Document:

CHSP-2014.09.30-EX 10.1

Exhibit 10.1
  
  
LOAN AGREEMENT

Dated as of July 3, 2014

between

CHSP 31ST STREET LLC and
CHSP 36TH STREET LLC, 
 
 
collectively, as Borrower,
 
and
 
GOLDMAN SACHS MORTGAGE COMPANY, 
 
 
as Lender

	
			
	 
	 
	 

TABLE OF CONTENTS
	
	
	Page

ARTICLE I 
GENERAL TERMS
	
				
	Section 1.1.
	The Loan 
	30
	

	Section 1.2.
	Interest and Principal
	30
	

	Section 1.3.
	Method and Place of Payment
	32
	

	Section 1.4.
	Taxes; Regulatory Change
	32
	

	Section 1.5.
	Release
	34
	

ARTICLE II 
DEFEASANCE AND ASSUMPTION  
	
				
	Section 2.1.
	Defeasance
	34
	

	Section 2.2.
	Assumption
	36
	

	Section 2.3.
	Transfers of Equity Interests in Borrower
	37
	

ARTICLE III 
ACCOUNTS  
	
				
	Section 3.1.
	Cash Management Account
	38
	

	Section 3.2.
	Distributions from Cash Management Account
	40
	

	Section 3.3.
	Loss Proceeds Account
	40
	

	Section 3.4.
	Tax and Insurance Escrow Account
	41
	

	Section 3.5.
	FF&E Reserve Account
	42
	

	Section 3.6.
	Deferred Maintenance and Environmental Escrow Account
	43
	

	Section 3.7.
	Unfunded Obligations Account
	44
	

	Section 3.8.
	Performance Reserve Account
	45
	

	Section 3.9.
	Excess Cash Flow Reserve Account
	45
	

	Section 3.10.
	Account Collateral
	46
	

	Section 3.11.
	Bankruptcy
	46
	

ARTICLE IV 
REPRESENTATIONS  
	
				
	Section 4.1.
	Organization
	47
	

	Section 4.2.
	Authorization
	47
	

	Section 4.3.
	No Conflicts
	47
	

	Section 4.4.
	Consents
	48
	

	Section 4.5.
	Enforceable Obligations
	48
	

	Section 4.6.
	No Default
	48
	

	Section 4.7.
	Payment of Taxes
	48
	

	Section 4.8.
	Compliance with Law
	48
	

	Section 4.9.
	ERISA
	48
	

	Section 4.10.
	Investment Company Act
	49
	

	Section 4.11.
	No Bankruptcy Filing
	49
	

	Section 4.12.
	Other Debt
	49
	

	Section 4.13.
	Litigation
	49
	

	Section 4.14.
	Leases; Material Agreements
	49
	

TABLE OF CONTENTS
(continued) 

	
	
	Page

	
				
