage Loan is outstanding) for so long as any portion of
the Debt remains outstanding.  Notwithstanding
the foregoing, Lender approves (i) Continental Casualty Company, (ii) RSUI
Indemnity Company, and (iii) Fidelity National Insurance Company as insurers,
provided that throughout the term of the Loan the claims paying ability rating
and/or financial strength rating, as applicable, from each Rating Agency for
such insurers shall be no less than “A-” (or its equivalent).  All such policies (except policies for worker’s
compensation) shall name Lender as an additional named insured (subject to the
rights of Mortgage Lender, Intermediate Mezz Lender and Senior Mezz Lender), with
respect to the insurance required pursuant to Section 3.01(a)(iii) of the
Mortgage, shall provide, subsequent to the satisfaction of the Mortgage Loan,
for loss payable to Lender (subject to the rights of Senior Mezz Lender and
Intermediate Mezz Lender) and shall contain (or have attached):  (i) standard “non-contributory mortgagee”
endorsement or its equivalent relating, inter  alia, to recovery
by Lender notwithstanding the negligent or willful acts or omissions of
Borrower; (ii) a waiver of subrogation endorsement as to Lender; (iii) an
endorsement indicating that neither Lender nor Borrower shall be or be deemed
to be a co-insurer with respect to any casualty risk insured by such policies
and shall provide for a deductible per loss of an amount not more than that
which is customarily maintained by owners of similar properties similarly
situated, and (iv) a provision that such policies shall not be canceled,
terminated, denied renewal or amended, including, without limitation, any
amendment reducing the scope or limits of coverage, without at least thirty
(30) days’ prior written notice to Lender in each instance.  Not less than thirty (30) days prior to the
expiration dates of the insurance policies obtained pursuant to this Agreement,
originals or certified copies of renewals of such policies (or certificates
evidencing such renewals) bearing notations evidencing the payment of premiums
or accompanied by other reasonable evidence of such payment (which premiums
shall not be paid by Borrower or Owner through or by any financing arrangement
which would entitle an insurer to terminate a policy) provided, however,
premiums for the insurance required pursuant to this Section may be paid
quarterly in advance or as otherwise reasonably acceptable to Lender, it being
acknowledged that paying the premium for such policies by financing the same,
paying twenty percent (20%) of the total annual premium (inclusive of finance
charges) at the time of the applicable policy renewal and paying the remaining
eighty percent (80%) of the total annual premium (inclusive of finance charges)
in nine (9) equal monthly installments is acceptable to Lender) shall be
delivered by Borrower to Lender. 
Borrower shall not carry separate insurance, concurrent in kind or form
or contributing in the event of loss, with any insurance required under Section
3.01 of the Mortgage or Section 2.30(c) hereof.

 

(b)           If
Borrower fails to maintain and deliver to Lender the original policies or 

 

31

 

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

 

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

 

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

 

(a)           After
the Mortgage Loan, the Senior Mezz Loan and the Intermediate Mezz Loan have been
paid in full, in the event of any loss or damage covered by any insurance,
Lender is hereby authorized (i) if an Event of Default shall have occurred or,
if no Event of Default shall have occurred but Borrower, Senior Mezz Borrower,
Intermediate Mezz Borrower or Owner fails to settle and adjust any claim within
ninety (90) Business Days after such casualty has occurred, to settle and
adjust any claim under such insurance without the consent of Borrower, Senior
Mezz Borrower, Intermediate Mezz Borrower or Owner, or (ii) if no Event of
Default has occurred, to allow Borrower or Owner within ninety (90) Business
Days after such casualty to settle and adjust such claim with, if any
settlement may reasonably be anticipated to result in proceeds in excess of $250,000.00,
the consent of Lender, not to be unreasonably withheld; provided, however, that
in either case Lender shall, and is hereby authorized to, collect and receive
any such insurance proceeds, subject, however, to the rights of Mortgage Lender
under the Mortgage Loan Documents, Senior Mezz Lender under the Senior Mezz
Loan Documents and Intermediate Mezz Lender under the Intermediate Mezz Loan
Documents.  The expenses incurred by
Lender in the adjustment and collection of such proceeds of insurance shall be
additional Debt of Borrower, and shall be reimbursed to Lender upon demand or,
at Lender’s option, in the event and to the extent sufficient proceeds are
available, deducted by Lender from such proceeds of insurance prior to any
other application thereof.  If the
Mortgage Loan, the Senior Mezz Loan and the Intermediate Mezz Loan have been
paid in full, each insurance company which has issued insurance is hereby authorized
and directed to make payment for all losses covered by such insurance to Lender
alone, and not to Lender and Borrower, Senior Mezz Borrower, Intermediate Mezz
Borrower or Owner jointly.  Borrower
agrees to execute and cause Owner, Senior Mezz Borrower and Intermediate Mezz
Borrower to execute all documents and make all deliveries required in order to
permit adjustment and payment of insurance proceeds as provided above.

 

32

 

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

 

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

 

Section 2.33. 
Power of Attorney. 
Borrower hereby irrevocably appoints and instructs Lender as its
attorney-in-fact, with full authority in the place and stead of Borrower and in
the name of Borrower, Lender or otherwise, from time to time in Lender’s
discretion to take any and all actions necessary and proper, to carry out the
intent of this Agreement and (a) to perfect and 

 

33

 

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

 

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

 

(b)           Subject to the
rights of Mortgage Lender in respect of the Rents under the Mortgage Loan
Documents, the rights of Senior Mezz Lender in respect of the Rents under the
Senior Mezz Loan Documents, and the rights of Intermediate Mezz Lender in
respect of the Rents under the Intermediate Mezz Loan Documents, at any time
that (i) payments are not being made to the Central Account, (ii) following
repayment of the Mortgage Loan or (iii) following the occurrence of an Event of
Default, then Lender shall have the immediate right to notify all tenants and
other third parties to make payments directly to the Lockbox Account.  Borrower hereby authorizes and directs the
tenants and other third parties to make such payments directly to the Lockbox
Account upon notice by Lender.  Subject
to the rights of Mortgage Lender under the Mortgage Loan Documents, Senior Mezz
Lender under the Senior Mezz Loan Documents and Intermediate Mezz Lender under
the Intermediate Mezz Loan Documents, security and other refundable deposits of
tenants, whether held in cash or any other form, shall, after and during the
continuance of an Event of Default, be turned over to Lender (together with any
undisbursed interest earned thereon) upon Lender’s request therefor to be held
by Lender subject to the terms of the Leases. 
Any letter of credit or other instrument which Borrower or Owner holds
in lieu of 

 

34

 

cash security deposit shall be maintained in full force and effect in
the full amount of such deposits unless replaced by cash deposits as
herein-above described and shall in all respects comply with any applicable
Legal Requirements and otherwise be satisfactory to Lender.  Borrower shall, upon request, provide Lender
with evidence satisfactory to Lender of Borrower’s, Senior Mezz Borrower’s,
Intermediate Mezz Borrower’s and Owner’s compliance with the foregoing.

 

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

 

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

 

35

 

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

 

Section 2.36. 
Ground Lease.

 

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

 

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

 

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

 

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

 

36

 

exercise of any such option.

 

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

 

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

 

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

 

(h)           Borrower
shall immediately, after obtaining knowledge thereof, notify Lender of any
filing by or against the Ground Lessor of a petition under the Bankruptcy
Code.  Borrower shall thereafter
forthwith give written notice of such filing to Lender, setting forth any
information available to Borrower or Owner as to the date of such filing, the
court in which such petition was filed, and the relief sought therein.  Borrower shall promptly deliver to Lender 

 

37

 

following receipt any and all notices, summonses,
pleadings, applications and other documents received by Borrower or Owner in
connection with any such petition and any proceedings relating thereto.

 

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

 

ARTICLE III. 
EVENTS OF DEFAULT/REMEDIES

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)           if
any representation or warranty of Borrower, Senior Mezz Borrower, Intermediate
Mezz Borrower, Owner or Guarantor made herein or in any other Loan Document 

 

38

 

or in any certificate, report, financial statement
or other instrument or agreement furnished to Lender shall prove false or
misleading in any material respect as of the date made or furnished;

 

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

 

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

 

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

 

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

 

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

 

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

 

(n)           if
a default shall occur under any of the other terms, covenants or conditions of 

 

39

 

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

 

Section 3.02. 
Remedies.  (a)  Upon the occurrence and during the
continuance of any Event of Default, Lender may, in addition to any other
rights or remedies available to it hereunder or under any other Loan Document,
at law or in equity, take such action, without notice or demand, as it
reasonably deems advisable to protect and enforce its rights against Borrower
and in and to the Collateral, including, but not limited to, the following
actions, each of which may be pursued singly, concurrently or otherwise, at
such time and in such order as Lender may determine, in its sole discretion,
without impairing or otherwise affecting any other rights and remedies of Lender
hereunder, at law or in equity:  (i)
declare all or any portion of the unpaid Loan to be immediately due and
payable; provided, however, that upon the occurrence of any of the events
specified in Section 3.01(i), the entire Loan will be immediately due and
payable without notice or demand or any other declaration of the amounts due
and payable; or (ii) bring an action to foreclose this Agreement and thereupon
Lender may (A) exercise all rights and powers of Borrower with respect to the
Collateral or any part thereof, whether in the name of Borrower or otherwise
and (B) apply the receipts from the Collateral to the payment of the Debt,
after deducting therefrom all expenses (including, without limitation,
reasonable attorneys’ fees and disbursements and all applicable transfer taxes)
reasonably incurred in connection therewith, as well as just and reasonable
compensation for the services of Lender’s third-party agents; or (iii) sell the
Collateral or institute proceedings for the complete foreclosure of this
Agreement, or take such other action as may be allowed pursuant to Legal
Requirements, at law or in equity, for the enforcement of this Agreement; or
(iv) pursue any or all such other rights or remedies as Lender may have under
applicable law or in equity (including, without limitation, all rights and
remedies to a secured party under the UCC); provided, however, that the
provisions of this Section shall not be construed to extend or modify any of
the notice requirements or grace periods provided for hereunder or under any of
the other Loan Documents.

 

(b)           In
addition to the remedies described in subsection (a) above, if any Event
of Default shall occur, so long as such Event of Default shall be continuing,
(i) Lender and/or its nominees or designees shall have the right to
receive any and all dividends, payments or Distributions paid with respect to
the Equity Interests and the other Collateral, as applicable, and make
application thereof in accordance with this Agreement (and any dividends and
other payments received in trust by Borrower for the benefit of Lender shall be
segregated from the other funds of Borrower) and (ii) at Lender’s
election, all Equity Interests shall be transferred to Lender and/or one (1) or
more nominee(s) or designee(s) thereof, and Lender and/or such nominee(s) or
designee(s) may in the name of Borrower or in Lender’s and/or such nominee’s(s’)
or designee’s(s’) own name, collect all payments and assets due Borrower
pursuant to the Equity Interests and/or the applicable Organizational
Documents, and Lender and/or such nominee(s) or designee(s) may thereafter
exercise (A) all voting and other rights pertaining to the Equity
Interests under the Organizational Documents, and (ii) any and all rights
of conversion, exchange, subscription and any other rights, privileges or
options pertaining to the Equity Interests as if they were the absolute owners
thereof (including the right to exchange at 

 

40

 

their discretion any and all of the Equity Interests
upon the merger, consolidation, reorganization, recapitalization or other
change in the structure of any Corporation, LLC or Partnership), or upon the
exercise by Borrower or Lender and/or such nominee(s) or designee(s) of any
right, privilege or option pertaining to such Equity Interests, and, in
connection therewith, the right to deposit and deliver evidences of the Equity
Interests with any committee, depository, transfer agent, registrar or other
designated agency (upon such terms and conditions as they may determine), all
without liability except to account for property actually received by them, but
neither Lender nor any such nominee or designee shall have any duty to exercise
any such right, privilege or option and shall not be responsible for any
failure to do so or delay in so doing. 
Further, unless and until Lender and/or such nominee(s) or designee(s)
succeeds to actual ownership thereof, pursuant to the exercise of Lender’s
remedies described in subsection (a) above, neither Lender nor any such
nominee or designee shall be obligated to perform or discharge any obligation,
duty or liability in connection with the Equity Interests or the Collateral.  The rights of Lender hereunder shall not be
conditioned or contingent upon the pursuit by Lender of any other right or
remedy against Borrower or any guarantor of any of the Debt, or against any
other Person which may be or become liable in respect of all or any part of the
Debt or against any other collateral security therefor, guarantee thereof or
right of offset with respect thereto. 
Neither Lender nor any of its nominees or designees shall be liable for
any failure to demand, collect or realize upon all or any part of the
Collateral or for any delay in doing so, nor shall they be under any obligation
to sell or otherwise dispose of any Collateral upon the request of Borrower or
any other Person or to take any other action whatsoever with regard to the
Collateral or any part thereof.

 

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

 

(d)           Without
limiting the generality of the other provisions of this Agreement, Lender is
hereby authorized by Borrower, but not obligated, in the event of any Event of
Default hereunder giving rise to Lender’s rights to sell or otherwise dispose
of the Collateral, and after the giving of any notices required herein, to sell
all or any part of the Collateral at private sale, subject to an investment
letter or in any other manner which will not require the Collateral, or any
part thereof, to be registered in accordance with the Securities Act of 1933,
as amended (the “Securities Act”), or other applicable rules and
regulations promulgated thereunder, or any other law or regulation, at the best
price reasonably obtainable by Lender at any such private sale or other
disposition in the manner mentioned above, and Borrower specifically
acknowledges that any such disposition shall be commercially reasonable under
the UCC even though any such private sales may be at prices and on terms less
favorable than those obtainable through a public sale without such
restrictions, and agrees that Lender shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the issuer thereof to register it for a form
of public sale required by registration under the Securities Act or under
applicable state securities laws, even if such issuer would, or should 

 

41

 

agree to, so register it.  Lender is also hereby authorized by Borrower,
but not obligated, to take such actions, give such notices, obtain such
consents, and do such other things as Lender may deem required or appropriate
in the event of a sale or disposition of any of the Collateral.  If Lender determines to exercise its right to
sell any or all of the Collateral, upon written request, Borrower shall and
shall cause each issuer of any Pledged Interests or other Equity Interests
owned by Borrower to be sold hereunder from time to time to furnish to Lender
all such information as Lender may request in order to determine the number of
shares and other instruments included in the Collateral which may be sold by
Lender in exempt transactions under the Securities Act and the rules and
regulations of the Securities and Exchange Commission thereunder, as the same
are from time to time in effect.  Borrower
clearly understands that Lender may at its discretion approach a restricted
number of potential purchasers and that a sale under such circumstances may
yield a lower price for the Collateral, or any part or parts thereof, than
would otherwise be obtainable if same were registered and sold in the open
market.  Borrower agrees:  (i) in the event Lender shall, upon an
Event of Default hereunder, sell the Collateral, or any portion thereof, at
such private sale or sales, Lender shall have the right to rely upon the advice
and opinion of any member firm of the National Security Exchange as to the best
price reasonably obtainable upon such private sale thereof; and (ii) that
such reliance shall be conclusive evidence that Lender handled such matter in a
commercially reasonable manner under the UCC.

 

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

 

(f)            Any
time after an Event of Default Lender shall have the power to sell the
Collateral or any part thereof at public auction, in such manner, at such time
and place, upon 

 

42

 

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

 

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

 

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

 

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

 

Fourth:  The surplus, if any, to Borrower unless
otherwise required by Legal Requirements.

 

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

 

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

 

(h)           Upon
the completion of any sale or sales made by Lender under or by virtue of this
Section, Lender, or any officer of any court empowered to do so, shall execute
and deliver to the accepted purchaser or purchasers a good and sufficient
instrument, or good and sufficient instruments, granting, conveying, assigning
and transferring all estate, right, title and interest in and to the
Collateral.  Lender is hereby irrevocably
appointed the true and lawful attorney-in-fact of Borrower (coupled with an
interest), in its name and stead, to make all necessary conveyances,
assignments, transfers and deliveries and for that purpose Lender may execute
all necessary instruments of conveyance, assignment, transfer and delivery, and
may substitute one or more 

 

43

 

Persons with like power, Borrower hereby ratifying
and confirming all that its said attorney-in-fact or such substitute or
substitutes shall lawfully do by virtue hereof. 
Nevertheless, Borrower, if so requested by Lender, shall ratify and
confirm any such sale or sales by executing and delivering to Lender, or to
such purchaser or purchasers all such instruments as may be advisable, in the
sole judgment of Lender, for such purpose, and as may be designated in such
request.  Any such sale or sales made
under or by virtue of this Section shall operate to divest all the estate,
right, title, interest, claim and demand whatsoever, whether at law or in
equity, of Borrower in and to the Collateral, and shall, to the fullest extent
permitted under Legal Requirements, be a perpetual bar, both at law and in
equity against Borrower and against any and all Persons claiming or who may
claim the same, or any part thereof, from, through or under Borrower.

 

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

 

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

 

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

 

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

 

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

 

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

 

44

 

sale of the Collateral.

 

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

 

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

 

Section 3.04. 
Additional Security. 
Borrower authorizes Lender without notice or demand and without
affecting its liability under this Agreement or under the Note (i) to take and
hold security in addition to the security interest in the Collateral granted by
Borrower to Lender pursuant to this Agreement, for the payment of the Debt or
any part thereof, and to exchange, waive or release any such other security and
(ii) to release or substitute Borrower.

 

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

 

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

 

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

 

Section 3.08. 
Payment of Debt After Default. 
If following the occurrence of any Event of Default, Borrower shall
tender payment of an amount sufficient to satisfy the Debt in whole or in part
at any time prior to a UCC sale of the Collateral, and if at the time of such
tender prepayment of the principal balance of the Note is not permitted by the
Note and this Agreement, 

 

45

 

Borrower shall, in addition to the entire Debt, also
pay to Lender a sum equal to interest which would have accrued on the principal
balance of the Note at an interest rate equal to the LIBOR Margin for the Note
plus the greater of (x) the then current LIBOR Rate and (y) the then current
average yield for “This Week” as published by the Federal Reserve Board during
the most recent full week preceding the date on which Borrower tenders such
payment in Federal Reserve Statistical Release H.15 (519) for instruments
having a ten (10) year maturity, from the date of such tender to the earlier of
(a) the Maturity Date or (b) the first day of the period during which
prepayment of the principal balance of the Note would have been permitted
together with a prepayment consideration equal to the prepayment consideration
which would have been payable as of the first day of the period during which
prepayment would have been permitted.  If
at the time of such tender, prepayment of the principal balance of the Note is
permitted, such tender by Borrower shall be deemed to be a voluntary prepayment
of the principal balance of the Note and Borrower shall, in addition to the
entire Debt, also pay to Lender the applicable Exit Additional Interest Payment
and prepayment consideration specified in the Note and this Agreement.

 

Section 3.09. 
No Impairment; No Releases. 
The interests and rights of Lender under the Loan Documents shall not be
impaired by any indulgence, including (a) any renewal, extension or
modification which Lender may grant with respect to any of the Loan; (b) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Lender may grant with respect to the Loan Documents or any portion
thereof; or (c) any release or indulgence granted to any maker, endorser, or surety
of any of the Loan.

 

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

 

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

 

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

 

46

 

earlier action was commenced.

 

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

 

ARTICLE IV. 
INDEMNIFICATION

 

Section 4.01. 
Indemnification Covering Property.  In addition, and without limitation, to any
other provision of this Agreement or any other Loan Document, Borrower shall
protect, indemnify and save harmless Lender and its successors and assigns, and
each of their agents, employees, officers, directors, stockholders, partners
and members (collectively, “Indemnified Parties”) for, from and against
any claims, demands, penalties, fines, liabilities, settlements, damages, costs
and expenses of whatever kind or nature, known or unknown, contingent or
otherwise, whether incurred or imposed within or outside the judicial process,
including, without limitation, reasonable attorneys’ fees and disbursements
imposed upon or incurred by or asserted against any of the Indemnified Parties
by reason of (a) ownership of this Agreement or the Collateral; (b) any
accident, injury to or death of any person or loss of or damage to property
occurring in, on or about the Premises or any part thereof or on the adjoining
sidewalks, curbs, parking areas, streets or ways; (c) any use, nonuse or
condition in, on or about, or possession, alteration, repair, operation,
maintenance or management of, the Premises or any part thereof or on the
adjoining sidewalks, curbs, parking areas, streets or ways; (d) any failure on
the part of Borrower to perform or comply with any of the terms of this
Agreement; (e) performance of any labor or services or the furnishing of any
materials or other property in respect of the Premises or any part thereof; (f)
any claim by brokers, finders or similar Persons claiming to be entitled to a
commission in connection with any Lease or other transaction involving the
Premises or any part thereof; (g) any Imposition including, without limitation,
any Imposition attributable to the execution, delivery, filing, or recording of
any Loan Document, Lease or memorandum thereof; (h) any lien or claim arising
on or against the Premises or any part thereof under any Legal Requirement or
any liability asserted against any of the Indemnified Parties with respect
thereto; (i) any claim arising out of or in any way relating to any tax or
other imposition on the making and/or recording of this Agreement, the Note or
any of the other Loan Documents; (j) a Default under Sections 2.02(f), 2.02(g),
2.02(k) or 2.02(s) hereof, (k) the failure of any Person to file timely with
the Internal Revenue Service an accurate Form 1099-B, Statement for Recipients
of Proceeds from Real Estate, Broker and Barter Exchange Transactions, which
may be required in connection with the Loan, or to supply a copy thereof in a
timely fashion to the recipient of the proceeds of the Loan; (l) the claims of
any lessee or any Person acting through or under any lessee or otherwise
arising under or as a consequence of any Lease; or (m) the actual or alleged
presence, disposal, escape, seepage, leakage, spillage, discharge, emission,
release or threat of release of any Hazardous Materials in, on, over, under,
from or affecting the Premises or (n) the failure to pay any insurance
premiums.  Notwithstanding the foregoing
provisions of this Section to the contrary, Borrower shall have no obligation
to indemnify the Indemnified Parties pursuant to this Section for liabilities,
obligations, claims, damages, penalties, causes of action, costs and expenses
relative to the foregoing which result from Lender’s, and its successors’ or
assigns’, willful misconduct or gross negligence.  Any amounts payable to Lender by reason of
the application of this Section shall constitute a part of the Debt secured by
this Agreement and the 

 

47

 

other Loan Documents and shall become immediately
due and payable and shall bear interest at the Default Rate from the date the
liability, obligation, claim, cost or expense is sustained by Lender, as
applicable, until paid.  The provisions
of this Section shall survive the termination of this Agreement whether by
repayment of the Debt, foreclosure of this Agreement, assignment or
otherwise.  In case any action, suit or
proceeding is brought against any of the Indemnified Parties by reason of any
occurrence of the type set forth in (a) through (m) above, Borrower shall, at
Borrower’s expense, resist and defend such action, suit or proceeding or will
cause the same to be resisted and defended by counsel at Borrower’s expense for
the insurer of the liability or by counsel designated by Borrower (unless
reasonably disapproved by Lender promptly after Lender has been notified of
such counsel); provided, however, that nothing herein shall
compromise the right of Lender (or any other Indemnified Party) to appoint its
own counsel at Borrower’s expense for its defense with respect to any action
which, in the reasonable opinion of Lender or such other Indemnified Party, as
applicable, presents a conflict or potential conflict between Lender or such
other Indemnified Party that would make such separate representation
advisable.  Any Indemnified Party will
give Borrower prompt notice after such Indemnified Party obtains actual
knowledge of any potential claim by such Indemnified Party for indemnification
hereunder.  The Indemnified Parties shall
not settle or compromise any action, proceeding or claim as to which it is
indemnified hereunder without notice to Borrower.  Notwithstanding the foregoing, so long as no
Default has occurred and is continuing and Borrower is resisting and defending
such action, suit or proceeding as provided above in a prudent and commercially
reasonable manner, in order to obtain the benefit of this Section with respect
to such action, suit or proceeding, Lender and the Indemnified Parties agree
that they shall not settle such action, suit or proceeding without obtaining
Borrower’s consent which Borrower agrees not to unreasonably withhold, condition
or delay; provided, however, (x) if Borrower is not diligently
defending such action, suit or proceeding in a prudent and commercially
reasonable manner as provided above and Lender has provided Borrower with
thirty (30) days’ prior written notice, or shorter period if mandated by the
requirements of the applicable law, and Borrower has failed to correct such
failure, or (y) failure to settle could, in Lender’s reasonable judgment,
expose Lender to criminal liability, Lender may settle such action, suit or
proceeding without the consent of but upon notice to Borrower and be entitled
to the benefits of this Section with respect to the settlement of such action,
suit or proceeding.

 

ARTICLE V.  SECURITY AGREEMENT

 

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

 

48

 

with the provisions hereof at least ten (10) days
prior to such action shall constitute reasonable notice to Borrower.

 

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

 

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

 

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

 

ARTICLE VI.  PREPAYMENT

 

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

 

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

 

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

 

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

 

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

 

(iv)          Intentionally omitted.

 

49

 

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

 

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

 

(vii)         No prepayments shall be made on the Mortgage Loan until the
Loan shall have been paid in full other than in connection with a Release
pursuant to the Mortgage Loan, in which case Borrower shall be required to
prepay only a portion of the Loan in an amount equal to the outstanding
principal amount of the Loan for the Cross-collateralized Property which is the
subject of the Release multiplied by a fraction, the numerator of which is (A)
one hundred fifteen percent (115%) of the Allocated Loan Amount for the
Cross-collateralized Property which is the subject of the Release or (B) with
respect to the Delano Hotel only, one hundred ten percent (110%) of the
Allocated Loan Amount of the Delano Hotel, and the denominator of which is the
original principal amount of the Loan.

 

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

 

ARTICLE VII.  MISCELLANEOUS

 

Section 7.01. 
Notices.  Any notice,
demand, statement, request or consent made hereunder shall be in writing and
delivered personally or sent to the party to whom the notice, demand or request
is being made by overnight delivery by Federal Express or other nationally 

 

50

 

recognized overnight delivery service, as follows
and shall be deemed given when delivered personally or one (1) Business Day
after being deposited with Federal Express or such other nationally recognized
delivery service:

 

	
   

  	
  If to Lender:

  	
   

  	
  Wachovia
  Bank, National Association

  
	
   

  	
   

  	
   

  	
  Commercial
  Real Estate Services

  
	
   

  	
   

  	
   

  	
  8739
  Research Drive URP-4

  
	
   

  	
   

  	
   

  	
  NC
  1075

  
	
   

  	
   

  	
   

  	
  Charlotte,
  NC 28262

  
	
   

  	
   

  	
   

  	
  Loan
  Number:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attention:
  Portfolio Management

  
	
   

  	
   

  	
   

  	
  Fax
  No.: (704) 715-0036

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with
  copies to:

  	
   

  	
  Hypo Real Estate Capital Corporation

  
	
   

  	
   

  	
   

  	
  622 Third Avenue

  
	
   

  	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
   

  	
  Attn: Chief Risk Officer

  
	
   

  	
   

  	
   

  	
  Facsimile No.: (212)
  671-6445

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Hypo Real Estate Capital
  Corporation

  
	
   

  	
   

  	
   

  	
  622 Third Avenue

  
	
   

  	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
   

  	
  Attn: Chief Legal Officer

  
	
   

  	
   

  	
   

  	
  Facsimile No.: (212)
  671-6368

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Proskauer Rose LLP

  
	
   

  	
   

  	
   

  	
  1585 Broadway

  
	
   

  	
   

  	
   

  	
  New York, New York 10036

  
	
   

  	
   

  	
   

  	
  Attn: David J. Weinberger,
  Esq.

  
	
   

  	
   

  	
   

  	
  Facsimile No.: (212)
  969-2900

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  If to Borrower:

  	
   

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

  
	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
  277-4268,

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  with
  copies to:

  	
   

  	
  NorthStar Capital
  Investment Corp.

  
	
   

  	
   

  	
   

  	
  527 Madison Avenue, 17th
  Floor

  
	
   

  	
   

  	
   

  	
  New York, New York 10022

  
	
   

  	
   

  	
   

  	
  Attn: Marc S. Gordon

  
	
   

  	
   

  	
   

  	
  Facsimile No.: (212)
  319-4557

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  and

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Skadden,
  Arps, Slate, Meagher & Flom LLP

  
	
   

  	
   

  	
   

  	
  Four
  Times Square

  

 

51

 

 

	
   

  	
   

  	
   

  	
  New
  York, New York 10036

  
	
   

  	
   

  	
   

  	
  Attn:
  Neil L. Rock, Esq.,

  
	
   

  	
   

  	
   

  	
  Facsimile
  No.: (917) 777-3787,

  

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

52

 

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

 

Section 7.10. 
Headings; Construction of Documents, etc.  The headings and captions of various
paragraphs of this Agreement are for convenience of reference only and are not
to be construed as defining or limiting, in any way, the scope or intent of the
provisions hereof.  Borrower acknowledges
that it was represented by competent counsel in connection with the negotiation
and drafting of this Agreement and the other Loan Documents and that neither
this Agreement nor the other Loan Documents shall be subject to the principle
of construing the meaning against the Person who drafted same.

 

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

 

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

 

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

 

Section 7.14. 
Usury Laws.  This Agreement
and the Note are subject to the express condition, and it is the expressed
intent of the parties, that at no time shall Borrower be obligated 

 

53

 

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

 

Section 7.15. 
Remedies of Borrower.  In
the event that a claim or adjudication is made that Lender has acted
unreasonably or unreasonably delayed acting in any case where by law or under
the Note, this Agreement or the Loan Documents, it has an obligation to act
reasonably or promptly, Lender shall not be liable for any monetary damages,
and Borrower’s remedies shall be limited to injunctive relief or declaratory
judgment.

 

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

 

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

 

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

 

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

 

54

 

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

 

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

 

Section 7.22. 
No Joint Venture or Partnership. 
Borrower and Lender intend that the relationship created hereunder be
solely that of pledgor and pledgee or borrower and lender, as the case may
be.  Nothing herein is intended to create
a joint venture or partnership relationship between Borrower and Lender nor to
grant Lender any interest in the Collateral other than that of pledgee or
lender.

 

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

 

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

 

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

 

55

 

address of the Premises and the Loan Amount) in
press releases or other marketing materials.

