Document:

Exhibit 10.2

 

TERMINATION AND CHANGE IN CONTROL AGREEMENT

 

THIS TERMINATION AND CHANGE IN CONTROL AGREEMENT (this “Agreement”), effective as of            , 2011 (the “Effective Date”) is entered into by and among Sunstone Hotel Investors, Inc., a Maryland corporation (the “Company”), and Robert Springer (the “Executive”).

 

WHEREAS, the Executive is employed by the Company as its Senior Vice President - Acquisitions; and

 

WHEREAS, the Board of Directors of the Company (the “Board”) believes that it is in the best interest of the Company that the Executive be reasonably secure in his employment and position with the Company, so that the Executive can exercise independent judgment as to the best interest of the Company and its shareholders, without distraction by any personal uncertainties or risks regarding the Executive’s employment with the Company created by the possibility of a change in control of the Company.

 

NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

 

1.                                       Term of this Agreement

 

This Agreement will continue in effect until the earlier of: (a) the termination or cessation of the Executive’s employment with the Company, or (b) the Company’s performance of all of its obligations, and the Executive’s receipt of all of the payments and benefits to which he is entitled, under this Agreement (the “Term”).

 

2.                                       Termination of Employment.

 

(a)                                  If a Change in Control (as defined below) occurs during the Term, and the Executive’s employment is terminated by the Company (or its successor, as the case may be) without Cause or by the Executive for Good Reason (both such capitalized terms as defined below), in each case within twelve (12) months after the effective date of the Change in Control, then the Executive shall be entitled to the following payments and benefits, subject to the terms and conditions set forth in this Agreement:

 

(i)                                     The Executive shall be paid, in two lump sum payments: (A) the Executive’s earned but unpaid base salary and accrued but unpaid vacation pay through the Date of Termination (as defined below) and any annual cash bonus for any fiscal year of the Company that ends on or before the Date of Termination to the extent not previously paid (the “Accrued Obligations”), and (B) an amount (the “Severance Amount”) equal to two (2) times the sum of (x) the base salary in effect on the Date of Termination (without giving effect to any reduction that would constitute Good Reason) plus (y) the Bonus Severance Amount (as defined below) in effect on the Date of Termination. For purposes hereof, the “Bonus Severance Amount” shall equal the lesser of the Executive’s target annual cash bonus for the year in which the Date of Termination takes place or the actual annual cash bonus that the Executive earned in the calendar year prior to the year in which the Date of Termination occurs; provided, however, that solely for purposes of this Section 2(a)(i), the Company will calculate the Executive’s

 

 

Bonus Severance Amount utilizing a cash bonus for the calendar year 2011 which is based on one hundred percent (100%) of the Executive’s annualized base salary rather than the Executive’s actual base salary earnings in 2011. For example, if (a) a Change in Control occurs on July 1, 2011 and the Executive’s employment is terminated by the Company (or its successor, as the case may be) without Cause or by the Executive for Good Reason on August 1, 2011, (b) the base salary in effect as of August 1, 2011 is $285,000, and (c) the Executive’s target annual cash bonus for calendar year 2011 is $213,750, then the Executive will be paid the Accrued Obligations plus a Severance Amount equal to $997,500 (calculated as follows: 2 x ($285,000 (base salary in effect as of August 1, 2011) + $213,750 (target cash bonus for 2011)). The Accrued Obligations shall be paid when due under California law and the Severance Amount shall be paid no later than 60 days after the Date of Termination;

 

(ii)                                         For a period of eighteen (18) months following the Termination Date, the Company shall, at the Company’s sole expense, continue to provide the Executive and the Executive’s eligible family members with group health insurance coverage at least equal to that which would have been provided to them if the Executive’s employment had not been terminated (or at the Company’s election, pay the applicable COBRA premium for such coverage); provided, however, that if the Executive becomes re-employed with another employer and is eligible to receive group health insurance coverage under another employer’s plans, the Company’s obligations under this Section 2(a)(ii) shall be reduced to the extent comparable coverage is actually available to the Executive and the Executive’s eligible family members, and any such coverage shall be reported by the Executive to the Company;

 

(iii)                                      To the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any vested benefits and other amounts or benefits required to be paid or provided or which the Executive is eligible to receive as of the Termination Date under any plan, program, policy or practice or contract or agreement of the Company and its affiliates; and

 

(iv)                                     All outstanding stock options, restricted stock units and other equity awards granted to the Executive under any of the Company’s equity incentive plans (or awards substituted therefore covering the securities of a successor company) shall become immediately vested and exercisable in full.

 

Notwithstanding the foregoing, it shall be a condition to the Executive’s right to receive the amounts and benefits provided for in Sections 2(a)(i)(B), 2(a)(ii), 2(a)(iii) and 2(a)(iv) above that the Executive execute, deliver to the Company and not revoke a release of claims in substantially the form attached hereto as Exhibit A.

 

(b)                                        If the Executive’s employment is terminated by the Company (or its successor, as the case may be) without Cause or by the Executive for Good Reason (both such capitalized terms as defined below), in each case without a Change of Control having occurred in the preceding twelve (12) months, then only the unvested and outstanding restricted shares of stock from the Executive’s initial upfront grant of restricted stock awarded on or about the Effective Date (the “Initial Grant”) shall become immediately vested; provided, however, that in the event the implied market

 

 

value of the total shares provided for in the Initial Grant (calculated using the closing market price of the Company’s common stock on the New York Stock Exchange (“NYSE”) as of the termination date) is less than $500,000 on the date the Executive’s employment is terminated, the Company will pay the Executive in cash a lump sum amount equal to the difference between $500,000 and the implied market value of the total shares provided for in the Initial Grant, multiplied by a fraction the numerator of which is equal to the number of unvested shares from the Initial Grant as of the termination date and the denominator equal to the total shares provided for in the Initial Grant. For example, if (a) the Initial Grant consisted of 100,000 shares to vest in five equal annual installments, each on the anniversary of the Effective Date (accordingly, the threshold value per share of restricted stock would be $5.00 ($5.00 x 100,000 shares = $500,000), (b) the Executive’s employment at the Company is terminated by the Executive for Good Reason or by the Company without Cause after the third anniversary of the Effective Date but prior to the fourth anniversary of the Effective Date, and (c) on the date of such termination, the closing market price of the Company’s common stock on the NYSE is $2.00, then the Company would pay to the Executive the sum of $120,000 (calculated as follows):

 

1)                                      100,000 (shares provided for in Initial Grant) ÷ 5 (total number of vesting periods applicable to Initial Grant) = 20,000 shares per vesting period

 

2)                                      20,000 (shares per vesting period) x 2 (remaining vesting periods applicable to Initial Grant) = 40,000 shares remaining unvested

 

3)                                      40,000 (shares remaining unvested) x $3.00 (difference between minimum value of $5.00/share of common stock and closing price of Company common stock on NYSE of $2.00 on date of termination) = $120,000

 

(c)                                  For purposes of this Agreement, “Change in Control” shall mean the occurrence of any of the following events:

 

(i)                                     Any transaction or event resulting in the beneficial ownership of voting securities, directly or indirectly, by any “person” or “group” (as those terms are defined in Sections 3(a)(9), 13(d), and 14(d) of the Exchange Act and the rules thereunder) having “beneficial ownership” (as determined pursuant to Rule 13d-3 under the Exchange Act) of securities entitled to vote generally in the election of directors (“voting securities”) of the Company that represent greater than 50% of the combined voting power of the Company’s then outstanding voting securities (unless Executive has beneficial ownership of at least 50% of such voting securities), other than any transaction or event resulting in the beneficial ownership of securities:

 

(A)                                  By a trustee or other fiduciary holding securities under any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company or by any employee benefit plan (or related trust) sponsored or maintained by the Company or any person controlled by the Company, or

 

 

(B)                                    By the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of the stock of the Company, or

 

(C)                                    Pursuant to a transaction described in clause (iii) below that would not be a Change in Control under clause (iii);

 

(ii)                                  Individuals who, as of the Effective Date, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election by the Company’s stockholders, or nomination for election by the Board, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(iii)                               The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of the Company’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction

 

(A)                                  which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, greater than 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

 

(B)                                     after which no person or group beneficially owns voting securities representing greater than 50% of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this clause (B) as beneficially owning greater than 50% of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; or

 

(iv)                              The approval by the Company’s stockholders of a liquidation or dissolution of the Company.

 

For purposes of clause (i) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of the Company’s stockholders, and for purposes of clause (iii) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of the Company’s stockholders.

 

 

(d)                                 For purposes of this Agreement, “Cause” shall mean the occurrence of any one or more of the following events:

 

(i)                                     The Executive’s willful failure to perform or gross negligence in performing his duties owed to the Company, after ten (10) days following a written notice being delivered to the Executive by the Board, which notice specifies such failure or negligence;

 

(ii)                                  The Executive’s commission of an act of fraud or dishonesty in the performance of his duties;

 

(iii)                               The Executive’s conviction of, or entry by the Executive of a guilty or no contest plea to, any felony or any felony or misdemeanor involving moral turpitude;

 

(iv)                              Any breach by the Executive of his fiduciary duty or duty of loyalty to the Company; or

 

(v)                                 The Executive’s material breach of the Non-Competition Agreement or the Non-Disclosure Agreement between the Executive and the Company, if any.

 

The termination of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of a majority the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity to be heard before the Board), finding that, in the good faith opinion of the Board, sufficient Cause exists to terminate the Executive pursuant to this Section 2(d); provided, that if the Executive is a member of the Board, the Executive shall not participate in the deliberations regarding such resolution, vote on such resolution, nor shall the Executive be counted in determining a majority of the Board.

 

(e)                                  For purposes of this Agreement, “Date of Termination” means (i) if the Executive’s employment is terminated by the Company for Cause, the date of receipt of the Notice of Termination or any later date specified therein (which date shall not be more than thirty (30) days after the giving of such notice), as the case may be, or (ii) if the Executive’s employment is terminated by the Executive with or without Good Reason, the Date of Termination shall be the thirtieth day after the date on which the Executive notifies the Company of such termination, unless otherwise agreed by the Company and the Executive.

 

(f)                                    For purposes of this Agreement, “Good Reason” shall mean the occurrence of any one or more of the following events without the Executive’s prior written consent, unless the Company cures the circumstances constituting Good Reason (provided such circumstances are capable of cure) prior to the Date of Termination:

 

 

(i)                                     A material reduction in the Executive’s titles, duties, authority and responsibilities, or the assignment to the Executive of any duties materially inconsistent with the Executive’s position, authority, duties or responsibilities as in effect immediately prior to a Change in Control without the written consent of the Executive;

 

(ii)                                  The Company’s material reduction of the Executive’s annual base salary or bonus opportunity as in effect immediately prior to a Change in Control;

 

(iii)                               The relocation of the Company’s headquarters to a location more than thirty five (35) miles from the Company’s headquarters as of the date immediately prior to a Change in Control; or

 

(iv)                              The Company’s failure to cure a material breach of its obligations under this Agreement in accordance with the requirements of this section.

 

The Executive must provide written notification of his intention to resign within ninety (90) days after the Executive knows of the occurrence of any event constituting Good Reason and the Company shall have thirty (30) days from the date of receipt of such notice to effect a cure of the condition constituting Good Reason under this Section 2(e).

 

(g)                                 Notice of Termination. Any termination by the Company for Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other parties hereto given in accordance with Section 8(c) of this Agreement. For purposes of this Agreement, a “Notice of Termination” means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive’s employment under the provision so indicated and (iii) if the date of termination is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty (30) days after the giving of such notice) (the “Termination Date”). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

 

The provisions of this Section 2 shall survive the termination of this Agreement.

 

3.                                           Full Settlement. The amounts due under this Section 3 are in the nature of severance payments considered to be reasonable by the Company and the Executive and are not in the nature of a penalty.  Such amounts are in full satisfaction of all claims that the Executive may have in respect of his employment by the Company or its affiliates and are provided as the sole and exclusive benefits to be provided to the Executive in respect of his termination of employment from the Company.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by

 

 

way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as expressly provided, such amounts shall not be reduced whether or not the Executive obtains other employment. If any party to this Agreement institutes any action, suit, counterclaim, appeal, arbitration or mediation for any relief against another party, declaratory or otherwise (collectively, an “Action”), to enforce the terms hereof or to declare rights hereunder, then the Prevailing Party in such Action shall be entitled to recover from the other party all costs and expenses of the Action, including reasonable attorneys’ fees and costs (at the Prevailing Party’s attorneys’ then-prevailing rates) incurred in bringing and prosecuting or defending such Action and/or enforcing any judgment, order, ruling or award (collectively, a “Decision”) granted therein, all of which shall be deemed to have accrued on the commencement of such Action and shall be paid whether or not such Action is prosecuted to a Decision. Any Decision entered in such Action shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such Decision. A court or arbitrator shall fix the amount of reasonable attorneys’ fees and costs upon the request of either party. Any judgment or order entered in any final judgment shall contain a specific provision providing for the recovery of all costs and expenses of suit, including reasonable attorneys’ fees and expert fees and costs incurred in enforcing, perfecting and executing such judgment. For the purposes of this paragraph, costs shall include, without limitation, in addition to costs incurred in prosecution or defense of the underlying action, reasonable attorneys’ fees, costs, expenses and expert fees and costs incurred in the following: (a) post judgment motions and collection actions; (b) contempt proceedings; (c) garnishment, levy, debtor and third party examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals of any order or judgment. “Prevailing Party” within the meaning of this Section includes, without limitation, a party who agrees to dismiss an Action (excluding an Action instituted in contravention of the requirements of Paragraph 7(b) below) in consideration for the other party’s payment of the amounts allegedly due or performance of the covenants allegedly breached, or obtains substantially the relief sought by such party.

 

4.                                       Effect of Section 409A of the Code. Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date the Executive’s employment with the Company terminates or at such other time that the Company determines to be relevant, Executive is a “specified-employee” (as such term is defined under Section 409A) of the Company and (ii) that any payments to be provided to Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“Section 409A Taxes”) if provided at the time otherwise required under this Agreement then (A) such payments shall be delayed until the date that is six months after date of the Executive’s “separation from service” (as such term is defined under Section 409A of the Code) with the Company, or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes (the “Payment Delay Period”) and (B) such payments shall be increased by an amount equal to interest on such payments for the Payment Delay Period at a rate equal to the prime rate in effect as of the date the payment was first due plus one point (for this purpose, the prime rate will be based on the rate published from time to time in The Wall Street Journal).

 

5.                                       Indemnification Agreement. On the Effective Date, the Company and the Executive shall enter into an indemnification agreement in substantially the form attached hereto as Exhibit B (the “Indemnification Agreement”).

 

 

6.                                       Successors.

 

(a)                                  This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

(c)                                  The Company will require any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

7.                                       Miscellaneous.

 

(a)                                  Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(b)                                 Arbitration. To the fullest extent allowed by law, any controversy, claim or dispute between Executive and the Company (and/or any of its owners, directors, officers, employees, affiliates, or agents) relating to or arising out of Executive’s employment or the cessation of that employment will be submitted to final and binding arbitration in the county in which Executive work(ed) for determination by one arbitrator in accordance with the American Arbitration Association’s (“AAA”) National Rules for the Resolution of Employment Disputes, as the exclusive remedy for such controversy, claim or dispute. In any such arbitration, the parties may conduct discovery in accordance with the applicable rules of the arbitration forum, except that the arbitrator shall have the authority to order and permit discovery as the arbitrator may deem necessary and appropriate in accordance with applicable state or federal discovery statutes. The arbitrator shall issue a reasoned, written decision, and shall have full authority to award all remedies which would be available in court. The parties shall share the filing fees required for the arbitration, provided that Executive shall not be required to pay an amount in excess of the filing fees required by a federal or state court with jurisdiction. The Company shall pay the arbitrator’s fees and any AAA administrative expenses. Any judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract, torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the California Labor Code, and any other statutes or laws relating to an employee’s relationship with his/her employer, regardless of whether such dispute is initiated by the Executive or the Company. Thus, this bilateral arbitration agreement applies to any and

 

 

all claims that the Company may have against the Executive, including but not limited to, claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contract, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty by the Executive. However, notwithstanding anything to the contrary contained herein, Company and Executive shall have their respective rights to seek and obtain injunctive relief with respect to any controversy, claim or dispute to the extent permitted by law. Claims for workers’ compensation benefits and unemployment insurance (or any other claims where mandatory arbitration is prohibited by law) are not covered by this arbitration agreement, and such claims may be presented by either Executive or the Company to the appropriate court or government agency. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY. This arbitration agreement is to be construed as broadly as is permissible under applicable law.

 

(c)                                  Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive: at the Executive’s most recent address on the records of the Company,

 

If to the Company:

 

Sunstone Hotel Investors, Inc.

120 Vantis, Suites 350

Aliso Viejo, California 92656

Attn: Corporate Secretary

 

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

 

(d)                                 Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the contrary, if the Company determines, in its reasonable and good faith judgment, that any transfer or deemed transfer of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, then such transfer or deemed transfer shall not be made to the extent necessary or appropriate so as not to violate the Exchange Act and the rules and regulations promulgated thereunder.

 

(e)                                  Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision or term hereof is deemed to have exceeded applicable legal authority or shall be in conflict with applicable legal limitations, such provision shall be reformed and rewritten as necessary to achieve consistency with such applicable law.

 

(f)                                    Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. In addition, notwithstanding any other provision of this Agreement, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Excise Tax Gross-Up Payment and the Executive hereby consents to such withholding.

 

 

(g)                                 No Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 2(e) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

(h)                                 409A of the Code. This Agreement shall be interpreted in a manner to comply with Section 409A of the Code. If any compensation or benefits provided by this Agreement would result in the application of Section 409A of the Code, the Executive and the Company will agree on a modification to the Agreement in order to, where applicable (1) exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A, or (2) comply with the provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory guidance issued under such statutory provisions and to make such modifications to comply with the provisions of Section 409A. Any payment or benefit due upon a termination of the Executive’s employment that represents a “deferral of compensation” within the meaning of Section 409A of the Code shall be paid or provided to the Executive only upon a “separation from service” as defined in Treas. Reg. § 1.409A-1(h). Each payment or benefit to be provided under this Agreement shall be deemed to be a separate payment for purposes of Section 409A. Amounts payable under Sections 2 and 4 of this Agreement shall be deemed not to be a “deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation §§ 1.409A-1(b)(4) (“short-term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Treasury Regulation §§ 1.409A-1 through A-6.”

 

(i)                                     Entire Agreement. As of the Effective Date, this Agreement and the Indemnification Agreement, constitute the final, complete and exclusive agreement between the Executive and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to Executive with respect to the subject matter hereof.

 

(j)                                     Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel and other advisors of his own choosing concerning the terms, enforceability and implications of this Agreement, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability or implications of this Agreement other than as reflected in this Agreement.

 

(k)                                  Counterparts. This Agreement may be executed simultaneously in two counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

 

(l)                                     Employment Status. Nothing in this Agreement provides the Executive with any continued employment with the Company or any affiliate or shall interfere with the Company’s right to terminate the Executive’s employment at any time and for any (or no) reason.

 

 

(n)                                        Survival. The Executive and the Company agree that certain provisions of this Agreement will survive the expiration or termination of this Agreement and the termination of the Executive’s employment with the Company.  Such provisions will be limited to those within this Agreement which, by their express and implied terms, obligate either party to perform beyond the termination of the Executive’s employment or termination of this Agreement.

 

[Signatures appear on next page.]

 

 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

 

	
Sunstone Hotel   Investors, Inc.
    	
 
    
	
 
    	
 
    
	
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Robert Springer
    	
 
    
	
 
    	
 
    	
 
    
	
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EXHIBIT A

TO TERMINATION AND CHANGE IN CONTROL AGREEMENT

 

GENERAL RELEASE

 

For a valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Sunstone Hotel Investors, Inc., a Maryland corporation, and each of its partners, subsidiaries, associates, affiliates, successors, heirs, assigns, and each of their agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the  employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the  Age Discrimination In Employment Act, the Americans With Disabilities Act, and the  California Fair Employment and Housing Act.

 

THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 

(A)                                      HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

 

 

(B)                                     HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

 

(C)                                       HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.

 

The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.

 

The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.

 

The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

 

IN WITNESS WHEREOF, the undersigned has executed this Release this        day of               , 20    .

 

	
 
    	
 
    
	
 
    	
Robert Springer
    

 

 

EXHIBIT B

TO TERMINATION AND CHANGE IN CONTROL AGREEMENT

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT is made and entered into this           day of                , 2011 (“Agreement”), by and between Sunstone Hotel Investors, Inc., a Maryland corporation (the “Company”), and Robert Springer (“Indemnitee”).

 

WHEREAS, at the request of the Company, Indemnitee currently serves as an officer of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his service; and

 

WHEREAS, as an inducement to Indemnitee to continue to serve as an officer, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and

 

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1. Definitions. For purposes of this Agreement:

 

(a) “Change in Control” means a Change in Control as defined in the Change in Control  Agreement attached to this Agreement.

 

(b) “Corporate Status” means the status of a person who is or was a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (each, an “Enterprise”) for which such person is or was serving at the request of the Company.

 

(c) “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advance of Expenses is sought by Indemnitee.

 

(d) “Effective Date” means the date set forth in the first paragraph of this Agreement. 

 

(e) “Expenses” shall include all reasonable and out-of-pocket attorneys’ fees, retainers,  court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premiums, security for, and other costs  relating to any cost bond, supersedeas bond or other appeal bond or its equivalent.

 

 

(f) “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements), or (ii) any other party to or witness in the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. If a Change of Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of Indemnitee, which approval will not be unreasonably withheld. If a Change of Control has occurred, Independent Counsel shall be selected by Indemnitee.

 

(g) “Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (including on appeal), except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee.

 

(h) Reference to “fines” shall include any excise tax assessed with respect to any employee benefit plan; references to “serving at the request of the Company” shall include any service as an officer, director, committee member or official which imposes duties on, or involves services by, such officer, with respect to an employee benefit plan, its participants or beneficiaries; and action taken or omitted to be taken by Indemnitee with respect to an employer benefit plan in the performance of Indemnitee’s duties for a purpose reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to be a purpose that is” “not opposed to the best interests of the Company” as referred to in this Agreement.

 

Section 2. Services by Indemnitee. Indemnitee will serve as an officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any, provided that this Agreement shall continue in force after such time as Indemnitee has ceased to serve as an officer of the Company and Indemnitee will retain all rights provided under this Agreement after such time.

 

Section 3. Indemnification - General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the date hereof and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418 of the Maryland General Corporation Law (“MGCL”), the charter or bylaws of the Company, a resolution of stockholders or directors, another agreement or otherwise.

 

 

Section 4. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to or a witness in any threatened, pending, or completed Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding by reason of his Corporate Status unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and  (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

Section 5. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to or a witness in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against all amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding unless it is established that (i) the act  or omission of Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (ii) Indemnitee actually received an improper personal benefit in money, property or services.

 

Section 6. Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances:

 

(a) if it determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the expenses of securing such reimbursement; or

 

(b) if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding.

 

 

Section 7. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of his Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding, he shall be indemnified for all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than  all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 8. Advance of Expenses. Notwithstanding any provision herein to the contrary, the Company shall advance all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with any Proceeding (other than a Proceeding brought to enforce indemnification under this Agreement, applicable law, the Charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors) to which Indemnitee is, or is threatened to be, made a party or a witness, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit B-1 or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor. Advances shall be unsecured and interest free.

 

Section 9. Procedure for Determination of Entitlement to Indemnification.

 

(a) To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The  omission to notify the Company will not relieve the Company from any liability that it may have to Indemnitee other than under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

 

 

(b) Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion  to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors (as herein defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a  written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon  reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of  this Section 9. Any Expenses actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

 

Section 10. Presumptions and Effect of Certain Proceedings.

 

(a) In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

 

(b) The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo  contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

(c) Unless Indemnitee has reason to believe otherwise, for purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 10(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the  Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

 

(d) The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise, excluding the Indemnitee, shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

Section 11. Remedies of Indemnitee.

 

(a) If (i) a determination is made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is  not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(b) of this Agreement within 30 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his rights under Section 7 of this Agreement.

 

(b) In any judicial proceeding or arbitration commenced pursuant to this Section 11 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be.

 

 

(c) If a determination shall have been made pursuant to Section 9(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 11, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.

 

(d) In the event that Indemnitee, pursuant to this Section 11, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

 

Section 12. Defense of the Underlying Proceeding.

 

(a) Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of Expenses under this Agreement unless the Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

 

(b) Subject to the provisions of the last sentence of this Section 12(b) and of  Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which  (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11 above or Section 18 below.

 

 

(c) Notwithstanding the provisions of Section 12(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i) Indemnitee reasonably concludes, based upon an opinion of counsel to Indemnitee, that he may  have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel to Indemnitee, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal  counsel of Indemnitee’s choice, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company (subject to Section 11(d)), to represent Indemnitee in connection with any such matter.

 

Section 13. Non-Exclusivity; Survival of Rights; Subrogation; Insurance.

 

(a) The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter or Bylaws of the  Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or  omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Maryland law, whether by statute  or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s charter or bylaws or this Agreement, except with respect to suits against the Company relating to this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other right or remedy.

 

(b) In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

 

(c) The Company shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and to the extent that Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.

 

 

(d) Notwithstanding any other provision of this Agreement to the contrary, the Company shall not be liable for indemnification or advance of Expenses in connection with any settlement or judgment for insider trading or for disgorgement of profits pursuant to Section 16(b) of the Securities Exchange Act of 1934.

 

Section 14. Insurance. The Company will use its reasonable best efforts to acquire directors and officers liability insurance, on terms and conditions deemed appropriate by the Board of Directors of the Company, with the advice of counsel, covering Indemnitee or any claim made against Indemnitee for service as a director or officer of the Company and covering the Company for any indemnification or advance of Expenses made by the Company to Indemnitee for any claims made against Indemnitee for service as a director or officer of the Company. Without in any way limiting any other obligation under this Agreement, the Company shall indemnify Indemnitee for any payment by Indemnitee arising out of the amount of any deductible or retention and the amount of any excess of the aggregate of all judgments, penalties, fines, settlements and reasonable Expenses actually and reasonably incurred by Indemnitee in connection with a Proceeding over the coverage of any insurance referred to in the previous sentence.

 

Section 15. Indemnification for Expenses of a Witness. Notwithstanding any other provision of this Agreement, to the extent that Indemnitee is or may be, by reason of his Corporate Status, a witness in any Proceeding, whether instituted by the Company or any other party, and to which Indemnitee is not a party but in which the Indemnitee receives a subpoena to testify, he shall be advanced all reasonable Expenses and indemnified  against all Expenses actually and reasonably incurred by him or on his behalf in connection therewith.

 

Section 16. Duration of Agreement; Binding Effect.

 

(a) This Agreement shall continue until and terminate ten years after the date that Indemnitee’s Corporate Status shall have ceased; provided, that the rights of Indemnitee hereunder shall continue until the final termination of any Proceeding then pending in respect of which Indemnitee is granted rights of indemnification or advance of Expenses hereunder and of any proceeding commenced by Indemnitee pursuant to Section 11 of this Agreement relating thereto.

 

(b) The indemnification and advance of Expenses provided by, or granted pursuant to, this Agreement shall be binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), shall continue as to an Indemnitee who has ceased to be a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person is or was serving at the written request of the Company, and shall inure to the benefit of Indemnitee and his spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

 

 

(c) The Company shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial  part, of the business and/or assets of the Company, by written agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.

 

Section 17. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable that is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each  portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested thereby.

 

Section 18. Exception to Right of Indemnification or Advance of Expenses. Notwithstanding any other provision of this Agreement, Indemnitee shall not be entitled to indemnification or advance of Expenses under this Agreement with respect to any Proceeding brought by Indemnitee, unless (a) the Proceeding is brought to enforce indemnification under this Agreement, and then only to the extent in accordance with and as authorized by Sections 8 and 11 of this Agreement, or (b) the Company’s Bylaws, as amended, the Charter, a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a party expressly provide otherwise.

 

Section 19. Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same Agreement. One such counterpart signed by the party against whom enforceability is sought shall be sufficient to evidence the existence of this Agreement.

 

Section 20. Headings. The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

 

Section 21. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

 

Section 22. Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

 

(a) If to Indemnitee, to: The Indemnitee’s address on the books and records of the  Company.

 

 

(b) If to the Company, to: 

Sunstone Hotel Investors, Inc.

120 Vantis, Suite 350

Aliso Viejo, California 92656

Attn: Corporate Secretary

 

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

 

Section 23. Governing Law. The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without regard to its conflicts of laws rules.

 

Section 24. Miscellaneous. Use of the masculine pronoun shall be deemed to include usage of the feminine pronoun where appropriate.

 

[Signatures appear on next page.]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

 

 

	
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EXHIBIT B-1

TO INDEMNIFICATION AGREEMENT

 

FORM OF UNDERTAKING TO REPAY EXPENSES ADVANCED

 

The Board of Directors of Sunstone Hotel Investors, Inc. 

Re: Undertaking to Repay Expenses Advanced

 

Ladies and Gentlemen:

 

This undertaking is being provided pursuant to that certain Indemnification Agreement dated the            day of                               , 2011, by and between Sunstone Hotel Investors, Inc. (the “Company”) and the undersigned Indemnitee (the “Indemnification Agreement”), pursuant to which I am entitled to advance of expenses in connection with [Description of Proceeding] (the “Proceeding”).

 

Terms used herein and not otherwise defined shall have the meanings specified in the Indemnification Agreement.

 

I am subject to the Proceeding by reason of my Corporate Status or by reason of alleged actions or omissions by me in such capacity. I hereby affirm that at all times, insofar as I was involved as an officer of the Company, in any of the facts or events giving rise to the Proceeding, I (1) acted in good faith and honestly, (2) did not receive any improper personal benefit in money, property or services and (3) in the case of any criminal proceeding, had no reasonable cause to believe that any act or omission by me was unlawful.

 

In consideration of the advance of Expenses by the Company for reasonable attorneys’ fees and related expenses incurred by me in connection with the Proceeding (the “Advanced Expenses”), I hereby agree that if, in connection with the Proceeding, it is established that (1) an act or omission by me was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (2) I actually received an improper personal benefit in money, property or services or (3) in the case of any criminal proceeding, I had reasonable cause to believe that the act or omission was unlawful, then I shall promptly reimburse the portion of the Advanced Expenses relating to the claims, issues or matters in the Proceeding as to which the foregoing findings have been established and which have not been successfully resolved as described in Section 7 of the Indemnification Agreement. To the extent that Advanced Expenses do not relate to a specific claim, issue or matter in the Proceeding, I agree that such Expenses shall be allocated on a reasonable and proportionate basis.

 

IN WITNESS WHEREOF, I have executed this Affirmation and Undertaking on this        day of                         , 2011.

 

	
 
    	
 
    
	
 
    	
Robert SpringerExhibit 10.3

 

 

LOAN AGREEMENT

 

Dated as of April 15, 2011

 

among

 

ONE PARK BOULEVARD, LLC
 as Borrower

 

and

 

SUNSTONE PARK LESSEE, LLC

as Operating Lessee

 

 AAREAL CAPITAL CORPORATION,
  as Agent for the Lenders,

 

and

 

AAREAL CAPITAL CORPORATION,

as Lender

 

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
 
    	
 
    	
 
    
	
Article I DEFINITIONS
    	
1
    
	
 
    	
Section 1.1
    	
Definitions
    	
1
    
	
 
    	
Section 1.2
    	
Other Definitional Provisions
    	
29
    
	
 
    	
 
    	
 
    
	
Article II THE LOAN
    	
29
    
	
 
    	
Section 2.1
    	
The Loan; Use of Funds
    	
29
    
	
 
    	
Section 2.2
    	
Interest
    	
30
    
	
 
    	
Section 2.3
    	
Determination of Applicable Interest Rate
    	
30
    
	
 
    	
Section 2.4
    	
Principal Payments
    	
32
    
	
 
    	
Section 2.5
    	
Payment; Default Rate; Application of Certain Monies;   Priority of Payments; Set-offs
    	
33
    
	
 
    	
Section 2.6
    	
Usury
    	
34
    
	
 
    	
Section 2.7
    	
Interest Rate Protection Agreement
    	
35
    
	
 
    	
Section 2.8
    	
Breakage
    	
37
    
	
 
    	
Section 2.9
    	
“Additional Interest” under Lender Interest Rate Agreements
    	
37
    
	
 
    	
Section 2.10
    	
No Withholdings
    	
38
    
	
 
    	
Section 2.11
    	
Unavailability; Illegality of LIBOR
    	
39
    
	
 
    	
Section 2.12
    	
Increased Costs and Capital Adequacy
    	
39
    
	
 
    	
Section 2.13
    	
Obligation to Mitigate
    	
42
    
	
 
    	
Section 2.14
    	
Closing
    	
43
    
	
 
    	
Section 2.15
    	
Fees
    	
43
    
	
 
    	
 
    	
 
    
	
Article III ACCOUNTS;   RESERVES; LETTERS OF CREDIT
    	
43
    
	
 
    	
Section 3.1
    	
Operating Account
    	
43
    
	
 
    	
Section 3.2
    	
Cash Collateral Account; Cash Sweep Letter of Credit
    	
43
    
	
 
    	
Section 3.3
    	
Tenant Security Account
    	
44
    
	
 
    	
Section 3.4
    	
Capital/FF&E Reserve   Account
    	
46
    
	
 
    	
Section 3.5
    	
Security Interest in Accounts
    	
47
    
	
 
    	
Section 3.6
    	
Letters of Credit
    	
47
    
	
 
    	
 
    	
 
    
	
Article IV CONDITIONS   PRECEDENT TO THE EFFECTIVENESS OF THIS LOAN AGREEMENT
    	
49
    
	
 
    	
Section 4.1
    	
Representations and Warranties
    	
49
    
	
 
    	
Section 4.2
    	
Closing Documents, Etc.
    	
49
    
	
 
    	
Section 4.3
    	
Payment of Fees and Expenses
    	
49
    
	
 
    	
Section 4.4
    	
No Default or Event of Default
    	
49
    
	
 
    	
Section 4.5
    	
No Casualty or Taking
    	
49
    
	
 
    	
Section 4.6
    	
Financial Statements
    	
49
    
	
 
    	
Section 4.7
    	
Loan-To-Value
    	
49
    
	
 
    	
Section 4.8
    	
Compliance with Other Conditions
    	
49
    
	
 
    	
Section 4.9
    	
Other Documents
    	
50
    
	
 
    	
Section 4.10
    	
Adverse Conditions; Internal Approval
    	
50
    
					

 

i

 

	
Article V REPRESENTATIONS   AND WARRANTIES
    	
50
    
	
 
    	
Section 5.1
    	
Due Organization
    	
50
    
	
 
    	
Section 5.2
    	
Due Execution
    	
50
    
	
 
    	
Section 5.3
    	
Enforceability
    	
50
    
	
 
    	
Section 5.4
    	
No Violation
    	
51
    
	
 
    	
Section 5.5
    	
No Litigation
    	
51
    
	
 
    	
Section 5.6
    	
No Default or Event of Default
    	
51
    
	
 
    	
Section 5.7
    	
Offsets, Defenses, Etc.
    	
51
    
	
 
    	
Section 5.8
    	
Consents
    	
51
    
	
 
    	
Section 5.9
    	
Financial Statements and Other Information
    	
51
    
	
 
    	
Section 5.10
    	
Full Disclosure
    	
52
    
	
 
    	
Section 5.11
    	
Accounts
    	
52
    
	
 
    	
Section 5.12
    	
Indebtedness
    	
52
    
	
 
    	
Section 5.13
    	
Insurance Policies
    	
52
    
	
 
    	
Section 5.14
    	
Availability of Utilities and Access
    	
52
    
	
 
    	
Section 5.15
    	
No Liens
    	
52
    
	
 
    	
Section 5.16
    	
Compliance with Legal Requirements
    	
53
    
	
 
    	
Section 5.17
    	
Certain Agreements
    	
53
    
	
 
    	
Section 5.18
    	
Security Documents
    	
54
    
	
 
    	
Section 5.19
    	
Casualty and Taking
    	
54
    
	
 
    	
Section 5.20
    	
Brokerage
    	
54
    
	
 
    	
Section 5.21
    	
Encroachments
    	
54
    
	
 
    	
Section 5.22
    	
Foreign Person
    	
54
    
	
 
    	
Section 5.23
    	
Control Person
    	
54
    
	
 
    	
Section 5.24
    	
Government Regulation
    	
54
    
	
 
    	
Section 5.25
    	
ERISA
    	
55
    
	
 
    	
Section 5.26
    	
Labor Relations
    	
55
    
	
 
    	
Section 5.27
    	
Name; Principal Place of Business
    	
55
    
	
 
    	
Section 5.28
    	
Intellectual Property
    	
55
    
	
 
    	
Section 5.29
    	
Flood Zone
    	
56
    
	
 
    	
Section 5.30
    	
Taxes
    	
56
    
	
 
    	
Section 5.31
    	
Title
    	
56
    
	
 
    	
Section 5.32
    	
Creditworthiness
    	
56
    
	
 
    	
Section 5.33
    	
Patriot Act
    	
56
    
	
 
    	
Section 5.34
    	
Leases
    	
57
    
	
 
    	
Section 5.35
    	
Special Purpose Entity
    	
57
    
	
 
    	
Section 5.36
    	
Intentionally Deleted
    	
57
    
	
 
    	
Section 5.37
    	
Ground Lease
    	
58
    
	
 
    	
 
    	
 
    
	
Article VI GENERAL AND   OPERATIONAL COVENANTS
    	
58
    
	
 
    	
Section 6.1
    	
Financial Statements, Reports and Documents of Loan Parties
    	
58
    
	
 
    	
Section 6.2
    	
Marketing, Management, Maintenance and Repairs
    	
63
    
	
 
    	
Section 6.3
    	
Inspection of Premises and Books and Records
    	
64
    
	
 
    	
Section 6.4
    	
Compliance with Legal, Insurance and Contractual   Requirements
    	
65
    
	
 
    	
Section 6.5
    	
Appraisals
    	
65
    
	
 
    	
Section 6.6
    	
Payment of Impositions
    	
66
    

 

ii

 

	
 
    	
Section 6.7
    	
Liens and Encumbrances; Ownership of Collateral
    	
66
    
	
 
    	
Section 6.8
    	
Permitted Contests
    	
67
    
	
 
    	
Section 6.9
    	
Alterations
    	
68
    
	
 
    	
Section 6.10
    	
Leases
    	
70
    
	
 
    	
Section 6.11
    	
Required Insurance
    	
72
    
	
 
    	
Section 6.12
    	
Damage or Destruction
    	
74
    
	
 
    	
Section 6.13
    	
Taking of the Mortgaged Property
    	
79
    
	
 
    	
Section 6.14
    	
Costs and Expenses
    	
81
    
	
 
    	
Section 6.15
    	
Transfers
    	
82
    
	
 
    	
Section 6.16
    	
Defense of Title
    	
84
    
	
 
    	
Section 6.17
    	
Recordation and Certain Taxes
    	
84
    
	
 
    	
Section 6.18
    	
Name, Fiscal Year and Accounting Method
    	
84
    
	
 
    	
Section 6.19
    	
Consolidation, Merger, Conveyance, Transfer or Lease
    	
84
    
	
 
    	
Section 6.20
    	
Organization Restrictions
    	
84
    
	
 
    	
Section 6.21
    	
Changes in Zoning
    	
84
    
	
 
    	
Section 6.22
    	
Distributions, Dividends and Affiliate Payments
    	
85
    
	
 
    	
Section 6.23
    	
ERISA
    	
85
    
	
 
    	
Section 6.24
    	
Maintenance of Existence
    	
85
    
	
 
    	
Section 6.25
    	
Subsidiaries and Joint Ventures
    	
85
    
	
 
    	
Section 6.26
    	
Intentionally Deleted
    	
85
    
	
 
    	
Section 6.27
    	
Utilities
    	
86
    
	
 
    	
Section 6.28
    	
Margin Stock
    	
86
    
	
 
    	
Section 6.29
    	
Compliance with Anti-Money Laundering and OFAC Laws
    	
86
    
	
 
    	
Section 6.30
    	
Limitation on Indebtedness
    	
87
    
	
 
    	
Section 6.31
    	
Loans to Members, Etc.
    	
87
    
	
 
    	
Section 6.32
    	
Transactions with Affiliates
    	
87
    
	
 
    	
Section 6.33
    	
Debt Service Coverage Ratio
    	
87
    
	
 
    	
Section 6.34
    	
Required Repairs
    	
88
    
	
 
    	
Section 6.35
    	
Ground Lease
    	
88
    
	
 
    	
Section 6.36
    	
Operating Leases
    	
88
    
	
 
    	
 
    	
 
    
	
Article VII EVENTS OF   DEFAULT
    	
89
    
	
 
    	
Section 7.1
    	
Events of Default
    	
89
    
	
 
    	
Section 7.2
    	
Acceleration of Loan
    	
92
    
	
 
    	
Section 7.3
    	
Agent’s Right to Perform; Protective Advances
    	
92
    
	
 
    	
Section 7.4
    	
Assignment of Funds
    	
94
    
	
 
    	
Section 7.5
    	
Accounts
    	
94
    
	
 
    	
Section 7.6
    	
No Liability of Agent or Lenders
    	
95
    
	
 
    	
Section 7.7
    	
Management Agreement
    	
95
    
	
 
    	
Section 7.8
    	
Right of Offset
    	
95
    
	
 
    	
Section 7.9
    	
Termination of Loan Agreement
    	
95
    
	
 
    	
 
    	
 
    
	
Article VIII ASSIGNMENTS AND   PARTICIPATIONS
    	
96
    
	
 
    	
Section 8.1
    	
Assignment and Participations
    	
96
    
	
 
    	
Section 8.2
    	
Participation
    	
97
    
	
 
    	
Section 8.3
    	
Availability of Records
    	
97
    
	
 
    	
Section 8.4
    	
Loan Parties’ Facilitation of Transfer
    	
97
    

 

iii

 

	
 
    	
Section 8.5
    	
Notice; Registration Requirement
    	
99
    
	
 
    	
Section 8.6
    	
Registry
    	
99
    
	
 
    	
Section 8.7
    	
Lender Interest Rate Protection Agreements
    	
99
    
	
 
    	
Section 8.8
    	
Disclosure by Agent or Lender
    	
100
    
	
 
    	
 
    	
 
    
	
Article IX AGENT AND LENDERS
    	
100
    
	
 
    	
Section 9.1
    	
Scope of Article IX
    	
100
    
	
 
    	
Section 9.2
    	
Agent
    	
100
    
	
 
    	
Section 9.3
    	
Distributions
    	
102
    
	
 
    	
Section 9.4
    	
Authority, No Reliance; Binding Effect
    	
102
    
	
 
    	
Section 9.5
    	
Loan
    	
103
    
	
 
    	
Section 9.6
    	
Equitable Adjustments
    	
106
    
	
 
    	
Section 9.7
    	
Other Transactions
    	
106
    
	
 
    	
Section 9.8
    	
Obligations Absolute
    	
106
    
	
 
    	
Section 9.9
    	
Indemnification
    	
106
    
	
 
    	
Section 9.10
    	
Taxes
    	
107
    
	
 
    	
Section 9.11
    	
Return of Payments
    	
107
    
	
 
    	
Section 9.12
    	
No Partnership
    	
108
    
	
 
    	
Section 9.13
    	
Resignation and Removal of Agent; Successor Agent
    	
108
    
	
 
    	
Section 9.14
    	
Defaults by any Lender
    	
109
    
	
 
    	
Section 9.15
    	
Purchase Price; Payment for Defaulting Lender’s Pro Rata   Share
    	
110
    
	
 
    	
Section 9.16
    	
Enforcement Action Plan
    	
110
    
	
 
    	
 
    	
 
    
	
Article X GENERAL CONDITIONS
    	
111
    
	
 
    	
Section 10.1
    	
Indemnity
    	
111
    
	
 
    	
Section 10.2
    	
No Waivers
    	
113
    
	
 
    	
Section 10.3
    	
Submission of Evidence
    	
113
    
	
 
    	
Section 10.4
    	
Loan
    	
114
    
	
 
    	
Section 10.5
    	
Contractors
    	
114
    
	
 
    	
Section 10.6
    	
Entire Agreement
    	
114
    
	
 
    	
Section 10.7
    	
Assignment
    	
114
    
	
 
    	
Section 10.8
    	
Further Assurances; Filing of Financing Statements
    	
114
    
	
 
    	
Section 10.9
    	
Cumulative Remedies
    	
114
    
	
 
    	
Section 10.10
    	
Amendments, Consents, Waivers, Approvals, Etc.
    	
115
    
	
 
    	
Section 10.11
    	
Notices
    	
115
    
	
 
    	
Section 10.12
    	
Limitation on Liability
    	
117
    
	
 
    	
Section 10.13
    	
Binding Effect
    	
117
    
	
 
    	
Section 10.14
    	
Severability of Provisions
    	
117
    
	
 
    	
Section 10.15
    	
Governing Law and Consent to Jurisdiction
    	
118
    
	
 
    	
Section 10.16
    	
Waiver of Jury Trial
    	
118
    
	
 
    	
Section 10.17
    	
No Joint Venture
    	
118
    
	
 
    	
Section 10.18
    	
Determinations and Consents of Agent and Lenders
    	
118
    
	
 
    	
Section 10.19
    	
Reliance by Agent and Lenders on Action on Behalf of Loan   Parties
    	
118
    
	
 
    	
Section 10.20
    	
Headings, Etc.
    	
119
    
	
 
    	
Section 10.21
    	
Incorporation by Reference
    	
119
    

 

iv

 

	
 
    	
Section 10.22
    	
Counterparts
    	
119
    
	
 
    	
Section 10.23
    	
Attorneys’ Fees
    	
119
    
	
 
    	
Section 10.24
    	
Employer Identification Number Etc.
    	
119
    
	
 
    	
Section 10.25
    	
Confidentiality
    	
119
    

 

Exhibits and Schedules

 

	
Exhibit A:
    	
The   Land
    
	
Exhibit B:
    	
Definition   of Single Purpose Entity
    
	
Exhibit C:
    	
Required   Amortization Payments
    
	
Schedule 2.7(a):
    	
Interest   Rate Protection Agreement Acknowledgment
    
	
Schedule   5:
    	
Exceptions   to Representations and Warranties
    
	
Schedule 5.11:
    	
Accounts
    
	
Schedule 5.17:
    	
Material   Operating Agreements
    
	
Schedule 6.11:
    	
Insurance   Requirements
    
	
Schedule   6.34:
    	
Required   Repairs
    
	
Schedule 8.5:
    	
Assignment   and Acceptance
    

 

v

 

LOAN AGREEMENT

 

This LOAN AGREEMENT (this “Loan Agreement”) dated as of April 15, 2011 by and among ONE PARK BOULEVARD, LLC, a Delaware limited liability company, having offices at 120 Vantis, Suite 350, Aliso Viejo, California 92656 (“Borrower”), SUNSTONE PARK LESSEE, LLC, a Delaware limited liability company, having offices at 120 Vantis, Suite 350, Aliso Viejo, California 92656 (“Operating Lessee”; Borrower and Operating Lessee are each sometimes referred to as a “Loan Party” and as “Loan Parties”), AAREAL CAPITAL CORPORATION, a Delaware corporation, having offices at 250 Park Avenue, Suite 820, New York, New York 10177, as agent for the Lenders (in its capacity as agent, together with its permitted successors and assigns, “Agent”) and AAREAL CAPITAL CORPORATION, a Delaware corporation, having offices at 250 Park Avenue, Suite 820, New York, New York 10177, as “Lender”, and the lenders party to this Loan Agreement from time to time (such lenders, together with their respective permitted successors and assigns, are referred to hereinafter each individually as a “Lender” and collectively as “Lenders”).

 

W I T N E S S E T H:

 

WHEREAS, Borrower is the owner of (a) a leasehold interest in certain real property and (b) the improvements constructed thereon, which are collectively known as “The Hilton San Diego Bayfront Hotel” located in San Diego, California, which property is more particularly described in Exhibit A attached hereto (the “Land”);

 

WHEREAS, Borrower, as lessor, and Operating Lessee, as lessee, are parties to that certain Lease Agreement dated as of April 15, 2011 (the “Operating Lease;”); and

 

WHEREAS, Borrower wishes to borrow $240,000,000.00 (the “Loan Amount”) from Lenders upon the terms and conditions contained herein; and

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants contained herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1            Definitions.  For purposes of this Loan Agreement, the following terms shall have the respective meanings set forth in this Article I:

 

“Aareal” means Aareal Capital Corporation, its successors or assigns by merger, consolidation, sale of all or substantially all of its assets or interests in one or a series of related transactions or other corporate reorganization.

 

“Acceleration Event” means the occurrence and continuance of the principal balance of the Loan being immediately due and payable in accordance with this Loan Agreement.

 

 

“Account Agreement” means in the case of any Account specified herein as being controlled by Agent, an account control agreement reasonably acceptable to Agent that satisfies the requirements of Section 9-104 of the Uniform Commercial Code and that provides Loan Parties with full access to such Account until the required notice has been given by Agent to the depository bank in accordance with such account control agreement, to be executed and delivered by Loan Parties, Agent and the bank at which the Account that is the subject of such agreement is held, which bank shall be reasonably acceptable to Agent.

 

“Account(s)” means, collectively, all accounts of each Loan Party and all accounts of any Person held on behalf of or for the benefit of each Loan Party, including the Tenant Security Account (if any), the Cash Collateral Account and the Capital/FF&E Reserve Account.

 

“Additional Costs” has the meaning set forth in Section 2.12(c).

 

“Additional Interest” means, without duplication, all sums payable pursuant to Sections 2.8, 2.9, 2.10 and 2.12.

 

“Adjusted Debt Service” means as of any Testing Determination Date, the greatest of:

 

(a)           the Debt Service as of the applicable Testing Determination Date;

 

(b)           the aggregate amount of interest and principal amortization payments that would be payable over a twelve (12) month period on a hypothetical 30-year fully amortizing loan in an original principal amount equal to the outstanding principal amount of the Loan as of the applicable Testing Determination Date with an interest rate equal to the sum of the Treasury Rate plus two and one-quarter percent (2.25%) and which requires monthly constant payments of principal and interest on the first date of each month throughout the term of such loan; and/or

 

(c)           the product of (i) the outstanding principal amount of the Loan as of the Testing Determination Date multiplied by (ii) seven percent (7.00%).

 

“Adjusted Debt Service Coverage Ratio” means as of any Testing Determination Date, the ratio of (i) the Net Operating Income for the twelve (12) month period ending on the Testing Determination Date to (ii) the Adjusted Debt Service applicable to such twelve (12) month period (provided that, in the case of clause (a) of the definition of Adjusted Debt Service, with respect to the first three (3) Testing Determination Dates which shall occur during the term of the Loan, the Adjusted Debt Service shall be annualized based upon the period commencing on the Closing Date and ending on such Testing Determination Date).

 

“Administrative Fee” has the meaning set forth in the Loan Fee Letter.

 

“Affected Lender” has the meaning set forth in Section 2.12(e).

 

“Affiliate” means, with respect to any Person, any other Person:

 

2

 

(a)           which directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such Person or is an executive officer or board member (or other member of an equivalent governing body) of such Person; or

 

(b)           which, directly or indirectly, beneficially owns or holds ten percent (10%) or more of any class of stock or any other ownership interest in such Person;

 

(c)           which is a member of the family (as defined in Section 267(c)(4) of the IRC) of such Person or which is a trust or estate, the beneficial owners of which are members of the family (as defined in Section 267(c)(4) of the IRC) of such Person; or

 

(d)           which is a subsidiary (whether direct or indirect), general partner, controlling shareholder, managing member, executive officer or board member (or other member of an equivalent governing body) of such Person.

 

For purposes of this definition, each Sponsor and Guarantor shall be deemed to be Affiliates of Loan Parties but neither Sponsor shall be deemed to be an Affiliate of the other.

 

“Agent” has the meaning set forth in the first paragraph of this Loan Agreement.

 

“Agent’s Counsel” means such counsel as Agent from time to time may engage on behalf of itself and/or Lenders.

 

“Agent’s Counsel Fees” means the reasonable, documented out-of-pocket fees and disbursements of Agent’s Counsel for services heretofore or hereafter rendered to Agent on behalf of itself and/or Lenders in connection with the Loan (except as otherwise set forth herein), including the preparation, negotiation, administration and modification of the Loan Documents, and the enforcement of Agent’s and Lenders’ rights and remedies under the Loan Documents.

 

“Anti-Money Laundering Laws” means any laws or regulations relating to money laundering or terrorist financing, including, without limitation, the Bank Secrecy Act, 31 U.S.C. sections 5301 et seq.; the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. 107-56 (a/k/a the USA Patriot Act); Laundering of Monetary Instruments, 18 U.S.C. section 1956; Engaging in Monetary Transactions in Property Derived from Specified Unlawful Activity, 18 U.S.C. section 1957; the Financial Recordkeeping and Reporting of Currency and Foreign Transaction Regulations, 31 C.F.R. Part 103; and any similar laws or regulations currently in force or hereafter enacted.

 

“Applicable Accounting Standards” means (i) with respect to reports prepared by Loan Parties or a Guarantor, GAAP, and (ii) with respect to reports prepared by Property Manager, the Uniform System of Accounts for the Lodging Industry, Tenth Revised Edition (unless otherwise set forth in the Management Agreement), consistently applied.

 

“Applicable Interest Rate” has the meaning set forth in Section 2.2(a).

