Document:

Filed by Bowne Pure Compliance

 

EXHIBIT
10.2

EXECUTION COPY

PLEDGE AGREEMENT

PLEDGE AGREEMENT, dated as of June 29, 2007 (this “Agreement”), made by PGRT ESH, INC., a
Delaware corporation (the “Pledgor”), in favor of CITICORP USA, INC., a Delaware corporation (the
“Lender”).

WITNESSETH:

WHEREAS, the Pledgor is a party to the Loan Agreement of even date herewith (as amended,
supplemented or otherwise modified from time to time, the “Loan Agreement”; capitalized terms used
herein and not otherwise defined herein shall have the meanings assigned to such terms in the Loan
Agreement) with the Lender, pursuant to which the Lender has agreed, among other things, to make a
loan to the Pledgor in the principal amount of $120,000,000, subject to the terms and conditions
set forth in the Loan Agreement;

WHEREAS, the Pledgor is the legal and beneficial owner of all of the Pledged Interests (as
defined below); and

WHEREAS, it is a condition precedent to the effectiveness of the Loan Agreement that the
Pledgor shall have executed and delivered this Agreement in favor and for the benefit of the
Lender.

NOW, THEREFORE, in consideration of the promises contained herein and to induce the Lender to
enter into the Loan Agreement, the Pledgor hereby agrees as follows:

SECTION 1. Pledge.The Pledgor hereby pledges to the Lender and grants to the Lender a
lien on and security interest in the following, whether now owned or at any time hereafter acquired
by the Pledgor (collectively, the “Collateral”):

(a) all of the Series A-2 Units and Common A-2 Units (collectively, the “Pledged Interests”)
of BHAC Capital IV, L.L.C., a Delaware limited liability company (the “Issuer”), and the
certificates representing the Pledged Interests, and all distributions, cash, 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 Pledged Interests, and all additional Units (as defined in the
Second Amended and Restated Limited Liability Company Agreement of the Issuer dated as of June 29,
2007 (the “LLC Agreement”)) of or in the Issuer from time to time acquired in any manner by the
Pledgor, and the certificates, if any, representing such additional Units, and all distributions,
cash, instruments and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of such additional Units; and

(b) all proceeds of any of the foregoing (including, without limitation, proceeds constituting
any property of the types described above).

 

 

The Pledgor has delivered to the Lender each of the certificates representing the Pledged
Interests, accompanied by an undated transfer power with respect to each such certificate, executed
in blank by the Pledgor and an acknowledgment (the “Acknowledgment”) of the Chief Financial Officer
of the Issuer confirming, among other things, that the Lender’s security interest in the Pledged
Interests has been registered in the books and records of the Issuer, that such security interest
does not violate any term or provision of the LLC Agreement or any of the Issuer’s other
organizational documents and that the Issuer will follow the Lender’s instructions with respect to
any distributions payable on account of, or any other proceeds of, the Pledged Interests.

SECTION 2. Security for Obligations. The pledge of, and the grant of a lien on and
security interest in, the Collateral hereunder secures the prompt and complete payment and
performance when due (whether at the stated maturity, by acceleration or otherwise) of (i) all of
the Obligations and (ii) all of the Obligations under and as defined in the PGRT Equity Loan
Agreement and the PGRT Equity II Loan Agreement (collectively, the “Secured Obligations”).

SECTION 3. Representations and Warranties. The Pledgor represents and warrants as
follows:

(a) It is a corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified to do business and is in good standing as a foreign
corporation in all other states where such qualification is required (except where the failure to
be so qualified could not reasonably be expected to have a material adverse effect on the business,
prospects, operations, results of operations, assets, liabilities or condition (financial or
otherwise) of the Pledgor), and has all necessary corporate power and authority to enter into this
Agreement.

(b) It has taken all requisite corporate action through its shareholders or directors to
authorize the execution and delivery of, and the performance of its obligations under, this
Agreement, and this Agreement constitutes the legal, valid and binding obligation of the Pledgor
enforceable against it in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors’ rights generally.

(c) It is the legal and beneficial owner of record of the Collateral free and clear of any
Lien, except for the Lien created by this Agreement. On the date hereof, no effective financing
statement or other instrument similar in effect covering all or any part of the Collateral is on
file in any recording office.

(d) The pledge of the Collateral pursuant to this Agreement, together with the delivery to the
Lender of the certificate(s) evidencing the Pledged Interests and the related transfer powers, the
execution and delivery of the Acknowledgment and the filing of the UCC Financing Statement
describing the Pledged Interests as collateral, creates a valid and perfected first priority lien
on and security interest in the Collateral, securing the payment and performance of the Secured
Obligations, and all filing and other actions necessary or desirable to perfect and protect such
lien and security interest have been duly made or taken.

(e) No authorization, approval, or other action by, and no notice to or filing with, any
Person is required for (i) the pledge by the Pledgor of the Collateral pursuant to this Agreement,
the grant by the Pledgor of the lien and security interest granted
hereby or the execution, delivery or performance of this Agreement by the Pledgor, (ii) the perfection of
the lien and security interest granted in this Agreement or (iii) the exercise by the Lender of the
rights or remedies provided for in this Agreement.