 

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

 

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

 

(b)           Borrower
acknowledges that Lender may on or after the Closing Date sell and assign
participation interests in and to the Loan, or pledge, hypothecate or encumber,
or sell and 

 

56

 

assign all or any portion of the Loan, to or with
such domestic or foreign banks, insurance companies, pension funds, trusts or
other institutional lenders or other Persons, parties or investors (including,
without limitation, grantor trusts, owner trusts, special purpose corporations,
real estate investment trusts or other similar or comparable investment
vehicles) as may be selected by Lender in its sole and absolute discretion and
on terms and conditions satisfactory to Lender in its sole and absolute
discretion.  Borrower and all Affiliates
of Borrower shall cooperate in all respects with Lender in connection with the
sale of participation interests in, or the pledge, hypothecation or encumbrance
or sale of all or any portion of, the Loan, and shall, in connection therewith,
at Borrower’s sole cost and expense with respect to the first request made by
Lender following the Closing Date and at Lender’s expense for any additional
requests thereafter, execute and deliver such estoppels, certificates,
instruments and documents as may be reasonably requested by Lender.  Borrower grants to Lender the right to
distribute financial and other information concerning Borrower, the Collateral,
and all other pertinent information with respect to the Loan to any Person who
has purchased a participation interest in the Loan, or who has purchased the
Loan, or who has made a loan to Lender secured by the Loan or who has expressed
an interest in purchasing a participation interest in the Loan, or expressed an
interest in purchasing the Loan or the making of a loan to Lender secured by
the Loan.  If requested by Lender,
Borrower shall execute and deliver, and shall cause each Affiliate of Borrower
to execute and deliver, at no cost or expense to Borrower, such documents and
instruments as may be necessary to split the Loan into two or more loans
evidenced by separate sets of notes and secured by separate sets of other
related Loan Documents to the full extent required by Lender to facilitate the
sale of participation interests in the Loan or the sale of the Loan or the
making of a loan to Lender secured by the Loan, it being agreed that (a) any
such splitting of the Loan will not adversely affect or diminish the rights of
Borrower as presently set forth herein and in the other Loan Documents and will
not increase the respective obligations and liabilities of Borrower or any
other Person associated or connected with the Loan or the Collateral, (b) the
Loan Documents securing the Loan as so split will have such priority of lien as
may be specified by Lender, and (c) the retained interest of Lender in the Loan
as so split shall be allocated to or among one or more of such separate loans
in a manner specified by Lender in its sole and absolute discretion.  From and after the effective date of any
assignment of all or any portion of the Loan to any Person (an “Assignee”)
(a) such Assignee shall be a party hereto and to each of the other Loan Documents
to the extent of the applicable percentage or percentages assigned to such
Assignee and, except as otherwise specified herein, shall succeed to the rights
and obligations of Lender hereunder in respect of such applicable percentage or
percentages and (b) Lender shall relinquish its rights and be released from its
obligations hereunder and under the Loan Documents to the extent of such
applicable percentage or percentages. 
The liabilities of Lender and each of the other Assignees shall be
separate and not joint and several. 
Neither Lender nor any Assignee shall be responsible for the obligations
of any other Assignee.  Borrower
acknowledges that the information provided by Borrower to Lender may be
incorporated into the offering documents for a Securitization and to the
fullest extent permitted, Borrower irrevocably waives all rights, if any, to
prohibit such disclosures including, without limitation, any right of privacy.  Lender and each Rating Agency shall be
entitled to rely on the information supplied by, or on behalf of, Borrower and
Borrower indemnifies Lender as to any liabilities, obligations, claims,
damages, penalties, causes of action, costs and expenses, (including, without
limitation, reasonable attorney’s fees and expenses, whether incurred within or
outside the judicial process) that arise out of or are based upon any untrue
statement or alleged 

 

57

 

untrue statement of any material fact contained in
such information or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in such
information or necessary in order to make the statements in such information,
or in light of the circumstances under which they were made, not misleading.

 

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

 

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

 

Section 7.29. 
Mortgage Loan Defaults.

 

(a)           Without
limiting the generality of the other provisions of this Agreement, and without
waiving or releasing Borrower from any of its obligations hereunder, if there
shall occur any Event of Default under the Mortgage Loan Documents (without
regard to any other defenses or offset rights Owner may have against Mortgage
Lender), or under the Senior Mezz Documents (without regard to any defenses or
offset rights Senior Mezz Borrower may have against Senior Mezz Lender) or
under the Intermediate Mezz Documents (without regard to any defenses or offset
rights Intermediate Mezz Borrower may have against Intermediate Mezz 

 

58

 

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

 

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

 

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

 

(d)           If
Lender shall receive a copy of any notice of default under the Mortgage Loan
Documents sent by Mortgage Lender to Owner, under the Senior Mezz Loan
Documents sent by Senior Mezz Lender to Senior Mezz Borrower or under the
Intermediate Mezz Loan Documents 

 

59

 

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

 

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

 

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

 

Section 7.32. 
Reinstatement.  This
Agreement and each other Loan Document shall continue to be effective or be
reinstated, as the case may be, if at any time payment and performance of the
Debt or any part thereof, is, pursuant to applicable law, rescinded or reduced
in amount, or must otherwise be restored or returned by Borrower, whether as a “voidable
preference”, “fraudulent conveyance”, or otherwise, all as though such payment
or performance had not been made.  In the
event that any payment, or any part thereof, is rescinded, reduced, restored or
returned, the Debt shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.

 

ARTICLE VIII. 
EXCULPATION

 

Section 8.01. 
Exculpation. 
Notwithstanding anything herein or in any other Loan Document to the
contrary, except as otherwise set forth in this Section 8.01 to the contrary,
Lender shall not enforce the liability and obligation of Borrower and (a) if
Borrower is a partnership, its constituent partners or any of their respective
partners, (b) if Borrower is a trust, 

 

60

 

its beneficiaries or any of their respective
Partners (as hereinafter defined), (c) if Borrower is a corporation, any of its
shareholders, directors, principals, officers or employees, or (d) if Borrower
is a limited liability company, any of its members and their respective legal,
equitable and beneficial owner (the Persons described in the foregoing clauses
(a) - (d), as the case may be, are hereinafter referred to as the “Partners”)
to perform and observe the obligations contained in this Agreement or any of
the other Loan Documents by any action or proceeding wherein a money judgment
shall be sought against Borrower or the Partners, except that Lender may bring
a UCC sale, action for specific performance, or other appropriate action or
proceeding (including, without limitation, an action to obtain a deficiency
judgment) solely for the purpose of enabling Lender to realize upon (i)
Borrower’s interest in the Collateral and (ii) any other collateral given to
Lender under the Loan Documents (the “Default Collateral”); provided,
however, that any judgment in any such action or proceeding shall be
enforceable against Borrower and the Partners only to the extent of any such
Default Collateral.  The provisions of
this Section shall not, however, (a) impair the validity of the Debt evidenced
by the Note or in any way affect or impair the lien of this Agreement or any of
the other Loan Documents or the right of Lender to enforce this Agreement
following the occurrence of an Event of Default; (b) impair the right of Lender
to name Borrower as a party defendant in any action or suit for judicial
foreclosure and sale under this Agreement; (c) affect the validity or
enforceability of the Note, this Agreement, or any of the other Loan Documents,
or impair the right of Lender to seek a personal judgment against the
Guarantor; (d) impair the right of Lender to obtain the appointment of a
receiver; (e) impair the right of Lender to bring suit for a monetary judgment
with respect to damages incurred by Lender resulting from fraud or intentional misrepresentation
by Borrower, or any other Person in connection with this Agreement, the Note or
the other Loan Documents, and the foregoing provisions shall not modify,
diminish or discharge the liability of Borrower or the Partners with respect to
same; (f) impair the right of Lender to bring suit for a monetary judgment to
obtain the Recourse Distributions received by Borrower including, without
limitation, the right to bring suit for a monetary judgement to proceed against
any Partner, to the extent of any such Recourse Distributions theretofore
distributed to and received by such Partner, and the foregoing provisions shall
not modify, diminish or discharge the liability of Borrower or the Partners
with respect to same; (g) impair the right of Lender to bring suit for a
monetary judgment with respect to Borrower’s misappropriation of tenant
security deposits or Rent, and the foregoing provisions shall not modify,
diminish or discharge the liability of Borrower or the Partners with respect to
same; (h) impair the right of Lender to obtain insurance proceeds due to Lender
pursuant to this Agreement; (i) impair the right of Lender to enforce the
provisions of Sections 2.02(g) and 4.01, inclusive of this Agreement, even
after repayment in full by Borrower of the Debt; (j) prevent or in any way
hinder Lender from exercising, or constitute a defense, or counterclaim, or
other basis for relief in respect of the exercise of, any other remedy against
any or all of the collateral securing the Note as provided in the Loan
Documents; (k) impair the right of Lender to bring suit for a monetary judgment
with respect to damages incurred by Lender resulting from any misapplication or
conversion of Loss Proceeds (as defined in the Mortgage), and the foregoing
provisions shall not modify, diminish or discharge the liability of Borrower or
the Partners with respect to same; (l) impair the right of Lender to sue for,
seek or demand a deficiency judgment against Borrower solely for the purpose of
foreclosing the Premises or any part thereof, or realizing upon the Default
Collateral; provided, however, that any such deficiency judgment
referred to in this clause (l) shall be enforceable against Borrower and the
Partners only to the extent of any of the Default Collateral; (m) impair 

 

61

 

the ability of Lender to bring suit for monetary
judgment with respect to damages incurred by Lender resulting from arson or
waste to or of the Premises and/or the Collateral or damage to the Premises
committed by Borrower or its Affiliates; (n) impair the right of Lender to
bring a suit for a monetary judgment in the event of the exercise of any right
or remedy under any federal, state or local forfeiture laws resulting in the
loss of the lien of this Agreement, or the priority thereof, against the Collateral;
(o) be deemed a waiver of any right which Lender may have under Sections
506(a), 506(b), 1111(b) or any other provision of the Bankruptcy Code to file a
claim for the full amount of the Debt or to require that all collateral shall
continue to secure all of the Debt; (p) impair the right of Lender to bring
suit for monetary judgment with respect to damages incurred by Lender resulting
from any losses resulting from any claims, actions or proceedings initiated by
Borrower (or any Affiliate of Borrower) alleging that the relationship of
Borrower and Lender is that of joint venturers, partners, tenants in common,
joint tenants or any relationship other than that of debtor and creditor; (q) impair
the right of Lender to bring suit for a monetary judgment for damages incurred
by Lender in the event of a Transfer in violation of the provisions of Section
2.11 hereof, including, without limitation, the failure to obtain Lender’s
consent to a Transfer as, when and to the extent required thereunder; (r)
impair the right of Lender to bring suit for a monetary judgment in the event
that Borrower moves its principal place of business or its books and records
relating to the Collateral which are governed by the UCC, or changes its name,
its jurisdiction of organization, type of organization or other legal structure
or, if it has one, organizational identification number, without first giving
Lender thirty (30) days prior written notice or (s) impair the right of Lender
to bring suit for a monetary judgment in the event that Borrower changes its
name of otherwise does anything which would make the information set forth in
any UCC Financing Statements relating to the Collateral materially misleading
without giving Lender thirty (30) days prior written notice thereof.  The provisions of this Section shall be
inapplicable to Borrower if (a) any proceeding, action, petition or filing
under the Bankruptcy Code, or any similar state or federal law now or hereafter
in effect relating to bankruptcy, reorganization or insolvency, or the
arrangement or adjustment of debts, shall be filed by, consented to or
acquiesced in by or with respect to Borrower, or if Borrower shall institute
any proceeding for its dissolution or liquidation, or shall make an assignment
for the benefit of creditors or (b) Borrower or any Affiliate contests or in
any material way interferes with, directly or indirectly (collectively, a “Contest”)
any UCC sale or other material remedy exercised by Lender upon the occurrence
of any Event of Default under the Loan Documents whether by making any motion,
bringing any counterclaim, claiming any defense, seeking any injunction or
other restraint, commencing any action, or otherwise (provided that if any such
Person obtains a non-appealable order successfully asserting a Contest,
Borrower shall have no liability under this clause (b)) or (c) Borrower (i)
fails to cause Owner to deliver notice of default under the Ground Lease to
Lender or any other Person designated in writing by Lender or (ii) fails to
prevent Owner from amending or modifying the Ground Lease without the prior
written consent of Lender, in which event Lender shall have recourse against
all of the assets of Borrower including, without limitation, any right, title
and interest of Borrower in and to the Premises, and any partnership interests
in Borrower (but excluding the other assets of such Partners to the extent
Lender would not have had recourse thereto other than in accordance with the
provisions of this Section).

 

*  *  * 
*  *

 

62

 

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

 

 

	
  Borrower’s Organizational
  Identification

  	
  MMRDH JUNIOR MEZZ HOLDING

  
	
  Number:  3829579

  	
  COMPANY LLC, Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
  Title: Authorized
  Signatory

  
					

 

 

EXHIBIT A

 

Description of the Premises

 

 

 

2

 

EXHIBIT B

 

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

 

Unpaid Principal Balance of Senior Mezz Loan:  $51,250,000.00

 

Unpaid Principal balance of Intermediate Mezz Loan:
$30,000,000.00

 

 

EXHIBIT C

 

CERTAIN DEFINED TERMS

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Lease” means all
leases and other agreements or arrangements affecting the use, enjoyment or
occupancy of all or any portion of the Premises now in effect or hereafter
entered into (including, without limitation, all lettings, subleases, licenses,
concessions, tenancies and 

 

4

 

other occupancy agreements covering or
encumbering all or any portion of the Premises), whether before or after the
filing by or against Owner of any petition for relief under the Bankruptcy
Code, together with any guarantees, supplements, amendments, modifications,
extensions and renewals of the same, and all additional remainders, reversions,
and other rights and estates appurtenant thereto.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Lockbox Account”
shall mean account number 5000000074400 established
with Wachovia Bank, National Association in the name “Wachovia Bank, National
Association, as secured party of MMRDH Junior Mezz Holding Company LLC”.

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

“Proceeds” shall mean
(a) all “proceeds” (as such term is defined in the UCC) and “products” (as
such term is defined in the UCC) with respect to the Collateral and
(b) includes, without limitation: 
whatever is receivable or received when Collateral is sold, collected, 

 

8

 

exchanged or otherwise disposed of, whether
such disposition is voluntary or involuntary; all rights to payment, including
return premiums, with respect to any insurance relating thereto; all interest,
dividends and other property receivable or received on account of the
Collateral or proceeds thereof, (including all Distributions or other income
from the Equity Interests, all collections thereon or all Distributions with
respect thereto); and proceeds of any indemnity or guaranty payable to Borrower
or Lender from time to time with respect to any Collateral.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Solvent” shall mean,
as to any Person, that (a) the sum of the assets of such Person, at a fair
valuation, exceeds its liabilities, including contingent liabilities, (b) such
Person has sufficient capital with which to conduct its business as presently
conducted and as proposed to be conducted and (c) such Person has not incurred
debts, and does not intend to incur debts, beyond 

 

9

 

its ability to pay such debts as they
mature.  For purposes of this definition,
“debt” means any liability on a claim, and “claim” means (a) a
right to payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured, or (b) a right to an equitable remedy
for breach of performance if such breach gives rise to a payment, whether or
not such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, or
unsecured.  With respect to any such
contingent liabilities, such liabilities shall be computed in accordance with
GAAP at the amount which, in light of all the facts and circumstances existing
at the time, represents the amount which can reasonably be expected to become
an actual or matured liability.

 

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

 

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

 

“Transfer” shall mean
any conveying, assigning, selling, mortgaging, encumbering, pledging,
hypothecating, granting of a security interest in, granting of options with
respect to or other disposition (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise and whether or not for
consideration or of record) of all or any portion of any legal or beneficial
interest in the Collateral, Borrower, Senior Mezz Borrower, Intermediate Mezz
Borrower, Owner, the Premises or any other portion of the Property (as defined
in the Mortgage); provided, however, notwithstanding the foregoing or anything
to the contrary contained in any other Loan Document, “Transfer” shall not
include (a) any sale, transfer, conveyance, encumbrance or assignment of any
direct or indirect legal or beneficial ownership interest in Borrower,
provided, in each case, that no Person or group of Affiliated Persons which did
not, as of the Closing Date, own 49% or more of Borrower, obtains a direct or
indirect ownership interest in Borrower of more than 49% or obtains, directly
or indirectly, Control of Borrower (other than a Person to whom Control is attributed
under the Securities Act solely by virtue of being a director of a public
company and other than, in connection with an IPO, to a Person with respect to
which Edward Scheetz or David Hamamoto have the title and responsibilities of a
chief executive officer, president and/or chief financial officer and a seat on
the board of directors of the public company formed in connection with the IPO
so long as Edward Scheetz or David Hamamoto remain actively involved in the
management of the operations of Borrower) unless such Person or group of
Affiliated Persons (the “Sub Owners”) are owned by a Person or group of
Affiliated Persons (the “Parent Owner”), which owned 49% or more of the
direct and/or indirect legal or beneficial ownership interest in Borrower prior
to such transfer and either (A) Borrower had previously delivered an opinion of
counsel which discussed the substantive non-consolidation of such Parent Owner
in form and substance and prepared by counsel reasonably acceptable to Lender
or (B) Sub-Owner owns such interest in 

 

10

 

Borrower through ownership of a Person or
group of Affiliated Persons with respect to which such a substantive
non-consolidation opinion was previously delivered to Lender or (b) subsequent
to an IPO, transfers of publicly traded stock on a national stock exchange or
on the NASDAQ Stock Market in the normal course of business and not in
connection with a tender offer or a sale of the public Person resulting from
the IPO or substantially all of the assets of such Person.

 

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

 

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

 

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

 

11

 

Schedule 1

 

Corporations, Limited Liability Corporations and Partnerships

 

 

MMRDH Intermediate Mezz Holding Company LLC, a Delaware limited
liability company

 

 

Schedule 2

 

Ownership Chart

 

 

 

 

Schedule 3

 

Intentionally Omitted.

 

 

Schedule 4

 

Stock Power

 

 

A transfer power in form and
substance acceptable to Lender.

 

 

Schedule 5

 

Allocated Loan Amount

 

 

	
  Property

  	
   

  	
  Allocated Loan Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Hudson Hotel

  	
   

  	
  $9,827,586.21

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Morgans Hotel

  	
   

  	
  $1,810,344.83

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Royalton Hotel

  	
   

  	
  $2,607,758.62

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Delano Hotel

  	
   

  	
  $5,668,103.45

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mondrian Hotel

  	
   

  	
  $5,086,206.90

  	
   

  

 

 

CONSENT AND WAIVER

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

	
   

  	
  MMRDH INTERMEDIATE MEZZ
  HOLDING

  
	
   

  	
  COMPANY LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Marc S. Gordon

  	
   

  
	
   

  	
   

  	
   

  	
  Name: Marc S. Gordon

  
	
   

  	
   

  	
   

  	
  Title: Authorized
  SignatoryExhibit 10.19

 

24 NOVEMBER 2005

 

 

£107,456,000 FACILITY AGREEMENT

 

IAN SCHRAGER LONDON
LIMITED

(to be renamed MORGANS
HOTEL GROUP LONDON LIMITED)

as Borrower

 

and

 

CITIGROUP GLOBAL MARKETS
LIMITED

as Arranger

 

and

 

THE FINANCIAL INSTITUTIONS
LISTED IN SCHEDULE 1

as Lenders

 

and

 

CITIBANK INTERNATIONAL PLC

as Agent

 

and

 

CITIBANK INTERNATIONAL PLC

as Security Trustee

 

Herbert Smith LLP

 

 

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  DEFINITIONS AND
  INTERPRETATION

  	
   

  
	
   

  	
   

  	
   

  
	
  2.

  	
  THE FACILITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  3.

  	
  PURPOSE

  	
   

  
	
   

  	
   

  	
   

  
	
  4.

  	
  CONDITIONS OF DRAWDOWN

  	
   

  
	
   

  	
   

  	
   

  
	
  5.

  	
  SECURITY

  	
   

  
	
   

  	
   

  	
   

  
	
  6.

  	
  DRAWDOWN

  	
   

  
	
   

  	
   

  	
   

  
	
  7.

  	
  REPAYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  8.

  	
  PREPAYMENT AND CANCELLATION

  	
   

  
	
   

  	
   

  	
   

  
	
  9.

  	
  INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  10.

  	
  INTEREST PERIODS

  	
   

  
	
   

  	
   

  	
   

  
	
  11.

  	
  CHANGES
  TO THE CALCULATION OF INTEREST

  	
   

  
	
   

  	
   

  	
   

  
	
  12.

  	
  FEES

  	
   

  
	
   

  	
   

  	
   

  
	
  13.

  	
  TAX
  GROSS UP AND INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  14.

  	
  INCREASED
  COSTS

  	
   

  
	
   

  	
   

  	
   

  
	
  15.

  	
  BREAK
  COSTS AND OTHER INDEMNITIES

  	
   

  
	
   

  	
   

  	
   

  
	
  16.

  	
  MITIGATION
  BY THE LENDERS

  	
   

  
	
   

  	
   

  	
   

  
	
  17.

  	
  COSTS AND
  EXPENSES

  	
   

  
	
   

  	
   

  	
   

  
	
  18.

  	
  REPRESENTATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  19.

  	
  INFORMATION UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  20.

  	
  BANK ACCOUNTS

  	
   

  
	
   

  	
   

  	
   

  
	
  21.

  	
  PROPERTY
  UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  22.

  	
  FINANCIAL
  COVENANTS

  	
   

  
	
   

  	
   

  	
   

  
	
  23.

  	
  GENERAL
  UNDERTAKINGS

  	
   

  
	
   

  	
   

  	
   

  
	
  24.

  	
  EVENTS OF DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  25.

  	
  CHANGES
  TO THE LENDERS

  	
   

  
	
   

  	
   

  	
   

  
	
  26.

  	
  ASSIGNMENTS AND TRANSFER BY THE BORROWER

  	
   

  
	
   

  	
   

  	
   

  
	
  27.

  	
  ROLE OF THE AGENT, THE ARRANGER AND THE SECURITY
  TRUSTEE

  	
   

  
	
   

  	
   

  	
   

  
	
  28.

  	
  THE
  SECURITY TRUSTEE

  	
   

  

 

 

	
  29.

  	
  CONDUCT OF BUSINESS BY THE FINANCE PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  30.

  	
  SHARING AMONG THE FINANCE PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  31.

  	
  PAYMENT MECHANICS

  	
   

  
	
   

  	
   

  	
   

  
	
  32.

  	
  SET-OFF

  	
   

  
	
   

  	
   

  	
   

  
	
  33.

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  34.

  	
  CALCULATIONS AND CERTIFICATES

  	
   

  
	
   

  	
   

  	
   

  
	
  35.

  	
  REINSTATEMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  36.

  	
  PARTIAL
  INVALIDITY

  	
   

  
	
   

  	
   

  	
   

  
	
  37.

  	
  REMEDIES
  AND WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  38.

  	
  AMENDMENTS
  AND WAIVERS

  	
   

  
	
   

  	
   

  	
   

  
	
  39.

  	
  OFFICERS, EMPLOYEES OR AGENTS OF THE FINANCE PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  40.

  	
  COUNTERPARTS

  	
   

  
	
   

  	
   

  	
   

  
	
  41.

  	
  GOVERNING LAW

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 1 THE ORIGINAL PARTIES

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 2
  CONDITIONS PRECEDENT

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 3
  DRAWDOWN REQUEST

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 4
  MANDATORY COST FORMULA

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 5
  FORM OF TRANSFER CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 6
  FORM OF COMPLIANCE CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULE 7
  FORM OF QUARTERLY REPORT

  	
   

  

 

 

THIS AGREEMENT is dated 24 November 2005 and made between:

 

(1)           IAN
SCHRAGER LONDON LIMITED (to be renamed MORGANS
HOTEL GROUP LONDON LIMITED), a company incorporated in England and Wales with
registered number 03462675 (the “Borrower”);

 

(2)           CITIGROUP GLOBAL MARKETS LIMITED (the “Arranger”);

 

(3)           THE FINANCIAL INSTITUTIONS listed in Part I of Schedule 1 (the “Original A
Lenders”);

 

(4)           THE FINANCIAL INSTITUTIONS listed in Part II of Schedule 1
(the “Original B Lenders”);

 

(5)           CITIBANK INTERNATIONAL
plc as agent of the other Finance Parties (the “Agent”); and

 

(6)           CITIBANK
INTERNATIONAL plc as security trustee for the other Finance Parties (the “Security Trustee”).

 

IT IS AGREED as follows:

 

SECTION 1

 

INTERPRETATION

 

1.            DEFINITIONS AND INTERPRETATION

 

1.1           Definitions

 

In this Agreement:

 

“A  Commitment” means:

 

(A)          in relation to an Original A Lender, the amount set opposite its
name under the heading “A Commitment” in Part I of Schedule 1 (The Original Parties) and the amount of any other A
Commitment transferred to it under this Agreement; and

 

(B)           in relation to any other A Lender, the amount of any A Commitment
transferred to it under this Agreement,

 

to the extent not cancelled, reduced or transferred by
it under this Agreement.

 

“A  Facility” means the A term loan facility made available
under this Agreement as described in Clause
2.1.1 (The Facility).

 

“A Facility Amount”
means £82,432,000.

 

“A  Finance Costs” means, as calculated by the Agent (acting
reasonably) for any period, the aggregate of all accrued interest, fees and
other finance costs (for the avoidance of doubt, excluding all payments of
principal) which were paid or were payable by the Borrower to the A Lenders
under the Finance Documents during that period.

 

“A Lender” means:

 

1

 

(A)            any Original A Lender; and

 

(B)             any person, bank, financial institution, trust, fund or other entity
which has become a Party as an A Lender in accordance with Clause 25 (Changes to the Lenders),

 

which in each case has not ceased to be a Party in
accordance with the terms of this Agreement.

 

“A Loan” means the loan made or to be made under the A Facility
or the principal amount outstanding for the time being of that loan.

 

“A Margin” means the amount specified as the A Margin in the A
Margin Letter.

 

“A Margin Letter” means the letter dated on or about the
date of this Agreement between the Borrower and the Agent setting out the A
Margin.

 

“Account Bank”
means National Westminster Bank plc or such other bank as may be previously
approved in writing by the Agent.

 

“Account Bank Rating
Requirements” means, at any time, a rating of not less than:

 

(A)          F1 by Fitch Ratings Ltd;

 

(B)           P-1+ by Moody’s Investor Service Limited; and

 

(C)           A-1+ by Standard & Poor’s Rating Services, a division
of The McGraw Companies, Limited.

 

“Account Charge”
means the assignment of Revenues and charge over the monies held from time to
time in the Charged Accounts, granted by the Borrower to the Security Trustee.

 

“Affiliate”
means, in relation to any person, a Subsidiary of that person or a Holding
Company of that person or any other Subsidiary of that Holding Company.

 

“Agent’s Solicitors”
means Herbert Smith LLP, Exchange House, Primrose Street, London, EC2A 2HS.

 

“Agreement for Lease”
means any agreement by the Borrower to grant an Occupational Lease of all or
any part of its interest in a Property.

 

“Allocated Loan
Amount” means:

 

(A)          with respect to the Property known as The Sanderson, £42,982,400;
and

 

(B)          with respect to the Property known as the St. Martin’s Lane Hotel, £64,473,600.

 

“Approved Accountant”
means KPMG, PricewaterhouseCoopers, Deloitte & Touche, Ernst &
Young, BDO Stoy Hayward or any other firm of chartered accountants of
internationally recognised standing that has been selected by the Borrower and
previously approved by the Agent (acting reasonably) and appointed as auditors
of the Borrower.

 

“Authorisation”
means an authorisation, consent, approval, resolution, licence, exemption,
filing, notarisation or registration.

 

2

 

“Available Commitment”
means the Available A Commitment or the Available B Commitment.

 

“Available Facility”
means the Available A Facility or the Available B Facility.

 

“Available A Commitment”
means a Lender’s A Commitment minus:

 

(A)           its participation in the outstanding A Loan; and

 

(B)            in relation to the proposed Drawdown, its participation in the A
Loan due to be made on or before the proposed Drawdown Date.

 

“Available A Facility”
means the aggregate for the time being of each Lender’s Available A Commitment.

 

“Available B Commitment”
means a Lender’s B Commitment minus:

 

(A)           its participation in the outstanding B Loan; and

 

(B)            in relation to the proposed Drawdown, its participation in the B
Loan due to be made on or before the proposed Drawdown Date.

 

“Available B Facility”
means the aggregate for the time being of each Lender’s B Available Commitment.

 

“Availability Period”
means the period from and including the date of this Agreement to and including
31 December 2005.

 

“B  Commitment” means:

 

(A)           in relation to an Original B Lender, the amount set opposite its
name under the heading “B Commitment” in Part II of Schedule 1 (The Original Parties) and the amount of any other B Commitment
transferred to it under this Agreement; and

 

(B)            in relation to any other B Lender, the amount of any B Commitment
transferred to it under this Agreement,

 

to the extent not cancelled, reduced or transferred by
it under this Agreement.

 

“B  Facility” means the B term loan facility made available
under this Agreement as described in Clause
2.1.2 (The Facility).

 

“B Facility Amount”
means £25,024,000.

 

“B Finance Costs” means, as calculated by the Agent (acting
reasonably) for any period, the aggregate of all accrued interest, fees and
other finance costs (for the avoidance of doubt excluding all payments of
principal) which were paid or were payable by the Borrower to the B Lenders
under the Finance Documents during that period.

 

“B Lender” means:

 

(A)            any Original B Lender; and

 

(B)             any person, bank, financial institution, trust, fund or other entity
which has become a Party as a B Lender in accordance with Clause 25 (Changes to the Lenders),

 

3

 

which in each case has not ceased to be a Party in
accordance with the terms of this Agreement.

 

“B Loan” means the loan made or to be made under the B Facility
or the principal amount outstanding for the time being of that loan.

 

“B Margin” means the amount specified as the B Margin in the B
Margin Letter.

 

“B Margin Letter”
means the letter dated on or about the date of this Agreement between the
Borrower and the Agent setting out the B Margin.

 

“Borrower’s
Solicitors” means Macfarlanes, 10 Norwich Street, London EC4A 1BD.

 

“Break Costs”
means the amount (if any) by which:

 

(A)          the interest (excluding the Margin) which a Lender should have
received for the period from the date of receipt of all or any part of its
participation in a Loan or Unpaid Sum to the last day of the current Interest
Period in respect of a Loan or Unpaid Sum, had the principal amount or Unpaid
Sum received been paid on the last day of that Interest Period;

 

exceeds:

 

(B)           the amount which that Lender would be able to obtain by placing an
amount equal to the principal amount or Unpaid Sum received by it on deposit
with a leading bank in the Relevant Interbank Market for a period starting on
the Business Day following receipt or recovery and ending on the last day of
the current Interest Period.

 

“Business Day”
means a day (other than a Saturday or Sunday) on which banks are open for
general business in London.

 

“Certificate of Title”
means a certificate of title dated on the Drawdown Date in relation to each
Property, each in a form and substance satisfactory to the Agent, addressed to
the Finance Parties and their successors in title, and prepared by the Borrower’s
Solicitors.

 

“Charged Accounts” means the General Account, FF&E Account, the Deposit
Account and the Revenue Account.

 

“Charge on Shares” means the charge over the entire share
capital of the Borrower.

 

“Commitment”
means the A Commitment and the B Commitment.

 

“Compliance Certificate”
means a certificate substantially in the form set out in Schedule 6 (Form of Compliance Certificate).

 

“Contribution Notice”
means a contribution notice issued by the Pensions Regulator under section 38
or section 47 of the Pensions Act 2004.

 

“Debenture” means the debenture granted by the
Borrower in favour of the Security Trustee.

 

“Default” means
an Event of Default or any event or circumstance specified in Clause 24 (Events of Default) which would (with the expiry of a grace
period, the giving of notice, the making of any determination under the Finance
Documents or any combination of any

 

4

 

of the foregoing, in each case as specified in Clause 24
(Events of Default)) be an Event
of Default.

 

“Deposit Account”
means the current account so designated and referred to in Clause 20 (Bank Accounts).

 

“Drawdown” means
a drawdown of a Facility.

 

“Drawdown Date”
means the date of a Drawdown, being the date on which a Loan is made or
proposed to be made.

 

“Drawdown Request”
means a notice substantially in the form set out in Schedule 3 (Drawdown Request).

 

“Environmental
Authorisations” means all permits, licences, consents or other
authorisations or approvals required at any time under any Environmental Laws
for the operation of the business of the Borrower or the occupation of a
Property by any person.