 

“Appraisal” means a written appraisal report of the Premises as the term “appraisal” is defined in the Code of Professional Ethics of the Appraisal Institute, meeting the

 

3

 

requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, prepared by a professional appraiser retained by Agent (except with respect to an Appraisal provided in accordance with Section 3.2(b), Section 3.6(c) and/or Section 7.9, in which case such appraiser may be retained by Loan Parties (and reasonably approved by Agent) or a refinancing lender) at Borrower’s expense (to the extent provided in Section 6.5) who is a member of the Appraisal Institute, addressed to Agent (except with respect to an Appraisal provided in accordance with Section 3.2(b), Section 3.6(c) and/or Section 7.9, in which case such Appraisal may be addressed to Borrower or a refinancing lender but shall provide that Agent may rely thereon) and in form, scope and substance reasonably satisfactory to Agent, setting forth such appraiser’s determination of the Appraised Value.

 

“Appraisal Update” means any written supplement or “update” to an Appraisal required hereunder, prepared by a professional appraiser retained by Agent at Borrower’s expense (to the extent provided in Section 6.5) who is a member of the Appraisal Institute, addressed to Agent and in form, scope and substance reasonably satisfactory to Agent, setting forth such appraiser’s determination of the Appraised Value.

 

“Appraised Value” means the “as-is” fair market value of the Premises, which would be obtained in an arm’s length sale of the Premises between an informed and willing buyer and an informed and willing seller, under no compulsion, respectively, to buy or sell, on the appraisal date of the Appraisal or Appraisal Update, as applicable.

 

“Approved Assignee” means an Eligible Assignee which, as of the date of determination, is not then directly or through an Affiliate adverse to Agent or its Affiliates in any pending litigation, action, proceeding, mediation or arbitration involving claims or counterclaims of fraud or bad faith against such Eligible Assignee or Affiliate.

 

“Approved Bank” means Agent and any other bank or other financial institution, the long term unsecured debt obligations of which are rated at least “A-” by Standard & Poor’s Ratings Group and “A3” by Moody’s or equivalent rating by Fitch Inc.

 

“Approved Capital/FF&E Expenditures Budget” means, for any fiscal year of Loan Parties, the Capital/FF&E Expenditures Budget approved (or deemed approved) by Agent pursuant to Section 6.1(j), and any amendments or modifications thereto approved (or deemed approved) by Agent pursuant to Section 6.1(j).

 

“Assignee” has the meaning set forth in Section 8.1.

 

“Assignment and Acceptance” has the meaning set forth in Section 8.5.

 

“Assignment of Agreements” means that certain Assignment of Agreements dated as of the Closing Date made by Loan Parties in favor of Agent.

 

“Assignment of Leases and Rents” means that certain Assignment of Leases and Rents dated as of the Closing Date made by Loan Parties in favor of Agent.

 

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“Authorized Agent Representative” means Joseph Kelly, and any other person designated as such by Agent from time to time for purposes of Sections 2.3(c) or (d) by delivery of a notice to Loan Parties.

 

“Authorized Loan Parties’ Representative” means either of Lindsay Monge or Bryan Giglia and any other Person designated as such by Loan Parties from time to time for purposes of Sections 2.3(c) or (d) by delivery of a notice to Agent.

 

“Bankruptcy Proceeding” means with respect to any Person, (i) consenting in writing to the appointment of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, (ii) admitting in writing its inability to pay its debts generally as they become due or (iii) filing a petition, or otherwise instituting, or consenting in writing to the institution against it of, proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors under any federal, state or foreign bankruptcy, insolvency, receivership or similar law.

 

“Base Rate” means, as of any date of determination, the sum of (a) the higher of (i) the prime rate announced from time to time by JPMorgan Chase Bank, N.A., or  such other bank as agreed to by Loan  Parties and Agent, and (ii) the Federal Funds Rate plus one-half of one percent (0.50%) per annum, plus (b) the Margin.

 

“Borrower” has the meaning set forth in the first paragraph of this Loan Agreement.  For the avoidance of doubt, in no event shall Operating Lessee be deemed a co-borrower under the Loan, and any and all agreements, covenants and other undertakings of Operating Lessee hereunder shall be limited solely to itself and the performance of its own obligations.

 

“Breakage Costs” shall have the meaning set forth in Section 2.8.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City, London, England or Frankfurt, Germany are authorized or required by law or executive order to close.

 

“Calendar Quarter” means each of the periods of January 1 through the immediately succeeding March 31, April 1 through the immediately succeeding June 30, July 1 through the immediately succeeding September 30, and October 1 through the immediately succeeding December 31.

 

“Capital/FF&E Expenditures” means expenditures for (a) capital alterations or improvements to the Premises which are required or permitted under Applicable Accounting Standards to be capitalized or (b) the repair, replacement or acquisition (as appropriate) of FF&E.

 

“Capital/FF&E Expenditures Budget” means, for any fiscal year of Loan Parties, a budget for Capital/FF&E Expenditures delivered to Agent pursuant to Section 6.1(j).

 

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“Capital/FF&E Reserve Account” has the meaning set forth in Section 3.4.

 

“Capital/FF&E Reserve Amount” means, for any calendar month, an amount equal to four percent (4%) of FF&E Gross Revenues for the month prior to the immediately preceding calendar month.  (E.g., the Capital/FF&E Reserve Amount due and payable on August 1, 2011 will be four percent (4%) of FF&E Gross Revenues for June, 2011.)

 

“Cash Collateral Account” has the meaning set forth in Section 3.2(a).

 

“Cash Collateral Payment Amount” means, as of any Payment Date, the excess of (a) Gross Revenues for the previous month with respect to which a determination is being made, over (b) the sum of, without duplication, to the extent paid by or on behalf of Borrower during such previous month:

 

(i) Operating Expenses, Capital/FF&E Expenditures (except to the extent paid from the Capital/FF&E Reserve Account) paid or reasonably reserved for in such month;

 

(ii) expenses incurred with respect to a Restoration, if any, paid or reasonably reserved for in such month;

 

(iii) Required Amortization Payments, payments on account of Interest (taking into account any payments received on account of any Interest Rate Protection Agreement then in effect), deposits into the Capital/FF&E Reserve Account and other sums due to Agent and/or the Lenders for such month;

 

(iv) federal and state income taxes, franchise taxes and other taxes based on income due and owing from Loan Parties (but, for the avoidance of doubt, not from any Loan Party Member or any other owner of a direct or indirect interest in either Loan Party) paid or reserved for in such month; and

 

(v) amounts due by Loan Parties to Agent, Lender or any other Person pursuant to Section 2.7 paid in such month.

 

“Cash Sweep Condition” shall exist:

 

(a)           during the continuance of an Event of Default; and/or

 

(b)           with respect to each Testing Determination Date (i) from the thirtieth (30th) day after the delivery of the Quarterly Compliance Statement required to be delivered to Agent pursuant to Section 6.1(c) for the Calendar Quarter ending on such Testing Determination Date which provides that the Adjusted Debt Service Coverage Ratio for the applicable Calendar Quarter is less than 1.40:1.00 (the “Minimum DSCR”) or (ii) if the Quarterly Compliance Statement required to be delivered to Agent pursuant to Section 6.1(c) for the Calendar Quarter ending on such Testing Determination Date is not delivered to Agent by the date required under Section 6.1(c), from such date of required delivery unless, in the case of clause (i) (but not clause (ii)), Borrower shall have either (y) made a partial prepayment of the Loan in an amount such that, after giving

 

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effect thereto as though such prepayment was made on the first day of the twelve (12) month period ending on such Testing Determination Date (but, for the avoidance of doubt, giving effect to Required Amortization Payments and other payments of principal actually received during such twelve (12) month period), the Adjusted Debt Service Coverage Ratio would be greater than or equal to the Minimum DSCR (which prepayment Borrower shall not be permitted to make prior to the Permitted Prepayment Date) or (z) delivered to Agent a Cash Sweep Letter of Credit, and in the case of any Cash Sweep Condition occurring under clauses (i) and/or (ii) above, such Cash Sweep Condition shall continue to exist thereafter until there shall occur two (2) consecutive Testing Determination Dates on which the Adjusted Debt Service Coverage Ratio for the Calendar Quarter ending on such Testing Determination Date shall be equal to or greater than the Minimum DSCR.  Notwithstanding the foregoing, any Cash Sweep Condition which commenced solely with respect to the matter described in clause (b)(ii) above shall end upon the delivery of the Quarterly Compliance Statement then required to be delivered to Agent pursuant to Section 6.1(c), if such Quarterly Compliance Statement provides that the Adjusted Debt Service Coverage Ratio was equal to or greater than the Minimum DSCR as of the last Testing Determination Date, but only to the extent that such Quarterly Compliance Statement is delivered to Agent within thirty (30) days of the date due, it being agreed that this provision shall not be applicable with respect to any Quarterly Compliance Statement which is delivered more than thirty (30) days after the date due.

 

“Cash Sweep Letter of Credit” means a Letter of Credit in an amount which if deducted from the outstanding principal amount of the Loan on the first day of the twelve (12) month period ending on such Testing Determination Date (but, for the avoidance of doubt, giving effect to Required Amortization Payments and other payments of principal actually received during such twelve (12) month period) would cause the Adjusted Debt Service Coverage Ratio to be greater than or equal to the Minimum DSCR.

 

“Casualty” means damage or destruction to all or any part of the Premises.

 

“Casualty Threshold” means $10,000,000.

 

“Central Bank Pledge” has the meaning set forth in Section 8.1.

 

“Claim” has the meaning set forth in Section 10.1.

 

“Closing” means the execution and delivery of this Loan Agreement and the funding of the Loan.

 

“Closing Date” means the date upon which the Closing occurs.

 

“Collateral” means the Mortgaged Property and all other property, real or personal, tangible or intangible, and all Loan Parties’ rights thereto, now or hereafter pledged, mortgaged, assigned or delivered pursuant or with respect to the Loan Documents or otherwise by Loan Parties to Agent and/or Lenders as security for the Obligations.

 

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“Commitment(s)” means, (a) as to any Lender, the commitment of such Lender with respect to the Loan in the amount set forth on the signature page hereto, and hereafter, as any Lender’s commitment shall be established pursuant to any Assignment and Acceptance by which such Lender becomes a Lender or by which such Lender assigns all or any portion of its rights and/or obligations in and to the Loan and the other Loan Documents to an Assignee, and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Loan, which aggregate commitment shall be the Loan Amount on the Closing Date, as the amounts set forth in the foregoing clauses (a) and (b) may be adjusted in accordance with this Loan Agreement.

 

“Comparable Standards” means the standards of management, operation and maintenance of first-class hotels in San Diego County, California which are comparable to the Premises in size, facilities, amenities, quality and nature; provided, however, that for so long as Hilton (or any Affiliate thereof which customarily manages hotels under the ‘Hilton” brand) is Property Manager, “Comparable Standards” shall mean the operation, management, and maintenance of the Premises in accordance with and as required under Section 4.1 of the Management Agreement.

 

“Condemnation Threshold” means $10,000,000.

 

“Consented-to-Lender” has the meaning set forth in the Ground Lease.

 

“Constituent Member(s)” means any direct shareholder, member or partner in Loan Parties and any person or entity that, directly or indirectly through one or more other partnerships, limited liability companies, corporations or other entities is a member or partner in Loan Parties or owns an interest in Loan Parties.

 

“Contingent Obligations” means contingent indemnity obligations of Loan Parties which survive the repayment of the principal amount of the Loan and Interest for which no claim has been asserted by Agent or Lenders (other than such claims which have been settled and paid).

 

“Control” (and its correlative meanings) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of stock, by contract or otherwise; provided that neither a change in the composition of the board of directors of the REIT nor the change in the identity of any officer of the REIT shall be deemed to constitute a change of Control.

 

“Covered Bond Pool Pledge” has the meaning set forth in Section 8.1.

 

“Debt Service” means as of any Testing Determination Date, the sum of (i) the Required Amortization Payments under the Loan Documents for the twelve (12) month period ending on the applicable Testing Determination Date and (ii) the scheduled Interest payments (net of any payments received on account of any Interest Rate Protection Agreement in effect) due under the Loan Documents for the twelve (12) month period ending on the applicable Testing Determination Date.

 

“Debt Service Coverage Ratio” means as of any Testing Determination Date, the ratio of (i) the Net Operating Income for the twelve (12) month period ending on the Testing

 

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Determination Date to (ii) the Debt Service applicable to such twelve (12) month period (provided that, with respect to the first three (3) Testing Determination Dates which shall occur during the term of the Loan, the Debt Service shall be annualized based upon the period commencing on the Closing Date and ending on such Testing Determination Date).

 

“Deed of Trust” means that certain Leasehold and Subleasehold Deed of Trust, Security Agreement, Financing Statement, Fixture Filing and Assignment of Rents dated as of the Closing Date made by Loan Parties to the trustee named therein for the benefit of Agent.

 

“Default” means any event which, with the giving of notice or the passage of time, or both, would constitute an Event of Default.

 

“Default DSCR” has the meaning set forth in Section 6.33.

 

“Default DSCR Letter of Credit” means a Letter of Credit in an amount which if deducted from the outstanding principal of the Loan as of the first day of the twelve (12) month period ending on the most recent Testing Determination Date (but, for the avoidance of doubt, giving effect to Required Amortization Payments and other payments of principal actually received during such twelve (12) month period) would cause the Debt Service Coverage Ratio to be greater than or equal to the Default DSCR.

 

“Default Rate” means, as to any date (i) with respect to any Loan Portion, the Applicable Interest Rate for such Loan Portion, plus four percent (4%) per annum and (ii) with respect to any other sums due and payable under any Loan Documents, the highest Applicable Interest Rate then in effect plus four percent (4%) per annum.

 

“Defaulting Lender(s)” has the meaning set forth in Section 9.14(a).

 

“Dollars” or the sign “$” means dollars in the lawful currency of the United States of America.

 

“Documentation” has the meaning set forth in Section 10.24.

 

“Eligibility Requirements” means, with respect to any Person in connection with a Covered Bond Pool Pledge, that such Person (i) has total assets (in name or under management) in excess of $600,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity of $250,000,000 and (ii) is regularly engaged in the business of making or owning commercial real estate loans or operating commercial mortgage properties.

 

“Eligible Assignee” means any of the following which is not an Affiliate of Loan Parties or Sponsor and which constitutes a Consented-to-Lender:

 

(a)           a Lender;

 

(b)           Agent;

 

(c)           an Affiliate of any Lender or Agent (but not any natural person);

 

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(d)           a commercial bank organized under the laws of the United States, or any State thereof, which is not directly or indirectly an Affiliate of Loan Parties and which has (x) total assets in excess of $5,000,000,000 and (y) a combined capital and surplus of at least $500,000,000;

 

(e)           a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development (“OECD”), or a political subdivision of any such country which is not directly or indirectly an Affiliate of Loan Parties and has (x) total assets in excess of $5,000,000,000 and (y) a combined capital and surplus of at least $500,000,000, provided that such bank is acting through a branch or agency located in the country in which it is organized or another country which is also a member of OECD;

 

(f)            a life insurance company organized under the laws of any State of the United States, or organized under the laws of any country and licensed as a life insurer by any State within the United States which is not directly or indirectly an Affiliate of Loan Parties, and has assets of at least $5,000,000,000; or

 

(g)           a pension fund in the business of making loans, or an Affiliate thereof organized under the laws of any State of the United States, and licensed or qualified to conduct such business under the laws of any such State which is not directly or indirectly an Affiliate of Loan Parties and has (1) total assets of at least $5,000,000,000 and (2) a net worth of at least $500,000,000.

 

“Environmental Indemnity” means that certain Environmental Indemnity dated as of the Closing Date made by Borrower and Guarantor in favor of Agent.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder by any Governmental Authority, as from time to time in effect.

 

“ERISA Affiliate” means any organization, trade or business, or other arrangement (whether or not incorporated) which is a member of a group of which either Loan Parties is also a member and which is treated as a single employer within the meaning of IRC, Section 414(b), (c), (m) or (o) or Section 4001 of ERISA.

 

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Pension Plan (other than an event for which the 30-day notice period is waived); (b) the withdrawal of Loan Parties or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer, as defined in Section 4001(a)(2) of ERISA, (c) the complete or partial withdrawal of either Loan Party or any ERISA Affiliate from any Multiemployer Plan, (d) notice of reorganization or insolvency of a Multiemployer Plan, (e) the filing of a notice of intent to terminate a Pension Plan or the treatment of a plan amendment as a termination under Section 4041 of ERISA, (f) the institution, or threat of institution, of proceedings to terminate or appoint a trustee to administer a Pension Plan or Multiemployer Plan by the PBGC, (g) the failure to make any required contribution to a Pension Plan or Multiemployer Plan, (h) the

 

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imposition of a lien under IRC Section 430(k) or Section 303(k) of ERISA on either Loan Party or any ERISA Affiliate, (i) the failure with respect to any Pension Plan to satisfy the minimum funding standards IRC Section 412 or Section 302 of ERISA, whether or not waived, or (j) any event or condition that might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or the imposition on either Loan Party or any ERISA Affiliate of any liability under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA.

 

“Event of Default” has the meaning set forth in Section 7.1.

 

“Excluded Sums” has the meaning set forth in Section 9.3.

 

“Excluded Taxes” means (a) income, franchise, branch profits or similar Taxes imposed on (or measured by) any Person’s net income or net profits by any jurisdiction (other than a jurisdiction (other than the State of California and any political subdivision thereof, it being agreed that income taxes payable by any Lender in the State of California and any political subdivision thereof shall constitute Excluded Taxes) in which such Person would not have a connection but for and solely as a result of its execution, delivery of any Loan Document or its exercise of its rights or performance of its obligations thereunder); (b) withholding Taxes, except to the extent imposed solely as a result of a change in applicable law occurring after (i) the date that such Person became a party to this Loan Agreement, or (ii) with respect to an assignment, acquisition, designation of a new applicable lending office or the appointment of a successor Agent or other transfer, the effective date thereof, except that such Person shall be entitled to additional amounts for withholding Taxes to the extent that such Person’s predecessor was entitled to such amounts (or in the case of a designation of a new applicable lending office, to the extent such Person was entitled to such amounts with respect to its prior applicable lending office) and (c) Taxes imposed by reason of the failure of the Agent or such Person to comply with its obligations under Section 2.10 and/or Section 9.10.

 

“Exercise Notice” has the meaning set forth in Section 9.14(c).

 

“FF&E” has the meaning set forth in the Deed of Trust.

 

“FF&E Gross Revenues” means “Gross Revenues” as defined in the Management Agreement.

 

“Federal Funds Rate” means, for any period, a fluctuating interest rate per annum (based on a 360-day year) equal, for each day of such period, to the rate of interest quoted at 11:00 a.m. New York time charged on overnight federal funds transactions with member banks of the Federal Reserve System.

 

“Full Recourse Event” means any of those events or circumstances described in clause (e) or clause (g) of the definition of “Recourse Liability Events” in this Section 1.1.

 

“Funding Direction Letter” means that certain Funding Direction Letter dated as of the Closing Date from Borrower to Agent.

 

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GAAP” means those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants or by the Financial Accounting Standards Board  and which are consistently applied for all periods, so as to properly reflect the financial position of a Person.

 

“Government List” means (a) the OFAC SDN List, (b) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC that Agent notified Loan Parties in writing is now included in “Government Lists,” (c) any similar lists maintained by (i) the United States Department of State, (i) the United States Department of Commerce, (ii) any other U.S. Governmental Authority, (iii) the European Union or (iv) the Federal Republic of Germany or (d) any similar lists maintained pursuant to any Executive Order of the President of the United States of America that Agent notified Loan Parties in writing is now included in “Government Lists.”

 

“Governmental Authority” means any federal, state, county, municipal, parish, provincial or other government, or any department, commission, board, court, agency, committee, or quasi-governmental unit whether of the United States of America or any instrumentality of any of them, or any other political subdivision thereof.  For purposes of Section 2.12, “Governmental Authority” shall include the European Union and the Federal Republic of Germany and any government, department, commission, board, court, agency, committee, quasi-governmental unit, any other political subdivision thereof or any instrumentality of any of them.

 

“Gross Revenues” means all revenue of Loan Parties derived from the ownership and operation of the Premises from whatever source determined on cash basis (provided that, for the purpose of determining Net Operating Income, Gross Revenues shall be determined on an accrual basis), excluding, without duplication, for the purpose of determining Net Operating Income and for the purpose of determining the Cash Collateral Payment Amount on any Payment Date, the following:  (a) gratuities to employees; (b) federal, state, or municipal excise, and sales or use taxes or any other taxes collected directly from patrons or guests or included as part of the sales price of any goods or services; (c) proceeds received on account of a Taking which are other than in the nature of compensation for lost rents or profits; (d) proceeds received pursuant to any Insurance Policy (other than the proceeds received on account of any business interruption or rental/loss); and (e) unapplied Security Deposits.

 

“Ground Lease” has the meaning set forth in the Deed of Trust.

 

“Ground Lessor” means the ground lessor under the Ground Lease.

 

“Ground Rent” means any and all rent payable by Borrower under the Ground Lease.

 

“Guarantor” means, individually and collectively, each Person constituting Sponsor or any other Person that now or hereafter guarantees any of Loan Parties’ obligations under the Loan Documents.

 

“Hilton” means Hilton Worldwide, Inc., a Delaware corporation (f/k/a Hilton Hotels Corporation).

 

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“Hilton Management” means HLT Conrad Domestic LLC, a Delaware limited liability company.

 

“Impositions” means and includes all taxes, assessments for public improvements or benefits and any payments in lieu thereof, whether or not commenced or completed prior to the date hereof or while any of the Obligations are outstanding, water and sewer rents, charges, and other governmental levies or payments, of every kind and nature whatsoever, general and special, foreseen or unforeseen, ordinary and extraordinary, which now or at any time hereafter are assessed, levied, confirmed, imposed or which become a lien upon the Mortgaged Property, or any portion thereof, or which are payable with respect thereto, or upon the rents, issues, revenue, income, proceeds or profits thereof, or on the occupancy, operation, use, possession or activities thereof, whether any or all of the same be levied directly or indirectly or as excise or income or franchise taxes in lieu of taxes which are otherwise imposed upon the Mortgaged Property, together with any penalties or other charges with respect to the late payment or non-payment thereof.

 

“Improvements” has the meaning set forth in the Deed of Trust.

 

“Indebtedness” means:

 

(a)           all indebtedness for borrowed money or for the deferred purchase price of property or services (including all obligations, contingent or otherwise in connection with letter of credit facilities, acceptance facilities or other similar facilities);

 

(b)           all obligations evidenced by bonds, notes, debentures or other similar instruments;

 

(c)           all indebtedness created or arising under any conditional sale or other title retention agreement with respect to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of default are limited to repossession or sale of such property);

 

(d)           all capital lease obligations; and

 

(e)           all indebtedness of the nature referred to in clauses (a) through (d) above of another Person guaranteed or secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any lien, security interest or other charge or encumbrance upon or in property (including accounts and contract rights) owned by the Person with respect to whom Indebtedness is being determined, even though such Person has not assumed or become liable for the payment of such Indebtedness.

 

“Indemnified Party” has the meaning set forth in Section 10.1(a).

 

“Insurance Policies” means, in addition to any insurance required to be maintained by Loan Parties pursuant to the Ground Lease and the Management Agreement, the policies of insurance required to be maintained pursuant to Section 6.11.

 

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“Insurance Premiums” means the premiums payable with respect to the Insurance Policies.

 

“Insurance Requirements” means and includes all requirements of any Insurance Policy, all requirements of the issuer of any such Insurance Policy, and all orders, rules, regulations and other requirements of the National Board of Fire Underwriters (or any other body exercising similar functions) applicable to or affecting the Premises.

 

“Interest” means interest payable on the Loan at the Applicable Interest Rate or the Default Rate, as applicable.

 

“Interest Period” means the period commencing on each Payment Date and ending on the day immediately preceding the next succeeding Payment Date, provided that the first Interest Period shall commence on the Closing Date.

 

“Interest Rate Protection Agreement” means an agreement with respect to an interest rate cap or swap or other derivative arrangement reasonably acceptable to Agent, in each case, which conforms to the requirements set forth in Section 2.7 and shall include any Lender Interest Rate Protection Agreement.

 

“Interest Rate Protection Agreement Acknowledgment” has the meaning set forth in Section 2.7(a)(v).

 

“IRC” means the Internal Revenue Code of 1986, as amended.

 

“Land” has the meaning set forth in the recitals hereof.

 

“Lease” has the meaning set forth in the Deed of Trust, but shall be limited to commercial leases entered into by a Loan Party from time to time with a Lessee and shall specifically exclude the Ground Lease and Operating Lease.

 

“Lease Letter(s) of Credit” means any letter of credit provided to Operating Lessee by any Lessee under or guarantor of any Lease as security or otherwise.

 

“Legal Requirements” means, collectively, (a) all current and future laws, statutes, regulations, ordinances, codes, rules, rulings, orders, judgments, decrees, injunctions and other requirements of any Governmental Authority (including those regarding fire, health, handicapped access, sanitation, ecological, historic, zoning, environmental protection, wetlands and building laws and the Americans with Disabilities Act of 1990, Pub. L. No. 89-670, 104 Stat. 327 (1990), as amended, and all regulations promulgated pursuant thereto) in any way applicable to Loan Parties or to the acquisition, construction, development, sale, use, occupancy, possession, operation, management, maintenance or ownership of the Premises, or any part thereof; and (b) all requirements of each Operating Permit.

 

“Lender” and “Lenders” have the meaning set forth in the first paragraph of this Loan Agreement.

 

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“Lender Interest Rate Protection Agreement” means any Interest Rate Protection Agreement to which Borrower and any Lender or any Affiliate of any Lender are parties in the event that Loan Parties and any Lender or any Lender’s Affiliate elect to enter into an Interest Rate Protection Agreement.  Borrower’s performance of its obligations pursuant to any Lender Interest Rate Protection Agreement which is not an interest rate cap is secured by the Collateral.

 

“Lessee” means a lessee, tenant, licensee, concession holder or other Person having the right to use or occupy all or any portion of the Premises pursuant to a Lease, but excluding each and all hotel guests of the Premises and excluding Borrower as lessee under the Ground Lease and Operating Lessee, as lessee, under the Operating Lease.

 

“Letter of Credit” means an irrevocable, unconditional, transferable, clean sight draft letter of credit acceptable to Agent in its good faith reasonable discretion (either an evergreen letter of credit or one which does not expire until at least one hundred (100) days after the scheduled Maturity Date) in favor of Agent and entitling Agent to draw thereon in New York, New York (or in accordance with the procedures of the issuing bank, provided that such issuing bank allows for draws by facsimile), issued by a domestic Approved Bank or the U.S. agency or branch of a foreign Approved Bank, at the request of an applicant/obligor that is not the Loan Parties.

 

“LIBOR” means (a) the London Interbank Offered Rate for Dollar deposits in an amount equal to the applicable Loan Portion being determined as appearing on the Reuters Screen LIBOR 01 Page (or such other page as may replace LIBOR 01 Page on that service or such other service as may be nominated by the British Bankers’ Association as the information vendor for the purpose of displaying British Bankers’ Association Interest Settlement Rates for Dollar deposits) at approximately 11:00 A.M. London time (or as soon thereafter as practicable) on the day which is two (2) LIBOR Banking Days prior to the first day of the applicable LIBOR Rate Period and with respect to which the LIBOR Rate is being determined for a time period equal to, or if no equal time period is so appearing on the Reuters Screen LIBOR 01 Page (or substitute thereof as aforesaid), the time period so appearing which is most approximately equal to, such LIBOR Rate Period; or (b) if the method referred to in clause (a) above for determining the London Interbank Offered Rate shall not be available, the arithmetic average of the rates per annum (rounded upwards, if necessary, to the nearest 1/1000th of 1%) quoted by the Reference Banks at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the day which is two (2) LIBOR Banking Days prior to the first day of the applicable LIBOR Rate Period for the offering by the Reference Banks to leading banks in the London interbank Eurodollar market having a term comparable to such LIBOR Rate Period and in an amount equal to the applicable Loan Portion.  Each determination of the London Interbank Offered Rate by Agent shall be conclusive, absent manifest error.

 

“LIBOR Banking Day” means any Business Day on which dealings in deposits in Dollars are transacted in the London interbank market and banks are also open for business in London, England.

 

“LIBOR Rate” means, as to any Loan Portion, with respect to any period during which an Applicable Interest Rate shall be a LIBOR Rate, an interest rate per annum equal to the sum of (a) the applicable LIBOR, plus (b) the Margin.

 

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“LIBOR Rate Period” means for any Loan Portion, each period for the computation of Interest on a Loan Portion at a LIBOR Rate.  Subject to Section 2.3(e), each LIBOR Rate Period shall have a duration of three (3) or six (6) months (in each case, subject to general availability), as selected by Borrower in accordance with Section 2.3(a) and/or Section 2.3(c), or such other period as Borrower and Lenders shall agree.  Notwithstanding the foregoing, in the case of a LIBOR Rate Period which would otherwise end after the date which is the Maturity Date, such LIBOR Rate Period shall have a duration equal to the period commencing on the effective date of such LIBOR Rate Period and ending on and including the Maturity Date.  Each LIBOR Rate Period shall commence with respect to any outstanding principal of the Loan, on any date selected by Borrower in accordance with Section 2.3; provided, however, that notwithstanding anything in this definition of LIBOR Rate Period to the contrary, (i) if any LIBOR Rate Period would otherwise end on a day which is not a LIBOR Banking Day, such LIBOR Rate Period shall be extended to the next succeeding LIBOR Banking Day, unless the result of such extension would be to carry such LIBOR Rate Period over into another calendar month, in which event such LIBOR Rate Period shall end on the immediately preceding LIBOR Banking Day and (ii) any LIBOR Rate Period that begins on the last LIBOR Banking Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such LIBOR Rate Period) shall end on the last LIBOR Banking Day of the calendar month during which the LIBOR Rate Period would otherwise expire (e.g., three (3) or six (6) months).

 

“Lien” means any deed of trust, mortgage, pledge, assignment of leases and rents, security interest, encumbrance, lien or charge of any kind including any conditional sale or other title retention agreement, any lease in the nature thereof, or the filing of, or any agreement to give, any financing statement under the Uniform Commercial Code of any jurisdiction.

 

“Loan” has the meaning set forth in Section 2.1.

 

“Loan Agreement” has the meaning set forth in the first paragraph of this Loan Agreement.

 

“Loan Amount” has the meaning set forth in the recitals hereof.

 

“Loan Documents” means, collectively, this Loan Agreement, the Note, the Deed of Trust, the Assignment of Leases and Rents, the Assignment of Agreements, the Environmental Indemnity, the Recourse Liability Agreement, the Loan Fee Letter, the Funding Direction Letter, the Loan Parties’ Certificate, the UCC Financing Statements, the Manager SNDA, any Lender Interest Rate Protection Agreement, any Account Agreement(s) and all other agreements, certificates or other documents now or hereafter evidencing or securing or entered into by either Loan Party and/or Guarantor (or any Affiliate(s) of Loan Parties and/or Guarantor) for the benefit of Agent and/or Lenders in connection with the Loan.

 

“Loan Fee Letter” means that certain Loan Fee Letter dated as of the Closing Date between Agent and Borrower.

 

“Loan Parties” has the meaning set forth in the first paragraph of this Loan Agreement.

 

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“Loan Parties’ Certificate” means that certain Loan Parties’ Certificate dated as of the Closing Date made by Loan Parties in favor of Agent.

 

“Loan Party Member” shall mean, collectively, HHC One Park Boulevard, LLC, a Delaware limited liability company, and Sunstone Park, LLC, a Delaware limited liability company.

 

“Loan Portion” means any principal of the Loan with respect to which an Applicable Interest Rate has been established (and, in the case of any LIBOR Rate, whether or not such Applicable Interest Rate has become effective); provided, however, that the amount of any Loan Portion with respect to which a LIBOR Rate is established shall be at least equal to $1,000,000.

 

“Loan-to-Value Ratio” means, to the extent required to be determined pursuant to Section 4.7 and/or Section 6.12(d)(i)(F) of this Loan Agreement, the ratio of the outstanding principal amount of the Loan as of the date of determination to the Appraised Value of the Premises based on the then most current Appraisal or Appraisal Update.

 

“Manager SNDA” means that certain Manager Subordination and Cooperation Agreement dated as of the Closing Date and entered into between Agent, Property Manager and Loan Parties, as may be amended, restated, replaced, severed, split, supplemented or otherwise modified from time to time pursuant to the terms hereof.

 

“Management Agreement” means that certain Management Agreement, dated as of April 15, 2011, between Property Manager and Operating Lessee, with such modifications, together with any replacement Management Agreement entered into with another Property Manager, as shall be entered into in accordance with an Assignment and Assumption of Management Agreement and this Loan Agreement.

 

“Margin” means three and one-quarter of one percent (3.25%) per annum.

 

“Material Adverse Effect” means the occurrence or existence of a condition or event which could be reasonably in good faith expected to (i) materially adversely affect the condition (financial or otherwise) or business of Loan Parties or Guarantor, (ii) materially adversely affect the condition, use, value or ownership of the Mortgaged Property, (iii) adversely affect the validity or enforceability of any Loan Document (or the priority of the Lien thereof), (iv) materially adversely affect the ability of Loan Parties to pay any amounts under the Loan Documents as they become due, (v) prevent Loan Parties or Guarantor from performing the material obligations under such Loan Documents which Loan Parties or Guarantor, as the case may be, are party to, or (vi) prevent or materially impede or limit in any material respect Agent’s ability to exercise those rights and remedies which Agent must reasonably be able to exercise in order to realize the principal benefits and/or security intended to be provided by the Loan Documents.

 

“Material Alteration” means either (a) a structural alteration or (b) an alteration to the Improvements where the anticipated cost to complete such alterations exceeds $5,000,000; provided, however, that in no event shall any of the following constitute a Material Alteration: (i) any tenant improvement work performed pursuant to any Lease existing on the date hereof or

 

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entered into hereafter in accordance with the provisions of this Loan Agreement; (ii) any work required to be completed pursuant to Section 6.12 or 6.13; or (iii) any work to be performed under an Approved Capital/FF&E Expenditures Budget.

 

“Material Lease” means (i) all Leases which individually or in the aggregate with respect to the same Lessee and its Affiliates demise more than 7,500 square feet of space in the Improvements or (ii) any Lease which by its terms requires the performance of a Material Alteration.

 

“Material Lease Action” has the meaning set forth in Section 6.10(a).

 

“Material Operating Agreement” means the Operating Agreements listed on Schedule 5.17 hereto and any additional Operating Agreements entered into after the date hereof which either (a) have non-cancelable terms of longer than ninety (90) days and are not terminable at any time without cause by Loan Parties without any penalty or other fee (other than payment of amounts then due and owing) or (b) require payments by Loan Parties in excess of $1,000,000 per calendar year.

 

“Material Taking” means a Taking of a portion of the Premises (a) in excess of fifteen percent (15%) of the area of the Improvements and (b) where the condemnation award is greater than or equal to fifteen percent (15%) of the outstanding principal amount of the Loan.

 

“Maturity Date” means April 15, 2016, or such earlier date as the entire principal amount of the Loan shall become due and payable by acceleration or otherwise pursuant to the terms of the Loan Documents.

 

“Mechanic’s Claim” has the meaning set forth in Section 6.7.

 

“Minimum DSCR” has the meaning set forth in the definition of “Cash Sweep Condition.”

 

“Minor Lease” means any Lease which is not a Material Lease.

 

“Mortgaged Property” has the meaning set forth in the Deed of Trust.

 

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA to which either Loan Party or any ERISA Affiliate has any obligation or liability, contingent or otherwise.

 

“Net Operating Income” means, as of any Testing Determination Date, the excess, if any, of Gross Revenues for the immediately preceding twelve (12) month period over the Operating Expenses for such twelve (12) month period; provided, that, for the purposes of calculating Net Operating Income, Gross Revenues (which, for the avoidance of doubt shall be determined after giving effect to exclusions set forth in clauses (a)-(e) of the definition of “Gross Revenues”) shall exclude: (i) proceeds of the Loan and any loan, equity investment or capital contribution made by any member of Loan Parties or any other Person to Loan Parties; (ii) any gain arising from any write-up of assets or other non-cash items; (iii) proceeds from the sale of FF&E and all other non-recurring extraordinary items of income; (iv) Rent payable under any

 

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Lease with a Lessee which is the subject of a Bankruptcy Proceeding unless such Lease shall have been affirmed; (v) Rent payable under any Lease where there exists a rent default and such rent default has continued for a period in excess of sixty (60) days; (vi) lease termination payments; (vii) interest income; and (viii) any refunds, rebates, discounts and credits of a similar nature, given, paid or returned in the course of obtaining Gross Revenues or components thereof.

 

“Net Proceeds” means the amount of all insurance proceeds paid pursuant to any Insurance Policy as the result of a Casualty, after deduction of the reasonable costs and expenses (including fees of any insurance consultant or adjuster and reasonable attorneys’ fees and disbursements), if any, incurred in collecting the same.

 

“Net Restoration Award” means the amount of all awards and payments received by or for the account of Loan Parties on account of a Taking, after deduction of the costs and expenses (including reasonable attorneys’ fees and disbursements), if any, incurred in collecting the same.

 

“Non-Availability Notice” has the meaning set forth in Section 2.11(a).

 

“Note” means that certain Promissory Note dated as of the Closing Date in an amount equal to $240,000,000.00 made by Borrower in favor of Agent.

 

“Obligations” means, collectively, all present and future indebtedness, obligations, duties and liabilities of each Loan Party to Agent and Lenders arising, as applicable, pursuant to the terms of this Loan Agreement, any Lender Interest Rate Protection Agreement and the other Loan Documents or evidenced by the Note, and all interest accruing thereon, pursuant to the Loan Documents, regardless of whether such indebtedness, obligations, duties or liabilities are fixed, contingent, joint, several or joint and several.

 

“OECD” has the meaning set forth in the definition of “Eligible Assignee” in this Section 1.1.

 

“OFAC” means the Office of Foreign Assets Control of the United States.

 

“OFAC Laws” means any laws, regulations, and Executive Orders relating to the economic sanctions programs administered by OFAC, including without limitation, the International Emergency Economic Powers Act, 50 U.S.C. sections 1701 et seq.; the Trading with the Enemy Act, 50 App. U.S.C. sections 1 et seq.; and the Office of Foreign Assets Control, Department of the Treasury Regulations, 31 C.F.R. Parts 500 et seq. (implementing the economic sanctions programs administered by OFAC) and any similar laws, regulations or orders of the European Union or the Federal Republic of Germany.

 

“OFAC SDN List” means the list of “Specially Designated Nationals and Blocked Persons” maintained by OFAC

 

“OFAC Violation” has the meaning assigned to such term in Section 6.29(e).

 

“Operating Account” means, collectively, each of those certain bank account numbers 4121689186 and 4122175292 at Wells Fargo Bank, National Association, and other

 

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bank account(s) in which, during the continuance of an Event of Default, the receipts from the operation and management of the Mortgaged Property are deposited by Loan Parties  or Property Manager in accordance with Section 3.1 of this Loan Agreement.

 

“Operating Agreement” means any agreement entered into by a Loan Party, other than the Premises Documents, the limited liability company agreement (or comparable agreement) of Loan Parties, the Leases, the Ground Lease, the Operating Lease, any Management Agreement and any reservation agreement with a hotel guest entered into by a Loan Party or Property Manager in the ordinary course of business, which relates to the ownership, operation or maintenance of, or the use, licensing or leasing of any personal property or equipment in connection with the operation and maintenance of, the Premises.

 

“Operating Expenses” means, for any period, collectively but without duplication, the operating costs and expenses incurred by Loan Parties or reserved by Loan Parties  to the extent such reserves are maintained in the ordinary course of business and in a manner consistent with good business practices, during such period in connection with the ownership, use, occupancy, management, leasing and/or operation of the Premises, determined in accordance with Applicable Accounting Standards, including, Ground Rent, departmental expenses, management fees payable under the Management Agreement and amounts actually deposited into the “Capital Renewals Reserve” (as defined in the Management Agreement);

 

excluding, without duplication, the following:

 

(a)           any Operating Expense to the extent paid from any reserve maintained by Loan Parties or any other Person, including Property Manager and Agent, on behalf of or for the benefit of Loan Parties and treated as an Operating Expense in prior periods;

 

(b)           the scheduled Interest payments, Required Amortization Payments and other amounts payable to Agent or a Lender under the Loan Documents and any sums payable by Loan Parties in connection with an Interest Rate Protection Agreement;

 

(c)           federal and state income taxes, franchise taxes or other taxes based on income due and owing from Loan Parties;

 

(d)           depreciation and amortization or any other non-cash deductions of Loan Parties; and

 

(e)           amounts funded from insurance or condemnation proceeds which are applied to the repair or Restoration of the Mortgaged Property.

 

Nothing contained in this definition shall be deemed to limit or restrict the payment of operating expenses, tenant improvement costs, leasing commissions or other costs and expenses of Loan Parties or with respect to the Mortgaged Property; provided, however, the foregoing does not limit any restrictions, limitations or other requirements specifically provided elsewhere in this Loan Agreement or in the other Loan Documents.

 

“Operating Lease” has the meaning set forth in the recitals hereto.

 

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“Operating Lessee” has the meaning set forth in the recitals hereto.

 

“Operating Permits” means, collectively, all authorizations, consents and approvals given by and licenses and permits issued by Governmental Authorities which are required for the ownership, use and occupancy of the Premises in accordance with all Legal Requirements.

 

“Par Prepayment Date” means April 15, 2013.

 

“Participant” has the meaning set forth in Section 8.2.

 

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of 2001, as the same may be amended, supplemented or replaced from time to time, and corresponding provisions of future laws.

 

“Patriot Act Offense” means any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (i) the criminal laws against terrorism or (ii) the Anti-Money Laundering Laws.  “Patriot Act Offense” also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense.

 

“Payment Date” means the first (1st) Business Day of each calendar month during the Term, and the Maturity Date.  “Payment Date” shall also include such earlier date, if any, on which the unpaid principal amount of the Loan is paid in full.

 

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

 

“Pension Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA, IRC Section 412 or Section 302 of ERISA, and in respect of which a Loan Party or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

 

“Permitted Encumbrances” means, collectively (i) the matters set forth in Schedule B-I of the Title Policy and/or on the Survey, (ii) Liens created by the Loan Documents, (iii) Liens, if any, for Impositions or any Mechanic’s Claim for amounts not yet due and payable or delinquent or that are being contested as set forth in Section 6.8; (iv) any pledge which would constitute a Permitted Transfer, (v) such other matters expressly consented to by Requisite Lenders in their reasonable discretion, (vi) Liens (including “precautionary” UCC financing statements) to secure or memorialize Permitted Equipment Financing.

 

“Permitted Equipment Financing” means equipment financing (including, without limitation, any Equipment Lease) that is (i) entered into in the ordinary course of Loan Parties’ business, (ii) for equipment related to the ownership or operation of the Premises whose removal

 

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would not materially damage or impair the value of the Premises and (iii) which is secured only by the financed equipment.

 

“Permitted Indebtedness” means any Indebtedness of Loan Parties under (a) the Loan, (b) Operating Agreements entered into in accordance with this Loan Agreement, (c) Permitted Equipment Financing and (d) unsecured trade payables incurred in the ordinary course of business relating to the ownership and operation of the Mortgaged Property which in the case of Permitted Equipment Financing and trade payables (1) are not evidenced by a note, (2) do not exceed, at any time, a maximum aggregate amount (for all Permitted Equipment Financing and all of such trade payables) of four percent (4%) of the original principal amount of the Loan and (3) subject to Loan Parties’ contest rights set forth in Section 6.8, are paid prior to delinquency.

 

“Permitted Prepayment Date” means April 15, 2012.

 

“Permitted Transfer” means

 

(a)           a Transfer by (i) HHC One Park Boulevard, LLC (or any direct or indirect owner of HHC One Park Boulevard, LLC) to Sunstone (or a wholly-owned Affiliate of Sunstone) of all or any portion of the direct or indirect ownership interest in a Loan Party owned by HHC One Park Boulevard, LLC (or any direct or indirect owner of HHC One Park Boulevard, LLC) or (ii) HLT JV Acquisition LLC (or any direct or indirect owner of HLT JV Acquisition LLC ) to Sunstone (or a wholly-owned Affiliate of Sunstone) of all or any portion of the direct or indirect ownership interest in a Loan Party owned by HLT JV Acquisition LLC (or any direct or indirect owner of HLT JV Acquisition LLC ); provided that (i) after giving effect to such Transfer, Hilton (or a replacement Property Manager reasonably acceptable to the Requisite Lenders) shall continue to manage the Premises and (ii) such Transfer shall be permitted under the Ground Lease;

 

(b)           a Transfer by (i) Sunstone of all or a portion of its direct or indirect ownership interest in a Loan Party to an Affiliate of Sunstone which is wholly-owned and Controlled by Sunstone, or (ii) Hilton of all or a portion of its direct or indirect ownership interest in a Loan Party to an Affiliate of Hilton which is wholly-owned and Controlled by Hilton;

 

(c) a Transfer, directly or indirectly, of any interests in Borrower (other than the interest owned by Borrower GP) provided that:

 

(i)            after giving effect to such Transfer (1) Sunstone shall directly or indirectly retain not less than fifty-one percent (51%) of the interests in Borrower in the aggregate, (2) Sunstone shall, directly or indirectly, continue to Control Borrower and (3) the representation set forth in Section 5.33 of this Loan Agreement shall be true; and

 

(ii)           with respect to any Transfer of a direct or indirect interest in Borrower equal to or greater than twenty percent (20%), (1) the proposed transferee shall (x) be solvent, (y) have never been the subject of a voluntary or involuntary (to the extent the same has not been discharged) bankruptcy proceeding and (z) have no outstanding material judgments against them and (2) except with respect to a transferee which is

 

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controlled by Sunstone, Agent shall have received a credit check and background investigation against such individuals and/or entities reasonably acceptable to Agent;

 

(d)           any pledge (but not the foreclosure thereon, except with respect to the foreclosure of the direct or indirect ownership interests in a Loan Party owned by Hilton or its Affiliates, in which event the foreclosure shall be permitted) of indirect ownership interests in a Loan Party to an institutional lender providing a corporate line of credit or other financing to the holder of such indirect ownership interests in a Loan Party; provided  that (A) such operating line of credit or other financing benefits all or substantially all of the portfolio of such entity comprising any Sponsor, and (B) the value of the equity in the Premises which is indirectly pledged as collateral under such corporate line of credit or other financing constitutes no more than ten percent (10%) of the total value of all assets directly or indirectly securing such line of credit or other financing at the time of such pledge;

 

(e)           a Transfer and/or issuance of any publicly traded shares (including the Transfer or issuance of shares or of operating partnership units in the REIT or Sunstone, as the case may be; provided that, after giving effect to such Transfer, Borrower shall continue to be Controlled by Sunstone);

 

(f)            a Transfer of Personal Property in the ordinary course of business provided that such Personal Property is replaced with comparable Personal Property;

 

(g)           a Lease entered into in accordance with the Loan Documents; and

 

(h)           a Transfer, including a pledge, of the direct or indirect equity interest in Hilton Worldwide, Inc.

 

“Person” means an individual, partnership, limited partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, or other entity of any kind.

 

“Personal Property” has the meaning set forth in the Deed of Trust.

 

“Plan Assets” has the meaning set forth in Section 5.25.

 

“Premises” has the meaning set forth in the Deed of Trust.

 

“Premises Documents” has the meaning set forth in the Deed of Trust.

 

“Prepayment Fee” means, with respect to any principal amount prepaid prior to the Par Prepayment Date (other than with respect to such prepayments of any portion of the principal amount of the Loan for which a Prepayment Fee shall not be required as expressly set forth in this Loan Agreement), an amount equal to (i) with respect to any prepayment made on or after the Permitted Prepayment Date and prior to the Par Prepayment Date, an amount equal to three quarters of one percent (0.75%) of the amount of such prepayment.  For the avoidance of doubt, it is agreed that (i) on and after the Par Prepayment Date, there shall be no Prepayment Fee payable with respect to any principal amount repaid, and (ii) notwithstanding anything contained herein to the contrary, no Prepayment Fee shall be payable in connection with any

 

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prepayment made by Borrower in order to meet the Default DSCR or the Minimum DSCR or funded with amounts drawn from the Cash Collateral Account by Agent pursuant to Section 3.2.

 

“Pro Rata Share” means, with respect to all matters relating to any Lender, the ratio, expressed as a percentage, obtained by dividing (a) the Commitment of such Lender by (b) the aggregate Commitment of all Lenders, in each case as of the date of determination.

 

“Property Manager” means (i) as of the date hereof, HLT Conrad Domestic LLC, and (ii) at any time after the date hereof, (A) Hilton or any Affiliate of Hilton which is then the manager of all of the “Hilton” brand hotels (including, Hilton Management), to the extent that such Person is at such time party to the Management Agreement as the “Manager”, or (B) any other property manager of the Premises that is hereafter approved in the reasonable discretion of the Requisite Lenders in accordance with this Loan Agreement.

 

“Proposed Material Lease(s)” has the meaning set forth in Section 6.10(a).

 

“Purchase Date” has the meaning set forth in Section 9.14(c).

 

“Qualified Counterparty” means a financial institution which is reasonably acceptable to Agent and whose senior long term debt is rated “A-” or better by Standard & Poor’s Ratings Group and A3 by Moody’s Investors Service, Inc.

 

“Quarterly Compliance Statement” has the meaning set forth in Section 6.1(c).

 

“Recourse Liability Agreement” means that certain Recourse Liability Agreement dated as of the Closing Date made by Borrower and Sponsor for the benefit of Agent.

 

“Recourse Liability Events” means, collectively, any or all of the following in connection with the Loan and/or the Mortgaged Property:

 

(a)           fraud or willful misconduct on the part of Loan Parties, or Guarantor or any Affiliate of any such Person (but, for the avoidance of doubt, excluding any representation or warranty made on behalf of Loan Parties or Sponsor by Agent or any Lender pursuant to the exercise by Agent or any Lender of any power of attorney granted to Agent or any Lender under the Loan Documents) in connection with the execution, delivery and/or performance of this Loan Agreement, the Note, the Deed of Trust, any of the other Loan Documents, or any certificate, report, financial statement or other instrument or document furnished to Agent or any Lender at the time of the closing of the Loan or during the Term of the Loan;

 

(b)           a material, intentional misrepresentation on the part of Loan Parties or Guarantor or any Affiliate of any such Person in connection with the execution, delivery and/or performance of this LoanAgreement, the Note, the Deed of Trust, any of the other Loan Documents, or any certificate, report, financial statement or other instrument or document furnished to Agent or any Lender at the time of the closing of the Loan or during the Term of the Loan;

 

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(c)           misappropriation or misapplication by Loan Parties, Property Manager, Guarantor (or any Affiliate of any of the foregoing) of Gross Revenues, insurance proceeds, condemnation awards, Security Deposits, sums payable pursuant to any Interest Rate Protection Agreement, proceeds of the disposition of all or any portion of the Collateral in contravention of this Loan Agreement or any other Loan Document, including a breach by Loan Parties or Property Manager of Section 3.1, Section 3.2, Section 3.3 and/or Section 3.4 of this Loan Agreement;

 

(d)           material physical waste of the Mortgaged Property or any material part thereof caused by Loan Parties or Sponsor (or any Affiliate of Loan Parties or Sponsor), provided that, for the avoidance of doubt, none of the following shall in any event constitute a Recourse Liability Event: (i) any waste caused solely by the failure of the Premises to generate sufficient Net Operating Income to avoid such waste; (ii) the occurrence of a Casualty or Taking and/or the failure to complete the Restoration of the Premises thereafter; or (iii) the failure of any direct or indirect owner of Loan Parties to make additional capital contributions or other advances to Loan Parties to avoid such waste;

 

(e)           the occurrence of any Transfer which is not a Permitted Transfer (to the extent that the Event of Default resulting therefrom has not been waived by all of the Lenders) or is not consented to by all of the Lenders (provided that, for the avoidance of doubt, a Transfer (i) from Borrower to Ground Lessor resulting from the termination of the Ground Lease by reason of the exercise of Ground Lessor’s rights under the Ground Lease to terminate the Ground Lease as a result of a default by Borrower as lessee thereunder, (ii) to a Governmental Authority as a result of a Taking, (iii) as a result of a foreclosure of the Deed of Trust (or the delivery of a deed-in-lieu thereof), (iv) which results from Impositions and/or Mechanic’s Claims and (v) the foreclosure of any pledge which is otherwise a Permitted Transfer, shall not, in each case, constitute a Recourse Liability Event);

 

(f)            the incurrence by Loan Parties of any Indebtedness which is not Permitted Indebtedness (provided that, any Indebtedness (i) which was Permitted Indebtedness when incurred but became non Permitted Indebtedness due to the inability of Loan Parties to repay such Indebtedness as it became due caused by the failure of the Premises to generate sufficient Net Operating Income or the refusal of Agent or the Lenders to consent to a withdrawal of the required funds from the Operating Account or (ii) which was incurred by a receiver which was appointed at the request of Agent or the Lenders shall not, in each case, constitute a Recourse Liability Event);

 

(g)           the occurrence of an Event of Default pursuant to clause (o) of Section 7.1 with respect to Loan Parties (it being agreed that a Bankruptcy Proceeding where the debtor is not a Loan Party shall not constitute a Recourse Liability Event) or the occurrence of a Default or an Event of Default pursuant to clause (p) of Section 7.1 as a result of (i) an action taken by Loan Parties in collusion with another Person, (ii) the failure of Loan Parties to contest or otherwise seek dismissal of any proceeding or petition referred to therein, or (iii) an action taken by an Affiliate of Loan Parties either alone or in collusion with another Person.