 

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(f) The execution, delivery and performance by the Pledgor of this Agreement, the granting of
the lien and security interest hereunder and the exercise by the Lender of any or all of the
remedies hereunder do not and will not violate, contravene or constitute a default under any
contractual obligation to which the Pledgor or the Issuer is a party.

(g) The Pledged Interests constitute all of the issued and outstanding Series A-2 Units and
Common A-2 Units of the Issuer.

(h) All of the Pledged Interests are duly authorized, fully paid and nonassessable. All of
the Pledged Interests are represented by certificates.

(i) The exact correct name of the Pledgor and the jurisdiction of organization of the Pledgor
are set forth in the introductory paragraph of this Agreement.

(j) The pledge effected and evidenced hereby does not constitute a sale for tax purposes.

SECTION 4. Further Assurances; Covenants.

(a) The Pledgor covenants and agrees that at any time and from time to time, at the expense of
the Pledgor, the Pledgor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable, or that the Lender may request, in
order to perfect and protect any Liens granted or purported to be granted hereby or to enable the
Lender to exercise and enforce its rights and remedies hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Pledgor will execute and file such financing
or continuation statements, or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Lender may request, in order to perfect and preserve the Liens
granted or purported to be granted hereby.

(b) The Pledgor hereby authorizes the Lender to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the Collateral. A carbon,
photographic or other reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(c) The Pledgor covenants and agrees that the Pledgor will not (i) sell, assign (by operation
of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the
Collateral, (ii) create or suffer to exist any Lien upon or with respect to any of the Collateral,
except for the lien and security interest created by this Agreement, (iii) vote to enable, or take
any other action to permit, the Issuer to issue any Units or other equity interests of the Issuer
or to issue any other securities convertible into or granting the right to purchase or exchange for
any Units or other equity interests of the Issuer, in each case which have a preference over the
Pledged Interests in right of distribution or in liquidation, or (iv) enter into any agreement or
undertaking restricting the right or ability of the Lender to sell, assign or transfer any of the
Collateral.

 

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SECTION 5. Distributions; Voting; Compensation; Etc.

(a) So long as no Default or Event of Default shall have occurred and be continuing, the
Pledgor shall be entitled to exercise any and all voting and other consensual rights pertaining to
the Collateral or any part thereof for any purpose not inconsistent with the terms of this
Agreement and in a manner which does not impair any of the Collateral and to receive and retain any
and all distributions paid in respect of the Collateral; provided, however, that
any and all:

	 	(i)	 	distributions paid or payable other than in
cash in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange for,
any Collateral,
	 
	 	(ii)	 	distributions paid or payable in cash in
respect of any Collateral in connection with a partial or total
liquidation or dissolution of the Issuer, or in connection with a
reduction of capital, capital surplus or paid-in-surplus of the Issuer,
and
	 
	 	(iii)	 	cash paid, payable or otherwise distributed in
exchange for, or in redemption of, any Collateral

shall, if received by the Pledgor, be received in trust for the benefit of the Lender, segregated
from the other property or funds of the Pledgor, and forthwith delivered to the Lender as
Collateral in the same form as so received (with any necessary endorsement); provided,
further, however, that the foregoing provisions of this Section 5(a) shall not
apply to dividends and distributions made pursuant to and to the extent permitted by Section 5.2.7
of the Loan Agreement.

(b) Upon the occurrence and during the continuance of a Default or an Event of Default:

	 	(i)	 	All rights of the Pledgor to receive any
distributions that it would otherwise be authorized to receive and
retain pursuant to Section 5(a) shall cease, and all such rights shall
thereupon become vested in the Lender who shall thereupon have the sole
right to receive and hold as Collateral such distributions, subject,
however, to the terms of Section 5.2.7 of the Loan Agreement.
	 
	 	(ii)	 	Any and all distributions payable to the
Pledgor in respect of the Collateral shall be received by the Pledgor
in trust for the benefit of the Lender, segregated from other funds of
the Pledgor and forthwith paid over to the Lender as Collateral in the
same form as so received (with any necessary endorsement), also
subject, however, to the terms of Section 5.2.7 of the Loan Agreement.

(c) The Pledgor hereby irrevocably constitutes and appoints the Lender, with full power of
substitution, as its true and lawful attorney-in-fact with full power and authority in the place
and stead of the Pledgor and in the name of the Pledgor or otherwise, upon the occurrence and
during the continuance of a Default or an Event of Default, to
exercise the voting and other consensual rights which the Pledgor would otherwise be entitled to exercise
pursuant to Section 5(a) (whereupon all rights of the Pledgor to exercise such rights shall cease).
The Pledgor hereby ratifies all that such attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney is coupled with an interest and is irrevocable.