 

“Environmental Laws”
means all applicable statutes, statutory instruments, common law, treaties,
regulations, directives, codes of conduct, circulars, guidance notes, orders,
notices, demands and other measures having the force of law or which are
customarily complied with by persons similar to the Borrower imposed by any
authority to which the Borrower or any of a Property is or has been or is
reasonably likely to be subject which relate to the pollution or protection of
the environment or the protection of the health of any living organism or the
protection of public health or welfare.

 

“Environmental
Matters” means:

 

(A)            the generation, deposit, disposal, keeping, treatment,
transportation, transmission, handling, importation, exportation, processing,
collection, sorting, presence or manufacture of any pollution, waste (as
defined in the Environmental Protection Act 1990) or substance which is toxic,
hazardous, flammable, explosive or capable of damaging the environment;

 

(B)             public or private nuisance, noise, defective premises or health and
safety at work;

 

(C)             the carrying out of any development (as defined in Section 55(1) Town
and Country Planning Act 1990); and

 

(D)             any act, default or phenomenon which is capable of causing harm to
human health or welfare or harm to any other living organism or of damaging the
environment.

 

“Event of Default”
means any event or circumstance specified as such in Clause 24 (Events of Default).

 

“Facility” means
the A Facility or the B Facility.

 

“Facility Office”
means the office or offices notified by a Lender to the Agent in writing on or
before the date it becomes a Lender (or, following that date, by not less than
five Business Days’ written notice) as the office or offices through which it
will perform its obligations under this Agreement.

 

“Facility Period”
means the period starting on the date of this Agreement and ending on the date
on which all the obligations and liabilities of the Borrower under the Finance

 

5

 

Documents are discharged in full and the Finance
Parties have no continuing obligations in relation to any Facility.

 

“FF&E”
means the repair and/or replacement of worn out or damaged furnishings,
fixtures and equipment and other similar ordinary replacement items and related
capital improvements to the Properties as required pursuant to the relevant
Management Agreement.

 

“FF&E Account”
means the current account so designated and referred to in Clause 20 (Bank Accounts).

 

“Final Repayment
Date” means the fifth anniversary of the Drawdown Date.

 

“Finance Costs”
means, as calculated by the Agent for any period, the aggregate of all accrued
interest, fees and other finance costs (excluding for the avoidance of doubt
any payment of principal) which were paid or were payable by the Borrower to
the Finance Parties under the Finance Documents during that period.

 

“Finance Documents”
means this Agreement, the Security Documents, the A Margin Letter, the B Margin
Letter and any other documents designated as such by the Agent and the
Borrower, and “Finance Document” means any of them.

 

“Finance Parties”
means the Agent, the Arranger, the Security Trustee and the Lenders, and “Finance
Party” means any of them.

 

“Financial Indebtedness”
means any indebtedness for or in respect of (without any double counting):

 

(A)            moneys borrowed;

 

(B)             any amount raised by acceptance under any acceptance credit
facility;

 

(C)             any amount raised pursuant to any note purchase facility or the
issue of bonds, notes, debentures, loan stock or any similar instrument;

 

(D)             any amount raised in accordance with any issue of shares which are
expressed to be preferred or redeemable on or prior to the Final Repayment
Date;

 

(E)             the amount of any liability in respect of any lease or hire purchase
contract which would, in accordance with GAAP, be treated as a finance or
capital lease;

 

(F)             the amount of any liability outstanding for goods or services bought
or received if the same are capable of remaining outstanding for more than six
months in accordance with the terms of the contract under which such goods or
services were bought or received;

 

(G)             receivables sold or discounted (other than any receivables to the
extent they are sold on a non-recourse basis);

 

(H)             any amount raised under any other transaction (including any forward
sale or purchase agreement) having the commercial effect of a borrowing;

 

(I)              any derivative transaction entered into in connection with
protection against or benefit from fluctuation in any rate or price (and, when
calculating the value of

 

6

 

any derivative transaction, only the net aggregate
marked to market value shall be taken into account);

 

(J)              any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, standby or documentary letter of credit or any other
instrument issued by a bank or financial institution; and

 

(K)             the amount of any liability in respect of any guarantee or indemnity
for any of the items referred to in paragraphs (A) to (J) above, to the
extent that the same is not otherwise included in any such paragraphs.

 

“Financial Support
Direction” means a financial support direction issued by the
Pensions Regulator under section 43 of the Pensions Act 2004.

 

“Fixed Rate”
means the rate (expressed as a percentage rate per annum) calculated by the
Agent and notified to the Borrower on the Drawdown Date.

 

“GAAP” means, in
relation to the Borrower, generally accepted accounting principles in the
jurisdiction of its incorporation.

 

“General Account”
means the current account so designated and referred to in Clause 20 (Bank Accounts).

 

“Group” means
the Borrower and its Subsidiaries from time to time.

 

“Headlease”
means the lease of the Sanderson under which the Borrower holds title to that
Property.

 

“Hedging Arrangement”
means the interest rate swap, cap, floor, collar option or swaption transaction
or any other treasury transaction entered into against or to benefit from
fluctuations in any rate or price.

 

“Holding Company”
means, in relation to a company or corporation, any other company or
corporation in respect of which it is a Subsidiary.

 

“Insurance Company Rating
Requirements” means, at any time, a rating of not less than:

 

(A)            A- by Fitch Ratings Ltd;

 

(B)             A3 by Moody’s Investor Service Limited; and

 

(C)             A- by Standard &
Poor’s Rating Services, a division of The McGraw Companies, Limited.

 

“Insurance Policies”
means insurance policies in respect of each Property in form and substance
satisfactory to the Agent (acting reasonably) which shall be obtained and
maintained by the Borrower pursuant to Clause 21.8 (Insurance).

 

“Interest Period”
means, in relation to a Loan, each period determined in accordance with Clause 10
(Interest Periods) and, in relation to an
Unpaid Sum, each period determined in accordance with Clause 9.3 (Default interest).

 

“Interest Payment Date” means the 16th day in each
calendar month in each year.

 

7

 

“Legal Reservations”
means:

 

(A)             the principle that equitable remedies may be granted or refused at
the discretion of the court and the limitation of enforcement by laws relating
to insolvency, reorganisation and other laws generally affecting the rights of
creditors;

 

(B)              the time barring of claims under the Limitation Acts, the
possibility that an undertaking to assume liability for, or, indemnify a person
against, non-payment of UK stamp duty may be void and defences of set—off or
counterclaim;

 

(C)              any qualification or reservation as to matters of law which appears
in any legal opinions delivered under Schedule 2 (Conditions precedent).

 

“Lender” means
an A Lender or a B Lender.

 

“LIBOR” means,
in relation to a Loan:

 

(A)            the applicable Screen Rate; or

 

(B)             (if no Screen Rate is available for Sterling for the Interest Period
of the Loan) the rate quoted by leading banks in the London interbank market to
the Agent,

 

as of 11.00 a.m. on the Quotation Day for the
offering of deposits in Sterling and for a period comparable to the Interest
Period for the Loan.

 

“Loan” means the
loans made or to be made under any Facility or the principal amount outstanding
for the time being of those loans and shall include the A Loan and the B Loan.

 

“Majority Lenders”
means:

 

(A)            if a Loan is not outstanding, a Lender or Lenders whose Commitments
aggregate more than 662/3% of the Total Commitments (or,
if the Total Commitments have been reduced to zero, aggregated more than 662/3%
of the Total Commitments immediately prior to the reduction); or

 

(B)             at any other time, a Lender or Lenders whose participations in the
Loans aggregate more than 662/3%.

 

“Manager”
means Royalton UK Management Limited (to be renamed Morgans Hotel Group UK Management
Limited) (a company incorporated in England & Wales with registered
number 03520726) as manager of each Property under the terms of the Management
Agreements or any other person appointed as a manager of any Property in
accordance with this Agreement.

 

“Management
Agreement” means each management agreement dated 18 June 1998
between the Borrower and the Manager relating to the management of each
Property as a hotel or any other management agreement entered into by the
Borrower relating to the management of a Property in accordance with this
Agreement.

 

“Mandatory Cost”
means the percentage rate per annum calculated by the Agent in accordance with Schedule 4
(Mandatory Cost formula).

 

“Margin” means
the A Margin or the B Margin.

 

8

 

“Market Value” has
the meaning given to that term in the then current Appraisal and Valuation
Standards issued by the Assets Valuation Standards Committee of the Royal
Institution of Chartered Surveyors (RICS).

 

“Material Adverse Effect” means a material adverse effect on:

 

(A)           the business, operations,
condition (financial or otherwise) or prospects of the Borrower in any
jurisdiction;

 

(B)            any Property and/or the
income derived from the Property (including, without limitation, the Revenues);

 

(C)            the ability of the
Borrower to perform any of its obligations under any of the Finance Documents;
or

 

(D)           the validity or
enforceability of any of the Finance Documents or the rights or remedies of the
parties thereunder.

 

“Material Litigation”
means any litigation, arbitration or administrative proceedings of or before
any court, arbitral body or agency which is reasonably likely to be adversely
determined and if adversely determined, might reasonably be expected in the
opinion of the Agent (acting reasonably) to have a Material Adverse Effect.

 

“Money Laundering
Regulations” means any regulations applicable to the Finance Parties
for the prevention of money laundering and financial crime, including all
Financial Services Authority requirements, guidance notes issued by the Joint
Money Laundering Steering Group, the Proceeds of Crime Act 2002 and any other
regulations in any relevant jurisdiction from time to time.

 

“Month” means a
period starting on one day in a calendar month and ending on the numerically
corresponding day in the next calendar month, except that:

 

(A)               if the numerically corresponding day is not a Business Day, that
period shall end on the next Business Day in that calendar month in which that
period is to end if there is one, or if there is not, on the immediately
preceding Business Day; and

 

(B)               if there is no numerically corresponding day in the calendar month
in which that period is to end, that period shall end on the last Business Day
in that calendar month.

 

“Net Operating
Income” means, in respect of any period, the operating profit of the
Borrower for such period (including gains or losses from the sale of rental
equipment), before taking account of:

 

(D)          corporation tax on the overall income of the Borrower payable in
respect of the period;

 

(E)           Finance Costs;

 

(F)           unless they have a cash impact, extraordinary or exceptional items;

 

(G)           amortisation of intangible assets and depreciation of tangible
assets; and

 

(H)          any amounts paid into the FF&E Account during the relevant
period,

 

9

 

all as determined by reference to the most recent
financial statements and certificates delivered pursuant to Clause 19.1 (Financial Statements) and 19.2 (Compliance  Certificate).

 

“Occupational Lease”
means any occupational lease, underlease, sub-lease, licence, tenancy or right
to occupy (in each case howsoever described and whether on a fixed term or
periodic basis) to which all or any part of a Property may be subject from time
to time.

 

“Original Financial
Statements” means the audited financial statements of the Borrower
for the financial year ended 31 December 2004 audited by an Approved
Accountant in accordance with GAAP consistently applied.

 

“Owners”
means:

 

(A)          Burford Hotels Limited;

 

(B)          Royalton Europe Holdings LLC; or

 

(C)          any other person consented to in accordance with Clause 18.18.2 (Ownership).

 

“Participating Member State”
means any member state of the European Communities that adopts or has adopted
the euro as its lawful currency in accordance with legislation of the European
Community relating to Economic and Monetary Union.

 

“Party” means a
party to this Agreement.

 

“Pensions Regulator”
means the body corporate called the Pensions Regulator established under Part I
of the Pensions Act 2004.

 

“Property”
means:

 

(A)          the freehold property known as The St. Martin’s Lane Hotel, 45 St.
Martin’s Lane, London, WC2N 4HX registered at the Land Registry with title
number 379553; and

 

(B)           the leasehold property known as The Sanderson Hotel, 50 Berners
Street, London, W1T 3NG registered at the Land Registry with title number
NGL748048,

 

and any other freehold or leasehold property
designated as such by the Agent from time to time.

 

“Qualifying Lender”
has the meaning given to it in Clause 13 (Tax gross-up and
indemnities).

 

“Quarter Date”
means each of 31 March, 30 June, 30 September and 31 December in any
year.

 

“Quarter Period”
means any three month period ending on a Quarter Date.

 

“Quotation Day”
means, in relation to any period for which an interest rate is to be
determined, the first day of that period unless market practice differs in the
Relevant Interbank Market in which case the Quotation Day will be determined by
the Agent in accordance with market practice in the Relevant Interbank Market
(and if quotations would normally be given by leading banks in the Relevant
Interbank Market on more than one day, the Quotation Day will be the last of
those days).

 

10

 

“Relevant Consents”
means any Authorisation of whatsoever nature necessary or appropriate to be
obtained for the purpose of:

 

(A)          acquiring and managing a Property; and

 

(B)           entering into and performing the Borrower’s obligations under the
Finance Documents and Management Agreements;

 

“Relevant Interbank Market”
means the London interbank market.

 

“Repayment Instalment”
means the instalments set out in Clause 7.1 (Repayment of
the Loans).

 

“Repeating Representations”
means each of the representations set out in Clause 18, save for those
contained in Clauses 18.5 (Validity and
admissibility in evidence), 18.7.1, 18.7.2 and 18.7.4 (Deduction of Tax), Clause 18.8 (No filing or stamp taxes), Clause 18.10.1
(No default), Clause 18.12 (Financial Statements) and 18.13.1 (Ranking).

 

“Revenue”
means, in respect of any period, the gross revenue of the Borrower arising from
its ownership of the Properties.

 

“Sanderson”
means the Property described at paragraph (B) of the definition of
Property.

 

“Screen Rate”
means the British Bankers’ Association Interest Settlement Rate for Sterling
for the relevant period, displayed on the appropriate page of the Telerate
screen.  If the agreed page is
replaced or service ceases to be available, the Agent may specify another page or
service displaying the appropriate rate after consultation with the Borrower
and the Lenders.

 

“Security” means
a mortgage, charge, pledge, lien or other security interest securing any
obligation of any person or any other agreement or arrangement having a similar
effect.

 

“Security Documents”
means the security documents referred to in Clause 5 (Security).

 

“Service Charge”
means that proportion of the Revenues which consists of any service charges,
insurance premiums, the cost of insurance valuations, any contributions to any
sinking fund paid by any Manager pursuant to any Management Agreement and any
VAT on any such sums.

 

“Shareholder”
means IS Europe Limited (to be renamed Morgans Hotel Group Europe Limited) (a
company incorporated in England & Wales with company number 03203996).

 

“St Martin’s Lane”
means the Property described at paragraph (A) of the definition of
Property.

 

“Subsidiary”
means (i) a subsidiary within the meaning of Section 736 of the
Companies Act 1985; and (ii) a subsidiary undertaking within the meaning
of Section 258 of the Companies Act 1985.

 

“Tax” means any
tax, levy, impost, duty or other charge or withholding of a similar nature
(including any penalty or interest payable in connection with any failure to
pay or any delay in paying any of the same).

 

11

 

“Tax Report”
means a report prepared by an Approved Accountant in form and substance satisfactory
to the Agent (acting reasonably), confirming the tax status of inter alia the Borrower.

 

“Taxes Act”
means the Income and Corporation Taxes Act 1988.

 

“Test Date”
means 16 February, 16 May, 16 August and 16 November in each year.

 

“Total A Commitments”
means the aggregate of the A Commitments being £82,432,000 at the date of this
Agreement.

 

“Total B Commitments”
means the aggregate of the B Commitments being £25,024,000 at the date of this
Agreement.

 

“Total Commitments”
means the Total A Commitments or the Total B Commitments.

 

“Transfer Certificate”
means a certificate substantially in the form set out in Schedule 5 (Form of Transfer Certificate) or any other form agreed
between the Agent and the Borrower.

 

“Transfer Date”
means, in relation to a transfer, the later of:

 

(A)          the proposed Transfer Date specified in the Transfer Certificate;
and

 

(B)          the date on which the Agent executes the Transfer Certificate.

 

“Unpaid Sum”
means any sum due and payable but unpaid by the Borrower under the Finance
Documents.

 

“Valuation”
means a valuation of a Property on a Market Value basis, in form and substance
satisfactory to the Agent (acting reasonably), prepared by and issued by the
Valuer and addressed to the Finance Parties.

 

“Valuer” means
any firm of chartered surveyors approved by the Agent.

 

“VAT” means
value added tax as provided for in the Value Added Tax Act 1994 and any other
tax of a similar nature.

 

1.2           Construction

 

1.2.1           Unless a contrary indication appears, any reference in this
Agreement to:

 

(A)          the “Agent”, the “Arranger”,
the “Borrower”, the “Security Trustee”, any “Lender” any “Finance Party” or any “Party” shall be
construed so as to include its successors in title, permitted assigns and
permitted transferees;

 

(B)          “assets” includes present and
future properties, revenues and rights of every description;

 

(C)          a “Finance Document” or any other
agreement or instrument is a reference to that Finance Document or other
agreement or instrument as amended or novated from time to time;

 

12

 

(D)          “indebtedness” includes any
obligation (whether incurred as principal or as surety) for the payment or
repayment of money, whether present or future, actual or contingent;

 

(E)           a “person” includes any person, firm,
company, corporation, government, state or agency of a state or any
association, trust or partnership (whether or not having separate legal
personality) or two or more of the foregoing;

 

(F)           a “regulation” includes any
regulation, rule, official directive, request or guideline (whether or not
having the force of law but if not having the force of law, being one with
which a person such as the relevant person would customarily comply with) of
any governmental, intergovernmental or supranational body, agency, department
or regulatory, self-regulatory or other authority or organisation;

 

(G)          “Sterling” or “£”
means the lawful currency for the time being of the United Kingdom;

 

(H)          “euro” or “€”
means the lawful currency for the time being of the European Union;

 

(I)            a provision of law is a reference to that provision as amended or
re-enacted from time to time;

 

(J)           a time of day is a reference to London time; and

 

(K)          any reference to “including” shall be construed as “including
without limitation”.

 

1.2.2           Section, Clause and Schedule headings are for ease of reference
only.

 

1.2.3           Unless a contrary indication appears, a term used in any other
Finance Document or in any notice given under or in connection with any Finance
Document has the same meaning in that Finance Document or notice as in this
Agreement.

 

1.2.4           A Default (other than an Event of Default) is “continuing”
if it has not been remedied or waived and an Event of Default is “continuing” if it has not been waived.

 

1.3           Third
party rights

 

Unless expressly provided to the contrary in this
Agreement, a person who is not a Party has no right under the Contracts (Rights
of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this
Agreement.  For the avoidance of doubt
the provisions of this Clause 1.3 will not prevent any person to whom any
Finance Party at any future time assigns or transfers any interest or right
created by or existing under this Agreement from enforcing or enjoying the
benefit of any term of this Agreement.

 

13

 

SECTION 2

 

THE FACILITIES

 

2.            THE
FACILITIES

 

2.1           The
Facilities

 

Subject to the terms of this Agreement, the Lenders
make available to the Borrower:

 

2.1.1           a Sterling term loan
facility in an aggregate amount equal to the A Facility Amount; and

 

2.1.2           a Sterling term loan
facility in an aggregate amount equal to the B Facility Amount.

 

2.2           Finance
Parties’ rights and obligations

 

2.2.1           The obligations of each Finance Party under the Finance Documents
are several.  Failure by a Finance Party
to perform its obligations under the Finance Documents does not affect the
obligations of any other Party under the Finance Documents.  No Finance Party is responsible for the
obligations of any other Finance Party under the Finance Documents.

 

2.2.2           The rights of each Finance Party under or in connection with the
Finance Documents are separate and independent rights and any debt arising
under the Finance Documents to a Finance Party from the Borrower shall be a
separate and independent debt.

 

2.2.3           A Finance Party may, except as otherwise stated in the Finance
Documents, separately enforce its rights under the Finance Documents.

 

3.            PURPOSE

 

3.1           Purpose

 

The Borrower shall apply all amounts borrowed by it
under the Facilities towards:

 

3.1.1           the payment of any fees and expenses or other amounts due and
payable hereunder;

 

3.1.2           the refinancing of its existing indebtedness in connection with the
Properties (which shall include making loans to the Shareholder to enable the Shareholder
to repay its outstanding shareholder loans and make other distributions); and

 

3.1.3           the working capital requirements of the Borrower.

 

3.2           Monitoring

 

No Finance Party is bound to monitor or verify the
application of any amount borrowed pursuant to this Agreement.

 

14

 

4.            CONDITIONS
OF DRAWDOWN

 

4.1           Initial
conditions precedent

 

The Lenders will only be obliged to comply with Clause
6.4 (Lenders’ participation) in
relation to any Request if the Agent has received all of the documents and
other evidence listed in Schedule 2 (Conditions precedent)
in form and substance satisfactory to the Agent.  The Agent shall notify the Borrower and the
Lenders promptly upon being so satisfied.

 

4.2           Further
conditions precedent

 

The Lenders will only be obliged to comply with Clause
6.4 (Lenders’ participation) if on the date
of the Drawdown Request and on the proposed Drawdown Date:

 

4.2.1           no Default is continuing or would result from the proposed Loan;

 

4.2.2           each of the representations set out in Clause 18 (Representations) to be made by the
Borrower are true in all material respects;

 

4.2.3           the proposed A Loan would not exceed 56% (fifty six per cent.) of the
Market Value of the Properties and/or the proposed B Loan (when aggregated with
the proposed A Loan) would not exceed 73% (seventy three per cent.) of the
Market Value of the Properties each as determined in accordance with the most
recent Valuation; and

 

4.2.4           the Drawdown Requests are for both an A Loan and a B Loan in amounts
pro rata to the proportion that the A Commitment bears to the B Commitment.

 

5.            SECURITY

 

5.1           Security
for the Loans

 

The Loans and all other amounts outstanding under this
Agreement shall be secured by the following security:

 

5.1.1           the Account Charge;

 

5.1.2           the Debenture;

 

5.1.3           Charge on Shares;

 

5.1.4           any supplemental charge executed by the Borrower after the date of
this Agreement; and

 

5.1.5           such other Security as the Agent may from time to time require in
connection with the Facility in accordance with a Finance Document.

 

15

 

SECTION 3

 

UTILISATION DRAWDOWN

 

6.            DRAWDOWN

 

6.1           Delivery
of a Drawdown Request

 

The Borrower may draw down a Facility by delivery to
the Agent of a duly completed Drawdown Request not later than 11.00 a.m. 2
(two) Business Days before the proposed Drawdown Date.

 

6.2           Completion
of a Drawdown Request

 

6.2.1           Each Drawdown Request is irrevocable and will not be regarded as
having been duly made unless:

 

(1)           the proposed Drawdown Date is a Business Day within the Availability
Period; and

 

(2)           the currency and amount of the Drawdown comply with Clause 6.3 (Currency and amount).

 

6.2.2           Only two Drawdown Requests may be issued being one for an A Loan and
one for a B Loan which shall both specify the same Drawdown Date.

 

6.3           Currency
and amount

 

6.3.1           The currency specified in the Drawdown Request must be Sterling.

 

6.3.2           The amount of the relevant Loan must be an amount which is not more
than the relevant Facility Amount.

 

6.4           Lenders’
participation

 

6.4.1           If the conditions set out in this Agreement have been met, each
Lender shall make its participation in the relevant Loan available to the
Borrower by the Drawdown Date through its Facility Office.

 

6.4.2           The amount of each Lender’s participation in a Loan will be equal to
the proportion borne by its relevant Commitment to the relevant Facility
immediately prior to making the Loan.

 

6.4.3           The Agent shall notify each Lender of the amount of each Loan and
the amount of its participation in that Loan by 3.00 p.m. 2 (two) Business
Days before the proposed Drawdown Date.

 

16

 

SECTION 4

 

REPAYMENT, PREPAYMENT AND
CANCELLATION

 

7.            REPAYMENT

 

7.1           Repayment
of the Loans

 

The Borrower shall repay an amount of the A Loan in
instalments:

 

(A)          on each Interest Payment Date falling on or prior to the second
anniversary of the Drawdown Date, in the amount of £125,000; and

 

(B)           on each Interest Payment Date falling after the second anniversary
of the Drawdown Date, in the amount of £183,333.33.

 

7.2           Subject to
Clause 7.1, the balance of the Loans (and all other amounts outstanding under
the Finance Documents) shall be repaid in full on the Final Repayment Date.

 

7.3           Reborrowing

 

The Borrower may not reborrow any part of a Facility
which is repaid.

 

8.            PREPAYMENT
AND CANCELLATION

 

8.1           Illegality

 

If it becomes unlawful in any applicable jurisdiction
relevant to a Facility and/or a Lender for such Lender to perform any of its
obligations as contemplated by this Agreement or to fund or maintain its
participation in any Loan:

 

8.1.1           that Lender shall promptly notify the Agent upon becoming aware of
that event;

 

8.1.2           upon the Agent notifying the Borrower, the relevant Commitment of
that Lender will be immediately cancelled; and

 

8.1.3           the Borrower shall repay that Lender’s participation in the relevant
Loan together with accrued interest and all other amounts accrued or
outstanding to that Lender under the Finance Documents on the last day of the
Interest Period ending immediately prior to the date specified by that Lender
in the notice delivered to the Agent (being no earlier than the last day of any
applicable grace period permitted by law).

 

8.2           Mandatory
Prepayment — Change of control

 

If the
Owners cease to directly or indirectly control all the shares in the Borrower:

 

8.2.1           the Borrower shall promptly notify the Agent upon becoming aware of
that event; and

 

8.2.2           if the Agent so requires and if the Agent has not consented in
advance to the change of control, the Agent may, by not less than 10 days
notice (the “Prepayment Notice”)
to the Borrower, cancel the Facilities and declare the outstanding Loans,
together with accrued interest and all other amounts accrued

 

17

 

under
the Finance Documents, due and payable whereupon the Facilities will be
cancelled and all such outstanding amounts will become due and payable and if
that date is not the last day of the then current Interest Period the Borrower
shall pay into the Deposit Account all outstanding amounts under the Finance
Documents (including accrued interest and all other amounts accrued under the
Finance Documents) and in addition an amount equal to the aggregate amount that
will be payable under Clause 9.2 (Payment of
Interest) on the Loans at the end of such Interest Period and all
such amounts deposited shall be applied at the end of the Interest Period in
prepayment of the Loans and payment of all other amounts due under the Finance
Documents.  If no Default is outstanding
following application of the amounts deposited into the Deposit Account in
accordance with this Clause, any interest that has accrued on such amount that
remains in the Deposit Account shall be paid to the General Account.

 

8.3           Mandatory
Prepayment — Disposals

 

On a disposal of all or part of a Property in
accordance with Clause 23.5 (Disposals)
the Borrower must apply an amount equal to 115 per cent of the Allocated Loan
Amount for that Property from the proceeds of the sale of the Property (net of
any reasonable costs of the sale of such Property) firstly, as to 78.26%, in
prepayment of the A Loan and secondly, as to 21.74%, in prepayment of the B
Loan.  Any prepayment under this Clause 8.3
must be made on the last day of the Interest Period in which the relevant
disposal occurred and pending any such prepayment, the relevant disposal
proceeds shall be paid into the Deposit Account.  If no Default is outstanding following
application of the amounts deposited into the Deposit Account in accordance
with this Clause, any interest that has accrued on such amount that remains in
the Deposit Account shall be paid to the General Account.

 

8.4           Voluntary
prepayment of a Loan

 

The
Borrower may, if it gives the Agent not less than 10 (ten) Business Days’ (or
such shorter period as the Majority Lenders may agree) prior notice, prepay the
whole or any part of the Loans on any date (but, if in part, being an amount
that reduces the amount of the Loans by a minimum amount of £2,000,000). Any
such prepayment shall be made together with accrued interest on the amount
prepaid and an amount equal to the amount of interest that would have been
payable had the amount prepaid been paid on the next following Interest Payment
Date and the prepayment fee referred to in Clause 12.3 (Prepayment
fee). Any notice given by the Borrower under this Clause 8.4 shall
be irrevocable.  If no Default is
outstanding following application of the amounts deposited into the Deposit
Account in accordance with this Clause, any interest that has accrued on such
amount that remains in the Deposit Account shall be paid to the General
Account.

 

8.5           Right
of repayment and cancellation in relation to a single Lender

 

8.5.1           If:

 

(A)          any sum payable to any Lender by the Borrower is required to be
increased under Clause 13.2.3 (Tax gross-up);
or

 

(B)          any Lender claims indemnification from the Borrower under Clause 13.3
(Tax indemnity) or Clause 14.1 (Increased costs);

 

the Borrower may, whilst the circumstance
giving rise to the requirement or indemnification continues, give the Agent
notice of cancellation of the relevant

 

18

 

Commitment of that Lender and its intention
to repay that Lender’s participation in the relevant Loan without premium or
penalty.

 

8.5.2           On receipt of a notice referred to in Clause 8.5.1 above, the
Commitment of that Lender shall immediately be reduced to zero.

 

8.5.3           On the last day of the Interest Period which ends after the Borrower
has given notice under Clause 8.5.1 above (or, if earlier, the date specified
by the Borrower in that notice), the Borrower shall repay that Lender’s
participation in the Loans together with accrued interest and all other amounts
accrued or outstanding to that Lender under the Finance Documents but no fee
shall be payable under Clause 12.3 (Prepayment
fee) on any such amount prepaid.

 

8.6           Restrictions

 

8.6.1           Any notice of cancellation or prepayment given by any Party under
this Clause 8 shall be irrevocable and, unless a contrary indication
appears in this Agreement, shall specify the date or dates upon which the
relevant cancellation or prepayment is to be made and the amount of that
cancellation or prepayment.

 

8.6.2           The Borrower may not reborrow any part of any Facility which is
prepaid.

 

8.6.3           The Borrower shall not repay or prepay all or any part of the Loans
except at the times and in the manner expressly provided for in this Agreement.

 

8.6.4           No amount of the Total Commitments cancelled under this Agreement
may be subsequently reinstated.

 

8.6.5           If the Agent receives a notice under this Clause 8 it shall promptly
forward a copy of that notice to either the Borrower or the affected Lender, as
appropriate.

 

8.6.6           Each prepayment under this Agreement shall be applied against the
Repayment Instalments pro rata and, once applied against all of the Repayment
Instalments, thereafter in prepayment pro rata of the principal of the Loans.

 

19

 

SECTION 5

 

COSTS OF UTILISATION

 

9.            INTEREST

 

9.1           Calculation
of interest

 

9.1.1           The rate of interest on the A Loan for each Interest Period is the
percentage rate per annum which is the aggregate of the applicable:

 

(A)      A Margin;

 

(B)       Fixed Rate; and

 

(C)       Mandatory Cost, if any.

 

9.1.2           The rate of interest on the B Loan for each Interest Period is the
percentage rate per annum which is the aggregate of the applicable:

 

(A)      B Margin;

 

(B)       Fixed Rate; and

 

(C)       Mandatory Cost, if any.

 

9.2           Payment
of interest

 

The Borrower shall pay accrued interest on the Loans
on the last day of each Interest Period.

 

9.3           Default
interest

 

9.3.1           If the Borrower fails to pay any amount payable by it under a
Finance Document on its due date, interest shall accrue on the overdue amount
from the due date up to the date of actual payment (both before and after
judgment) at a rate which, subject to Clause 9.3.2, is 2% (two per cent.) above
the higher of:

 

(A)          the rate determined in accordance with Clause 9.1 (Calculation of interest) which would have
been payable if the overdue amount had, during the period of non-payment,
constituted a Loan (applying (1) the rate determined in accordance with
Clause 9.1.1 (if the Agent determines that the failure to pay relates to the A
Loan) or Clause 9.1.2 (if the Agent determines that the failure to pay relates
to the B Loan) or (2) the higher of the rates determined in accordance
with Clause 9.1.1 and 9.1.2 (if the Agent determines that the failure to pay
relates to neither an A Loan or B Loan)); and

 

(B)          the Margin, LIBOR and Mandatory Costs, in the currency of the
overdue amount for successive Interest Periods, each of a duration selected by
the Agent (acting reasonably).  Any
interest accruing under this Clause 9.3 shall be immediately payable by the
Borrower on demand by the Agent.