 

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(h)           the incurrence of any liability by Loan Parties pursuant to ERISA caused by any act or omission of Loan Parties or their Affiliates;

 

(i)            distributions, dividends or payments made in contravention of Section 6.22; and

 

(j)            the failure of either Loan Party to be a Single Purpose Entity to the extent there occurs a substantive consolidation of the assets of a Loan Party with any other Person in a Bankruptcy Proceeding pursuant to a final, non-appealable judgment of a court of competent jurisdiction.

 

“Reference Banks” means Aareal Bank AG, Deutsche Bank AG, Barclays Bank PLC and BNP Paribas London or such other banks constituting Approved Banks as may be reasonably and in good faith selected by Agent (without any implied requirement of advance consultation with Loan Parties) from time to time with concurrent written notice to Loan Parties.

 

“REIT” means Sunstone Hotel Investors, Inc., a Maryland corporation.

 

“Register” has the meaning set forth in Section 8.6.

 

“Release Condition” and “Release Conditions” has the meaning set forth in Section 6.12(d)(i).

 

“Rents” has the meaning set forth in the Deed of Trust.

 

“Rent Roll” has the meaning set forth in Section 5.34.

 

“Replacement Lender” has the meaning set forth in Section 2.12(f) of this Loan Agreement.

 

“Required Amortization Payments” means, with respect to each Payment Date, the amortization payment in the amount set forth on Exhibit C attached hereto, required to be made pursuant to Section 2.4(b).

 

“Required Repairs” has the meaning set forth in Section 6.34.

 

“Requisite Lenders” means, at any time, non-Defaulting Lenders having Commitments representing at least sixty seven percent (67%) of the total Commitments of all non-Defaulting Lenders at such time and, provided there are two (2) or more non-Defaulting Lenders at such time, not less than two (2) Lenders.

 

“Restoration” means in case of a Casualty or a Taking, the restoration, replacement or rebuilding of the portion of the Premises affected by the Casualty or Taking such that when such restoration, replacement or rebuilding is completed, the Premises shall have been restored, in the case of any Casualty, substantially to the same character and condition as prior to such Casualty, and in the case of any Taking, to an integral unit as substantially similar as reasonably possible, taking into account the extent of the Taking, to the character and condition of the Premises prior to such Taking, in each case in accordance with this Loan Agreement, all

 

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Legal Requirements and the Permitted Encumbrances in all material respects.  In any case, Restoration shall provide sufficient (in Agent’s reasonable and good faith determination) access across and over the Premises to the public roads and highways, provided that if the Premises has the same access that existed before the Casualty or Taking, such access shall be deemed sufficient.

 

“Section 2.12 Prepayment Notice” has the meaning set forth in Section 2.12(e).

 

“Section 2.12 Replacement Notice” has the meaning set forth in Section 2.12(e).

 

“Security Deposit” means any cash security or other deposit given by or on behalf of a Lessee to Operating Lessee as the landlord under a Lease that has not been applied or returned in accordance with such Lease.

 

“Security Documents” means, collectively, this Loan Agreement, the Deed of Trust, the Assignment of Agreements, the Assignment of Leases and Rents, any Account Agreement, the UCC Financing Statements and any other Loan Document entered into to secure the Obligations.

 

“Single Purpose Entity” has the meaning set forth on Exhibit B attached hereto.

 

“Sponsor” means, individually and collectively, Sunstone and Hilton.

 

“Spread Maintenance Premium” means, with respect to any payment or prepayment of the outstanding principal amount of the Loan (including an acceleration of the Loan but excluding any prepayment by Borrower to satisfy the Default DSCR or Minimum DSCR or any mandatory prepayment of the Loan as a result of a Casualty, a Taking or usury in accordance with this Loan Agreement) prior to the Permitted Prepayment Date, an amount equal to the greater of (i) five percent (5%) of the amount prepaid and (ii) product of the following:  (A) the amount of such prepayment (or the amount of principal so accelerated), multiplied by (B) the then applicable Margin, as applicable), multiplied by (C) a fraction (expressed as a percentage) having a numerator equal to the number of days difference between the Permitted Prepayment Date and the date such prepayment occurs and a denominator equal to three hundred sixty (360).

 

“Sunstone” means Sunstone Hotel Partnership, LLC, a Delaware limited liability company.

 

“Survey” means that certain survey prepared by Millman Surveying, Inc., dated November 29, 2010, and last revised December 7, 2010.

 

“Taking” (and its correlative meanings) means any temporary or permanent taking by any Governmental Authority of the Premises or any portion thereof through eminent domain, condemnation or other proceedings or by any settlement or compromise of such proceedings, or any voluntary conveyance of such property or any portion thereof during the pendency of any such proceedings.

 

“Taxes” has the meaning set forth in Section 2.10.

 

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“Tenant Security Account” has the meaning set forth in Section 3.3(a).

 

“Term” means the period commencing on the Closing Date and ending on the Maturity Date.

 

“Term Sheet” means that certain Term Sheet dated as of March 23, 2011 of Agent pertaining to the Loan.

 

“Testing Determination Date” means the date which is the last day of the Calendar Quarter with respect to which a Quarterly Compliance Statement is required to have been delivered to Agent pursuant to Section 6.1(c).

 

“Title Company” means Stewart Title Guaranty Company.

 

“Title Policy” means the mortgagee title insurance policy in favor of Agent issued on the Closing Date, including all endorsements thereto.

 

“Transfer” means (a) the conveyance, transfer, assignment, pledge, mortgage, encumbrance, hypothecation or sale, by operation of law or otherwise, of (i) the Collateral, or any part thereof or interest therein (except for the sale or other disposition of inventory in the ordinary course of business and the replacement or disposition of tangible personal property that is obsolete or worn out and is being or will be replaced with items of at least the same utility, quality and value, unless Property Manager reasonably determines that the replacement of such personal property is not required in order to continue to operate the Premises in accordance with Comparable Standards), or (ii) a direct or indirect equity or beneficial interest as a partner, shareholder, member or otherwise in a Loan Party or in any Person having a direct or indirect equity or beneficial interest in a Loan Party, (b) the leasing of all or substantially all of the Premises (except in accordance with this Loan Agreement) or (c) any change in Control of either Loan Party, as the case may be.  The term “Transfer” does not include Permitted Encumbrances or Permitted Equipment Financing.

 

“Treasury Rate”  means, as of any Testing Determination Date, the annualized yield on securities issued by the United States Treasury having a remaining maturity of one hundred twenty (120) months, as quoted in Federal Reserve Statistical Release H. 15(519) under the heading “U.S. Government Securities - Treasury Constant Maturities” for the Treasury Rate Determination Date, converted to a monthly equivalent yield.  If yields for such securities of such applicable maturity are not shown in such publication, then the Treasury Rate shall be determined by Agent by linear interpolation between the yields of securities of the next longer and next shorter maturities.  If said Federal Reserve Statistical Release or any other information necessary for determination of the Treasury Rate in accordance with the foregoing is no longer published or is otherwise unavailable, then the Treasury Rate shall be reasonably determined by Agent based on comparable data.

 

“Treasury Rate Determination Date”  means the date which is five (5) Business Days prior to the applicable Testing Determination Date.

 

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“UCC Financing Statements” means such UCC financing statements as Agent shall deem reasonably necessary or desirable to perfect Agent’s security interest in the Collateral (or any portion thereof).

 

“Withdrawal Liability” means at any time the aggregate liability incurred (whether or not assessed) with respect to all Multiemployer Plans pursuant to Section 4201 of ERISA or for increases in contributions required to be made pursuant to Section 4243 of ERISA.

 

Section 1.2            Other Definitional Provisions.

 

(a)           All terms defined in this Loan Agreement shall have the above-defined meanings when used in the Note or any of the other Loan Documents, or in any other certificate, report or other document made or delivered pursuant to this Loan Agreement, unless the context therein shall otherwise require.

 

(b)           Whenever appropriate herein or required by the context or circumstances, the masculine shall be construed as the feminine and/or the neuter, the singular as the plural, and vice versa.

 

(c)           The words “hereof”, “herein”, “hereunder” and similar terms when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement.

 

(d)           The words “include” and “including” wherever used in this Loan Agreement or any other Loan Document shall be deemed to be followed by the words “without limitation”.

 

(e)           Any reference to any Loan Document or any other document, instrument or agreement in this Loan Agreement or in any other Loan Document shall be deemed to mean such Loan Document or other document, instrument or agreement, as applicable, as it may from time to time be amended, supplemented, restated, consolidated, severed, split, extended, substituted for, partially released, replaced, increased, waived, cross-collateralized, renewed or otherwise modified in accordance with the terms of the Loan Documents.

 

ARTICLE II

 

THE LOAN

 

Section 2.1            The Loan; Use of Funds.  Subject to the conditions and upon the terms herein provided, each Lender severally agrees to lend to Borrower and Borrower agrees to borrow from each Lender, on the Closing Date, an amount up to such Lender’s Commitment, which Commitments in the aggregate shall equal the Loan Amount, or such lesser amount as shall be the maximum amount available pursuant to the terms of this Loan Agreement (the “Loan”).  The Loan shall be made by Lenders ratably in proportion to their respective Commitments.  The Loan shall be evidenced by the Note.  Interest and Additional Interest, if any, shall be payable in accordance with the Note and this Loan Agreement.  The Loan shall be repaid with Interest, Additional Interest, costs, fees and charges as more particularly set forth in this Loan Agreement, the Note, the Deed of Trust and the other Loan Documents.  Principal

 

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amounts of the Loan which are repaid for any reason may not be reborrowed.  The proceeds of the Loan shall be used to (i) repay indebtedness, (ii) pay transaction costs and (iii) make deposits into Accounts as required in this Loan Agreement.  Any excess proceeds may be used for any lawful purpose.

 

Section 2.2            Interest.

 

(a)           Interest at the Applicable Interest Rate.  Until paid in full, and subject to Sections 2.5(c), 2.11 and 2.12(d), each Loan Portion shall bear interest at an interest rate which shall be a LIBOR Rate as designated by Borrower pursuant to Section 2.3 or the Base Rate as provided in Section 2.11 or Section 2.12 (the “Applicable Interest Rate”).

 

(b)           Interest Payments.

 

(i)            On the date hereof, Borrower shall pay Interest on the unpaid outstanding principal amount of the Loan from the date hereof through and including April 29, 2011.

 

(ii)           On June 1, 2011 and on each Payment Date thereafter, Borrower shall pay Interest as provided in this Loan Agreement on each Loan Portion, in arrears, for the Interest Period then ending.

 

(iii)          Borrower shall pay Additional Interest as and when provided herein, and in the event any Lender Interest Rate Protection Agreement is in effect, in such Lender Interest Rate Protection Agreement.

 

(c)           Calculation of Interest.

 

(i)            Interest accruing at the Applicable Interest Rate shall be calculated on the basis of the actual number of days elapsed and a year of 360 days.

 

(ii)           Any change in the Base Rate shall be automatically effective as of the day on which such change in rate occurs.

 

(iii)          Each determination of an interest rate by Agent pursuant to the provisions of this Loan Agreement shall be conclusive and binding on Borrower in the absence of manifest error.

 

Section 2.3            Determination of Applicable Interest Rate.

 

(a)           Applicable Interest Rate.

 

(i)            The initial Applicable Interest Rate for the Loan shall be the applicable LIBOR Rate based on the LIBOR Rate Period(s) selected by Borrower in writing and delivered to Agent on or prior to the Closing Date for each Loan Portion.

 

(ii)           The Applicable Interest Rate (and any related LIBOR Rate Period) from time to time applicable to any Loan Portion upon and after the expiration of any

 

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LIBOR Rate Period with respect to such Loan Portion shall be determined in the manner set forth in Section 2.3(c), (d) and (e), Section 2.11(a) and (b) and Section 2.12(d).

 

(iii)          After a conversion election, each Loan Portion shall bear interest during each applicable Interest Period at the Applicable Interest Rate as shall have been designated pursuant to Section 2.3(c) or (e), or as otherwise provided in Section 2.3(d).  In connection with the selection or conversion of the Applicable Interest Rate pursuant to Section 2.3(c) or (e), Borrower shall specify the principal amount of the Loan Portion for which such selection or conversion is being made.

 

(iv)          At any particular time, the sum of all Loan Portions shall equal the outstanding principal amount of the Loan.

 

(v)           There shall be no more than six (6) Loan Portions at any one time.

 

(b)           Intentionally Omitted.

 

(c)           LIBOR Rate Conversion Options.  Subject to Section 2.3(f) and Section 2.5(c), Borrower may elect to convert the Applicable Interest Rate from one LIBOR Rate to another LIBOR Rate effective upon the expiration of the then current LIBOR Rate Period; provided, however, that (x) there shall not have occurred and be continuing any Event of Default, (y) the circumstances referred to in Section 2.11 or Section 2.12(d) shall not have occurred and be continuing, and (z) after giving effect to such conversion, the number of LIBOR Rate Loan Portions in effect shall not exceed, in the aggregate, six (6).  If Borrower wishes to convert the Applicable Interest Rate on any Loan Portion as permitted by the preceding sentence, an Authorized Loan Parties’ Representative shall give notice thereof (which shall be irrevocable) to Agent to the attention of an Authorized Agent Representative prior to 3:00 p.m. (New York City time) on the day that is not less than three (3) LIBOR Banking Days prior to the proposed conversion date specifying (A) the principal amount of the Loan with respect to which such conversion shall occur, (B) the proposed conversion date, which shall be determined in accordance with the preceding sentence, and (C) the applicable LIBOR Rate Period.

 

(d)           Reversion to Three-Month LIBOR Rate.  If an Authorized Loan Parties’ Representative fails to timely notify an Authorized Agent Representative in accordance with Section 2.3(a)(i), (c) or (e) of Borrower’s election of a LIBOR Rate or Base Rate for any Loan Portion with an expiring LIBOR Rate Period or fails to provide all of the information required by Section 2.3(c) or (e) for the election of a LIBOR Rate, the Applicable Interest Rate on such Loan Portion shall, provided that no Event of Default shall then exist, automatically upon the expiration of such LIBOR Rate Period convert to a LIBOR Rate having a LIBOR Rate Period of three (3) months or, if such three-month LIBOR Rate Period would end after the Maturity Date, a LIBOR Rate Period having a duration equal to the period commencing upon the expiration of such expiring LIBOR Rate Period and ending on and including the Maturity Date, subject to the proviso in the definition of “LIBOR Rate Period” herein.

 

(e)           Interest Rate Corresponding to Interest Rate Protection Agreements.  Notwithstanding anything to the contrary set forth in this Section 2.3, at all times that a LIBOR Rate shall be in effect, Borrower shall cause a portion of the Loan corresponding to the notional

 

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amount with respect to which any such Interest Rate Protection Agreements were established to have an Applicable Interest Rate which is a LIBOR Rate having a LIBOR Rate Period that is the same as and is co-terminous with the period used in such Interest Rate Protection Agreement.

 

(f)            Notice of Applicable Interest Rate Conversion.  Agent shall promptly notify each Lender upon its receipt of notice from Borrower pursuant to Section 2.3(c) electing to convert to an Applicable Interest Rate.

 

Section 2.4            Principal Payments.

 

(a)           Principal Payment at Maturity.  Borrower shall pay the then outstanding unpaid principal amount of the Loan in a single installment on the Maturity Date, together with all accrued and unpaid Interest and all other sums then due to Agent and Lenders under the Loan Documents.

 

(b)           Amortization Payments.  On each Payment Date, Borrower shall pay to Agent, in addition to Interest then due, the applicable Required Amortization Payment.  Prepayments of the Loan made pursuant to Section 2.4(d) or other provision hereof shall not reduce the amount of such scheduled amortization payments.

 

(c)           Cash Sweep Condition Prepayment.  Agent (with the consent or at the direction of the Requisite Lenders) may, in accordance with and subject to the terms and conditions of Section 3.2, apply funds on deposit in the Cash Collateral Account to the repayment of (i) principal, (ii) Breakage Costs, if any, payable in accordance with Section 2.8 and (iii) all sums required to be paid pursuant to Section 2.4(g).

 

(d)           Optional Prepayments.  Borrower may not voluntarily prepay the Loan, in whole or in part, prior to the Permitted Prepayment Date.  From and after the Permitted Prepayment Date, Borrower may, upon at least seven (7) days’ prior written notice to Agent, prepay the Loan, in whole or in part, in accordance with this Section 2.4(d).  Any such prepayment notice shall specify the date and amount of the prepayment to be made; provided, however, neither Borrower’s failure to make such prepayment, nor Borrower’s making of such prepayment on a date which is different than the date specified in such prepayment notice, shall be a Default or an Event of Default; provided, further, that Borrower shall pay within five (5) Business Days of written demand by Agent (i) all reasonable out-of-pocket expenses incurred by Agent by reason of Borrower’s failure to make such prepayment on the date specified in such prepayment notice and (ii) Breakage Costs and Additional Interest which, in each case, results from Agent not having received such payment prior to 11:00 A.M. (New York time) on the date specified in such prepayment notice.  Concurrently with any such prepayment, Borrower shall pay to Agent all sums required to be paid pursuant to, and shall otherwise comply with, Section 2.4(g).

 

(e)           Other Sums.  Borrower shall pay to Agent all other sums owed to Agent and/or Lenders pursuant to the Loan Documents when such sums are due and payable as provided in the applicable Loan Document, or if not provided therein, within ten (10) days after the due date thereof or if expressly required or with respect to amounts payable which cannot be determined by Borrower in the absence of determination by Agent or Lenders, within ten

 

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(10) days after written demand by Agent.  To the extent any other such sums are determined on a per diem or similar basis, such sums shall be calculated on the basis of a three hundred sixty (360) day year and the actual number of days elapsed.

 

(f)            Mandatory Prepayment.  Borrower shall be required to prepay the Loan upon the occurrence of any of the circumstances expressly requiring prepayment described in Section 6.12 and/or Section 6.13 in this Loan Agreement by paying the principal amount so required to be prepaid, provided that such prepayment shall be without payment of any Prepayment Fee or other penalty or premium (for the avoidance of doubt, it is agreed that the payment of Additional Interest shall not be deemed to be a penalty or premium).  Concurrently with any such prepayment, Borrower shall pay to Agent all sums required to be paid pursuant to, and shall otherwise comply with Section 2.4(g).  For the avoidance of doubt, it is agreed that any prepayment made in accordance with Section 6.33 and any prepayment made to prevent the commencement of or end the continuation of a Cash Sweep Condition shall not be subject to payment of the Prepayment Fee.

 

(g)           Reduction of Interest Rate Protection Arrangement and Payment of Other Sums.  Concurrently with any prepayment of principal pursuant to this Section 2.4, Borrower shall, as a further condition of such prepayment, (w)(1) in the case of any Lender Interest Rate Protection Agreement other than an interest rate cap then in effect, cause a reduction of the notional amount of such interest rate protection arrangement so as to cause such notional amount to correspond to the outstanding principal amount of the Loan, after giving effect to such prepayment, (2) pay all sums, if any, payable by Borrower pursuant to any Interest Rate Protection Agreement with respect to such reduction and (3) provide evidence to Agent of Borrower’s compliance with clauses (1) and (2) above, (x) pay all accrued and unpaid Interest to and including the date of such prepayment on the amount being prepaid, (y) pay all Additional Interest and any other amounts due and payable to Agent and/or Lenders hereunder and under the Note, the Deed of Trust and the other Loan Documents and (z) pay all reasonable fees and out-of-pocket expenses incurred by Agent in connection with the Loan and/or with the prepayment of the Loan.  In addition, concurrently with any prepayments of principal, other than as expressly set forth in Section 2.4(f), which occur prior to the Par Prepayment Date, Borrower shall, in addition to the other sums described in this Section 2.4(g), pay the Prepayment Fee, applicable thereto.

 

Section 2.5            Payment; Default Rate; Application of Certain Monies; Priority of Payments; Set-offs.

 

(a)           Manner of Payment.  All sums payable by Borrower under this Loan Agreement or any other Loan Document shall be made in Dollars and in immediately available funds not later than 11:00 a.m. (New York City time) on the date when such payment is due.  Such sums shall be payable by wire transfer to the credit of Agent, at Bank of New York, New York, ABA # 021000018 / Routing # IRVTUS3NXXX, Account # 8900492465, Account Name:  Aareal Bank AG, Wiesbaden / AARBDE5WXXX, Reference:  Loan # # 1037274600/ 9000141197, or to such other account or address as Agent may from time to time designate in writing to Borrower.  In the event that any sums are received by Agent from or on behalf of Borrower after the applicable time limit set forth in this Section 2.5(a), such sums shall be treated as being received by Agent on the immediately succeeding Business Day for all purposes.

 

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(b)           Payment on a Non-Business Day.  Whenever any payment to be made under the Loan Documents shall be stated to be due, or if the Maturity Date would otherwise occur, on a day which is not a Business Day, such payment shall be made, and the Maturity Date shall occur, as applicable, on the immediately succeeding Business Day.  Any such extension of time shall be included in the computation of payment of Interest (including interest at the Default Rate), fees, and Additional Interest.

 

(c)           Default Rate.

 

(i)            Notwithstanding anything to the contrary contained herein or in another Loan Document, if an Event of Default shall have occurred and be continuing, each Loan Portion and any other sums which are due but unpaid shall bear Interest from and including the date of the occurrence of such Event of Default (after as well as before judgment) at a fluctuating rate of interest per annum equal to the Default Rate with respect to each Loan Portion and any other sums which are due but unpaid, which interest at the Default Rate shall be payable upon demand of Agent.  Interest accruing at the Default Rate shall be calculated on the basis of the actual number of days elapsed and a year of three hundred sixty (360) days.

 

(ii)           Agent’s failure to collect interest at the Default Rate at any time shall not constitute a waiver of Lenders’ right thereafter, at any time and from time to time (including upon acceleration of the Maturity Date or upon payment in full of the Loan), to collect such previously uncollected interest at the Default Rate or to collect subsequently accruing interest at the Default Rate.

 

(d)           Priority of Payments.  All payments received with respect to the Loan shall be applied on account of sums due and owing pursuant to the Note, this Loan Agreement, the Deed of Trust or the other Loan Documents in the manner set forth in the Note.

 

(e)           No Set-offs.  All sums payable by Borrower under the Note, this Loan Agreement and the other Loan Documents shall be paid in full and without set-offs, counterclaims, deductions or withholdings of any kind except as expressly provided in Section 2.10 and Section 9.10.

 

Section 2.6            Usury.  The Note, this Loan Agreement, the Deed of Trust, and the other Loan Documents are subject to the express condition that at no time shall Borrower be obligated or required to pay interest on the Obligations at a rate which could subject any Lender 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 for or to agree to pay.  If by the terms of the Note, this Loan Agreement, the Deed of Trust or any other Loan Document, Borrower is at any time required or obligated to pay interest at a rate in excess of such maximum rate, the rate of interest shall be deemed to be immediately reduced to such maximum rate and the interest payments in excess of such maximum rate shall be applied (without any Prepayment Fee or other premium or penalty, (for the avoidance of doubt, it is agreed that the payment of Additional Interest shall not be deemed to be a penalty or premium)) and shall be deemed to have been payments in reduction of principal.

 

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Section 2.7            Interest Rate Protection Agreement.

 

(a)           Interest Rate Protection Agreement.  At or before the Closing, Borrower shall, enter into and satisfy all conditions precedent to the effectiveness of one or more Interest Rate Protection Agreements that shall collectively satisfy all of the following conditions and shall thereafter maintain such Interest Rate Protection Agreement in full force and effect:

 

(i)            The Interest Rate Protection Agreement shall be an interest rate cap or swap, the effect of which is to protect Borrower against upward fluctuations of an Applicable Interest Rate which is LIBOR (as distinguished from the LIBOR Rate) applicable to a LIBOR Rate Period of three (3) months in excess of the amount which would cause the LIBOR Rate to exceed three and three-quarter percent (3.75%) per annum for a minimum term of two (2) years in the notional amount equal to One Hundred Twenty Million Dollars ($120,000,000);

 

(ii)           The Interest Rate Protection Agreement shall be entered into between Borrower and a Qualified Counterparty;

 

(iii)          All sums payable by Borrower on account of the purchase price for the Interest Rate Protection Agreement during the term of the Interest Rate Protection Agreement shall have been paid in full on or prior to the effective date thereof;

 

(iv)          Borrower’s interest in such Interest Rate Protection Agreement, including all rights of Borrower to payment thereunder and any residual value thereof, shall have been collaterally assigned to Agent pursuant to the Deed of Trust and the Assignment of Agreements;

 

(v)           The financial institution which is party to such Interest Rate Protection Agreement shall have executed and delivered to Agent a consent to the collateral assignment of Borrower’s interest in such Interest Rate Protection Agreement referred to in clause (iv) above pursuant to a consent substantially in the form annexed hereto as Schedule 2.7(a) or otherwise in form and content reasonably acceptable to Agent (the “Interest Rate Protection Agreement Acknowledgment”); and

 

(vi)          Such Interest Rate Protection Agreement shall be reasonably satisfactory to Agent in form and content.

 

(b)           Supplemental Interest Rate Protection Agreement.  Prior to the expiration of the Interest Rate Protection Agreement described in Section 2.7(a), Borrower shall enter into an Interest Rate Protection Agreement in a notional amount equal to one half (50%) of the then outstanding principal amount of the Loan and which otherwise satisfies the requirements of Section 2.7(a) and shall thereafter maintain such an Interest Rate Protection Agreement in full force and effect throughout the remainder of the Term.

 

(c)           Failure to Provide Interest Rate Protection.  In the event that Borrower breaches its obligation to maintain an Interest Rate Protection Agreement in full force and effect as set forth in Section 2.7(a) and/or Section 2.7(b) and such failure continues for ten (10) Business Days after Borrower’s receipt of notice from Agent, in addition to Agent’s and

 

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Lenders’ rights and remedies hereunder or under the other Loan Documents, Agent may, but shall have no obligation to, at Borrower’s sole cost and expense and on Borrower’s behalf, enter into an Interest Rate Protection Agreement as may be required pursuant to Section 2.7(a).  In the event that Agent shall elect to enter into an Interest Rate Protection Agreement on Borrower’s behalf after the above described notice and cure period, such Interest Rate Protection Agreement, at Agent’s election, may be a Lender Interest Rate Protection Agreement; provided that such Lender Interest Rate Protection Agreement contains commercially reasonable terms consistent with an arms-length transaction comparable to the transaction which is the subject of this Loan Agreement.  Agent is hereby irrevocably appointed the true and lawful attorney of Borrower (coupled with an interest), in its name and stead, to execute such an Interest Rate Protection Agreement and all necessary documents ancillary thereto (each of which shall be in a reasonable form),  Borrower hereby ratifying and confirming all that its said attorney shall lawfully do by virtue hereof consistent with the terms hereof, provided that Agent shall not exercise such power of attorney unless Borrower has failed to enter into an Interest Rate Protection Agreement in the form and content required pursuant to Section 2.7(a) following the expiration of the ten (10) Business Day cure period set forth in this Section 2.7(c).  All sums paid and liabilities incurred by Agent pursuant to this Section 2.7 shall be paid by Borrower (and not from the proceeds of the Loan) within ten (10) days after Agent’s demand with interest at the Default Rate to the date of payment to Agent and such sums and liabilities, including such interest until paid, shall be deemed and shall constitute advances under this Loan Agreement and be evidenced by the Note and be secured by the Security Documents.

 

(d)           Obligation of Borrower Unaffected by Interest Rate Protection Agreement.  No Interest Rate Protection Agreement shall alter, impair, restrict, limit or modify in any respect the obligation of Borrower to pay Interest or Additional Interest on the Loan, as and when the same becomes due and payable in accordance with the provisions of the Loan Documents.

 

(e)           Termination, etc. of Interest Rate Protection Agreement.  Borrower shall not terminate, modify, cancel or surrender, or consent to the termination, modification, cancellation or surrender of, any Interest Rate Protection Agreement without the prior consent of the Requisite Lenders.  Within thirty (30) days after Borrower obtains knowledge of or receipt of notice (which may be given by Agent or a Lender) of a default by the financial institution that is a party to any Interest Rate Protection Agreement, Borrower shall substitute for such defaulted Interest Rate Protection Agreement another Interest Rate Protection Agreement (to which the Person that defaulted under the defaulted Interest Rate Protection Agreement is not a party) so that, after giving effect to such substitution, Borrower is in compliance with the requirements of Section 2.7(a).

 

(f)            Receipts from Interest Rate Protection Agreements.  All payments due to Borrower pursuant to any Interest Rate Protection Agreement, including upon any termination thereof, shall be payable to and held by Agent until repayment in full of the Obligations (other than Contingent Obligations); provided, however, that all periodic “net payments” due to Borrower so received by Agent in connection with a payment made by a counterparty to an Interest Rate Protection Agreement shall be applied by Agent on account of Interest then due and payable on the Loan or if no Interest is then due and payable, on account of Interest next due and payable on the Loan.  If an Event of Default occurs, Agent may, in its sole discretion, for so long

 

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as such Event of Default is continuing and in addition to any other rights and remedies hereunder, apply the amounts so held by Agent to the Loan or other amounts due by Borrower under the Loan Documents at Agent’s election.  Until such time as all Obligations (other than Contingent Obligations) have been paid in full, Borrower shall have no right to withdraw or otherwise apply any funds received by Agent on account of any Interest Rate Protection Agreement.  Such funds shall constitute additional security for the Obligations, a security interest therein being granted hereby.  In the event Borrower receives any sums pursuant to or in connection with any Interest Rate Protection Agreement, it shall promptly pay such sums to Agent to be held by Agent and applied to Interest which is or shall become due and payable.

 

(g)           Security.  No Interest Rate Protection Agreement shall be secured by all or any portion of the Collateral unless it is a Lender Interest Rate Protection Agreement which is not an interest rate cap, in which case such Lender Interest Rate Protection Agreement shall be secured by the Deed of Trust and other Security Documents.

 

Section 2.8            Breakage.  Borrower shall pay Agent and/or Lenders, as applicable, any documented out-of-pocket loss and/or reasonable and documented out-of-pocket cost or expense (excluding lost profits) which Agent or any Lender actually sustains or incurs as a consequence of any payment or prepayment (whether voluntary or involuntary) of the Loan or any portion thereof, whether or not required by any provision of this Loan Agreement or any other Loan Document or otherwise, made and applied on account of principal on a date other than the last day of a LIBOR Rate Period (noting, for purpose of clarification, that no such sums would be incurred with respect to an Applicable Interest Rate which is a Base Rate), including any loss or expense actually sustained or incurred by any Lender(s) in obtaining, liquidating or redeploying deposits or other funds acquired by such Lender(s) to maintain or fund the Loan or any portion thereof (“Breakage Costs”).  The amount of any loss or expense for which Borrower shall pay Agent or Lenders under this Section 2.8 shall be an amount equal to the excess, if any, as reasonably determined by Agent or the applicable Lender(s), of (i) the reasonable and documented out-of-pocket cost to the applicable Lender(s) of obtaining the funds for the portion of the Loan being paid or prepaid for the period from the date of such payment or prepayment to the last day of the LIBOR Rate Period over (ii) the amount of interest (as reasonably determined by such Lender) that would be realized by such Lender(s) in redeploying the funds so paid or prepaid, as the case may be.  Agent’s or any Lender’s determination of any amount or amounts which Agent and/or any Lender is entitled to receive pursuant to this Section 2.8 shall be conclusive, absent manifest error.  Upon Borrower’s request, Agent or the affected Lender shall provide Borrower with a calculation of the Breakage Costs incurred setting forth such Breakage Costs in reasonable detail.

 

Section 2.9            “Additional Interest” under Lender Interest Rate Agreements.  Borrower shall pay to Agent all documented losses and all reasonable and documented out-of-pocket, costs and expenses of Agent or any Lender incurred and payable by Borrower pursuant to any Lender Interest Rate Protection Agreement, including any termination thereof, unless such Lender Interest Rate Protection Agreement has been terminated in accordance with Section 2.7(e).  In the event of the foregoing, Borrower shall pay to Agent, concurrently with any principal payment, or within such shorter period as shall be specified in any Lender Interest Rate Protection Agreement, such amount as shall equal the amount of the Additional Interest (without duplication of payments due hereunder or under the Lender Interest Rate Protection Agreement)

 

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certified (with supporting detail) by Agent (or the applicable Lender) to Borrower by reason of such event.  Failure on the part of Agent to demand payment from Borrower for any Additional Interest attributable to any particular period shall not constitute a waiver of Agent’s (or the applicable Lender’s) right to demand payment of such amount for any subsequent or prior period.

 

Section 2.10         No Withholdings.  All sums payable by Borrower under the Note, this Loan Agreement and the other Loan Documents, shall be paid in full and without set-off or counterclaims and free of any deductions or withholdings for any and all present and future taxes, levies, imposts, deductions, duties, filing and other fees or charges (collectively, “Taxes”) other than Excluded Taxes.  In the event that Borrower is prohibited by any law from making any such payment free of such deductions or withholdings with respect to Taxes as a result of any change in any applicable law, regulation or treaty, or in the interpretation or administration thereof by any domestic or foreign governmental authority charged with the interpretation or administration thereof (whether or not having the force of law), or by any domestic or foreign court, then Borrower shall pay such additional amount to Agent as may be necessary in order that the actual amount received by Lenders after such deduction or withholding (and after payment of any additional Taxes due as a consequence of the payment of such additional amount) shall equal the amount that would have been received if such deduction or withholding were not required; provided, however, that Borrower shall not be obligated to pay such additional amounts attributable to Excluded Taxes.  In addition, Borrower shall not be obligated to pay such additional amounts on account of a specific Lender or the Agent if at the time such Lender became a “Lender” hereunder or at the time Agent became the “Agent” hereunder or as a result of the failure to update a form or document described below or in Section 9.10, Borrower is required to deduct or withhold any sums solely because such Lender or Agent had a legal basis to deliver, but failed to deliver, to Borrower (a) a duly executed copy of United States Internal Revenue Service Form W-8 BEN, W-8 ECI or W-8 IMY and/or any successor form or any required renewal thereof, as the case may be, certifying in each case that such Lender or Agent is entitled to receive payments hereunder or under the other Loan Documents without deduction or withholding of any United States federal income taxes, (b) a duly executed United States Internal Revenue Service Form W-9 or any successor form or any required renewal thereof and/or (c) other required form or documentation establishing that a full exemption exists from United States backup withholding tax, and as result of such failure, Borrower was prohibited by the applicable Legal Requirements, from making any such payment free of such deductions or withholding.  Notwithstanding anything contained in this Section 2.10, in no event will any Lender’s failure to deliver any such forms, or any renewal or extension thereof, affect, postpone or relieve Borrower from any obligation to pay Interest, principal, Additional Interest and other amounts due under the Loan Documents (other than amounts due under this Section 2.10 as a result of Agent’s or a Lender’s failure to deliver such forms).  Such additional amount shall be due concurrently with the payment with respect to which such additional amount is owed in the amount of Taxes certified by Agent (or the applicable Lender).  A certificate as to the amount of Taxes submitted by Agent to Borrower setting forth Agent’s (or the applicable Lender’s) basis for the determination of Taxes shall be conclusive evidence of the amount thereof, absent manifest error.  Failure on the part of Agent to demand payment from Borrower for any Taxes attributable to any particular period shall not constitute a waiver of Agent’s (or the applicable Lender’s) right to demand payment of such amount for any subsequent or prior period.

 

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Section 2.11         Unavailability; Illegality of LIBOR.

 

(a)           Unavailability of LIBOR.  If on any date on which Borrower seeks to establish a LIBOR Rate as the Applicable Interest Rate pursuant to Section 2.3, or if Section 2.3(d) applies, Agent reasonably and in good faith determines that (i) Dollar deposits in an amount approximately equal to the then outstanding principal amount of the Loan Portion bearing interest at a LIBOR Rate are not generally available at such time in the London interbank Eurodollar market for deposits in Eurodollars or (ii) reasonable means do not exist for ascertaining LIBOR, Agent shall promptly give notice (the “Non-Availability Notice”) of such fact to Borrower and the option to convert to or to continue the Applicable Interest Rate on such Loan Portion as a LIBOR Rate shall be suspended until such time as such condition no longer exists.  In the event that the option to elect, to convert to or to continue an Applicable Interest Rate as a LIBOR Rate shall be suspended as provided in this Section 2.11(a), effective upon the giving of the Non-Availability Notice, and if applicable, effective as of the first date that the one (1) month LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(d), interest on the Loan Portion for which a LIBOR Rate was to be determined shall be payable at the Base Rate, from and including the date of the giving of the Non-Availability Notice (or the date that the one (1) month LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(d), if applicable) until the earlier to occur of:  the Maturity Date and the date that the conditions referred to in this Section 2.11(a) no longer exist.

 

(b)           Illegality.  In the event that at any time while any Loan Portion bears interest at a LIBOR Rate, any Lender determines (which determination shall be conclusive and binding on Borrower absent manifest error) that it shall become illegal for such Lender to maintain the Loan or a portion thereof on the basis of one or more LIBOR Rates, Agent shall promptly after receiving notice thereof from such Lender give notice of such fact to Borrower, and the option to elect, to convert to or to continue the Applicable Interest Rate on the applicable Loan Portions as a LIBOR Rate shall be suspended until such time as such condition shall no longer exist.  In the case of existing Loan Portions affected by the circumstances described in the immediately preceding sentence, the Applicable Interest Rate on such Loan Portion shall be converted automatically to the Base Rate (unless such Lender determines that such conversion is not required with respect to any existing Loan Portion) and shall be payable at the Base Rate in the same manner as provided in Section 2.11(a) until the circumstance described in the first sentence of this Section 2.11(b) no longer exists.

 

Section 2.12         Increased Costs and Capital Adequacy.

 

(a)           Borrower agrees to pay to Agent, without duplication of any other amounts paid by Borrower hereunder, such additional amounts as any applicable affected Lender shall reasonably and in good faith determine will compensate such affected Lender for documented out-of-pocket costs incurred in maintaining the Loan or any portion thereof outstanding or for the reduction of any amounts received or receivable with respect to the Loan as a result of (1) compliance by any Lender, or any lending office of any Lender, or the holding company of any Lender, with any applicable new request or new directive implemented after the date hereof of any foreign or domestic Governmental Authority, central bank or comparable agency and/or (2) any change after the date hereof in any applicable law, regulation or treaty, or in the interpretation or administration thereof by any domestic or foreign Governmental

 

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Authority charged with the interpretation or administration thereof (whether or not having the force of law), or by any domestic or foreign court, (i) changing the basis of taxation of payments to any Lender (other than Excluded Taxes), (ii) imposing, modifying or applying any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, credit extended by, or any other acquisition of funds for loans by any Lender (whether directly, indirectly or on a portfolio wide basis) or (iii) imposing on any Lender any other condition affecting the Note or the Loan, excluding, in each case, amounts relating to Taxes, which shall be governed solely by Section 2.10, in each case, to the extent increasing the costs incurred by any Lender in maintaining the Loan or any portion thereof.  Notwithstanding the foregoing, all requests, rules, guidelines or directions under or in connection with the Dodd-Frank Wall Street Reform and Consumer Protection Act shall be deemed not to have been the subject of any request or directive implemented or any change having occurred prior to the date hereof.  No Lender shall impose on Borrower any Additional Cost pursuant to this Section 2.12(a) unless such Lender’s imposition of such cost is reasonably allocable to the Loan and unless such Lender imposes such costs on other similarly situated borrowers to which such governmental rules apply.

 

(b)           If any Lender shall reasonably and in good faith determine that (i) any change after the date hereof in the general application of any law, rule, regulation or guideline adopted or arising out of the June 2006 report of the Basel Committee on Banking Regulations and Supervisory Practices entitled “Basel II:  International Convergence of Capital Measurement and Capital Standards:  a Revised Framework - Comprehensive Version”, or any change in the interpretation or administration thereof by any domestic or foreign Governmental Authority, central bank or comparable agency charged with the interpretation or administration thereof, (ii) any applicable change after the date hereof in or adoption or implementation after the date hereof of any other law, rule, regulation or guideline regarding capital adequacy (other than any rule, regulation or guideline adopted or issued after the date hereof that is consistent with any law in effect before the date hereof) or (iii) compliance by any Lender, or any lending office of any Lender, or the holding company of any Lender, with any applicable request or directive regarding capital adequacy (having the force of law) of any such authority, central bank or comparable agency based on any such change, adoption or implementation, has the effect of reducing the rate of return on any Lender’s capital to a level below that which such Lender would have achieved but for such adoption, change, implementation or compliance (taking into consideration the policies of such Lender or such holding company with respect to capital adequacy), then upon notice from time to time Borrower shall, without duplication of any other amounts paid by Borrower hereunder, pay to Agent such additional amounts as will compensate such Lender for such actual reduction with respect to any portion of the Loan, if any, outstanding.  Notwithstanding the foregoing, any change based on the reports and supporting documentation of the Basel Committee on Banking Supervision of December 2009 entitled “Strengthening the Resilience of the Banking Sector” and “International Framework for Liquidity Risk Measurement, Standards and Monitoring”, in each case together with any amendments thereto, shall not be deemed to have occurred on or prior to the date hereof.  No Lender shall impose on Borrower any Additional Cost pursuant to this Section 2.12(b) unless such cost is reasonably allocable to the Loan and unless such Lender imposes such costs on other similarly situated borrowers to which such governmental rules apply.

 

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(c)           Any amount payable by Borrower pursuant to Section 2.12(a) or (b) (such amounts collectively referred to as “Additional Costs”) shall be paid to Agent within ten (10) Business Days of receipt by Borrower of a certificate of Agent (or of the applicable Lender, with a copy to Agent) setting forth the amount due and Agent’s (or the applicable Lender’s) basis (with reasonable detail) for the determination of such Additional Costs, which certificate shall be sent by Agent within one hundred twenty (120) days after Agent (or the applicable Lender) obtains actual knowledge thereof.  If Agent (or the applicable Lender) fails to demand payment from Borrower for any such Additional Costs attributable to any particular period within such one hundred twenty (120) day period, Agent (or the applicable Lender) shall only be entitled to demand payment for costs incurred from and after the date that is one hundred twenty (120) days prior to the date that Agent (or the applicable Lender) actually notifies Borrower.

 

(d)           If any Lender shall reasonably and in good faith determine that the LIBOR Rate does not adequately and fully reflect such Lender’s costs of funds, then such Lender shall give prompt notice (including reasonable detail) to Borrower (with a copy to Agent) of such fact and the option to convert to or to continue the Applicable Interest Rate as a LIBOR Rate shall be suspended until such time as such condition no longer exists.  In the event that the option to convert to or to continue an Applicable Interest Rate as a LIBOR Rate shall be suspended as provided in this Section 2.12(d), effective upon the giving of such notice, and if applicable, effective as of the first date that the LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(d), interest on the Loan Portion for which a LIBOR Rate was to be determined shall be payable at the Base Rate, from and including the date of the giving of such notice (or the date that the LIBOR Rate Period would otherwise be in effect pursuant to Section 2.3(d), if applicable) until the earlier to occur of: the Maturity Date and the date that the conditions referred to in this Section 2.12(d) no longer exist.  No Lender shall provide notice of the suspension of the option to convert or continue the Applicable Interest Rate as a LIBOR Rate pursuant to this Section 2.12(d) unless such Lender takes similar action with respect to other similarly situated borrowers with respect to loans where such Lender has a contractual right to do so.

 

(e)           If any Lender (an “Affected Lender”) gives notice to Borrower of the occurrence of the circumstances described in Section 2.10, Section 2.11(b), Section 2.12(a), Section 2.12(b), or Section 2.12(d), Borrower may, within ninety (90) days of receipt of such notice, give written notice to Agent and to each Lender of Borrower’s intention to (y) replace the Affected Lender with an Eligible Assignee designated in such notice and otherwise reasonably acceptable to Agent (any such notice, a “Section 2.12 Replacement Notice”), or (z) from and after the Permitted Prepayment Date only, prepay the entire outstanding principal balance of the Loan, together with any Breakage Costs in connection therewith under Section 2.8, but, provided that no Event of Default shall have occurred and be continuing and provided further that Borrower shall have used commercially reasonable efforts for a period not less than ninety (90) days to replace the Affected Lender with a Replacement Lender, without any Prepayment Fee or any other prepayment premium or fee (any such notice, a “Section 2.12 Prepayment Notice”).

 

(f)            If Borrower delivers a Section 2.12 Replacement Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Section 2.12 Replacement Notice, to waive the application of Section 2.11(b), Section 2.12(a), Section 2.12(b), or Section 2.12(d), as applicable, the Affected Lender shall thereafter, so long as no Event of Default exists,

 

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assign all of its rights and obligations under this Loan Agreement to a financial institution which is an Approved Assignee (the “Replacement Lender”) and the Replacement Lender shall assume all of the Affected Lender’s rights and obligations under this Loan Agreement, in each case pursuant to an agreement, substantially in the form of an Assignment and Acceptance, executed by the Affected Lender and the Replacement Lender.  In connection therewith, the Replacement Lender shall pay to the Affected Lender an amount equal to the Affected Lender’s Pro Rata Share of the outstanding principal amount of the Loan plus all interest accrued thereon, plus all other then accrued and unpaid amounts, if any, allocable to the Affected Lender.  Upon the effective date of such Assignment and Acceptance, the Replacement Lender shall become a party to this Loan Agreement and shall have all the rights and obligations of a Lender hereunder and the Affected Lender shall be released from its obligations hereunder, and no further consent or action by any party shall be required.  Borrower, Agent and the Lenders shall execute such modifications to the Loan Documents as shall be reasonably required in connection with and to effectuate the foregoing.  Any Affected Lender which is replaced as a Lender under this Section 2.12(f) shall remain entitled to the benefits of this Loan Agreement, including, without limitation, this Section 2.12, in respect of the period prior to its replacement.

 

(g)           If Borrower delivers a Section 2.12 Prepayment Notice, then unless the Affected Lender agrees, within ten (10) days of receipt of such Section 2.12 Prepayment Notice, to waive the application of Section 2.11(b), Section 2.12(a), Section 2.12(b), or Section 2.12(d), Borrower shall have the right, exercisable within ninety (90) days after the end of such ten (10) day period, to prepay the entire outstanding principal balance of the Loan, together with any Breakage Costs thereon under Section 2.8, but, provided that no Event of Default shall have occurred and be continuing and provided further that Borrower shall have used commercially reasonable efforts for a period not less than ninety (90) days to replace the Affected Lender with a Replacement Lender, without a Prepayment Fee, it being agreed, however, that Borrower shall have no right to make a prepayment under this Section 2.12(g) whatsoever until the occurrence of the Permitted Prepayment Date.  By way of example and not limitation, if Borrower delivers a Section 2.12 Prepayment Notice on April 1, 2013, the Affected Lender would have until April 10, 2013 to decide whether or not to waive the payment of the Additional Costs in question, and Borrower would then have until July 10, 2013 (so long no Event of Default exists at the time of such prepayment) to make such a prepayment of the Loan.

 

Section 2.13         Obligation to Mitigate.  Each Lender agrees that, within a reasonable period of time after the officer of such Lender having primary responsibility for administering its portion of the Loan becomes aware of the occurrence of an event or the existence of a condition that would entitle such Lender to receive payments or exercise rights under Section 2.11 or 2.12, such Lender will, to the extent not inconsistent with the internal policies of such Lender and any applicable legal or regulatory restrictions, use reasonable efforts to (a) make, issue, fund or maintain its portion of the Loan through another office of such Lender, or (b) take such other measures as such Lender may deem reasonable, if as a result thereof the circumstances which would cause the additional amounts which would otherwise be required to be paid to such Lender, or invoke the rights of such Lender, pursuant to Section 2.11 or 2.12 to be materially reduced and if, as determined by such Lender in its sole discretion, the making, issuing, funding or maintaining of its portion of the Loan through such other office or in accordance with such other measures, as the case may be, would not otherwise adversely affect such Loan portion or the interests of such Lender; provided, such Lender will not be obligated to utilize such other

 

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office pursuant to this Section 2.13 unless Borrower agrees to pay all incremental expenses incurred by such Lender as a result of utilizing such other office as described above.

 

Section 2.14         Closing.  The Closing shall be effectuated pursuant to an escrow with the Title Company.

 

Section 2.15         Fees.  Borrower shall pay to Agent all fees provided for in the Loan Fee Letter in accordance with the terms of the Loan Fee Letter.

 

ARTICLE III

 

ACCOUNTS; RESERVES; LETTERS OF CREDIT

 

Section 3.1            Operating Account.  Loan Parties shall cause all Gross Revenue to be deposited into the Operating Account promptly after Loan Parties’ or Property Manager’s receipt thereof in accordance with the Management Agreement.  Loan Parties hereby grant to Agent a security interest in all rights of Loan Parties in and to the Operating Account and all sums on deposit therein as additional security for the Obligations, and at any time during the continuance of an Event of Default, Agent shall have all the rights specified in this Loan Agreement or in the other Loan Documents with respect to the Operating Account, in each case subject to the Manager SNDA.  Subject to the Manager SNDA, Property Manager (or Loan Parties) may make deposits into and receive withdrawals from the Operating Account to pay for Operating Expenses and for all other purposes except to the extent prohibited by this Loan Agreement.  On each Payment Date during the continuance of a Cash Sweep Condition, an amount equal to the Cash Collateral Payment Amount shall be deposited by Loan Parties (or Property Manager) into the Cash Collateral Account for application in accordance with Section 3.2.

 

Section 3.2            Cash Collateral Account; Cash Sweep Letter of Credit.

 

(a)           If a Cash Sweep Condition shall exist, then on the immediately succeeding Payment Date and on each Payment Date thereafter during the continuance of such Cash Sweep Condition, Loan Parties shall (or shall cause Property Manager to) deposit an amount equal to the Cash Collateral Payment Amount into an Account (the “Cash Collateral Account”) as additional, cash collateral for the Obligations; provided, that, if an Account Agreement has not been fully executed with respect to such Cash Collateral Account, such Cash Collateral Payment Amount shall be held by Agent until the applicable Account Agreement is delivered (which funds shall be deposited by Agent in such Account upon the execution and delivery of the Account Agreement).  Provided that no Event of Default or monetary Default shall then be continuing, any funds in the Cash Collateral Account that have not been previously disbursed or applied shall be disbursed to Loan Parties upon the termination of such Cash Sweep Condition; provided  further, that, if such Cash Sweep Condition shall exist for four (4) consecutive Testing Determination Dates, then Agent, may, if directed by the Requisite Lenders, apply all or any portion of the sums then on deposit in the Cash Collateral Account to the Obligations as set forth in Section 2.4(c) (or, to the extent that a Cash Sweep Letter of Credit has been delivered to Agent, draw on such Cash Sweep Letter of Credit and apply the proceeds thereof to the

 

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Obligations, in either case in such order as Agent may elect).  Any amounts not applied to the Obligations in accordance with the previous sentence after a Cash Sweep Condition shall have existed for four (4) consecutive Testing Determination Dates shall, subject to Section 3.5, be held as cash collateral for the Obligations for the remainder of the Term.  Neither the application by Agent of sums on deposit in the Cash Collateral Account to the Obligations nor the application of proceeds of a Cash Sweep Letter of Credit to the Obligations shall be subject to payment of a Prepayment Fee.

 

(b)           If Loan Parties shall have delivered a Cash Sweep Letter of Credit to Agent so as to prevent the occurrence of a Cash Sweep Condition (in accordance with the definition of Cash Sweep Condition in Section 1.1), then, provided that no Default or Event of Default shall then be continuing, Agent shall return such Cash Sweep Letter of Credit, (i) within ten (10) Business Days after the date on which the Cash Sweep Period which would have (in Agent’s determination) commenced in the absence of the delivery of such Cash Sweep Letter of Credit would have (in Agent’s reasonable and good faith determination) ended or (ii) in any event, upon repayment of the Obligations (other than Contingent Obligations) (or with respect to a repayment of the Obligations where the Appraised Value (as set forth in an Appraisal which is not dated more than thirty (30) days prior to the date of such repayment) is less than the Obligations (other than Contingent Obligations), one hundred (100) days after such prepayment).

 

(c)           In addition, Agent shall have the rights with respect to any Cash Sweep Letter of Credit set forth in Section 3.6.

 

Section 3.3            Tenant Security Account.

 

(a)           Loan Parties shall comply with all Legal Requirements in all material respects and the applicable Lease with respect to any security given under any Lease (excluding the Ground Lease or Operating Lease).  Subject to the foregoing and if required by applicable Legal Requirements, Loan Parties shall deposit or cause to be deposited all Security Deposits under the Leases into an account with a bank or other financial institution approved by Agent (the “Tenant Security Account”) within two (2) Business Days after receipt.  Subject to the terms of the applicable Leases and Legal Requirements, Loan Parties hereby grant to Agent and Lenders a security interest in all rights of Loan Parties in and to the Tenant Security Account and all sums on deposit therein as additional security for the Obligations.

 

(b)           Loan Parties shall not withdraw any sums from the Tenant Security Account or apply any Security Deposits if an Acceleration Event is continuing, except as provided below.  Loan Parties may make withdrawals from the Tenant Security Account at any time when an Acceleration Event is continuing, provided the proceeds are (i) applied in the ordinary course of business to sums due under the applicable Lease when the terms of such Lease or applicable Legal Requirements permit the application thereof or (ii) returned to the applicable Lessee pursuant to Legal Requirements or the terms of the applicable Lease which require Loan Parties to return such Security Deposit.  If an Acceleration Event is continuing, neither Loan Parties nor any other Person shall have any right to, and each Loan Party covenants that it shall not, withdraw any amounts from the Tenant Security Account or apply any Security Deposits, except as may be approved by Agent or as may be required by the terms of the applicable Lease or by Legal Requirements.  If, during the continuance of an Acceleration Event,

 

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either Loan Party is required pursuant to the terms of the applicable Lease or applicable Legal Requirements to return any Security Deposit to the applicable Lessee, such Loan Party shall deliver a notice to Agent certifying same and stating the reason therefor.  Agent shall promptly, at Agent’s option and at such Loan Party’s sole cost and expense, either permit such Loan Party to return the Security Deposit to the applicable Lessee or, if Agent elects, cause such Security Deposit to be returned directly to the applicable Lessee.