 

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SECTION 6. Records, Etc. The Pledgor shall keep its office and principal place of
business and the place where it keeps its records concerning the Collateral at its address
specified in Section 8.6 of the Loan Agreement. The Pledgor will hold and preserve such records
and, upon 48 hours’ notice from the Lender, will permit representatives of the Lender at any time
during normal business hours to inspect and make abstracts from such records. 

SECTION 7. Lender Appointed Attorney-in-Fact; Irrevocable Authorization and Instruction to
Issuer. The Pledgor hereby appoints the Lender the Pledgor’s attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor or otherwise, from
time to time in the Lender’s discretion, to take any action and to execute any instrument which the
Lender may deem necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation, to receive, endorse and collect all instruments made payable to the Pledgor
representing any distribution in respect of the Collateral or any part thereof and to give full
discharge for the same. The Pledgor hereby authorizes and instructs the Issuer to comply with any
instruction received by the Issuer from the Lender in writing that (a) states that an Event of
Default has occurred and (b) is otherwise in accordance with the terms of this Agreement, without
any other or further instructions from the Pledgor, and the Pledgor agrees that the Issuer shall be
fully protected in so complying. The Pledgor hereby ratifies all that such attorney shall lawfully
do or cause to be done by virtue hereof. This power of attorney is coupled with an interest and is
irrevocable.

SECTION 8. Lender May Perform. If the Pledgor fails to perform any agreement contained
herein, the Lender may perform, or cause performance of, such agreement, and the expenses of the
Lender incurred in connection therewith shall be payable by the Pledgor.

SECTION 9. Reasonable Care. The Lender shall be deemed to have exercised reasonable
care in the custody and preservation of the Collateral (including, without limitation, the
certificate(s) representing the Pledged Interests) in its possession if the Collateral is accorded
treatment substantially equal to that which the Lender accords its own property, it being
understood that the Lender shall not have the responsibility under this Agreement for taking any
necessary steps to preserve rights against any parties with respect to any Collateral.

SECTION 10. Remedies upon Default; Private Placement. (a) If any Event of Default
shall have occurred and be continuing, the Lender may exercise in respect of the Collateral, in
addition to the other rights and remedies provided for herein or otherwise available to it, all the
rights and remedies of a secured party under the Uniform Commercial Code of the State of New York
(the “Code”) and other applicable law, and the Lender may also, without notice except as specified
below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at
any exchange or broker’s board or at any of the Lender’s offices or elsewhere, for cash, on credit
or for future delivery, and upon such other terms as the Lender may deem commercially reasonable.
The Pledgor agrees that, to the extent notice of sale shall be required by law, at least ten days’
notice to it of the time and place of any public or private sale shall constitute reasonable
notification. The Lender shall not be obligated to make any sale of

 

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Collateral regardless of notice of sale having been given. The Lender may adjourn any public
or private sale from time to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to which it was so adjourned. If
an Event of Default shall have occurred and be continuing, the Lender may, pursuant to the power of
attorney granted herein, transfer the Collateral on the books of the Pledgor and the Issuer, in
whole or in part, to the name of the Lender or such other Person or Persons as the Lender may
designate and take all such other and further actions as the Pledgor could have taken with respect
to the Collateral which the Lender in its absolute discretion determines to be necessary or
appropriate to accomplish the purposes of this Agreement.

(b) In view of the fact that federal and state securities laws may impose certain restrictions
on the method by which a sale of all or any part of the Collateral may be effected after an Event
of Default, the Pledgor agrees that, after the occurrence and during the continuation of an Event
of Default, the Lender may, from time to time, attempt to sell all or any part of the Collateral by
means of a private placement restricting the bidders and prospective purchasers to those who are
qualified and will represent and agree that they are purchasing for investment only and not for
distribution. In so doing, the Lender may solicit offers to buy all or any part of the Collateral
from a limited number of Persons deemed by the Lender, in its sole discretion, to be financially
responsible parties who might be interested in purchasing such Collateral. The Pledgor
acknowledges and agrees that any such private placement may result in prices and other terms less
favorable to the Lender than if such sale were a public sale. If the Lender solicits such offers
from not less than three such Persons (none of which is an Affiliate of the Lender), then the
acceptance by the Lender of the highest offer obtained therefrom shall be deemed to be a
commercially reasonable method of disposing of such Collateral; provided, however,
that this subsection shall not be construed to impose a requirement that the Lender solicit offers
from three or more Persons for any such sale to be deemed commercially reasonable. The Lender
shall be under no obligation to delay a sale of any of the Pledged Interests for the period of time
necessary to permit the Issuer to register such securities for public sale under the Securities Act
(as defined below) or under applicable state securities laws.