	Section 4.15.
	Full and Accurate Disclosure
	50
	

	Section 4.16.
	Financial Condition
	50
	

	Section 4.17.
	Single-Purpose Requirements
	50
	

	Section 4.18.
	Use of Loan Proceeds
	51
	

	Section 4.19.
	Not Foreign Person
	51
	

	Section 4.20.
	Labor Matters
	51
	

	Section 4.21.
	Title
	51
	

	Section 4.22.
	No Encroachments
	51
	

	Section 4.23.
	Physical Condition
	52
	

	Section 4.24.
	Fraudulent Conveyance
	52
	

	Section 4.25.
	Management
	52
	

	Section 4.26.
	Condemnation
	52
	

	Section 4.27.
	Utilities and Public Access
	53
	

	Section 4.28.
	Environmental Matters
	53
	

	Section 4.29.
	Assessments
	53
	

	Section 4.30.
	No Joint Assessment
	54
	

	Section 4.31.
	Separate Lots
	54
	

	Section 4.32.
	Permits; Certificate of Occupancy
	54
	

	Section 4.33.
	Flood Zone
	54
	

	Section 4.34.
	Security Deposits
	54
	

	Section 4.35.
	Acquisition Documents
	54
	

	Section 4.36.
	Insurance
	54
	

	Section 4.37.
	No Dealings
	54
	

	Section 4.39.
	Federal Trade Embargos
	54
	

	Section 4.40.
	Capital Plan; Property Improvement Plan
	55
	

	Section 4.41.
	Franchise Agreement
	55
	

	Section 4.42.
	Survival
	55
	

ARTICLE V
AFFIRMATIVE COVENANTS
	
				
	Section 5.1.
	Existence; License; Tax Status
	55
	

	Section 5.2.
	Maintenance of Property
	56
	

	Section 5.3.
	Compliance with Legal Requirements
	57
	

	Section 5.4.
	Impositions and Other Claims
	57
	

	Section 5.5.
	Access to Properties
	57
	

	Section 5.6.
	Cooperate in Legal Proceedings
	58
	

	Section 5.7.
	Leases
	58
	

	Section 5.8.
	Plan Assets, etc
	59
	

	Section 5.9.
	Further Assurances
	59
	

	Section 5.10.
	Management of Collateral
	60
	

	Section 5.11.
	Notice of Material Event
	61
	

	Section 5.12.
	Annual Financial Statements
	61
	

	Section 5.13.
	Quarterly Financial Statements
	62
	

TABLE OF CONTENTS
(continued) 

	
	
	Page

	
				
	Section 5.14.
	Monthly Financial Statements
	63
	

	Section 5.15.
	Insurance
	63
	

	Section 5.16.
	Casualty and Condemnation
	68
	

	Section 5.17.
	Annual Budget
	71
	

	Section 5.18.
	Nonbinding Consultation
	71
	

	Section 5.19.
	Compliance with Encumbrances and Material Agreements
	71
	

	Section 5.20.
	Prohibited Persons
	72
	

	Section 5.21.
	Operating Lease
	72
	

ARTICLE VI 
NEGATIVE COVENANTS  
	
				
	Section 6.1.
	Liens on the Collateral
	73
	

	Section 6.2.
	Ownership
	73
	

	Section 6.3.
	Transfer; Prohibited Change of Control
	73
	

	Section 6.4.
	Debt
	73
	

	Section 6.5.
	Dissolution; Merger or Consolidation
	74
	

	Section 6.6.
	Change in Business
	74
	

	Section 6.7.
	Debt Cancellation
	74
	

	Section 6.8.
	Affiliate Transactions
	74
	

	Section 6.9.
	Misapplication of Funds
	74
	

	Section 6.10.
	Jurisdiction of Formation; Name
	74
	

	Section 6.11.
	Modifications and Waivers
	74
	

	Section 6.12.
	ERISA
	75
	

	Section 6.13.
	Alterations and Expansions
	75
	

	Section 6.14.
	Advances and Investments
	76
	

	Section 6.15.
	Single-Purpose Entity
	76
	

	Section 6.16.
	Zoning and Uses
	76
	

	Section 6.17.
	Waste
	76
	

ARTICLE VII 
DEFAULTS  
	
				
	Section 7.1.
	Event of Default
	77
	

	Section 7.2.
	Remedies
	79
	

	Section 7.4.
	Application of Payments after an Event of Default
	81
	

ARTICLE VIII 
CONDITIONS PRECEDENT  
	
				
	Section 8.1.
	Conditions Precedent to Closing
	81
	

ARTICLE IX 
MISCELLANEOUS  
	
				
	Section 9.1.
	Successors
	84
	

	Section 9.2.
	GOVERNING LAW
	84
	

	Section 9.3.
	Modification, Waiver in Writing
	85
	

	Section 9.4.
	Notices
	85
	

TABLE OF CONTENTS
(continued) 

	
	
	Page

	
				