 

(c)           Within ten (10) Business Days of Agent’s request therefor during the continuance of an Event of Default, Loan Parties shall transfer (to the extent transferable) to the name of Agent and deliver to Agent all original Lease Letters of Credit obtained by Loan Parties promptly after receipt of same, together with reasonable evidence that all fees payable to the issuer on account of such assignment and transfer have been paid.  Subject to the terms of the applicable Lease and Legal Requirements, each Loan Party hereby grants to Agent and Lenders a security interest in all rights of Loan Parties in and to all Lease Letters of Credit, including all proceeds thereof, as additional security for the Obligations.  In addition to all other rights and remedies of Agent and Lenders, Agent may, and to the extent necessary in order to do so, each Loan Party hereby grants to Agent an irrevocable power of attorney, coupled with an interest, and Agent shall be entitled to act pursuant to such power following an Event of Default that shall have occurred and be continuing by reason of a failure to comply with the terms of this Section 3.3, solely to draw upon or otherwise realize on each such Lease Letters of Credit in accordance with its terms, applicable Legal Requirements and those of the applicable Lease.

 

(d)           If a Loan Party is entitled to make a drawing on any Lease Letter of Credit which is being held by Agent in accordance with Section 3.3(c) above under the terms of the applicable Lease, Lease Letter of Credit or Legal Requirements, Agent shall, at such Loan Party’s sole cost and expense, re-transfer such Lease Letter of Credit to such Loan Party in trust for the benefit of Agent and subject to Agent’s security interest, provided that such Loan Party delivers to Agent a written request certifying that such Loan Party is entitled to draw on the applicable Lease Letter of Credit, and indicating the applicable Lease and Lease Letter of Credit, the amount of the draw and the reasons for such draw.  Loan Parties shall hold any such Lease Letter of Credit solely for the purpose of drawing or realizing thereon in accordance with the provisions of the applicable Lease or Lease Letter of Credit and Legal Requirements and, during the continuance of an Event of Default, shall promptly remit the proceeds of any such drawing to Agent and Agent shall apply the same in reduction of the Obligations in such order as Agent shall elect, unless the drawing is being made to liquidate any Lease Letter of Credit because the issuer thereof has elected to cancel or not to renew same or for any other reason not arising from a default by the Lessee in which case the applicable Loan Party shall deposit such proceeds in the Tenant Security Account.  The original of any Lease Letters of Credit (to the extent not fully drawn) delivered to Loan Parties under this Section 3.3(d) shall be promptly re-assigned, transferred (to the extent transferrable) and re-delivered to Agent following Loan Parties’ draw on same.  If either Loan Party is required by the terms of the applicable Lease or applicable Legal Requirements to return any Lease Letter of Credit to the Lessee, Agent shall, at such Loan Party’s sole cost and expense, re-assign and transfer (to the extent transferable) and deliver possession of such original Lease Letter of Credit to such Loan Party provided such Loan Party delivers to Agent a written request for same, certifying the foregoing and indicating the applicable Lease and Lease Letter of Credit and the reasons for such return.  Upon a Loan Party’s receipt, such Loan Party shall promptly return the same to the applicable Lessee.  At

 

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Agent’s election and at such Loan Party’s sole cost and expense, instead of delivering such Lease Letter of Credit to such Loan Party, Agent may timely return same to the applicable Lessee.  If a Lease permits a Lessee to re-post a new Lease Letter of Credit, or to amend an existing Lease Letter of Credit, Agent will permit same and cooperate with such Loan Party to effect same, at such Loan Party’s sole cost and expense.

 

Section 3.4            Capital/FF&E Reserve Account Funding the Capital/FF&E Reserve Account.  On each Payment Date Loan Parties shall, or shall cause Property Manager to, deposit the Capital/FF&E Reserve Amount for the  month prior to the immediately preceding calendar month in an interest-bearing account (the “Capital/FF&E Reserve Account”) at Agent and under Agent’s sole dominion and control as more particularly set forth in the applicable Account Agreement, but subject to the Manager SNDA.  All amounts deposited into the Capital/FF&E Reserve Account by or on account of Loan Parties shall be held and applied in accordance with the terms of this Loan Agreement.  Subject to the restrictions on disbursements from the Capital/FF&E Reserve Account  contained in this Section 3.4, any interest on amounts held in the Capital/FF&E Reserve Account shall accrue for the benefit of Loan Parties  and may be used by Loan  Parties for the payment of Capital/FF&E Expenditures pursuant to Section 3.4(b) hereof.

 

(b)           Disbursements.  Loan Parties (or Property Manager) may withdraw from the Capital/FF&E Reserve Account amounts to pay for Capital/FF&E Expenditures (provided that, during a Cash Sweep Condition (except in the case of an emergency), Loan Parties (or Property Manager) shall not make more than one withdrawal in any calendar month) subject to satisfaction of the following conditions:

 

(i)            at the time of making of such request and at the time a withdrawal is to be made, no Acceleration Event shall have occurred and be continuing;

 

(ii)           the Capital/FF&E Expenditures that are the subject of the disbursement request were identified in an Approved Capital/FF&E Expenditures Budget or are otherwise approved in writing by Agent (which approval shall not be unreasonably withheld, conditioned or delayed), except with respect to Capital/FF&E Expenditures made on account of an emergency;

 

(iii)          except in the case of an emergency, Loan Parties (or Property Manager) shall have delivered to Agent, if a Cash Sweep Condition is then in effect, a written request for the withdrawal at least ten (10) Business Days prior to the date requested for the withdrawal, which shall include (x) a certificate of a duly authorized officer of Loan Parties certifying as to the matters set forth in the preceding clauses (i) through (iii) above, (y) invoices or bills for the payment of the Capital/FF&E Expenditures which are the subject of such withdrawal request, and (z) the total amount of the requested withdrawal.

 

Notwithstanding anything set forth herein to the contrary, subject to the terms of the Manager SNDA, so long as the Management Agreement (or a replacement management agreement with Hilton or any Affiliate thereof) is in effect, Manager shall have the right

 

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to use funds in the “Capital Renewals Reserve” and “Capital Renewals Account” in accordance with the Management Agreement.

 

Section 3.5            Security Interest in Accounts.  Loan Parties hereby grant to Agent a security interest in all rights of Loan Parties in and to the Accounts and all sums on deposit therein.  Loan Parties shall cause all banks or financial institutions other than Agent which are holding any Account to execute and deliver to Agent an Account Agreement with respect to such Account.  Subject to the rights of Loan Parties (or Property Manager) expressly set forth herein to make withdrawals from the Accounts, and subject to the Manager SNDA, Loan Parties hereby acknowledge and agree that Agent shall have sole dominion and control of the Accounts as more particularly described in the Account Agreements.  Loan Parties shall not close any Account without obtaining the prior written consent of Agent, or to the extent that such closed Account is not immediately replaced with another Account which shall be subject to a security interest in favor of Agent, the Requisite Lenders.  Loan Parties shall not open any Account other than the Accounts open as of the Closing Date (whether in substitution of another Account or otherwise) (a) without delivering to Agent at least ten (10) Business Days prior notice of Loan Parties’ intention to open a new Account and (b) unless, (i) the bank or other financial institution at which such Account is to be opened is reasonably acceptable to Agent and (ii) prior to the opening of such Account, Loan Parties shall have delivered to Agent an Account Agreement with respect to such Account.  Loan Parties shall maintain the Accounts and shall pay all fees and charges payable to the depository bank with respect thereto when due, and shall keep in full force and effect the Account Agreement with respect thereto.  All interest earned on amounts deposited in any Accounts shall be re-deposited therein and become part thereof.  No funds in any Account may be commingled with any other funds of Loan Parties, Property Manager, any Affiliate of Loan Parties or Property Manager or with any other Person or with any funds contained in any other Account; provided, that, the funds in any Account held by Agent, may be commingled with the general funds of Agent.  Agent shall not be liable for any loss of interest on or any penalty or charge assessed against the funds in, payable on, or credited to any Account as a result of the exercise by Agent of any of its rights, remedies or obligations under any of the Loan Documents.  All sums held in the Accounts shall constitute additional security for the Obligations.  At any time following the occurrence and during the continuance of an Event of Default, Agent may (at the direction of the Requisite Lenders) apply such sums (except with respect to the Tenant Security Account) as set forth in Section 7.5, subject to the Manager SNDA.

 

Section 3.6            Letters of Credit.

 

(a)           Each Letter of Credit (other than a Lease Letter of Credit) delivered to Agent in accordance with this Loan Agreement shall be held by Agent subject to the terms and conditions of this Loan Agreement and this Section 3.6.

 

(b)           Neither Loan Parties nor the applicant/obligor under any Letter of Credit shall be entitled to draw upon any such Letter of Credit.  If a Loan Party shall, at any time, receive notice that the bank issuing such Letter of Credit has ceased to be an Approved Bank, such Loan Party shall within twenty (20) Business Days after receipt of such notice replace such Letter of Credit with another Letter of Credit in the same amount as the replaced Letter of Credit, which new Letter of Credit shall be issued by a bank that is an Approved Bank.  Agent shall

 

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reasonably cooperate with Loan Parties to cause any such Letter of Credit to be cancelled timely so that any collateral securing such Letter of Credit may be used to issue the replacement Letter of Credit.

 

(c)           Each Letter of Credit delivered by or on behalf of a Loan Party under this Loan Agreement shall be additional security for the payment of the Obligations so long as such Letter of Credit continues to be held by Agent in accordance with this Loan Agreement.  Upon the occurrence and during the continuance of an Event of Default, Agent shall have the right, at its option, to draw on any such Letter of Credit and to apply the proceeds thereof to payment of the Obligations in such order, proportion or priority as Agent may determine.  Any such application to the Obligations after an Event of Default which occurs prior to the Par Prepayment Date shall be subject to the Spread Maintenance Premium (if prior to the Permitted Prepayment Date) or the Prepayment Fee (if on or after the Permitted Prepayment Date but prior to the Par Prepayment Date), as applicable, to the extent of the principal reduction and further, only to the extent that in such circumstances the Prepayment Fee or the Spread Maintenance Premium, as the case may be, would otherwise be payable under the terms of this Loan Agreement.  Each Letter of Credit not previously returned to a Loan Party in accordance with the terms of this Loan Agreement shall be returned to such Loan Party promptly after repayment of the Obligations (other than Contingent Obligations), (or with respect to a repayment of the Obligations where the Appraised Value (as set forth in an Appraisal which is not dated more than thirty (30) days prior to the date of such repayment) is less than the Obligations (other than Contingent Obligations), one hundred (100) days after such prepayment).

 

(d)           In addition to any other right Agent may have to draw upon a Letter of Credit pursuant to the terms and conditions of this Loan Agreement, Agent shall have the additional rights to draw in full any Letter of Credit (unless such Letter of Credit is required to be re-delivered to a Loan Party under the other terms of this Loan Agreement):  (i) with respect to any evergreen Letter of Credit, if Agent has received a notice from the issuing bank that such Letter of Credit will not be renewed and a substitute Letter of Credit is not provided at least ten (10) days prior to the date on which such Letter of Credit is scheduled to expire; (ii) with respect to any Letter of Credit with a stated expiration date, if Agent has not received a notice from the issuing bank that it has renewed such Letter of Credit at least ten (10) days prior to the date on which such Letter of Credit is scheduled to expire and a substitute Letter of Credit is not provided at least ten (10) days prior to the date on which such outstanding Letter of Credit is scheduled to expire; (iii) upon receipt of notice from the issuing bank that any Letter of Credit will be terminated and has not been replaced within ten (10) days of such notice; (iv) if Agent has received notice that the bank issuing such Letter of Credit shall cease to be an Approved Bank and Loan Parties shall not have replaced such Letter of Credit with a Letter of Credit issued by an Approved Bank within twenty (20) Business Days after notice thereof; or (v) if either Loan Party shall become a debtor in a Bankruptcy Proceeding within ninety (90) days after the prepayment of all or any portion of the Loan.  Notwithstanding anything to the contrary contained in the above, Agent is not obligated to draw any Letter of Credit upon the happening of an event specified in (i), (ii), (iii), (iv) or (v) above and shall not be liable for any losses sustained by Loan Parties due to the insolvency of the bank issuing any Letter of Credit if Agent has not drawn such Letter of Credit.

 

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(e)                                  This Section 3.6 shall not apply or govern with respect to any Lease Letters of Credit.

 

ARTICLE IV

 

CONDITIONS PRECEDENT TO THE
 EFFECTIVENESS OF THIS LOAN AGREEMENT

 

This Loan Agreement shall not be effective until the following conditions shall have been satisfied, except to the extent that Agent may elect (which election may be made without written or express notice of such waiver) to irrevocably waive any such conditions:

 

Section 4.1                                   Representations and Warranties.  The representations and warranties made by Loan Parties and Guarantor in the Loan Documents and in any certificate, document, or financial or other statement furnished by Loan Parties or Guarantor pursuant to or in connection therewith, shall be true and correct in all material respects on and as of the Closing Date.

 

Section 4.2                                   Closing Documents, Etc.  Agent shall have received fully executed and, where appropriate, acknowledged counterparts of this Loan Agreement, each of the other Loan Documents and all other documents, agreements, instruments, certificates and other items which are expressly required under the Loan Documents or Agent shall otherwise require, each of which shall be dated as of the Closing Date, unless otherwise expressly stated (all of which shall be in such form, substance and content as Agent shall require).

 

Section 4.3                                   Payment of Fees and Expenses.  Agent and Lenders shall have received payment of all fees and expenses required to be paid pursuant to the Loan Fee Letter, this Loan Agreement or the other Loan Documents, including Section 6.14.

 

Section 4.4                                   No Default or Event of Default.  No Default or Event of Default shall have occurred and be continuing.

 

Section 4.5                                   No Casualty or Taking.  No Casualty shall have occurred to any portion of the Premises.  No Taking of any portion of the Premises or any modification, realignment or relocation of any streets or roadways abutting the Premises or denial of access to the Premises, from any point of access (public or private), shall have occurred or be threatened or pending.

 

Section 4.6                                   Financial Statements.  Loan Parties shall have delivered to Agent such balance sheets and other financial statements of Loan Parties and Guarantor as Agent and/or any Lender may reasonably request.

 

Section 4.7                                   Loan-To-Value.  Agent shall have confirmed in accordance with its internal underwriting criteria and standards that the Loan-to-Value Ratio shall not exceed sixty five percent (65%).

 

Section 4.8                                   Compliance with Other Conditions.  Loan Parties and Guarantor shall have complied fully with all other conditions to funding set forth in the Term Sheet.

 

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Section 4.9                                   Other Documents.  Loan Parties shall have delivered to Agent such other documents, instruments, opinions, reports, estoppel certificates and approvals as Agent or Agent’s Counsel shall have requested.

 

Section 4.10                            Adverse Conditions; Internal Approval.  Agent shall be satisfied that there has been no material disruption or material adverse change in financial, banking or capital market conditions that could materially impair the sale or syndication of the Loan and that there has been no outbreak or escalation of hostilities involving the United States or the declaration by the United States of a national emergency or war, and shall have received all internal underwriting approvals to make the Loan and otherwise pertaining to Loan Parties and all other relevant parties.

 

The conditions precedent in this Article IV shall be deemed satisfied or waived upon the authorization of Agent and Lenders to release the Loan proceeds from the closing escrow established among Agent, Loan Parties and the Title Company.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES

 

To induce Lenders to make the Loan and to induce Lenders and Agent to enter into this Loan Agreement and to perform Lenders’ and Agent’s obligations hereunder, Loan Parties hereby represent and warrant to Agent and Lenders as follows as of the date hereof (which representations and warranties shall survive (but shall not be re-made or deemed to be made or re-made after the date hereof) the execution and delivery of this Loan Agreement and the other Loan Documents, regardless of any investigation made by Agent or Lenders or on its or their behalf), except to the extent (if any) disclosed on Schedule 5 hereto with reference to a specific Section of this Article V:

 

Section 5.1                                   Due Organization.  Each Loan Party is duly organized and validly existing under the laws of the state of its formation and duly qualified to do business in the state where the Premises are located.  Each Loan Party has all necessary limited liability company power and authority to own or lease the Mortgaged Property and to conduct its business as presently conducted and to enter into and perform its obligations under this Loan Agreement and the other Loan Documents to which it is a party, and all other agreements and instruments to be executed by Loan Parties, in connection herewith and therewith.  Attached to the Loan Parties’ Certificate is a true and correct organizational chart of Loan Parties as of the Closing Date as to the entities shown thereon.

 

Section 5.2                                   Due Execution.  This Loan Agreement and the other Loan Documents to which each Loan Party is a party have been duly executed and delivered, and all necessary actions have been taken to authorize each Loan Party to perform its obligations hereunder and thereunder.

 

Section 5.3                                   Enforceability.  This Loan Agreement and the other Loan Documents to which each Loan Party is a party constitute legal, valid and binding obligations of

 

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each Loan Party, subject to principles of equity, bankruptcy, insolvency and other laws generally affecting creditors’ rights and enforcement of debtors’ obligations.

 

Section 5.4                                   No Violation.  The consummation of the transactions herein contemplated, the execution and delivery of this Loan Agreement, the other Loan Documents to which each Loan Party is a party, and all other agreements and instruments to be executed by each Loan Party in connection herewith and therewith, and the performance by each Loan Party of its obligations hereunder and thereunder, do not and will not (a) violate any Legal Requirement currently in effect, (b) result in a breach of any of the terms, conditions or provisions of, or constitute a default under any mortgage, deed of trust, indenture, agreement, permit, franchise, license, note or instrument to which each Loan Party is a party or by which it or any of its properties is bound to the extent that any such breach is reasonably likely to result in a Material Adverse Effect, (c) result in the creation or imposition of any lien, charge or encumbrance of any nature whatsoever upon any of the assets of either Loan Party or any Guarantor (except as contemplated by this Loan Agreement and by the other Loan Documents) or (d) violate any provision of any organizational documents of either Loan Party.  Neither Loan Party is in default with respect to any Legal Requirement currently in effect relating to its formation or organization.

 

Section 5.5                                   No Litigation.  There are no actions, suits or proceedings at law or in equity or before or instituted by any Governmental Authority pending to which each Loan Party or any Guarantor is a party, or, to either Loan Party’s actual knowledge, threatened (in writing), against or affecting either Loan Party, Guarantor, the Premises, the Collateral or any material part thereof (including any condemnation or eminent domain proceeding against the Premises, or any part thereof) which is reasonably likely to result in a Material Adverse Effect.

 

Section 5.6                                   No Default or Event of Default.  No Default or Event of Default has occurred and is continuing.

 

Section 5.7                                   Offsets, Defenses, Etc.  Neither Loan Party has an offsets, defenses or counterclaims against its obligations under the Loan Documents as of the Closing Date, any and all such offsets, defenses and counterclaims, if any, being waived by Loan Parties.

 

Section 5.8                                   Consents.  All consents, approvals, orders or authorizations of, or registrations, declarations or filings with, or other actions with respect to or by, any Governmental Authorities or any party to any Permitted Encumbrance that are required in connection with the valid execution, delivery and performance by Loan Parties of this Loan Agreement and the other Loan Documents have been obtained and are in full force and effect.

 

Section 5.9                                   Financial Statements and Other Information.  All statements of financial condition and related schedules of Loan Parties and Guarantor heretofore delivered to Agent or any Lender (when taken together) are true, correct and complete in all material respects, fairly present the financial conditions of the subjects thereof as of the respective dates thereof and have been prepared in accordance with Applicable Accounting Standards.  No material adverse change has occurred in the financial conditions reflected in the most recent of the aforesaid statements of financial condition and related schedules since the respective dates thereof.  Neither the aforesaid statements of financial condition and related schedules nor any 

 

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written certificate, statement, document or information furnished to Agent, any Lender, Agent’s Counsel or to any other Person at the request of Agent or any Lender by or on behalf of Loan Parties or any Affiliate of Loan Parties in connection with or related to the transactions contemplated hereby, when taken together, nor any representation nor warranty in this Loan Agreement or any other Loan Document, when taken together, contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein not materially misleading in light of the circumstances under which it was furnished.  Notwithstanding anything herein to the contrary, no representation or warranty is made with respect to any projections made by or on behalf of Loan Parties or Property Manager in respect of the Premises, Loan Parties or any Sponsor other than that such projections have been made by Loan Parties in good faith.

 

Section 5.10                            Full Disclosure.  To Loan Parties’ actual knowledge, there is no material fact pertaining to Loan Parties, Sponsor, the Premises or the Collateral known to Loan Parties that Loan Parties have not disclosed to or is not known by Agent that is reasonably likely to result in a Material Adverse Effect.

 

Section 5.11                            Accounts.  All Accounts of Loan Parties or of any other Person, held on behalf of or for the benefit of Loan Parties which are required to be established pursuant to this Loan Agreement or any other Loan Document and which are not held at or by Agent, including the account number of each Account and the name and address of the financial institution at which each Account is held, are as set forth on Schedule 5.11 attached hereto.  Loan Parties have no other Accounts except those held at Agent and those set forth on said schedule.

 

Section 5.12                            Indebtedness.  Loan Parties are not currently indebted or in contract for any Indebtedness, and are not otherwise liable in respect of any Indebtedness, other than Permitted Indebtedness and are not holding out their credit as being available to satisfy the obligations of any other Person.

 

Section 5.13                            Insurance Policies.  The Insurance Policies required to be maintained pursuant to this Loan Agreement are in full force and effect.

 

Section 5.14                            Availability of Utilities and Access. All utility services and facilities necessary for the current operation, use and occupancy of the Premises are available at the boundaries of the Premises, including water supply, storm and sanitary sewer facilities, gas and electric and telephone facilities.  The Premises have direct physical access to and from at least one public road.

 

Section 5.15                            No Liens.  Except for the Loan Documents and Permitted Encumbrances, Loan Parties have not made, assumed or been assigned any contract or arrangement of any kind, the performance of which by the other party thereto would give rise to a Lien against all or any portion of the Collateral.  There exists no Lien on any direct or, with respect to holders of indirect interests equal to or greater than twenty percent (20%), indirect equity or beneficial interest in Loan Parties, other to the extent of Liens which constitute Permitted Encumbrances and/or Permitted Transfers.

 

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Section 5.16                            Compliance with Legal Requirements.  The Legal Requirements, including zoning ordinances and regulations, permit the current operation, use and occupancy of the Premises in all material respects.  All Operating Permits for the existing use and operation of the Premises have been obtained and are in full force and effect, except those Operating Permits (if any) the failure of which to possess would not be reasonably likely to result in a Material Adverse Effect and all conditions to the continued effectiveness of such permits have been satisfied in all material respects, except to the extent that the failure to comply is not reasonably likely to have a Material Adverse Effect.  There are no pending or, to Loan Parties’ actual knowledge, threatened (in writing) actions, suits or proceedings to revoke, attach, invalidate, rescind or modify the ordinances and regulations currently in effect and to which the Premises or any of the Operating Permits as currently existing are subject, in each case, to the extent that any such revocation, attachment, invalidation, rescission or modification is reasonably likely to have a Material Adverse Effect.  Loan Parties, the Premises and the existing uses thereof comply in all material respects with all Legal Requirements, including all applicable zoning ordinances and regulations and building codes.

 

Section 5.17                            Certain Agreements.  Each Loan Party has delivered to Agent true, correct and complete copies of any unrecorded Permitted Encumbrances, the Management Agreement and the Premises Documents.  No default or failure of performance in any material respect by Loan Parties exists under the Management Agreement, any Material Operating Agreement in effect as of the Closing Date, the Premises Documents or any Permitted Encumbrance, and each of said documents is in full force and effect.  To Loan Parties’ knowledge, there are no offsets, claims or defenses to the enforcement by Loan Parties of the Management Agreement, the Premises Documents, any Material Operating Agreement or Permitted Encumbrance presently outstanding and Loan Parties have not received a notice of default under the Management Agreement, the Premises Documents, any Material Operating Agreement or any Permitted Encumbrance, in each case, which is reasonably likely to result in a Material Adverse Effect.  No Material Operating Agreement, Premises Document or unrecorded Permitted Encumbrance contains any option to purchase or right of first refusal to purchase the Mortgaged Property or any part thereof.  There are no Operating Agreements which are Material Operating Agreements except those set forth on Schedule 5.17 attached hereto.  The Management Agreement is in full force and effect and is valid and enforceable.  Neither the Premises Documents nor the Management Agreement, if any, has been amended, modified, terminated, assigned or otherwise changed, or the provisions thereof waived by Loan Parties, except as permitted hereunder.  To Loan Parties’ knowledge, no default exists and no grounds for termination by Loan Parties or any other party to the Premises Documents or the Management Agreement exists and no event exists which, with the giving of notice or passage of any cure period, or both, would constitute a default thereunder or give rise to any right of any party thereto to terminate same.  To Loan Parties’ knowledge, there are no offsets, claims or defenses to the enforcement by Loan Parties of the Management Agreement, if any.  Except as set forth in the limited liability company agreement of Loan Parties, the Management Agreement and the Manager SNDA, taken together, represent the entire agreement between Loan Parties and Property Manager with respect to the management of the Premises, and there are no other agreements or representations, written or oral, between Loan Parties and Property Manager with respect to thereto.  The Management Agreement, if any, does not contain any option to purchase or right of first refusal to purchase the Mortgaged Property or any part thereof.

 

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Section 5.18                            Security Documents.  The provisions of each Security Document are effective to create, in favor of Agent for the benefit of itself and Lenders, a legal, valid and enforceable Lien on or security interest in all of Loan Parties’ right, title and interest of Loan Parties  in the collateral described therein, to the extent a Lien or security interest can be created therein (it being acknowledged and agreed to by Agent and Lenders that no representation or warranty is made with respect to any collateral description purporting to cover “all assets” or “all personal property” of any Person, or using similar language) under the governing law specified in such Security Document, and when the appropriate recordings and filings have been effected in public offices, each of the Security Documents will create a perfected Lien on and security interest in all right, title, estate and interest in the collateral described therein, prior and superior to all other Liens to the extent perfection can be achieved by such recording and filing, subject to the Permitted Encumbrances except as permitted under the Loan Documents.

 

Section 5.19                            Casualty and Taking.  No Casualty has occurred to any portion of the Premises that has not been repaired.  No Taking of any portion of the Premises, or modification, realignment or relocation of any streets or roadways abutting the Premises or denial of access to the Premises from any point of access (public or private), has occurred or is pending,  or, to Loan Parties’ knowledge, has been threatened in writing.

 

Section 5.20                            Brokerage.  Loan Parties have not dealt with any brokers or “finders” in connection with the Loan other than Eastdil Secured Broker Services, Inc. and Chatham Financial Corp.

 

Section 5.21                            Encroachments.  Other than as disclosed on the Survey, the Premises do not encroach upon any building line, setback line, side yard line, any Permitted Encumbrance or any other recorded easement or any visible easement or other easement of which Loan Parties are aware, except in the case of immaterial encroachments which are either permitted pursuant to the Permitted Encumbrances currently in effect or are affirmatively insured over in the Title Policy, or encroach over any property line of the Land.

 

Section 5.22                            Foreign Person.  Neither Loan Party is a “foreign person” within the meaning of Section 1445 or 7701 of the IRC.

 

Section 5.23                            Control Person.  Neither Loan Party is, and no Person having “control” (as that term is defined in 12 U.S.C. § 375b or in regulations promulgated pursuant thereto) of either Loan Party is, an “executive officer,” “director,” or “person who directly or indirectly or in concert with one or more persons, owns, controls, or has the power to vote more than ten percent (10%) of any class of voting securities” (as those terms are defined in 12 U.S.C. § 375b or in regulations promulgated pursuant thereto) of any Lender, of a bank holding company of which any Lender is a subsidiary, or of any other subsidiary of a bank holding company of which any Lender is a subsidiary.

 

Section 5.24                            Government Regulation.  Neither Loan Party is an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940.  Neither Loan Party is engaged principally, or as one of its important activities, in the business of extending, or arranging for the extension of, credit for the purpose of “purchasing or carrying any margin stock,” within the meaning of Regulation U of 

 

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the Board of Governors of the Federal Reserve System.  No portion of the assets of either Loan Party consists of any such margin stock, and no part of the proceeds of the Loan shall be used to purchase or carry any such margin stock within the meaning of said regulation or to extend credit to others for such purpose.

 

Section 5.25                            ERISA.  None of the assets of either Loan Party constitute or, as long as any Obligations remain outstanding, will constitute “Plan Assets” of one or more such plans within the meaning of 29 C.F.R. § 2510.3-101, as modified by Section 3(42) of ERISA; and neither Loan Party is nor, as long as any Obligation remains outstanding, will it be a “governmental plan” within the meaning of § 3(3) of ERISA.  Each Pension Plan is in compliance in all material respects with all applicable provisions of ERISA, the IRC and other requirements of applicable law.  There has been no, nor is there reasonably expected to occur any, ERISA Event that could reasonably be expected to, alone or in the aggregate with all other ERISA Events, result in material liability to Loan Parties.  Neither Loan Parties nor any ERISA Affiliate has incurred any Withdrawal Liability as a result of a complete withdrawal as of the date hereof from any Multiemployer Plan.

 

Section 5.26                            Labor Relations.  Neither Loan Party is a party to any collective bargaining agreement other than (i) the Agreement between Borrower and the International Union of Operating Engineers Local 501 dated as of September 1, 2010 and (ii) the Agreement between Borrower and Unite Here Local #30 effective as of February 3, 2010.  There are no material grievances, disputes or controversies with any union or any other organization of employees at the Premises, including employees of Loan Parties, or threats of strikes, work stoppages or any asserted pending demands for collective bargaining by any union or organization.

 

Section 5.27                            Name; Principal Place of Business.  Except as set forth in Section 5.28, Loan Parties do not use nor will Loan Parties use any trade name and have not done nor will it do business under any name other than Loan Parties’ actual names set forth herein.  The principal place of business of Loan Parties is as stated in the first paragraph of this Loan Agreement.

 

Section 5.28                            Intellectual Property.  Loan Parties shall notify Agent of any trademark (other than “The Hilton San Diego Bayfront Hotel”) used by Loan Parties in connection with the Premises.  Agent may make any filing, at Loan  Parties’ sole cost and expense, with the United States Patent and Trademark Office or otherwise in order to obtain and perfect a security interest in such trademarks which are owned by Loan  Parties.  To Loan Parties’ knowledge, there exists no claim by any Person that contests or questions Loan Parties’ right to use all applicable patents, trademarks, copyrights, technology, know-how and processes necessary for the conduct of the business and the operation of the Premises by Loan Parties or Property Manager substantially in the manner currently conducted and operated.  To Loan Parties’ knowledge, there are no claims and there is no infringement of the rights of any Person, arising from the use of such patents, trademarks, copyrights, technology, know-how and processes by Loan Parties.  To Loan Parties’ knowledge, there is no infringement by any third party on any rights of Loan Parties in any of their intellectual property.  No name or logo used by Loan Parties in connection with the Premises or any part thereof or business therein is a 

 

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registered tradename or trademark, other than the intellectual property licensed or used by Property Manager or tradenames or trademarks registered by Loan Parties.

 

Section 5.29                            Flood Zone.  Other than as disclosed on the Survey or in any flood hazard certificate delivered to Agent, neither the Premises nor any portion thereof is located within an area that has been designated or identified as an area having special flood hazards by the Secretary of Housing and Urban Development of the United States or by such other official as shall from time to time be authorized by federal or state law to make such designation pursuant to the National Flood Insurance Act of 1968, as such act may from time to time be amended, or pursuant to any other national, state, county or city program of flood control.

 

Section 5.30                            Taxes.  All material tax returns required to be filed by Loan  Parties in any jurisdiction have been filed and all material taxes, assessments, fees, and other governmental charges upon Loan  Parties or upon any of its properties, income or franchises have been paid that are required to be paid prior to the time that the non-payment of such taxes could give rise to a lien on any asset of Loan  Parties, unless such tax, assessment, fee or charge is being contested in accordance with Section 6.8 hereof.  To Loan  Parties’ knowledge, there is no material proposed tax assessment against the Premises which are in addition to those assessments currently affecting the Premises or any basis for such new assessment which is material and not being contested in good faith by Loan  Parties through appropriate proceedings after the establishment of appropriate reserves therefor with Agent’s approval.  The Land is separately assessed from all other adjacent land for purposes of real estate taxes, and for all purposes may be dealt with as an independent parcel.

 

Section 5.31                            Title.  Borrower has a good, marketable and indefeasible leasehold estate in the real property comprising the Mortgaged Property and Operating Lessee has a good, marketable and indefeasible sub-leasehold estate in the real property comprising the Mortgaged Property,  in each case  subject to no Liens or encumbrances other than the Permitted Encumbrances.  Each Loan Party owns its Personal Property free and clear of all Liens and encumbrances other than Permitted Encumbrances.

 

Section 5.32                            Creditworthiness.  Both before and immediately after entering into each of the Loan Documents to which it is a party, Loan  Parties are  able to pay their debts and other obligations when due and has a positive net worth.

 

Section 5.33                            Patriot Act.  Neither Loan Parties nor, any Persons holding any legal or beneficial interest in Loan Parties, whether directly or indirectly:  (a) appear on any Government List; (b) are included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to any of the Persons referred to or described in any Government List; (c) to Loan Parties’ knowledge, have conducted business with or engaged in any transaction with any Person named on any Government List or any Person included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to any of the Persons referred to or described in any Government List in contravention of applicable Legal Requirements; (d) are Persons who have been determined by competent authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of OFAC or in any enabling legislation or other 

 

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Presidential Executive Orders in respect thereof; (e) have been previously indicted for or convicted of any felony involving a crime or crimes or moral turpitude or for Patriot Act Offense; or (f) are currently under investigation by any Governmental Authority for alleged criminal activity.  Borrower is the ultimate beneficiary of the Loan.

 

Section 5.34                            Leases.  A true, correct and complete copy (in all material respects) of the most recent rent roll for the Leases in effect for the Premises as of the Closing Date is attached to Loan Parties’ Certificate (such rent roll and any rent roll for the Premises subsequently delivered to Agent, a “Rent Roll”).  As of the Closing Date, there are no Leases with respect to the Premises other than the Leases that are set forth on the Rent Roll which is attached to the Loan Parties’ Certificate.  Except as set forth on the Rent Roll or any estoppels:  (a) each Lease is in full force and effect; (b) all Rents due and payable under the Leases have been paid and no portion of any Rent has been paid for any period more than thirty (30) days in advance; (c) the fixed rent payable under each Lease is the amount of fixed rent set forth in the Rent Roll, and, to Loan Parties’ actual knowledge, there is no claim or basis for a claim by the Lessee thereunder for an adjustment to such fixed rent; (d) no Lessee has made any material written claim against Loan Parties or Property Manager that remains outstanding that either Loan Party is in default under its applicable Lease; (e) no material default has occurred by Loan Parties or, to Loan Parties’ actual knowledge, any Lessee under any Lease, and no event which, with the giving of notice or passage of time, or both, would constitute a material default under any Lease by Loan Parties or, to Loan Parties’ actual knowledge, any Lessee, has occurred; (f) each Lease is the valid, binding and enforceable obligation of Loan Parties, as applicable and, to Loan Parties’ actual knowledge, the applicable Lessee thereunder; (g) all Security Deposits under the Leases are as set forth on the Rent Roll and are held pursuant to Section 3.3 and Loan Parties and Property Manager, if any, are in compliance with all Legal Requirements in all material respects with respect to all Security Deposits; (h) no use restriction contained in any Lease, Permitted Encumbrance or Premises Document is violated by any use permitted under any other Lease, any Permitted Encumbrances or any Premises Document where such violation is reasonably likely to result in a Material Adverse Effect; (i) no Lease contains any option to purchase or right of first refusal to purchase the Premises or any part thereof; (j) to Loan Parties’ actual knowledge, no Lease has been assigned or sublet by any tenant to any Person; and (k) to Loan Parties’ knowledge, no Lessee has (i) consented to the appointment of a conservator, receiver, trustee, custodian or liquidator in any insolvency, readjustment of debt, marshalling of assets and liabilities or similar proceedings of or relating to it or of or relating to all, or substantially all, of its property, or for the winding-up or liquidation of its affairs, (ii) admitted in writing its inability to pay its debts generally as they become due, (iii) filed a petition, or otherwise instituted, or consented to the institution against it, of proceedings to take advantage of any law relating to bankruptcy, insolvency or reorganization or the relief of debtors, (iv) made an assignment for the benefit of its creditors or (v) suspended payment of its obligations.  Nothing in this Section 5.34 shall apply or extend to the Ground Lease or Operating Lease.

 

Section 5.35                            Special Purpose Entity.  Each Loan Party is a Single Purpose Entity and has been a Single Purpose Entity since its formation.

 

Section 5.36                            Intentionally Deleted.

 

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Section 5.37                            Ground Lease.(a)   Recording; Modification.  A memorandum of ground lease has been duly recorded (or shall be recorded at closing prior to the recordation of the Deed of Trust).  The Ground Lease permits the interest of Borrower thereunder to be encumbered by a mortgage.

 

(b)                                 No Liens.  Except for the Permitted Encumbrances, Borrower’s interest in the Ground Lease is not subject to any Liens or encumbrances superior to, of equal priority with, or subordinate to the Deed of Trust.

 

(c)                                  Default.  As of the date hereof, the Ground Lease is in full force and effect, there is no default on the part of Borrower thereunder and, to Borrower’s knowledge, (i) no default on the part of Ground Lessor exists thereunder and (ii) there is no existing condition which, but for the passage of time or the giving of notice, would result in a default by Borrower under the terms of the Ground Lease.  Neither Borrower nor Ground Lessor has commenced any action or given or received any notice for the purpose of terminating the Ground Lease.

 

ARTICLE VI

 

GENERAL AND OPERATIONAL COVENANTS

 

Section 6.1                                   Financial Statements, Reports and Documents of Loan Parties.  Loan Parties shall deliver to Agent each of the following:

 

(a)                                  Annual Financial Statements.  Within one hundred and twenty (120) days after the close of each fiscal year of Loan Parties, financial statements of Loan Parties for such period, which shall include a detailed balance sheet, statement of operations (income and expenses), statement of cash flow and statement of changes in members’ or partners’ capital or shareholder’s equity, as applicable, and contingent liability schedule in form reasonably acceptable to Agent, prepared in accordance with Applicable Accounting Standards.  Such financial statements shall be certified by Loan Parties as being true, correct and complete in all material respects and fairly presenting the financial position of Loan Parties as of the date of such statement and audited by and accompanied by an opinion thereon by an independent certified public accounting firm selected by Loan Parties and reasonably acceptable to Agent, which audit shall be unqualified as to the scope of audit and state that such financial statements were prepared in accordance with Applicable Accounting Standards, and that the examination of such accounting firm in connection with such financial statements has been made in accordance with generally accepted auditing standards (provided that, the annual financial statements of Loan Parties shall not be required to be audited if (i) the annual financial statements of such Loan Parties are audited in connection with the audit of the REIT’s annual financial statements and (ii) the annual financial statements of the REIT are delivered to Agent within one hundred and twenty (120) days after the close of its fiscal year).

 

(b)                                 Quarterly Financial Statements.

 

(i)                                     Within forty five (45) days after the end of each Calendar Quarter (other than the Calendar Quarter ending December 31st of any year), Loan Parties shall deliver (or shall cause Property Manager to deliver) to Agent:

 

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(A)                              a rent roll containing the names of all Lessees, the term and expiration date of their respective Leases, the space occupied, the rents payable and the Security Deposits, if any, thereunder, and the name of any Lease guarantor thereof;

 

(B)                                the balance sheet of Loan Parties prepared in accordance with Applicable Accounting Standards and certified by Loan Parties as being true, correct and complete in all material respects and fairly presenting the financial position of Loan Parties as of the date of such statement;

 

(C)                                statement of operations (income and expenses);

 

(D)                               statement of cash flow; and

 

(E)                                 a comparison of the balance sheet and statement of operations to the to the applicable Calendar Quarter of the then  previous year.

 

Each of the foregoing items shall be certified by Loan Parties (or Property Manager) as being true, correct and complete in all material respects and the items described in clauses (B), (C) and (D) shall be prepared in accordance with Applicable Accounting Standards.

 

(c)                                  Compliance Certificate.  Within forty five (45) days after the end of each of the Calendar Quarters in any fiscal year of Loan Parties, a certificate (a “Quarterly Compliance Statement”) executed by Loan Parties which certificate shall (i) set forth the Adjusted Debt Service Coverage Ratio as of the Testing Determination Date occurring as of the end of such Calendar Quarter (together with the calculation thereof), (ii) set forth the Debt Service Coverage Ratio as of the Testing Determination Date occurring as of the end of such Calendar Quarter (together with the calculation thereof), (iii) certify that to the knowledge of Loan Parties, no Event of Default shall exist as of the date of such statement, and, if so, stating the facts with respect thereto, and (iv) contain such other statements pertaining to the operations of the Premises as Agent may reasonably request.

 

(d)                                 Notices by Governmental Authorities.  Promptly upon Loan Parties’ receipt of same, true and complete copies of any official written notice, claim or complaint by any Governmental Authority pertaining to Loan Parties, Property Manager or Guarantor, the Premises, the Collateral, Loan Parties’ rights under any Permitted Encumbrance or any Operating Permit obtained by Loan Parties, in each case, which is reasonably likely to have a Material Adverse Effect, including any written notice from a public authority concerning any tax or special assessment, or any notice of any alleged violation of any zoning ordinance and any written notice of any Taking or other eminent domain action or proceeding affecting or threatened in writing against any portion of the Premises.

 

(e)                                  Annual Budgets.  No later than December 31st of each calendar year, a copy of the preliminary operating and capital expense budget for the Premises for the following calendar year.  No later than March 31st of each calendar year, Loan Parties shall deliver to Agent a copy of the final operating and capital expense budget for the Premises for such calendar year.

 

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(f)                                    Monthly Reports. As soon as practical, but in any event no later than thirty (30) days after the end of each calendar month, Loan Parties shall deliver (or cause Property Manager to deliver) (w) a monthly operating statement of the Premises which statement shall (1) reflect the cash flow and operations of the Premises for such calendar month and on a year-to-date basis and (2) set forth the Gross Revenues, FF&E Gross Revenues, Operating Expenses, required deposits into the Capital/FF&E Reserve Account and Cash Collateral Payment Amount, if any, for such calendar month, (x) the Smith Travel Research STAR report for the Premises for such month, (y) the monthly Ground Lease rent credit reconciliation prepared by Property Manager for such calendar and (z) the monthly Ground Lease rent calculation prepared by Property Manager for such calendar month.

 

(g)                                 Management.  Except as otherwise set forth in Section 6.1(h), contemporaneous with Loan Parties’ receipt or giving of same, a copy of all financial statements and reports provided to or by Loan Parties pursuant to the Management Agreement and any material notice or other material written communication (other than communications subject to a joint defense and communication agreement) given under, pursuant to or in connection with the Management Agreement.

 

(h)                                 Notification by Loan Parties.  The following notifications:

 

(i)                                     promptly upon Loan Parties’ learning thereof, any litigation or proceeding before any Governmental Authority or any mediation or arbitration with respect to Loan Parties, Guarantor, the Premises, the Collateral, Loan Parties’ rights under any Permitted Encumbrance, or any license, permit or approval obtained by Loan Parties or the Liens securing the Obligations, in each case, provided same is reasonably likely to have a Material Adverse Effect, including any challenge to or appeal of any Operating Permit or zoning applicable to the Premises, specifying the nature and status thereof, and any material determinations in all such litigation, proceedings, mediations and arbitrations to the extent an unfavorable ruling in such litigation, proceeding, arbitration or mediation is reasonably likely to have a Material Adverse Effect;

 

(ii)                                  within ten (10) Business Days after Loan Parties’ learning thereof, of any acceleration of any material Indebtedness of Loan Parties;

 

(iii)                               within ten (10) Business Days after the occurrence thereof, of any name change or change in fiscal year of Loan Parties;

 

(iv)                              promptly upon the occurrence thereof, a copy of any material amendment to any organizational document of Loan Parties, and promptly following Agent’s request (not to be made more frequently than twice per fiscal year of Loan Parties), a list or organizational chart of the owners of direct or indirect beneficial and equitable interests in Loan Parties in the form and scope attached to the Loan Parties’ Certificate;

 

(v)                                 promptly upon Loan Parties’ learning thereof, any breach, default or failure of performance by any party under, or any notice that a party has challenged or denied the validity or enforceability of any material Permitted Encumbrances, any

 

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Material Operating Agreement, the Management Agreement or any material other agreement, contract, or other instrument to which any Loan Party is a party or by which any of its properties are bound to the extent the same is reasonably likely to have a Material Adverse Effect;

 

(vi)                              promptly upon Loan Parties’ learning thereof, any Event of Default.

 

(vii)                           promptly upon Loan Parties’ learning thereof, the occurrence or existence, as applicable, of any act, event, condition or state of facts which in Loan Parties’ reasonable judgment, is reasonably likely to result in a Material Adverse Effect;

 

(viii)                        promptly upon Loan Parties’ learning thereof, any material adverse claim against or affecting Loan Parties, the Premises, the Collateral, Loan Parties’ rights under any Permitted Encumbrance or any license, permit or approval obtained by Loan Parties or the Liens securing the Obligations to the extent the same is reasonably likely to result in a Material Adverse Effect;

 

(ix)                                (i) within ten (10) days after Loan Parties or any ERISA Affiliate knows or has reason to know that any ERISA Event has occurred, written notice describing such event; (ii) within ten (10) days after Loan Parties or any ERISA Affiliate knows or has reason to know that a request for a minimum funding waiver under IRC Section 412 has been filed with respect to any Pension Plan or Multiemployer Plan, a written statement of Loan Parties describing such ERISA Event or waiver request and the action, if any, Loan Parties and ERISA Affiliates propose to take with respect thereto and a copy of any notice filed with the PBGC or the Internal Revenue Service pertaining thereto; (iii) within thirty (30) days after Loan Parties or any ERISA Affiliate knows or has reason to know that there has been a material increase in the unfunded pension liability of any Pension Plan, notice of such occurrence; (iv) simultaneously with the date that Loan Parties or any ERISA Affiliate files a notice of intent to terminate any Pension Plan, if such termination would reasonably be expected to require material additional contributions in order to be considered a standard termination within the meaning of Section 4041(b) of ERISA, a copy of each notice; and (v) within ten (10) days after Loan Parties or any ERISA Affiliate adopts a new Pension Plan or becomes obligated to contribute to a Multiemployer Plan, written notice describing same;

 

(x)                                   other than statements and reports which are expressly referred to in  Section 6.1(a), Section 6.1(b) or Section 6.1(h), promptly following Loan Parties’ receipt or giving of same, a copy of all material statements and reports provided to or by a Loan Parties pursuant to the Management Agreement and any material notice or other material written communication given under, pursuant to or in connection with the Management Agreement; and

 

(xi)                                within ten (10) days of a Loan Parties’ receipt or giving of same, a copy of any written notice under, pursuant to or in connection with any Lease, (i) alleging a default by any Loan Parties or Lessee thereunder (provided that, with respect to a Lease which is not a Material Lease, such notice under this clause (i) shall not be required 

 

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unless and until such default has continued beyond applicable notice and cure periods) or (ii) exercising a renewal, extension, expansion or termination option thereunder.

 

(i)                                     Notice Regarding Contracts.  Promptly following the occurrence thereof, notification of any material changes in any Material Operating Agreement, and with respect to any other contracts which are necessary for the operation of the Premises, including elevator maintenance agreements, agreements with respect to electricity, gas, water, and telephone service (both local and long distance), heating, ventilating and air conditioning, and other major mechanical maintenance agreements, Loan Parties will (or will cause Property Manager to) notify Agent if any such contracts are not renewed or replaced with similar agreements upon their expiration or termination.

 

(j)                                     Capital/FF&E Expenditures Budget.  As soon as available, but in no event prior to the end of each fiscal year of Loan Parties, Loan Parties shall deliver (y) a copy of the preliminary Capital/FF&E Expenditures Budget and (z) a copy of the operating budget  approved by Loan Parties and Property Manager, each for the next fiscal year of Loan Parties.  Loan Parties shall not approve any Capital/FF&E Expenditures Budget without Agent’s approval, which approval shall not be unreasonably withheld, conditioned or delayed.  Agent’s failure to approve or disapprove any Capital/FF&E Expenditures Budget or revision thereto within fifteen (15) days after Agent’s receipt thereof shall be deemed to constitute Agent’s approval thereof.  No Approved Capital/FF&E Expenditures Budget shall be amended or modified without the prior consent of Agent, which consent shall not be unreasonably withheld, conditioned or delayed.  Except in the case of an emergency or variances not exceeding ten percent (10%) in respect of the applicable line item and ten percent (10%) in the aggregate, no operating budget shall be materially amended or modified without delivering a copy of such amendment or modification to Agent at ten (10) days prior to the effectiveness thereof.  Notwithstanding the foregoing, (1) so long as Hilton (or any Affiliate thereof) is Property Manager, Agent shall not disapprove any the Capital/FF&E Expenditures Budget or any amendments thereto or modifications thereof to the extent that such disapproval would prevent the maintenance and operation of the Premises in accordance with the standards set forth in the “Operating Manual” (as defined in the Management Agreement) and (2) so long as the applicable Management Agreement is in effect (y) any Capital/FF&E Expenditures Budget in effect by operation of the dispute resolution provisions of Section 12.4 of such Management Agreement and (z) any variance from (including any additional expenditures to) any Approved Capital/FF&E Expenditures Budget permitted under Section 4.2.6 of the Management Agreement shall be deemed approved by Agent.

 

(k)                                  Estoppel Certificates.

 

(i)                                     Within ten (10) Business Days after request therefor from Agent (such request not to be made more than once per fiscal year of Loan Parties except in connection with an assignment or participation of a Lender’s interest in the Loan in accordance with Article VIII), Loan Parties will deliver to Agent a certificate executed by Loan Parties, stating (1) the amount due under the Note and this Loan Agreement, (2) any known offsets or defenses to the payment of the Obligations, if any, (3) that this Loan Agreement and the other Loan Documents have not been modified or if modified, giving particulars of such modification and (4) that as of the date of such certificate, to Loan  

 

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Parties’ best knowledge, no Event of Default has occurred and is continuing or, if any such Event of Default has occurred and is continuing, describing in reasonable detail each such Event of Default and the action, if any, taken or being taken to cure the same, and such other information regarding the Loan, the Premises and Loan Parties as Agent reasonably requests.

 

(ii)                                  Within ten (10) Business Days after request therefor from Loan Parties or Guarantor, Agent will deliver to Loan Parties a certificate executed by Agent, stating (1) the amount due under the Note and this Loan Agreement, (2) any offsets or defenses to the payment of the Obligations, if any, (3) that this Loan Agreement and the other Loan Documents have not been modified or if modified, giving particulars of such modification and (4) that as of the date of such certificate whether or not Agent has sent any notice of default under the Loan Documents which remains uncured in the opinion of Agent.

 

(l)                                     Other Information.  Promptly upon Agent’s request and at Loan Parties’ sole cost and expense, such other information concerning the business, properties, or financial condition of Loan Parties and Guarantor, including the performance of their obligations under the Loan Documents, as Agent shall reasonably request.

 

Section 6.2                                   Marketing, Management, Maintenance and Repairs.

 

(a)                                  The Premises shall at all times be managed exclusively by Property Manager under the Management Agreement in a manner consistent in all material respects with Comparable Standards.  Loan Parties shall cause the Management Agreement to remain in full force and effect at all times, except as replaced in accordance with this Section 6.2, and subject to the application of the dispute resolution mechanism set forth in Section 12.4 of the Management Agreement, shall comply with the Management Agreement in all material respects at all times.  In the event Property Manager is replaced, Loan Parties shall cause the replacement manager to enter into a manager subordination, non-disturbance and attornment agreement substantially in the form of the Manager SNDA (and with changes thereto reasonably acceptable to the Requisite Lenders).  Operating Lessee shall not, without the prior consent of the Requisite Lenders, surrender, terminate or cancel the Management Agreement.  Operating Lessee shall not modify, amend or supplement any term or provision of the Management Agreement which would increase Loan Parties’ economic obligations thereunder, enter into any agreement in substitution for the Management Agreement, or consent to the assignment of the Management Agreement without, in each instance, the Requisite Lenders’ prior consent.  Operating Lessee shall comply in all material respects with all terms of the Management Agreement.  During the continuance of an Event of Default, Agent (with the consent of the Requisite Lenders) shall have the right, subject to the Manager SNDA (i) to terminate or require that Operating Lessee terminate, the Management Agreement and (ii) require Loan Parties upon such termination to engage a replacement manager reasonably acceptable to the Requisite Lenders and the Ground Lessor pursuant to a replacement management agreement reasonably acceptable to the Requisite Lenders and on commercially reasonable terms.