SECTION 11. Registration Rights.  If the Lender shall determine to exercise
its right to sell all or any of the Pledged Interests under Section 10, the Pledgor agrees that,
upon request of the Lender, it will:

(a) execute and deliver all such instruments and documents, and do or cause to be done all
such other acts and things, as may be necessary or, in the opinion of the Lender, advisable to
register such Pledged Interests under the provisions of the Securities Act of 1933, as amended (the
“Securities Act”), and to cause the registration statement relating thereto to become effective and
to remain effective for such period as prospectuses are required by law to be furnished, and to
make all amendments and supplements thereto and to the related prospectus which, in the opinion of
the Lender, are necessary or advisable, all in conformity with the requirements of the Securities
Act and the rules and regulations of the Securities and Exchange Commission applicable thereto;

(b) use its best efforts to qualify such Pledged Interests under the state securities or “Blue
Sky” laws and to obtain all necessary governmental approvals for the sale of such Pledged
Interests, as requested by the Lender;

 

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(c) use its best efforts to cause the Issuer to make available to its security holders, as
soon as practicable, an earnings statement which will satisfy the provisions of Section 11(a) of
the Securities Act; and

(d) use its best efforts to do or cause to be done all such other acts and things as may be
necessary to make such sale of such Pledged Interests or any part thereof valid and binding and in
compliance with applicable law.

The Pledgor further agrees to do or cause to be done all such other acts as may be reasonably
requested to make any sale or sales of all or any portion of the Pledged Interests under this
Section 11 valid and binding and in compliance with any and all other applicable requirements of
law. Pledgor further agrees that a breach of any of the covenants contained in this Section 11
will cause irreparable injury to the Lender, that the Lender has no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant contained in this
Section 11 shall be specifically enforceable against the Pledgor, and to the maximum extent
permitted by applicable law, the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants except for a defense that no Event of
Default has occurred.

SECTION 12. Securities Collateral. The Pledgor acknowledges that the Pledged
Interests are represented by certificates and constitute “securities” as governed and defined by
Article 8 of the Uniform Commercial Code in effect in any jurisdiction and are transferable and
assignable to the extent provided in Article 8 of the LLC Agreement. The Pledgor further agrees
that it and the Issuer will at no time “opt out” of Article 8 through any amendment to the Issuer’s
certificate of formation, LLC Agreement or other governing document or by any other means cause the
Pledged Interests and the certificates representing any Pledged Interests to cease to be
“securities” under Article 8 of the Uniform Commercial Code. Any action taken to so “opt out” will
be null and void and of no effect.

SECTION 13. Application of Proceeds. All money held by the Lender as Collateral and
all cash proceeds received by the Lender in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral, shall be applied to the Secured Obligations in
such order as determined by the Lender in its sole discretion.

SECTION 14. Indemnity and Expenses.

(a) The Pledgor agrees to indemnify and hereby indemnifies the Lender from and against any and
all claims, damages, losses, liabilities and expenses arising out of, in connection with, or
resulting from, this Agreement (including, without limitation, enforcement of this Agreement) other
than such as arise from the Lender’s gross negligence or willful misconduct.

(b) The Pledgor will upon demand pay to the Lender the amount of any and all reasonable
expenses, including, without limitation, the reasonable fees and expenses of its counsel and of any
experts and agents, that the Lender may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of any of the rights of
the Lender hereunder, (iv) the failure of the Pledgor to perform or observe any of the provisions
hereof or (v) any action taken by the Lender pursuant to this Agreement.

 

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SECTION 15. Amendments, Etc. No amendment of any provision of this Agreement shall in
any event be effective unless the same shall be in writing and signed by the Pledgor and the
Lender; no waiver of any provision of this Agreement, and no consent to any departure by the
Pledgor herefrom, shall in any event be effective unless the same shall be in writing and signed by
the Lender, and then such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No failure to exercise and no delay in exercising on the
part of the Lender any right, power or privilege under this Agreement shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege under this Agreement shall
preclude any other or further exercise thereof or the exercise of any other right, power or
privilege.

SECTION 16. Security Interest Absolute. All rights of the Lender and the lien and
security interest granted to it hereunder, and all obligations of the Pledgor hereunder, shall be
absolute and unconditional irrespective of:

(a) any lack of enforceability of the Loan Agreement or any of the other Loan Documents or any
other agreement or instrument relating thereto;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any
of the Secured Obligations, or any other amendment or waiver of or any consent to departure from
the Loan Agreement, any of the other Loan Documents, the PGRT Equity Loan Agreement, the PGRT
Equity II Loan Agreement, the Lichtenstein Credit Agreement or any agreement, instrument or
document delivered in connection therewith;

(c) any taking and holding of collateral or guarantees for all or any of the Secured
Obligations, or any amendment, alteration, exchange, substitution, transfer, enforcement, waiver,
subordination, termination or release of any collateral or such guarantees, or any non-perfection
of any collateral, or any consent to departure from any such guaranty;

(d) any manner of application of collateral, or proceeds thereof, to all or any of the Secured
Obligations, or the manner of sale or other disposition of any collateral or the collection of
proceeds thereof;

(e) any consent by the Lender to the restructure or refinancing of the Secured Obligations or
any portion thereof;

(f) any other modification, compromise, settlement or release by the Lender, by operation of
law or otherwise, of the Secured Obligations or the liability of any obligor or guarantor, or of
any collateral, in whole or in part, and any refusal by the Lender to accept any payment, in whole
or in part, from any obligor or guarantor in connection with any of the Secured Obligations, in
each case whether or not with notice to, further assent by, or any reservation of rights against,
the Pledgor; or

(g) any other circumstance (including, without limitation, any statute of limitations) which
might otherwise constitute a defense available to, or a discharge of, any third party pledgor or
guarantor.