 

20

 

9.3.2           If any overdue amount consists of all or part of a Loan which became
due on a day which was not the last day of an Interest Period relating to that Loan:

 

(A)          the first Interest Period for that overdue amount shall have a
duration equal to the unexpired portion of the current Interest Period relating
to the Loan; and

 

(B)          the rate of interest applying to the overdue amount during that
first Interest Period shall be 2% (two per cent.) higher than the rate which
would have applied if the overdue amount had not become due.

 

9.3.3           Default interest (if unpaid) arising on an overdue amount will be
compounded with the overdue amount at the end of each Interest Period
applicable to that overdue amount but will remain immediately due and payable.

 

9.4           Notification
of rates of interest

 

The Agent shall promptly notify the Lenders and the
Borrower of the determination of a rate of interest under this Agreement.

 

10.          INTEREST
PERIODS

 

10.1         Interest
Periods

 

10.1.1         Each of the Interest Periods for each Loan will be of one months
duration.

 

10.1.2         Each Interest Period for a Loan will start on the Drawdown Date or
on (and including) an Interest Payment Date and end on (but excluding) the next
following Interest Payment Date.

 

10.1.3         If an Interest Period would otherwise extend beyond the Final
Repayment Date, it will be shortened and end on the Final Repayment Date.

 

10.2         Non-Business
Days

 

If an Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period will instead end on the next
Business Day in that calendar month (if there is one) or the preceding Business
Day (if there is not).

 

11.          CHANGES TO THE CALCULATION OF INTEREST

 

11.1         Market
disruption

 

11.1.1         If a Market Disruption Event occurs in relation to an Unpaid Sum to
which Clause 9.3.1(B) applies for any Interest Period, then the rate of
interest on each Lender’s share of that Unpaid Sum for the Interest Period
shall be the rate per annum which is the sum of:

 

(A)          the Margin;

 

(B)          the rate notified to the Agent by that Lender as soon as practicable
and in any event before interest is due to be paid in respect of that Interest
Period, to be that which expresses as a percentage rate per annum the cost

 

21

 

to that
Lender of funding its participation in that Unpaid Sum from whatever source it
may reasonably select; and

 

(C)          the Mandatory Cost, if any, applicable to that Lender’s participation
in that Loan.

 

11.1.2         In this Agreement “Market Disruption Event”
means:

 

(A)          at or about noon on the Quotation Day for the relevant Interest
Period the Screen Rate is not available and the Agent (acting reasonably) has
been unable to obtain satisfactory quotations from leading banks in the
Relevant Interbank Market so as to determine LIBOR for Sterling for the
relevant Interest Period; or

 

(B)          before close of business in London on the Quotation Day for the
relevant Interest Period, the Agent receives notifications from a Lender or
Lenders (whose participations in that Loan exceed 33.33% (thirty three point
three three per cent.) that the cost to it or them of obtaining matching
deposits in the Relevant Interbank Market would be in excess of LIBOR.

 

11.2         Alternative
basis of interest or funding

 

11.2.1         If Clause 11.1 applies and a Market Disruption Event occurs and the
Agent or the Borrower so requires, the Agent and the Borrower shall enter into
negotiations (for a period of not more than 30 (thirty) days) with a view to
agreeing a substitute basis for determining the rate of interest.

 

11.2.2         Any alternative basis agreed pursuant to Clause 11.2.1 above shall,
with the prior consent of all the Lenders, be binding on all Parties.

 

12.          FEES

 

12.1         Arrangement
fee

 

The Borrower shall pay to the Arranger (for its own
account) an arrangement fee of 0.65 per cent. (zero point six five per cent.)
of the Total Commitments (being £711,100) which shall be payable on the
Drawdown Date.

 

12.2         Agency
fee

 

The Borrower shall pay to the Agent (for its own
account) an agency fee of £10,000 per annum in advance and which shall be
payable on the Drawdown Date and each anniversary thereof.

 

12.3         Prepayment
fee

 

In the event that the Borrower elects to prepay the
whole or any part of a Loan in accordance with Clause 8.4 (Voluntary
prepayment of a Loan), the Borrower shall pay a prepayment fee
calculated as follows:

 

12.3.1         if the prepayment occurs on or before the first anniversary of the
Drawdown Date, a fee of 0.75 per cent. of the amount so prepaid;

 

22

 

12.3.2         if the prepayment occurs after the first anniversary of the Drawdown
Date but on or before the second anniversary of the Drawdown Date, a fee of
0.50 per cent. of the amount so prepaid;

 

12.3.3         if the prepayment occurs after the second anniversary of the
Drawdown Date but on or before the third anniversary of the Drawdown Date, a
fee of 0.25 per cent. of the amount so prepaid; and

 

12.3.4         thereafter, no such fee shall be payable.

 

12.4         Abort Fee

 

If the Borrower does not drawdown a Loan before the
earlier of the date (the “payment date”)
which is the end of the Availability Period and the date on which the Borrower
notifies the Arranger that the Borrower does not intend to use a Facility for
any reason other than where it would be unlawful for a Lender to perform its
obligations under this Agreement, then the Borrower shall on the payment date
pay the Arranger (for its own account) an abort fee of £250,000.

 

23

 

SECTION 6

 

ADDITIONAL PAYMENT
OBLIGATIONS

 

13.          TAX GROSS UP AND INDEMNITIES

 

13.1         Definitions

 

13.1.1         In this Agreement:

 

“Protected Party”
means a Finance Party which is or will be subject to any liability, or required
to make any payment, for or on account of Tax in relation to a sum received or
receivable (or any sum deemed for the purposes of Tax to be received or
receivable) under a Finance Document.

 

“Qualifying Lender”
means a Lender which is beneficially entitled to interest payable to that
Lender in respect of an advance under a Finance Document and is:

 

(A)      a Lender:

 

(1)           which is a bank (as defined
for the purpose of Section 349 of the Taxes Act) making an advance under a
Finance Document; or

 

(2)           in respect of an advance
made under a Finance Document by a person that was a bank (as defined for the
purpose of Section 349 of the Taxes Act) at the time that that advance was
made,

 

and which is within the charge to United
Kingdom corporation tax as respects any payments of interest made in respect of
that advance; or

 

(B)       a UK
Non-Bank Lender; or

 

(C)       a Treaty Lender.

 

“Tax Confirmation”
means a confirmation by a Lender that the person beneficially entitled to
interest payable to that Lender in respect of an advance under a Finance
Document is either:

 

(A)      a company resident in the United Kingdom, or a partnership each
member of which is a company resident in the United Kingdom, for United Kingdom
tax purposes; or

 

(B)       a company not so resident in the United Kingdom which carries on a
trade in the United Kingdom through a branch or agency and that interest
payable in respect of that advance falls to be brought into account in
computing the chargeable profits of that company for the purposes of Section 11(2) of
the Taxes Act.

 

“Tax Credit”
means a credit against, relief or remission for, or repayment of any Tax.

 

“Tax Deduction”
means a deduction or withholding for or on account of Tax from a payment under
a Finance Document.

 

“Tax Payment”
means either the increase in a payment made by the Borrower to a Finance Party
under Clause 13.2 (Tax gross-up)
or a payment under Clause 13.3 (Tax indemnity).

 

24

 

“Treaty Lender”
means a Lender which:

 

(A)          is treated as a resident of a Treaty State for the purposes of the
Treaty; and

 

(B)          does not carry on a business in the United Kingdom through a
permanent establishment with which that Lender’s participation in a Loan is
effectively connected.

 

“Treaty State”
means a jurisdiction having a double taxation agreement (a “Treaty”) with the United Kingdom which makes provision for
full exemption from tax imposed by the United Kingdom on interest.

 

“UK Non-Bank Lender”
means a Lender which is:

 

(A)          a company resident in the United Kingdom for United
Kingdom tax purposes;

 

(B)          a partnership each member of which is a company resident in
the United Kingdom for United Kingdom tax purposes; or

 

(C)          a company not
so resident in the United Kingdom which carries on a trade in the United
Kingdom through a permanent establishment and which brings into account
interest payable in respect of that advance in computing its chargeable profits
(within the meaning given by Section 11(2) of the Taxes Act).

 

13.1.2         Unless a contrary indication appears, in this Clause 13 a reference
to “determines” or “determined” means a determination made in the absolute
discretion of the person making the determination.

 

13.2         Tax
gross-up

 

13.2.1         The Borrower shall make all payments to be made by it without any
Tax Deduction, unless a Tax Deduction is required by law.

 

13.2.2         The Borrower shall promptly upon becoming aware that it must make a
Tax Deduction (or that there is any change in the rate or the basis of a Tax
Deduction)  notify the Agent accordingly.  Similarly, a Lender shall notify the Agent on
becoming so aware in respect of a payment payable to that Lender.  If the Agent receives such notification from
a Lender it shall notify the Borrower.

 

13.2.3         If a Tax Deduction is required by law to be made by the Borrower, the
amount of the payment due from the Borrower shall be increased to an amount
which (after making any Tax Deduction) leaves an amount equal to the payment
which would have been due if no Tax Deduction had been required.

 

13.2.4         The Borrower is not required to make an increased payment to a
Lender under Clause 13.2.3 above for a Tax Deduction in respect of tax imposed
by the United Kingdom from a payment of interest on a Loan, if on the date on
which the payment falls due:

 

(A)          the payment could have been made to the relevant Lender without a
Tax Deduction if it was a Qualifying Lender, but on that date that Lender is

 

25

 

not or
has ceased to be a Qualifying Lender other than as a result of any change after
the date it became a Lender under this Agreement in (or in the interpretation,
administration, or application of) any law or Treaty, or any published practice
or concession of any relevant taxing authority;

 

(B)          the relevant Lender is a Treaty Lender and the Borrower is able to
demonstrate that the payment could have been made to that Lender without the
Tax Deduction had that Lender complied with its obligations under Clause 13.2.7
below; or

 

(C)

 

(1)           the relevant Lender is a Qualifying Lender solely under paragraph (B) of
the definition of Qualifying Lender;

 

(2)           the Board of Customs and Revenue has given (and not revoked) a
direction (a “Direction”) under section 349C
of the Taxes Act (on that provision has effect on the date on which the
relevant Lender became a Party) which relates to that payment and that Lender
has received from the Borrower a certified copy of that Direction; and

 

(3)           the payment could have been made to the Lender without any Tax
Deduction in the absence of that Direction.

 

13.2.5         If the Borrower is required to make a Tax Deduction, the Borrower
shall make that Tax Deduction and any payment required in connection with that
Tax Deduction within the time allowed and in the minimum amount required by
law.

 

13.2.6         Within 30 (thirty) days of making either a Tax Deduction or any
payment required in connection with that Tax Deduction, the Borrower shall
deliver to the Agent for the Finance Party entitled to the payment evidence
reasonably satisfactory to that Finance Party that the Tax Deduction has been
made or (as applicable) any appropriate payment paid to the relevant taxing
authority.

 

13.2.7         A Treaty Lender and the Borrower which makes a payment to which that
Treaty Lender is entitled shall co-operate in completing any procedural
formalities necessary for the Borrower to obtain authorisation to make that
payment without a Tax Deduction.

 

13.2.8         A UK Non-Bank Lender which becomes a Party on the day on which this
Agreement is entered into gives a Tax Confirmation to the Borrower by entering
into this Agreement.

 

13.2.9         A UK Non-Bank Lender shall promptly notify the Borrower and the
Agent if there is any change in the position from that set out in the Tax
Confirmation.

 

13.3         Tax
indemnity

 

13.3.1         The Borrower shall (within 3 (three) Business Days of demand by the
Agent) pay to a Protected Party an amount equal to the loss, liability or cost
which that Protected Party determines will be or has been (directly or
indirectly) suffered for or on account of Tax by that Protected Party in
respect of a Finance Document.

 

26

 

13.3.2         Clause 13.3.1 above shall not apply:

 

(A)          with respect to any Tax assessed on a Finance Party:

 

(1)           under the law of the jurisdiction in which that Finance Party is
incorporated or, if different, the jurisdiction (or jurisdictions) in which
that Finance Party is treated as resident for tax purposes; or

 

(2)           under the law of the jurisdiction in which that Finance Party’s
Facility Office is located in respect of amounts received or receivable in that
jurisdiction,

 

if that Tax is imposed on or calculated by
reference to the net income received or receivable (but not any sum deemed to
be received or receivable) by that Finance Party; or

 

(B)          to the extent a loss, liability or cost:

 

(1)           is compensated for by an increased payment under Clause 13.2 (Tax gross-up); or

 

(2)           would have been compensated for by an increased payment under Clause
13.2 (Tax gross-up) but was not so compensated
solely because one of the exclusions in Clause 13.2.4 (Tax gross-up)
applied.

 

13.3.3         A Protected Party making, or intending to make a claim under Clause 13.3.1
shall promptly notify the Agent of the event which will give, or has given,
rise to the claim, following which the Agent shall notify the Borrower.

 

13.3.4         A Protected Party shall, on receiving a payment from the Borrower
under this Clause 13.3, notify the Agent.

 

13.4         Tax
Credit

 

If the Borrower makes a Tax Payment and the relevant
Finance Party determines that:

 

13.4.1         a Tax Credit is attributable either to an increased payment of which
that Tax Payment forms part, or to that Tax Payment; and

 

13.4.2         that Finance Party has obtained, utilised and retained that Tax
Credit,

 

the Finance Party shall pay an amount to the Borrower
which that Finance Party determines will leave it (after that payment) in the
same after-Tax position as it would have been in had the Tax Payment not been
required to be made by the Borrower.

 

13.5         Stamp
taxes

 

The Borrower shall pay and, within 3 (three) Business
Days of demand, indemnify each Finance Party against any cost, loss or
liability that Finance Party incurs in relation to all stamp duty, registration
and other similar Taxes payable in respect of any Finance Document other than a
Transfer Certificate.

 

27

 

13.6         Value
added tax

 

13.6.1         All consideration expressed to be payable under a Finance Document
by any Party to a Finance Party shall be deemed to be exclusive of any
VAT.  If VAT is chargeable on any supply
made by any Finance Party to any Party in connection with a Finance Document,
that Party shall pay to the Finance Party (in addition to and at the same time
as paying the consideration) an amount equal to the amount of the VAT.

 

13.6.2         Where a Finance Document requires any Party to reimburse a Finance
Party for any costs or expenses, that Party shall also at the same time pay and
indemnify the Finance Party against all VAT incurred by the Finance Party in
respect of the costs or expenses to the extent that the Finance Party
reasonably determines that it is not entitled to credit or repayment of the
VAT.

 

14.          INCREASED COSTS

 

14.1         Increased
costs

 

14.1.1         Subject to Clause 14.3 (Exceptions) the
Borrower shall, within 3 (three) Business Days of a demand by the Agent, pay
for the account of a Finance Party the amount of any Increased Costs incurred
by that Finance Party or any of its Affiliates as a result of (i) the
introduction of or any change in (or in the interpretation, administration or
application of) any law or regulation or (ii) compliance with any law or
regulation, in each case, made after the date of this Agreement.

 

14.1.2         In this Agreement “Increased Costs”
means:

 

(A)          a reduction in the rate of return from a Facility or on a Finance
Party’s (or its Affiliate’s) overall capital;

 

(B)          an additional or increased cost; or

 

(C)          a reduction of any amount due and payable under any Finance
Document,

 

which is incurred or suffered by a Finance Party or
any of its Affiliates to the extent that it is attributable to that Finance
Party having entered into its Commitment or funding or performing its
obligations under any Finance Document.

 

14.2         Increased
cost claims

 

14.2.1         A Finance Party intending to make a claim pursuant to Clause 14.1 (Increased costs) shall notify the Agent of the event giving
rise to the claim, following which the Agent shall promptly notify the
Borrower.

 

14.2.2         Each Finance Party shall, as soon as practicable after a demand by
the Agent, provide a certificate confirming in reasonable detail the amount of
its Increased Costs.

 

14.3         Exceptions

 

14.3.1         Clause 14.1 (Increased costs)
does not apply to the extent any Increased Cost is:

 

28

 

(A)          attributable to a Tax Deduction required by law to be made by the
Borrower;

 

(B)          compensated for by Clause 13.3 (Tax indemnity) (or would have been compensated for under Clause 13.3 (Tax indemnity) but was not so compensated solely because any
of the exclusions in Clause 13.3.2 (Tax indemnity)
applied);

 

(C)          compensated for by the payment of the Mandatory Cost; or

 

(D)          attributable to the wilful breach by the relevant Finance Party or
its Affiliates of any law or regulation.

 

14.3.2         In this Clause 14.3, a reference to a “Tax
Deduction” has the same meaning given to the term in Clause 13.1 (Definitions).

 

15.          BREAK COSTS AND OTHER INDEMNITIES

 

15.1         Break
Costs

 

15.1.1         The Borrower shall, within 3 (three) Business Days of demand by a
Finance Party, pay to that Finance Party its Break Costs attributable to all or
any part of a Loan or Unpaid Sum being paid by that Borrower on a day other
than the last day of an Interest Period for that Loan or Unpaid Sum.

 

15.1.2         Each Lender shall, as soon as reasonably practicable after a demand
by the Agent, provide a certificate confirming in reasonable detail the amount
of its Break Costs for any Interest Period in which they accrue.

 

15.2         Hedging
Arrangement Indemnity

 

15.2.1         The Borrower acknowledges that the Lenders may enter into Hedging
Arrangements to four decimal places for the purpose of hedging for the Fixed
Rate payable in respect of a Loan and shall promptly give details of such
Hedging Arrangements to the Borrower.

 

15.2.2         If any Hedging Arrangement entered into by a Lender is terminated
for any reason other than a breach by the Lender of the Hedging Arrangement
(not being a breach caused directly or indirectly by the Borrower):

 

(A)          the Borrower shall (without prejudice to the generality of the other
provisions of this Clause 15), on demand, pay to the Lender (i) such
amount as is legally obliged to pay to the relevant counterparty of the Hedging
Arrangement on early termination, and/or (ii) such amount as the Lender has
paid or is obliged to pay to purchase (having agreed to purchase such interest
rate swap (or other hedging)), any interest rate swap (or other hedging)
contract to replace the unexpired period of the previously terminated Hedging
Arrangement; or

 

(B)          the Lenders shall within three Business Days (without prejudice to
the generality of the other provisions of this Clause 15) use such amount as
the Lenders receive by way of breakage gain or premium from the relevant
counterparty of the Hedging Arrangement on (i) early termination or (ii) any
purchase of any interest rate swap as set out below:

 

29

 

(1)           first, if there is a
Default outstanding, towards prepayment of the Loans;

 

(2)           second towards payment
of all sums then due to the Lenders; and

 

(3)           third, any balance
shall be paid into the Revenue Account.

 

15.2.3         Any Lender making a claim under this Clause 15.2 shall provide to
the Borrower reasonable details of any amount claimed at the time of making
such claim.

 

15.2.4         The Original A Lender and Original B Lender agree that prior to
setting the Fixed Rate they will consult with the Borrower or its
representatives on the setting of that Fixed Rate in a ‘live pricing call’.

 

15.2.5         Provided that no Default is outstanding, the Borrower and/or its
representative are available at the relevant time and it is commercially
feasible, each Lender agrees to consult with the Borrower or its representative
as to the level of any break gains or break losses payable on any partial or
whole termination of any Hedging Arrangement. 
In the absence of any consultation under this clause and provided that
no Default is outstanding each Lender agrees that any sum payable on any
partial or whole termination of any Hedging Arrangement will be calculated in
accordance with section 6(e) of the ISDA Master Agreement 2002 where
the Lender is the ‘affected party’.

 

15.3         Currency
indemnity

 

15.3.1         If any sum due from the Borrower under the Finance Documents (a “Sum”), or any order, judgment or award given or made in
relation to a Sum, has to be converted from the currency (the “First Currency”) in which that Sum is payable into another
currency (the “Second Currency”) for the purpose
of:

 

(A)          making or filing a claim or proof against the Borrower;

 

(B)          obtaining or enforcing an order, judgment or award in relation to
any litigation or arbitration proceedings,

 

the Borrower shall as an independent obligation,
within 3 (three) Business Days of demand, indemnify each Finance Party to whom
that Sum is due against any cost, loss or liability arising out of or as a
result of the conversion including any discrepancy between (A) the rate of
exchange used to convert that Sum from the First Currency into the Second
Currency and (B) the rate or rates of exchange available to that person at
the time of its receipt of that Sum.

 

15.3.2         The Borrower waives any right it may have in any jurisdiction to pay
any amount under the Finance Documents in a currency or currency unit other
than that in which it is expressed to be payable.

 

15.4         Other
indemnities

 

The Borrower shall within 3 (three) Business Days of
demand, indemnify each Finance Party against any cost, loss or liability
incurred by that Finance Party as a result of:

 

15.4.1         the occurrence of any Event of Default;

 

30

 

15.4.2         a failure by the Borrower to pay any amount due under a Finance
Document on its due date, including without limitation, any cost, loss or
liability arising as a result of Clause 30 (Sharing among the Finance
Parties);

 

15.4.3         funding, or making arrangements to fund, its participation in any
Loan requested by the Borrower in a Drawdown Request but not made by reason of
the operation of any one or more of the provisions of this Agreement (other
than by reason of default or negligence by that Lender alone); or

 

15.4.4         the Loans (or part of a Loan) not being prepaid in accordance with a
notice of prepayment given by the Borrower.

 

15.5         Indemnity
to the Agent and Security Trustee

 

The Borrower shall promptly indemnify the Agent and
Security Trustee against any cost, loss or liability incurred by the Agent or
Security Trustee (acting reasonably) as a result of:

 

15.5.1         investigating any event which it reasonably believes is a Default;
or

 

15.5.2         acting or relying on any notice, request or instruction which it
reasonably believes to be genuine, correct and appropriately authorised.

 

16.          MITIGATION BY THE LENDERS

 

16.1         Mitigation

 

16.1.1         Each Finance Party shall, in consultation with the Borrower, take
all reasonable steps to mitigate any circumstances which arise and which would
result in any amount (or increased amount) becoming payable under or pursuant
to, or cancelled pursuant to, any of Clause 8.1 (Illegality),
Clause 13 (Tax gross-up and indemnities), Clause 14
(Increased costs) or paragraph 3 of Schedule 4
(Mandatory Cost formulae) including (but
not limited to) transferring its rights and obligations under the Finance
Documents to another Affiliate or Facility Office.

 

16.1.2         Clause 16.1.1 above does not in any way limit the obligations of the
Borrower under the Finance Documents.

 

16.2         Limitation
of liability

 

16.2.1         The Borrower shall indemnify each Finance Party for all costs and
expenses reasonably incurred by that Finance Party as a result of steps taken
by it under Clause 16.1 (Mitigation).

 

16.2.2         A Finance Party is not obliged to take any steps under Clause 16.1 (Mitigation) if, in the opinion of that Finance Party (acting
reasonably), to do so might be prejudicial to it.

 

31

 

17.          COSTS AND EXPENSES

 

17.1         Transaction
expenses

 

The Borrower shall promptly on demand pay to each
Finance Party the amount of all costs and out of pocket expenses (including
legal fees) reasonably incurred by that Finance Party in connection with the
negotiation, preparation, printing and execution of:

 

17.1.1         this Agreement, the Security Documents and any other documents
referred to in this Agreement; and

 

17.1.2         any other Finance Documents executed after the date of this
Agreement.

 

17.2         Amendment
costs

 

If (a) the Borrower requests an amendment, waiver
or consent or (b) an amendment is required pursuant to Clause 31.10 (Change of currency), the Borrower shall, within 10 (ten)
Business Days of demand, reimburse the Agent for the amount of all costs and
expenses (including legal fees) reasonably incurred by the Agent in responding
to, evaluating, negotiating or complying with that request or requirement.

 

17.3         Enforcement
costs

 

The Borrower shall, within 3 (three) Business Days of
demand, pay to each Finance Party the amount of all costs and expenses
(including legal fees) incurred by that Finance Party in connection with the
enforcement of, or the preservation of any rights under, any Finance Document.

 

32

 

SECTION 7

 

REPRESENTATIONS,
UNDERTAKINGS AND EVENTS OF DEFAULT

 

18.          REPRESENTATIONS

 

The Borrower makes the representations and warranties
set out in this Clause 18 to each Finance Party on the date of this Agreement
and on the Drawdown Date and in the case of the Repeating Representations on
the dates provided for in Clause 18.20 (Repetition).

 

18.1         Status

 

18.1.1         It is a corporation, duly incorporated and validly existing under
the law of its jurisdiction of incorporation.

 

18.1.2         It has the capacity to sue or be sued in its own name.

 

18.1.3         It has full power and all necessary governmental and other consents,
approvals, licences and authorities to own its assets and carry on its business
as it is being conducted.

 

18.2         Binding
obligations

 

Subject to the Legal Reservations, the obligations
expressed to be assumed by it in each Finance Document and each Management
Agreement are legal, valid, binding and enforceable obligations.

 

18.3         Non-conflict
with other obligations

 

The entry into and performance by it of, and the
transactions contemplated by, the Finance Documents or any Management Agreement
do not and will not conflict with:

 

18.3.1         any law or regulation applicable to it;

 

18.3.2         its constitutional documents; or

 

18.3.3         any agreement, instrument, judgment, order, licence, permit or
consent binding upon it or any of its assets.

 

18.4         Power
and authority

 

It has the power to enter into, perform and deliver,
and has taken all necessary action to authorise its entry into, performance and
delivery of, the Finance Documents to which it is a party or each Management
Agreement and the transactions contemplated by those Finance Documents and/or
each Management Agreement.

 

18.5         Validity
and admissibility in evidence

 

All Authorisations required or desirable:

 

18.5.1         to enable it lawfully to enter into, exercise its rights and comply
with its obligations in the Finance Documents to which it is a party or each
Management Agreement; and

 

33

 

18.5.2         to make the Finance Documents to which it is a party or each
Management Agreement admissible in evidence in its jurisdiction of
incorporation,

 

have been obtained or effected or will be obtained or
effected prior to its entry into such documents and are or will then be in full
force and effect.

 

18.6         Governing
law and enforcement

 

18.6.1         The choice of English law as the governing law of the Finance
Documents will be recognised and enforced in its jurisdiction of incorporation.

 

18.6.2         Any judgment obtained in England in relation to a Finance Document
to which it is a party will be recognised and enforced in its jurisdiction of
incorporation.

 

18.7         Deduction
of Tax

 

18.7.1         As at the date of this Agreement, it is not required under the law
of its jurisdiction of incorporation to make any deduction for or on account of
Tax from any payment it may make under any Finance Document.

 

18.7.2         As at the date of this Agreement, it is entitled to receive all
Revenue free from any deduction or withholding for or on account of any Tax
(whether pursuant to section 42A of the Taxes Act or otherwise).

 

18.7.3         It is registered for VAT and is not a member of any group for VAT
purposes, other than a group made up solely of itself and the Shareholder.

 

18.7.4         It has exercised its option to charge VAT in respect of supplies
made in relation to the Properties and has received confirmation from HM
Revenue & Customs in writing that such option is acknowledged.

 

18.8         No
filing or stamp taxes

 

As at the date of this Agreement and save for the
registration of any Security Documents at the Land Registry and/or Companies
House under the law of its jurisdiction of incorporation it is not necessary
that the Finance Documents be filed, recorded or enrolled with any court or
other authority in that jurisdiction or that any stamp, registration or similar
tax be paid on or in relation to the Finance Documents or the transactions
contemplated by the Finance Documents whether for the purpose of ensuring the
enforceability of any right or otherwise.

 

18.9         Tax
Residence

 

It is resident for tax purposes in the United Kingdom
and in no other jurisdiction.

 

18.10       No default

 

18.10.1       No Default is continuing or might reasonably be expected to result
from the making of a Loan.

 

18.10.2       No Event of Default is continuing.

 

18.10.3       No other event or circumstance is outstanding which constitutes a
default under any other agreement or instrument which is binding on it or to
which its assets are subject which is reasonably likely to have a Material
Adverse Effect.

 

34

 

18.11       No
misleading information

 

18.11.1       (A)          Any
factual information (as supplemented from time to time) that has been or will
hereafter be provided to any Finance Party, a Valuer or an Approved Accountant
by any member of the Group in connection with a Facility and any Property (or
for the purposes of any Valuation and/or the Tax Report) was true, complete and
accurate in all material respects as at the date it was provided or as at the
date (if any) at which it is stated; and

 

(B)          all information provided by, or on behalf of the Borrower to the
Borrower’s Solicitors for the purposes of preparing the Certificates of Title
is true, complete and accurate in all material respects as at the date of the
Certificate of Title.

 

18.11.2       All financial projections (if any) that have been or will be
prepared by any member of the Group and provided to any Finance Party have been
or will be prepared on the basis of recent historical information and on the
basis of assumptions believed by the Borrower to be reasonable.

 

18.11.3       At the Drawdown Date, nothing has occurred since the date the
information referred to in Clause 18.11.1 above was supplied which, if
disclosed, would make that information untrue or misleading in any material
respect.

 

18.12       Financial
statements

 

18.12.1       The Original Financial Statements were audited by an Approved
Accountant in accordance with GAAP consistently applied unless disclosed in the
Original Financial Statements.

 

18.12.2       The Original Financial Statements fairly represent the financial
condition and operations of the Borrower during the relevant financial year
unless previously disclosed to the Agent in writing by the Borrower before the
date of this Agreement.

 

18.12.3       There has been no change in the business or consolidated financial
condition of the Borrower since the date of the Original Financial Statements
which is reasonably likely to have a Material Adverse Effect.

 

18.12.4       The financial statements of the Shareholder delivered to the Agent
in accordance with Clause 4.1 (Initial
Conditions Precedent) fairly represent the financial condition and
operations of that Shareholder during the relevant year.

 

18.13       Ranking

 

18.13.1       Its payment obligations under the Finance Documents rank at least
pari passu with the claims of all its other unsecured and unsubordinated
creditors (except for obligations mandatorily preferred by law applying to
companies generally).

 

18.13.2       The security conferred by each Security Document constitutes a first
priority security interest of the type described over the assets referred to in
that Security Document and these assets are not subject to any prior or pari
passu security.

 

35

 

18.14       No
proceedings pending or threatened

 

No Material Litigation has been started or (to the
best of its knowledge and belief) threatened against it.

 

18.15       Environmental
Authorisations

 

It is in possession of all and any Environmental
Authorisations required for the conduct of its business and it has not breached
in any material respect any of the terms and conditions of such Environmental
Authorisations nor has it received any notice relating to an actual or
potential contravention of any Environmental Authorisation.

 

18.16       Environmental
Compliance

 

It has not breached any Environmental Laws and no
condition exists or event has occurred which could be reasonably likely to give
rise to any breach of, or liability on it or a Finance Party of any kind under,
any Environmental Laws.

 

18.17       Ownership
of the Properties

 

The Borrower is the legal and beneficial owner of each
Property, and will at all times during the Facility Period have a good valid
and marketable title (which was acquired with full title guarantee and the
Borrower has the right to transfer each Property with full title guarantee) to
each Property and (subject to the matters fully disclosed in each Certificate
on Title) free from any Security, restrictions, agreements, stipulations,
reservations, conditions, interests, rights, covenants, trusts or other matters
whatsoever affecting each Property, and all deeds and documents (if any)
necessary to show good and marketable title to each Property will be in the
possession of or held to the order of the Agent.