 

(b)                                 Loan Parties shall not commit or permit any physical waste of or to the Premises or other Improvements, structures and equipment thereon (provided that the occurrence 

 

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of a Casualty shall not constitute a breach of such covenant so long as Loan Parties performs their obligations under Section 6.12(c)).  Loan Parties shall promptly, diligently and continuously restore, replace or rebuild or cause to be restored, replaced or rebuilt any part of and Improvements on the Premises damaged or destroyed by any Casualty (including any Casualty for which insurance was not obtained or obtainable) or which may be affected by any Taking, in accordance with the Loan Documents.  Loan Parties shall promptly replace, or caused to be replaced, any part of the Premises taken by theft to the extent necessary to comply with the provisions of this Section 6.2(b).  All such repairs, renewals and replacements shall be substantially similar in quality, value and class to that of the Improvements which are the subject of such repairs, renewals and replacements.

 

(c)                                  Loan Parties shall cause the Premises to be at all times operated, managed and, without limiting Section 6.2(b) hereof, maintained, at all times and in the manner and accordance with the standards required pursuant to the Management Agreement (including all marketing, advertising, promotional and reservation programs in all material respects), but in no event below Comparable Standards.

 

(d)                                 The Management Agreement, including all of Property Manager’s rights thereunder, subject to the terms of the Manager SNDA, shall at all times be unconditionally subject, junior and subordinate to the terms and the Lien of this Loan Agreement, the Deed of Trust and the other Loan Documents to the extent set forth in the Manager SNDA.

 

(e)                                  Loan Parties shall not consent to any assignment by Property Manager of its rights and obligations under the Management Agreement without the prior written consent of the Requisite Lenders, noting, that for the purpose of avoiding any ambiguity, that Property Manager may assign its rights and obligations under the Management Agreement without the consent of Loan Parties to the extent that Loan Parties’ consent is not required under the Management Agreement (without giving effect to any subsequent amendment thereof) and the consent of Ground Lessor is not required under the Ground Lease (without giving effect to any subsequent amendment thereof).

 

Section 6.3                                   Inspection of Premises and Books and Records.

 

(a)                                  Subject to the rights of Lessees and hotel guests, Loan Parties will permit Agent and Lenders or designated representatives of Agent and Lenders to enter upon and inspect the Premises, or any part thereof, in an emergency and at all other times during normal business hours and upon reasonable notice, provided that such inspection shall be made in a way to minimize any disruption to the operation of the Premises.

 

(b)                                 Agent shall have no duty to make any inspection nor shall Agent incur any liability or obligation for not making any such inspection or, once having undertaken any such inspection, for making the inspection, not making the same carefully or properly, or for not completing the same; nor shall the fact that such inspection may not have been made by Agent relieve Loan Parties of any obligations that it may otherwise have under the Loan Documents.

 

(c)                                  Loan Parties shall at all times keep complete and accurate books, records and accounts of its transactions.  At Loan Parties’ expense (but not more than two times in any 

 

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twelve (12) month period, unless an Event of Default shall be continuing), Loan Parties shall permit any representative of Agent, at all times during normal business hours upon reasonable notice, to examine and copy the books and records of Loan Parties, and all contracts, statements, invoices, bills, and claims for labor, materials, and services supplied for the construction, reconstruction, maintenance, operation and repair of the Premises in the possession of Loan Parties, Property Manager or any Affiliate of Loan Parties.  Loan Parties shall have no obligation to disclose materials (y) which are protected by attorney-client privilege or (z) to the extent the disclosure thereof would violate confidentiality obligations of Loan Parties, Property Manager or such Affiliate.

 

Section 6.4                                   Compliance with Legal, Insurance and Contractual Requirements.

 

(a)                                  Subject to Loan Parties’ right to contest as set forth in Section 6.8, Loan Parties, at its sole cost and expense, shall in all material respects comply and cause compliance of the Premises and the construction, use, occupancy, possession, operation, management, maintenance and ownership thereof, in all material respects of all Legal Requirements and all Insurance Requirements whether or not compliance therewith shall require changes in, or interfere with the use and enjoyment of, the Premises or any part thereof.  Subject to Loan Parties’ rights under Section 6.8, Loan  Parties shall preserve and maintain all of their material rights, privileges, licenses and Operating Permits necessary to operate the Premises in accordance with Section 6.2 hereof.  Agent shall not have any obligation or responsibility whatsoever for any matter incident to the Premises or the maintenance and operation of the Premises.  Subject to Loan  Parties’ right to contest Legal Requirements in accordance with Section 6.8, Loan  Parties agree that all consents, approvals, orders or authorizations of, or registrations, declarations or filings with, or other actions with respect to or by, any Governmental Authorities required for the operation and maintenance of the Premises will be obtained when required, except where the failure to obtain is not reasonably likely to have a Material Adverse Effect.

 

(b)                                 Each Loan Party, at its sole cost and expense, shall comply with all of its material covenants, obligations, agreements and undertakings under the Premises Documents, the Permitted Encumbrances and the Material Operating Agreements to the extent that failure to comply is reasonably likely to result in a Material Adverse Effect, and shall use commercially reasonable efforts to secure the performance of the obligations of the other parties thereto.  Loan Parties shall keep in full force and effect and not terminate, cancel, surrender, materially modify, materially amend or enter into any agreement in substitution for any Permitted Encumbrance, any Premises Document or any Material Operating Agreement to the extent the same is reasonably likely to result in a Material Adverse Effect, in each case without the prior consent of the Requisite Lenders, which consent shall not be unreasonably withheld, conditioned or delayed.

 

Section 6.5                                   Appraisals.

 

(a)                                  Agent shall be entitled to obtain, at Loan Parties’ expense, an Appraisal or Appraisal Update (as applicable) at Agent’s election if one or more of the following circumstances apply:

 

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(i)                                     at any time that an Event of Default has occurred and is continuing;

 

(ii)                                  in connection with the foreclosure of the Deed of Trust or the granting of a deed-in-lieu thereof or the exercise of other remedies against Loan  Parties hereunder;

 

(iii)                               if required for regulatory purposes applicable to Agent or any Lender;

 

(iv)                              if required to determine the satisfaction of the condition described in Section 6.12(d)(i)(F) of this Loan Agreement; and

 

(v)                                 at any other time requested by any Lender from and after November 10, 2012; provided, that, Loan Parties shall not be required to pay for more than one (1) Appraisal or Appraisal Update under clause (iii) or this clause (v) in any twenty-four (24) month period.

 

Loan Parties shall reasonably cooperate with Agent and any such appraiser and their agents and employees in connection with Appraisals and Appraisal Updates.

 

(b)                                 Nothing in this Loan Agreement shall require Loan Parties to cause the maintenance of any Loan-to-Value Ratio after the Closing Date (except as set forth in Section 6.12(d)(i)(G)), and the statements and conclusions set forth in any Appraisal or Appraisal Update shall in no event give rise to a Default or an Event of Default.

 

(c)                                  For any Appraisal or Appraisal Update paid for by Loan Parties, Agent shall deliver a copy of such Appraisal or Appraisal Update to Loan Parties and Sponsor upon a request from any of them.

 

Section 6.6                                   Payment of Impositions.  Subject to Loan Parties’ right to contest as set forth in Section 6.8, Loan Parties shall pay or cause to be paid all Impositions on or before the due date thereof and in any event before any fine, penalty, interest or cost may be added for non-payment.  Loan Parties promptly shall deliver to Agent after payment of any Imposition and at other times, upon request, copies of official receipts or other evidence reasonably satisfactory to Agent evidencing the payment of the Impositions.

 

Section 6.7                                   Liens and Encumbrances; Ownership of Collateral.  Borrower shall at all times be the owner of, and have marketable legal, beneficial and indefeasable leasehold title to the Premises, subject only to the Permitted Encumbrances.  Loan Parties shall at all times be the sole and absolute owner of and have legal and beneficial title to the other Collateral, free and clear of any Lien but subject to the Permitted Encumbrances and the Loan Documents, provided that Loan Parties shall be entitled to contest the validity of the demands of mechanics, materialmen, laborers and others which, if unpaid, might result in a Lien (each, a “Mechanic’s Claim”) in accordance with Section 6.8.  In furtherance of the foregoing, (a) Loan Parties shall not make, grant, modify or terminate any rights of way or use, declarations, transfers of air rights, other declarations, zoning lot development agreements, privileges, franchises, licenses, servitudes, easements and other encumbrances over, under or on the Land or 

 

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Improvements or any portion thereof, without the prior consent of the Requisite Lenders, which consent shall not be unreasonably withheld, conditioned or delayed and (b) Loan Parties shall not directly or indirectly create or permit or suffer to be created any Lien on Loan Parties’ interest in the Collateral or any part thereof, other than the Permitted Encumbrances and the Loan Documents.  Subject to its rights under Section 6.8, no Loan Party shall directly or indirectly suffer or permit, and shall promptly discharge or cause to be discharged, any Lien on any direct or indirect equity or beneficial interest in a Loan Party or any Person directly or indirectly holding an equity or beneficial interest in either Loan Party except for Permitted Encumbrances.

 

Section 6.8                                   Permitted Contests.  Each Loan Party, at its sole cost and expense, may contest, or cause to be contested, by appropriate legal proceedings conducted in good faith and with due diligence, the amount or validity or application, in whole or in part, of any Imposition, Mechanic’s Claim, Legal Requirement, utility payment or Insurance Requirement and defer the payment thereof or compliance therewith, subject, however, to the following conditions:

 

(i)                                     in the case of an unpaid Imposition, such proceedings shall suspend the collection thereof from Loan Parties, Agent, Lenders and the Mortgaged Property and other Collateral;

 

(ii)                                  neither the Mortgaged Property, the other Collateral, any Rents nor any part thereof or interest therein with a market or replacement value in excess of $100,000 in the aggregate over the term of the Loan would be in any imminent danger of being sold, forfeited, terminated, canceled or lost in any respect;

 

(iii)                               in the case of a Legal Requirement, Loan Parties would not be in danger of criminal liability for failure to comply therewith and neither Agent nor any Lender would be in danger of any civil or criminal liability for Loan Parties’ failure to comply therewith;

 

(iv)                              Loan Parties shall have furnished such security, if any, as may be required in the proceedings, or, if none is required, as may be reasonably and in good faith requested by Agent to ensure the payment of any Imposition or the compliance with any Legal Requirement or Insurance Requirement, as the case may be, together with any interest or penalties which become due in connection therewith;

 

(v)                                 the non-payment of the whole or any part of any tax, assessment or charge during the pendency of any such action will not result in the delivery of a tax deed to the Mortgaged Property or any part thereof, because of such non-payment;

 

(vi)                              the payment of any sums required to be paid under this Loan Agreement and the other Loan Documents (other than any unpaid Imposition, Mechanic’s Claim, Legal Requirement or Insurance Requirement at the time being contested in accordance with this Section 6.8) shall not be interfered with or otherwise adversely affected;

 

(vii)                           in the case of any Insurance Requirement, the failure of Loan Parties to comply therewith shall not affect the validity or effectiveness of any insurance required to be maintained by Loan Parties under Section 6.11;

 

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(viii)                        each Loan Party complies with any and all conditions or requirements set forth in any other agreement to which such Loan Party is a party or pursuant to which the Premises is bound with respect to such contest where the failure to comply therewith is reasonably likely to result in a Material Adverse Effect; and

 

(ix)                                Loan Parties give Agent prompt written notice of the commencement of such permitted contest.

 

provided, that, the conditions set forth in clauses (i), (iii), (iv), (v) and (vii) shall not be conditions to a permitted contest pursuant to this Section 6.8 if Loan Parties pay and otherwise comply with such Imposition, Mechanic’s Claim, Legal Requirement or Insurance Requirement.

 

Section 6.9                                   Alterations.

 

(a)                                  All repairs and alterations at the Premises shall be done in a good and workmanlike manner and shall be completed in accordance with all Legal Requirements in all material respects and, subject to the Permitted Encumbrances, free and clear of Liens or claims for materials supplied or for labor or services performed in connection with such repairs and alterations or otherwise.

 

(b)                                 Neither Agent’s nor any Lender’s prior approval shall be required in connection with any alterations or repairs to the Improvements (including entering into any contract regarding such alterations or repairs) which is not a Material Alteration.

 

(c)                                  Loan Parties shall not perform any Material Alteration without the Requisite Lenders’ prior written consent, which consent shall be conditioned on the satisfaction of the following conditions but shall not be unreasonably withheld or delayed:

 

(i)                                     the Requisite Lenders shall have determined in their reasonable discretion that (x) each Loan Party has the financial resources to complete the Material Alteration on a timely and lien-free basis and (y) the Material Alteration can be completed prior to the Maturity Date;

 

(ii)                                  is applicable considering the size, scope and nature of the alteration or repair, Agent shall have received architectural or engineering plans and specifications for the Material Alteration and an estimate of the costs and expenses of such Material Alteration, all of which shall be reasonably acceptable to Agent and Agent’s construction consultants;

 

(iii)                               if requested by Agent, Agent shall have received copies of the agreements pursuant to which the Material Alteration shall be done all of which shall be in form and substance reasonably satisfactory to the Requisite Lenders and, which also shall be reasonably satisfactory to the Requisite Lenders as to the party performing the construction obligations thereunder;

 

(iv)                              Agent shall have received the assignment to Agent of all construction and design-professional contracts related to the Material Alteration, together with the written consent to such assignments by all parties to such contracts (which may 

 

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be included in any such contract), all of which shall be in form and substance reasonably satisfactory to Agent;

 

(v)                                 with respect to any Material Alteration which is being performed in connection with a new Lease, such Lease shall have been approved by Agent if required under Section 6.10;

 

(vi)                              Agent shall have received all authorizations, consents and approvals given by and licenses and permits issued by Governmental Authorities that are required and then obtainable for the performance of the Material Alterations in accordance with all Legal Requirements, each of which shall be reasonably acceptable to Agent and Agent’s construction consultants;

 

(vii)                           with respect to any proposed Material Alteration which will increase the rentable square footage of the Premises, Agent shall have received evidence reasonably satisfactory to Agent that the Premises, after giving effect to such Material Alteration, comply with applicable zoning regulations; and

 

(viii)                        Agent shall have received such other information and documentation as Agent may reasonably request regarding the Material Alteration and the cost thereof.

 

Loan Parties shall not perform any Material Alteration except in compliance with this Section 6.9.  After completion of the Material Alteration, Loan Parties shall provide Agent with a copy of the as-built plans and specifications for same, if available.  Notwithstanding anything to the contrary set forth herein, the approval by Agent of a Lease in accordance with this Loan Agreement which requires the performance of a Material Alteration shall constitute approval of such Material Alteration under this Section 6.9 (provided that Loan Parties shall be required to satisfy the conditions set forth in clauses (ii) through (iv) and (vi) through (vii) of this Section 6.9(c).

 

(d)                                 Agent’s Inspection.  From time to time and upon not less than two (2) Business Days’ prior notice to Loan Parties, Loan Parties shall permit Agent, Lenders and their agents and representatives, to enter upon the Premises during normal business hours for the purpose of inspection of a Material Alteration, provided that such inspection shall be conducted in such a manner as to minimize any disruption to the operation of the Premises.  Upon Agent’s reasonable request, Loan Parties shall to the extent available provide to Agent a copy of:

 

(i)                                     All materials, plans, specifications and drawings, including drawings marked up to reflect as-built conditions, substitutions and approved changes pertaining to the performance of the Material Alteration;

 

(ii)                                  Any material contracts, bills of sale, statements, receipts or vouchers pertaining to the Material Alteration; and

 

(iii)                               All books and records of Loan Parties pertaining to the Material Alteration, including all work done, labor performed or materials furnished.

 

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provided, however, Loan Parties shall have no obligation to disclose materials (y) which are protected by attorney-client privilege or (z) to the extent the disclosure thereof would violate confidentiality obligations of Loan Parties, Property Manager or such Affiliate.

 

(e)                                  This Section 6.9 shall not apply to any rebuilding, repair or restoration being performed under Section 6.12 or 6.13.

 

Section 6.10                            Leases.

 

(a)                                  Loan Parties shall not materially amend, materially modify, terminate, consent to the assignment (unless required to do so under the applicable Material Lease and excluding any assignment pursuant to any Loan Document) or surrender of, or grant a waiver of any material provision or right of Loan Parties under, or otherwise materially supplement any Material Lease or any guaranty thereof or subject to Section 6.10(b), any Minor Lease or any guaranty thereof (each, a “Material Lease Action”) without Requisite Lenders’ prior consent in the case of a Material Lease or Agent’s prior consent in the case of a Minor Lease or enter into a Material Lease or any Minor Lease that does not satisfy the requirements of clause (ii) of Section 6.10(b) without Requisite Lenders’ prior consent in the case of a Material Lease or Agent’s prior consent in the case of such a Minor Lease, which consent shall not be unreasonably withheld, conditioned or delayed.  Prior to seeking Requisite Lenders’ consent to enter into any Material Lease, Loan Parties shall deliver to Agent and Lenders a copy of such proposed lease (a “Proposed Material Lease”).  Subject to clause (h) below, Agent (with the approval of Requisite Lenders where required) shall approve or disapprove each Proposed Material Lease or Material Lease Action for which Agent’s and/or Requisite Lenders’, as applicable, approval is required under this Loan Agreement within ten (10) Business Days of the submission by Loan Parties to Agent and each Lender of a written request for such approval, accompanied by a final copy of the Proposed Material Lease, non-conforming Minor Leases or Material Lease Action.  If requested by Loan Parties, Agent and Requisite Lenders, as applicable, will grant conditional approvals of Proposed Material Leases, non-conforming Minor Leases or proposed Material Lease Actions at any stage of the leasing process, including from initial “term sheet” through negotiated lease drafts, provided that Agent and Requisite Lenders, as applicable, shall retain the right to disapprove any such Proposed Material Lease, non-conforming Minor Lease or proposed Material Lease Action, if subsequent to any preliminary approval material changes are made to the terms previously approved by Agent and/or Requisite Lenders, as applicable, or additional material terms are added that had not previously been considered and approved by Agent and/or Requisite Lenders, as applicable, in connection with such Proposed Material Lease, non-conforming Minor Lease or proposed Material Lease Action.  Notwithstanding anything set forth herein to the contrary, Agent’s and/or Requisite Lenders, as applicable, consent shall not be required for any renewal, extension, expansion, termination, assignment or subletting of or any action with respect to, a Lease unilaterally exercised by the tenant thereunder in accordance with the provisions of such Lease.  Without limiting this Section 6.10(a), Loan Parties shall deliver to Agent a copy of any Material Lease and any amendment, modification or supplement thereof within ten (10) Business Days after the execution and delivery thereof.

 

(b)                                 Notwithstanding the provisions of Section 6.10(a) above, provided that no Event of Default is continuing, Leases and any actions with respect thereto shall not be subject to the prior approval of Agent provided (i) the proposed Lease would be a Minor Lease or the 

 

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existing Lease is (or, as amended, modified or renewed, if applicable, would still be) a Minor Lease, and (ii)(w) with respect to a proposed Lease only, the proposed Lease shall be written substantially in accordance with a form of Lease used for other Lessees which shall have been approved by Agent, subject in each case to any commercially reasonable changes (given the prevailing market conditions) made in the course of negotiation with the applicable tenant, (y) with respect to a proposed Lease or an extension of an existing Minor Lease, the tenant under the proposed Lease or existing Minor Lease shall be creditworthy (or there shall be a creditworthy guarantor or a commercially reasonable Security Deposit) and (z) the Minor Lease as amended or modified or the renewal of the Minor Lease or series of leases or proposed lease or series of leases:  (a) shall provide for net effective rental rates comparable to existing local market rates and (b) shall provide for automatic self-operative subordination to the Deed of Trust and, at Agent’s option, (x) attornment to Agent and (y) the unilateral right by Agent, at the option of Agent, to subordinate the Lien of the Deed of Trust to the Minor Lease.

 

(c)                                  Each Loan Party shall perform its obligations under the Leases in all material respects and shall not permit any Lessee to prepay Rents pursuant to the terms of any Lease other than the usual prepayment of Rent as would result from the acceptance on the first day of each month of the Rent for the ensuing month, according to the terms of any Leases.  Loan Parties shall promptly (i) notify Agent, in writing, of any material defaults by any Lessee or Lease guarantor under any Lease after Loan Parties become aware of such defaults and (ii) deliver to Agent a copy of all termination notices, default notices, notices claiming any offset rights and all other material notices from any Lessee or Lease guarantor to Loan Parties or from Loan Parties to any Lessee or Lease guarantor.

 

(d)                                 Without limiting Loan Parties’ obligation to deliver to Agent copies of each Material Lease and each amendment and supplement thereto, Loan Parties shall furnish to Agent, within ten (10) days after a request by Agent to do so, true copies of each Lease and any Lease guaranty thereof or amendments and supplements thereto not previously furnished to Agent.

 

(e)                                  Loan Parties shall use commercially reasonable efforts to enforce the performance of the obligations of the Lessees and Lease guarantor.

 

(f)                                    All Leases hereafter entered into by Loan Parties shall be made expressly subject and subordinate to the Deed of Trust and the terms and provisions thereof and shall contain provisions obligating the Lessees thereunder to attorn to Agent or any purchaser therefrom upon its written demand in the event Agent or such purchaser succeeds to the interest of Loan Parties under such Leases.  Each Lease guaranty shall provide that it shall remain in full force and effect, and that the guarantor thereunder shall perform for the benefit of Agent or such purchaser, upon attornment by the Lessee.  Upon Loan Parties’ request in connection with any Material Lease, Agent agrees to enter into with a Lessee a subordination, non-disturbance and attornment agreement that is substantially similar to those delivered at the Closing (with such changes as are reasonably acceptable to Agent).

 

(g)                                 Loan Parties shall pay all documented, reasonable out-of-pocket expenses of Agent, including Agent’s Counsel Fees, incurred in connection with the review of any 

 

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proposed Lease, amendment, modification, waiver, supplement, termination or surrender under this Section 6.10 which requires Agent’s and or Requisite Lenders’ approval.

 

(h)                                 In the event that Loan Parties request Agent’s consent under this Section 6.10, including, without limitation consent to a Minor Lease that does not meet the requirements of Section 6.10(b), Agent shall be deemed to have given such consent in the event Agent fails to notify Loan Parties whether or not it consents to such requested action within three (3) Business Days after the following conditions are satisfied:

 

(y)                                 Loan Parties shall have delivered to Agent a notice requesting Agent’s consent, together with the items required to be delivered in connection therewith in accordance with this Section 6.10 and  such other information concerning the applicable Lease or the proposed Lessee as may be reasonably necessary for Agent to respond to such request (provided such information is requested within five (5) Business Days of Agent’s receipt of Loan Parties’ notice); and

 

(z)                                   In the event that Agent shall have failed to respond to Loan Parties’ notice within ten (10) Business Days after delivery of the notice and other materials set forth in clause (y) above, Loan Parties shall have delivered to Agent another notice which shall contain in boldface type at the beginning of such notice text to the following effect:  “THIS IS A SECOND REQUEST MADE PURSUANT TO SECTION 6.10 OF THE LOAN AGREEMENT BETWEEN ONE PARK BOULEVARD, LLC, SUNSTONE PARK LESSEE, LLC AND AAREAL CAPITAL CORPORATION AS AGENT WITH RESPECT TO APPROVAL OF A PROPOSED LEASE OR LEASE ACTION WITH [LESSEE’S NAME] SENT TO YOU ON [DATE].  FAILURE TO RESPOND WITHIN FIVE (5) BUSINESS DAYS OF RECEIPT OF THIS NOTICE SHALL BE DEEMED TO BE A CONSENT TO SAID LEASE OR LEASE ACTION.

 

Section 6.11                            Required Insurance.

 

(a)                                  Required Coverage.  In addition to any insurance required to be maintained by Loan Parties pursuant to the Management Agreement, the Premises Documents or the Leases, Loan Parties, at their sole cost and expense, shall maintain, or, as specifically set forth below, cause to be maintained, the Insurance Policies set forth on Schedule 6.11 attached hereto.

 

(b)                                 General Requirements of Insurance Policies.  All Insurance Policies shall be issued by financially sound and responsible insurers reasonably acceptable to Agent and authorized to do business in the state in which the Premises are located.  All Insurance Policies shall be issued by an insurer or insurers with an A.M. Best rating of A:X or better (or as otherwise may be approved by Agent).  All Insurance Policies shall name each Loan Party as a named Insured.  The property, boiler and machinery Insurance Policies shall also name Agent and each Lender under a non-contributing New York Standard Mortgagee or Lender Loss Payee clause and, with respect to rental income, as Lender Loss Payee, on forms reasonably acceptable to Agent, or equivalent endorsements reasonably satisfactory to Agent and shall be otherwise reasonably satisfactory to Agent in form and content.  All property Insurance Policies also shall 

 

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include a replacement cost and co-insurance waiver and/or an agreed amount endorsement and other endorsements as are provided in Schedule 6.11 attached hereto.  The amount of any deductible under any Insurance Policy must be reasonably acceptable to Agent, provided that Agent hereby approves the deductibles in effect under the Insurance Policies in effect on the Closing Date.  No Insurance Policy shall contain any exclusion for terrorism or terrorist acts or be subject to any sublimit for terrorism or terrorist acts without the prior approval of Agent.  Without Agent’s prior consent, Loan Parties shall not name any Person other than Agent as loss payee (except as may be required in connection with any Permitted Equipment Financing and in such case only to the extent of the equipment which is the subject thereof) or mortgagee under any property Insurance Policies nor shall Loan Parties carry separate or additional insurance coverage covering the Premises and such improvements and betterments which Loan Parties are required to insure pursuant to any agreement concurrent in form or contributing in the event of loss with that required by this Loan Agreement; provided, that, if blanket policies are obtained, this sentence shall not apply to property covered by such blanket policies, other than the Premises and such improvements and betterments.  Loan Parties shall pay the Insurance Premiums as the same become due and payable, and shall not finance premiums without the prior approval of the Agent.

 

(c)                                  Proof of Required Insurance to Agent.  Loan Parties shall deliver to Agent certified copies of the Insurance Policies required to be maintained pursuant to Section 6.11(a), provided, however, Agent shall not be deemed by reason of the custody of such Insurance Policies to have knowledge of the contents thereof.  Loan Parties also shall deliver to Agent, within ten (10) days of Agent’s request, a certificate of each insurance carrier evidencing the coverages set forth herein together with evidence that all Insurance Premiums due thereon have been paid and that such coverages are in full force and effect.  Not later than seven (7) days prior to the expiration date of each of the Insurance Policies, Loan Parties shall deliver to Agent a certificate of insurance, evidencing renewal of coverage as required herein or binders of all such renewal Insurance Policies, if available, provided that if the foregoing are not available as of such date, then Loan Parties shall deliver to Agent evidence reasonably satisfactory to Agent that the coverages required herein shall be timely renewed, and shall promptly deliver to Agent such certificates and/or binders once they are available; provided, however, the certificates and/or binders shall be delivered not later than the expiration of the current insurance.  Such proof of renewal insurance shall include evidence satisfactory to Agent that all Insurance Premiums therefor have been paid and that the Insurance Policies are in full force and effect.  Any certificate of insurance delivered to Agent in compliance with the requirements of this Loan Agreement shall include a letter from the respective insurance company confirming that the Person issuing such certificates of insurance is authorized to do so, and in delivering such certificates such Person is acting as an agent of the insurance company providing the coverage.  If such letter is not provided, then the Agent will only accept insurance company issued binders or full policies confirming that the Required Insurance is in full force and effect.

 

(d)                                 As to Agent and the Lenders.  Each Insurance Policy shall contain a provision whereby the insurer (1) agrees that such policy shall not be canceled or fail to be renewed, or the terms thereof modified as described in clauses (y) and (z) below without, in each case, at least thirty (30) days’ prior written notice to Agent, (2) waives any right to claim any premiums and commissions against Agent and the Lenders, provided, that the policy need not waive the requirement that the premium be paid in order for a claim to be paid to the insured and 

 

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(3) provides that Agent is permitted to make payments to effect the continuation of such policy upon notice of cancellation due to nonpayment of premiums.  Loan Parties shall notify Agent in the event that (x) such policy shall be canceled or terminated, (y) the coverage, deductible and limits of such policy shall be modified or (z) other provisions of such policy shall be modified if such policy, after giving effect to such modification, and all modifications in the aggregate, would not satisfy the requirements of this Loan Agreement.  Notwithstanding anything to the contrary in the preceding sentence, Loan Parties shall be required to maintain such Insurance Policies in accordance with the requirements of this Loan Agreement.  In the event any Insurance Policy (except for general public and other liability and workers’ compensation insurance) shall contain breach of warranty provisions, such policy shall provide that with respect to the interest of Agent, such Insurance Policy shall not be invalidated by and shall insure Agent regardless of (A) any act, failure to act or negligence of or violation of warranties, declarations or conditions contained in such policy by any named insured, (B) the occupancy or use of the Premises for purposes more hazardous than permitted by the terms thereof or (C) any foreclosure or other action or proceeding taken by Agent pursuant to any provision of this Loan Agreement.

 

(e)                                  Blanket Policies.  Any insurance maintained pursuant to this Section 6.11 may be evidenced by blanket insurance policies covering the Premises and other properties or assets of Loan Parties or their Affiliates; provided, that, any such policy shall in all other respects comply with the requirements of this Section 6.11.

 

(f)                                    Agent’s Right to Procure Insurance.  Notwithstanding anything to the contrary contained herein, if at any time Agent is not in receipt of written evidence reasonably confirming that all insurance required hereunder is maintained in full force and effect, then after giving written notice to Loan Parties, Agent shall have the right (but not the obligation) to obtain such undocumented insurance coverages as are required hereunder, and all out-of-pocket expenses incurred by Agent in connection with obtaining such insurance and keeping it in effect shall be paid by Loan Parties promptly after demand and shall be secured by the Loan Documents.

 

Section 6.12                            Damage or Destruction.

 

(a)                                  Promptly, and in any case within five (5) Business Days after the occurrence thereof, Loan Parties shall notify Agent of any fire or other Casualty with respect to any portion of the Premises with an estimated claims value in excess of $250,000.  Such notice also shall generally describe the nature and extent of such Casualty.  Promptly upon the same becoming available, Loan Parties shall deliver to Agent Loan Parties’ best estimate of the cost of Restoration.

 

(b)                                 Agent shall be entitled to receive all insurance proceeds payable on account of a Casualty in excess of the Casualty Threshold (for the avoidance of doubt, it is understood that all proceeds payable on account of a Casualty in excess of the Casualty Threshold shall be deposited with Agent, not merely the portion of such proceeds which exceeds the Casualty Threshold).  Subject to the terms hereof, each Loan Party hereby irrevocably assigns, transfers and sets over to Agent all of such Loan Party’s right to any such insurance proceeds, award or payment.  Loan Parties hereby irrevocably authorize and empower Agent, in the name of Loan Parties or otherwise, to file for and prosecute in its own name what would 

 

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otherwise be Loan Parties’ claim for any such insurance proceeds.  Notwithstanding the foregoing, so long as no Event of Default shall have occurred and shall then be continuing and provided Loan Parties promptly file all claims and diligently prosecute same, and subject to the terms of the Ground Lease, Loan Parties shall have the right to file, adjust, settle and prosecute any claim for such insurance proceeds; provided, however, that Loan Parties shall not agree to any adjustment or settlement of any such claim payable with respect to a Casualty the insurance proceeds with respect to which are greater than the Casualty Threshold without the prior consent of the Requisite Lenders, which consent shall not be unreasonably withheld, conditioned or delayed.  Loan Parties shall within ten (10) days after demand pay to Agent all documented, reasonable out-of-pocket costs and expenses (including the fee of any insurance consultant or adjuster and reasonable attorneys’ fees and disbursements) incurred by Agent in connection with a Casualty and seeking and obtaining any insurance proceeds, award or payment with respect thereto.  Net Proceeds held by Agent, together with any interest earned thereon, shall constitute additional security for the payment of the Obligations (a security interest therein being granted hereby), until the earlier of the disbursement of such Net Proceeds and interest in accordance with this Section 6.12 or the satisfaction of the Obligations (other than Contingent Obligations).

 

(c)                                  Loan Parties shall, at the sole cost and expense of Loan Parties, promptly commence and diligently and continually perform to completion the Restoration in a good and workmanlike manner and in compliance with all Legal Requirements and the requirements of the Permitted Encumbrances which, if not complied with is reasonably likely to result in a Material Adverse Effect, whether or not Loan Parties shall have satisfied the requirements of Section 6.12(d) in order to cause the Net Proceeds to be made available for such Restoration and whether or not such insurance proceeds on account of the Casualty shall be sufficient for such purpose.

 

(d)                                 In the case of any Casualty with respect to which the insurance proceeds payable are less than the Casualty Threshold and provided that no Event of Default shall then exist, the Net Proceeds shall be held by Loan Parties to be applied and used for the Restoration.  If the insurance proceeds are equal to or greater than the Casualty Threshold, the Net Proceeds shall be held by Agent, if Agent so elects, in an interest bearing account, as a part of the Collateral and shall be applied by Agent as follows:

 

(i)                                     Subject to the terms of the Ground Lease, the Net Proceeds shall be made available to reimburse Loan Parties for the costs of Restoration or to be applied directly to such costs provided that the following conditions are satisfied (each a “Release Condition” and collectively, the “Release Conditions”):

 

(A)                              no Event of Default shall have occurred and be continuing;

 

(B)                                the loss is in an aggregate amount less than twenty-five percent (25%) of the outstanding principal amount of the Loan (or such higher amount agreed to by the Requisite Lenders in their sole and absolute discretion);

 

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(C)                                the Ground Lease shall remain in full force and effect during and after the completion of the Restoration, notwithstanding the occurrence of such Casualty;

 

(D)                               Loan Parties shall have demonstrated to the reasonable satisfaction of Agent that the Restoration can be completed at least six (6) months prior to the scheduled Maturity Date, or such earlier time as may be required by applicable Legal Requirements;

 

(E)                                 Loan Parties shall have demonstrated to the reasonable satisfaction of Requisite Lenders that sufficient funds are available to Loan Parties through rent and/or business interruption insurance maintained pursuant to this Loan Agreement, cash and/or a Letter of Credit or other similar cash-equivalent security reasonably satisfactory to Agent as to form, content and issuer, and which shall be for the benefit of Agent, to pay any anticipated shortfall in Debt Service with respect to the Loan or operating expenses with respect to the Mortgaged Property during the period reasonably estimated by Loan Parties as necessary for the completion of the Restoration;

 

(F)                                 to the extent, in the Requisite Lenders’ reasonable and good faith judgment, the Net Proceeds are insufficient to pay the costs of the Restoration, Loan Parties shall have provided Agent with a Letter of Credit, cash deposit or similar equivalent security in the amount of such deficiency in form and content and with an issuer reasonably satisfactory to Agent;

 

(G)                                Agent shall have been provided an Appraisal or any Appraisal Update, certifying that upon completion of the Restoration of the Mortgaged Property the Loan-to-Value Ratio shall be equal to or less than the Loan-to-Value Ratio immediately preceding the subject Casualty;

 

(H)                               Agent shall have reasonably determined that upon completion of the Restoration, the Adjusted Debt Service Coverage Ratio shall not be less than the Minimum DSCR, provided that Loan Parties may provide Agent with a Letter of Credit, cash deposit or similar equivalent security in a face amount which, if deducted from the outstanding principal would cause the Adjusted Debt Service Coverage Ratio to be greater than or equal to the Minimum DSCR; and

 

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(I)                                    Agent shall have received architectural plans and specifications for the Restoration and an estimate of the costs and expenses of all such Restoration, all of which shall be in form reasonably acceptable to Agent.

 

(ii)                                  Notwithstanding anything to the contrary in this Section 6.12(d), if Agent (with the consent of the Requisite Lenders) does not elect to hold the Net Proceeds which it has the right to hold pursuant to Section 6.12(b) or 6.12(d), Loan Parties shall not disburse any Net Proceeds other than in accordance with the conditions of this Section 6.12(d) and Sections 6.12(e) and (f).

 

(e)                                  If one or more of the Release Conditions are not satisfied or otherwise waived by the Requisite Lenders within one hundred eighty (180) days (or such longer period as may be agreed to by Agent (with the consent of the Requisite Lenders) in writing) of the date of the Casualty, Net Proceeds may be applied in accordance with Section 6.12(h).

 

(f)                                    All documented, reasonable out-of-pocket costs and expenses incurred by Agent in connection with making the Net Proceeds available for the Restoration (including documented, reasonable out-of-pocket attorneys’ fees and disbursements and reasonable fees and actual out-of-pocket expenses of Agent’s construction consultants and inspectors) shall be paid by Loan Parties.  Any Net Proceeds (including, without limitation, any excess business interruption/rent loss proceeds) remaining after the Restoration and the payment in full of all costs incurred in connection with the Restoration shall, provided that no Event of Default shall be continuing, be distributed by Agent to Loan Parties.

 

(g)                                 Business interruption/rent loss insurance proceeds of Loan Parties shall be deposited into either (i) an Account or subaccount of Agent or (ii) an Account at a bank or other financial institution approved by Agent and shall be disbursed to Loan Parties each month in the amount equal to the proceeds allocable to such month.  Loan Parties hereby grant to Agent a security interest in all rights of Loan Parties in and to such Account and all sums on deposit therein as additional security for the Obligations.  Upon the occurrence and during the continuation of an Event of Default, Agent shall have the rights and remedies with respect to such Account specified in this Loan Agreement and in any other Loan Document.  If held by Agent, the credit balance in such Account or subaccount may be commingled with the general funds of Agent.  If not held by Agent, Loan Parties shall cause the bank or financial institution at which such Account is held to execute and deliver to Agent an Account Agreement with respect to such Account, Loan Parties shall pay all fees and costs with respect thereto and Loan Parties shall not close such account without obtaining the prior consent of Agent, or to the extent that such closed Account is not immediately replaced with another Account which shall be subject to a security interest in favor of Agent, the Requisite Lenders.  Neither Agent nor Lenders shall be liable for any loss of interest on or any penalty or charge assessed against the funds in, payable on, or credited to such Account as a result of the exercise by Agent of any of its rights or remedies hereunder or under any other Loan Document.  Any interest earned on the balance of such Account shall be deposited into such account and be applied with the balance of such account in accordance with this Section 6.12(g).  Agent shall have sole control over such Account subject to the terms of the Account Agreement.

 

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(h)                                 Upon a Casualty, if the disposition of the Net Proceeds is governed by Section 6.12(e), at the option of Requisite Lenders, the Loan shall be due and payable upon sixty (60) days prior written notice to Loan Parties or, if earlier, the Maturity Date.  Regardless of whether Agent shall so elect to accelerate the maturity of the Loan as aforesaid, Agent (with the approval of the Requisite Lenders) shall have the option to (i) make available the Net Proceeds to Loan Parties for Restoration in the manner provided in Section 6.12(d) or (ii) apply the Net Proceeds to the Obligations, in such order and manner as Requisite Lenders determine, as the case may be, without payment of the Prepayment Fee or any other prepayment premium, fee or penalty (for the avoidance of doubt, it is agreed that the payment of Additional Interest shall not be deemed to be a penalty or premium).

 

(i)                                     With respect to any Net Proceeds which Agent is required to make available (or otherwise elects to make available in its sole discretion), such Net Proceeds shall be disbursed to Loan Parties from time to time in accordance with Agent’s customary and reasonable construction lending practices and upon the receipt of the following, each in form and substance reasonably satisfactory to Agent:

 

(i)                                     A request for disbursement signed by Loan Parties, accompanied by billing statements, vouchers or invoices, which request for disbursement shall expressly warrant that the work with respect to which the advance is requested has been or will be performed in accordance with the approved plans and specifications for the Restoration;

 

(ii)                                  Proof that all invoices for labor and materials previously submitted by Loan Parties and approved and reimbursed or paid by Agent have been paid, except for those the subject of the current request for disbursement;

 

(iii)                               With respect to payments in excess of $25,000, Lien waivers for all payees under previous requests for disbursements;

 

(iv)                              If requested by Agent, a report from Loan Parties’ architect or, if Agent shall elect, Agent’s consultant, which shall specify the percentage of completion of Restoration, shall provide reasonably detailed comments on specific work performed since the date of the last such report, and, if required by Agent, an estimate of the cost to complete the Restoration after taking into account the work then completed;

 

(v)                                 At the request of Agent, a title report which shall show no Liens of record (other than Permitted Encumbrances);

 

(vi)                              If requested by Agent, copies of the agreements pursuant to which the Restoration or repair shall be done, including, without limitation, any general contractor agreement, construction management agreement, architect’s agreement or material subcontract, all of which shall be in form and substance reasonably satisfactory to Agent, and which also shall be reasonably satisfactory to Agent as to the party performing the construction obligations thereunder;

 

(vii)                           If requested by Agent, a collateral assignment to Agent of all construction and design-professional contracts with respect to the Restoration (which 

 

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may be pursuant to the Assignment of Agreements), together with the written consent to such assignments by all parties to such contracts (which may be included in any such contract); and

 

(viii)                        If requested by Agent, such other information and documentation as Agent may reasonably and in good faith request regarding the Improvements and the Restoration and the cost thereof.

 

(j)                                     Notwithstanding anything to the contrary contained in this Section 6.12, in the event of any conflict between the provisions of this Section 6.12 and the Ground Lease with respect to the payment or application of Net Proceeds, the provisions of the Ground Lease shall control.  In amplification of the foregoing sentence, the Net Proceeds shall be applied to the costs of Restoration to the extent required by the Ground Lease; provided that (i) the Release Conditions (C), (F) and (I) set forth in Section 6.12(d) have been satisfied and (ii) the disbursement of any Net Proceeds shall be subject to Section 6.12(i).  If a Loan Party or its Affiliate should hereafter acquire the lessor’s interest in the Ground Lease, the provisions of this Section 6.12(j) shall automatically cease to be of any force or effect.

 

Section 6.13                            Taking of the Mortgaged Property.

 

(a)                                  Within five (5) Business Days after the occurrence thereof, Loan Parties shall notify Agent of any Taking of any portion of the Mortgaged Property or the commencement of any proceedings or negotiations which could be reasonably expected to result in such a Taking.  Such notice shall generally describe the nature and extent of such Taking or the nature of such proceedings or negotiations and the nature and extent of the Taking which might result therefrom.  Agent shall be entitled hereunder to hold and apply in accordance with this Section 6.13 all awards or compensation payable to or on account of Loan Parties by reason of a Taking if such awards or compensation exceed the Condemnation Threshold.  Each Loan Party hereby irrevocably assigns, transfers and sets over to Agent all rights of each Loan Party to any such awards or compensation and irrevocably authorizes and empowers Agent, in the name of Loan Parties or otherwise, to collect and receipt for any such award or compensation and grants to Agent the right to file and prosecute any and all claims for any such awards or compensation and to participate in any and all hearings, trials and appeals in connection with a Taking on behalf of Loan Parties to the extent the condemnation award or compensation exceeds the Condemnation Threshold; provided that, so long as no Event of Default shall be continuing, Agent shall not exercise the right to file and/or prosecute any such claim and Loan Parties shall have the right to settle claims with the reasonable prior consent of the Requisite Lenders.  Upon the occurrence and continuance of an Event of Default, Agent may participate in such proceedings or negotiations upon prior notice to Loan Parties and Loan Parties will deliver or cause to be delivered to Agent all instruments requested by Agent to permit such participation; provided, however, that Agent shall be under no obligation to question the amount of the award or compensation.  Although it is hereby expressly agreed that the same shall not be necessary, and in any event, Loan Parties shall, upon demand of Agent, make, execute and deliver any and all assignments and other instruments sufficient for the purpose of assigning any such award or compensation in excess of the Condemnation Threshold to Agent, free and clear of any encumbrances of any kind or nature whatsoever other than Permitted Encumbrances.  In connection with a taking where the condemnation award or compensation exceeds the 

 

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Condemnation Threshold, Agent may be represented by counsel satisfactory to it at the reasonable expense of Loan Parties.  Loan Parties will pay within ten (10) days after demand therefor reasonable and documented out-of-pocket costs and expenses (including attorneys’ fees and disbursements and fees and disbursements of any appraiser or other consultant) incurred by Agent in connection with any Taking and seeking and obtaining any award or payment on account thereof.

 

(b)                                 Loan Parties shall, at their sole cost and expense, promptly commence and diligently and continually perform to completion the Restoration in a good and workmanlike manner and in compliance with all Legal Requirements and the requirements of the Permitted Encumbrances, whether or not Loan Parties shall have satisfied the Release Conditions in order to cause the Net Restoration Award to be made available for such Restoration and whether or not such awards or compensation, if any, on account of the Taking shall be sufficient for such purpose.

 

(c)                                  All Net Restoration Awards payable on account of a Taking in excess of the Condemnation Threshold (for the avoidance of doubt, it is understood that all Net Restoration Awards payable on account of a Taking in excess of the Condemnation Threshold shall be deposited with Agent, not merely the portion of such proceeds which exceeds the Condemnation Threshold) shall be held by Agent at its election in an interest bearing account.  All such Net Restoration Awards shall be applied as follows:

 

(i)                                     If the Release Conditions are satisfied (other than the Release Condition described in Section 6.12(d)(i)(A), which Release Condition shall not be applicable to a Taking), and the Taking is not a Material Taking, all Net Restoration Awards shall be applied to pay the cost of Restoration in accordance with the terms of the Ground Lease, such application to be effected in the same manner as provided in Section 6.12(d) with respect to Net Restoration Awards and the balance, if any, of such Net Restoration Awards shall, at the option of Agent, be applied as a prepayment of the principal amount of the Loan (and, provided that no Event of Default shall have occurred and be continuing, without payment of the Prepayment Fee or any other prepayment premium, fee or penalty (for the avoidance of doubt, it is agreed that the payment of Additional Interest shall not be deemed to be a penalty or premium)) or be paid over or assigned to Loan Parties following completion of the Restoration.

 

(ii)                                  If the Taking is a Material Taking or one or more of the Release Conditions are not satisfied within one hundred eighty (180) days of the date of the Taking (other than the Release Condition described in Section 6.12(d)(i)(B), which Release Condition shall not be applicable to a Taking), all Net Restoration Awards being held by Agent or Loan Parties shall be applied in accordance with Section 6.12(h).

 

(iii)                               In the case of a Taking for temporary use, any Net Restoration Awards shall be treated as business interruption/rent loss proceeds and shall be applied as set forth in Section 6.12(g).

 

(iv)                              Upon a Taking, if the disposition of the Net Restoration Awards is governed by Section 6.13(c)(ii), at the option of Agent, the Loan shall be due and payable 

 

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upon sixty (60) days prior written notice to Loan Parties, or if earlier, the Maturity Date.  Regardless of whether Agent shall so elect to accelerate the maturity of the Loan as aforesaid, Agent shall have the option to (i) make available the Net Restoration Awards to Loan Parties for Restoration in the manner provided in Section 6.12(d) or (ii) apply the Net Restoration Awards to the Obligations, in such order and manner as Agent determines, as the case may be without payment of the Prepayment Fee (unless an Event of Default shall then be continuing, in which event the Prepayment Fee shall be due and payable) or any other prepayment premium, fee or penalty (for the avoidance of doubt, it is agreed that the payment of Additional Interest shall not be deemed to be a penalty or premium).

 

(d)                                 Notwithstanding anything to the contrary contained in this Section 6.13, in the event of any conflict between the provisions of this Section 6.13 and the Ground Lease with respect to the payment or application of any Net Restoration Award, the provisions of the Ground Lease shall control.  In amplification of the foregoing sentence, the Net Restoration Award shall be applied to the costs of Restoration to the extent required by the Ground Lease provided that (i) the Release Conditions (C), (F) and (I) set forth in Section 6.12(d) have been satisfied and (ii) the disbursement of any Net Restoration Award shall be subject to Section 6.12(i).  If Loan  Parties or their Affiliates should hereafter acquire the lessor’s interest in the Ground Lease, the provisions of this Section 6.13(d) shall automatically cease to be of any force or effect.

 

Section 6.14                            Costs and Expenses.  Without limiting any other provision of this Loan Agreement or of any other Loan Document, Loan Parties shall pay within ten (10) days after demand by Agent (or to the extent expressly otherwise provided in this Loan Agreement, within the time period set forth within such express provision), to or for the account of Agent as the case may be, Agent’s Counsel Fees and all other documented, reasonable out-of-pocket costs and expenses incurred by or on behalf of Agent in connection with the closing of the Loan (together with the documented, reasonable out-of-pocket attorney’s fees of each Lender incurred in respect of negotiating Article VII and Article IX of this Loan Agreement for the Closing), any prepayments of the Loan, Agent’s responses to requests for consents and waivers under the Loan Documents, all payments from any Accounts, any modification, amendment or restructuring of the Loan or the Loan Documents requested by Loan Parties (regardless if such modification, amendment or restructuring closes) and, during an Event of Default, the enforcement of Agent’s and Lenders’ rights and remedies under the Loan Documents, including the following, whether currently outstanding or which may arise at any time during the term of the Loan:

 

(a)                                  all taxes and recording expenses, including all filing fees and mortgage recording and deed transfer taxes, with respect to the Security Documents, and any other documents requested by Loan Parties modifying, extending or consolidating the Security Documents;

 

(b)                                 in the event the Mortgaged Property or other Collateral, or any part thereof, shall be advertised for foreclosure sale and not sold, all costs in connection therewith, including documented, reasonable out-of-pocket attorneys’ fees and disbursements, advertising costs and trustees’ commissions;

 

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(c)                                  all title insurance charges and premiums; and

 

(d)                                 subject to the provisions hereof and/or the other Loan Documents, appraisal, fees and expenses and all costs of preparing environmental and insurance reports concerning the Premises.

 

Section 6.15                            Transfers.

 

(a)                                  No Transfer shall be made without the prior consent of all Lenders except for a Permitted Transfer; provided, that, in the case of a Permitted Transfer:

 

(i)                                     Except with respect to a Permitted Transfer described in clauses (d),(e) or (h) of the definition of “Permitted Transfer”, no Event of Default shall have occurred and be continuing as of the date of such Permitted Transfer;

 

(ii)                                  Except with respect to a Permitted Transfer described in clauses (d),(e), (f), (g) or (h) of the definition of “Permitted Transfer,” Loan Parties shall have given Agent prior written notice of the proposed Transfer, which notice shall identify the proposed transferee(s) and the proposed percentage interest to be transferred and include the following items:

 

(A)                              a revised organizational chart of Loan Parties which shall show the effect of such proposed Transfer, which organizational chart shall be in substantially the same form, detail and scope as the Loan Parties’ organizational chart delivered on the Closing Date;

 

(B)                                drafts (other than initial or interim drafts) of all consents, notices, instruments of transfer and other documents required to be executed or delivered under the organizational documents of the entity whose ownership interests are being transferred, along with any amendment to the organizational documents of the entity whose ownership interests are being transferred, any consent of the members, partners, shareholders, as applicable, of the entity whose ownership interests are being transferred, and any other instrument of transfer which is entered into or delivered in connection with any such transfer (and final executed copies of each of the foregoing shall be delivered to Agent within ten (10) days after the date upon which such Permitted Transfer occurs); and

 

(C)                                such information as may be reasonably requested by Agent within ten (10) Business Days of receipt of Loan Parties’ notice in order to evidence Loan Parties’ compliance with Sections 6.20 and 6.29;

 

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(iii)                               the proposed Transfer shall not result in Loan Parties, the transferor or the proposed transferee being in default under any Loan Document or under any other agreement, instrument or document of which any of the foregoing Persons is a party, either upon such transfer or but for the passage of time or the giving of notice or both;

 

(iv)                              all taxes (other than income taxes), including, stamp taxes, mortgage recording taxes, transfer taxes, recordation taxes, intangible taxes and other taxes, charges and fees incurred in connection with such Transfer shall have been paid by the transferor or the proposed transferee at the time of such proposed transfer, and if such amounts shall become due as a result of the proposed transferor’s or transferee’s direct or indirect ownership interest in Loan Parties or the Premises, evidence of such payment shall have been delivered to Agent within ten (10) days after such transfer;

 

(v)                                 Agent shall have been or shall be reimbursed for all documented, reasonable out-of-pocket expenses incurred by Agent, if any, in connection with such proposed transfer, including Agent’s Counsel Fees;

 

(b)                                 If, as a result of any Permitted Transfer, any Guarantor no longer owns any direct or indirect interest in Loan Parties, it shall also be a condition hereunder that a replacement guarantor (1) with a Net Worth and Cash or Cash Equivalents (as such terms are defined in the Recourse Liability Agreement) which is not less than $120,000,000 and $10,000,000, respectively, (2) which is otherwise satisfactory to the Lenders, (3) which is an Affiliate of the proposed transferee and (4) which owns a direct or indirect interest in Loan Parties, shall execute and deliver a recourse liability agreement (in the same form as the Recourse Liability Agreement) and an environmental indemnity agreement (in the same form as the Environmental Indemnity) on or prior to the date of such Permitted Transfer, pursuant to which, in each case, the replacement guarantor/indemnitor agrees to be liable under each such recourse liability agreement and environmental indemnity agreement from and after the date of such Permitted Transfer (whereupon the applicable Guarantor shall be released from any further liability under the Recourse Liability Agreement and Environmental Indemnity from and after the date of such Permitted Transfer and such replacement guarantor/indemnitor shall be the “Guarantor” for all purposes set forth in this Loan Agreement); and

 

(c)                                  Without limiting Section 6.15(a), Loan Parties shall not assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of its interest or rights in the Loan, the Loan Documents or the Collateral, or attempt to do any of the foregoing or suffer any of the foregoing, nor shall any party owning a direct or indirect interest in Loan Parties assign, sell, pledge, encumber, transfer, hypothecate or otherwise dispose of any of its rights or interest (direct or indirect) in Loan Parties, attempt to do any of the foregoing or suffer any of the foregoing, if such action would cause the Loan, or the exercise of any of Agent’s or Lenders’ rights in connection therewith, to constitute a prohibited transaction under ERISA or the IRC (unless Loan Parties furnish to Agent a legal opinion reasonably satisfactory to Lenders that the transaction is exempt from the prohibited transaction provisions of ERISA and the IRC) or otherwise result in Agent or any Lender being deemed in violation of any applicable provision of ERISA.  Loan  Parties agree to indemnify and hold Agent and Lenders free and harmless from and against all actual losses, reasonable out-of-pocket costs (including reasonable attorneys’ fees 

 

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and expenses), taxes, actual damages and reasonable expenses Agent or any Lender may suffer by reason of the investigation, defense and settlement of claims and in obtaining any prohibited transaction exemption under ERISA by reason of a breach of the foregoing prohibitions.