 

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SECTION 17. Addresses for Notices. All notices and other communications hereunder
shall be in writing and sent by certified or registered mail, return
receipt requested, by overnight delivery service, with all charges prepaid, by hand delivery, or by telecopier, if
to the Lender, then to Citicorp USA, Inc., 101 John F. Kennedy Parkway, Fourth Floor, Short Hills,
New Jersey 07078, Telecopy: (973) 921-2435, Attn.: Ms. Diana Yusun, Director, with a copy to
Luskin, Stern & Eisler LLP, 330 Madison Avenue, New York, New York 10017, Telecopy: (212)
293-2705, Attn.: Nathan M. Eisler, Esq.; and if to the Pledgor, then to PGRT ESH, Inc., 77 West
Wacker Drive, Suite 3900, Chicago, Illinois 60601, Telecopy: (312) 917-1597, Attn.: Jeffrey A.
Patterson, Title: President and Chief Executive Officer, with a copy to James Hoffman, Esq.,
General Counsel, Telecopy: (312) 917-3937; or, in each case, to such other address as the Lender
or the Pledgor may specify to the other party in the manner required hereunder. All such notices
and correspondence shall be deemed given (i) if sent by certified or registered mail, three
Business Days after being postmarked, (ii) if sent by overnight delivery service or by hand
delivery, when received at the above stated addresses or when delivery is refused and (iii) if sent
by telecopier transmission, when such transmission is confirmed.

SECTION 18. Continuing Security Interest; Assignment. This Agreement shall create a
continuing lien on and security interest in the Collateral and shall (a) remain in full force and
effect until released in accordance herewith, (b) be binding upon the Pledgor and its successors
and assigns, and (c) inure, together with the rights and remedies of the Lender hereunder, to the
benefit of the Lender and its successors and assigns. Without limiting the generality of the
foregoing clause (c), the Lender may assign or otherwise transfer all or any portion of its rights
and obligations under this Agreement to any other Person which is an assignee of the Lender under
the Loan Agreement, and such other Person shall thereupon become vested with all the benefits in
respect hereof granted to the Lender herein. 

SECTION 19. Telecopied Signature. This Agreement may be executed and delivered by
e-mail, telecopier or other facsimile transmission all with the same force and effect as if the
same was a fully executed and delivered original manual counterpart.

SECTION 20. Governing Law. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS
AGREEMENT AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, WHETHER SOUNDING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE
CONFLICTS OF LAW PROVISIONS) AND DECISIONS OF THE STATE OF NEW YORK. 

SECTION 21. Limited Recourse. Notwithstanding anything herein or in any other Loan
Document to the contrary, the Pledgor shall be fully liable hereunder and in respect of the other
Secured Obligations, provided that the Lender agrees not to enforce any judgment it may
obtain against the Pledgor with respect to this Agreement or the other Secured Obligations against
any of the Pledgor’s assets other than the Initial Collateral. The Lender further agrees that it
shall not have or seek recourse to the PGRT Entities (other than to realize on pledges of the
equity interests in the REIT and Prime Group Realty, L.P.) or their
respective assets, other than to the Pledgor to the extent described in the previous sentence as to the Initial Collateral, for
the payment of the Secured Obligations. The Lender’s recourse against the Guarantors under the
Guaranties, and the Lender’s rights and remedies against all other Collateral Entities and all
other Collateral (as defined in the Loan Agreement), shall in no way be limited or otherwise be
affected hereby.

 

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IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be executed by its proper and
duly authorized managing member as of the day and year first above written.

	 	 	 	 	 
	 	PGRT ESH, INC.

 	 
	 	By:  	/s/ David Lichtenstein
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

 

10Filed by Bowne Pure Compliance

 

EXHIBIT 10.3

EXECUTION COPY

CONTINUING GUARANTY

CITICORP USA, INC.

			
	NEW YORK
	 	June 29, 2007

I. For and in consideration of the obligations to Citicorp USA, Inc. (“Citicorp” or
“you”) of PGRT ESH, Inc. (the “Borrower”), a Delaware corporation, under (i) the
Promissory Note of even date herewith in the principal amount of $120,000,000 (as amended,
restated, replaced, supplemented or otherwise modified from time to time, the “Note”) by
the Borrower in favor of Citicorp, and (ii) the Loan Agreement of even date herewith (as amended,
restated, replaced, supplemented or otherwise modified from time to time, the “Loan
Agreement”) between the Borrower and Citicorp, David Lichtenstein, an individual (the
“Undersigned”), does hereby unconditionally and irrevocably GUARANTEE the punctual payment
to you of the Obligations (as defined in the Loan Agreement), as and when payable, together with
interest thereon, fees related thereto and any and all costs and expenses which may be incurred by
you in collecting all or any of the Obligations or in enforcing any rights hereunder.