 

18.18       Ownership

 

18.18.1       Except where prior written consent has been given by the Agent to
any charge, the entire issued share capital of the Borrower is legally and
beneficially owned and controlled by the Shareholder.

 

18.18.2       The Borrower is directly or indirectly owned and controlled by the
Owners or with the Agent’s prior written consent and after having received the
confirmation of the Finance Parties that they have completed any know your
customer checks, any other person.

 

18.18.3       The shares in the capital of the Borrower are fully paid.

 

18.19       No other
business

 

18.19.1       The Borrower has not traded or carried on any business since the
date of its incorporation except for the acquisition, ownership and management
of its interests in the Properties.

 

18.19.2       The Borrower is not a party to any material agreement other than:

 

(A)          the Finance Documents;

 

(B)          each Management Agreement;

 

36

 

(C)          contracts entered into on arms length terms with third parties in
the ordinary course of business in relation to the day to day administration of
Property (including, but not limited to, maintenance contracts and employment
contracts); and

 

(D)          contracts and arrangements expressly disclosed in any Certificates
of Title.

 

18.20       No
Subsidiaries

 

The Borrower does not have any Subsidiaries.

 

18.21       Relevant Consents

 

18.21.1       All Relevant Consents which it is necessary or appropriate for the
Borrower to hold at the relevant time of making or being deemed to repeat this
representation and warranty have been obtained and effected and are in full
force and effect.

 

18.21.2       There exists no reason known to it, having made all reasonable
enquiries, why any Relevant Consent might be withdrawn, suspended, cancelled,
varied, surrendered or revoked.

 

18.21.3       All Relevant Consents and other consents, permissions and approvals
have been or are being complied with.

 

18.22       Pensions

 

18.22.1       It is not nor
has it at any time been an Employer (as defined in Section 318 of the
Pensions Act 2004) of an ‘occupational pension scheme’ which is not a ‘money
purchase scheme’ (both terms as defined in the Pensions Schemes Act 1993); and

 

18.22.2       it has not received nor is it aware of any circumstance which might
lead to it receiving a Financial Support Directive or Contribution Notice from
the Pensions Regulator.

 

18.23       Repetition

 

The
Repeating Representations are deemed to be made by the Borrower by reference to
the facts and circumstances then existing on the date of each Drawdown Request
and each Interest Payment Date.

 

19.          INFORMATION UNDERTAKINGS

 

The undertakings in this Clause 19 remain in force
from the date of this Agreement for so long as any amount is outstanding under
the Finance Documents or any Commitment is in force.

 

19.1         Financial
statements

 

The Borrower shall supply to the Agent in sufficient
copies for all the Lenders:

 

19.1.1         as soon as the same become available, but in any event within 180
(one hundred and eighty) days after the end of each of its financial years, its
audited financial statements for that financial year; and

 

37

 

19.1.2         as soon as the same become available, but in any event within 45
(forty five) days after the end of each quarter of each of its financial years,
its financial statements for that financial quarter year.

 

19.2         Compliance
Certificate

 

19.2.1         The Borrower shall supply to the Agent, with each set of financial
statements delivered pursuant to Clauses 19.1.1 or 19.1.2 (Financial
statements), a Compliance Certificate setting out (in reasonable
detail) computations as to compliance with Clause 21.14 (Financial
covenants) as at the date as at which those financial statements
were drawn up.

 

19.2.2         Each Compliance Certificate shall be signed by two directors of the
Borrower.

 

19.3         Requirements
as to financial statements

 

19.3.1         Each set of financial statements delivered by the Borrower pursuant
to Clause 19.1 (Financial statements)
shall be certified by a director of the Borrower as fairly representing its
financial condition as at the date as at which those financial statements were
drawn up.

 

19.3.2         The Borrower shall procure that each set of financial statements of
the Borrower delivered pursuant to Clause 19.1 (Financial
statements) is prepared using GAAP (and in the case of the financial
statements delivered under Clause 19.1.1, audited by the Approved Accountant),
accounting practices and financial reference periods consistent with those
applied in the preparation of the Original Financial Statements for the
Borrower unless, in relation to any set of financial statements, it notifies
the Agent that there has been a change in GAAP, the accounting practices or
reference periods and an Approved Accountant or such other person as approved
by the Agent acting reasonably delivers to the Agent:

 

(A)          a description of any change necessary for those financial statements
to reflect the GAAP, accounting practices and reference periods upon which the
Original Financial Statements were prepared; and

 

(B)          sufficient information, in form and substance as may be reasonably
required by the Agent, to enable the Lenders to determine whether Clause 22 (Financial covenants) has been complied with and make an
accurate comparison between the financial position indicated in those financial
statements and the Original Financial Statements.

 

Any reference in this Agreement to those
financial statements shall be construed as a reference to those financial
statements as adjusted to reflect the basis upon which the Original Financial
Statements were prepared.

 

19.3.3         If the Borrower notifies the Agent of a change in accordance with
Clause 19.3.2 above then the Borrower and Agent shall enter into negotiations
in good faith with a view to agreeing:

 

(B)          whether or not the change would result in any material alteration in
the commercial effect of any of the terms of this Agreement (including, without
limitation, Clause 22 (Financial Covenants);
and

 

38

 

(C)          if so, any amendments to this Agreement which may be necessary to
ensure that the change does not result in any material alteration in the
commercial effect of those terms

 

and if any amendments are agreed they shall take
effect and be binding on each of the Parties in accordance with their terms.

 

19.4         Information:
miscellaneous

 

The Borrower shall supply to the Agent (in sufficient
copies for all the Lenders, if the Agent so requests):

 

19.4.1         all documents dispatched by the Borrower to its shareholders (or any
class of them) or its creditors generally at the same time as they are
dispatched;

 

19.4.2         promptly upon becoming aware of them, the details of any Material
Litigation; and

 

19.4.3         promptly, such further information regarding the financial
condition, business and operations of the Borrower as any Finance Party
(through the Agent) may reasonably request.

 

19.5         Notification
of default

 

19.5.1         The Borrower shall notify the Agent of any Default (and the steps,
if any, being taken to remedy it) promptly upon becoming aware of its
occurrence.

 

19.5.2         Promptly upon request by the Agent, the Borrower shall supply to the
Agent a certificate signed by two of its directors or senior officers on its
behalf certifying that no Default is continuing (or if a Default is continuing,
specifying the Default and the steps, if any, being taken to remedy it).

 

19.6         Use of
websites

 

19.6.1         The Borrower may satisfy its obligation under this Agreement to
deliver any information in relation to those Lenders ( the “Website Lenders”) who accept this method of communication by
posting this information onto an electronic website designated by the Borrower
and the Agent (the “Designated Website”)
if:

 

(A)          the Agent expressly agrees (after consultation with each of the
Lenders) that it will accept communication of the information by this method;

 

(B)          both the Borrower and
the Agent are aware of the address of and any relevant password specifications
for the Designated Website; and

 

(C)          the information is in a format previously agreed between the
Borrower and the Agent.

 

If any Lender (a “Paper Form Lender”)
does not agree to the delivery of information electronically then the Agent
shall notify the Borrower accordingly and the Borrower shall supply the
information to the Agent (in sufficient copies for each Paper Form Lender)
in paper form.  In any event the Borrower
shall

 

39

 

supply the Agent with at least one copy in
paper form of any information required to be provided by it.

 

19.6.2         The Agent shall supply each Website Lender with the address of and
any relevant password specifications for the Designated Website following
designation of that website by the Borrower and the Agent.

 

19.6.3         The Borrower shall promptly upon becoming aware of its occurrence
notify the Agent if:

 

(A)          the Designated Website cannot be accessed due to technical failure;

 

(B)          the password specifications for the Designated Website change;

 

(C)          any new information which is required to be provided under this
Agreement is posted onto the Designated Website;

 

(D)          any existing information which has been provided under this
Agreement and posted onto the Designated Website is amended; or

 

(E)           the Borrower becomes aware that the Designated Website or any
information posted onto the Designated Website is or has been infected by any
electronic virus or similar software.

 

If the Borrower notifies the Agent under Clause 19.6.3(A) or
Clause 19.6.3(E) above, all information to be provided by the Borrower
under this Agreement after the date of that notice shall be supplied in paper
form unless and until the Agent and each Website Lender is satisfied that the
circumstances giving rise to the notification are no longer continuing.

 

19.6.4         Any Website Lender may request, through the Agent, one paper copy of
any information required to be provided under this Agreement which is posted
onto the Designated Website.  The
Borrower shall comply with any such request within 10 (ten) Business Days.

 

19.7         Property
Information

 

The Borrower shall or shall procure that the Manager
shall:

 

19.7.1         promptly and in any event no later than 3 (three) Business Days
prior to each Test Date provide to the Agent (in sufficient copies for all of
the Lenders) the following information (in form and substance satisfactory to
the Agent) in respect of each Property and the immediately preceding Quarter
Period:

 

(A)          copies of any management accounts and management cash flows produced
by or for the Borrower showing amongst other things, with respect to each
Property, the occupancy rate, the average room rate, revenue per available
room, total revenue, total operating expenses, gross operating income, total
overheads, gross operating profit, total fixed expenses and net operating
income (containing at least the information set out in Schedule 7) with
supporting information;

 

(B)          details of any arrears of amounts due (if any) to the Borrower under
any Management Agreement with respect to the occupancy of hotel rooms,

 

40

 

VAT,
and all other amounts due but unpaid under the Management Agreement and any
steps being taken to recover the same;

 

(C)          if not contained within information provided in accordance with
paragraph (A) above, details of the Manager’s fees;

 

(D)          a copy of the relevant extract of the minutes (if any) of any
significant property management meetings relating to each Property; and

 

(E)           a summary of  any proposed or
actual FF&E expenditure carried out by the Borrower or any Manager on its
behalf;

 

19.7.2         give notice to the Agent of any insolvency, bankruptcy,
receivership, administration, liquidation or any other analogous proceedings
affecting the Manager promptly upon becoming aware of any such event;

 

19.7.3         notify the Agent of any potential purchaser of a Property; and

 

19.7.4         promptly provide to the Agent such other information in its
possession or control about a Property, as the Agent may reasonably request
from time to time.

 

19.8         Money
Laundering Information

 

The Borrower shall promptly provide to the Agent all
such information and identification or other evidence as the Agent may from
time to time require to ensure compliance with Money Laundering Regulations.

 

20.          BANK ACCOUNTS

 

20.1         Designation
of Accounts

 

20.1.1         The Borrower shall forthwith at the request of the Agent open and
thereafter maintain at the Account Bank, the following bank accounts
denominated in Sterling:

 

(A)          an
account designated the Revenue Account in
the name of the Borrower;

 

(B)          a current account designated the General
Account in the name of the Borrower;

 

(C)          a current account designated the FF&E
Account in the name of the Borrower; and

 

(D)          a current account designated the Deposit
Account in the name of the Borrower.

 

The Account Bank must at all times comply with the
Account Bank Rating Requirements. If at any time the rating of the Account Bank
falls below the Account Bank Rating Requirements, then the Borrower shall move
the accounts forthwith to a replacement account bank which meets the Account
Bank Rating Requirements and which shall be previously approved in writing by
the Agent (such approval not to be unreasonably withheld or delayed).

 

41

 

20.1.2         The Borrower may not without the prior consent of the Agent maintain
any other bank account (except for any bank account which only receives
deposits from amounts permitted under this Agreement to be withdrawn from the
General Account).

 

20.2         Control
of Accounts

 

20.2.1         The Agent and the Borrower shall have joint signing rights on the
Revenue Account provided that if a Default is
continuing only the Agent shall have sole signing rights on the Revenue
Account.

 

20.2.2         Subject to Clause 20.6 below, the Borrower shall have sole signing
rights on the General Account.

 

20.2.3         The Agent shall have sole signing rights on the FF&E Account and
the Deposit Account.

 

20.3         Payments
into the Accounts

 

The Borrower shall ensure that all Revenue and other
amounts payable to it (other than any amounts required to be paid into another
Charged Account) is paid into the Revenue Account.

 

20.4         Indirect
Receipts

 

If the Borrower or the Manager receives or recovers
any amount otherwise than by credit to the relevant Charged Account, the
Borrower shall pay (or shall procure the payment of by the Manager) the same
into the Revenue Account immediately after receipt or recovery and in like
funds as received or recovered by the Borrower, who shall in the meantime hold
the same subject to the security created by the Finance Documents.

 

20.5         Withdrawals
from the Revenue Account

 

20.5.1         The Borrower may make no withdrawals from the Revenue Account
without the Agent’s prior written consent.

 

20.5.2         On each Interest Payment Date the amounts standing to the credit of
the Revenue Account shall be applied by the Agent in the following order and in
or towards the following items:

 

(A)          first, in or
towards payment of any Unpaid Sum (not otherwise referred to in this Clause 20.5.2);

 

(B)          second, in or
towards payment of any costs, fees and expenses of the Agent or the Arranger
which are due but unpaid under the Finance Documents;

 

(C)          third, in or
towards payment of accrued interest due but unpaid to the A Lenders under the
Finance Documents;

 

(D)          fourth, in or
towards any repayment or prepayment of principal which is due but unpaid to the
A Lenders under the Finance Documents;

 

(E)           fifth, in or
towards payment of accrued interest due but unpaid to the B Lenders under the
Finance Documents;

 

42

 

(F)           sixth, in or
towards any repayment or prepayment of principal which is due but unpaid to the
B Lenders under the Finance Documents;

 

(G)          seventh, in or
towards payment of such amounts as the Agent considers are necessary in respect
of any Service Charge shortfalls or other liabilities with respect to any
Property (including any insurance premia, rates or other monies which may from
time to time be payable by the Borrower in respect of any Property), such
amounts not being recoverable under the Management Agreement;

 

(H)          eight, if the
Borrower is not in compliance with its obligations under Clause 22 (Financial Covenants), ignoring any right
it may have under Clause 20.8 (Deposit
Account) to remedy such non compliance but only until such time as
that breach is remedied under that Clause, in payment of any essential
operating costs (which shall include VAT due to be paid by the Borrower, staff
gratuities due to be paid onto any member of staff or other amounts charged to
guests of any Property which are due to any concessionaire or tenant of the
Borrower) relating to each Property in accordance with the Borrower’s annual
budget for each Property or otherwise any expenditure which the Agent may, in
its absolute discretion approve, and, thereafter, in prepayment of the A Loan;

 

(I)            ninth, any
other amount due to the Finance Parties;

 

(J)           tenth, an
amount equal to 4 per cent. of the Net Operating Income received in the
Interest Period ending on that Interest Payment Date to the FF&E Account;

 

(K)          eleventh,
subject to Clause 20.5.3 below, payment of any surplus into the General
Account.

 

Any
surplus monies not paid into the General Account in accordance with this
provision may be applied by the Agent, at its discretion, towards a prepayment
of the Loans at any time or may be retained in the Revenue Account.

 

20.5.3         The Agent is obliged to make a withdrawal from the Revenue Account
in accordance with Clause 20.5.2 above only if:

 

(A)          no Default is continuing; and

 

(B)          the Repeating Representations are correct and will be correct
immediately after the withdrawal.

 

20.5.4         The Agent may authorise withdrawals at any time from the Revenue
Account to pay any amount due but unpaid under the Finance Documents.

 

20.5.5         The Agent may vary the order set out in Clause 20.5.2 above if a
Default (other than a Default arising solely under Clause 22.1 (Loan to Value Covenant) or Clause 22.2 (Interest Cover) is continuing or any of
the Repeating Representations are not correct at any time.

 

20.5.6         If the Borrower fails to pay any amount due under any Headlease on
the day on which it is due, the Agent may, and is irrevocably authorised by the
Borrower to

 

43

 

withdraw
from the Revenue Account a sum necessary to meet the due amount and apply that
sum in payment of that due amount.

 

20.5.7         Notwithstanding Clause 20.5.2 above the Borrower may on any date (but
no more than once in any week) on which:

 

(A)          no Default is outstanding;

 

(B)          the Borrower is in compliance with Clause 22 (Financial Covenants);

 

(C)          the Repeating Representations are all correct and will be correct
immediately after the withdrawal;

 

(D)          the Agent reasonably believes that the Borrower will be in
compliance with each of the matters set out in paragraphs (A) to (C) when
tested on the next Interest Payment Date; and

 

(E)           and the balance standing to the credit of the Account is more than
the Agent’s estimate, acting reasonably, of the amount due under the Finance
Documents on the next Interest Payment Date,

 

request
that the Agent’s estimate of the surplus amount not required to meet amounts
due under the Finance Documents on that next Interest Payment Date be released
to the General Account.

 

20.6         General
Account

 

20.6.1         Provided no Default is continuing or would occur as a result of the
withdrawals, the Borrower may withdraw any amount from the General Account.

 

20.6.2         At any time when a Default is continuing, the Agent may, and is
irrevocably authorised by the Borrower to:

 

(A)          operate the General Account; and

 

(B)          withdraw from, and apply amounts standing to the credit of, the
General Account in or towards any purpose for which monies in any Account may
be applied under the powers contained in the Finance Documents.

 

20.7         FF&E
Account

 

20.7.1         Provided no Default is continuing or would occur as a result of the
withdrawals, the Borrower may request the Agent to withdraw any amount from the
FF&E Account in order to fund FF&E on the Properties in accordance with
the relevant Management Agreement.

 

20.7.2         At any time when a Default is continuing, the Agent may, and is
irrevocably authorised by the Borrower to withdraw from, and apply amounts
standing to the credit of, the FF&E Account in or towards any purpose for
which monies in any Account may be applied under the powers contained in the
Finance Documents.

 

20.8         Deposit
Account

 

20.8.1         The Borrower must ensure that:

 

44

 

(F)           any amount required to be paid into the Deposit Account by this
Agreement is paid into the Deposit Account; and

 

(G)          any amount received by it under any insurance policy is paid into
the Deposit Account.

 

20.8.2         Provided no Default is continuing or would occur as a result of a
withdrawal, the Borrower may request the Agent to withdraw any amount deposited
in accordance with Clause 20.8.1(A) from the Deposit Account to meet any
liability of the Borrower for which the relevant amount was paid out by the
relevant insurer.

 

20.8.3

 

(A)           if the Agent notifies the Borrower that there is a breach of Clause 22.1
(Loan to Value Covenant) then the
Borrower may within 3 (three) months remedy that breach by:

 

(i)         depositing into the Deposit Account an amount which when applied in
prepaying the Loans will be sufficient to ensure compliance with Clause 22.1 (Loan to Value Covenant), such amount to be
applied by the Agent on the next Interest Payment Date in prepayment of the
Loans; or

 

(ii)        depositing an amount into the Deposit Account (an “LTV Remedy Amount”);

 

(B)            an LTV Remedy Amount above shall be the amount calculated by the
Agent which if it were used to prepay the Loans would be enough to ensure
compliance with Clause 22.1 (Loan to Value
Covenant);

 

(C)            if the Borrower deposits an LTV Remedy Amount in accordance with
Clause 20.8.3(A)(ii) into the 
Deposit Account the Borrower will not be regarded as being in breach of
Clause 22.1 (Loan to Value Covenant);
and

 

(D)           in relation to any LTV Remedy Amount or any part thereof, if the
test in Clause 22.1 (Loan to Value Covenant)
is satisfied (without taking into account the LTV Remedy Amount or any part
thereof) on the relevant test date and no Default is continuing the Agent
shall, upon the request of the Borrower, release any of the amount of the LTV
Remedy Amount not required to satisfy the relevant test to the General Account
and any amount so released shall cease to be part or all of any LTV Remedy
Amount.

 

20.8.4

 

(E)            if the Agent notifies the Borrower that there is a breach of Clause 22.2
(Interest Cover) then the
Borrower may within 5 (five) Business Days remedy that breach by:

 

(i)         deposit into the Deposit Account an amount which when applied in
prepaying the Loans will be sufficient to ensure compliance with Clause 22.2 (Interest Cover), such amount to be applied
by the

 

45

 

Agent on the next Interest Payment Date in
prepayment of the Loans; or

 

(ii)        depositing an amount into the Deposit Account (an “ICR Remedy Amount”);

 

(F)            an ICR Remedy Amount shall be the amount calculated by the Agent as
being sufficient if added to Net Operating Income before the last Interest
Payment Date would have been enough to ensure compliance with Clause 22.2 (Interest Cover);

 

(G)            if the Borrower deposits an ICR Remedy Amount in accordance with
Clause 20.8.4(A)(ii) the Borrower will not be regarded as being in breach
of Clause 22.2 (Interest Cover);
and

 

(H)           in relation to any ICR Remedy Amount or any part thereof, if the
test in Clause 22.2 (Interest Cover)
is satisfied (without taking into account the ICR Remedy Amount or any part
thereof) on the relevant test date and no Default is continuing the Agent
shall, upon the request of the Borrower, release any of the ICR Remedy Amount
not required to satisfy the relevant test to the General Account and any amount
so released shall cease to be part or all of any ICR Remedy Amount.

 

(I)             and any amount so released shall cease to be part or all of any ICR
Remedy Amount.

 

20.8.5         Any LTV Remedy Amount deposited in the Deposit Account may also form
part of any ICR Remedy Amount and vice versa in order that the Borrower need
only deposit one amount in the Deposit Account as ICR Remedy Amount and LTV
Remedy Amount in an amount of the higher of the amount required under Clause 20.8.3
or 20.8.4.

 

20.8.6         Other than any amount deposited in accordance with Clauses 20.8.1(B),
20.8.3 or 20.8.4 above, provided no Default is outstanding or would occur as a
result of the withdrawals, the Agent shall withdraw any amount from the Deposit
Account on the next Interest Payment Date in prepayment of the Loans.

 

20.9         Withdrawals
generally

 

20.9.1         The Borrower hereby irrevocably authorises the Agent to effect the
withdrawals and transfers referred to in this Clause 20.

 

20.9.2         The Agent may delegate its powers to make withdrawals under this
Clause 20 to any administrator, receiver and/or manager appointed under the
powers contained in the Security Documents.

 

20.9.3         While a Default is continuing, the Agent may, and is irrevocably
authorised by the Borrower to, withdraw monies standing to the credit of each
Charged Account and apply in or towards repayment of the Loans and/or payment
of any other amount outstanding under the Finance Documents or in or towards
any purpose for which monies in any Charged Account may be applied under the
powers contained in the Finance Documents.

 

46

 

20.10       No
Liability

 

The Agent shall not be responsible to the Borrower for
any non-payment of any liability of the Borrower which could be paid out of
monies standing to the credit of any Account unless caused by the wilful
neglect or gross negligence of the Agent. 
The Agent shall not be liable to the Borrower for any withdrawal wrongly
made if it is made in good faith.

 

21.          PROPERTY UNDERTAKINGS

 

21.1         Planning

 

The Borrower shall:

 

21.1.1         comply or procure compliance in all respects with any conditions
attached to any planning permissions relating to or affecting any Property and
not without the prior written consent of the Agent carry out any development or
make any alteration to the use of any Property (such consent not to be
unreasonably withheld or delayed in the case of any development); and

 

21.1.2         not make any application for planning permission or implement any
planning permission obtained or enter into any agreement or undertaking under Section 106
of the Town and Country Planning Act 1990 or Section 33 of the Local
Government (Miscellaneous Provisions) Act 1982 or Sections 38 or 278 of the
Highways Act 1980 or any other similar act or acts without the prior written
consent of the Agent (such consent not to be unreasonably withheld).

 

21.2         Title

 

The Borrower shall:

 

21.2.1         observe and perform all restrictive and other covenants, stipulations
and obligations now or at any time affecting any Property insofar as the same
are subsisting and are capable of being enforced; and

 

21.2.2         duly and diligently enforce all material restrictive or other
covenants, stipulations and other obligations benefiting any Property and not
waive, release or vary (or agree to do so) the obligations of any other party
thereto.

 

21.3         Management
Agreements and Leases

 

21.3.1         The Borrower shall comply with all of its obligations under each
Management Agreement and, without prejudice to Clause 21.3.2(A), ensure that it
is at all times party to a Management Agreement, under which the Manager is
obliged to operate the hotel businesses at the Properties.

 

21.3.2

 

(A)          Other than as set out in paragraph (B) below, the Borrower
shall not after the date of this Agreement, without the prior written consent
of the Agent (such consent not be unreasonably withheld or delayed):

 

(i)            enter into any Management Agreement or agree to do so;

 

47

 

(ii)           give any consent to any matter, document or proposal requested under
or in relation to any Management Agreement provided that while no Default is
continuing the Borrower may grant such consent (other than any consent relating
to the agreeing of any budget for a Property) to the extent that the consent or
relevant matter, document or proposal would not reasonably be expected to have
a prejudicial affect on any Finance Party or a Material Adverse Effect;

 

(iii)          agree to any amendment or waiver in respect of any Management
Agreement nor agree to the termination of any Management Agreement;

 

(iv)          grant, or permit the grant of, any contractual licence, Occupational
Lease, Agreement for Lease or right to occupy any part of a Property (other
than permitting the renting of individual rooms as part of its business at the
Property) or grant any consent under the same or agree to any assignment of any
Occupational Lease, Agreement for Lease or licence; or

 

(v)           agree any budget for a Property with the Manager.

 

(B)          The consent of the Agent is not required under paragraph (A) above:

 

(i)            subject to the Agent having been notified in writing prior to the
date of this Agreement of a contractual obligation to enter into an agreement,
to the entry into by the Borrower of  the
same;

 

(ii)           having given the Agent prior written notice of the proposed terms of
such lease, for the granting of an Occupational Lease on arms length terms over
the former Lumiere Cinema space at St. Martin’s Lane to Gymbox Limited for a
term of approximately twenty years at an annual rent of approximately £150,000;

 

(iii)          if the Agent has been notified in writing of such grant prior to its
being granted, in respect of the grant of any licence, Agreement for Lease,
Occupational Lease or right to occupy any part of a Property in such case
granted to a statutory undertaker or telecommunications company in connection
with the supply of any utility or telecoms service to a Property; and

 

(iv)          subject to the Agent having been notified prior to any such grant, for
the grant of any consent under a contractual licence, Occupational Lease,
Agreement for Lease or other right to occupy part of a Property in
circumstances where the Borrower is under a contractual obligation not to
unreasonably withhold or delay the grant of such consent and where the
withholding of such consent because the consent of the Agent has not been
obtained in time would cause the Borrower to be in breach of that contractual
obligation.

 

21.3.3         The Borrower shall duly and diligently implement the provisions of
each Management Agreement.

 

48

 

21.3.4         The Borrower shall promptly following receipt of the same supply to
the Agent a copy of any notice or document (including but not limited to the
annual budget for each property) it receives from any Manager in connection
with any Management Agreement.

 

21.3.5         No later than 6 months before the expiry of any Management Agreement
(and thereafter if required by the Agent from time to time), the Borrower shall
inform the Agent of the steps being taken to renew that Management Agreement or
to enter into a new Management Agreement.

 

21.4         Managers

 

21.4.1         The Borrower shall:

 

(A)          ensure that at all times whilst any monies are outstanding under the
Finance Documents each Property shall be managed by a Manager approved by the
Agent (acting reasonably) and shall procure that each Manager carries out its
duties in accordance with the terms of the relevant Management Agreement; or

 

(B)          not appoint a new Manager or replace a Manager without the prior
written consent of, and upon terms approved by, the Agent (acting reasonably)
including, without limitation, the entering into a new Management Agreement.

 

21.4.2         If:

 

(C)          a Manager is in breach of its duties under the terms of its
appointment by the Borrower; or

 

(D)          a Manager has ceased to exist or become insolvent;

 

the Agent may require the Borrower to
terminate the appointment of the Manager (which the Borrower agrees to do on
the date required by the Agent) and to appoint a new Manager. The Borrower
shall procure that any new Manager so appointed shall enter into a Management
Agreement.

 

21.5         Environmental
Compliance

 

The Borrower shall:

 

21.5.1         comply in all material respects with all Environmental Laws; and

 

21.5.2         obtain and do all that is necessary to maintain in full force and
effect all Environmental Authorisations; and

 

21.5.3         promptly on becoming aware of the same, notify the Agent of the
following:

 

(E)           any indication that any Property is referred to or listed or might
be referred to or listed in any register maintained or proposed under Section 143
of the Environmental Protection Act 1990;

 

(F)           any claim, notice of violation, prosecution, official warning,
abatement or other order relating to Environmental Matters or requiring
compliance with any Environmental Laws or with any licence or approval relating
to

 

49

 

Environmental Matters which to its knowledge is
pending or threatened against the Borrower or any of its officers in their
capacity as such or against any Property or of any requirement to make any
investment or expenditure or to take or desist from taking action which might
be reasonably likely to have a Material Adverse Effect;

 

(G)          the existence or recent
existence of any Environmental Matters at any of the Properties which may give
rise to any environmental liability, and in such circumstances the Borrower
shall take or procure the taking of all necessary action to remedy or remove or
prevent the incursion of Environmental Matters in a manner that complies with
all Environmental Laws;

 

(H)          any facts or circumstances
entitling any Environmental Authorisation to be revoked, suspended, amended or
not renewed where this might be reasonably likely to have a Material Adverse
Effect and of any requirement to make any investment or expenditure or to take
or desist from taking any action where this might have a similar effect; and

 

(I)            full details of any inspections, investigations, audits, tests or
other analyses concerning Environmental Matters relating to the Borrower or to
a Property occurring after the date of this Agreement; and

 

21.5.4         on demand indemnify the Finance Parties against any loss or
liability which:

 

(A)          any Finance Party incurs as a result of any actual or alleged breach
of any Environmental Law by any person; and

 

(B)          which would not have arisen if a Finance Document had not been
entered into.

 

21.6         VAT
Election

 

The Borrower shall not carry out or permit to be
carried out any action which will or may cause any option or right of election
that the supplies made in respect of any lease or tenancy of the same by it
shall be taxable for VAT purposes at the standard or any other applicable rate
which has already been exercised, to be revoked or disapplied.

 

21.7         Valuations,
Structural Survey or Environmental Survey

 

21.7.1         The Agent may at any time but only once per annum request the Valuer
promptly to prepare and deliver to the Agent a Valuation in respect of a
Property or the Properties as the Agent may direct and the cost of any such
Valuation shall borne by the Borrower.

 

21.7.2         The Agent may request the Valuer or any agent of the Valuer promptly
to prepare and deliver to the Agent a structural survey and/or environmental
report with respect to a Property if the Agent has serious grounds to believe
that the environmental or structural condition of that Property has materially
altered since the first Drawdown Date and the cost of any such survey or report
shall be borne by the Borrower.

 

21.7.3         On or after the occurrence of a Default which is continuing, the
Agent may at any time and from time to time request a Valuation of any
Property.

 

50

 

21.7.4         The Borrower shall ensure that the Valuer has all such assistance as
the Agent may require to carry out any such Valuation, structural survey or
environmental report including (upon reasonable notice and during normal
business hours) full access to each Property upon reasonable written notice.