 

Section 6.16                            Defense of Title.  Loan Parties will defend title to the Premises and all other material Collateral, subject to the Permitted Encumbrances, but Agent shall have the right, at any time, to intervene in any suit affecting such title and to employ independent counsel in connection with any such suit to which it may be a party by intervention or otherwise; and upon demand, Loan Parties agree to pay Agent within ten (10) days of demand all documented, reasonable expenses paid or incurred by Agent in respect of any such suit affecting title to any such property or affecting Agent’s Lien or rights hereunder, including Agent’s Counsel Fees.  Loan Parties will indemnify and hold harmless Agent from and against any and all reasonable and documented out-of-pocket costs and expenses, including any and all cost, loss, damage or liability which Agent may suffer or incur by reason of the failure of Loan Parties to hold leasehold title to all or any part of the Premises or fee title to any part of the Improvements or of Agent to have a security interest in any material Collateral and all amounts at any time so payable by Loan Parties shall be secured by the Security Documents.

 

Section 6.17                            Recordation and Certain Taxes.  Loan Parties, at their sole cost and expense, shall pay all recording, registration and filing fees, taxes and other similar charges, including any recording, transfer or intangible personal property tax or similar imposition, with respect to the Security Documents, and shall comply with all Legal Requirements in order fully and effectively to establish, preserve, perfect and protect the lien of the Security Documents subject only to Permitted Encumbrances.  Loan Parties hereby authorize Agent to file UCC Financing Statements (and continuations thereof) with respect to the Collateral.

 

Section 6.18                            Name, Fiscal Year and Accounting Method.  Except as may be approved by Agent (which approval shall not be unreasonably withheld, conditioned or delayed), Loan Parties will not change its fiscal year or its method of accounting.

 

Section 6.19                            Consolidation, Merger, Conveyance, Transfer or Lease.  Without the prior consent of Requisite Lenders, Loan Parties shall not consolidate with or merge into any other Person or convey, transfer or lease its properties or assets substantially as an entirety to any Person.

 

Section 6.20                            Organization Restrictions.  Each Loan Party shall at all times be a Single Purpose Entity.  Each Loan Party shall not (i) make or permit any change, amendment or modification to any of its organizational documents that would be material and adverse to the interests of Agent or Lenders or (ii) terminate or cancel or permit any termination or cancellation of its organizational documents, in each case without the prior consent of the Requisite Lenders (which consent shall not be unreasonably withheld, conditioned or delayed).  Each Loan Party shall not take or permit any action which would result in a Loan Party not being a Single Purpose Entity.

 

Section 6.21                            Changes in Zoning.  Loan Parties shall not request or seek to obtain any change to, or consent to any request for or change in, any Legal Requirement, restrictive covenant or other restriction applicable to the Premises or any portion thereof or any 

 

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other law, ordinance, rule, or regulation affecting the zoning, development or use of the Premises or any portion thereof, or any variance or special exception therefrom that would be binding on any Loan Party or the Premises, without the prior consent of the Requisite Lenders (which consent shall not be unreasonably withheld, conditioned or delayed).

 

Section 6.22                            Distributions, Dividends and Affiliate Payments.  Loan Parties shall not make any dividends, payments (other than to Hilton in its capacity as Property Manager as expressly set forth in the Management Agreement) or distributions to any direct or indirect owner of any equity interest issued in Loan Parties (solely on account of its capacity as a direct or an indirect owner of Loan Parties) (i) during the continuance of an Event of Default or a Cash Sweep Condition or (ii) at any time during which the Adjusted Debt Service Coverage Ratio as of the then most recent Testing Determination Date shall be less than the Minimum DSCR (after giving effect to any principal reductions of the Loan or any reduction in the stated amount of any Letter(s) of Credit (other than a Lease Letter of Credit) delivered to Agent).

 

Section 6.23                            ERISA.  Loan Parties shall not at any time while any Obligation remains outstanding have any employees or engage in any transaction which would cause any obligation or action taken or to be taken hereunder by Loan Parties to be a non-exempt (under a statutory or administrative class exemption) prohibited transaction under ERISA.  Loan Parties (i) shall, and shall cause all ERISA Affiliates to make all required contributions to any Pension Plan or Multiemployer Plan and (ii) shall not, nor shall it permit any ERISA Affiliate to, cause or permit to occur an event that would result in the imposition of a Lien under IRC Section 430(k) or Section 303(k) or 4068 of ERISA, or any ERISA Event that is reasonably likely, alone or in the aggregate with all other ERISA Events, to have a Material Adverse Effect on Loan Parties.

 

Section 6.24                            Maintenance of Existence.  Each Loan Party shall (a) qualify to do business in and remain in good standing under the laws of its jurisdiction of organization and the State where the Premises are located and, to the extent a Material Adverse Effect is reasonably likely to result from the failure to qualify or remain in good standing, under the laws of such other jurisdiction as may be required for the ownership, management and operation of its assets, (b) preserve, renew and keep in full force and effect its existence as an entity organized and existing pursuant to the laws of its jurisdiction of organization and qualified to do business in the State where the Premises are located, (c) maintain all rights, privileges and franchises necessary for the conduct of its business in its jurisdiction of organization and the State where the Premises are located, and any other jurisdiction to the extent a Material Adverse Effect is reasonably likely to result from the failure to maintain such rights, privileges and franchises, and (d) comply in all material respects with all Legal Requirements with respect to the foregoing.

 

Section 6.25                            Subsidiaries and Joint Ventures.  Loan Parties shall not acquire any stock or assets of, or form a partnership, joint venture or other similar arrangement with, any Person, without the prior consent of all of the Lenders.  For the avoidance of doubt, it is acknowledged that this Section 6.25 shall not prohibit the acquisition by Loan Parties of FF&E or inventory in the ordinary course of business.

 

Section 6.26                            Intentionally Deleted.

 

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Section 6.27                            Utilities.  Loan Parties shall pay, or cause to be paid, all charges for all utility services at any time rendered to the Premises subject to Loan Parties’ right to challenge, in good faith, such charges from time to time in accordance with Section 6.8, the payment of which is the obligation of Loan Parties in connection with the Premises and will do all other things required for the maintenance and continuance of utility services necessary for the operation, use and occupancy of the Premises for their intended purposes in accordance with this Loan Agreement, and use commercially reasonable efforts to ensure that they are available at the boundaries of the Premises.

 

Section 6.28                            Margin Stock.  Loan Parties shall not use any of the proceeds of the Loan for the purpose of purchasing or carrying “margin stock” within the meaning of Regulation T, U or X issued by the Board of Governors of the Federal Reserve System, as at any time amended, and Loan Parties agree to execute all instruments necessary to comply with all the requirements of Regulation U of the Federal Reserve System, as at any time amended.

 

Section 6.29                            Compliance with Anti-Money Laundering and OFAC Laws.

 

(a)                                  Loan Parties shall comply at all times with the requirements of all Anti-Money Laundering Laws in all material respects.

 

(b)                                 Loan Parties shall provide Agent any information regarding Loan Parties, their Affiliates, and their subsidiaries necessary for Agent and Lenders to comply with all Anti-Money Laundering Laws.

 

(c)                                  Loan Parties shall comply at all times with the requirements of all OFAC Laws in all material respects.

 

(d)                                 Neither Loan Party, any Affiliates, subsidiaries nor Persons holding any legal or beneficial interest in Loan Parties (whether directly or indirectly) shall, conduct business with or engage in any transaction with any Person named in any Government List or any Person included in, owned by, Controlled by, acting for or on behalf of, providing assistance, support, sponsorship, or services of any kind to any of the Persons referred to or described in any Government List in violation of Legal Requirements.

 

(e)                                  If either Loan Party obtains actual knowledge or receives any written notice that a Loan Party or any Affiliate or subsidiary of a Loan Party or any Person holding any legal or beneficial interest whatsoever therein (whether directly or indirectly) is named on any Government List (such occurrence, an “OFAC Violation”), such Loan Party shall promptly (i) give written notice to Agent of such OFAC Violation and (ii) comply with all applicable laws with respect to such OFAC Violation (regardless of whether the party included on the OFAC SDN List is located within the jurisdiction of the United States of America), including the OFAC Laws, and each Loan Party hereby authorizes and consents to Agent’s or any Lender taking any and all steps Agent or any Lender deems necessary, in its sole but good faith discretion, to comply with all applicable laws with respect to any such OFAC Violation, including the requirements of the OFAC Laws that are legally binding on Agent or any Lender (including the “freezing” and/or “blocking” of assets and reporting such action to OFAC as may be legally required on account of any actual or potential OFAC Violation).

 

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(f)                                    Upon Agent’s request from time to time (to be made not more frequently than once in any twelve (12) month period), Loan Parties shall deliver a certification confirming its compliance with the covenants set forth in this Section 6.29.

 

(g)                                 Without limiting Section 6.15, in the event that Loan Parties shall not be the ultimate beneficiary of the Loan, Loan Parties shall immediately notify Agent of same in writing, which written notice shall include the name and address of the new ultimate beneficiary.

 

Section 6.30                            Limitation on Indebtedness.  Loan Parties shall not incur, create, contract for, assume, have outstanding, guarantee or otherwise become liable with respect to Indebtedness other than Permitted Indebtedness.

 

Section 6.31                            Loans to Members, Etc.  Loan Parties shall not make any loan or advance to Loan Party Member or to any employee or Affiliate of Loan Parties, except for business travel, out-of-pocket incidental personal business expenses and similar advances in the ordinary course of business.

 

Section 6.32                            Transactions with Affiliates.  Loan Parties shall not enter into, or be a party to, any transaction with any Affiliates of Loan Parties except contracts for the providing of goods and services in the ordinary course of Loan Parties’ business and upon fair and reasonable terms which are fully disclosed to Agent and are no more onerous to it than it would obtain in a comparable arm’s length transaction with a Person not its Affiliate.  Lenders acknowledge that for purposes of this Section 6.32, the Management Agreement constitutes an arm’s length agreement between Loan Parties and Property Manager.

 

Section 6.33                            Debt Service Coverage Ratio.  Loan Parties shall cause the Premises to maintain, as to any Testing Determination Date, a Debt Service Coverage Ratio of not less than 1.15:1.00 (the “Default DSCR”); provided that the failure of the Premises to maintain a Debt Service Coverage Ratio greater than or equal to the Default DSCR at any time shall not constitute a Default or an Event of Default if, within thirty (30) days after the delivery of the Quarterly Compliance Statement required to be delivered to Agent pursuant to Section 6.1(c) for the Calendar Quarter ending on such Testing Determination Date, Borrower either (y) makes a partial principal prepayment of the Loan in an amount such that, after giving effect thereto as though made on the first day of the twelve (12) month period ending on such Testing Determination Date most recently ended (but, for the avoidance of doubt, giving effect to Required Amortization Payments and other payments of principal actually received during such twelve (12) month period), the Debt Service Coverage Ratio would be greater than or equal to the Default DSCR (which prepayment Borrower shall not be permitted to make prior to the Permitted Prepayment Date) or (z) Borrower delivers to Agent a Default DSCR Letter of Credit.  Any such Letter(s) of Credit delivered to Agent shall be held in accordance with Section 3.6.  Agent shall return each Default DSCR Letter of Credit then being held by Agent at such time as the Adjusted Debt Service Coverage Ratio shall have been equal to or greater than the Minimum DSCR as of two (2) consecutive Testing Determination Dates; provided that, if the Adjusted Debt Service Coverage Ratio is less than the Minimum DSCR for four (4) consecutive Testing Determination Dates, then Agent, may, if directed by the Requisite Lenders, draw on such Default DSCR Letter of Credit and apply the proceeds thereof to the Obligations in such order as 

 

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Agent may elect.  Any prepayment made in accordance with this Section 6.33 shall not be subject to payment of the Prepayment Fee.

 

Section 6.34                            Required Repairs.  Loan Parties shall perform the repairs and other work at the Premises as set forth on Schedule 6.34 hereto in all material respects (such repairs and other work hereinafter referred to as “Required Repairs”) and shall complete each of the Required Repairs on or before the date specified on Schedule 6.34.

 

Section 6.35                            Ground Lease.

 

(a)                                  Borrower shall:

 

(i)                                     pay when due any installment of fixed rent payable under the Ground Lease prior to the expiration of any applicable grace period following delivery of the notice required, if any, under the Ground Lease to commence such grace period;

 

(ii)                                  pay additional rent or other charge payable under the Ground Lease prior to the expiration of any applicable grace period following delivery of the notice required, if any, under the Ground Lease to commence such grace period, and

 

(iii)                               observe and perform all other terms, covenants and conditions of the Ground Lease prior to the expiration of any applicable grace period provided therein following the delivery of the notice, if any, required under the Ground Lease to commence such grace period.

 

(b)                                 Borrower shall not:

 

(i)                                     cause or permit the occurrence of any event that would cause the Ground Lease to terminate without notice or action or would entitle Ground Lessor to terminate the Ground Lease and the term after applicable notice and grace periods, if any, thereof by giving notice to Borrower;

 

(ii)                                  voluntarily surrender the leasehold estate created by the Ground Lease;

 

(iii)                               cause or permit the termination of Ground Lease; or

 

(iv)                              cause or permit any term of the Ground Lease to be modified or supplemented without the prior consent of the Requisite Lenders.

 

Section 6.36                            Operating Leases.

 

(a)                                  Each Loan Party shall (i) perform and observe as and when required thereunder all of the covenants required to be performed and observed by it under the Operating Lease; (ii) promptly notify Agent of any default (beyond any applicable notice, grace or cure period) under the Operating Lease; and (iii) promptly deliver to Agent (without duplication) a copy of any notice of default or other material notice under the Operating Lease delivered to or from a Loan Party.

 

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(b)                                 If at any time, (i) Operating Lessee shall become insolvent or a debtor in a bankruptcy proceeding or (ii) Agent or its designee has taken title to the Premises by foreclosure, deed in lieu, or assignment in lieu of foreclosure, has become a mortgagee-in-possession or has otherwise taken title to the Premises, Agent shall have the absolute right to (and each Loan Party shall reasonably cooperate and not in any way hinder, delay or otherwise interfere with Agent’s right to), immediately terminate the Operating Lease.

 

(c)                                  Loan Parties shall not, without the prior written consent of Agent, which consent shall not be unreasonably withheld: (i) surrender, terminate or cancel the Operating Lease or otherwise replace the Operating Lessee or enter into any other operating lease with respect to the Premises; provided, however, at the end of the term of the Operating Lease, Borrower may renew the Operating Lease or enter into a replacement Operating Lease with Operating Lessee at rent mutually determined by Loan Parties pursuant to the Internal Revenue Code (if applicable) and otherwise on substantially the same terms as the expiring Operating Lease (but Agent shall have the right to approve any material change thereto) or (ii) reduce or consent to the reduction of the term of the Operating Lease.

 

ARTICLE VII

 

EVENTS OF DEFAULT

 

Section 7.1                                   Events of Default.  The following shall each constitute an “Event of Default” hereunder:

 

(a)                                  the failure of Borrower to pay when due the principal of, and accrued, unpaid interest on, the Note;

 

(b)                                 the failure of Borrower to pay within five (5) Business Days of the date due (i) any payment or deposit required pursuant to Section 2.4(c), Section 2.4(f), Section 2.4(g) or Article III or (ii) any Additional Interest following delivery of the certificate to Borrower detailing the calculation thereof;

 

(c)                                  the failure of Loan Parties, as applicable, (i) to pay within five (5) Business Days after same is due any payment on account of any fees when due under the Loan Fee Letter or (ii) to pay when due any other monetary Obligations, excluding those referred to in clause (a) or (b) of this Section 7.1 on or before the due date therefor and such failure described in this subclause (ii) continues for five (5) Business Days following notice to Loan Parties of such failure;

 

(d)                                 if any of the Impositions are not paid prior to the date such Impositions are delinquent, subject to the right to contest the same as set forth herein and/or in the other Loan Documents;

 

(e)                                  if the Insurance Policies required hereunder are not kept in full force and effect in accordance with the terms and conditions hereof;

 

(f)                                    if any Transfer is made in violation of the terms of this Loan Agreement or any other Loan Document which remains uncured for thirty (30) days (for the avoidance of 

 

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doubt, it is agreed that the foregoing thirty (30) day period shall commence upon the occurrence of the Transfer and not upon Agent delivering notice thereof to Loan Parties);

 

(g)                                 if, except as otherwise expressly permitted under Section 6.10 of this Loan Agreement, any Lease shall hereafter be entered into, terminated (other than by operation of its express terms), extended (other than by operation of its express terms), modified or amended by Loan Parties without the prior written consent of Agent or Requisite Lenders, as applicable;

 

(h)                                 if Loan Parties fail to deliver to Agent any financial statement or certificate required to be delivered pursuant to Section 6.1(a), (b) or (c), and such failure continues (i) for fifteen (15) days after written notice from Agent with respect to any such financial statement or certificate required to be delivered to Agent on a quarterly basis and (ii) for thirty (30) days after written notice from Agent with respect to any such financial statement required to be delivered to Agent on an annual basis, provided, that, Loan Parties shall not be entitled to more than two (2) written notices with respect to delivery of any of the foregoing financial statements and/or certificates during any twelve (12) month period, and if after said two (2) written notices have been delivered by Agent, any such financial statements or certificates are not provided to Agent within fifteen (15) days after the date such financial statement or certificate was required to be so delivered, with respect to any financial statement required to be delivered to Agent on a quarterly basis, or within thirty (30) days after the date such financial statement was required to be so delivered, with respect to any financial statement required to be delivered to Agent on an annual basis, an Event of Default shall occur without notice;

 

(i)                                     Loan Parties shall fail in the due performance or observance of any covenant, agreement or term binding upon Loan Parties contained in this Loan Agreement or in any other Loan Document, other than those covenants, agreements or terms which Loan Parties’ failure to perform would constitute another Event of Default referred to in this Section 7.1, and such failure shall continue un-remedied for more than thirty (30) days after notice thereof shall have been given to Loan Parties by Agent; provided, however, that if such failure is of a nature such that it cannot be cured by the payment of money and if such failure requires work to be performed, acts to be done or conditions to be removed which cannot by their nature, with due diligence, be performed, done or removed, as the case may be, within such thirty (30) day period and Loan Parties shall have commenced to cure such failure within such thirty (30) day period, such period shall be deemed extended for so long as shall be required by Loan Parties in the exercise of due diligence to cure such failure, but in no event shall such thirty (30) day period be so extended to be a period in excess of one hundred and twenty (120) days;

 

(j)                                     any “Event of Default” under any other Loan Document or any other default shall occur under any other Loan Document, and shall continue beyond the applicable grace period, if any, provided for therein, (other than a Default under this Loan Agreement, such a default being the subject of other provisions of this Section 7.1);

 

(k)                                  any warranty, representation or certification made by Loan Parties or Guarantor in or pursuant to this Loan Agreement or any other Loan Document or any document, instrument or certificate heretofore or hereafter executed and delivered in connection herewith or therewith shall prove to have been incorrect or misleading in any material respect when made or 

 

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deemed to have been made unless the breach of such representation, warranty or certification was unintentional and is susceptible to cure and such breach is cured to the reasonable satisfaction of the Requisite Lenders reasonable satisfaction within thirty (30) days after Borrowers’ receipt of notice that the applicable certification, representation or warranty was incorrect or misleading;

 

(l)                                     intentionally omitted;

 

(m)                               the Management Agreement is amended, modified or terminated without the prior consent or prior approval of the Requisite Lenders, to the extent such consent or approval is required pursuant to this Loan Agreement;

 

(n)                                 any breach or default by Borrower shall occur and shall continue, beyond any applicable grace period provided for therein, under any Interest Rate Protection Agreement;

 

(o)                                 Loan Parties or Guarantor (other than Hilton) shall (i) voluntarily commence a Bankruptcy Proceeding (of the type identified in clause (iii) of the definition thereof) under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely manner any such proceeding or petition (unless instituted by Agent or any of the Lenders), (iii) take any actions described in clause (i) of the definition of Bankruptcy Proceeding (except with respect to the appointment of a receiver or trustee which is requested by Agent or any of the Lenders), (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding (other than petition by Agent or any of the Lenders and other than to make a true, correct and complete response to such petition), (v) make a general assignment for the benefit of creditors (other than Agent or the Lenders) or (vi) admit in writing its inability to pay its debts generally as they become due;

 

(p)                                 except with respect to any Bankruptcy Proceeding initiated by Agent or any of the Lenders, an involuntary Bankruptcy Proceeding shall be filed seeking (i) liquidation, reorganization or other relief in respect of Loan Parties or Guarantor (other than Hilton) or its debts, or of a substantial part of its assets, under any federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for Loan Parties or Guarantor (other than Hilton) or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for ninety (90) days or a final, non-appealable order or decree approving or ordering any of the foregoing shall be entered by a court of competent jurisdiction;

 

(q)                                 Borrower shall fail in the due performance and observance of any of its covenants contained in Sections 2.7 or 6.35;

 

(r)                                    Loan Parties shall fail in the due performance and observance of any of its covenants contained in Sections 6.10(a), 6.19, 6.20, 6.22, 6.23, 6.33, 6.34, 6.35, or 6.36; or

 

(s)                                  (i) Loan Parties or Guarantor shall have incurred any liability, or an event or action shall have occurred that could reasonably be expected to cause Loan Parties to incur any liability, (x) with respect to any Pension Plan, including any liability under Section 412 of 

 

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the IRC or Title IV of ERISA or (y) on account of a partial or complete withdrawal (as such terms are defined in Section 4203 and 4205 of ERISA, respectively) from, unpaid contributions to, or the reorganization, termination or insolvency of, any Multiemployer Plan or (ii) Loan Parties or Guarantor shall have engaged in any transaction in connection with which Loan Parties could be subject to either a material civil penalty assessed pursuant to the provisions of Section 502 of ERISA or a material tax imposed under the provisions of Section 4975 of the IRC, and in each case in subclauses (i) and (ii) of this clause (s), such event or condition, together with all other such events or conditions under this clause (s), if any, is reasonably likely to result in a Material Adverse Effect or which would materially and adversely impair the ability of Agent and/or Lenders to enforce or collect any of the Obligations.

 

Section 7.2                                   Acceleration of Loan.  In addition to any other rights and remedies which Agent and Lenders may have under this Loan Agreement and the other Loan Documents or pursuant to law or equity, and without limitation thereof, upon and at any time during the occurrence of any Event of Default, Agent may, with the consent or at the direction of the Requisite Lenders, by notice to Loan Parties, declare the indebtedness evidenced by the Note, together with all other sums payable thereunder and under the other Loan Documents (including, with respect to any acceleration prior to the Permitted Prepayment Date, the Spread Maintenance Premium applicable thereto and with respect to any acceleration from and after the Permitted Prepayment Date and prior to the Par Prepayment Date, the Prepayment Premium applicable thereto), immediately due and payable (except with respect to any event of the nature described in Section 7.1(o) or (p), with respect to which such indebtedness and other sums shall automatically become due and payable upon the occurrence of any such event) and may exercise Agent’s rights and remedies pursuant to any one or more of the Security Documents, the other Loan Documents or as may be available at law or equity.

 

Section 7.3                                   Agent’s Right to Perform; Protective Advances.  (a) In addition to any other rights and remedies which Agent may have under this Loan Agreement and the other Loan Documents or pursuant to law or equity, and without limitation thereof, upon the occurrence and during the continuance of any Event of Default, Agent may, in its own name or in the name of Loan Parties, (i) enter upon and into possession of the Premises and any other Collateral, (ii) assume and/or perform all or any portion of the obligations and exercise all or any portion of the rights of Loan Parties under any or all Leases, agreements and documents to which a Loan Party is a party or by which the Premises are bound, (iii) satisfy liens, claims and judgments against the Collateral, (iv) pay Impositions, Carrying and Marketing Costs, insurance premiums and other operating expenses of the Premises, (v) perform and complete any construction or renovation that is then underway or scheduled to be done or required to be done pursuant to a Lease or otherwise at Loan Parties’ expense, and/or (vi) perform reconstruction and maintenance of, and otherwise operate, the Premises or any portion thereof, all at the sole risk, cost and expense of Loan Parties.  Agent shall have the right to discontinue any work commenced by Agent and to change any course of action undertaken by it and shall not be bound by any limitations or requirements of time whether set forth herein or otherwise.  Upon the occurrence and during the continuance of an Event of Default, Agent shall have the right and power (but shall not be obligated) to assume all or any portion of the obligations of Loan  Parties under any or all Leases, agreements and documents as Agent may elect and to take over and use all or any part or parts of the labor, materials, supplies and equipment contracted for by or on behalf of Loan Parties, whether or not previously incorporated into the Premises.  Upon the 

 

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occurrence and during the continuance of an Event of Default, Loan Parties hereby appoint Agent as its attorney-in-fact (coupled with an interest), with full power of substitution, and in the name of Loan Parties, if Agent elects to do so, at any time upon the occurrence and during the continuance of any Event of Default, (a) to use such sums as are necessary including all or any portion of the funds in the Accounts to pay the reasonable and documented out-of-pocket costs of the foregoing, (b) to endorse the name of Loan Parties on any checks or drafts representing proceeds of the insurance policies or condemnation awards, or other checks or instruments payable to Loan Parties with respect to the Collateral, (c) to prosecute or defend any action or proceeding incident to the Collateral, (d) to terminate any contract pertaining to the Collateral or any portion thereof and any other contract to which a Loan Party is party, (e) to negotiate and execute, on behalf of Loan Parties, any Lease, Management Agreement or other agreement, and amendment, modification, extension or supplement thereto and (f) to do every act with respect to the Premises, including the alteration or construction that is then underway or scheduled to be done or required to be done pursuant to a Lease or otherwise at Loan Parties’ expense, repair, reconstruction, maintenance, leasing and operation thereof or any portion thereof, which Loan Parties otherwise may do.  The power-of-attorney granted hereby is a power coupled with an interest and is irrevocable.  Agent shall have no obligation to undertake any of the foregoing actions, and if Agent should do so, it shall have no liability to Loan Parties for the sufficiency or adequacy of any such actions taken by Agent, except with respect to liability arising from Agent’s fraud, gross negligence or willful misconduct.  In connection with the foregoing (and upon the occurrence and during the continuance of any Event of Default), Agent may in good faith elect in order to protect Agent’s and/or Lenders’ interest in the Premises:

 

(i)                                     engage builders, construction managers, architects, general and trade contractors, suppliers, architects, engineers, inspectors and others for the purpose of furnishing labor, materials, equipment and fixtures;

 

(ii)                                  pay, settle or compromise all bills or claims which may become Liens against the Premises, or which have been or may be incurred in any manner in connection with such construction, reconstruction, renovation or repair or for the discharge of liens, encumbrances or defects in the title of the Premises; and

 

(iii)                               take such other action (including the employment of watchmen and the taking of other measures to protect the Premises) or refrain from acting under this Loan Agreement as Agent may in from time to time determine without any limitation whatsoever.

 

(b)                                 Loan Parties shall be liable to Agent for all documented, reasonable out-of-pocket sums paid or incurred in connection with the construction, reconstruction, or repair of the Premises whether the same shall be paid or incurred pursuant to the provisions of this Section 7.3, and all other payments made or liabilities incurred by Agent under this Loan Agreement of any kind whatsoever to the extent consistent with the rights and remedies granted to Agent and/or Lenders hereunder, all of which shall be paid by Loan Parties to Agent upon demand with interest at the Default Rate within ten (10) Business Days of receipt by Loan Parties of written notice from Lender of the payment of the same from the time incurred by Agent to the date of payment to Agent, and all of the foregoing sums, including such interest at 

 

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the Default Rate, shall be deemed and shall constitute disbursements of Loan proceeds under this Loan Agreement and be evidenced by the Note and secured by the Security Documents.

 

Section 7.4                                   Assignment of Funds.  During the continuance of any Event of Default, the rights, powers and privileges provided in Section 7.3 and all other remedies available to Agent under this Loan Agreement or the other Loan Documents or by statute or by rule of law or equity may be exercised by Agent at any time and from time to time whether or not the Obligations shall be due and payable, and whether or not Agent shall have instituted any foreclosure or other action for the enforcement of any of the Security Documents, the Note or the other Loan Documents.  Loan Parties hereby assign to Agent a security interest in all right, title and interest of Loan Parties to all sums held in the Accounts and to the extent not held in an Account, all sums held by Agent for the account of Loan Parties and any other security delivered by Loan Parties as additional security (a security interest in all of the foregoing being granted hereby to Agent) for the Loan and the performance by Loan Parties of their obligations under the Loan Documents, all of which security may be utilized by Agent for the purposes set forth in Section 7.3 or the other Loan Documents or applied against the Obligations in such order and manner as Agent shall determine.

 

Section 7.5                                   Accounts.  Notwithstanding anything to the contrary contained herein, but subject to the terms of the Manager SNDA, at the direction of the Requisite Lenders issued after the occurrence and during the continuance of an Event of Default, the rights of Loan Parties and each and every other Person (excluding Agent) with respect to Accounts, upon notice to Loan Parties, shall immediately terminate, and no such Person except Agent shall make any further withdrawal therefrom and except with respect to checks initially issued in respect of such Account before such notice but presented for payment after such notice.  Thereafter, Agent may from time to time designate such signatories with respect to the Accounts as Agent may desire, and may make or authorize withdrawals from the Accounts (other than the Tenant Security Account) to pay the Obligations in whole or in part and/or pay operating expenses and Capital Expenses with respect to the Premises, including the sale and marketing thereof, and/or any other expenses, all as Agent may deem necessary or appropriate and in such order as Agent may elect, subject in each case to the terms of the Manager SNDA.  Agent may notify the financial institutions in which any Account is held that Loan  Parties no longer have a right to instruct such financial institution with respect to matters relating to the withdrawal, operation or administration of, or investment or application of funds on deposit in such Account, subject to the terms of the Manager SNDA.  Without limiting the foregoing, Agent shall have the right, subject to the terms of the Manager SNDA, to cause the withdrawal of all funds on deposit in any Account and the deposit of such funds in an account established with Agent at any time following receipt by Loan Parties and the financial institution in which such Account is held of a notice from Agent pursuant to the Account Agreement with respect to such Account, and Loan Parties hereby authorize and direct such financial institutions to make payment directly to Agent of the funds in or credited to such accounts, or such part thereof as Agent may request.  Such financial institution shall have the absolute right to rely upon such notice without inquiring as to the accuracy of the matters referred to in such notice and the depositories shall be fully protected by Loan Parties in relying upon such written notice from Agent.  In the event that Agent delivers such a notice, Agent shall thereafter have the exclusive right to so instruct such financial institution.  Nothing in this Section 7.5 shall be construed so as to limit or impair Agent’s absolute right to have a receiver appointed following an Event of Default.

 

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Section 7.6            No Liability of Agent or Lenders.  Whether or not Agent elects to employ any or all of the remedies pursuant to the Loan Documents or otherwise available to it at law or equity upon the occurrence of an Event of Default, neither Agent nor Lenders shall be liable for the construction of or failure to construct, complete or repair any improvements, or with respect to any other rights or obligations of Loan Parties or their Affiliates, including the rights and obligations of Loan Parties in, to or under any Permitted Encumbrance or the Management Agreement, or to protect the Premises or the Collateral, or for payment of any expense incurred in connection with the exercise of any remedy available to Agent or for the performance or non-performance of any other obligation of Loan Parties.  It is expressly understood that Agent and Lenders assume no liability or responsibility for (i) performance of any obligations or duties of Loan Parties hereunder or under any of the other Loan Documents, any Leases or the Management Agreement, (ii) compliance with any Legal Requirements or (iii) any other matters pertaining to control over the management and affairs of Loan Parties or the use, operation, management or ownership of the Premises or the Collateral, nor by any such action shall Agent or any Lender be deemed to create a partnership or joint venture with Loan Parties, provided that Lenders and Agent shall be liable for either or both of their gross negligence and willful misconduct.

 

Section 7.7            Management Agreement.  Except as set forth in the Management Agreement or the Manager SNDA, upon the occurrence and during the continuance of any Event of Default, in addition to any other rights or remedies of Agent hereunder or under the other Loan Documents, Agent, with the approval of the Requisite Lenders, may terminate any Management Agreement entered into with any Affiliate of Loan Parties and/or may require that Loan Parties terminate the Management Agreement to the extent that Loan Parties have the contractual right to do so.

 

Section 7.8            Right of Offset.  Loan Parties hereby grant to Agent and Lenders a right of offset, to secure the repayment of the Obligations, upon any and all monies, securities or other property of Loan Parties, and the proceeds therefrom, now or hereafter held or received by or in transit to Agent and any Lender, from or for the account of Loan Parties, whether for safekeeping, custody, pledge, transmission, collection or otherwise, and also upon any and all deposits (general or special) and credits of Loan Parties (including each Account), and any and all claims of Loan Parties against Agent or any Lender at any time existing.  At any time during the continuance of an Event of Default or following the maturity (whether by acceleration or otherwise) of the Loan, Agent and each Lender is hereby authorized from time to time, without notice to Loan Parties, to offset, appropriate, apply and enforce said liens against any and all sums hereinabove referred to against the Loan and the remaining Obligations, provided that Section 7.5 shall govern Agent’s exercise of any rights or remedies as to any of the Accounts.  Agent and Lenders shall not be liable for any loss of interest on or any penalty or charge assessed against funds in, payable on, or credited to any Account as a result of the exercise by Agent of any of its rights, remedies or obligations under any of the Loan Documents.

 

Section 7.9            Termination of Loan Agreement.  The obligations of the parties hereunder and the obligations in the other Loan Documents, excluding those which expressly survive the termination hereof or repayment of the Loan, shall automatically terminate only upon repayment in full of the outstanding principal amount of the Loan, together with all interest and other indebtedness due and payable in connection therewith, and all other outstanding

 

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Obligations (other than Contingent Obligations).  Upon such repayment, Agent shall execute and deliver to Loan Parties at Loan Parties’ sole cost and expense, such documentation as is reasonably necessary to confirm such termination, to release the Liens and security interests created under any of the Loan Documents and re-assign or transfer to Loan Parties any Collateral delivered to, held by or assigned to Agent, each as in a form reasonably acceptable to Agent; provided that, with respect to a prepayment of the Obligations, any Letters of Credit then being held as Collateral shall be returned to Loan Parties after such repayment (or with respect to a repayment of the Obligations where the Appraised Value (as set forth in an Appraisal which is not dated more than thirty (30) days prior to the date of such repayment) is less than the Obligations (other than Contingent Obligations), one hundred (100) days after such prepayment). If the Obligations have been repaid and thereafter such all or any portion of such payment is rescinded or must otherwise be returned or paid over by Agent or any Lender, whether required pursuant to any bankruptcy or insolvency law or otherwise, the Obligations and the obligations of each party under the Loan Documents, shall continue to the extent of such payment.

 

ARTICLE VIII

 

ASSIGNMENTS AND PARTICIPATIONS

 

Section 8.1            Assignment and Participations.  Agent and Lenders shall have the right, subject to this Section 8.1, to assign, sell, negotiate, pledge or hypothecate all or any portion of their rights and obligations hereunder.  No Lender shall assign, sell, negotiate, pledge, hypothecate or otherwise transfer all or any portion of its rights in and to the Loan to any other Person (an “Assignee”) (a) without Agent’s prior consent, not to be unreasonably withheld in the case of a proposed transfer to an Assignee which is an Eligible Assignee (provided that Agent’s consent shall not be required with respect to the assignment, sale, negotiation, pledge or hypothecation by any Lender of all or any portion of its interest in the Loan to (i) an Approved Assignee or (ii) another Lender or an Affiliate of any Lender, unless, in the case of clause (i) or clause (ii), the proposed transferee is an Affiliate of Loan Parties, in which case the prior unanimous consent of all Lenders shall be required; (b) other than in compliance with Section 8.5 hereof; (c) unless such transaction shall be an assignment of a constant (and not varying), ratable percentage of such Lender’s interest in the Loan; (d) unless the aggregate principal amount of the Loan to be held by the Assignee after such transaction is Fifteen Million Dollars ($15,000,000) or more (or such lesser amount approved by Agent); (e) unless, after giving effect to such transaction, such Lender’s aggregate unassigned interest in the Loan shall be in a principal amount of at least Fifteen Million Dollars ($15,000,000) (or such lesser amount approved by Agent) unless such transaction encompasses all of such Lender’s rights in and to the Loan, in which case such Lender shall have assigned all of its rights in and to the Loan and (f) unless such Assignee shall be a “Consented-To-Lender” under the Ground Lease or Ground Lessor shall have otherwise consented thereto; provided, however, any Lender shall have the right at any time without the consent of or notice to Agent, any other Lender or other Person (other than as required under the Ground Lease) to grant a security interest in all or any portion of such Lender’s interest in the Note or the Loan (i) to any Federal Reserve Bank or the central reserve bank or similar authority of any other country to secure any obligation of such Lender to such bank or similar authority (a “Central Bank Pledge”) and/or (ii) to a trustee, administrator or receiver (or their respective nominees, collateral agents or collateral trustees) of a mortgage pool securing covered mortgage bonds issued by a German mortgage bank, or any other Person

 

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meeting the Eligibility Requirements and permitted to issue covered mortgage bonds, under German Pfandbrief legislation, as such legislation may be amended and in effect from time to time, or any substitute or successor legislation (a “Covered Bond Pool Pledge”).  Effective on any such assignment and assumption by the assignee and on compliance with Section 8.5 hereof, the assigning Lender shall have no further liability hereunder with respect to the interest of such Lender that was the subject of such transfer and such Assignee shall be a Lender with respect to such interest.  Except for a Central Bank Pledge or a Covered Bond Pool Pledge, a Lender making any such assignment shall notify Borrower and to the extent required under the Ground Lease, the Ground Lessor of same, specifying the Assignee thereof and the amount of the assignment.  The assigning or selling Lender shall pay the reasonable and documented out-of-pocket costs incurred by Agent to facilitate any assignment, sale or other transfer under this Section 8.1, including without limitation, Agent’s reasonable and documented out-of-pocket legal fees and expenses.

 

Section 8.2            Participation. Any Lender may assign, sell or otherwise transfer a participation in and to all or any portion of its rights and obligations in and to the Loan to any other Person (a “Participant”) without the consent of Agent, any Lender, Loan Parties or any other Person; provided that no such participation shall (i) release such Lender from any of its obligations hereunder or (ii) result in the Participant having the right to approve or provide any amendment, modification, termination, waiver, consent or approval under any Loan Document, or to exercise any other right of a Lender under any Loan Document except to the extent that any such amendment, modification, termination, waiver, consent, approval or exercise of any right required the unanimous consent of all Lenders.  Each Lender agrees to provide Agent prompt notice of all participations sold by such Lender together with a copy of the documentation governing such participations.  Each participation shall be subject to the terms of the Ground Lease and each Participant shall be approved by Ground Lessor.  The assigning or selling Lender shall pay the reasonable and documented out-of-pocket costs incurred by Agent to facilitate any participation under this Section 8.2, including without limitation, Agent’s reasonable and documented out-of-pocket legal fees and expenses.

 

Section 8.3            Availability of Records.  Loan Parties acknowledge and agree that Agent and each Lender may provide on a confidential basis to any actual or proposed Assignee or Participant originals or copies of this Loan Agreement, any other Loan Documents and any other documents, instruments, certificates, opinions, insurance policies, financial statements and other information, letters of credit, reports, requisitions and other materials and information at any time submitted by or on behalf of Loan Parties, Guarantor or other Persons and/or received by Agent or any Lender in connection with the Loan.  As a condition precedent to providing such documentation and information, each applicable Lender shall cause such Assignee or Participant to enter into a confidentiality agreement in favor of Loan Parties and Guarantors that is consistent with the scope and provisions of Section 10.25 hereof.

 

Section 8.4            Loan Parties’ Facilitation of Transfer.

 

(a)           In order to facilitate permitted assignments and other transfers to Assignees and sales to Participants, each Loan Party, as applicable, shall execute and deliver to Agent and shall cause Guarantor to execute and deliver to Agent such further documents, instruments or agreements as Agent or any Lender may reasonably and in good faith require,

 

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including one or more substitute promissory notes evidencing the Commitment of each Lender, provided that such documents, instruments or agreements do not (a) increase the obligations or liabilities of any such Person hereunder or under any other Loan Documents in excess of the obligations or liabilities provided herein or in any other Loan Documents or (b) decrease such Person’s rights hereunder or under any other Loan Documents to less than what they were prior to the execution of such documents, instruments or agreements, provided that, without impairing Loan Parties’ obligations set forth in this Loan Agreement, Loan Parties shall not be liable for any costs or expenses of Agent, any Lender, any Assignee or any Participant associated with execution and delivery of such documents, instruments or agreements.  In addition, Loan Parties agree to reasonably cooperate with Agent and Lenders, including providing such information and documentation regarding Loan Parties, Guarantor, any other Person and the Premises as Agent or any Lender or any potential Assignee or Participant may reasonably request from time to time, provided that Loan Parties shall not be liable for any costs or expenses of Agent, any Lender, any Assignee or any Participant associated with such cooperation, and provided, further, that Loan Parties may, as a condition precedent to the provision of such information and documentation, require Agent or any Lender to cause the intended recipients of such information or documentation to enter into a confidentiality agreement in favor of Loan Parties and Guarantors that is consistent with the scope and provisions of Section 10.25 hereof.  The assigning or selling Lender shall pay the reasonable and documented out-of-pocket costs incurred by Loan Parties and Guarantor under this Section 8.4(a), including without limitation, Loan Parties’ and/or Guarantor’s reasonable and documented out-of-pocket legal fees and expenses.

 

(b)           Agent shall, with the approval or at the direction of all Lenders, have the right, at any time (whether prior to, in connection with, or after any permitted assignment, participation and other transfers to Assignees and sales to Participants), with respect to all or any portion of the Loan, to modify, split and/or sever all or any portion of the Loan as hereinafter provided, and Loan Parties and Guarantor shall reasonably cooperate with Agent in connection therewith.  Without limiting the foregoing, Agent may, with the consent of each of the Lenders, (i) cause the Note, the Deed of Trust and the other Loan Documents to be split into multiple mortgage loans, (ii) create one or more senior and subordinate notes (e.g., an A/B or A/B/C structure), or (iii) create multiple components of the Note or Notes (and allocate or reallocate the principal amount of the Loan among such components and/or assign different interest rates and/or LIBOR and/or Base Rate spreads to each Note), which components may be represented by separate Notes, in each such case, in whatever proportion and whatever priority Agent determines; provided, however, in each such instance the outstanding principal amount of all the Notes evidencing the Loan (or components of such Notes) immediately after the effective date of such modification and economic terms (including as to the timing and the manner of application of payments) of the Notes immediately after the effective date of such modification is equivalent to the economic terms of the Notes immediately prior to such modification; provided, further, however, neither Loan Parties nor any of their Affiliates (including Guarantor) shall be required to enter into any such modifications which would create new or greater obligations or liabilities on or reduce the rights of Loan Parties or Guarantor or any of their Affiliates under the Notes, as applicable.  If requested by Agent, Loan Parties shall, and shall cause Guarantor and any applicable Affiliate of Loan Parties to, execute and deliver such documentation as Agent may reasonably request to evidence and/or effectuate any such modification or severance, provided, however, that neither Loan Parties nor any of their Affiliates (including Guarantor) shall be required to enter into any such documents or amendments which would alter the economic terms

 

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of any of the Loan Documents or which would create new or greater obligations or liabilities on or reduce the rights of Loan Parties or Guarantor or any of their Affiliates under any of the Loan Documents.  Agent shall pay the reasonable and documented out-of-pocket costs incurred by Loan Parties and Guarantor under this Section 8.4(b), including without limitation, Loan Parties’ and Guarantor’s reasonable and documented out-of-pocket legal fees and expenses and all costs and expenses to comply with Section 2.7 on account of such modification, and neither Loan Parties nor Guarantors shall be liable for any fees or expenses of Agent or any Lender incurred in connection therewith.

 

Section 8.5            Notice; Registration Requirement.  No assignment, sale, negotiation, pledge, hypothecation or other transfer of any part of any Lender’s interest in and to the Loan shall be effective or permitted under this Article VIII until (a) an assignment and acceptance agreement in the form attached hereto as Schedule 8.5 (an “Assignment and Acceptance”) with such changes thereto as are reasonably acceptable to Agent (or such other form as may reasonably acceptable to Agent) with respect to such assignment, sale, negotiation, pledge, hypothecation or other transfer shall have been delivered to Agent, and (b) the parties to such transfer, assignment or purchase shall have paid to Agent a processing and registration fee of $5,000.00.  The entries in the Register shall be conclusive, absent manifest error.  Upon satisfaction of the conditions set forth in the foregoing clauses (a) and (b), Agent shall register such Assignee’s name and address in the Register which Agent maintains for the recordation of the names, addresses and interests of Lenders.  This Section 8.5 shall not apply to any Central Bank Pledge or Covered Bond Pool Pledge.

 

Section 8.6            Registry.  Agent shall maintain a register (the “Register”) on which Agent will record the Commitments from time to time of each Lender, each repayment with respect to the principal amount of the Loan of each Lender.  Failure to make any such recordation, or any error in such recordation shall not affect Loan Parties’ obligations in respect of the Loan.  With respect to any Lender, the transfer of the Commitments of such Lender and the rights to the principal of, and interest on, any disbursement made pursuant to such Commitments shall not be effective until such transfer is recorded on the Register maintained by Agent with respect to ownership of such Commitments and prior to such recordation all amounts owing to the transferor with respect to such Commitments shall remain owing to the transferor.  The registration of a transfer of all or part of any Commitment shall be recorded by Agent on the Register only upon the acceptance by Agent of a properly executed and delivered Assignment and Acceptance by the assignor and assignee.  At the assigning Lender’s option, concurrently with the delivery of an Assignment and Acceptance pursuant to which an interest of such Lender in the Loan was assigned to such Assignee, the assigning Lender shall surrender its Note evidencing the portion of the Loan corresponding to the interest so transferred and Borrower shall deliver to Agent one or more new promissory notes in the same aggregate principal amount issued to the assigning Lender and/or the Assignee in accordance with Section 8.4.  The Register shall be available for inspection by Loan Parties and/or any Lender at Agent’s New York City office, at the sole cost and expense of Loan Parties or such Lender, at any reasonable time and from time to time and upon reasonable prior written notice.

 

Section 8.7            Lender Interest Rate Protection Agreements.  Each Lender that is a party to any Interest Rate Protection Agreement acknowledges that the interest of Borrower in and to such Interest Rate Protection Agreement will be pledged and collaterally assigned to

 

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Agent pursuant to the Loan Documents, and hereby consents without any restrictions to such pledge and collateral assignment.  All payments, if any, due under such Interest Rate Protection Agreement shall be paid directly to Agent and all other rights of Borrower shall, upon the occurrence and during the continuance of an Event of Default, be exercisable by Agent in accordance with the terms of this Loan Agreement.  Each Lender that is a party to any Interest Rate Protection Agreement shall execute and deliver to Agent, and cause any Affiliate of such Lender that is a party to any Interest Rate Protection Agreement to execute and deliver to Agent, upon entering into such agreement the Interest Rate Protection Agreement Acknowledgment in order to confirm the foregoing.

 

Section 8.8            Disclosure by Agent or Lender.  Without limiting Section 8.3, Loan Parties consent to the issuance by Agent and Lenders of press releases, advertisements and other promotional materials in connection with the marketing activities of Agent and Lenders, including the disclosure that Aareal is the Agent for the Loan, the amount of the Loan and the name, location and use of the Premises; provided that the content of all such release, advertisements and promotional materials shall be subject to Loan Parties’ reasonable prior approval and provided, further, in no event shall such release, advertisements or promotional materials disclose the identity of any Sponsor (other than Hilton) or any direct or indirect owner of Loan Parties.

 

ARTICLE IX

 

AGENT AND LENDERS

 

Section 9.1            Scope of Article IX.  This Article IX shall be binding on Agent and Lenders, but shall not be binding on or, except with respect to Section 9.2(f)(i), enforceable by Loan Parties unless otherwise expressly provided herein.  As among Agent and Lenders, the provisions of this Article IX may be amended, waived or otherwise modified by Agent and Lenders without, except as set forth in Section 9.2(f)(i), Loan Parties’ consent and without the need for Loan Parties to be party to any of the same.  Without limiting the foregoing, nothing contained in this Article IX or any amendments, waivers or modifications thereof by Agent and Lenders, shall limit or modify the rights and obligations of, and restrictions applicable to, Loan Parties, Agent or Lenders set forth in any other provision of this Loan Agreement or in the other Loan Documents, except as among Agent and Lenders.

 

Section 9.2            Agent.

 

(a)           Appointment.  Each Lender hereby irrevocably designates and appoints Agent as the agent of such Lender with respect to the Loan and to act as “Agent” under the Loan Documents.  Each Lender hereby irrevocably authorizes Agent, as its agent, to take such action and to exercise such powers on such Lender’s behalf as may be taken by Agent under any Loan Document, including as a payee, mortgagee, assignee or beneficiary or otherwise, together with such other powers as are reasonably incidental thereto.  Nothing contained in this Loan Agreement, any Assignment and Acceptance or in any other Loan Document is intended to create or shall be construed as imposing on Agent any obligations except as expressly set forth in this Loan Agreement or in any other Loan Document.  Agent shall not have any fiduciary or trustee relationship with Lenders.

 

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(b)           Duties of Agent.  Agent shall not have any duties or responsibilities except those expressly set forth in this Loan Agreement and in the other Loan Documents; no implied covenants, functions, responsibilities, duties, obligations or liabilities of Agent shall be construed to exist under this Loan Agreement or any other Loan Document.  Agent shall perform its duties hereunder in accordance with the same standard of care as that customarily exercised by Agent with respect to the administration of a loan similar to the Loan held entirely for its own account.  Agent shall not have any duty to ascertain or inquire into or verify the performance or observance of any covenants or agreements in any Loan Documents by Loan Parties or any other Person or the satisfaction of any condition or to inspect the Premises.  Agent shall not be liable for any undertaking of Loan Parties or any other Person or for any error of judgment, or for any action taken or omitted to be taken by Agent other than willful misconduct or gross negligence of Agent.

 

(c)           Reliance by Agent.  Agent is entitled to rely upon (and shall be protected in relying upon) any written or oral statement and notices or any other certification or documents believed by Agent to be genuine and correct and to have been signed or made by the proper Person and, with respect to all of its duties under the Loan Documents, upon advice of counsel (including counsel for Loan Parties and Guarantor), independent public accountants, engineers, architects and other experts selected by Agent and shall not be liable for any action taken or omitted to be taken by Agent in good faith in accordance with the advice of such counsel, independent public accountants, engineers, architects and other experts.

 

(d)           Delegation of Duties.  Agent may execute any of its duties under this Loan Agreement and any duties as Agent or as a party, payee, mortgagee, assignee or beneficiary under any Loan Document, by or through agents, Affiliates or attorneys-in-fact; provided that such agents, Affiliates or attorneys-in-fact shall be subject to the same standard of care as Agent as set forth in Section 9.2(b).  Agent shall not be responsible for the negligence or misconduct of any agents, Affiliates or attorneys-in-fact selected by Agent with reasonable care and prudence.

 

(e)           Agent in its Capacity as a Lender.  With respect to Aareal’s ownership interest in the Loan as a Lender, Aareal in its capacity as Lender shall have the rights and powers of a Lender under this Loan Agreement and the other Loan Documents as set forth herein and therein and may exercise or refrain from exercising the same as though it were not Agent, and the term “Lender” and “Lenders” shall include Aareal in its individual capacity for so long as Aareal shall hold any interest in the Loan.

 

(f)            Relationship with Loan Parties.

 

(i)            Each Lender acknowledges that, with respect to the Loan and the Loan Documents, Agent shall have the sole and exclusive authority to deal and communicate with Loan Parties and any other Person on behalf of Lenders and each Lender acknowledges that any notices or demands from such Lender to Loan Parties or such Person must be promptly forwarded to Agent for delivery. This subclause (i) may not be amended or waived without the consent of Loan Parties.

 

(ii)           Each Lender agrees that it will not take any legal action, institute any actions or proceedings, or otherwise exercise remedies, against Loan Parties or any

 

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other Person with respect to any of the Obligations, without the prior consent of Agent, which consent may be withheld by Agent in its discretion.