II. As implementing the foregoing, it is understood and agreed that the Undersigned
unconditionally and irrevocably guarantees that the Obligations will be paid to you strictly in
accordance with the terms and provisions of the Note, the Loan Agreement, the other Loan Documents
or any other agreement, express or implied, which has been or may hereafter be made or entered into
by the Borrower in reference thereto, regardless of any law, regulation or decree, now or hereafter
in effect, which might in any manner affect any of the terms or provisions of the Note, the Loan
Agreement, the other Loan Documents, or any such other agreement or your rights with respect
thereto as against the Borrower, or cause or permit to be invoked any alteration in the time,
amount or manner of payment by the Borrower of any of the Obligations.

III. To induce you to make the Loan (as defined in the Loan Agreement) under the Note and the
Loan Agreement, the Undersigned represents and warrants as follows as of the date hereof: (a) no
authorization or approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery and performance of this
Guaranty by the Undersigned, and the execution, delivery and performance of this Guaranty by the
Undersigned do not and will not violate or otherwise contravene law or any material agreement by
which the Undersigned or his property is bound; (b) this Guaranty is the legal, valid and binding
obligation of the Undersigned, enforceable against the Undersigned in accordance with its terms,
except as such enforceability may be limited by applicable bankruptcy, insolvency and similar laws
affecting rights of creditors generally and general principles of equity; (c) the balance sheet and
other financial statements of the Undersigned most recently furnished to you by or on behalf of the
Undersigned are true, correct and complete, and fairly present the financial condition of the
Undersigned as of the date thereof for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and since such date, there has been
no material adverse change in such financial condition of the Undersigned or in the ability of the
Undersigned to perform the Undersigned’s obligations hereunder; (d) all tax returns with respect to
the Undersigned and the Undersigned’s property which are required to be filed have been duly filed,
all taxes and assessments shown thereon to be due and payable by the Undersigned have been paid,
and no taxing authority has asserted any claim for unpaid taxes or assessments against the
Undersigned; (e) there is no action or proceeding affecting the Undersigned pending before any
court, governmental agency or arbitrator or, to the knowledge of the Undersigned, threatened, and
there is no other action or proceeding affecting the Undersigned pending before any court,
governmental agency or arbitrator or, to the knowledge of the Undersigned, threatened, which may
materially adversely affect the financial condition, affairs or prospects of the Undersigned, or
which purports to affect the legality, validity or enforceability of this Guaranty or any document
executed or delivered in connection herewith by the Undersigned (including, without limitation, any
other Loan Document); and (f) no Event of Default (as defined in the Loan Agreement) has occurred and is continuing nor has any event occurred
which, with the giving of notice or the passage of time, or both, would constitute an Event of
Default.

 

 