	Section 9.5.
	TRIAL BY JURY
	86
	

	Section 9.6.
	Headings
	86
	

	Section 9.7.
	Assignment and Participation
	86
	

	Section 9.8.
	Severability
	87
	

	Section 9.9.
	Preferences; Waiver of Marshalling of Assets
	88
	

	Section 9.10.
	Remedies of Borrower
	88
	

	Section 9.11.
	Offsets, Counterclaims and Defenses
	88
	

	Section 9.12.
	No Joint Venture
	89
	

	Section 9.13.
	Conflict; Construction of Documents
	89
	

	Section 9.14.
	Brokers and Financial Advisors
	89
	

	Section 9.15.
	Counterparts
	89
	

	Section 9.16.
	Estoppel Certificates
	89
	

	Section 9.17.
	General Indemnity; Payment of Expenses
	90
	

	Section 9.18.
	No Third-Party Beneficiaries
	92
	

	Section 9.19.
	Recourse
	92
	

	Section 9.20.
	Right of Set-Off
	95
	

	Section 9.21.
	Exculpation of Lender
	95
	

	Section 9.22.
	Servicer
	95
	

	Section 9.23.
	No Fiduciary Duty
	96
	

	Section 9.24.
	Borrower Information
	97
	

	Section 9.25.
	PATRIOT Act Records
	98
	

	Section 9.26.
	Prior Agreements
	98
	

	Section 9.27.
	Publicity
	98
	

	Section 9.28.
	Delay Not a Waiver
	98
	

	Section 9.29.
	Schedules and Exhibits Incorporated
	99
	

	Section 9.30.
	Joint and Several Liability
	99
	

Exhibits
A    Organizational Chart 
B    Form of Uniform System of Accounts
 
Schedules

A    Property 
B    Exception Report
C    Deferred Maintenance Conditions 
D    Unfunded Obligations 
E    Leases 
F    Material Agreements
G    Capital Plan
H    Allocated Loan Amounts 
I    ECB Violations 
 

 

LOAN AGREEMENT
This Loan Agreement (this “Agreement”) is dated July 3, 2014 and is between GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership, as lender (together with its successors and assigns, including any lawful holder of any portion of the Indebtedness, as hereinafter defined, “Lender”), and each of CHSP 31st Street LLC, a Delaware limited liability company and CHSP 36th Street LLC, collectively, as borrower (individually or collectively, as the context may require, jointly and severally, together with their respective permitted successors and assigns, “Borrower”).
RECITALS
Borrower desires to obtain from Lender the Loan (as hereinafter defined) in connection with the financing of the Hyatt Herald Square and Hyatt Place (each as hereinafter defined).
Lender is willing to make the Loan on the terms and subject to the conditions set forth in this Agreement if Borrower joins in the execution and delivery of this Agreement, the Note and the other Loan Documents.
Each of CHSP TRS 31st Street LLC and CHSP TRS 36th Street LLC join in this Agreement for the purposes of making the representations applicable to them and agreeing to their obligations, in each case, as expressly set forth herein.
In consideration of the agreements, provisions and covenants contained herein and in the other Loan Documents, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower agree as follows:
DEFINITIONS
(a)    When used in this Agreement, the following capitalized terms have the following meanings:
“Account Collateral” means, collectively, the Collateral Accounts and all sums at any time held, deposited or invested therein, together with any interest and other earnings thereon, and all securities and investment property credited thereto and all proceeds thereof (including proceeds of sales and other dispositions), whether accounts, general intangibles, chattel paper, deposit accounts, instruments, documents or securities.
“Account Control Agreement(s)” means, individually or collectively as the context may require, (i) the Hyatt Herald Square Account Control Agreement and (ii) the Hyatt Place Account Control Agreement. 
 “Agreement” means this Loan Agreement, as the same may from time to time hereafter be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.

	
			
	 
	 
	 

 

“Allocated Loan Amount” means the portion of the Loan allocated to each Property, as set forth on Exhibit H.
 “ALTA” means the American Land Title Association, or any successor thereto.
“Alteration” means any demolition, alteration, installation, improvement  or expansion of or to any of the Properties or any portion thereof.
“Annual Budget” means a capital and operating expenditure budget for each Property (including a hotel marketing plan and operating plan, forward/group booking schedule and a “pace report”) prepared by the Approved Property Manager that specifies amounts sufficient to operate and maintain each Property at a standard at least equal to that maintained on the Closing Date and, in any event, at the standard required under each respective Approved Management Agreement.
“Appraisal” means, with respect to each Property, an as-is appraisal of such Property that is prepared by a member of the Appraisal Institute selected by Lender, meets the minimum appraisal standards for national banks promulgated by the Comptroller of the Currency pursuant to Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (FIRREA) and complies with the Uniform Standards of Professional Appraisal Practice (USPAP).
“Approved Annual Budget” has the meaning set forth in Section 5.17.
“Approved FF&E Account(s)” means, individually or collectively as the context may require, (i) the Hyatt Place Manager FF&E Account and (ii) the Hyatt Herald Square Manager FF&E Account.
“Approved Franchise Agreement(s)” means, individually or collectively as the context may require, (i) the Hyatt Place Franchise Agreement, (ii) the Hyatt Herald Square Franchise Agreement, and (iii) until termination thereof, the Holiday Inn Franchise Agreement.
“Approved Franchisor” means (i) with respect to Hyatt Herald Square, Hyatt Franchising, L.L.C. and, until termination of the Holiday Inn Franchise Agreement, Holiday Hospitality Franchising, Inc., (ii) with respect to Hyatt Place, Hyatt Place Franchising, L.L.C. or (iii) any other franchisor approved by Lender, in each case unless and until Lender requests the termination of that franchisor pursuant to Section 5.10(e). 
“Approved Management Agreement(s)” means, individually or collectively as the context may require, (i) the Hyatt Place Management Agreement and (ii) the Hyatt Herald Square Management Agreement.
“Approved Operating Account(s)” means, individually or collectively or as the context may require, (i) the Hyatt Place Operating Account and (ii) the Hyatt Herald Square Operating Account.