 

21.8         Insurance

 

The Borrower shall at all times during the Facility
Period:

 

21.8.1         effect and maintain the Insurance Policies in full force and effect
with such insurers which comply with the Insurance Company Rating Requirements,
in such amounts and against all such risks of loss or damage as the Agent may
from time to time require (including, without limitation, subsidence,
terrorism, professional fees, site clearance, consequential loss, third party
liability, VAT and not less than, from the date of this Agreement up to the
date of the renewal of the loss of Revenue policy delivered to the Agent in
accordance with Clause 4.1 (Initial
Conditions Precedent), two years, but thereafter, three years’ loss
of Revenue and any fees payable to the Manager during any period of loss or
damage);

 

21.8.2         duly and punctually pay all premiums and other monies due and
payable under or in connection with the Insurance Policies (and promptly upon
request by the Agent, supply copies of the premium receipts or other evidence
of payment) and not do or omit to do anything which may result in any Insurance
Policy being made void or voidable;

 

21.8.3         ensure that the terms of each Insurance Policy provide that the
Security Trustee is named as co-insured and as loss payee and that the Insurance
Policy shall not be invalidated as against the Security Trustee for failure to
pay any premium without at least 10 (ten) Business Days’ prior written notice
being given to the Security Trustee and contain terms providing that the
Security Trustee shall have no duty of disclosure to the insurance company or
underwriters and have no liability to pay any unpaid premium, and whereby the
relevant insurer agrees in terms satisfactory to the Security Trustee not to
vitiate or avoid the Insurance Policy as a result of any misrepresentation, act
or omission of any party other than the Security Trustee;

 

21.8.4         procure that on each anniversary of the Drawdown Date (for as long
as there are any amounts outstanding under any Facility) there shall be
produced to the Agent a confirmation from its insurance broker to the Agent
that each Property is insured in accordance with this Clause 21.8;

 

21.8.5         promptly upon request provide to the Agent such information in its
possession in connection with the Insurance Policies as the Agent may
reasonably require and promptly notify the Agent upon becoming aware of
renewals made and variations or cancellations of policies made or, to its
knowledge, threatened or pending; and

 

21.8.6         if so required by the Agent, deposit with the Agent the Insurance
Policies and all other contracts of insurance relating to each Property or, if
this is not permitted by any lease to which that Property is subject, shall
produce a copy of the same to the Agent for inspection.

 

51

 

21.8.7         Each of the Borrower’s insurers must at all times comply with the
Insurance Company Rating Requirements. If at any time the rating of any insurer
falls below the Insurance Company Rating Requirements, then the Borrower shall
procure that the relevant assets are insured forthwith by a replacement
insurer, which shall be previously approved in writing by the Agent acting
reasonably.

 

21.8.8         If the Borrower fails to comply with any of the provisions of this
Clause 21.8, the Agent may effect the insurances concerned, with an insurer
complying with the Insurance Company Requirements, and any cost, liability or expense
properly incurred in connection therewith shall promptly on demand be paid by
the Borrower to the Agent.

 

21.9         Repair

 

The Borrower shall:

 

21.9.1         procure that each Property is maintained in good and substantial
repair and condition, and ensure that all plant, machinery and equipment which
forms part of the Properties is replaced as necessary with items of similar quality
and value; and

 

21.9.2         make good any want of maintenance and repair in each Property
promptly upon the request of the Agent (acting reasonably) so to do, and notify
the Agent immediately upon completion of such maintenance and repair.

 

21.10       Alterations

 

The Borrower shall not without the prior written
consent of the Agent (acting reasonably):

 

21.10.1       effect, carry out or permit to be carried out any demolition,
reconstruction or rebuilding of or any material structural or other material
alteration to or change in the use of all or any part of any Property; or

 

21.10.2       sever, unfit or remove any of the fixtures, fittings, plant or
machinery on or at any Property (other than in accordance with the principles
of good hotel management and in accordance with the relevant Management
Agreement).

 

21.11       Revenue
Account

 

The Borrower shall ensure that on each Interest
Payment Date there are sufficient sums in the Revenue Account to enable the
Agent to make each of the transfers and payments listed in Clause 20 (Bank Accounts).

 

21.12       Survey
Recommendations

 

The Borrower will promptly implement (and in any event
within any time period stipulated in any such report or survey) all steps
recommended to be implemented under any environmental report or structural survey
provided to the Agent pursuant to Schedule 1 (Conditions
Precedent) which the Agent (acting on the reasonable advice of the
Valuer) requires to be implemented and notify the Agent when all such steps
have been fully implemented.

 

52

 

21.13       Headlease

 

The
Borrower shall in relation to the Headlease under which the Borrower derives
its estate or interest in a Property:

 

(J)            observe and perform all covenants, stipulations and obligations on
the lessee under the Headlease;

 

(K)          diligently enforce all covenants on the part of the lessor under the
Headlease;

 

(L)           not, without the prior written consent of the Agent (acting
reasonably):

 

(1)           waive, release or vary any obligation under, or the terms of; or

 

(2)           exercise any option or power to break, determine or extend,

 

in each case, the Headlease;

 

(M)         not do or permit anything under the Headlease whereby the same may
be forfeited;

 

(N)          other than any rent increase fixed under the terms of the Headlease,
not agree any change to the rent payable under the Headlease without the prior
written consent of the Agent (acting reasonably); and

 

(O)          promptly notify the Agent of any matter or event under or by reason
of which the Headlease has or may become subject to determination or to the
exercise of any right of re-entry or forfeiture and, if so requested by the
Agent, to apply for relief against forfeiture.

 

21.14       FF&E
Reserve

 

Subject always to the terms of any Headlease the
Borrower shall promptly and diligently carry out all works and/or incur all
necessary expenditure in connection with the FF&E in accordance with the
terms of the relevant Management Agreement.

 

22.          FINANCIAL COVENANTS

 

22.1         Loan to
Value Covenant

 

Subject
to Clause 20.8 (Deposit Account),
the Borrower undertakes and covenants with the Agent that:

 

22.1.1         on the Drawdown Date the aggregate sum of outstandings under the A
Facility shall not exceed 56% of the aggregate Market Value of the Properties
determined in accordance with the most recent Valuation; and

 

22.1.2         after the Drawdown Date until (and including) the date on which all
the obligations and liabilities of the Borrower under the Finance Documents are
discharged in full and the Finance Parties have no continuing obligations in
relation to any Facility, the aggregate sum of outstandings under the Facility
shall not at any time exceed 73% of the aggregate Market Value of the
Properties determined in accordance with the most recent Valuation.

 

22.2         Interest
Cover

 

22.2.1         Subject to Clause 20.8 (Deposit
Account), the Borrower shall ensure that:

 

53

 

(P)           on each Test Date falling before the second anniversary of the date
of this Agreement, the Net Operating Income for the year ending on the last
Quarter Date is not less than 200% (two hundred per cent.) of the A Finance
Costs for the year ending on (and including) that Test Date (or, in respect of
an Test Date falling before the first anniversary of the Drawdown Date, the A
Finance Costs calculated in accordance with Clause 22.2.2);

 

(Q)          on each Test Date falling on or after the second anniversary of the
date of this Agreement but before the fourth anniversary of the date of this
Agreement, the Net Operating Income for the year ending on the last Quarter Date
is not less than 205% (two hundred and five per cent.) of the A Finance Costs
for the year ending on (and including) that Test Date;

 

(R)          on each Test Date falling on or after the fourth anniversary of the
date of this Agreement, the Net Operating Income for the year ending on the
last Quarter Date is not less than 210% (two hundred and ten per cent.) of the
A Finance Costs for the year ending on (and including) that Test Date;

 

(S)           on each Test Date falling before the second anniversary of the date
of this Agreement, the Net Operating Income for the year ending on the last
Quarter Date is not less than 135% (one hundred and thirty five per cent.) of
the B Finance Costs for the year ending on (and including) that Test Date (or,
in respect of a Test Date falling before the first anniversary of the Drawdown
Date, the B Finance Costs calculated in accordance with Clause 22.2.2);

 

(T)          on each Test Date falling on or after the second anniversary of the
date of this Agreement but before the fourth anniversary of the date of this
Agreement, the Net Operating Income for the year ending on the last Quarter
Date is not less than 140% (one hundred and forty per cent.) of the B Finance
Costs for the year ending on (and including) that Test Date; and

 

(U)          on each Test Date falling on or after the fourth anniversary of the
date of this Agreement, the Net Operating Income for the year ending on the
last Quarter Date is not less than 145% (one hundred and forty five per cent.)
of the B Finance Costs for the year ending on (and including) that Test Date.

 

22.2.2         In calculating Finance Costs under this Clause on a Test Date
falling before the first anniversary of the Drawdown Date, the Finance Costs
shall be calculated by dividing the Finance Costs actually incurred to the relevant
calculation date by the number of days elapsed since the Drawdown Date
(including such date) and then multiplying the product of such sum by 365.

 

22.3         Calculations

 

22.3.1         All calculations made at any time for the purposes of this Clause 22
shall be made by reference to the following:

 

54

 

(A)          where such calculations
relate to the date as at or to which audited financial statements of the
Borrower are prepared, the most recent such financial statements; and

 

(B)          where such calculations relate to a date on which quarterly accounts or
management accounts of the Borrower are prepared, the most recent such
accounts,

 

adjusted in each case, as
the Agent may in its discretion reasonably consider appropriate, to take
account of any changes in the financial condition or
circumstances of the Borrower which occur after the date as at or to which such
financial statements or accounts were or certificate was prepared.

 

22.3.2         If there is any dispute as to any computation under this Clause 22
the decision of the Agent shall, in the absence of manifest error, be
conclusive and binding on the Parties to this Agreement.

 

23.          GENERAL UNDERTAKINGS

 

The undertakings in this Clause 23 remain in force
from the date of this Agreement for so long as any amount is outstanding under
the Finance Documents or any Commitment is in force.

 

23.1         Authorisations

 

The Borrower shall promptly:

 

23.1.1         obtain, comply with and do all that is necessary to maintain in full
force and effect; and

 

23.1.2         supply certified copies to the Agent of,

 

any Authorisation:

 

(V)            required or desired under any law or regulation of its jurisdiction
of incorporation to enable it lawfully to enter into, exercise its rights and
comply with and perform its obligations under the Finance Documents and each
Management Agreement; and

 

(W)          to ensure the legality, validity, enforceability or admissibility in
evidence in its jurisdiction of incorporation of any Finance Document and
Management Agreement.

 

23.2         Compliance
with laws

 

The Borrower shall comply in all respects with all
laws and regulations to which it may be subject, if failure so to comply would
materially impair its ability to perform its obligations under the Finance
Documents.

 

23.3         Financial
Indebtedness

 

The Borrower shall not incur any Financial
Indebtedness to any person other than the Finance Parties other than Financial
Indebtedness not exceeding in aggregate £1,200,000.

 

55

 

23.4         Negative
pledge

 

23.4.1         The Borrower shall not create or permit to subsist any Security over
any of its assets.

 

23.4.2         The Borrower shall not:

 

(A)          sell, transfer or otherwise dispose of any of its assets on terms
whereby they are or may be leased to or re-acquired by the Borrower;

 

(B)          sell, transfer or otherwise dispose of any of its receivables on
recourse terms;

 

(C)          enter into any arrangement under which money or the benefit of a
bank or other account may be applied, set-off or made subject to a combination
of accounts; or

 

(D)          enter into any other preferential arrangement having a similar
effect,

 

in circumstances where the arrangement or transaction
is entered into primarily as a method of raising Financial Indebtedness or of
financing the acquisition of an asset.

 

23.4.3         Clauses 23.4.1 and 23.4.2 above do not apply to:

 

(A)          any lien arising by operation of law and in the ordinary course of
trading and securing amounts not more than 90 days overdue; and

 

(B)          any Security entered into pursuant to any Finance Document.

 

23.5         Disposals

 

23.5.1         The Borrower shall not enter into a single transaction or a series
of transactions (whether related or not) and whether voluntary or involuntary
to sell, lease, transfer or otherwise dispose of any part or parts of any
Property or its assets (or agree to accept any surrender or cancellation of any
Occupational Lease).

 

23.5.2         Clause 23.5.1 above does not apply to:

 

(A)          sales of stock in the ordinary course of business (other than of any
Property);

 

(B)          disposal on arms length and normal commercial terms of obsolete
assets (other than any Property);

 

(C)          the payment of cash as consideration for the acquisition of any
asset or provision of any services at arms length and on normal commercial
terms for the purpose of carrying on its business;

 

(D)          any sale of a Property with the prior written consent of the Agent
(acting reasonably); and

 

(E)           any sale, lease, transfer or other disposal expressly permitted by
this Agreement.

 

56

 

23.6         Merger

 

The Borrower shall not enter into any amalgamation,
demerger, merger or corporate reconstruction.

 

23.7         Conduct
of business

 

The Borrower shall conduct and carry on its business
in a proper and efficient manner and shall procure that no substantial change
is made to the general nature of the business of the Borrower from that carried
on at the date of this Agreement.

 

23.8         Access

 

The Borrower shall permit the Agent and any person
(being an accountant, auditor, solicitor, valuer or other professional adviser
of the Agent) authorised by the Agent to have, at all reasonable times during
normal business hours and on reasonable notice, (save in an emergency) access
to its property, premises and accounting books and records.

 

23.9         Ranking
of Obligations

 

The Borrower shall ensure that its payment obligations
under the Finance Documents, to the extent that they are secured under the
Security Documents, shall at all times be payable in priority to all its other
Financial Indebtedness other than such Financial Indebtedness as would be
preferred by applicable law and to the extent that they are not so secured
ensure that they will at all times rank at least equally and rateably in all
respects with all its other unsecured Financial Indebtedness except for such
Financial Indebtedness as would be mandatorily preferred by law and not by
contract.

 

23.10       Further
Assurance

 

The Borrower shall, at the request of the Agent, take
or procure the taking of all actions and things, and shall execute or procure
the execution of all such deeds and documents as are, in the reasonable opinion
of the Agent, necessary to ensure that the Finance Parties obtain all their
rights and benefits under the Finance Documents as contemplated by the terms
thereof.

 

23.11       Centre of
Main Interests

 

23.11.1       The Borrower shall not permit its centre of main interests for the
purposes of Council Regulation (EC) No 1346/2000 to be in any jurisdiction
other than its jurisdiction of incorporation.

 

23.11.2       The Borrower shall not permit to exist an establishment for the
purpose of Council Regulation (EC) No 1346/2000 in any jurisdiction other than
its jurisdiction of incorporation.

 

23.12       Loans

 

The
Borrower will not make any loan or provide any other form of credit or
financial accommodation to any person.

 

23.13       Contracts

 

The
Borrower may not enter into any material contract other than those contracts
listed in Clause 18.19.2.

 

57

 

23.14       Dividends,
subordination and share capital

 

The Borrower shall not:

 

23.14.1       other than with monies standing to the credit of the General
Account, pay any dividends, make any distributions or repay or redeem any of
its share capital; or

 

23.14.2       other than with the prior written consent of the Agent, issue any
further shares or alter any rights attaching to its issued shares as at the
date of this Agreement.

 

23.15       Consents

 

The Borrower must ensure that:

 

23.15.1       all Relevant Consents; and

 

23.15.2       all statutory requirements, as are necessary:

 

(X)          to enable it to perform its obligations under the Finance Documents
or Management Agreements to which it is a party; and

 

(Y)          in connection with the management, use and occupation of the
Properties,

 

are duly obtained and maintained in full force and
effect or, as the case may be, complied with.

 

23.16       Pensions

 

23.16.1       On and after the date of this Agreement the Borrower shall ensure
that it is not at any time an Employer (as defined in Section 318 of the
Pensions Act 2004) of an ‘occupational pension scheme’ which is not a ‘money
purchase scheme’ (both terms as defined in the Pension Schemes Act 1993).

 

23.16.2       The Borrower shall as soon as possible after becoming aware of it
notify the Agent of any investigation or proposed investigation by the Pensions
Regulator which is reasonably likely to lead to the issue of a Financial
Support Direction or a Contribution Notice to it.

 

23.16.3       The Borrower shall ensure that it does not receive a Financial
Support Direction or a Contribution Notice from the Pensions Regulator unless
the Agent is satisfied that that Financial Support Direction or a Contribution
Notice would not have a Material Adverse Effect.

 

23.17       Taxes

 

The Borrower shall ensure that it pays all Taxes shown
to be due and payable by it in any tax assessment or demand within the period for
payment of such Tax.

 

23.18       Asbestos

 

The Borrower shall ensure that all asbestos remediation
work is satisfactorily carried out with respect to St. Martin’s Lane and a
report that the work has been satisfactorily completed by a reputable
professional competent in providing such reports is delivered to the Agent
within the period of six months commencing on the date of this Agreement, the

 

58

 

identity of the professional having been approved by
the Agent (acting reasonably) and such report to be in a form and substance
satisfactory to the Agent (acting reasonably).

 

24.          EVENTS OF DEFAULT

 

Each of the events or circumstances set out in Clause 24
is an Event of Default.

 

24.1         Non-payment

 

Any person (other than a Finance Party) does not pay
on the due date any amount payable by it pursuant to a Finance Document at the
place at and in the currency in which it is expressed to be payable unless:

 

24.1.1         its failure to pay is caused by administrative or technical error;
and

 

24.1.2         payment is made within 2 (two) Business Days of its due date.

 

In the event of any such administrative or
technical error, the Borrower shall notify the Agent immediately upon becoming
aware of the same.

 

24.2         Financial
covenants

 

Any requirement of Clause 22.1 (Loan to Value Covenant) or 22.2 (Interest Cover) is not satisfied on any four Test Dates.

 

24.3         Other
obligations

 

24.3.1         Any person (other than a Finance Party) does not comply with any
provision of the Finance Documents (other than those referred to in Clause 24.1
(Non-payment) and Clause 24.2 (Financial covenants)).

 

24.3.2         No Event of Default under Clause 24.3.1 above will occur if the
failure to comply is capable of remedy and is remedied within the earlier of 20
(twenty) Business Days of (A) the Agent giving notice to the Borrower or (B) the
Borrower becoming aware of the failure to comply.

 

24.4         Misrepresentation

 

24.4.1         Any representation or statement made or deemed to be made by any
person (other than a Finance Party) in the Finance Documents or any other
document delivered by or on behalf of it under or in connection with any
Finance Document is or proves to have been incorrect or misleading in any
material respect when made or deemed to be made.

 

24.4.2         No Event of Default under Clause 24.4.1 above will occur if the
misrepresentation is capable of remedy and is remedied within the earlier of 20
(twenty) Business Days of (A) the Agent giving notice to the Borrower or (B) the
Borrower becoming aware of the misrepresentation.

 

24.5         Cross
default

 

24.5.1         Any Financial Indebtedness of the Borrower is not paid when due nor
within any originally applicable grace period.

 

59

 

24.5.2         Any Financial Indebtedness of the Borrower is declared to be or
otherwise becomes due and payable prior to its specified maturity as a result
of an event of default (however described).

 

24.5.3         Any commitment for any Financial Indebtedness of the Borrower is
cancelled or suspended by a creditor of the Borrower as a result of an event of
default (however described).

 

24.5.4         Any creditor of the Borrower becomes entitled to declare any
Financial Indebtedness of the Borrower due and payable prior to its specified
maturity as a result of an event of default (however described).

 

24.5.5         No Event of Default will occur under this Clause 24.5 if the
aggregate amount of Financial Indebtedness or commitment for Financial
Indebtedness falling within Clauses 24.5.1 to 24.5.4 above is less than
£250,000 (or its equivalent in any other currency or currencies).

 

24.6         Insolvency

 

24.6.1         The Borrower is unable or admits inability to pay its debts as they
fall due, suspends making payments on any of its debts or, by reason of actual
or anticipated financial difficulties, commences negotiations with one or more
of its creditors with a view to rescheduling any of its indebtedness.

 

24.6.2         The value of the assets of the Borrower is less than its liabilities
(taking into account contingent and prospective liabilities).

 

24.6.3         A moratorium is declared in respect of any indebtedness of the
Borrower.

 

24.7         Insolvency
proceedings

 

Any corporate action, legal proceedings or other
procedure or formal step is taken in relation to:

 

24.7.1         other than any winding up petition which the Agent is satisfied is
both (a) frivolous or vexatious and (b) which will be discharged or
dismissed within 5 Business Days (or such later date to which the Agent agrees)
of being filed or if earlier the day on which it is advertised, the suspension
of payments, a moratorium of any indebtedness, winding-up, dissolution,
administration or reorganisation (by way of voluntary arrangement, scheme of
arrangement or otherwise) of the Borrower (other than a solvent liquidation or
reorganisation to which the Agent has given its prior written consent);

 

24.7.2         a composition, assignment or arrangement with any creditor of the
Borrower;

 

24.7.3         the appointment of a liquidator, receiver, administrator,
administrative receiver, compulsory manager or other similar officer in respect
of the Borrower or any of its assets; or

 

24.7.4         enforcement of any Security over any assets of the Borrower,

 

or any analogous procedure or step is taken in any
jurisdiction.

 

60

 

24.8         Creditors’
process

 

Any expropriation, attachment, sequestration, distress
or execution affects any asset or assets of the Borrower.

 

24.9         Ownership
of the Borrower

 

Without the Majority Lenders prior written consent,
the Borrower ceases to be directly owned by the Shareholder.

 

24.10       Unlawfulness

 

It is or becomes unlawful or impossible for any person
(other than a Finance Party) to perform and observe, or to procure the
performance or observance of, any of its obligations under the Finance
Documents and/or the Management Agreement.

 

24.11       Repudiation

 

Any party to a Finance Document (other than a Finance
Party) or the Management Agreement repudiates a Finance Document or the
Management Agreement or evidences an intention to repudiate a Finance Document
or the Management Agreement.

 

24.12       Compulsory
Acquisition

 

Other than where the Agent is satisfied both that the
proceeds of such compulsory acquisition will be applied by the Borrower in
prepayment of the Loans and that there will be no Material Adverse Effect in
connection with such order, an order is made for the compulsory acquisition of
all or any part of a Property.

 

24.13       Major
damage

 

All or any part of a Property is destroyed or
otherwise damaged and the Agent determines (taking into account the proceeds of
any insurance) that the destruction or damage could result in a Material
Adverse Effect.

 

24.14       Manager

 

24.14.1       The Manager fails to pay any amount payable by it under the
Management Agreement without set-off, deduction or counterclaim or breaches any
obligation expressed to be assumed by it under the Management Agreement;

 

24.14.2       the Manager ceases to be liable for the obligations expressed to be
assumed by it under the Management Agreement; or

 

24.14.3       any of the events referred to in Clauses 24.5 (Insolvency) to 24.8 (Creditors’ Process) occurs in respect of
the Manager; and

 

the Agent is satisfied that any such event may have a
Material Adverse Effect.

 

24.15       Material
adverse change

 

Any event or circumstance occurs which the Agent
reasonably believes might have a Material Adverse Effect.

 

61

 

24.16       Headlease

 

Forfeiture proceedings are commenced against the
Borrower under the Headlease or the Headlease is forfeited.

 

24.17       Pensions

 

The Pensions Regulator issues a Financial Support
Direction or a Contribution Notice to the Borrower which has or is reasonably
likely to have a Material Adverse Effect.

 

24.18       Acceleration

 

On and at any time after the occurrence of an Event of
Default which is continuing the Agent may, and shall if so directed by the
Majority Lenders, by notice to the Borrower:

 

24.18.1       cancel the Total Commitments whereupon they shall immediately be
cancelled;

 

24.18.2       declare that all or part of the Loans, together with accrued
interest, and all other amounts accrued or outstanding under the Finance
Documents be immediately due and payable, whereupon it shall become immediately
due and payable; and/or

 

24.18.3       declare that all or part of the Loans be payable on demand,
whereupon it shall immediately become payable on demand by the Agent on the
instructions of the Majority Lenders.

 

62

 

SECTION 8

 

CHANGES TO PARTIES

 

25.          CHANGES TO THE LENDERS

 

25.1         Assignments
and transfers by the Lenders

 

25.1.1         Subject to this Clause 25, a Lender (the “Existing
Lender”) may assign any of its rights or transfer by novation any of
its rights and obligations under this Agreement to any person, bank, financial
institution, trust, fund or other entity which is regularly engaged in or
established for the purpose of making, purchasing or investing in loans,
securities or other financial assets (the “New Lender”).

 

25.1.2         An assignment will only be effective:

 

(A)           on receipt by the Agent of written confirmation from the New Lender (in
form and substance satisfactory to the Agent) that the New Lender will assume
the same obligations to the other Finance Parties as it would have been under
if it was an Original Lender; and

 

(B)          if it is in an amount of equal to or more than £2,000,000.

 

25.1.3         A transfer will only be effective if the procedure set out in Clause
25.4 (Procedure for transfer) is complied
with.

 

25.1.4         If:

 

(A)          a Lender assigns or transfers any of its rights or obligations under
the Finance Documents or changes its Facility Office; and

 

(B)          as a result of circumstances existing at the date the assignment,
transfer or change occurs, the Borrower would be obliged to make a payment to
the New Lender or Lender acting through its new Facility Office under Clause 13
(Tax gross-up and indemnities) or Clause 14
(Increased Costs),

 

then the New Lender or Lender acting through its new
Facility Office is only entitled to receive payment under those Clauses to the
same extent as the Existing Lender or Lender acting through its previous
Facility Office would have been if the assignment, transfer or change had not
occurred.

 

25.2         Assignment
or transfer fee

 

The New Lender shall, on the date upon which an
assignment or transfer takes effect, pay to the Agent (for its own account) a
fee of £1,000.

 

25.3         Limitation
of responsibility of Existing Lenders

 

25.3.1         Unless expressly agreed to the contrary, an Existing Lender makes no
representation or warranty and assumes no responsibility to a New Lender for:

 

(A)          the legality, validity, effectiveness, adequacy or enforceability of
the Finance Documents or any other documents;

 

63

 

(B)          the financial condition of the Borrower;

 

(C)          the performance and observance by the Borrower of its obligations
under the Finance Documents or any other documents; or

 

(D)          the accuracy of any statements (whether written or oral) made in or
in connection with any Finance Document or any other document,

 

and any representations or warranties
implied by law are excluded.

 

25.3.2         Each New Lender confirms to the Existing Lender and the other
Finance Parties that it:

 

(A)          has made (and shall continue to make) its own independent
investigation and assessment of the financial condition and affairs of the
Borrower and its related entities in connection with its participation in this
Agreement and has not relied exclusively on any information provided to it by
the Existing Lender in connection with any Finance Document; and

 

(B)          will continue to make its own independent appraisal of the
creditworthiness of the Borrower and its related entities whilst any amount is
or may be outstanding under the Finance Documents or any Commitment is in
force.

 

25.3.3         Nothing in any Finance Document obliges an Existing Lender to:

 

(A)          accept a re-transfer from a New Lender of any of the rights and
obligations assigned or transferred under this Clause 25; or

 

(B)          support any losses directly or indirectly incurred by the New Lender
by reason of the non-performance by the Borrower of its obligations under the
Finance Documents or otherwise.

 

25.4         Procedure
for transfer

 

25.4.1         A transfer is effected in accordance with Clause 25.4.2 below when
the Agent executes an otherwise duly completed Transfer Certificate delivered
to it by the Existing Lender and the New Lender.  The Agent shall, as soon as reasonably
practicable after receipt by it of a duly completed Transfer Certificate
appearing on its face to comply with the terms of this Agreement and delivered
in accordance with the terms of this Agreement, execute that Transfer
Certificate.

 

25.4.2         On the Transfer Date:

 

(A)          to the extent that in the Transfer Certificate the Existing Lender
seeks to transfer by novation its rights and obligations under the Finance
Documents the Borrower and the Existing Lender shall be released from further
obligations towards one another under the Finance Documents and their
respective rights against one another under the Finance Documents shall be
cancelled (being the “Discharged Rights and
Obligations”);

 

(B)          the Borrower and the New Lender shall assume obligations towards one
another and/or acquire rights against one another which differ from the
Discharged Rights and Obligations only insofar as the Borrower and the

 

64

 

New Lender
have assumed and/or acquired the same in place of the Borrower and the Existing
Lender;

 

(C)          the Agent, the Arranger, the Security Trustee, the New Lender and
other Lenders shall acquire the same rights and assume the same obligations
between themselves as they would have acquired and assumed had the New Lender
been an Original Lender with the rights and/or obligations acquired or assumed
by it as a result of the transfer and to that extent the Agent, the Arranger,
the Security Trustee and the Existing Lender shall each be released from
further obligations to each other under the Finance Documents; and

 

(D)          the New Lender shall become a Party as a “Lender”.

 

25.5         Disclosure
of information

 

25.5.1         Any Lender may disclose to its professional advisers, its auditors,
any of its Affiliates and any other person:

 

(A)          to (or through) whom that Lender assigns or transfers (or may
potentially assign or transfer) all or any of its rights and obligations under
this Agreement;

 

(B)          with (or through) whom that Lender enters into (or may potentially
enter into) any sub-participation in relation to, or any other transaction
under which payments are to be made by reference to, this Agreement or the
Borrower;

 

(C)          to whom, and to the extent that, information is required to be
disclosed by any applicable law or regulation; or

 

(D)          any rating agency,

 

any information about the Borrower, the Group and the
Finance Documents as that Lender shall consider appropriate provided that, in
the case of any person to whom information is disclosed under (A) or (B) above
(except where such disclosure is made in connection with (i) any
securitisation or capital markets issue of which a participation in the Loans
is to form a part or (ii) any general syndication), such person agrees to
keep such information confidential.

 

25.5.2         The Lenders may from time to time carry out credit checks on the
Borrower.

 

25.6         Tranching

 

The Finance Parties may whether in connection with any
securitisation, syndication, or other assignment or transfer of any or all of
their rights and obligations under this Agreement or otherwise, subdivide,
split, sever or modify any Facility provided that there shall be no overall
increase in any payments by the Borrower under this Agreement following such
subdivision, split, severance or modification of any Facility.

 

25.7         Securitisation,
Syndication or Sell Down

 

The Borrower agrees to co-operate with the Finance
Parties in connection with any sale or transfer of the Finance Parties’
interest in any Loan and/or any of the Finance Documents or in connection with
any securitisation, syndication, assignment or transfer of any Loan or

 

65

 

part of any Loan whether alone or in conjunction with
any other loan or loans and agrees to provide such information and to execute
such documents as the Agent may reasonably request (including making available
senior management and representatives of the Borrower to participate in bank
meetings and/or rating agency and investor meetings at such time and places as
the Agent may reasonably request and providing the Finance Parties with all the
information reasonably required by them to complete such sale, transfer,
securitisation or syndication of any Loan). 
Any such securitisation, syndication, assignment or other transfer of
any Loan is to be made without additional costs being incurred by the
Borrower.  All costs and expenses
(including legal fees) in connection with the negotiation, preparation,
printing, execution, syndication, assignment or transfer and securitisation of
any Loan or any part of it and/or any of the Finance Documents shall be borne
by the Finance Parties.

 

To ensure an orderly and effective syndication or
securitisation of any Facility, the Borrower agrees that until the completion
of that process (as determined by Citigroup), the Borrower will not, and will
not permit any of its Subsidiaries to, syndicate or issue, attempt to syndicate
or issue, announce or authorise the announcement of the syndication or issuance
of, or engage in discussions concerning the syndication or issuance of, any
debt facility (including the establishment of a series of bilateral
arrangements) or debt securities (including any renewals thereof) in the
commercial bank or capital markets, without the prior written consent of
Citigroup; provided that the foregoing shall not limit the Borrower’s ability
to issue commercial papers, utilise other short-term debt programmes currently
in place or issue equity securities.

 

26.          ASSIGNMENTS AND TRANSFER BY THE BORROWER

 

The Borrower may not assign any of its rights or
transfer any of its rights or obligations under the Finance Documents.

 

66

 

SECTION 9

 

THE FINANCE PARTIES

 

27.          ROLE OF THE AGENT, THE ARRANGER AND THE
SECURITY TRUSTEE

 

27.1         Appointment
of the Agent

 

27.1.1         Each other Finance Party appoints the Agent to act as its agent
under and in connection with the Finance Documents.