 

Section 9.3            Distributions.  Each Lender shall be entitled to receive, and Agent shall transfer to each Lender, each Lender’s Pro Rata Share of all payments received by Agent pursuant to the Loan Documents on account of principal, interest and other sums, excluding, however, (a) any sums payable to Agent or any Lender in a manner other than in proportion to each Lender’s Pro Rata Share in connection with any Interest Rate Protection Agreement or pursuant to Section 2.9 or 2.14, without regard as to whether such sums constitute Additional Interest, (b) except as otherwise agreed among Agent and Lenders, fees payable pursuant to the Loan Fee Letter and (c) any sums payable to Agent in its capacity as Agent, including any sums payable on account of expenses incurred by Agent which Loan Parties are obligated to reimburse Agent pursuant to the Loan Documents to the extent that Lenders have not made a payment on account thereof pursuant to Section 9.9 (the sums referred to in clauses (a) through (c) are hereinafter referred to as, “Excluded Sums”).  Payments actually received by Agent for the account of any Lenders shall be paid to such Lenders promptly following receipt and in any event within two (2) Business Days of Agent’s receipt thereof.  Notwithstanding anything to the contrary set forth herein, without increasing Loan Parties’ obligations under this Loan Agreement or any other Loan Document, if Aareal shall hereafter sell, assign or otherwise transfer its interest in the Loan to Aareal Bank AG, it is acknowledged and agreed that all Required Amortization Payments which are to be made pursuant to Section 2.4(b) which are otherwise allocable to Aareal Bank AG, shall not be received and transferred on a pro rata basis, but rather, shall be received and transferred solely to Aareal until the portion of the principal amount of the Loan attributable to Aareal is paid in full.

 

Section 9.4            Authority, No Reliance; Binding Effect.  Each Lender (a) represents and warrants that it is legally authorized to enter into this Loan Agreement, (b) agrees that neither Agent nor any Lender shall be responsible to one another for the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of any of the Loan Documents or any other instrument or document furnished pursuant thereto or in connection with the Obligations, (c) confirms and agrees that neither Agent nor any Lender has made or will be deemed to have made any warranty or representation to another or shall be responsible to another for any statements, warranties or representations (written or otherwise) made in or in connection with the Loan or the Loan Documents or for the financial condition of Loan Parties or any other Person or for the title or the value of any portion of the Mortgaged Property or other Collateral and (d) agrees that it will be bound by the provisions of this Loan Agreement and will perform in accordance with its terms all the obligations which by the terms of this Loan Agreement are required to be performed by it as a Lender.  Each Lender acknowledges that it has, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Loan Agreement.  Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking any action under this Loan Agreement.

 

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Section 9.5            Loan.

 

(a)           Amendments and Modifications; Exercise of Rights and Remedies.  Except as set forth in Section 9.5(b), Agent reserves the right, in its discretion, in each instance without prior notice to Lenders, (i) to exercise or refrain from exercising any powers or rights which Agent or Lenders may have under or with respect to the Note, this Loan Agreement or any other Loan Document, (ii) to enforce or forbear from enforcing the Loan Documents, (iii) to grant or withhold consents, approvals or waivers and to make any other determinations in connection with the Loan and the Loan Documents, (iv) to amend or modify the Loan Documents, (v) to acquire additional security or release any security given with respect to the Loan, (vi) to collect all sums due under the Loan Documents, (vii) to declare the Loan due and payable when permitted to do so pursuant to the terms of the Loan Documents, (viii) to enforce the Loan Documents, (ix) to take possession of, foreclose or accept a deed and/or assignment of the Collateral or any portion thereof in lieu of foreclosure, (x) to sell, dispose of or otherwise deal with the ownership and operation of the Collateral, (xi) to bid at foreclosure of the Deed of Trust such amount as Agent shall determine in its discretion and (xii) to exercise or determine not to exercise all powers which are incidental to any of the foregoing.  Notwithstanding anything to contrary contained in this Loan Agreement, any modification or supplement of Article IX, or of any of the rights or duties of the Agent hereunder, shall require the consent of the Agent.

 

(b)           Restrictions of Power of Agent.  Notwithstanding anything to the contrary contained in Section 9.5(a) or elsewhere in this Loan Agreement:

 

(i)            Agent shall not, without the prior written consent of all Lenders, do any of the following:

 

(A) agree to any amendment to or waiver of any of the terms or conditions of the Note, this Loan Agreement or any other Loan Document which would:  (1) extend the time for any payments of interest or principal, including the Maturity Date; (2) reduce the rate of interest payable pursuant to this Loan Agreement; (3) increase the principal amount of the Loan or the amount of any Commitment; (4) release any material portion of the Collateral granted under the Loan Documents except as required hereunder or thereunder; (5) release Loan Parties or any Guarantor of the Loan from any of their material obligations with respect to the Loan; (6) consent to any Transfer which is not a Permitted Transfer; (7) permit Loan Parties to incur any indebtedness which is not Permitted Indebtedness; (8) amend or modify Section 8.1; (9) amend or modify the definitions of “Permitted Indebtedness,” “Permitted Transfer,” or “Transfer;” or (10) amend or modify this Section 9.5(b);

 

(B) subordinate the lien on any Collateral for the Loan;

 

(C) modify the percentage or the requirement for a specific number of Lenders where applicable in the definition of “Requisite Lenders”;

 

(D) cross-collateralize the Loan with any other loan or indebtedness; or

 

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(E) take any other action, or grant or withhold any other consent or approval which pursuant to the express provisions of this Loan Agreement or any other Loan Documents requires the unanimous consent or approval of all Lenders;

 

(ii)           Agent shall not without the prior written consent of the Requisite Lenders:

 

(A) agree to any amendment to or waiver of any of the terms or conditions of the Note, this Loan Agreement or any other Loan Document which would amend or modify the following definitions: “Adjusted Debt Service,” “Adjusted Debt Service Coverage Ratio,” “Cash Sweep Condition,” “Cash Sweep Letter of Credit,” “Casualty Threshold,” “Condemnation Threshold,” ‘Debt Service Coverage Ratio,” “Default DSCR Letter of Credit,” “Material Adverse Affect,” “Material Lease Action,” “Material Operating Agreement,” “Material Taking,” “Single Purpose Entity,” “Spread Maintenance Premium.”

 

(B) waive in writing any monetary or material non-monetary Event of Default on the part of Loan Parties or any Guarantor under the Loan Documents;

 

(C) authorize, consent to, accept, vote to adopt or agree to any plan of reorganization, arrangements, adjustment or composition in a Bankruptcy Proceeding relative to Loan Parties or any guarantor under the Loan Documents;

 

(D) [reserved];

 

(E) adjust, compromise or settle any title insurance claim in excess of five percent (5%) of the then outstanding principal amount of the Loan;

 

(F) take any other action, or grant or withhold any other consent or approval which pursuant to the express provisions of this Loan Agreement or any other Loan Documents requires the consent or approval of the Requisite Lenders; or

 

(G) in connection with an Event of Default which is continuing: (1) declare the Loan to be immediately due and payable following an Event of Default or any rescission of any acceleration; (2) bring any action to foreclose the lien of the Deed of Trust, or conduct a foreclosure sale pursuant to a power of sale, or accept a deed in lieu of foreclosure, or appoint or seek the appointment of a receiver for the collection of Rents, or bringing any suit on the Notes to collect the indebtedness evidenced thereby or secured by the Deed of Trust; (3) determine the amount of any credit bid to be made by Agent in any foreclosure action, if such amount is less than the unpaid principal amount of the Loan, accrued and unpaid interest thereon at the interest rate thereon (other than interest at the Default Rate) and all amounts required to be paid or reimbursed to the Agent hereunder; (4) agree to any proposed sale of the Property for less than the unpaid principal amount of the Loan, accrued and unpaid interest thereon at the interest rate thereon (other than interest at the Default Rate) and all amounts required to be paid or reimbursed to the Agent hereunder; or (5) approve of any

 

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recommended course of action with respect to the Collateral for the Loan in the event that all or any portion of the Collateral for the Loan is acquired by Agent as the result of the exercise of any remedies under this Loan Agreement or under any other Loan Document, or is retained in satisfaction of all or any part of Loan Parties’ obligations under the Loan Documents, in which case, title to any such Collateral or any portion thereof shall be held in the name of Agent or a nominee or subsidiary of Agent and Lenders, as agent, for the ratable benefit of Lenders.

 

(c)           Deemed Consent.  In the event that Agent requests a Lender’s consent pursuant to Section 9.5(b) and Agent does not receive the Lender’s written response within ten (10) Business Days of the request therefor, such Lender shall be deemed to have consented to the action or determination proposed in such request.  All such requests for consent from Agent to Lenders shall (i) be given in the form of a written notice to each Lender, (ii) be accompanied by a description of the matter or item as to which such consent is requested, or shall advise each Lender where such matter or item may be inspected, or shall otherwise describe the matter or issue to be resolved and (iii) shall include Agent’s proposal in respect thereof.

 

(d)           Instructions from Lenders; Notices.

 

(i)            Agent may at any time request instructions from Lenders with respect to any actions, consents, waivers or approvals which, by the terms of any of the Loan Documents, Agent is permitted or required to take or to grant, and Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval, consent or waiver and shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval, consent or waiver under any of the Loan Documents until Agent shall have received such instructions.

 

(ii)           With respect to any actions, consents, waivers or approvals which, by the express terms of any of the Loan Documents, requires the approval or consent of all Lenders or the Requisite Lenders, Agent shall (i) take such action and shall grant any such consent, approval or waiver as shall be approved (or deemed approved) by all of the Lenders or the Requisite Lenders, as the case may be, and (ii) except as set forth in Section 9.16(b), shall refrain from taking such action and/or granting any such consent, approval or waiver which has not been approved (or deemed approved) by all of the Lenders or the Requisite Lenders, as the case may be.

 

(iii)          Agent shall deliver to Loan Parties and/or Guarantor any request by a Lender for information concerning the Premises or the business or financial condition of Loan Parties and Guarantor, including the performance of their obligations under the Loan Documents, as such Lender shall reasonably request.

 

(iv)          Agent shall (y) notify the Lenders of any action material action taken by Agent in accordance with Section 9.5(a) without the consent or approval of the Requisite Lenders, and (z) deliver to the Lenders a copy of all notices of default sent to Loan Parties and/or Guarantor and copies of material notices and material correspondence received from Loan Parties and/or Guarantor with respect to the Loan.

 

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Section 9.6            Equitable Adjustments.  If a Lender shall obtain any payment (whether voluntary, involuntary or otherwise) on account of such Lender’s interest in the Loan in excess of such Lender’s Pro Rata Share to which such Lender is entitled (other than payments on account of Excluded Sums payable to such Lender) or payment on account of Excluded Sums payable to another Person, such Lender shall forthwith pay over to Agent an amount sufficient to enable Agent to cause such excess payment to be shared ratably with the other Lenders or, in the case of Excluded Sums payable to another Person, such Excluded Sums.

 

Section 9.7            Other Transactions.  Agent and each Lender and their respective Affiliates and subsidiaries may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, Loan Parties, any Affiliate of Loan Parties, any subsidiaries of Loan Parties or its Affiliates and any Person who may do business with or own interests in or securities of Loan Parties or any such Affiliate or subsidiary without any duty to account therefor to each other.  In the event that Agent or a Lender shall enter into an Interest Rate Protection Agreement, Agent or such Lender, as the case may be, shall be free to exercise its rights and remedies pursuant to the terms of the applicable Interest Rate Protection Agreement as if Agent or Lender, as the case may be, was not Agent or a Lender hereunder.

 

Section 9.8            Obligations Absolute.  Each Lender acknowledges and agrees that its obligations hereunder are absolute and unconditional and shall not be affected by any circumstance whatsoever, including any breach by Agent or a Lender of their obligations under this Loan Agreement or any other Loan Document, any lack of validity or enforceability of the Note, this Loan Agreement or any other Loan Document, the occurrence and continuance of any Default or Event of Default or the failure to satisfy any term or condition of the Note, this Loan Agreement or any other Loan Document.  Without limiting the generality of the immediately preceding sentence, each Lender agrees that any payment required to be made by it shall be made without any offset, abatement, withholding or reduction whatsoever and a breach by Agent or any Lender of any of their obligations pursuant to this Loan Agreement or any other Loan Document shall not limit or otherwise affect a Lender’s obligations pursuant to this Loan Agreement.

 

Section 9.9            Indemnification.

 

(a)           Generally.  Lenders hereby agree to indemnify Agent (to the extent Agent is not otherwise reimbursed hereunder or under the Loan Documents by Loan Parties), on demand, in proportion to their Pro Rata Shares, for and against any and all claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel) of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against Agent in any way relating to or arising hereunder or out of any of the Loan Documents, any action taken or omitted by Agent hereunder or thereunder, the Premises or the Collateral, including any matter required to be indemnified by Loan Parties pursuant to Section 10.1; provided, however, that Lenders shall not be liable for (a) any of such claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements to the extent resulting from Agent’s willful misconduct or gross negligence or (b) any of such claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or

 

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disbursements which arise pursuant to any Lender Interest Rate Protection Agreement to which Agent or its Affiliate is party.  A certificate of Agent as to the amount for which Lenders are required to reimburse Agent pursuant to this Section 9.9 shall be prima facie evidence as to such amount in the absence of manifest error.  Lenders’ obligations under this Section 9.9 shall survive the termination of this Loan Agreement and the Loan Documents.  Without limiting the foregoing, in the event Agent with the approval or at the direction of the Requisite Lenders elects to make a protective advance, each Lender shall fund its Pro Rata Share thereof.  If Agent advances its own funds for any protective advance made with the approval or at the direction of the Requisite Lenders, each Lender shall upon Agent’s demand reimburse Agent for same in the amount of its Pro Rata Share thereof.

 

(b)           Indemnification Regarding Certain Actions.  Unless indemnified to Agent’s satisfaction against any claims, demands, liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements (including reasonable fees and disbursements of counsel), Agent may not be compelled to do any act under this Loan Agreement or any other Loan Document or to take any action toward the execution or enforcement of the powers hereby or thereby created or to prosecute or defend any suit with respect to this Loan Agreement or any other Loan Document.  In no event, however, shall Agent be required to take any action that Agent determines would be in violation of any applicable regulatory requirements, or could incur for Agent criminal or onerous civil liability.

 

Section 9.10         Taxes.  All taxes due and payable on any payments to be made to any Lender with respect to the Obligations or under the Loan Documents shall be such Lender’s sole responsibility.  All payments payable by Agent to any Lender hereunder or otherwise with respect to the Obligations shall be made without deduction for any taxes, charges, levies or withholdings, except to the extent, if any, that such amounts are required to be withheld by Agent under applicable law or the terms of the Loan Documents or this Loan Agreement.  Each Lender shall provide to Agent and Borrower before the first Payment Date after the execution of any Assignment and Acceptance pursuant to which it becomes a Lender hereunder, and from time to time thereafter, including upon a change in circumstances and upon the expiration of a previously delivered form, a completed and signed copy of any form(s) (including Internal Revenue Service Forms W-8 BEN, W-8 ECI and/or W-9) that may be required by the United States Internal Revenue Service in order to certify such Lender’s exemption from United States withholding and backup withholding taxes with respect to payments to be made to such Lender with respect to the Obligations or under the Loan Documents and/or such other documents as are necessary to indicate that all such payments are exempt from such taxes (or subject to such taxes at a rate reduced by an applicable tax treaty, in which case Agent and/or Borrower, as applicable, shall withhold Taxes to the extent required by law and, to the extent such Taxes are Excluded Taxes, shall not be required to pay any additional amounts to such Lender by reason of such withholding).  This paragraph shall inure to the benefit of, and be enforceable by, Borrower.

 

Section 9.11         Return of Payments.  If Agent has received or applied any payment with respect to the Loan and has paid to any Lender any portion of such payment, and thereafter such payment or application is rescinded or must otherwise be returned or paid over by Agent, whether required pursuant to any bankruptcy or insolvency law, the Loan Documents, or otherwise, such Lender shall, at Agent’s request, promptly return its share of such payment or application to Agent.  In addition, such Lender shall simultaneously remit its Pro Rata Share of

 

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any interest or other amounts required to be paid by Agent with respect to such payment or application.  If any Lender fails to remit such payment to Agent prior to 10:00 a.m. (New York City time) on the second (2nd) Business Day following Agent’s request for such funds, the payment owed to Agent shall earn interest at the Base Rate for each day from the date of Agent’s request until its payment to Agent.

 

Section 9.12         No Partnership.  This Loan Agreement, the Assignment and Acceptances and the other Loan Documents do not create a partnership or joint venture among Agent and/or Lenders.

 

Section 9.13         Resignation and Removal of Agent; Successor Agent.

 

(a)           Resignation.  Agent may resign, without the consent of  any Lender, from the performance of all its functions and duties hereunder at any time by giving at least fifteen (15) Business Days’ prior written notice to Loan Parties and Lenders, unless applicable law requires a shorter notice period or that there be no notice period, in which instance such applicable law shall control.

 

(b)           Removal of Agent.  (i) In the event of the occurrence of any material gross negligence or willful misconduct of Agent and the Requisite Lenders agree or (ii) if any of the following shall occur and the Requisite Lenders agree, (A) Agent is and continues to be a Defaulting Lender, (B) Agent has announced that Agent will not be engaged going forward or is no longer engaged in the United States of America in the business of servicing commercial real estate loans similar to the Loan, (C) Agent has announced that Agent will not be engaged going forward or is no longer engaged in the United States of America in the business of holding commercial real estate loans similar to the Loan, (D) Agent is the debtor in a Bankruptcy Proceeding pursuant to Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code, or in case of a foreign institution acting as Agent, their respective domestic legal equivalent or is the subject of dissolution or winding-down process or (E) the interest in the Loan being held by Agent and/or its Affiliates as a Lender shall be less than ten percent (10%) in the aggregate, then in any such event Agent may be removed as the administrative agent under this Loan Agreement and the Loan Documents; provided, however, that no such removal of Agent shall in any way affect the rights of Agent in its individual capacity as a Lender.

 

(c)           Appointment of Successor Agent by Requisite Lenders.  Upon any resignation or removal of Agent, the Requisite Lenders (including in the determination of the Requisite Lenders, the Pro Rata Shares of such Lender that is also the resigning or removed Agent) shall appoint a successor Agent (who, to the extent a Lender shall be willing to serve, also shall be a Lender) which is a “Consented-To-Lender” under the Ground Lease or shall otherwise have been approved by Ground Lessor under the Ground Lease.  Such resignation or removal shall take effect upon the acceptance by a successor Agent of appointment pursuant to Section 9.13(c) or, if applicable, the appointment by Agent of a successor Agent pursuant to Section 9.13(d).  Notwithstanding the foregoing, in no event shall an Affiliate of Loan Parties be appointed Agent without the unanimous consent of all Lenders.

 

(d)           Appointment by Resigning Agent.  If, upon the resignation of Agent, a successor Agent shall not have been appointed within the fifteen (15) Business Days or shorter

 

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period provided in Section 9.13(a), the resigning Agent shall then appoint a successor Agent (who, to the extent a Lender shall be willing to serve, also shall be a Lender), which successor shall serve as Agent until such time, if any, as the Requisite Lenders appoint a successor Agent as provided above and which successor shall be a “Consented-To-Lender” under the Ground Lease or shall otherwise have been approved by Ground Lessor under the Ground Lease.

 

(e)           Rights of the Successor and Retiring Agent.  Upon the acceptance of any appointment as Agent hereunder by a successor Agent, or, if applicable, the appointment of a successor Agent by Agent pursuant to Section 9.13(d), such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent arising from and after the date of such acceptance and appointment, and the retiring Agent shall be discharged from the duties and obligations of Agent arising from and after such date.  After the resignation or removal of Agent as provided herein, the provisions of this Loan Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Loan Agreement.

 

Section 9.14         Defaults by any Lender.

 

(a)           Consequences of Default.   If for any reason any Lender shall be in default of any of its material obligations pursuant to this Loan Agreement or any other Loan Document (a “Defaulting Lender”), then, in addition to the rights and remedies that may be available to Agent and any other Lender under this Loan Agreement, at law and in equity, such Defaulting Lender’s right to participate as a Lender in decisions under this Loan Agreement, including any rights to approve or direct any determination, action or inaction of Agent where the approval or direction of Lenders is required or permitted hereby, and such Defaulting Lender’s right to assign, transfer, sell all or any portion of its rights in and to the Loan or a participation therein pursuant to Article VIII, shall be suspended during the pendency of such failure or refusal.

 

(b)           Remedies.  If for any reason the Defaulting Lender fails to make timely payment of any amount required to be paid by such Defaulting Lender to or for the benefit of Agent or any other Lender hereunder, then, in addition to other rights and remedies which Agent or such other Lender may have hereunder or otherwise, Agent or any Lender shall be entitled, but not obligated (i) to advance funds on behalf of any Defaulting Lender, (ii) to the extent not paid by Borrower, to collect interest from the Defaulting Lender at the Base Rate until the date on which the payment is made, (iii) to withhold or set off or in the case of a Lender, to cause Agent to withhold or setoff, and to apply to the payment of the defaulted amount and any related interest, any amounts to be paid to the Defaulting Lender under this Loan Agreement, (iv) to bring an action or suit against the Defaulting Lender in a court of competent jurisdiction to recover the defaulted amount and any related interest and (v) to purchase the Defaulting Lender’s interest in the Loan in the manner set forth in this Section 9.14.  Upon the Defaulting Lender’s failure to make payments as set forth herein and so long as such failure remains uncured (and it is agreed an advance of funds by any other Lender pursuant to clause (i) above shall not be considered a cure of the Defaulting Lender’s default), the Defaulting Lender shall not be entitled to receive its share of any payments made by Borrower (or amounts owed by Loan Parties) after such date pursuant to the Loan Documents.  If Agent receives any payment with respect to the Obligations from Loan Parties as to which a Defaulting Lender would otherwise have been

 

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entitled, then such Defaulting Lender’s share of such payment shall be credited toward the amount owed hereunder by such Defaulting Lender on a dollar for dollar basis.

 

(c)           Purchase of Defaulting Lender’s Interest After Default.  In the event of a default by a Lender as referred to in Section 9.14(a), each Lender which is not a Defaulting Lender shall have the right, but not the obligation, in its sole discretion, to acquire such Defaulting Lender’s interest in the Loan.  If more than one Lender exercises such right, each such Lender which is not a Defaulting Lender shall have the right to acquire (in accordance with such acquiring Lender’s Pro Rata Share or upon agreement of the Lenders that desire to so purchase the Defaulting Lender’s interest, any other proportion) the Defaulting Lender’s interest in the Loan.  Such right to purchase shall be exercised by written notice from the applicable Lender(s) electing to exercise such right to the Defaulting Lender (an “Exercise Notice”), copies of which shall also be sent concurrently to each other Lender.  The Exercise Notice shall specify (i) the purchase price for the interest of the Defaulting Lender, determined in accordance with Section 9.15 and (ii) the date on which such purchase is to occur, which shall be any Business Day which is not less than fifteen (15) days after the date on which the Exercise Notice is given, provided that if such Defaulting Lender shall have cured its default in full (including with the payment of any interest and other amounts due in connection therewith) to the satisfaction of Agent within said fifteen (15) day period, then the Exercise Notice shall be of no further effect and the non-defaulting Lender(s) shall no longer have a right to purchase such Defaulting Lender’s interest.  Upon any such purchase of a Defaulting Lender’s interest and as of the date of such purchase (the “Purchase Date”), the Defaulting Lender’s interest in the Loan, and its rights hereunder as a Lender arising from and after the Purchase Date (but not its rights and liabilities with respect thereto or under this Loan Agreement or the other Loan Documents for obligations, indemnities and other matters arising or matters occurring before the Purchase Date) shall terminate on the Purchase Date, and the Defaulting Lender shall promptly execute all documents reasonably requested to surrender and transfer such interest.  Without in any manner limiting the remedies of Agent or any other Lender, the obligation of a Defaulting Lender to sell and assign its interest in the Loan under this Section 9.14 shall be specifically enforceable by Agent and/or any other Lender by an action brought in any court of competent jurisdiction for such purpose, it being acknowledged and agreed that, in light of the disruption in the administration of the Loan and the other terms of the Loan Documents that a Defaulting Lender may cause, damages and other remedies at law are not adequate.

 

Section 9.15         Purchase Price; Payment for Defaulting Lender’s Pro Rata Share.  The purchase price for the interest of a Defaulting Lender in the Loan shall be equal to the sum of all of the Defaulting Lender’s advances under the Loan Documents outstanding as of the Purchase Date, less the costs and expenses incurred by Agent and any non-defaulting Lender directly as a result of the Defaulting Lender’s default hereunder, including interest accrued on such unpaid amounts (at the Base Rate), court costs and including reasonable attorneys’ fees and disbursements, and fees for accountants and other similar advisors (provided that such costs and expenses are paid by the Lenders acquiring the interest of such Defaulting Lender to Agent and the Lenders incurring same).

 

Section 9.16         Enforcement Action Plan.  (a) Promptly after Agent acquires knowledge (as defined below) thereof, Agent shall give written notice to each Lender of any Event of Default under this Loan Agreement or any of the other Loan Documents which in

 

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Agent’s reasonable judgment materially and adversely affects any of the Lenders’ interests in the Loan or the value of the Premises.  If Agent determines that remedial action should not be taken, it shall so advise the Lenders, setting forth Agent’s reasons therefor.  Otherwise Agent shall prepare a recommended course of remedial action (other than the giving of notices of default and demands for performance) (the “Enforcement Action Plan”), which shall be subject to the approval of the Requisite Lenders to the extent provided in Section 9.5(b).  Agent agrees to consult with Lenders in respect of and shall act substantially in accordance with the decision of the Requisite Lenders (and shall be fully protected by all Lenders in so acting), subject, however, to Section 9.9(b) of this Loan Agreement, and provided that Agent shall not be obligated to take any action which Agent determines is not consistent with the Loan Documents or is not in accordance with applicable law, or exercise any remedy unless Agent determines that the underlying Event of Default permits the exercise of such remedy in accordance with applicable law and the Loan Documents and that exercising any such remedy at such time would not preclude it from thereafter commencing and prosecuting a foreclosure of the Deed of Trust.   As used in this Section 9.16, the term “knowledge” shall mean the actual knowledge of the officer of Agent then primarily responsible for the administration of the Loan.  The provisions of Section 9.5(c) of this Loan Agreement shall apply to each Lender’s consent to any Enforcement Action Plan proposed by Agent.

 

(b)           If the Requisite Lenders have not agreed on a proposed course of action by the end of one hundred (120) days after the occurrence of the Maturity Date or the acceleration of the Loan, as applicable, Agent shall commence to foreclose on, or otherwise realize on, the Collateral and otherwise exercise such other remedies as Agent determines.

 

ARTICLE X

 

GENERAL CONDITIONS

 

Section 10.1         Indemnity.

 

(a)           Each Loan Party hereby indemnifies and agrees to defend, protect and hold harmless Agent and Lenders and their respective Affiliates, participants, directors, officers, agents and employees (each, an “Indemnified Party”) from and against any and all losses, liabilities, obligations, charges, claims, damages, penalties, causes of action, reasonable and documented out-of-pocket costs and expenses (including reasonable documented out-of-pocket attorneys’ fees and disbursements) of any kind or nature, actually suffered or incurred by an Indemnified Party in connection with this Loan Agreement, any of the other Loan Documents, the consummation of the transactions contemplated herein or therein, the use, operation or occupancy of any of the Premises or any Mortgaged Property (each being a “Claim”), including the following:

 

(i)            any accident, injury to or death of Persons or loss of or damage to property occurring on or about the Premises or any part thereof, or the adjoining sidewalks, curbs, vaults and vault space, if any, and streets and ways;

 

(ii)           any design, construction, operation, use, non-use or condition of the Premises or any part thereof, or the adjoining sidewalks, curbs, vaults and vault space,

 

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if any, and streets and ways, including claims or penalties arising from violation of any Legal Requirement or Insurance Requirement, as well as any claim based on any patent or latent defect, whether or not discoverable by Agent or any Lender, any claim as to which the insurance is inadequate;

 

(iii)          any performance of or failure to perform any labor or services or furnishing of or failure to furnish any materials or other property in respect of the Premises or any part thereof;

 

(iv)          any negligence or tortious act or omission on the part of a Loan Party or any of its agents, contractors, servants, employees, Lessees, sublessees, licensees, guests or invitees;

 

(v)           any matter or other relationship that has arisen or may arise between or among Agent and/or Lenders on the one hand, and Loan Parties, Guarantor and/or any third party on the other hand (other than a prospective Assignee or a prospective or actual Participant), with respect to the Premises or the Mortgaged Property or any of the foregoing, as a result of the execution and delivery of the Note, this Loan Agreement or the other Loan Documents, or any other action contemplated hereby, thereby or by any other document executed in connection with the Loan;

 

(vi)          any action or other proceeding brought by or on behalf of any Person against Agent or any Lender as the holder of, or by reason of its interest in, any sum deposited or paid hereunder or in connection herewith, any insurance proceeds, any condemnation awards or other amounts applied to the Obligations of Loan Parties; and

 

(vii)         any circumstance resulting in the impairment of the Liens of the Deed of Trust and/or the other Security Documents, including as a result of non-compliance with any applicable lien law.

 

(b)           If any action or proceeding shall be commenced or taken (including an action to foreclose the Deed of Trust, collect the Obligations or enforce Agent’s rights under this Loan Agreement, the Note or the other Loan Documents) by Agent or any other Person, in which action or proceeding Agent or any Lender is involved or is made a party by reason of the execution and/or delivery of the Note, this Loan Agreement, or any other Loan Documents or in which it becomes necessary to enforce, defend or uphold the lien on the Mortgaged Property pursuant to the Deed of Trust, this Loan Agreement or the other Loan Documents or the Agent’s and Lenders’ rights under the Note or any other Loan Documents, all out-of-pocket sums paid by Agent for the expense of any such action or litigation shall be paid by Loan Parties to Agent ten (10) days after demand.  In the event the Mortgaged Property, or any part thereof, shall be advertised for foreclosure sale and not sold, Loan Parties shall pay all reasonable and documented out-of-pocket costs in connection therewith, including reasonable attorneys’ fees and disbursements and advertising costs.

 

(c)           Each Loan Party hereby indemnifies and agrees to defend and hold harmless the Indemnified Parties from and against any and all liabilities, claims, charges, actual out-of-pocket losses and expenses (including attorneys’ fees and disbursements) or damages of

 

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any kind or nature which may arise as a result of any claim by any broker, “finder” or advisor with which each Loan Party or any Affiliate of Loan Parties has dealt or is alleged to have dealt.

 

(d)           Loan Parties will hold Agent and each Lender harmless against any and all liability with respect to any mortgage/deed recording, transfer or intangible personal property tax or similar imposition now or hereafter in effect, to the extent that the same may be payable by Agent or any Lender with respect to this Loan Agreement, any Note or any other Loan Document.

 

(e)           Within ten (10) Business Days of demand by any Indemnified Party, Loan Parties shall commence to defend, and shall thereafter diligently pursue defense of, any investigation, action or proceeding in connection with any claim or liability, or alleged claim or liability, that would, if determined adversely to such Indemnified Party, be covered by the indemnification provisions contained in this Section, such defense to be at the sole cost and expense of Loan Parties and by counsel selected by Loan Parties and reasonably approved by such Indemnified Party, which counsel may, without limiting the rights of an Indemnified Party pursuant to the next succeeding sentence, also represent Loan Parties in such investigation, action or proceeding.  Any Indemnified Party may elect to conduct its own defense through counsel of its own choosing and at the expense of Loan Parties if (i) in the reasonable opinion of such Indemnified Party, Loan Parties’ counsel has a conflict of interest or (ii) such defense is not being conducted in a manner which is acceptable to such Indemnified Party in its reasonable discretion.  In addition, notwithstanding anything to the contrary set forth in this Loan Agreement or in any other Loan Document, Loan Parties shall not be required to pay for the attorneys fees of more than one Lender in connection with any act, condition, event or indemnity under this Loan Agreement or under any other Loan Document.

 

(f)            The provisions of this Section 10.1 shall survive the repayment of the Loan.  The provisions of the indemnities hereunder shall exclude (a) any Claims arising from the gross negligence or willful misconduct or breach of any provision of any Loan Document by any Indemnified Party; (b) any Claim arising during the possession or control of the Premises by any Indemnified Party; (c) any Claim arising as a result of any act, omission, event or conditions which first occurred or existed from and after foreclosure, deed in lieu of foreclosure or other similar proceeding; (d) any Claim arising as a result of any claim by any broker, finder or advisor retained by Agent or any Lender; or (e) any Claims arising on account of a dispute between or among Agent and/or Lenders (or between or among Agent and/or Lenders on the one hand, and a prospective Assignee or a prospective or actual Participant on the other hand).

 

Section 10.2         No Waivers.  No failure or delay on the part of Agent or Lenders in exercising any right, power or remedy hereunder or under or in connection with this Loan Agreement or the other Loan Documents or to insist upon the strict performance of any term of this Loan Agreement or any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy under or in connection with this Loan Agreement or any other Loan Document.

 

Section 10.3         Submission of Evidence.  Any condition of this Loan Agreement which requires the submission of evidence of the existence or non-existence of a specified fact or

 

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facts implies as a condition the existence or non-existence, as the case may be, of such fact or facts and Agent shall, at all times, be free to independently establish to its satisfaction such existence or non-existence.

 

Section 10.4         Loan Parties, Agent and Lenders Sole Beneficiaries.  No Person other than Loan Parties, Agent and Lenders shall be deemed to be beneficiary of the terms, provisions, covenants and other conditions of this Loan Agreement and the other Loan Documents (provided that the Constituent Members are third party beneficiaries of Section 10.12), any or all of which covenants and conditions of Loan Parties may be freely waived, in whole or in part, by Agent at any time if Agent deems it advisable or desirable to do so.

 

Section 10.5         Contractors.  No contractor, supplier or any other Person dealing with Loan Parties shall be, nor shall any of them be deemed to be, third party beneficiaries of this Loan Agreement, but each shall be deemed to have agreed, (a) that the contractor, supplier or other Person in question shall look to Loan Parties as their sole source of recovery if not paid and (b) except as otherwise agreed to in writing between Agent and such Person in question, that they may not claim against Agent or Lenders under any circumstances.

 

Section 10.6         Entire Agreement.  This Loan Agreement and the other Loan Documents embody the entire agreement and understanding between Loan Parties, Agent and/or Lenders with respect to the Loan and supersede and cancel all prior loan applications, expressions of interest, commitments, agreements and understandings, whether oral or written, relating to the subject matter hereof, except as specifically agreed in writing to the contrary.

 

Section 10.7         Assignment.  Loan Parties may not assign, transfer or otherwise convey this Loan Agreement or any other Loan Document, in whole or in part, nor all or any portion of the Loan nor any interest therein.

 

Section 10.8         Further Assurances; Filing of Financing Statements.  Subject to the limitations of Section 8.4, Loan Parties shall, within ten (10) Business Days after written request, make, execute or endorse, and acknowledge and deliver or file or cause the same to be done, all such vouchers, invoices, notices, certifications, instruments, additional agreements, undertakings, conveyances, deeds of trust, mortgages, transfers, assignments, financing statements or other assurances, and take all such other action, as Agent may, from time to time, deem reasonably necessary or proper in connection with this Loan Agreement or any of the other Loan Documents, the obligations of Loan Parties hereunder or thereunder, or for better assuring and confirming unto Agent and Lenders the full benefits and rights granted by this Loan Agreement or the other Loan Documents.  Loan Parties hereby agree that, without notice to or the consent of Loan Parties, Agent may file with the appropriate public officials such financing statements or similar documents as are or may become necessary to perfect and continue the perfection of the security interest granted by any Security Document.

 

Section 10.9         Cumulative Remedies.  The remedies in this Loan Agreement and the other Loan Documents herein are cumulative and not exclusive of any remedies available at law or equity or in any other agreement, document or instrument.

 

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Section 10.10       Amendments, Consents, Waivers, Approvals, Etc.  Except as set forth in Section 9.1, no amendment, modification, termination, or waiver of any provision of this Loan Agreement or the other Loan Documents shall be effective unless in writing and signed by Loan Parties and Agent.  With respect to any matter for which Agent’s and/or Lenders, as applicable, consent or approval is required hereunder or under the other Loan Documents, no such consent or approval by Agent and/or Lenders, as applicable, hereunder shall in any event be effective unless the same shall be in writing and signed by Agent, it being agreed that Loan Parties may rely on the consent of Agent as evidence that Agent has received the consent of those Lenders whose consent is required hereunder for the applicable matter.  No notice to or demand on Loan Parties in any case shall entitle Loan Parties to any other or further notice or demand in similar or other circumstances.  No failure or delay of Agent in exercising any power or right hereunder or to demand payment for any sums due pursuant to this Loan Agreement or any other Loan Document, shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other further exercise thereof or the exercise of any other right or power.

 

Section 10.11       Notices.  Except as may be otherwise expressly provided herein, all notices, certificates, demands, requests, approvals, consents, waivers and other communications provided for herein shall be in writing and (a) mailed (registered or certified mail, return receipt requested, and postage prepaid), (b) hand-delivered, with signed receipt, or (c) sent by nationally-recognized overnight courier as follows:

 

If to Loan Parties, to their address at:

 

c/o Hilton Worldwide, Inc.

7930 Jones Branch Drive, Suite 1100

McLean, Virginia 22102

Attention:  Treasurer

 

with copies similarly delivered to:

 

c/o Hilton Worldwide, Inc.

7930 Jones Branch Drive, Suite 1100

McLean, Virginia 22102

Attention:  General Counsel

 

with copies similarly delivered to:

 

c/o Sunstone Hotel Investors, Inc.

120 Vantis, Suite 350

Aliso Viejo, California 92656

Attention:  Finance Department

 

with copies similarly delivered to:

 

Gibson, Dunn & Crutcher LLP

 

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323 South Grand Avenue

Los Angeles, California 90071-3197

Attention:  Michael F. Sfregola, Esq.

 

If to Agent, to:

 

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention:  Ralph C. Marra, Jr.

 

with copies similarly delivered to:

 

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention:  Alan Griffin, Esq.

 

with copies similarly delivered to:

 

Kaye Scholer LLP

425 Park Avenue

New York, New York  10022

Attention:  Warren J. Bernstein, Esq.

 

If to Aareal Capital Corporation, as Lender:

 

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention:  Ralph C. Marra, Jr.

 

with copies similarly delivered to:

 

Aareal Capital Corporation

250 Park Avenue, Suite 820

New York, New York 10177

Attention:  Alan Griffin, Esq.

 

with copies similarly delivered to:

 

Kaye Scholer LLP

425 Park Avenue

New York, New York  10022

Attention:  Warren J. Bernstein, Esq.

 

or to such other address with respect to any, as such party shall notify the other parties in writing.  All such notices, certificates, demands, requests, approvals, waivers and other communications

 

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given pursuant to this Section 10.11 shall be effective when received (or delivery is refused) at the address specified as aforesaid.

 

Section 10.12       Limitation on Liability.  All Obligations shall be recourse to Borrower.  Notwithstanding anything to the contrary contained in this Loan Agreement, in the Note, the Deed of Trust or in the other Loan Documents, no recourse or any personal liability shall be had for the payment of the principal, Interest, Additional Interest or other amounts owed hereunder or under the Note or the other Loan Documents, or for any claim based on this Loan Agreement, the Note or any other Loan Document against any (i) Constituent Member, (ii) any present or future, direct or indirect, shareholder, officer, director, employee, trustee, beneficiary, advisor, member, partner, participant, principal or agent of or in Loan Parties or in any Person that is or becomes a Constituent Member, (iii) any of their respective successors and assigns, or (iv) any of the assets of any Person described in clauses (i) through (iii) above, it being expressly understood that the sole remedies of Agent and Lenders with respect to such amounts and claims shall be against Loan Parties and the assets of Loan Parties, including the Mortgaged Property, and other Collateral; provided, however, that:

 

(a)           nothing contained in this Loan Agreement (including the provisions of this Section 10.12), the Note or the other Loan Documents shall constitute a waiver of any of Borrower’s obligations herein, under the Note or the other Loan Documents, or of any of any obligations of Guarantors (including, to the extent a direct or indirect member of Loan Parties) under the Loan Documents to which it is a party;

 

(b)           nothing contained in this Loan Agreement (including the provisions of this Section 10.12), the Note or the other Loan Documents shall constitute a limitation of liability of Borrower or any of its assets;

 

(c)           nothing contained in this Loan Agreement (including the provisions of this Section 10.12), the Note or the other Loan Documents shall constitute a limitation of liability of Guarantor or any of its respective assets with respect to (i) the Recourse Liability Agreement, (ii) the Environmental Indemnity or (iii) any other guaranty or indemnity agreement given by it in connection with the Loan, as applicable; and

 

(d)           the liability of Operating Lessee shall be limited to its interest in the Mortgaged Property.

 

Section 10.13       Binding Effect.  This Loan Agreement shall be binding upon and inure to the benefit of Agent and Lenders and their respective permitted successors and assigns and Loan Parties and their permitted successors and assigns.

 

Section 10.14       Severability of Provisions.  Any provision of this Loan Agreement which is prohibited or unenforceable in the State of New York or in any other jurisdiction in the United States shall be, as to the State of New York or such other jurisdiction in the United States, ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provisions in any other jurisdiction.

 

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Section 10.15       Governing Law and Consent to Jurisdiction.  This Loan Agreement shall be governed by, and construed in accordance with, the substantive laws of the State of New York.  Loan Parties, Agent and Lenders irrevocably (a) agree that any suit, action or other legal proceeding arising out of or relating to this Loan Agreement, the Note or the other Loan Documents may be brought in the Courts of the United States of America located in the Southern District of New York or in a state court of record in New York County, New York, (b) consent to the jurisdiction of each such court in any such suit, action or proceeding and (c) waive any objection which it may have to the laying of venue of any such suit, action or proceeding in any of such courts and any claim that any such suit, action or proceeding has been brought in an inconvenient forum.  Loan Parties irrevocably consent to the service of any and all process in any such suit, action or proceeding by service of copies of such process to Loan Parties at their address provided in Section 10.11.  Nothing in this Section 10.15, however, shall affect the right of Agent to serve legal process in any other manner permitted by law or affect the right of Agent to bring any suit, action or proceeding against Loan Parties or their property in the courts of any other jurisdictions.

 

Section 10.16       Waiver of Jury Trial.  Loan Parties, Agent and Lenders each hereby expressly and unconditionally waives any and every right either party may have to a trial by jury, in any suit, action or proceeding brought under or with respect to this Loan Agreement, the Note or the other Loan Documents.

 

Section 10.17       No Joint Venture.  Loan Parties are not and shall not be deemed to be a joint venturer, partner, tenant in common or joint tenant with, or an agent of, Agent or Lenders for any purpose.  Neither Agent nor Lenders shall be deemed to be in privity of contract with any Person providing services with respect to the construction, operation and management the Premises or any part thereof unless and until and except to the extent that Agent shall affirmatively act to establish any such privity pursuant to Article VII, or in the exercise of Agent’s and Lenders’ remedies pursuant to the Deed of Trust, the Assignment of Agreements or any other Loan Document.

 

Section 10.18       Determinations and Consents of Agent and Lenders.  Unless expressly provided to the contrary in any particular instance, any determination, election or judgment made or any consent or waiver given by Agent and/or Lenders pursuant to this Loan Agreement or any other Loan Document shall be made or given, as the case may be, in Agent’s or Lender’s, as the case may be, sole and absolute discretion, whether or not the applicable provision of this Loan Agreement or such other Loan Document expressly so provides.  In making any such determination, election or judgment or in providing or deciding not to provide any such consent or waiver, Agent and Lenders shall be entitled to rely, to the extent Agent and/or Lenders so elect, in whole or in part on the advice of counsel, independent public accountants, engineers, architects and other experts selected by Agent and/or Lenders, as applicable.

 

Section 10.19       Reliance by Agent and Lenders on Action on Behalf of Loan Parties.  Unless Loan Parties shall have previously provided Agent and Lenders with express written notice that such Person shall not be authorized to bind Loan Parties, Agent and Lenders shall be entitled to rely on any notice, communication or other action taken by any Person purporting to sign as the officer or other authorized agent, signatory, representative or agent of

 

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Loan Parties purporting to be taken on Loan Parties’ behalf as being conclusive evidence of Loan Parties’ right to take such action and, in doing so, bind Loan Parties to the action taken.

 

Section 10.20       Headings, Etc.  The headings and captions of various sections of this Loan Agreement have been inserted for convenience only and are not to be construed as defining, modifying, limiting or amplifying, in any way, the scope or intent of the provisions hereof.

 

Section 10.21       Incorporation by Reference.  Loan Parties agree that the Note and the other Loan Documents shall be made subject to all the terms, covenants, conditions, obligations, stipulations and agreements contained in this Loan Agreement to the same extent and effect as if fully set forth in and made a part of the Note and the other Loan Documents.  In the event of a conflict between any of the Loan Documents and the provisions of this Loan Agreement, this Loan Agreement shall control.

 

Section 10.22       Counterparts.  This Loan Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this Loan Agreement to produce or account for more than one such counterpart.

 

Section 10.23       Attorneys’ Fees.  Any provisions of this Loan Agreement or any other Loan Document that require payment to Agent or Lenders of legal fees or expenses incurred by any of them shall be construed as including any and all such fees and expenses incurred in connection with litigation, mediation, arbitration, other alternative dispute processes, administration proceedings and Bankruptcy Proceedings, and any appeals from any of the foregoing (any of the foregoing, an “Action”); provided that, so long as no Event of Default shall have occurred and be continuing, in no event shall Loan Parties be required to pay more than one set of legal fees and expenses in any Action with respect to the payment of Lenders’ and Agent’s legal fees and expenses.

 

Section 10.24       Employer Identification Number Etc.  Loan Parties acknowledge that in order for Lenders to comply with the requirements under the Patriot Act, Loan Parties must provide to Agent certain information or supporting documentation (collectively “Documentation”) at the time of execution of this Loan Agreement.  Lenders may be required by the Patriot Act to verify and record any Documentation provided by Loan Parties to validate Loan Parties’ identity.  Documentation that may be requested from Loan Parties may include, but is not limited to, a Federal Employer Identification Number (FEIN), a Certificate of Good Standing to validate Loan Parties’ corporate, partnership or limited liability company existence, a Certificate of Incumbency to authenticate the management of Loan Parties, and other government issued certified documents to validate Loan Parties’ authorization to conduct business.

 

Section 10.25       Confidentiality.  Agent, each Lender and their respective Affiliates shall hold all information and materials at any time submitted by or on behalf of Loan Parties or Guarantor and/or received by Agent or any Lender in connection with the Loan or pursuant to any Loan Document in accordance with reasonable, customary procedures for handling confidential information, and Agent, each Lender and their respective Affiliates shall

 

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not disclose or permit their respective Affiliates, directors, officers, employees, agents or advisors (the “Lender Representatives”) to disclose such information to any Person, except that Agent or any Lender may (i) disclose information which is or becomes generally available to the public other than as a result of a disclosure by Lender Representatives or which becomes available from a Person who is not actually known by Agent or Lenders to be bound by a confidentiality agreement, (ii) disclose that portion of such information that is reasonably required by any bona fide potential Assignee or Participant in connection with an assignment or participation or a proposed assignment or participation in accordance with Article VIII, provided that such potential Assignee or Participant enters into a confidentiality agreement as required by Section 8.3; (iii) disclose such information to the extent permitted by, and in compliance with, Section 8.8; (iv) disclose such information to examiners, auditors and regulators of Agent and/or Lenders in the ordinary course of any applicable audit or examination; or (v) disclose such information as may be required by law, regulation or other applicable judicial or governmental order, provided that with respect to this clause (v), Agent or such Lender, as applicable, will, to the extent permitted by law, provide Loan Parties with prompt written notice of any request pursuant to such requirement so that Loan Parties may seek a protective order or other remedy, provided, further, that with respect to this clause (v) Agent or such Lender, as applicable, shall, at Loan Parties’ expense, cooperate with Loan Parties in a commercially reasonable manner in obtaining any such protective order or other remedy, and provided, further, that with respect to this clause (v), if no such protective order or other remedy is obtained, Agent or such Lender, as applicable, may disclose only that portion of such information that its legal counsel reasonably advises is legally required to be disclosed, and will exercise all commercially reasonable efforts to obtain reliable assurance that confidential treatment will be accorded to that portion of such information that is disclosed.  This paragraph shall run to the benefit of, and be enforceable by, Loan Parties and Guarantors.  The provisions of this Section 10.25 shall survive the repayment of the Loan and the termination of this Loan Agreement.

 

[The remainder of this page is intentionally left blank.]

 

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

 

	
 
    	
LOAN   PARTIES:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
ONE   PARK BOULEVARD, LLC, a Delaware limited liability company
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   Kenneth E. Cruse
    
	
 
    	
 
    	
Title:   Authorized Signatory
    
	
 
    	
 
    	
 
    
	
 
    	
SUNSTONE   PARK LESSEE, LLC, a Delaware limited liability company
    
	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:   Kenneth E. Cruse
    
	
 
    	
 
    	
Title:   Authorized Signatory
    

 

[Remainder of Page Intentionally Left Blank; Additional Signature Pages Follow]

 

 

	
 
    	
AGENT:
    
	
 
    	
 
    	
 
    
	
 
    	
AAREAL CAPITAL CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Remainder of Page Intentionally Left Blank; Signatures Continue on the Following Page]

 

 

	
 
    	
LENDER:
    
	
 
    	
 
    	
 
    
	
 
    	
AAREAL CAPITAL CORPORATION
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    	
 
    
	
 
    	
Commitment:   $240,000,000
    

 

 

EXHIBIT A

 

The Land

 

The land referred to herein is situated in the State of California, County of San Diego, and described as follows:

 

ALL THAT PORTION OF THE LAND CONVEYED TO THE SAN DIEGO UNIFIED PORT DISTRICT BY THAT CERTAIN ACT OF THE LEGISLATURE OF THESTATE OF CALIFORNIA PURSUANT TO CHAPTER 67, STATUTES OF 1962, FIRST EXTRAORDINARY SESSION, AS AMENDED, AND DELINEATED ON THAT CERTAIN MISCELLANEOUS MAP NO. 564, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON MAY 28, 1976 AS FILE NO. 1976-164686 OF OFFICIAL RECORDS, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

PARCEL NO. 1:

 

COMMENCING AT A 3” DIAMETER BRASS DISK MONUMENT STAMPED “SDUPD-015” AS SHOWN ON RECORD OF SURVEY 16668, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON JULY 25, 2000; THENCE LEAVING SAID MONUMENT NORTH 59° 46’ 30” EAST A DISTANCE OF 1,051.93 FEET (CALCULATED) TO THE TRUE POINT OF BEGINNING OF PARCEL NO. 1, SAID POINT BEING ON A LINE OFFSET 1.00 FOOT SOUTHWESTERLY OF AND PARALLEL WITH THE U.S. BULKHEAD LINE, AS SAID U.S. BULKHEAD IS SHOWN ON MAP ENTITLED “HARBOR LINES, SAN DIEGO BAY, CALIFORNIA, FILE NO. (D.O. SERIES) 426”, APPROVED BY THE SECRETARY OF THE ARMY, APRIL 29, 1964 AND FILED IN THE OFFICE OF THE DISTRICT ENGINEER, LOS ANGELES, CALIFORNIA; THENCE ALONG SAID 1.00 FOOT OFFSET LINE NORTH 50° 19’ 08” WEST A DISTANCE OF 992.68 FEET; THENCE LEAVING SAID 1.00 FOOT OFFSET LINE NORTH 39° 40’ 52” EAST A DISTANCE OF 186.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 166.26 FEET; THENCE NORTH 74° 55’ 08” EAST A DISTANCE OF 271.54 FEET TO A POINT HEREINAFTER KNOWN AS POINT “A”; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 669.75 FEET TO A POINT ON THE NORTHWESTERLY BOUNDARY OF THE DOLE FRESH FRUIT COMPANY LEASEHOLD, SAID DOLE FRESH FRUIT COMPANY LEASEHOLD WAS RECORDED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER MAY 25, 2001 AS DOCUMENT NO. 2001-0338693 AND ON FILE WITH THE SAN DIEGO UNIFIED PORT DISTRICT AS DOCUMENT NO. 42183; THENCE ALONG SAID DOLE FRESH FRUIT COMPANY LEASEHOLD NORTHWESTERLY BOUNDARY LINE SOUTH 39° 40’ 52” WEST A DISTANCE OF 407.78 FEET TO THE TRUE POINT OF BEGINNING OF PARCEL NO. 1, CONTAINING 350,552 SQUARE FEET OR 8.05 ACRES OF TIDELANDS AREA.