 

“Approved Property Manager” means Real Hospitality Group, LLC or any other management company approved by Lender and with respect to which the Rating Condition is satisfied.
“Assignment” has the meaning set forth in Section 9.7(b).
“Assumption” has the meaning set forth in Section 2.2.
“Bankruptcy Code” has the meaning set forth in Section 7.1(d).
“Bankruptcy Event” has the meaning set forth in Section 7.1(d).
“Borrower” or “Borrowers” has the meaning set forth in the first paragraph of this Agreement.
“Borrower Tax” means any U.S. Tax and any present or future tax, assessment or other charge or levy imposed by, or on behalf of, any jurisdiction through which or from which payments due hereunder are made (or any taxing authority thereof).
“Business Day” means any day other than (i) a Saturday and a Sunday and (ii) a day on which federally insured depository institutions in the State of New York or the state in which the offices of Lender, its trustee, its Servicer or its Servicer’s collection account are located are authorized or obligated by law, governmental decree or executive order to be closed.  
“Capital Expenditure” means hard and soft costs incurred by Borrower (or Operating Lessee) with respect to replacements and capital repairs made to the Properties (including repairs to, and replacements of, structural components, roofs, building systems, parking garages and parking lots), in each case to the extent capitalized in accordance with GAAP.
“Capital Plan” means the capital plan for the Hyatt Herald Square set forth on Schedule G.
“Cash Management Account” has the meaning specified in Section 3.1(b). 
“Cash Management Agreement” means that certain cash management agreement, dated as of the Closing Date, among Hyatt Herald Square Borrower, Hyatt Place Borrower, Lender, each Operating Lessee and the Cash Management Bank that maintains the Cash Management Account as of the Closing Date, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Cash Management Bank” means, individually and collectively, the Eligible Institution(s) at which the Collateral Accounts (other than the Approved Operating Account, the Approved FF&E Account and the Distribution Account) are maintained. 
“Casualty” means a fire, explosion, flood, collapse, earthquake or other casualty affecting all or any portion of any Property.

 

“Cause” means, with respect to an Independent Director, (i) acts or omissions by such Independent Director that constitute systematic and persistent or willful disregard of such Independent Director’s duties, (ii) such Independent Director has been indicted or convicted for any crime or crimes of moral turpitude or dishonesty or for any violation of any Legal Requirements, (iii) such Independent Director no longer satisfies the requirements set forth in the definition of “Independent Director”, (iv) the fees charged for the services of such Independent Director are materially in excess of the fees charged by the other providers of Independent Directors listed in the definition of “Independent Director” or (v) any other reason for which the prior written consent of Lender shall have been obtained.
“Certificates” means, collectively, any senior and/or subordinate notes, debentures or pass-through certificates, or other evidence of indebtedness, or debt or equity securities, or any combination of the foregoing, representing a direct or beneficial interest, in whole or in part, in the Loan.
“Closing Date” means the date of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended, and as it may be further amended from time to time, any successor statutes thereto, and applicable U.S. Department of Treasury regulations issued pursuant thereto in temporary or final form.
“Collateral” means all assets owned from time to time by Borrower and/or Operating Lessee including the Properties, the Revenues and all other tangible and intangible property (including any Defeasance Collateral and all of Borrower’s and Operating Lessee’s respective right, title and interest in and to the Operating Lease, the Approved Franchise Agreement and the Approved Management Agreement) in respect of which Lender is granted a Lien under the Loan Documents, and all proceeds thereof.
“Collateral Account” means each of the accounts and sub-accounts established and/or maintained pursuant to Article III hereof, except for the Distribution Account.
“Completion Guaranty” means that certain Completion Guaranty, dated as of the Closing Date, executed by Sponsor and Borrower for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith. 
“Condemnation” means a taking or voluntary conveyance of all or any part of any of the Properties or any interest in or right accruing to or use of any of the Properties, as the result of, or in settlement of, any condemnation or other eminent domain proceeding by any Governmental Authority.
“Contingent Obligation” means, with respect to any Person, any obligation of such Person directly or indirectly guaranteeing any Debt of any other Person in any manner and any contingent obligation to purchase, to provide funds for payment, to supply funds to invest in any other Person or otherwise to assure a creditor against loss.