IV. So long as any of the Obligations shall remain unpaid, the Undersigned will, unless you
shall otherwise consent in writing: (a) comply in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments and governmental charges imposed upon the Undersigned
or the Undersigned’s property, except to the extent contested in good faith and by appropriate
proceedings; (b) upon reasonable notice to the Undersigned and at reasonable times prior to an
Event of Default and at any time thereafter, provide you access to the books and financial records
of the Undersigned from time to time to inspect and make copies (at the Undersigned’s expense) of
such books and records and provide you with copies (photostatic or electronic, as the case may be)
of all financial statements, reports, books, records and accounts furnished to the Undersigned in
respect of the Specified Real Property Interests (as defined in the Loan Agreement) not later than
three (3) Business Days (as defined in the Loan Agreement) after receipt thereof by the
Undersigned; (c) maintain at all times for the Undersigned and Lightstone Holdings LLC, a Delaware
limited liability company (“Lightstone”), on a combined basis, but without duplication,
Unencumbered Liquid Assets (as defined below) of $75,000,000, and use reasonable efforts to
maintain at least $50,000,000 of such Unencumbered Liquid Assets with you, Citibank, N.A. or
another affiliate thereof; (d) maintain at all times for the Undersigned and Lightstone, on a
combined basis, but without duplication, a net worth, consisting of total assets less total
liabilities of the Undersigned and Lightstone, determined in accordance with generally accepted
accounting principles consistently applied (“Net Worth”), of not less than $900,000,000;
(e) furnish to you as soon as available and in any event by May 1 of each calendar year, the
balance sheet (showing, among other things, the Undersigned’s and Lightstone’s Net Worth and
Unencumbered Liquid Assets, each on a combined basis, but without duplication) and statement of
income and other regularly prepared financial statements of the Undersigned and each other Loan
Party (as defined in the Loan Agreement) for the previous calendar year, certified as true and
complete by the Undersigned; (f) promptly (and in any event within 30 days) after the filing
thereof, furnish, or cause to be furnished, to you all annual Federal income tax returns of the
Undersigned and each other Loan Party, including all schedules thereto; (g) furnish, or cause to be
furnished, to you on or before December 31, 2007, a projection of income and expenses, in form and
substance satisfactory to you, in respect of the Specified Real Property Interests and the
Collateral (as defined in the Loan Agreement) for calendar year 2008; (h) furnish, or cause to be
furnished, to you, no later than forty-five (45) days after the end of each calendar quarter,
operating statements and rent rolls with respect to the Specified Real Property Interests and on a
combined basis with respect to the Collateral, together with evidence, in form and substance
satisfactory to you, of the Collateral Value (as defined in the Loan Agreement) as of the end of
such calendar quarter, in each case certified by the Undersigned; (i) furnish, or cause to be
furnished, to you within forty-five (45) days after the end of calendar year 2007, a statement of
the operating results of the Specified Real Property Interests for such year; (j) furnish, or cause
to be furnished, to you a compliance certificate, in form and substance satisfactory to you, within
fifteen (15) days after the end of each month, demonstrating the Undersigned’s compliance with the
Unencumbered Liquid Assets covenant set out in clause (c) of this paragraph IV as of the end of
such month, accompanied by copies of the Undersigned’s relevant monthly bank and brokerage
statements sent to the Undersigned; (k) furnish, or cause to be furnished, to you a compliance
certificate, in form and substance satisfactory to you, within fifteen (15) days after the end of
each calendar quarter, demonstrating the Undersigned’s compliance with the Net Worth covenant set
out in clause (d) of this paragraph IV as of the end of such calendar quarter; (l) permit, and
cause the other Loan Parties to permit, you and your authorized agents to make periodic inspections
of the Specified Real Property Interests and/or the Collateral; and (m) within 150 days after the
Closing Date (as defined in the Loan Agreement), cause the Lockbox Arrangement (as defined in the
Loan Agreement) to become effective. So long as any of the Obligations shall remain unpaid, the
Undersigned will not, unless you shall otherwise consent in writing; (w) create or suffer to exist
at any time any Indebtedness (as defined in the Loan Agreement) of the Undersigned or any other
Loan Party other than the Indebtedness owing to you and unsecured trade debt incurred in the
ordinary course of business; (x) create, incur, assume or suffer to exist, or permit any other Loan
Party to create, incur, assume or suffer to exist, any Lien (as defined in the Loan Agreement) on
any portion of the Collateral or any other assets of the Undersigned or any other Loan Party, other
than Permitted Encumbrances (as defined in the Loan Agreement) described in parts (a), (c) or (d)
of the definition thereof; (y) permit or suffer to exist a Sale or Pledge (as defined in

 

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the Loan Agreement) by the Borrower or any other Loan Party of an interest in the Collateral
or any other assets (collectively, a “Transfer”), other than Permitted Encumbrances
(notwithstanding the foregoing restriction, a transfer to a Restricted Party (as defined in the
Loan Agreement) or by devise or descent or by operation of law upon the death of a grantor,
trustee, beneficiary, member, partner or shareholder to a Restricted Party shall not be deemed to
be a Transfer, so long as such Transfer does not apply to Collateral and does not impair or limit
the Liens in your favor pursuant to any Pledge Agreement (as defined in the Loan Agreement); or (z)
pay, or permit any other Loan Party to, directly or indirectly, pay, any dividends or distributions
on, or purchase, redeem or retire any shares of any class of capital stock or other equity
interests or any warrants, options or rights to purchase any such capital stock or other equity
interests, whether now or hereafter outstanding, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property, except as and to the extent otherwise
permitted in the case of dividends and distributions by the Borrower pursuant to Section 5.2.7 of
the Loan Agreement. As used herein, “affiliate” means, with respect to a Person (as defined
in the Loan Agreement), another Person, directly or indirectly, through one or more intermediaries,
controlling, controlled by, or under common control with the Person in question. The term
“control” as used in the preceding sentence (and, with correlative meaning, “controlled
by” and “under common control with”) means actual control or ownership or voting
control, directly or indirectly, of 30% or more of the voting stock, partnership interests, limited
liability company interests or other beneficial ownership interests of the Person in question.

V. The Undersigned hereby consents and agrees that you may at any time, or from time to time,
in your sole discretion: (a) extend or change the time of payment, or the manner, place or terms
of payment of all or any of the Obligations; (b) exchange, release or surrender all or any of the
Collateral, or any part thereof, by whomsoever granted or deposited, or release, amend or waive or
consent to departure from any other guaranty, which is now or may hereafter be held by you in
connection with all or any of the Obligations; (c) sell or purchase all or any such Collateral at
public or private sale, or at any broker’s board, and after deducting all costs and expenses of
every kind for collection, sale or delivery, the net proceeds of any such sale may be applied by
you upon all or any of the Obligations; and (d) settle or compromise with the Borrower, or any
other person or entity liable thereon, any and all of the Obligations, or subordinate the payment
of same, or any part thereof to the payment of any other debts or claims, which may at any time be
due or owing to you or any other person or entity, all in such manner and upon such terms as you
may deem proper, and without notice to or further assent from the Undersigned, it being hereby
agreed that the Undersigned shall be and remain bound upon this Guaranty, irrespective of the
existence, value or condition of any Collateral, and notwithstanding any such change, exchange,
settlement, compromise, surrender, release, sale, application, renewal or extension. The
Undersigned further agrees that the liability of the Undersigned under this Guaranty shall be
absolute and unconditional irrespective of: (i) any lack of validity or enforceability of the
Obligations, the Note, the Loan Agreement, any other Loan Document or any other agreement or
instrument relating thereto, (ii) any amendment or waiver of, or any consent to departure from, the
Note, the Loan Agreement, any other Loan Document or any other agreement or instrument relating to
the Obligations, (iii) any non-perfection of any Collateral, or (iv) any other circumstance which
might otherwise constitute a defense available to, or a discharge of, a surety or a guarantor.