 

27.1.2         Each other Finance Party authorises the Agent to exercise the
rights, powers, authorities and discretions specifically given to the Agent
under or in connection with the Finance Documents together with any other
incidental rights, powers, authorities and discretions.

 

27.2         Duties
of the Agent

 

27.2.1         The Agent shall promptly forward to a Party the original or a copy
of any document which is delivered to the Agent for that Party by any other
Party.

 

27.2.2         Except where a Finance Document specifically provides otherwise, the
Agent is not obliged to review or check the adequacy, accuracy or completeness
of any document it forwards to another Party.

 

27.2.3         If the Agent receives notice from a Party referring to this
Agreement, describing a Default and stating that the circumstance described is
a Default, it shall promptly notify the Finance Parties.

 

27.2.4         If the Agent is aware of the non-payment of any principal, interest,
commitment fee or other fee payable to a Finance Party (other than the Agent or
the Arranger) under this Agreement it shall promptly notify the other Finance
Parties.

 

27.2.5         The Agent’s duties under the Finance Documents are solely mechanical
and administrative in nature.

 

27.3         Appointment
of the Security Trustee

 

27.3.1         Each other Finance Party appoints the Security Trustee to act as
trustee on its behalf under and in connection with the Finance Documents.

 

27.3.2         Each other Finance Party
authorises the Security Trustee to exercise the rights, powers, authorities and
discretions specifically given to the Security Trustee under or in connection
with the Finance Documents together with any other incidental rights, powers,
authorities and discretions.

 

27.4         Role of
the Security Trustee

 

27.4.1         The Security Trustee declares that it shall hold the security
created or expressed to be created in favour of the Security Trustee pursuant
to the Finance Documents on trust for the benefit of the Finance Parties.  Each of the Parties to this Agreement agrees
that the Security Trustee shall have only those duties, obligations and
responsibilities expressly specified in this Agreement and in the Finance
Documents (and no others shall be implied).

 

67

 

27.4.2         The Security Trustee shall be entitled (i) to set aside by way
of reserve amounts required to meet and (ii) to make and pay any
deductions and withholdings (on account of Taxes or otherwise) which it is or
may be required by any applicable law to make from any distribution or payment
made by it under this Agreement and to pay all Taxes which may be assessed
against it in respect of any assets or revenues that are subject to the
security created or expressed to be created in favour of the Security Trustee
pursuant to the Finance Documents or as a consequence of performing its duties,
or by virtue of its capacity as Security Trustee under any of the Finance
Documents or otherwise (other than in connection with its remuneration for
performing its duties under this Agreement).

 

27.4.3         If the Security Trustee receives notice from the Borrower or any
other person referring to a Default under this Agreement, it shall promptly
notify the Lenders.

 

27.5         Role of
the Arranger

 

Except as specifically provided in the Finance
Documents, the Arranger has no obligations of any kind to any other Party under
or in connection with any Finance Document.

 

27.6         No
fiduciary duties

 

27.6.1         Nothing in this Agreement constitutes the Agent or the Arranger as a
trustee or fiduciary of any other person.

 

27.6.2         Neither the Agent nor the Arranger shall be bound to account to any
Lender for any sum or the profit element of any sum received by it for its own
account.

 

27.7         Business
with the Group

 

The Agent, the Arranger and the Security Trustee may
accept deposits from, lend money to and generally engage in any kind of banking
or other business with any member of the Group.

 

27.8         Rights
and discretions of the Agent and Security Trustee

 

27.8.1         The Agent and/or Security Trustee, may rely on:

 

(A)          any representation, notice or document believed by it to be genuine,
correct and appropriately authorised; and

 

(B)          any statement made by a director, authorised signatory or employee
of any person regarding any matters which may reasonably be assumed to be
within his knowledge or within his power to verify.

 

27.8.2         The Agent and/or Security Trustee may assume (unless it has received
notice to the contrary in its capacity as agent or trustee for the Lenders)
that:

 

(A)          no Default has occurred (unless it has actual knowledge of a Default
arising under Clause 24.1 (Non-payment));

 

(B)          any right, power, authority or discretion vested in any Party or the
Majority Lenders has not been exercised; and

 

68

 

(C)          any notice or request made by the Borrower (other than the Drawdown
Request) is made on behalf of and with the consent and knowledge of the
Borrower.

 

27.8.3         The Agent and/or Security Trustee may engage, pay for and rely on
the advice or services of any lawyers, accountants, surveyors or other experts.

 

27.8.4         The Agent and/or the Security Trustee may act in relation to the
Finance Documents through its personnel and agents.

 

27.8.5         The Agent and/or the Security Trustee may disclose to any other Party
any information it reasonably believes it has received as agent under this
Agreement.

 

27.8.6         Notwithstanding any other provision of any Finance Document to the
contrary, neither the Agent, Security Trustee nor the Arranger is obliged to do
or omit to do anything if it would or might in its reasonable opinion
constitute a breach of any law or regulation or a breach of a fiduciary duty or
duty of confidentiality.

 

27.9         Majority
Lenders’ instructions

 

27.9.1         Unless a contrary indication appears in a Finance Document, the
Agent shall (i) exercise any right, power, authority or discretion vested
in it as Agent in accordance with any instructions given to it by the Majority
Lenders (or, if so instructed by the Majority Lenders, refrain from exercising
any right, power, authority or discretion vested in it as Agent) and (ii) not
be liable for any act (or omission) if it acts (or refrains from taking any
action) in accordance with an instruction of the Majority Lenders.

 

27.9.2         Unless a contrary indication appears in a Finance Document, any
instructions given by the Majority Lenders will be binding on all the Finance
Parties.

 

27.9.3         The Agent may refrain from acting in accordance with the
instructions of the Majority Lenders (or, if appropriate, the Lenders) until it
has received such security as it may require for any cost, loss or liability
(together with any associated VAT) which it may incur in complying with the
instructions.

 

27.9.4         In the absence of instructions from the Majority Lenders, (or, if
appropriate, the Lenders) the Agent may act (or refrain from taking action) as
it considers to be in the best interest of the Lenders.

 

27.9.5         The Agent is not authorised to act on behalf of a Lender (without
first obtaining that Lender’s consent) in any legal or arbitration proceedings
relating to any Finance Document.

 

27.10       Responsibility
for documentation

 

Neither the Agent, the Arranger nor the Security
Trustee:

 

27.10.1       is responsible for the adequacy, accuracy and/or completeness of any
information (whether oral or written) supplied by the Agent, the Arranger, the
Security Trustee, the Borrower or any other person given in or in connection
with any Finance Document; or

 

69

 

27.10.2       is responsible for the legality, validity, effectiveness, adequacy
or enforceability of any Finance Document or any other agreement, arrangement
or document entered into, made or executed in anticipation of or in connection
with any Finance Document.

 

27.11       Exclusion
of liability

 

27.11.1       Without limiting Clause 27.11.2 below, the Agent will not be liable
for any action taken by it under or in connection with any Finance Document,
unless directly caused by its gross negligence or wilful misconduct.

 

27.11.2       No Party (other than the Agent) may take any proceedings against any
officer, employee or agent of the Agent in respect of any claim it might have
against the Agent or in respect of any act or omission of any kind by that
officer, employee or agent in relation to any Finance Document and any officer,
employee or agent of the Agent may rely on this Clause.

 

27.11.3       The Agent will not be liable for any delay (or any related
consequences) in crediting an account with an amount required under the Finance
Documents to be paid by the Agent if the Agent has taken all necessary steps as
soon as reasonably practicable to comply with the regulations or operating
procedures of any recognised clearing or settlement system used by the Agent
for that purpose.

 

27.12       Lenders’
indemnity to the Agent and Security Trustee

 

Each Lender shall (in proportion to its share of the
Total Commitments or, if the Total Commitments are then zero, to its share of
the Total Commitments immediately prior to their reduction to zero) indemnify
the Agent and/or the Security Trustee, within 3 (three) Business Days of
demand, against any cost, loss or liability incurred by the Agent or the
Security Trustee (otherwise than by reason of the Agent’s or Security Trustee’s
(as the case may be) gross negligence or wilful misconduct) in acting as Agent
or Security Trustee under the Finance Documents (unless the Agent or Security
Trustee has been reimbursed by the Borrower pursuant to a Finance Document).

 

27.13       Resignation
of the Agent or Security Trustee

 

27.13.1       The Agent and/or Security Trustee may resign and appoint one of its
Affiliates acting through an office in the United Kingdom as successor by
giving notice to the other Finance Parties and the Borrower.

 

27.13.2       Alternatively the Agent and/or Security Trustee may resign by giving
notice to the other Finance Parties and the Borrower, in which case the
Majority Lenders (after consultation with the Borrower) may appoint a successor
Agent or Security Trustee (on the case may be).

 

27.13.3       If the Majority Lenders have not appointed a successor Agent or
Security Trustee (on the case may be) in accordance with Clause 27.13.2 above
within 30 (thirty) days after notice of resignation was given, the Agent or
Security Trustee (as the case may be) (after consultation with the Borrower) may
appoint a successor Agent or Security Trustee (acting through an office in the
United Kingdom).

 

27.13.4       The retiring Agent or Security Trustee (as the case may be) shall,
at its own cost, make available to the successor Agent or Security Trustee such
documents and

 

70

 

records
and provide such assistance as the successor Agent or Security Trustee may
reasonably request for the purposes of performing its functions as Agent or
Security Trustee under the Finance Documents.

 

27.13.5       The Agent’s or Security Trustee’s resignation notice shall only take
effect upon the appointment of a successor.

 

27.13.6       Upon the appointment of a successor, the retiring Agent or Security
Trustee shall be discharged from any further obligation in respect of the
Finance Documents but shall remain entitled to the benefit of this Clause 27.  Its successor and each of the other Parties
shall have the same rights and obligations amongst themselves as they would
have had if such successor had been an original Party.

 

27.13.7       After consultation with the Borrower, the Majority Lenders may, by
notice to the Agent or Security Trustee, require it to resign in accordance
with Clause 27.13.2 above.  In this
event, the Agent or Security Trustee (on the case may be) shall resign in
accordance with Clause 27.13.2 above.

 

27.14       Confidentiality

 

27.14.1       In acting as agent or Trustee for the Finance Parties, the Agent
and/or Security Trustee shall be regarded as acting through its agency division
which shall be treated as a separate entity from any other of its divisions or
departments.

 

27.14.2       If information is received by another division or department of the
Agent or Security Trustee, it may be treated as confidential to that division
or department and the Agent or Security Trustee shall not be deemed to have
notice of it.

 

27.15       Relationship
with the Lenders

 

27.15.1       The Agent may treat each Lender as a Lender, entitled to payments
under this Agreement and acting through its Facility Office unless it has
received not less than 5 (five) Business Days prior notice from that Lender to
the contrary in accordance with the terms of this Agreement.

 

27.15.2       Each Lender shall supply the Agent with any information required by
the Agent in order to calculate the Mandatory Cost in accordance with Schedule 4
(Mandatory Cost formula).

 

27.16       Credit
appraisal by the Lenders

 

Without affecting the responsibility of the Borrower
for information supplied by it or on its behalf in connection with any Finance
Document, each Lender confirms to the Agent and the Arranger that it has been,
and will continue to be, solely responsible for making its own independent
appraisal and investigation of all risks arising under or in connection with
any Finance Document including but not limited to:

 

27.16.1       the financial condition, status and nature of each member of the
Group;

 

27.16.2       the legality, validity, effectiveness, adequacy or enforceability of
any Finance Document and any other agreement, arrangement or document entered
into, made or executed in anticipation of, under or in connection with any
Finance Document;

 

71

 

27.16.3       whether that Lender has recourse, and the nature and extent of that
recourse, against any Party or any of its respective assets under or in
connection with any Finance Document, the transactions contemplated by the
Finance Documents or any other agreement, arrangement or document entered into,
made or executed in anticipation of, under or in connection with any Finance
Document; and

 

27.16.4       the adequacy, accuracy and/or completeness of any information
provided by the Agent, any Party or by any other person under or in connection
with any Finance Document, the transactions contemplated by the Finance
Documents or any other agreement, arrangement or document entered into, made or
executed in anticipation of, under or in connection with any Finance Document.

 

27.17       Agent’s
and Security Trustee’s Management Time

 

Any amount payable to the Agent under Clause 15.5 (Indemnity to the Agent and Security Trustees), Clause 17
(Costs and expenses) and Clause 27.12 (Lenders’ indemnity to the Agent and Security Trustee) shall
include the cost of utilising the Agent’s or Security Trustee’s management time
or other resources and will be calculated on the basis of such reasonable daily
or hourly rates as the Agent or Security Trustee may notify to the Borrower and
the Lenders, and is in addition to any fee paid or payable to the Agent under
Clause 12 (Fees).

 

27.18       Deduction
from amounts payable by the Agent

 

If any Party owes an amount to the Agent under the
Finance Documents the Agent may, after giving notice to that Party, deduct an
amount not exceeding that amount from any payment to that Party which the Agent
would otherwise be obliged to make under the Finance Documents and apply the
amount deducted in or towards satisfaction of the amount owed.  For the purposes of the Finance Documents
that Party shall be regarded as having received any amount so deducted.

 

28.          THE SECURITY TRUSTEE

 

28.1         Trust

 

The Security Trustee shall hold the benefit of the
Security Documents to which it is a party in its capacity as Security Trustee
on trust for the Finance Parties.

 

28.2         Perpetuity,
powers, conflict and enforcement

 

28.2.1         The perpetuity period for the trusts established in relation to the
Security Documents by this Agreement shall be eighty years from the date of
this Agreement.

 

28.2.2         The powers conferred upon the Security Trustee by this Agreement and
the Security Documents shall be in addition to any powers which may from time
to time be vested in trustees by the general law.

 

28.2.3         If there is any conflict between the provisions of this Clause 28
and any Security Document with regard to any matters affecting the Security
Trustee, this Clause 28 will prevail.

 

28.2.4         Each Finance Party authorises and directs the Security Trustee (by
itself or by such person(s) as it may nominate) to enforce any security granted
by the

 

72

 

Security Documents as trustee (or as otherwise
provided) on its behalf, subject always to the terms of this Agreement and the
Security Documents.

 

28.3         Additional
Trustees

 

28.3.1         The Security Trustee may, upon giving prior notice to the Borrower
appoint any person established or resident in any jurisdiction (whether a trust
corporation or not) to act either as a separate trustee or as a co-trustee
jointly with the Security Trustee if the Security Trustee considers such
appointment to be in the interests of the Finance Parties.

 

28.3.2         Each of the Finance Parties irrevocably appoints the Security
Trustee to be its attorney in its name and on its behalf to execute any such
instrument of appointment.  Any such
additional trustee shall have such trusts, powers, obligations, authorities an
discretions (not exceeding those conferred on the Security Trustee by the
Finance Documents) and remuneration as shall be conferred or imposed by the
instrument of appointment.  The Security
Trustee shall have power in like manner to remove any such person.  The Borrower shall indemnify such additional
trustee as though it were the Security Trustee in accordance with this Clause.

 

28.4         Liability

 

28.4.1         The Security Trustee shall not be liable:

 

(A)          for any failure to give notice to any third party or to register,
file or record (or any defect in such registration, filing or recording) any
security created pursuant to any Security Document, or effect, procure the
registration of or otherwise protect the floating charge or any other such security
created by or pursuant to the Security Documents under the Land Registration
Act 1925 or nay other registration laws in England or any other jurisdiction;

 

(B)          for any failure to obtain any licence, consent or other authority
for the creation of any such security;

 

(C)          for any failure, omission, or defect in perfecting or protecting the
security constituted by the Security Documents; or

 

(D)          for any other omission or act taken by it in connection with any
Security Document unless directly caused by its gross negligence or wilful
misconduct.

 

28.4.2         The Security Trustee shall have no responsibility whatsoever to any
Finance Party as regards any deficiency which might arise because the Security
Trustee is subject to any tax or withholding from any payment made by it under
any Security Document.

 

28.4.3         Section 1 of the Trustee Act 2000 shall not apply to the duties
of the Security Trustee in relation to the trusts constituted by any Finance
Document.  Where there are any
inconsistencies between that Act and the provisions of that Finance Document,
the provisions of that Finance Document shall, to the extent allowed by law,
prevail and, in the case of any inconsistency with that Act, the provisions

 

73

 

of that Finance Document shall constitute a
restriction or exclusion for the purposes of that Act.

 

28.5         Security Trustee as trustee

 

28.5.1         The Security Trustee has no duty (in the absence of a specific
provision in this Agreement or any Security Document):

 

(E)           to provide any Party with any credit or other information relating
to the business, assets or financial condition of the Borrower whenever coming
into its possession; or

 

(1)           unless specifically requested to do so by the Majority Lenders, to
request any certificates or other documents from the Borrower or any other
person.

 

No person shall be entitled to take any action to
obtain from the Security Trustee any such credit or other information or any
such certificates or documents.

 

28.5.2         The Security Trustee need not (unless and to the extent ordered so
to do by a court of competent jurisdiction) disclose any information
(including, without limitation, information of a confidential, financial or
price-sensitive nature) if such disclosure would or might in the reasonable
opinion of the Security Trustee constitute a breach of any law or regulation or
be otherwise actionable at the suit of any person.

 

28.5.3         The Security Trustee may accept without enquiry such title as the
Borrower may have to the property over which security is intended to be created
by any Security Document or over which a negative pledge is given.

 

28.5.4         Save as otherwise provided in the Finance Documents, all moneys
which under the trusts herein or therein contained are received by the Security
Trustee in its capacity as trustee or otherwise may be invested in the name of
or under the control of the Security Trustee in any investment for the time
being authorised by English law for the investment by trustees of trust money
or in any other investments which may be selected by the Security Trustee with
the consent of the Majority Lenders. 
Additionally, the same may be placed on deposit in the name of or under
the control of the Security Trustee at such bank or institution (including the
Security Trustee) and upon such terms as the Security Trustee may think fit.

 

28.5.5         In no circumstances shall the Security Trustee itself be obliged to
give an indemnity to any receiver who requires an indemnity as a condition of
appointment.

 

28.6         Supplemental Powers

 

28.6.1         The Security Trustee shall have all the powers conferred upon
trustees by the Trustee Act 1925 of England and Wales.

 

28.6.2         The provisions of this Clause 28.6.2 shall supplemental the Trustee
Act 1925.

 

28.6.3         The Security Trustee shall:

 

74

 

(F)           not be under any obligation to hold any title deeds, Security
Documents or any other documents in connection with the assets charged by any
Security Document or any other such security in its own possession or to take
any steps to protect or preserve the same;

 

(G)          without prejudice to paragraph (A) above, be at liberty to hold
the Finance Documents and any other documents relating thereto or to deposit
them in any part of the world with any bank or company whose business includes
undertaking the safe custody of documents or firm of lawyers considered by the Security
Trustee shall not be responsible for or required to insure against any
liability incurred in connection with any such holding or deposit and may pay
all sums required to be paid on account of or in respect of any such deposit;
and

 

(H)          save as expressly otherwise provided in any Finance Document, have
absolute and uncontrolled discretion as to the exercise or non-exercise of its
trusts, powers, authorities and discretions under the Security Documents and
shall not be responsible for any loss or liability which may result from their
exercise or non-exercise and in particular the Security Trustee shall not be
bound to take any action under any provision of any Finance Document unless it
shall first be indemnified to its satisfaction against all costs, expenses,
losses or liabilities to which it may render itself liable or which it may
incur by so doing.

 

28.6.4         The Security Trustee may whenever it thinks fit delegate by power of
attorney or otherwise to any person or persons or fluctuating body of persons
all or any of its trusts, powers, authorities and discretions under any
Security Documents.  Such delegation may
be made upon such terms (including power to sub-delegate) and subject to such
conditions and regulations as the Security Trustee may in the interests of the
Finance Parties think fit.  The Security
Trustee shall not be under any obligation to supervise the proceedings or acts
of any such delegate or any misconduct or default on the part of any such
delegate or sub-delegate unless the Security Trustee wilfully defaulted in such
delegation.

 

28.6.5         The Security Trustee may in the conduct of the trusts instead of
acting personally employ and pay an agent (whether being a lawyer or other
professional person) to transact or conduct, or concur in transacting or
conducting, any business and to do, or concur in doing, all acts required to be
done in connection with the Security Documents. 
The Security Trustee shall not be in any way responsible for any
liability incurred by reason of any misconduct or default on the part of any
such agent or be bound to supervise the proceedings or acts of any such agent
unless the Security Trustee wilfully defaulted in such delegation.

 

28.7         Enforcement

 

No Finance Party (excluding for this purpose the
Security Trustee) shall have any independent power to enforce any of the
Security Documents or to exercise any rights, discretions or powers to grant
any consents or releases under or pursuant to the Security Documents or
otherwise have direct recourse to the security constituted by any of the
Security Documents except through the Security Trustee.

 

75

 

28.8         Release of security

 

The Security Trustee may release any security over any
asset the subject of the Security Documents if:

 

28.8.1         the Majority Lenders consent to such release; or

 

28.8.2         the asset is disposed of in accordance with any express permission
granted in the Finance Documents; or

 

28.8.3         the asset is disposed of by any receiver or other person in
accordance with the powers granted under the Security Documents,

 

29.          CONDUCT OF BUSINESS BY THE FINANCE
PARTIES

 

29.1         No
provision of this Agreement will:

 

29.1.1         interfere with the right of any Finance Party to arrange its affairs
(tax or otherwise) in whatever manner it thinks fit;

 

29.1.2         oblige any Finance Party to investigate or claim any credit, relief,
remission or repayment available to it or the extent, order and manner of any
claim; or

 

29.1.3         oblige any Finance Party to disclose any information relating to its
affairs (tax or otherwise) or any computations in respect of Tax.

 

30.          SHARING AMONG THE FINANCE PARTIES

 

30.1         Payments
to Finance Parties

 

If a Finance Party (a “Recovering
Finance Party”) receives or recovers any amount from the Borrower
other than in accordance with Clause 31 (Payment mechanics)
and applies that amount to a payment due under the Finance Documents then:

 

30.1.1         the Recovering Finance Party shall, within 3 (three) Business Days,
notify details of the receipt or recovery to the Agent;

 

30.1.2         the Agent shall determine whether the receipt or recovery is in
excess of the amount the Recovering Finance Party would have been paid had the
receipt or recovery been received or made by the Agent and distributed in
accordance with Clause 31 (Payment mechanics),
without taking account of any Tax which would be imposed on the Agent in
relation to the receipt, recovery or distribution; and

 

30.1.3         the Recovering Finance Party shall, within 3 (three) Business Days
of demand by the Agent, pay to the Agent an amount (the “Sharing
Payment”) equal to such receipt or recovery less any amount which
the Agent determines may be retained by the Recovering Finance Party as its
share of any payment to be made, in accordance with Clause 31.6 (Partial payments).

 

30.2         Redistribution
of payments

 

The Agent shall treat the Sharing Payment as if it had
been paid by the Borrower and distribute it between the Finance Parties (other
than the Recovering Finance Party) in accordance with Clause 31.6 (Partial payments).

 

76

 

30.3         Recovering
Finance Party’s rights

 

30.3.1         On a distribution by the Agent under Clause 30.2 (Redistribution of payments), the Recovering Finance Party
will be subrogated to the rights of the Finance Parties which have shared in
the redistribution.

 

30.3.2         If and to the extent that the Recovering Finance Party is not able
to rely on its rights under Clause 30.3.1 above, the Borrower shall be liable
to the Recovering Finance Party for a debt equal to the Sharing Payment which
is immediately due and payable.

 

30.4         Reversal
of redistribution

 

If any part of the Sharing Payment received or
recovered by a Recovering Finance Party becomes repayable and is repaid by that
Recovering Finance Party, then:

 

30.4.1         each
Finance Party which has received a share of the relevant Sharing Payment
pursuant to Clause 30.2 (Redistribution of payments)
shall, upon request of the Agent, pay to the Agent for account of that
Recovering Finance Party an amount equal to the appropriate part of its share
of the  Sharing Payment (together with an
amount as is necessary to reimburse that Recovering Finance Party for its
proportion of any interest on the Sharing Payment which that Recovering Finance
Party is required to pay); and

 

30.4.2         that
Recovering Finance Party’s rights of subrogation in respect of any
reimbursement shall be cancelled and the Borrower will be liable to the reimbursing
Finance Party for the amount so reimbursed.

 

30.5         Exceptions

 

30.5.1         This Clause 30 shall not apply to the extent that the Recovering
Finance Party would not, after making any payment pursuant to this Clause, have
a valid and enforceable claim against the Borrower.

 

30.5.2         A Recovering Finance Party is not obliged to share with any other
Finance Party any amount which the Recovering Finance Party has received or
recovered as a result of taking legal or arbitration proceedings, if:

 

(A)          it notified that other Finance Party of the legal or arbitration
proceedings; and

 

(B)          that other Finance Party had an opportunity to participate in those
legal or arbitration proceedings but did not do so as soon as reasonably
practicable having received notice and did not take separate legal or
arbitration proceedings.

 

77

 

SECTION 10

 

ADMINISTRATION

 

31.          PAYMENT MECHANICS

 

31.1         Payments
to the Borrower

 

Each payment to be made to the Borrower under this
Agreement shall be made available by the Lenders to the General Account (with
the exception of the first drawdown hereunder which shall be paid into the bank
account of the Borrower’s Solicitors).

 

31.2         Payments
to the Agent

 

31.2.1         On each date on which the Borrower or a Lender is required to make a
payment under a Finance Document, the Borrower or Lender shall make the same
available to the Agent (unless a contrary indication appears in a Finance
Document) for value on the due date at the time and in such funds specified by
the Agent as being customary at the time for settlement of transactions in the
relevant currency in the place of payment.

 

31.2.2         Payment shall be made to such account in London with such bank as
the Agent specifies.

 

31.3         Distributions
by the Agent

 

Each payment received by the Agent under the Finance
Documents for another Party shall, subject to Clause 31.4 (Distributions
to the Borrower) and Clause 31.5 (Clawback)
be made available by the Agent as soon as practicable after receipt to the
Party entitled to receive payment in accordance with this Agreement (in the
case of a Lender, for the account of its Facility Office), to such account as
that Party may notify to the Agent by not less than 5 (five) Business Days’
notice with a bank in London.

 

31.4         Distributions
to the Borrower

 

The Agent may (with the consent of the Borrower or in
accordance with Clause 32 (Set-off)) apply
any amount received by it for the Borrower in or towards payment (on the date
and in the currency and funds of receipt) of any amount due from the Borrower
under the Finance Documents or in or towards purchase of any amount of any
currency to be so applied.

 

31.5         Clawback

 

31.5.1         Where a sum is to be paid to the Agent under the Finance Documents
for another Party, the Agent is not obliged to pay that sum to that other Party
(or to enter into or perform any related exchange contract) until it has been
able to establish to its satisfaction that it has actually received that sum.

 

31.5.2         If the Agent pays an amount to another Party and it proves to be the
case that the Agent had not actually received that amount, then the Party to
whom that amount (or the proceeds of any related exchange contract) was paid by
the Agent shall on demand refund the same to the Agent together with interest on
that amount from

 

78

 

the
date of payment to the date of receipt by the Agent, calculated by the Agent to
reflect its cost of funds.

 

31.6         Partial
payments

 

31.6.1         If the Agent receives a payment that is insufficient to discharge
all the amounts then due and payable by the Borrower under the Finance
Documents, the Agent shall apply that payment towards the obligations of the
Borrower under the Finance Documents in the following order:

 

(A)          first, in or towards
payment pro rata of any unpaid fees, costs and expenses of the Finance Parties
under the Finance Documents;

 

(B)          secondly, in or
towards payment pro rata of any accrued interest, fee or commission due to the
A Lenders but unpaid under this Agreement;

 

(C)          thirdly, in or towards
payment pro rata of any principal due to the A Lenders but unpaid under this
Agreement;

 

(D)          fourthly, in or
towards payment pro rata of any amount due (but unpaid) to an A Lender under
Clause 15.2 (Hedging Arrangement Indemnity)
with respect to any Hedging Arrangement entered into in relation to an A Loan;

 

(E)           fifthly, in or
towards payment pro rata of any accrued interest, fee or commission due to the
B Lenders but unpaid under this Agreement

 

(F)           sixthly, in or
towards payment pro rata of any principal due to the B Lenders but unpaid under
this Agreement;

 

(G)          seventhly, in
or towards payment pro rata of any amount due but unpaid to a B Lender under
Clause 15.2 (Hedging Arrangement Indemnity)
with respect to any Hedging Arrangement entered into in relation to an B Loan;
and

 

(H)          eighthly, in or
towards payment pro rata of any other sum due but unpaid under the Finance
Documents.

 

31.6.2         The Agent may at its discretion and shall, if so directed by the
Majority Lenders, vary the order set out in Clauses 31.6.1(B) to (D) above.

 

31.6.3         Clauses 31.6.1 and 31.6.2 above will override any appropriation made
by the Borrower.

 

31.7         No
set-off by the Borrower

 

All payments to be made by the Borrower under the
Finance Documents shall be calculated and be made without (and free and clear
of any deduction for) set-off or counterclaim.

 

31.8         Business
Days

 

31.8.1         Any payment which is due to be made on a day that is not a Business
Day shall be made on the next Business Day in the same calendar month (if there
is one) or the preceding Business Day (if there is not).

 

79

 

31.8.2         During any extension of the due date for payment of any principal or
Unpaid Sum under this Agreement interest is payable on the principal or Unpaid
Sum at the rate payable on the original due date.

 

31.9         Currency
of account

 

31.9.1         Subject to Clauses 31.9.2 and 31.9.3 below, Sterling is the currency
of account and payment for any sum due from the Borrower under any Finance
Document.

 

31.9.2         Each payment in respect of costs, expenses or Taxes shall be made in
the currency in which the costs, expenses or Taxes are incurred.

 

31.9.3         Any amount expressed to be payable in a currency other than Sterling
shall be paid in that other currency.

 

31.10       Change of
currency

 

31.10.1       Unless otherwise prohibited by law, if more than one currency or
currency unit are at the same time recognised by the central bank of any
country as the lawful currency of that country, then:

 

(A)          any reference in the Finance Documents to, and any obligations
arising under the Finance Documents in, the currency of that country shall be
translated into, or paid in, the currency or currency unit of that country
designated by the Agent (after consultation with the Borrower); and

 

(B)          any translation from one currency or currency unit to another shall
be at the official rate of exchange recognised by the central bank for the
conversion of that currency or currency unit into the other, rounded up or down
by the Agent (acting reasonably).

 

31.10.2       If a change in any currency of a country occurs, this Agreement
will, to the extent the Agent (acting reasonably and after consultation with
the Borrower) specifies to be necessary, be amended to comply with any
generally accepted conventions and market practice in the Relevant Interbank
Market and otherwise to reflect the change in currency.

 

32.          SET-OFF

 

A Finance Party may set off any matured obligation due
from the Borrower under the Finance Documents (to the extent beneficially owned
by that Finance Party) against any matured obligation owed by that Finance
Party to the Borrower, regardless of the place of payment, booking branch or
currency of either obligation.  If the
obligations are in different currencies, the Finance Party may convert either
obligation at a market rate of exchange in its usual course of business for the
purpose of the set-off.

 

33.          NOTICES

 

33.1         Communications
in writing

 

Any communication to be made under or in connection
with the Finance Documents shall be made in writing and, unless otherwise
stated, may be made by fax or letter.