 

Ex. A - 1

 

PARCEL 2:

 

COMMENCING AT THE ABOVE DESCRIBED POINT “A”, SAID POINT ALSO BEING THE TRUE POINT OF BEGINNING OF PARCEL NO. 2; THENCE NORTH 74° 55’ 08” EAST A DISTANCE OF 191.09 FEET TO THE BEGINNING OF A 60.00 FOOT RADIUS CURVE CONCAVE SOUTHERLY; THENCE EASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 8° 22’ 34” AN ARC DISTANCE OF 8.77 FEET; THENCE NORTH 83° 17’ 42” EAST A DISTANCE OF 53.65 FEET TO THE BEGINNING OF A 60.00 FOOT RADIUS CURVE CONCAVE NORTHERLY; THENCE EASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 11° 53’ 08” AN ARC DISTANCE OF 12.45 FEET; THENCE NORTH 71° 24’ 34” EAST A DISTANCE OF 73.59 FEET TO THE BEGINNING OF A 256.00 FOOT RADIUS CURVE CONCAVE TO THE NORTHWEST; THENCE NORTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 26° 00’ 29” AN ARC DISTANCE OF 116.20 FEET; THENCE NORTH 45° 24’ 05” EAST A DISTANCE OF 49.01 FEET TO THE BEGINNING OF A 40.00 FOOT RADIUS CURVE CONCAVE TO THE SOUTHEAST; THENCE NORTHEASTERLY ALONG THE ARC OF SAID CURVE THROUGH A CENTRAL ANGLE OF 35° 38’ 00” AN ARC DISTANCE OF 24.88 FEET TO A POINT OF NON-TANGENCY WHICH BEARS NORTH 8° 57’ 56” WEST FROM THE CENTER OF SAID CURVE, SAID POINT ALSO LIES ON THE SOUTHWESTERLY RIGHT OF WAY LINE OF HARBOR DRIVE IN THE CITY OF SAN DIEGO, AS SAID HARBOR DRIVE IS DESCRIBED IN THE DOCUMENTS OF CONVEYANCE OF LAND FROM THE CITY OF SAN DIEGO TO THE SAN DIEGO UNIFIED PORT DISTRICT AND FILED IN THE OFFICE OF THE DISTRICT CLERK AS DOCUMENT NO. 75 AND DELINEATED ON DISTRICT CLERK DOCUMENT NO. 71; THENCE ALONG SAID SOUTHWESTERLY RIGHT OF WAY LINE OF HARBOR DRIVE SOUTH 51° 35’ 39” EAST A DISTANCE OF 230.61 FEET; THENCE CONTINUING ALONG SAID SOUTHWESTERLY RIGHT OF WAY LINE OF HARBOR DRIVE SOUTH 52° 22’ 06” EAST A DISTANCE OF 113.52 FEET; THENCE LEAVING SAID SOUTHWESTERLY RIGHT OF WAY LINE OF HARBOR DRIVE SOUTH 39° 40’ 52” WEST A DISTANCE OF 97.46 FEET TO THE NORTHWESTERLY CORNER OF THE ABOVE DESCRIBED DOLE FRESH FRUIT COMPANY LEASEHOLD; THENCE CONTINUING ALONG SAID DOLE FRESH FRUIT COMPANY LEASEHOLD BOUNDARY LINE SOUTH 39° 40’ 52” WEST A DISTANCE OF 297.93 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 75.00 FEET; THENCE SOUTH 39° 40’ 52” WEST A DISTANCE OF 68.22 FEET; THENCE LEAVING SAID DOLE FRESH FRUIT COMPANY LEASEHOLD BOUNDARY LINE NORTH 50° 19’ 08” WEST A DISTANCE OF 669.75 FEET TO THE TRUE POINT OF BEGINNING, CONTAINING 116,555 SQUARE FEET OR 2.68 ACRES OF TIDELANDS AREA AFTER EXCLUDING THE FOLLOWING DESCRIBED BUILDING FOOTPRINT EXCLUSION AREA:

 

BUILDING FOOTPRINT EXCLUSION AREA (PARCEL NO. 2)

 

COMMENCING AT THE ABOVE DESCRIBED POINT “A”; THENCE SOUTH

 

Ex. A - 2

 

50° 19’ 08” EAST A DISTANCE OF 291.07 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 42.90 FEET TO THE TRUE POINT OF BEGINNING OF THE BUILDING FOOTPRINT EXCLUSION AREA; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 23.50 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 12.20 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 44.50 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.30 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 186.80 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.30 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 41.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 17.60 FEET; THENCE NORTH 5° 19’ 08” WEST A DISTANCE OF 19.80 FEET; THENCE NORTH 84° 40’ 52” EAST A DISTANCE OF 23.00 FEET; THENCE SOUTH 5° 19’ 08” EAST A DISTANCE OF 19.71 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.47 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 206.50 FEET; THENCE SOUTH 39° 40’ 52” WEST A DISTANCE OF 3.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 20.50 FEET; THENCE SOUTH 39° 40’ 52” WEST A DISTANCE OF 349.20 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 248.60 FEET TO THE TRUE POINT OF BEGINNING OF THE BUILDING FOOTPRINT EXCLUSION AREA, CONTAINING 91,487 SQUARE FEET OR 2.10 ACRES OF TIDELANDS AREA.

 

ALSO: RESERVING FROM PARCELS 1 AND 2 ABOVE, AS APPLICABLE, THE FOLLOWING EASEMENTS:

 

A GENERAL UTILITY EASEMENT AT THE CORNER OF 8TH AVENUE AND HARBOR DRIVE DELINEATED AS “EASEMENT NO. 1” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

A WATER EASEMENT 30 FEET IN WIDTH IN THE NORTHWESTERLY PORTION OF PARCEL NO. 1 DELINEATED AS “EASEMENT NO. 2” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

A WATER EASEMENT, 15 FEET IN WIDTH, IN THE NORTHERLY PORTION OF PARCEL NO. 1 DELINEATED AS “EASEMENT NO. 3” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

A PUBLIC PEDESTRIAN AND LANDSCAPING EASEMENT IN THE NORTHWESTERLY PORTION OF PARCEL NO. 1 ALONG CONVENTION WAY DELINEATED AS “EASEMENT NO. 4” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

A LANDSCAPING EASEMENT WITHIN PARCELS 1 AND 2, 12 FEET IN

 

Ex. A - 3

 

WIDTH, ADJACENT TO 8TH AVENUE DELINEATED AS “EASEMENT NO. 5” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

A PUBLIC PEDESTRIAN ACCESS EASEMENT, 20 FEET IN WIDTH, WITHIN PARCELS 1 AND 2 ADJACENT TO THE ABOVE DESCRIBED LANDSCAPING EASEMENT, DELINEATED AS “EASEMENT NO. 6” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

AN EASEMENT FOR SDUPD/PUBLIC ACCESS, UTILITIES, LANDSCAPING, AND SIGNAGE OVER THE ENTIRE ABOVE DESCRIBED PARCEL NO. 2 DELINEATED AS “EASEMENT NO. 7” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

A VIEW CORRIDOR EASEMENT, 120 FEET IN WIDTH ACROSS PARCELS 1 AND 2, CENTERED ON THE PROLONGATION OF THE CENTER LINE OF PARK BOULEVARD EXTENDING TO THE SAN DIEGO BAY DELINEATED AS “EASEMENT NO. 8” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

A WATER EASEMENT, 15 FEET IN WIDTH WITHIN PARCEL NO. 2, ADJACENT TO HARBOR DRIVE DELINEATED AS “EASEMENT NO. 9” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

AN EASEMENT FOR A PEDESTRIAN BRIDGE ADJACENT TO HARBOR DRIVE WITHIN PARCEL 2 DELINEATED AS “EASEMENT NO. 10” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

A S.D.G.& E. CO. ELECTRICAL EASEMENT, ADJACENT TO HARBOR DRIVE WITHIN PARCEL 2 DELINEATED AS “EASEMENT NO. 11” ON SDUPD DRAWING NO. 019-044, DATED OCTOBER 11, 2005;

 

A S.D.G.& E. CO. ELECTRICAL EASEMENT, ADJACENT TO 8TH AVENUE WITHIN PARCEL 2 DELINEATED AS “EASEMENT NO. 12” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

A 36 FOOT PUBLIC PEDESTRIAN ACCESS EASEMENT ALONG THE SOUTHEASTERLY LINE OF PARCEL NO. 1 ADJACENT TO SAN DIEGO BAY DELINEATED AS “EASEMENT NO. 13” ON SDUPD DRAWING 019-044, DATED OCTOBER 11, 2005;

 

THE ABOVE DESCRIBED EASEMENTS AND RESERVATIONS ARE DELINEATED ON DRAWING NO. 019-044 DATED OCTOBER 11, 2005.

 

ALL BEARINGS AND DISTANCES IN THE ABOVE LEGAL DESCRIPTION ARE GRID, AND BASED UPON THE CALIFORNIA COORDINGATE SYSTEM, ZONE 6, N.A.D. 83, EPOCH 1991.35.

 

Ex. A - 4

 

PARCEL 3:

 

(OPTION PARCEL NO. 1, LAND/PIER AREA)

 

ALL THAT CERTAIN PORTION OF LAND CONVEYED TO THE SAN DIEGO UNIFIED PORT DISTRICT BY THAT CERTAIN ACT OF LEGISLATURE OF THE STATE OF CALIFORNIA PURSUANT TO CHAPTER 67, STATUTES OF 1962, FIRST EXTRAORDINARY SESSION, AS AMENDED, AND DELINEATED ON THAT CERTAIN MISCELLANEOUS MAP NO. 564, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON MAY 28, 1976, FILE NO. 1976-164686, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

COMMENCING AT A 3” BRASS DISK MONUMENT STAMPED SDUPD-015 AS SHOWN ON RECORD OF SURVEY NO. 16668, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON JULY 25, 2000; THENCE NORTH 59° 46’ 28” EAST A DISTANCE OF 1,051.93 FEET A POINT DISTANT 1.00 FOOT SOUTHWESTERLY FROM THE U.S. BULKHEAD LINE AS SAID U.S. BULKHEAD IS SHOWN ON MAP ENTITLED “HARBOR LINES, SAN DIEGO BAY, CALIFORNIA, FILE NO. (D.O. SERIES) 426”, APPROVED BY THE SECRETARY OF THE ARMY, APRIL 29, 1964 AND FILED IN THE OFFICE OF THE DISTRICT ENGINEER LOS ANGELES, CALIFORNIA, SAID POINT ALSO BEING THE SOUTHWESTERLY CORNER OF AN AREA CURRENTLY LEASED TO HILTON SAN DIEGO CONVENTION CENTER, LLC; THENCE ALONG A LINE PARALLEL WITH SAID U.S. BULKHEAD LINE NORTH 50° 19’ 08” WEST A DISTANCE OF 540.05 FEET TO THE TRUE POINT OF BEGINNING; THENCE SOUTH 39° 50’ 02” WEST A DISTANCE OF 173.31 FEET; THENCE NORTH 52° 08’ 03” WEST A DISTANCE OF 53.00 FEET; THENCE NORTH 40° 15’ 57” EAST A DISTANCE OF 175.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 51.65 FEET TO THE TRUE POINT OF BEGINNING OF SAID PARCEL, CONTAINING 9,109 SQUARE FEET OR 0.21 ACRE OF TIDELANDS AREA.

 

PARCEL 4:

 

(OPTION PARCEL NO. 2, WATER AREA)

 

ALL THAT CERTAIN PORTION OF LAND CONVEYED TO THE SAN DIEGO UNIFIED PORT DISTRICT BY THAT CERTAIN ACT OF LEGISLATURE OF THE STATE OF CALIFORNIA PURSUANT TO CHAPTER 67, STATUTES OF 1962, FIRST EXTRAORDINARY SESSION, AS AMENDED, AND DELINEATED ON THAT CERTAIN MISCELLANEOUS MAP NO. 564, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON MAY 28, 1976, FILE NO. 1976-164686, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND MORE PARTICULARLY DESCRIBED AS FOLLOWS:

 

Ex. A - 5

 

BEGINNING AT THE TRUE POINT OF BEGINNING OF THE ABOVE DESCRIBED OPTION PARCEL NO. 1 (PARCEL 3), SAID POINT ALSO BEING THE TRUE POINT OF BEGINNING; THENCE ALONG A LINE PARALLEL WITH SAID U.S. BULKHEAD LINE SOUTH 50° 19’ 08” EAST A DISTANCE OF 540.05 FEET; THENCE SOUTH 39° 40’ 50” WEST A DISTANCE OF 15.37 FEET; THENCE SOUTH 71° 20’ 52” WEST A DISTANCE OF 122.45 FEET; THENCE NORTH 78° 35’ 51” WEST A DISTANCE OF 843.06 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 20.95 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 519.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 235.98 FEET; THENCE SOUTH 40° 15’ 57” WEST A DISTANCE OF 175.00 FEET; THENCE SOUTH 52° 08’ 03” EAST A DISTANCE OF 53.00 FEET; THENCE NORTH 39° 50’ 02” EAST A DISTANCE OF 173.31 FEET TO THE TRUE POINT OF BEGINNING OF SAID PARCEL, CONTAINING 243,161 SQUARE FEET OR 5.58 ACRES OF WATER COVERED TIDELANDS AREA.

 

PARCEL 5:

 

(PARKING PARCEL)

 

A LICENSE FOR THE RIGHT TO PARK 894 CARS OVER THE FOLLOWING DESCRIBED PROPERTY, AS SUCH RIGHTS ARE MORE PARTICULARLY SET FORTH IN THE LEASE RECORDED JANUARY 12, 2006 AS FILE NO. 2006-0028175 OF OFFICIAL RECORDS AND GRANTED IN THE ADDENDUM TO LEASE RECORDED JANUARY 12, 2006 AS FILE NO. 2006-0028175 OF OFFICIAL RECORDS, AND DESCRIBED AS FOLLOWS:

 

COMMENCING AT A 3” DIAMETER BRASS DISK MONUMENT STAMPED “SDUPD-015” AS SHOWN ON RECORD OF SURVEY 16668, FILED IN THE OFFICE OF THE SAN DIEGO COUNTY RECORDER ON JULY 25, 2000; THENCE LEAVING SAID MONUMENT NORTH 59° 46’ 30” EAST A DISTANCE OF 1,051.93 FEET (CALCULATED), SAID POINT BEING ON A LINE OFFSET 1.00 FOOT SOUTHWESTERLY OF AND PARALLEL WITH THE U.S. BULKHEAD LINE, AS SAID U.S. BULKHEAD IS SHOWN ON MAP ENTITLED “HARBOR LINES, SAN DIEGO BAY, CALIFORNIA, FILE NO. (D.O. SERIES) 426”, APPROVED BY THE SECRETARY OF THE ARMY, APRIL 29, 1964 AND FILED IN THE OFFICE OF THE DISTRICT ENGINEER, LOS ANGELES, CALIFORNIA; THENCE ALONG SAID 1.00 FOOT OFFSET LINE NORTH 50° 19’ 08” WEST A DISTANCE OF 992.68 FEET; THENCE LEAVING SAID 1.00 FOOT OFFSET LINE NORTH 39° 40’ 52” EAST A DISTANCE OF 186.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 166.26 FEET; THENCE NORTH 74° 55’ 08” EAST A DISTANCE OF 271.54 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 291.07 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 42.90 FEET TO THE TRUE POINT OF BEGINNING; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 23.50 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 12.20 FEET;

 

Ex. A - 6

 

THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 44.50 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.30 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 186.80 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.30 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 15.10 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 41.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 17.60 FEET; THENCE NORTH 5° 19’ 08” WEST A DISTANCE OF 19.80 FEET; THENCE NORTH 84° 40’ 52” EAST A DISTANCE OF 23.00 FEET; THENCE SOUTH 5° 19’ 08” EAST A DISTANCE OF 19.71 FEET; THENCE NORTH 39° 40’ 52” EAST A DISTANCE OF 13.47 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 206.50 FEET; THENCE SOUTH 39° 40’ 52” WEST A DISTANCE OF 3.00 FEET; THENCE SOUTH 50° 19’ 08” EAST A DISTANCE OF 20.50 FEET; THENCE SOUTH 39° 40’ 52” WEST A DISTANCE OF 349.20 FEET; THENCE NORTH 50° 19’ 08” WEST A DISTANCE OF 248.60 FEET TO THE TRUE POINT OF BEGINNING, CONTAINING 91,487 SQUARE FEET OR 2.10 ACRES OF TIDELANDS AREA.

 

APN:  760-017-35 and 760-018-49

 

(End of Legal Description)

 

Ex. A - 7

 

EXHIBIT B

 

Definition of Single Purpose Entity

 

“Single Purpose Entity” means a corporation, limited partnership or limited liability company that:

 

(i)            is organized solely for the purpose of:  (A)(1)  intentionally omitted  (2) acquiring, owning, constructing improvements on, holding, managing, developing, financing, maintaining, marketing, selling, exchanging, assigning, transferring, operating, entitling, improving, rehabilitating, leasing, mortgaging, pledging and otherwise using, dealing with and disposing of the Premises, together with any additional land becoming part of the Premises pursuant to the exercise any option under the Ground Lease and (3) borrowing money and issuing evidence of indebtedness in furtherance of any or all of the objectives of its business and securing the same by mortgage, pledge or other liens; or (B) acting as a general partner of the limited partnership that owns the Premises or member of the limited liability company that owns the Premises, and in the case of either clause (A) or (B) above, doing any and all other acts or things that may be incidental or necessary to carry on its business as described in such clause;

 

(ii)           will not engage in any business unrelated to (A) the purposes described in clause (i)(A) above (including incidental personal property necessary therefor) (B) acting as general partner of the limited partnership that owns the Premises or (C) acting as a member of the limited liability company that owns the Premises, as applicable;

 

(iii)          will not have any assets other than those related to the Premises, together with any additional land becoming part of the Premises pursuant to the exercise any option under the Ground Lease and any incidental personal property necessary for the purposes described in clause (i)(A) above, or its partnership or member interest in the limited partnership or limited liability company that owns the Premises, as applicable;

 

(iv)          will not engage in, seek or consent to any dissolution, winding up, liquidation, consolidation, merger or asset sale (except as expressly permitted by this Loan Agreement), transfer of partnership or membership interests in violation of the Loan Documents, or amendment of its limited partnership agreement, articles of incorporation, articles of organization, certificate of formation or operating agreement which will adversely affect its status as a Single Purpose Entity, as applicable;

 

(v)           if such entity is a limited partnership, has and will have, as its only general partners, Single Purpose Entities;

 

(vi)          will maintain its accounts, books and records separate from any other Person and, to the extent required, will file its own tax returns (except to the extent that such entity is permitted or required to file a consolidated tax return under applicable Legal Requirements or is a tax disregarded entity which is not required to file a tax return under applicable Legal Requirements);

 

Ex. B - 1

 

(vii)         will not commingle its funds or assets with those of any other Person (other than Agent and other than as provided in the Management Agreement);

 

(viii)        will hold its assets in its own name;

 

(ix)           will conduct its business in its name except for services rendered under a management, franchise, license or similar agreement;

 

(x)            will maintain its financial statements, accounting records and other entity documents separate from any other Person except where consolidated financial statements are permitted or required under applicable Legal Requirements or Applicable Accounting Standards;

 

(xi)           will pay its own liabilities, including the salaries of its own employees (if any), out of its own funds and assets, provided, however, that the foregoing shall not require any parent or member of such entity to make any additional capital contributions or advance any other funds to such entity;

 

(xii)          Intentionally omitted;

 

(xiii)         will have no Indebtedness other than Permitted Indebtedness;

 

(xiv)        will not assume or guarantee or become obligated for the debts of any other Person or hold out its credit as being available to satisfy the obligations of any other Person except for the Loan;

 

(xv)         will not acquire obligations or securities of its owners;

 

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

 

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

 

(xviii)      will hold itself out and identify itself as a separate and distinct entity under its own name and not as a division or part of any other Person subject to the right to indentify the Premises as the San Diego Bayfront Hilton in accordance with the Property Management Agreement or with any other management, franchise or license agreement as may be entered into in accordance with this Loan Agreement;

 

(xxviii)     except as permitted under any Loan Document, will not make loans to any Person;

 

(xix)         will not identify its owners, or any Affiliate of any of them, as a division or part of it;

 

(xx)          will not enter into or be a party to, any transaction with its owners or Affiliates except (a) in connection with the Loan or as permitted under any Loan

 

Ex. B - 2

 

Document, (b) in the ordinary course of its business and on terms which are intrinsically fair and are no less favorable to it than would be obtained in a comparable arm’s-length transaction with an unrelated third party and (c) with respect to capital contributions and distributions permitted under its organizational documents; and

 

(xxi)         will have no obligation to indemnify its partners, officers, directors, members, as the case may be, unless such an obligation is subordinated to the Obligations and will not constitute a claim against it if cash flow in excess of the amount required to pay the then owing Obligations is insufficient to pay the then owing Obligations.

 

Ex. B - 3

 

EXHIBIT C

 

Required Amortization Payments

 

	
Month
    	
 
    	
Beginning
   Balance
    	
 
    	
Monthly
   Payment
    	
 
    	
Interest
    	
 
    	
Principal
   Reduction
    	
 
    	
Ending Balance
    	
 
    	
Yearly
   Reduction
    	
 
    	
%
   Amortized
    	
 
    	
Annual
   Payment
    	
 
    	
Constant
    	
 
    
	
5/1/2011
    	
 
    	
240,000,000.00
    	
 
    	
1,438,921.26
    	
 
    	
1,200,000.00
    	
 
    	
238,921.26
    	
 
    	
239,761,078.74
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6/1/2011
    	
 
    	
239,761,078.74
    	
 
    	
1,438,921.26
    	
 
    	
1,198,805.39
    	
 
    	
240,115.87
    	
 
    	
239,520,962.87
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7/1/2011
    	
 
    	
239,520,962.87
    	
 
    	
1,438,921.26
    	
 
    	
1,197,604.81
    	
 
    	
241,316.45
    	
 
    	
239,279,646.43
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8/1/2011
    	
 
    	
239,279,646.43
    	
 
    	
1,438,921.26
    	
 
    	
1,196,398.23
    	
 
    	
242,523.03
    	
 
    	
239,037,123.40
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9/1/2011
    	
 
    	
239,037,123.40
    	
 
    	
1,438,921.26
    	
 
    	
1,195,185.62
    	
 
    	
243,735.64
    	
 
    	
238,793,387.76
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10/1/2011
    	
 
    	
238,793,387.76
    	
 
    	
1,438,921.26
    	
 
    	
1,193,966.94
    	
 
    	
244,954.32
    	
 
    	
238,548,433.43
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
11/1/2011
    	
 
    	
238,548,433.43
    	
 
    	
1,438,921.26
    	
 
    	
1,192,742.17
    	
 
    	
246,179.09
    	
 
    	
238,302,254.34
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12/1/2011
    	
 
    	
238,302,254.34
    	
 
    	
1,438,921.26
    	
 
    	
1,191,511.27
    	
 
    	
247,409.99
    	
 
    	
238,054,844.35
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1/1/2012
    	
 
    	
238,054,844.35
    	
 
    	
1,438,921.26
    	
 
    	
1,190,274.22
    	
 
    	
248,647.04
    	
 
    	
237,806,197.31
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2/1/2012
    	
 
    	
237,806,197.31
    	
 
    	
1,438,921.26
    	
 
    	
1,189,030.99
    	
 
    	
249,890.27
    	
 
    	
237,556,307.04
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3/1/2012
    	
 
    	
237,556,307.04
    	
 
    	
1,438,921.26
    	
 
    	
1,187,781.54
    	
 
    	
251,139.73
    	
 
    	
237,305,167.31
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/2012
    	
 
    	
237,305,167.31
    	
 
    	
1,438,921.26
    	
 
    	
1,186,525.84
    	
 
    	
252,395.42
    	
 
    	
237,052,771.89
    	
 
    	
2,947,228.11
    	
 
    	
1.2
    	
%
    	
17,267,055.12
    	
 
    	
7.2
    	
%
    
	
5/1/2012
    	
 
    	
237,052,771.89
    	
 
    	
1,438,921.26
    	
 
    	
1,185,263.86
    	
 
    	
253,657.40
    	
 
    	
236,799,114.49
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6/1/2012
    	
 
    	
236,799,114.49
    	
 
    	
1,438,921.26
    	
 
    	
1,183,995.57
    	
 
    	
254,925.69
    	
 
    	
236,544,188.80
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7/1/2012
    	
 
    	
236,544,188.80
    	
 
    	
1,438,921.26
    	
 
    	
1,182,720.94
    	
 
    	
256,200.32
    	
 
    	
236,287,988.49
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8/1/2012
    	
 
    	
236,287,988.49
    	
 
    	
1,438,921.26
    	
 
    	
1,181,439.94
    	
 
    	
257,481.32
    	
 
    	
236,030,507.17
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9/1/2012
    	
 
    	
236,030,507.17
    	
 
    	
1,438,921.26
    	
 
    	
1,180,152.54
    	
 
    	
258,768.72
    	
 
    	
235,771,738.44
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10/1/2012
    	
 
    	
235,771,738.44
    	
 
    	
1,438,921.26
    	
 
    	
1,178,858.69
    	
 
    	
260,062.57
    	
 
    	
235,511,675.87
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
11/1/2012
    	
 
    	
235,511,675.87
    	
 
    	
1,438,921.26
    	
 
    	
1,177,558.38
    	
 
    	
261,362.88
    	
 
    	
235,250,312.99
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12/1/2012
    	
 
    	
235,250,312.99
    	
 
    	
1,438,921.26
    	
 
    	
1,176,251.56
    	
 
    	
262,669.70
    	
 
    	
234,987,643.30
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1/1/2013
    	
 
    	
234,987,643.30
    	
 
    	
1,438,921.26
    	
 
    	
1,174,938.22
    	
 
    	
263,983.04
    	
 
    	
234,723,660.25
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2/1/2013
    	
 
    	
234,723,660.25
    	
 
    	
1,438,921.26
    	
 
    	
1,173,618.30
    	
 
    	
265,302.96
    	
 
    	
234,458,357.30
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3/1/2013
    	
 
    	
234,458,357.30
    	
 
    	
1,438,921.26
    	
 
    	
1,172,291.79
    	
 
    	
266,629.47
    	
 
    	
234,191,727.82
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/2013
    	
 
    	
234,191,727.82
    	
 
    	
1,438,921.26
    	
 
    	
1,170,958.64
    	
 
    	
267,962.62
    	
 
    	
233,923,765.20
    	
 
    	
3,129,006.69
    	
 
    	
1.3
    	
%
    	
17,267,055.12
    	
 
    	
7.3
    	
%
    
	
5/1/2013
    	
 
    	
233,923,765.20
    	
 
    	
1,438,921.26
    	
 
    	
1,169,618.83
    	
 
    	
269,302.43
    	
 
    	
233,654,462.77
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6/1/2013
    	
 
    	
233,654,462.77
    	
 
    	
1,438,921.26
    	
 
    	
1,168,272.31
    	
 
    	
270,648.95
    	
 
    	
233,383,813.82
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7/1/2013
    	
 
    	
233,383,813.82
    	
 
    	
1,438,921.26
    	
 
    	
1,166,919.07
    	
 
    	
272,002.19
    	
 
    	
233,111,811.63
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8/1/2013
    	
 
    	
233,111,811.63
    	
 
    	
1,438,921.26
    	
 
    	
1,165,559.06
    	
 
    	
273,362.20
    	
 
    	
232,838,449.43
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9/1/2013
    	
 
    	
232,838,449.43
    	
 
    	
1,438,921.26
    	
 
    	
1,164,192.25
    	
 
    	
274,729.01
    	
 
    	
232,563,720.41
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10/1/2013
    	
 
    	
232,563,720.41
    	
 
    	
1,438,921.26
    	
 
    	
1,162,818.60
    	
 
    	
276,102.66
    	
 
    	
232,287,617.75
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    

 

Ex. C - 1

 

	
Month
    	
 
    	
Beginning
   Balance
    	
 
    	
Monthly
   Payment
    	
 
    	
Interest
    	
 
    	
Principal
   Reduction
    	
 
    	
Ending Balance
    	
 
    	
Yearly
   Reduction
    	
 
    	
%
   Amortized
    	
 
    	
Annual
   Payment
    	
 
    	
Constant
    	
 
    
	
11/1/2013
    	
 
    	
232,287,617.75
    	
 
    	
1,438,921.26
    	
 
    	
1,161,438.09
    	
 
    	
277,483.17
    	
 
    	
232,010,134.58
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12/1/2013
    	
 
    	
232,010,134.58
    	
 
    	
1,438,921.26
    	
 
    	
1,160,050.67
    	
 
    	
278,870.59
    	
 
    	
231,731,264.00
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1/1/2014
    	
 
    	
231,731,264.00
    	
 
    	
1,438,921.26
    	
 
    	
1,158,656.32
    	
 
    	
280,264.94
    	
 
    	
231,450,999.05
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2/1/2014
    	
 
    	
231,450,999.05
    	
 
    	
1,438,921.26
    	
 
    	
1,157,255.00
    	
 
    	
281,666.27
    	
 
    	
231,169,332.79
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3/1/2014
    	
 
    	
231,169,332.79
    	
 
    	
1,438,921.26
    	
 
    	
1,155,846.66
    	
 
    	
283,074.60
    	
 
    	
230,886,258.19
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/2014
    	
 
    	
230,886,258.19
    	
 
    	
1,438,921.26
    	
 
    	
1,154,431.29
    	
 
    	
284,489.97
    	
 
    	
230,601,768.22
    	
 
    	
3,321,996.98
    	
 
    	
1.4
    	
%
    	
17,267,055.12
    	
 
    	
7.4
    	
%
    
	
5/1/2014
    	
 
    	
230,601,768.22
    	
 
    	
1,438,921.26
    	
 
    	
1,153,008.84
    	
 
    	
285,912.42
    	
 
    	
230,315,855.80
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6/1/2014
    	
 
    	
230,315,855.80
    	
 
    	
1,438,921.26
    	
 
    	
1,151,579.28
    	
 
    	
287,341.98
    	
 
    	
230,028,513.82
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7/1/2014
    	
 
    	
230,028,513.82
    	
 
    	
1,438,921.26
    	
 
    	
1,150,142.57
    	
 
    	
288,778.69
    	
 
    	
229,739,735.13
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8/1/2014
    	
 
    	
229,739,735.13
    	
 
    	
1,438,921.26
    	
 
    	
1,148,698.68
    	
 
    	
290,222.58
    	
 
    	
229,449,512.55
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9/1/2014
    	
 
    	
229,449,512.55
    	
 
    	
1,438,921.26
    	
 
    	
1,147,247.56
    	
 
    	
291,673.70
    	
 
    	
229,157,838.85
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10/1/2014
    	
 
    	
229,157,838.85
    	
 
    	
1,438,921.26
    	
 
    	
1,145,789.19
    	
 
    	
293,132.07
    	
 
    	
228,864,706.78
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
11/1/2014
    	
 
    	
228,864,706.78
    	
 
    	
1,438,921.26
    	
 
    	
1,144,323.53
    	
 
    	
294,597.73
    	
 
    	
228,570,109.06
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12/1/2014
    	
 
    	
228,570,109.06
    	
 
    	
1,438,921.26
    	
 
    	
1,142,850.55
    	
 
    	
296,070.72
    	
 
    	
228,274,038.34
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1/1/2015
    	
 
    	
228,274,038.34
    	
 
    	
1,438,921.26
    	
 
    	
1,141,370.19
    	
 
    	
297,551.07
    	
 
    	
227,976,487.27
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2/1/2015
    	
 
    	
227,976,487.27
    	
 
    	
1,438,921.26
    	
 
    	
1,139,882.44
    	
 
    	
299,038.82
    	
 
    	
227,677,448.45
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3/1/2015
    	
 
    	
227,677,448.45
    	
 
    	
1,438,921.26
    	
 
    	
1,138,387.24
    	
 
    	
300,534.02
    	
 
    	
227,376,914.43
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/2015
    	
 
    	
227,376,914.43
    	
 
    	
1,438,921.26
    	
 
    	
1,136,884.57
    	
 
    	
302,036.69
    	
 
    	
227,074,877.74
    	
 
    	
3,526,890.48
    	
 
    	
1.5
    	
%
    	
17,267,055.12
    	
 
    	
7.5
    	
%
    
	
5/1/2015
    	
 
    	
227,074,877.74
    	
 
    	
1,438,921.26
    	
 
    	
1,135,374.39
    	
 
    	
303,546.87
    	
 
    	
226,771,330.87
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
6/1/2015
    	
 
    	
226,771,330.87
    	
 
    	
1,438,921.26
    	
 
    	
1,133,856.65
    	
 
    	
305,064.61
    	
 
    	
226,466,266.27
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
7/1/2015
    	
 
    	
226,466,266.27
    	
 
    	
1,438,921.26
    	
 
    	
1,132,331.33
    	
 
    	
306,589.93
    	
 
    	
226,159,676.34
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
8/1/2015
    	
 
    	
226,159,676.34
    	
 
    	
1,438,921.26
    	
 
    	
1,130,798.38
    	
 
    	
308,122.88
    	
 
    	
225,851,553.46
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
9/1/2015
    	
 
    	
225,851,553.46
    	
 
    	
1,438,921.26
    	
 
    	
1,129,257.77
    	
 
    	
309,663.49
    	
 
    	
225,541,889.96
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
10/1/2015
    	
 
    	
225,541,889.96
    	
 
    	
1,438,921.26
    	
 
    	
1,127,709.45
    	
 
    	
311,211.81
    	
 
    	
225,230,678.15
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
11/1/2015
    	
 
    	
225,230,678.15
    	
 
    	
1,438,921.26
    	
 
    	
1,126,153.39
    	
 
    	
312,767.87
    	
 
    	
224,917,910.28
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
12/1/2015
    	
 
    	
224,917,910.28
    	
 
    	
1,438,921.26
    	
 
    	
1,124,589.55
    	
 
    	
314,331.71
    	
 
    	
224,603,578.58
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
1/1/2016
    	
 
    	
224,603,578.58
    	
 
    	
1,438,921.26
    	
 
    	
1,123,017.89
    	
 
    	
315,903.37
    	
 
    	
224,287,675.21
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
2/1/2016
    	
 
    	
224,287,675.21
    	
 
    	
1,438,921.26
    	
 
    	
1,121,438.38
    	
 
    	
317,482.88
    	
 
    	
223,970,192.32
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
3/1/2016
    	
 
    	
223,970,192.32
    	
 
    	
1,438,921.26
    	
 
    	
1,119,850.96
    	
 
    	
319,070.30
    	
 
    	
223,651,122.03
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    	
 
    
	
4/1/2016
    	
 
    	
223,651,122.03
    	
 
    	
1,438,921.26
    	
 
    	
1,118,255.61
    	
 
    	
320,665.65
    	
 
    	
223,330,456.37
    	
 
    	
3,744,421.37
    	
 
    	
1.6
    	
%
    	
17,267,055.12
    	
 
    	
7.6
    	
%
    

 

Ex. C - 2

 

SCHEDULE 2.7(a)

 

Form of Interest Rate Protection Agreement Acknowledgment

 

[Letterhead of Issuer]

 

[Date]

 

[                            ] (“Counterparty”) has entered into a Confirmation (Reference No.:  [                ]) (“Interest Rate Protection Agreement”), dated as of [                  ], 20[    ], between the Counterparty and [One Park Boulevard, LLC,  a Delaware limited liability company] (“Assignor”).  Attached hereto as Exhibit A is a true, correct and complete copy of the Interest Rate Protection Agreement confirmation.  Counterparty acknowledges that it has been informed that Assignor has pledged and collaterally assigned all of its rights, title and interests in, to and under the Interest Rate Protection Agreement to Aareal Capital Corporation, as agent for the various lenders from time to time (together with its successors and assigns, in such capacity, the “Agent”).  Counterparty hereby consents to said pledge and collateral assignment, agrees that it will make any payments to become payable under or pursuant to the Interest Rate Protection Agreement directly to or as otherwise directed in writing by Agent and agrees that all rights of Assignor under the Interest Rate Protection Agreement, including all rights to consent to any termination or modification of same or grant any other consent thereunder, shall be exercisable by Agent.  Counterparty acknowledges that in the event it shall fail to make such payments directly to or as otherwise directed in writing by Agent, it shall be deemed to have not made such payment pursuant to the Interest Rate Protection Agreement.  Counterparty’s address for notices hereunder is:

 

[                                          ]

[                                          ]

[                                          ]

Attention: [                                          ]

Telephone: [                                          ]

Facsimile No.:   [                                          ]

Reference No.:  [                                          ]

 

Agent’s payment instructions as of the date hereof are as follows, provided that Agent may change same at any time upon notice to Counterparty:  [                                                    ], ABA #[                  ], Account #[                        ], Reference: Loan # [          /          ], Account Name:  [                                                                    ].

 

Counterparty shall be entitled to conclusively rely (without any independent investigation) on any notice or instructions from Agent in respect of the Interest Rate Protection Agreement.  In the event of any inconsistency between any notice or instructions from Assignor and any notice or instructions from Agent, Counterparty shall be entitled to conclusively rely (without any independent investigation) on the notice or instruction from Agent.  Assignor releases Counterparty from all liability in connection with Counterparty’s compliance with Agent’s written instructions.  Assignor hereby agrees to indemnify, defend and hold

 

Sch. 2.7(a) - 1

 

Counterparty harmless from and against any and all claims, other than those ultimately determined to be proximately caused by the gross negligence or willful misconduct of Counterparty, and from and against any damages, penalties, judgments, liabilities, losses or expenses (including reasonable attorneys’ fees and disbursements) incurred by Counterparty as a result of the assertion of any claim by any person or entity arising out of, or otherwise related to, any actions taken or omitted to be taken by Counterparty in reliance upon any instructions or notice provided by Agent.

 

Delivery of an executed counterpart of a signature page of this acknowledgment by telecopy or mail shall be effective as delivery of a manually executed original counterpart of this acknowledgment.  This acknowledgment may be executed in one or more counterparts, each of which shall be deemed an original, and it shall not be necessary in making proof of this acknowledgment to produce or account for more than one such counterpart.

 

	
 
    	
ISSUER:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
					

 

Sch. 2.7(a) - 2

 

	
 
    	
AGENT:
    
	
 
    	
 
    
	
 
    	
AAREAL   CAPITAL CORPORATION,
    
	
 
    	
as   Agent for Lenders
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
ACKNOWLEDGED   AND AGREED:
    
	
 
    	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    	
PURCHASER:
    	
 
    
	
 
    	
 
    	
 
    	
 
    
	
Dated:
    	
 
    	
 
    	
 
    
						

 

Sch. 2.7(a) - 3

 

EXHIBIT A

 

Interest Rate Protection Agreement Confirmation

 

(see attached)

 

Sch. 2.7(a) - 4

 

SCHEDULE 5

 

Exceptions to Representations and Warranties

 

1.               Exceptions to the representations and warranties contained in Section 5.20.

 

2.               Hodges Ward Elliot, as East Harbor Property, Inc.’s broker with respect to Sunstone’s acquisition of its ownership interests in Loan Parties.

 

Sch. 5- 1

 

SCHEDULE 5.11

 

Accounts

 

1.               Operating Account:  One Park Boulevard, LLC; Wells Fargo Bank, National Association Account No. 4121689186

 

2.               Operating Account:  Sunstone Park Lessee, LLC; Wells Fargo Bank, National Association Account No. 4122175292

 

3.               Capital/FF&E Reserve Account:  Sunstone Park Lessee, LLC; Compass Bank Account No. 2530641123

 

Sch. 5.11- 1

 

SCHEDULE 5.17

 

Material Operating Agreements

 

Agreements with the following Persons, in each case providing for to the type of service or otherwise related to the subject matter listed next to the Person’s name:

 

	
Counterparty:
    	
 
    	
Service/Subject Matter:
    
	
 
    	
 
    	
 
    
	
(a)
    	
Spectrasite Communications, LLC/American Tower
    	
 
    	
DAS   System
    
				

 

Sch. 5.17 - 1

 

SCHEDULE 6.11

 

Insurance Requirements

 

(a)           Loan Parties shall obtain and maintain, or cause to be maintained, insurance for Loan Parties and/or the Premises (as applicable) providing at least the following coverages:

 

(i)            so called “All Risk” or “Special Perils” property insurance, as is available in the insurance marketplace as of the closing date, on the Improvements and the Personal Property (as such term is defined in the Deed of Trust) (A) in an amount equal to one hundred percent (100%) of the “Full Replacement Cost,” which for purposes of this Loan Agreement shall mean actual replacement value (exclusive of costs of excavations, foundations, underground utilities and footings) without depreciation; (B) containing an agreed amount endorsement with respect to the Improvements and Personal Property waiving all co insurance provisions; (C) providing for no deductible in excess of Twenty-Five Thousand Dollars ($25,000) (the “Required Deductible”) for all such “All Risk” or “Special Perils” property insurance coverage or such higher deductible if Loan Parties provide Agent with cash or a Letter of Credit in an amount equal to the difference between the actual deductible and the Required Deductible; (D) covering at least the following perils or causes of loss:  building collapse, fire, flood, back-up of sewers and drains, water damage, windstorm, earthquake, earth movement, acts of terrorism impact of vehicles and aircraft, lightning, malicious mischief, and vandalism (earthquake, earth movement, flood, and other perils that may be specified by Agent may have a sub limit of such amount as is acceptable to Agent, coverage for these perils to be provided irrespective of the Improvement’s location in either a “High Hazard flood area, or in an area of high seismic activity); and (E) containing an “Ordinance or Law Coverage” endorsement covering “Demolition Expense” of and the replacement value for the “Undamaged Portion” as well as the increased cost to reconstruct following a loss due to enforcement of laws and building regulations or ordinances regulating construction following a loss, with a limit reasonably acceptable to the Agent.  In addition, Loan Parties shall obtain: (x) if any portion of the Improvements is currently or at any time in the future located in a federally designated “special flood hazard area,” flood hazard insurance in an amount equal to the greater of (1) the amount determined by a probable maximum loss study or other acceptable assessment of expected maximum loss, not to exceed the outstanding principal amount of the Note or (2) the maximum amount of such insurance available under the National Flood Insurance Act of 1968, the Flood Disaster Protection Act of 1973 or the National Flood Insurance Reform Act of 1994, as each may be amended; (y) Earthquake insurance in form and substance reasonably satisfactory to Agent in the event the Premises is located in an area with a high degree of seismic activity and (z) Coastal Windstorm insurance if the Improvements are located in a “Tier 1” designated area and if not covered in the “Special Perils” policy required hereunder, in form and substance reasonably satisfactory to Agent, all of which shall be provided in amounts and with deductibles as are customary in the market for insurance of commercial properties similar to the Premises, but in no event shall the deductible for the insurance required pursuant to clause (x), (y) or (z) be greater than five percent (5%) of the location insurable values;

 

Sch. 6.11 - 1

 

(ii)           Commercial General Liability insurance against claims for personal injury, bodily injury, death or property damage occurring upon, in or about the Premises, such insurance (A) to be on the so called “occurrence” form with a combined limit of not less than One Million and No/100 Dollars ($1,000,000) per occurrence and Two Million and No/100 Dollars ($2,000,000) in the aggregate, per location; (B) to continue at not less than the aforesaid limit until required to be changed by Agent in writing by reason of changed economic conditions making such protection inadequate; and (C) to cover at least the following hazards:  (1) premises and operations; (2) products and completed operations; (3) independent contractors; (4) blanket contractual liability for all legal contracts; and (5) contractual liability covering the indemnities (with regard to occurrences for property damage, bodily injury, personal injury and death for so called “insured” contracts as defined in the commercial general liability policy) to the extent the same is available.  Such insurance shall name the Agent as an Additional Insured, on a form reasonably acceptable to the Agent;

 

(iii)          Hotel Operations Specific Insurance.  Loan Parties shall include coverage for liquor liability, Garagekeeper’s liability, Innkeeper’s liability, safe deposit box liability and crime insurance, all in amounts reasonably satisfactory to Agent;

 

(iv)          business income or rental income insurance on an actual loss sustained basis (A) with a “Lenders Loss Payable” endorsement making all losses payable to Agent, except as provided elsewhere in this Loan Agreement; (B) covering all risks required to be covered by the insurance provided for in subsection (i) above; (C) containing an “Extended Period of Indemnity” endorsement which provides that after the physical loss to the Improvements and Personal Property has been repaired, the continued loss of income will be insured until such income either returns to the same level it was at prior to the loss, or three hundred sixty five (365) days from the date that the Premises is repaired or replaced and operations are resumed, whichever first occurs, and notwithstanding that the policy may expire prior to the end of such period; and (D) in an amount equal to one hundred percent (100%) of the projected gross income from the Premises for a period of twelve (12) months from the date of such Casualty (assuming such Casualty had not occurred) notwithstanding that the policy may expire at the end of such period.  The amount of such business income insurance shall be determined prior to the date hereof and at least once each year thereafter based on Loan Parties’ reasonable estimate of the gross income from the Premises for the succeeding twelve (12) month period.  All proceeds payable to Agent pursuant to this subsection shall be held and applied by Agent in accordance with Section 6.12; provided, however, that nothing herein contained shall be deemed to relieve Loan Parties of their obligations to pay the obligations secured by the Loan Documents on the respective dates of payment provided for in this Loan Agreement and the other Loan Documents except to the extent such amounts are actually paid out of the proceeds of such business income or rental income insurance;

 

(v)           at all times during which structural construction, repairs or alterations are being made with respect to the Improvements, and only if the Premises coverage form does not otherwise apply, the insurance provided for in subsection (i) above written in a so called “Builder’s Risk Completed Value” form (1) on a non reporting basis, (2) against

 

Sch. 6.11 - 2

 

all risks insured against pursuant to subsection (i) above, (3) including permission to occupy the Premises, and (4) with an agreed amount endorsement waiving co insurance provisions.  Loan Parties shall also ensure that the General Contractor shall provide for liability insurance that complies with the requirements of subsections (ii), (vi) and (ix) herein.  All terms and conditions of such policies shall be reasonably acceptable to the Agent;

 

(vi)          Worker’s Compensation insurance with respect to any employees of Loan Parties, as required by any Governmental Authority or Legal Requirement;

 

(vii)         if applicable, Comprehensive Boiler and Machinery insurance covering all pressure vessels and steam boilers (if any), mechanical equipment and electrical systems at the Premises, in amounts not less than Twenty Million and No/100 Dollars ($20,000,000) per accident or as shall otherwise be reasonably required by Agent, including, coverage extensions as required and keeping with terms consistent with the commercial property insurance policy required under subsections (i) and (iv) above;

 

(viii)        Umbrella Liability insurance in an amount not less than Seventy-Five Million and No/100 Dollars ($75,000,000) per occurrence, and in the aggregate, per location.  If the Umbrella Liability aggregate is shared with other locations, then the umbrella liability minimum limit shall be increased to one hundred million and no100 Dollars ($100,000,000);

 

(ix)           Motor Vehicle Liability coverage for all owned and non owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of One Million and No/100 Dollars ($1,000,000);

 

(x)            the Policies (as defined herein) will not contain an exclusion for acts of terrorism or if TRIPRA (which term shall mean the Terrorism Risk Insurance Program Reauthorization Act of 2007, as the same may be amended, restated, supplemented or otherwise modified from time to time) is not in effect and such Policies contain an exclusion for acts of terrorism, Loan Parties shall be required to obtain a standalone policy that provides the same coverage as the Policies would have if such exclusion did not exist; provided, however, that such stand-alone policy may have a deductible that is reasonable for such stand-alone policies with respect to properties similar to the Premises and reasonable for the geographic region where the Premises is located, so long as in no event shall such deductible exceed $25,000; and

 

(b)           upon sixty (60) days’ notice, such other insurance and in such reasonable amounts as Agent from time to time may reasonably and in good faith request against such other insurable hazards which at the time are commonly insured against for property similar to the Premises located in or around the region in which the Premises is located if such other insurance is recommended by an independent, third party insurance consultant commissioned by Agent. Loan Parties agree that they shall be responsible for all reasonable and documented out-of-pocket fees and expenses incurred in connection with the aforementioned insurance consultant.

 

Sch. 6.11 - 3

 

SCHEDULE 6.34

 

Required Repairs

 

1.               None.

 

Sch. 6.34 - 1

 

SCHEDULE 8.5

 

Form of Assignment and Acceptance

 

This ASSIGNMENT AND ACCEPTANCE (this “Assignment”) made as of                   , 20     by and between                                                      (“Assignor”), as a Lender (as defined in the Loan Agreement (as defined below)), and                                                      (together with its successors and assigns permitted under the Loan Agreement, “Assignee”).  Capitalized terms not otherwise defined herein shall have the respective meanings set forth in the Loan Agreement (as hereinafter defined).

 

WHEREAS, One Park Boulevard, LLC, a Delaware limited liability company (“Borrower”), Sunstone Park Lessee, LLC (“Operating Lessee”; Borrower and Operating Lessee are each sometimes referred to as a “Loan Party” and as “Loan Parties”), Aareal Capital Corporation, a Delaware corporation, as agent for the Lenders (as defined in the Loan Agreement) (in such capacity, “Agent”) and the Lenders party thereto, are parties to that certain Loan Agreement dated as of [April     ], 2011 (as the same may have been or may hereafter be amended, restated, extended or otherwise modified from time to time pursuant to the terms thereof, the “Loan Agreement”), pursuant to which Lenders have agreed to make, and Agent has agreed to administer, a loan to Borrower in the original principal amount of $[240,000,000.00] (the “Loan”);

 

WHEREAS, Assignor is one of the “Lenders” under the Loan Agreement; and

 

WHEREAS, Assignor wishes to sell and assign to Assignee all of Assignor’s right, title and interest in and to a portion of the Loan in an amount equal to $[          ], which constitutes         percent (      %) of Assignor’s interest in the entire Loan, together with all of Assignor’s right, title, and interest in and to the Loan Agreement and, the other Loan Documents in respect of such portion (the “Assigned Interest”).

 

NOW, THEREFORE, in consideration of ($[                  ]) paid by Assignee to Assignor with respect to the Assigned Interest, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Assignor and Assignee hereby agree as follows:

 

1.             As of the date hereof, Assignor hereby sells, assigns, transfers and grants to Assignee the Assigned Interest.  As of the date hereof, Assignee hereby purchases the Assigned Interest and assumes all obligations and liabilities of Assignor under the Loan Documents in respect of the Assigned Interest.

 

2.             Assignor (a) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Agreement or any other Loan Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Agreement or any other Loan Documents, or any other instrument or document furnished pursuant thereto, or any collateral security granted in connection therewith, if any, other than that there is no adverse claim upon the Assigned Interest and that the Assigned Interest is free and clear of any adverse claim; and (b) makes no representation or warranty and assumes no responsibility with respect to

 

Sch. 8.5 - 1

 

the financial condition of Borrower, any Guarantor, any of their respective Affiliates or any other obligor for the performance or the observance by Borrower, any Guarantor, any of their respective Affiliates or any other obligor of any of their respective obligations under the Loan Agreement, any other Loan Documents or any other instrument or document furnished pursuant hereto or thereto.

 

3.             Assignee (a) represents and warrants to Agent and Lenders that it is legally authorized to enter into this Assignment and is an Eligible Assignee; (b) confirms that it has received copies of the Loan Agreement, together with copies of the financial statements delivered pursuant thereto and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (c) agrees that it will, independently and without reliance upon Agent, Assignor or any other Lender, based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in granting or withholding any consent or approval under the Loan Agreement, the other Loan Documents or any other instrument or document furnished pursuant hereto or thereto; (d) confirms that Agent shall act as agent for Assignee and the other Lenders and shall take such action as agent on its behalf and to exercise such powers and discretion under the Loan Agreement, the other Loan Documents or other instruments or documents furnished pursuant hereto or thereto as are delegated to Agent by the terms thereof; and (e) agrees that it will be bound by the provisions of the Loan Documents and will perform in accordance with their respective terms all the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

 

4.             Assignor represents and warrants that (a) the current outstanding principal amount of the Loan is                            Dollars ($                      ), (b) Assignor has not previously assigned, pledged, transferred or hypothecated all or any portion of the Assigned Interest and (c) it is legally authorized to enter into this Assignment.

 

5.             From and after the date hereof, (a) Assignee shall be a party to the Loan Agreement and, to the extent of the Assigned Interest, shall have the rights and obligations of a Lender thereunder and under the other Loan Documents and shall be bound by the provisions thereof and (b) Assignor shall relinquish its rights as a Lender and be released from its obligations as a Lender under the Loan Documents and to the Loan with respect to the Assigned Interest.  Exhibit A attached hereto sets forth Assignor’s and Assignee’s respective Commitments after giving effect to this Assignment [(and, in the case of Assignor, any other Assignments that Assignor is entering simultaneously herewith)].

 

6.             The address of Assignee to which notices under the Loan Documents shall be sent is:

 

 

 

Attn:

Telephone:

 

Sch. 8.5 - 2

 

Facsimile:

 

with copies similarly delivered to:

 

 

Attn:

Telephone:

Facsimile:

 

7.             This Assignment shall be governed by and construed in accordance with the laws of the State of New York.

 

8.             This Assignment may be executed in any number of counterparts, with the same effect as if all of the parties had signed the same document.  All counterparts shall be construed together and constitute one agreement.(1)

 

(1)                                  With respect to an assignment from Aareal Capital Corporation to Aareal Bank AG, the following shall be added as a Section 9:  “Notwithstanding anything to the contrary contained in this Assignment, Assignor, Assignee and Agent hereby acknowledge and agree that (i) the Required Amortization Payments made in accordance with Section 2.4(b) of the Loan Agreement which are otherwise allocable to Aareal Bank AG shall be paid to Assignor and applied towards the outstanding principal balance of Assignor’s proportionate interest in the Loan until such outstanding principal balance is paid in full, in which event, the remainder of the Required Amortization Payments otherwise allocable to Aareal Bank AG shall be paid to Aareal Bank AG, and (ii) the foregoing clause (i) shall be for the benefit of Borrower and shall not result in any increase in Borrower’s obligations or the effective interest rate under the Loan Documents.”

 

Sch. 8.5 - 3

 

IN WITNESS WHEREOF, the parties have duly executed this Assignment as of the day and the year first above written.

 

	
 
    	
ASSIGNOR:
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
ASSIGNEE:
    
	
 
    	
 
    
	
 
    	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    	
Title:
    

 

, as agent for Lenders
 signs below for the sole purpose of consenting to
 this Assignment.  Such consent is not, and shall
 not be construed to be, a consent or waiver to any
 other assignment or any other provision of any
 Loan Document.  Agent shall retain all of its respective
 rights under the Loan Documents.

 

, as agent for Lenders

 

	
By:
    	
 
    	
 
    
	
Name:
    	
 
    
	
Title:
    	
 
    

 

Sch. 8.5 - 4

 

EXHIBIT A [to Schedule 8.5]

 

Assignor’s Commitment (following this Assignment [and the other assignments by Assignor being executed contemporaneously herewith]):

 

$                                                            .

 

Assignee’s Commitment - $                                                      .

 

Sch. 8.5 - 5

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