VI. The Undersigned hereby waives notice of acceptance of this Guaranty, and also presentment,
demand, protests and notice of dishonor of any and all of the Obligations, and promptness in
commencing suit against any party thereto or liable thereon, and/or in giving any notice to or of
making any claim or demand hereunder upon the Undersigned. No act or omission of any kind on your
part shall in any event affect or impair this Guaranty, nor shall same be affected by any change
which may arise by reason of the death, disability or incompetency of the Undersigned. The
Undersigned further agrees that this Guaranty shall continue to be effective or be reinstated, as
the case may be, if at any time payment, or any part thereof, of the Obligations is rescinded or
must otherwise be restored or returned by you upon the insolvency, bankruptcy or reorganization of
the Borrower, or otherwise, all as though such payment had not been made. The Undersigned further
agrees not to exercise any rights which the Undersigned may acquire by way of subrogation under
this Guaranty, by any payment made hereunder or otherwise, until all the Obligations shall have
been indefeasibly paid in full in cash. If any amount shall be paid to the Undersigned on account
of such subrogation rights at any time when all the Obligations shall
not have been paid in full, such amount shall be held in trust for your benefit and shall forthwith be
paid to you to be held as cash collateral or credited and applied upon the Obligations, whether
matured or unmatured.

 

-3-

 

VII. This Guaranty shall not be revoked or impaired as to the Undersigned by the death,
disability or incompetency or by the revocation or release of any liabilities hereunder of the
Undersigned.

VIII. In case any provision in or obligation under this Guaranty or any other document related
to this Guaranty shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.

IX. This Guaranty and the other documents related to this Guaranty constitute the entire
understanding between the parties hereto with respect to the subject matter hereof and supersede
any prior or contemporaneous agreements, written or oral, with respect thereto.

X. Without limiting your right to bring any action or proceeding against the Undersigned or
against property of the Undersigned arising out of or relating to this Guaranty (an
“Action”) in the courts of other jurisdictions, the Undersigned hereby irrevocably submits,
with respect to any Action (and, exclusively, with respect to any other proceeding involving the
Undersigned and you), to the jurisdiction of any New York State or Federal court sitting in New
York County, and the Undersigned hereby irrevocably agrees that any Action may be heard and
determined in such New York State court or in such Federal court. The Undersigned hereby
irrevocably waives, to the fullest extent the Undersigned may effectively do so, the defense of an
inconvenient forum to the maintenance of any Action in any jurisdiction. The Undersigned hereby
irrevocably agrees that the summons and complaint or any other process in any Action in any
jurisdiction may be served by mailing to either of the addresses set forth below or by hand
delivery to a person of suitable age and discretion at either of the addresses set forth below.
Such service will be complete on the date such process is so mailed or delivered. The Undersigned
may also be served in any other manner permitted by law, in which event the Undersigned’s time to
respond shall be the time provided by law.

XI. This is a continuing guaranty and shall (a) remain in full force and effect until all the
Obligations shall have been indefeasibly paid in full in cash; (b) be binding upon the Undersigned
and the heirs, executors, administrators, successors and assigns of the Undersigned, and shall
inure to the benefit of, and be enforceable by you and your successors, transferees and assigns;
and (c) be deemed to have been made under and shall be governed by the laws of the State of New
York in all respects, including matters of construction, validity and performance, and it is
understood and agreed that none of its terms or provisions may be waived, altered, modified or
amended except in writing duly signed for and on your behalf.

XII. “Unencumbered Liquid Assets,” as used herein, means the aggregate cash,
marketable securities and other liquid investments of the Undersigned and Lightstone that are not
subject to any Lien and that may be sold within 30 days without the consent of any other person or
entity.

XIII. All notices and other communications provided for hereunder shall be sent to the
Undersigned at their respective addresses set forth below in the manner set forth in Section 8.6 of
the Loan Agreement.

XIV.

 

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BOTH THE UNDERSIGNED AND YOU HEREBY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING UNDER OR RELATING TO ANY OBLIGATION OR THIS GUARANTY.

	 	 	 	 
	 	 
	/s/ David Lichtenstein
 	 
	 	 
	Address:  5 Grand Park Drive

                 Monsey, New York  10952 	 
	 

 

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