 

80

 

33.2         Addresses

 

The address and fax number (and the department or
officer, if any, for whose attention the communication is to be made) of each
Party for any communication or document to be made or delivered under or in
connection with the Finance Documents is:

 

33.2.1         in the case of the Borrower, that identified with its signature
below;

 

33.2.2         in the case of each Lender, that notified in writing to the Agent on
or prior to the date on which it becomes a Party; and

 

33.2.3         in the case of the Agent, that identified with its signature below,

 

or any substitute address, fax number or department or
officer as the Party may notify to the Agent (or the Agent may notify to the
other Parties, if a change is made by the Agent) by not less than 5 (five)
Business Days’ notice.

 

33.3         Delivery

 

33.3.1         Any communication or document made or delivered by one person to
another under or in connection with the Finance Documents will only be
effective:

 

(A)          if by way of fax, when received in legible form; or

 

(B)          if by way of letter, when it has been left at the relevant address
or 5 (five) Business Days after being deposited in the post postage prepaid in
an envelope addressed to it at that address,

 

and, if a particular department or officer is
specified as part of its address details provided under Clause 33.2 (Addresses), if addressed to that department or officer.

 

33.3.2         Any communication or document to be made or delivered to the Agent
will be effective only when actually received by the Agent and then only if it
is expressly marked for the attention of the department or officer identified
with the Agent’s signature below (or any substitute department or officer as
the Agent shall specify for this purpose).

 

33.3.3         All notices from or to the Borrower shall be sent through the Agent.

 

33.4         Notification
of address and fax number

 

Promptly upon receipt of notification of an address
and fax number or change of address or fax number pursuant to Clause 33.2 (Addresses) or changing its own address or fax number, the
Agent shall notify the other Parties.

 

33.5         Electronic
communication

 

33.5.1         Any communication to be made between the Agent and a Lender under or
in connection with the Finance Documents may be made by electronic mail or
other electronic means, if the Agent and the relevant Lender:

 

(A)          agree that, unless and until notified to the contrary, this is to be
an accepted form of communication;

 

81

 

(B)          notify each other in writing of their electronic mail address and/or
any other information required to enable the sending and receipt of information
by that means; and

 

(C)          notify each other of any change to their address or any other such
information supplied by them.

 

33.5.2         Any electronic communication made between the Agent and a Lender
will be effective only when actually received in readable form and in the case
of any electronic communication made by a Lender to the Agent only if it is
addressed in such a manner as the Agent shall specify for this purpose.

 

33.6         English
language

 

33.6.1         Any notice given under or in connection with any Finance Document
must be in English.

 

33.6.2         All other documents provided under or in connection with any Finance
Document must be:

 

(A)          in English; or

 

(B)          if not in English, and if so required by the Agent, accompanied by a
certified English translation and, in this case, the English translation will
prevail unless the document is a constitutional, statutory or other official
document.

 

34.          CALCULATIONS AND CERTIFICATES

 

34.1         Accounts

 

In any litigation or arbitration proceedings arising
out of or in connection with a Finance Document, the entries made in the
accounts maintained by a Finance Party are prima facie
evidence of the matters to which they relate.

 

34.2         Certificates
and Determinations

 

Any certification or determination by a Finance Party
of a rate or amount under any Finance Document is, in the absence of manifest
error, conclusive evidence of the matters to which it relates.

 

34.3         Day
count convention

 

Any interest, commission or fee accruing under a
Finance Document will accrue from day to day and is calculated on the basis of
the actual number of days elapsed and a year of 365 days or, in any case where
the practice in the Relevant Interbank Market differs, in accordance with that
market practice.

 

82

 

35.          REINSTATEMENT

 

35.1         If any payment
by the Borrower or any discharge given by
a Finance Party (whether in respect of the obligations of the Borrower or any security for those obligations or otherwise) is avoided or reduced
as a result of insolvency or any similar event:

 

35.1.1         the liability of the Borrower shall continue as if the payment,
discharge, avoidance or reduction had not occurred; and

 

35.1.2         each Finance Party shall be entitled to recover the value or amount
of that security or payment from the Borrower, as if the payment, discharge,
avoidance or reduction had not occurred.

 

36.          PARTIAL INVALIDITY

 

If, at any time, any provision of the Finance
Documents is or becomes illegal, invalid or unenforceable in any respect under
any law of any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions nor the legality, validity or enforceability of
such provision under the law of any other jurisdiction will in any way be
affected or impaired.

 

37.          REMEDIES AND WAIVERS

 

No failure to exercise, nor any delay in exercising,
on the part of any Finance Party, any right or remedy under the Finance
Documents shall operate as a waiver, nor shall any single or partial exercise
of any right or remedy prevent any further or other exercise or the exercise of
any other right or remedy.  The rights
and remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.

 

38.          AMENDMENTS AND WAIVERS

 

38.1         Required
consents

 

38.1.1         Subject to Clause 38.2 (Exceptions) any
term of the Finance Documents may be amended or waived only with the consent of
the Majority Lenders and any such amendment or waiver will be binding on all
Parties.

 

38.1.2         The Agent may effect, on behalf of any Finance Party, any amendment
or waiver permitted by this Clause.

 

38.2         Exceptions

 

38.2.1         An amendment or waiver that has the effect of changing or which
relates to:

 

(A)          the definition of “Majority Lenders” in Clause 1.1 (Definitions);

 

(B)          an extension to the date of payment of any principal amount under
the Finance Documents;

 

(C)          a reduction in the Margin or a reduction in the amount of any
payment of principal, interest, fees or commission payable;

 

(D)          an increase in or an extension of any Commitment;

 

83

 

(E)           any provision which expressly requires the consent of all the
Lenders; or

 

(F)           Clause 2.2 (Finance Parties’ rights
and obligations), Clause 25 (Changes to the Lenders)
or this Clause 38,

 

shall not be
made without the prior consent of all the Lenders.

 

38.2.2         An amendment or waiver which relates to the rights or obligations of
the Agent or the Arranger may not be effected without the consent of the Agent
or the Arranger.

 

39.          OFFICERS, EMPLOYEES OR AGENTS OF THE
FINANCE PARTIES

 

The Borrower may not take any proceedings against any
officer, employee or agent of a Finance Party in respect of any claim it might
have against a Finance Party (as the case may be) or in respect of any act or
omission of any kind by that officer, employee or agent in connection with any
Finance Document.  Any officer, employee
or agent of a Finance Party may rely on this clause and enforce its terms under
the Contracts (Rights of Third Parties) Act 1999.

 

40.          COUNTERPARTS

 

Each Finance Document may be executed in any number of
counterparts, and this has the same effect as if the signatures on the
counterparts were on a single copy of the Finance Document.

 

84

 

SECTION 11

 

GOVERNING LAW

 

41.          GOVERNING LAW

 

This Agreement is governed by English law.

 

85

 

SCHEDULE 1

 

THE ORIGINAL PARTIES

 

Part I

The Original A Lenders - other than UK Non-Bank Lenders

 

	
  Name of Original Lender

  	
   

  	
  A Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Citibank
  NA London

  	
   

  	
  £

  	
  82,432,000

  	
   

  
					

 

Part II

The Original B Lenders

 

	
  Name of Original Lender

  	
   

  	
  B Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Citibank
  NA London

  	
   

  	
  £

  	
  25,024,000

  	
   

  
					

 

86

 

Part III

The Original Lenders - UK Non-Bank Lenders

 

	
  Name of Original Lender

  	
   

  	
  Commitment

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

87

 

SCHEDULE 2

 

CONDITIONS
PRECEDENT

 

Conditions
Precedent to Initial Drawdown

 

1.1           Original Borrower

 

1.1.1           A copy of the
constitutional documents of the Borrower and the Shareholder.

 

1.1.2           A copy of a resolution of
the board of directors of the Borrower and the Shareholder:

 

(A)          approving the terms of, and
the transactions contemplated by, the Finance Documents to which it is a party
and resolving that it execute the Finance Documents to which it is a party;

 

(B)           authorising a specified
person or persons to execute the Finance Documents to which it is a party on
its behalf; and

 

(C)           authorising a specified
person or persons, on its behalf, to sign and/or despatch all documents and
notices (including, in respect of the Borrower, the Drawdown Request) to be
signed and/or despatched by it under or in connection with the Finance
Documents to which it is a party.

 

1.1.3           A specimen of the signature
of each person authorised by the resolution referred to in Clause 1.1.2 above.

 

1.1.4           A certificate of the
Borrower (signed by a director) confirming that borrowing or guaranteeing, as
appropriate, the Total Commitments would not cause any borrowing, guaranteeing
or similar limit binding on it to be exceeded.

 

1.1.5           A list of all the directors
of the Borrower, together with, for each director:

 

(A)          original or certified copy
passport or driving licence; and

 

(B)           original or certified copy
utility bill addressed to such director.

 

1.1.6           A certificate of an
authorised signatory of the Borrower and the Shareholder certifying that each
copy document relating to it specified in this Part I of Schedule 2
is correct, complete and in full force and effect as at a date no earlier than
the date of this Agreement.

 

1.1.7           A written resolution of the
Shareholder amending the articles of the Borrower.

 

1.2           Legal opinions

 

1.2.1           A legal opinion of Herbert
Smith LLP, legal advisers to the Arranger and the Agent in England.

 

1.2.2           If the Shareholder or a
Subordinated Creditor is incorporated in a jurisdiction other than England and
Wales, a legal opinion of the legal advisers to the

 

88

 

Arranger and the Agent in the relevant
jurisdiction, substantially in the form distributed to the Original Lenders
prior to signing this Agreement.

 

1.3           Other documents and evidence

 

1.3.1           The Original Financial
Statements of the Borrower together with a sources and applications statement
of the Borrower and the latest audited financial statements for each
Shareholder.

 

1.3.2           A certified copy of the
bank statements for the Borrower for the previous 12 months.

 

1.3.3           Evidence that the fees,
costs and expenses then due from the Borrower pursuant to Clause 12 (Fees) and Clause 17 (Costs and expenses)
have been paid or will be paid on or by the first Drawdown Date.

 

1.3.4           Each of the Finance
Documents duly executed by the parties thereto.

 

1.3.5           Duly completed Forms 395 in
respect of each Security Document which is capable of registration at the
Companies Registry.

 

1.3.6           Evidence that the Agent
will receive release documentation in respect of any Security which is held by
any person other than the Security Trustee over the assets charged by the
Security Documents.

 

1.3.7           Evidence of the approval of
the transactions contemplated by the Finance Documents by the credit committee
of the Lenders.

 

1.3.8           Details of any Material
Litigation which is pending or threatened against the Borrower or, if there is
none, a certificate signed by a director confirming that this is the case.

 

1.3.9           Details of any Material
Adverse Effect or, if there is none, a certificate signed by a director
confirming that this is the case.

 

1.3.10         A copy of any other
Authorisation or other document, opinion or assurance which the Agent considers
to be necessary or desirable (if it has notified the Borrower accordingly) in connection with the entry into and
performance of the transactions contemplated by any Finance Document or for the
validity and enforceability of any Finance Document.

 

1.3.11         A certified copy of each Management
Agreement.

 

1.4           Valuation and Survey

 

1.4.1           Valuation(s) (including a
copy of the insurance valuation of each Property) confirming that the aggregate
value of the Properties as at the proposed Drawdown Date is not less than
£145,000,000.

 

1.4.2           An environmental report
relating to each Property which shall be addressed to the Agent and shall be in
form and substance satisfactory to the Agent.

 

89

 

1.5           Insurance

 

1.5.1           A copy of the Insurance
Policies and a letter addressed to the Agent from its insurance broker
confirming that the Insurance Policies comply with the requirements of this
Agreement.

 

1.5.2           Evidence that all premiums
which have fallen due on or before the proposed Drawdown Date in respect of the
Insurance Policies have been paid in full.

 

1.6           Property Documentation

 

1.6.1           All title documents
relating to the interests of the Borrower in each Property (or an undertaking
from the Borrower’s Solicitors confirming that they are holding the same and
will forward the same to the Agent’s Solicitors).

 

1.6.2           The results of Land
Registry Searches in favour of the Agent on the appropriate forms against all
of the registered titles comprising each Property giving not less than 10 (ten)
Business Days’ priority beyond the date of the Security Documents and showing
no adverse entries.

 

1.6.3           The Certificates of Title.

 

1.6.4           The original of each
Occupational Lease or an undertaking from the Borrower’s solicitors confirming
that they are holding the same and will forward the same to the Agent’s
solicitors.

 

1.6.5           Appropriate Land Registry
application forms duly completed (including a direction to issue the title
documents to the Agent’s Solicitors) accompanied by all necessary Land Registry
fees.

 

1.6.6           Each notice of assignment
and confirmation from the Account Bank that it will return a duly completed
acknowledgement relating thereto which is required to be served on, and
acknowledged by, the Account Bank pursuant to Clause 4 of the Account Charge.

 

1.6.7           A notice of assignment and
a duly completed acknowledgement relating thereto which is required to be
served on, and acknowledged by, the Manager pursuant to the Account Charge.

 

1.6.8           All Authorisations
necessary for the charging of each Property to the Security Trustee (if any).

 

1.6.9           An undertaking from the
Borrower’s Solicitors to use reasonable endeavours forthwith to satisfy any
requisitions raised by HM Land Registry in connection with the application to
register the Security created in respect of each Property under the Security
Documents.

 

1.6.10         Confirmation from the
Borrower that the occupancy of each Property is in accordance with the
Certificates of Title.

 

1.6.11         A schedule of all title
deeds and documents to be handed over pursuant to Clause 1.6.1 above stating
whether original, certified copy or copy.

 

90

 

1.6.12         Evidence of the Borrower’s
compliance with the obligations under Clause 21.5 (VAT Election).

 

1.6.13         Evidence in a form
satisfactory to the Agent that the making of the Loans will not cause the
Borrower to be in breach of Clause 22.1 (Loan to Value Covenant).

 

1.6.14         Evidence that all consents,
permission and approvals (including any consent, notice or registration fee
required under any Headlease) required in respect of any Security Document have
been duly obtained and are in full force and effect.

 

1.6.15         Notice to the landlord of the
Sanderson of the security created by the security documents.

 

1.7           Tax Documentation

 

1.7.1           The Tax Report.

 

1.8           Bank Accounts

 

1.8.1           Evidence satisfactory to
the Agent of the establishment of such bank accounts as the Agent requires
pursuant to Clause 20 (Bank Accounts).

 

1.8.2           Duly signed bank mandates
for each bank account referred to in Clause 1.8.1 above.

 

91

 

SCHEDULE 3

 

DRAWDOWN REQUEST

 

From:      [IAN
SCHRAGER LONDON] LIMITED

 

To:          [Agent]

 

Dated:

 

Dear Sirs

 

IAN SCHRAGER LONDON
LIMITED — £109,400,000 Facility Agreement

 

dated
[         ] 2005 (the “Agreement”)

 

1              We refer to the
Agreement.  This is a Drawdown
Request.  Terms defined in the Agreement
have the same meaning in this Drawdown Request unless given a different meaning
in this Drawdown Request.

 

2.             We wish to borrow a [A/B]
Loan on the following terms:

 

	
  Proposed Drawdown Date:

  	
   

  	
  [       ] (or, if
  that is not a Business Day, the

  next Business Day)

  
	
  Amount:

  	
   

  	
  [       ] or, if
  less, the Available [A/B] Facility

  

 

 

3.             We confirm that each
condition specified in Clause 4.2 (Further conditions
precedent) is satisfied on the date of this Drawdown Request.

 

4.             The
proceeds of this Loan should be credited to [account].

 

5.             This
Drawdown Request is irrevocable.

 

	
   

  	
  Yours faithfully

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  authorised signatory for

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [IAN SCHRAGER LONDON] LIMITED

  	
   

  

 

92

 

SCHEDULE 4

 

MANDATORY COST FORMULA

 

1.             The Mandatory Cost is an addition to the interest rate to compensate
Lenders for the cost of compliance with (a) the requirements of the Bank
of England and/or the Financial Services Authority (or, in either case, any
other authority which replaces all or any of its functions) or (b) the
requirements of the European Central Bank.

 

2.             On the first day of each Interest Period (or as soon as possible
thereafter) the Agent shall calculate, as a percentage rate, a rate (the “Additional
Cost Rate”) for each Lender, in accordance with the paragraphs set out
below.  The Mandatory Cost will be
calculated by the Agent as a weighted average of the Lenders’ Additional Cost
Rates (weighted in proportion to the percentage participation of each Lender in
the relevant Loan) and will be expressed as a percentage rate per annum.

 

3.             The Additional Cost Rate for any Lender lending from a Facility Office in
a Participating Member State will be the percentage notified by that Lender to
the Agent.  This percentage will be
certified by that Lender in its notice to the Agent to be its reasonable
determination of the cost (expressed as a percentage of that Lender’s
participation in the Loan made from that Facility Office) of complying with the
minimum reserve requirements of the European Central Bank in respect of the
loan made from that Facility Office.

 

4.             The Additional Cost Rate for any Lender lending from a Facility Office in
the United Kingdom will be calculated by the Agent as follows:

 

	
   

  	
  AB+C (B – D) + E x 0.01

  	
   

  
	
   

  	
  100 – (A + C)

  	
  per cent. per annum

  

 

Where:

 

A             is the percentage of Eligible Liabilities (assuming these to be in
excess of any stated minimum) which that Lender is from time to time required
to maintain as an interest free cash ratio deposit with the Bank of England to
comply with cash ratio requirements.

 

B             is the percentage rate of interest (excluding the Margin and the
Mandatory Cost and, if the Loan is an Unpaid Sum, the additional rate of
interest specified in Clause 9.3 (Default interest))
payable for the relevant Interest Period on the Loan.

 

C             is the percentage (if any) of Eligible Liabilities which that Lender
is required from time to time to maintain as interest bearing Special Deposits
with the Bank of England.

 

D             is the percentage rate per annum payable by the Bank of England to
the Agent on interest bearing Special Deposits.

 

E              is designed to compensate Lenders for amounts payable under the Fees
Rules and is calculated by the Agent as being the average of the most
recent rates of charge supplied by the Reference Banks to the Agent pursuant to
paragraph 7 below and expressed in pounds per £1,000,000.

 

93

 

5.             For the purposes of this Schedule:

 

5.1           “Eligible Liabilities” and “Special Deposits” have the meanings
given to them from time to time under or pursuant to the Bank of England Act
1998 or (as may be appropriate) by the Bank of England;

 

5.2           “Fees Rules” means the rules on periodic fees contained in
the FSA Supervision Manual or such other law or regulation as may be in force
from time to time in respect of the payment of fees for the acceptance of
deposits;

 

5.3           “Fee Tariffs” means the fee tariffs specified in the Fees Rules under
the activity group A.1 Deposit acceptors (ignoring any minimum fee or zero
rated fee required pursuant to the Fees Rules but taking into account any
applicable discount rate); and

 

5.4           “Tariff Base” has the meaning given to it in, and will be
calculated in accordance with, the Fees Rules.

 

6.             In application of the above formulae, A, B, C and D will be included in
the formulae as percentages (i.e. 5 per cent. will be included in the formula
as 5 and not as 0.05).  A negative result
obtained by subtracting D from B shall be taken as zero.  The resulting figures shall be rounded to
four decimal places.

 

7.             If
requested by the Agent, each Reference Bank shall, as soon as practicable after
publication by the Financial Services Authority, supply to the Agent, the rate
of charge payable by that Reference Bank to the Financial Services Authority
pursuant to the Fees Rules in respect of the relevant financial year of
the Financial Services Authority (calculated for this purpose by that Reference
Bank as being the average of the Fee Tariffs applicable to that Reference Bank
for that financial year) and expressed in pounds per £1,000,000 of the Tariff
Base of that Reference Bank.

 

8.             Each Lender shall supply any
information required by the Agent for the purpose of calculating its Additional
Cost Rate.  In particular, but without
limitation, each Lender shall supply the following information on or prior to
the date on which it becomes a Lender:

 

8.1           the
jurisdiction of its Facility Office; and

 

8.2           any other
information that the Agent may reasonably require for such purpose.

 

Each Lender shall promptly notify the Agent of any
change to the information provided by it pursuant to this paragraph.

 

9.             The percentages of each Lender
for the purpose of A and C above and the rates of charge of each Reference Bank
for the purpose of E above shall be determined by the Agent based upon the
information supplied to it pursuant to paragraphs 7 and 8 above and on the
assumption that, unless a Lender notifies the Agent to the contrary, each
Lender’s obligations in relation to cash ratio deposits and Special Deposits
are the same as those of a typical bank from its jurisdiction of incorporation
with a Facility Office in the same jurisdiction as its Facility Office.

 

10.           The Agent shall have no
liability to any person if such determination results in an Additional Cost
Rate which over or under compensates any Lender and shall be entitled to assume
that the information provided by any Lender or Reference Bank pursuant to
paragraphs 7 and 8 above is true and correct in all respects.

 

94

 

11.           The Agent shall distribute the
additional amounts received as a result of the Mandatory Cost to the Lenders on
the basis of the Additional Cost Rate for each Lender based on the information
provided by each Lender and each Reference Bank pursuant to paragraphs 3, 7 and
8 above.

 

12.           Any determination by the Agent
pursuant to this Schedule in relation to a formula, the Mandatory Cost, an
Additional Cost Rate or any amount payable to a Lender shall, in the absence of
manifest error, be conclusive and binding on all Parties.

 

13.           The Agent may from time to time,
after consultation with the Borrower and the Lenders, determine and notify to
all Parties any amendments which are required to be made to this Schedule in
order to comply with any change in law, regulation or any requirements from
time to time imposed by the Bank of England, the Financial Services Authority
or the European Central Bank (or, in any case, any other authority which
replaces all or any of its functions) and any such determination shall, in the
absence of manifest error, be conclusive and binding on all Parties.

 

95

 

SCHEDULE 5

 

FORM OF TRANSFER

 

To:          [          ]
as Agent

 

From:      [The Existing Lender] (the “Existing
Lender”) and [The New Lender] (the “New
Lender”)

 

Dated:

 

[IAN SCHRAGER LONDON] LIMITED — £109,400,000 Facility Agreement

 

dated [       ] 2005 (the “Agreement”)

 

1.             We refer to the
Agreement.  This is a Transfer
Certificate.  Terms defined in the
Agreement have the same meaning in this Transfer Certificate unless given a
different meaning in this Transfer Certificate.

 

2.             We
refer to Clause 25.4 (Procedure for transfer):

 

(a)           (The Existing Lender and the New Lender agree to the Existing Lender
transferring to the New Lender by novation all or part of the Existing Lender’s
Commitment, rights and obligations referred to in the Schedule in
accordance with Clause 25.4 (Procedure for transfer).

 

(b)           The proposed Transfer Date is
[         ].

 

(c)           The Facility Office and address, fax number and attention details
for notices of the New Lender for the purposes of Clause 33.2 (Addresses) are set out in the Schedule.

 

3.             The New Lender expressly
acknowledges the limitations on the Existing Lender’s obligations set out in
Clause 25.3.3 (Limitation of responsibility of Existing
Lenders).

 

4.             [The New Lender confirms
that the person beneficially entitled to interest payable to that Lender in
respect of an advance under a Finance Document is either:

 

(a)           a company resident in the United Kingdom, or a partnership each
member of which is a company resident in the United Kingdom, for United Kingdom
tax purposes; or

 

(b)           a company not so resident in the United Kingdom which carries on a
trade in the United Kingdom through a branch or agency and interest payable in
respect of an advance under a Finance Document falls to be brought into account
in computing the chargeable profits of that company for the purposes of Section 11(2) of
the Taxes Act.]

 

[4/5].       This
Transfer Certificate may be executed in any number of counterparts and this has
the same effect as if the signatures on the counterparts were on a single copy
of this Transfer Certificate.

 

[5/6].       This Transfer Certificate is
governed by English law.

 

96

 

THE SCHEDULE

 

Commitment/rights and
obligations to be transferred

 

[insert relevant details
including loan type (A/B)]

[Facility Office address, fax number and attention details for notices and
account details for payments,]

 

	
  [Existing Lender]

  	
  [New Lender]

  
	
   

  	
   

  
	
  By:

  	
  By:

  

 

This Transfer Certificate is accepted by the Agent and the Transfer
Date is confirmed as
[           ].

 

[Agent]

 

97

 

SCHEDULE 6

 

FORM OF COMPLIANCE
CERTIFICATE

 

To:          [      ]
as Agent

 

From:      IAN
SCHRAGER LONDON LIMITED

 

Dated:

 

Dear Sirs

 

[IAN SCHRAGER LONDON]
LIMITED — £109,400,000 Facility Agreement

dated [           ] 2005
(the “Agreement”)

 

1.             We refer to the
Agreement.  This is a Compliance
Certificate.  Terms defined in the
Agreement have the same meaning in this Compliance Certificate unless given a
different meaning in this Compliance Certificate.

 

2.             We confirm that:  [Insert details of covenants to be certified]

 

3.             We
confirm that no Default is continuing.

 

	
  Signed:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Director

  	
  Director

  
	
   

  	
  Of

  	
  Of

  
	
   

  	
  [Borrower]

  	
  [Borrower]

  

 

[insert applicable certification
language]**

 

 

	
   

  	
   

  
	
   

  
	
  for and on behalf of

  
	
   

  
	
  [name of auditors
  of the Borrower]***

  

 

98

 

SCHEDULE 7

 

FORM OF QUARTERLY REPORT

 

 

	
  Room Statistics

  	
   

  	
  Underwritten SAN

  %

  	
   

  	
  Underwritten SML

  %

  	
   

  	
  Combined

  Underwriting%

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Occupancy%

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Available
  Rooms

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Occupied
  Rooms

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Average
  Rate

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REVENUE

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rooms

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minibar

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Telephone

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minor
  Operating

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Rents
  and other income

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  TOTAL REVENUE

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OPERATING EXPENSES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rooms

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minibar

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Telephone

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minor
  Operating

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Rents
  and other income

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  TOTAL OPERATING EXPENSES

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GROSS OPERATING INCOME

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Rooms

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minibar

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Telephone

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Minor
  Operating

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Rents
  and other income

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  GROSS OPERATING INCOME (GOI)

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  OVERHEAD EXPENSES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Administration
  and General

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Sales
  and Marketing

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  Repairs
  and Maintenance Utilities

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
  TOTAL OVERHEAD EXPENSES

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  GROSS OPERATING PROFIT (GOP)

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL FIXED EXPENSES

  	
   

  	
  £

  	
   

  	
   

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NET OPERATING INCOME (NOI)

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FF&E RESERVE (4%)

  	
   

  	
  £

  	
   

  	
  £

  	
   

  	
  £

  	
   

  

 

99

 

SIGNATURE PAGE

 

	
  Signed by IAN
  SCHRAGER LONDON

  	
  Borrower’s Address for Notices:

  
	
  LIMITED

  	
   

  
	
   

  	
  20 Thayer Street

  
	
  as Borrower

  	
  London W1M 5LT

  
	
   

  	
   

  
	
   

  	
  Fax Number: 020 7224 1710

  
	
  Signature:

  	
  /s/ Julian Gleek

  	
   

  	
   

  
	
   

  	
  Attention: Julian Gleek

  
	
  Name:

  	
  Julian Gleek

  	
   

  	
   

  
	
   

  	
  With a copy to:

  
	
  Position:

  	
  Director

  	
   

  	
   

  
	
   

  	
  475 Tenth Avenue

  
	
   

  	
  New York

  
	
   

  	
  New York 10018

  
	
   

  	
  United States of America

  
	
   

  	
   

  
	
   

  	
  Fax Number: 001 212 277 4280

  
	
   

  	
   

  
	
   

  	
  Attention: Ed Scheetz

  
	
   

  	
   

  
	
  Signed by CITIGROUP GLOBAL

  	
  Arranger’s Address for Notices:

  
	
  MARKETS LIMITED

  	
   

  
	
   

  	
  Citigroup Real Estates Finance

  
	
  as Arranger

  	
  Citigroup Centre

  
	
   

  	
  Canada Square

  
	
   

  	
  Canary Wharf

  
	
  Signature:

  	
  /s/ David Basra

  	
   

  	
  London E14 5LB

  
	
   

  	
   

  
	
  Name:

  	
  David Basra

  	
   

  	
  Fax Number: 020 7892 0657

  
	
   

  	
   

  
	
  Position:

  	
  Managing Director

  	
   

  	
  Attention: Chris Hunter/Kathleen Dearsley

  
	
   

  	
   

  
	
  Signed by CITIBANK NA LONDON

  	
  A Lender’s Address for Notices:

  
	
   

  	
   

  
	
  as Lender

  	
  Citigroup Real Estates Finance

  
	
   

  	
  Citigroup Centre

  
	
   

  	
  Canada Square

  
	
   

  	
  Canary Wharf

  
	
  Signature:

  	
  /s/ Mark Lightbown

  	
   

  	
  London E14 5LB

  
	
   

  	
   

  
	
  Name:

  	
  Mark Lightbown

  	
   

  	
  Fax Number: 020 7892 0657

  
	
   

  	
   

  
	
  Position:

  	
  Credit Manager

  	
   

  	
  Attention: Chris Hunter/Kathleen Dearsley

  
					

 

1

 

	
  Signed by CITIBANK NA LONDON

  	
  B Lender’s Address for Notices:

  
	
   

  	
   

  
	
  as Lender

  	
  Citigroup Real Estates Finance

  
	
   

  	
  Citigroup Centre

  
	
   

  	
  Canada Square

  
	
   

  	
  Canary Wharf

  
	
   

  	
  London E14 5LB

  
	
  Signature:

  	
  /s/ Mark Lightbown

  	
   

  	
   

  
	
   

  	
  Fax Number: 020 7892 0657

  
	
  Name:

  	
  Mark Lightbown

  	
   

  	
   

  
	
   

  	
  Attention: Chris Hunter/Kathleen Dearsley

  
	
  Position:

  	
  Credit Manager

  	
   

  	
   

  
	
   

  	
   

  
	
  Signed by CITIBANK INTERNATIONAL

  	
  Agent’s Address for Notices:

  
	
  PLC

  	
   

  
	
   

  	
  Citigroup Real Estates Finance

  
	
  as Agent

  	
  Citigroup Centre

  
	
   

  	
  Canada Square

  
	
   

  	
  Canary Wharf

  
	
   

  	
  London E14 5LB

  
	
   

  	
   

  
	
  Signature:

  	
  /s/ Mark Lightbown

  	
   

  	
  Fax Number: 020 7892 0657

  
	
   

  	
   

  
	
  Name:

  	
  Mark Lightbown

  	
   

  	
  Attention: Chris Hunter/Kathleen Dearsley

  
	
   

  	
   

  
	
  Position:

  	
  Credit Manager

  	
   

  	
   

  
	
   

  	
   

  
	
  Signed by CITIBANK INTERNATIONAL

  	
  Security Trustee’s Address for Notices:

  
	
  PLC

  	
   

  
	
   

  	
  Citigroup Real Estates Finance

  
	
  as Security Trustee

  	
  Citigroup Centre

  
	
   

  	
  Canada Square

  
	
   

  	
  Canary Wharf

  
	
   

  	
  London E14 5LB

  
	
  Signature:

  	
  /s/ Mark Lightbown

  	
   

  	
   

  
	
   

  	
  Fax Number: 020 7892 0657

  
	
  Name:

  	
  Mark Lightbown

  	
   

  	
   

  
	
   

  	
  Attention: Chris Hunter/Kathleen Dearsley

  
	
  Position:

  	
  Credit Manager

  	
   

  	
   

  

 

2

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00094-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00094-of-00352.parquet"}]]