 

 “Control” of any entity means the ownership, directly or indirectly, of at least 51% of the equity interests in, and the right to at least 51% of the distributions from, such entity and the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ability to exercise voting power, by contract or otherwise (“Controlled” and “Controlling” each have the meanings correlative thereto). 
“Cooperation Agreement” means that certain Mortgage Loan Cooperation Agreement, dated as of the Closing Date, among Borrower, Lender and Sponsor, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Damages” to a party means any and all liabilities, obligations, losses, demands, damages, penalties, assessments, actions, causes of action, judgments, proceedings, suits, claims, costs, expenses and disbursements of any kind or nature whatsoever (including reasonable attorneys’ fees and other costs of defense and/or enforcement whether or not suit is brought), fines, charges, fees, settlement costs and disbursements imposed on, incurred by or asserted against such party, whether based on any federal, state, local or foreign laws, statutes, rules or regulations (including securities and commercial laws, statutes, rules or regulations and Environmental Laws), on common law or equitable cause or on contract or otherwise.
“DBRS” means DBRS, Inc. or its applicable affiliate.
“Debt” means, with respect to any Person, without duplication: 
(i)      all indebtedness of such Person to any other party (regardless of whether such indebtedness is evidenced by a written instrument such as a note, bond or debenture), including indebtedness for borrowed money or for the deferred purchase price of property or services;
(ii)      all letters of credit issued for the account of such Person and all unreimbursed amounts drawn thereunder;
(iii)      all indebtedness secured by a Lien on any property owned by such Person (whether or not such indebtedness has been assumed) except obligations for impositions that are not yet due and payable;
(iv)      all Contingent Obligations of such Person;
(v)      all payment obligations of such Person under any interest rate protection agreement (including any interest rate swaps, floors, collars or similar agreements) and similar agreements; 
(vi)      all contractual indemnity obligations of such Person; and
(vii)        any material actual or contingent liability to any Person or Governmental Authority with respect to any employee benefit plan (within the meaning of Section 3(3) 

 

of ERISA) subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the Code.
“Default” means the occurrence of any event that, but for the giving of notice or the passage of time, or both, would be an Event of Default.
“Default Interest” means, during the continuance of an Event of Default, the amount by which interest accrued on the Notes or Note Components at their respective Default Rates exceeds the amount of interest that would have accrued on the Notes or Note Components at their respective Interest Rates.
“Default Rate” means, with respect to any Note or Note Component, the greater of (x) 4% per annum in excess of the interest rate otherwise applicable to such Note or Note Component hereunder and (y) 1% per annum in excess of the Prime Rate from time to time; provided that, if the foregoing would result in an interest rate in excess of the maximum rate permitted by applicable law, the Default Rate shall be limited to the maximum rate permitted by applicable law.
“Defeasance Borrower” has the meaning set forth in Section 2.1(b).
“Defeasance Collateral” means government securities (as described in Treasury Reg. 1.860G-2(a)(8)(ii)) that are the direct obligations of the United States of America, which obligations are not subject to prepayment, call or early redemption.
“Defeasance Pledge Agreement” has the meaning set forth in Section 2.1(a)(iii). 
“Defease” means to deliver Defeasance Collateral as substitute Collateral for the Loan in accordance with Section 2.1 and to cause the Defeased Note to be assumed by a Defeasance Borrower in accordance herewith; and the terms “Defeased” and “Defeasance” have meanings correlative to the foregoing.
“Deferred Maintenance Amount” means $0.
“Deferred Maintenance Conditions” means those items described in Schedule C.
“Deferred Maintenance and Environmental Escrow Account” has the meaning set forth in Section 3.6(a).
“Distribution Account” means an account owned and controlled by Borrower or Operating Lessee and identified to Lender from time to time.
“ECB Violations” means the New York City Environmental Control Board violations listed on Schedule I.
“Eligible Account” means (i) a segregated account maintained with a federal or state-chartered depository institution or trust company that complies with the definition of Eligible Institution, or (ii) a segregated trust account or accounts maintained with the corporate 

 

trust department of a federal depository institution or state-chartered depository institution that has an investment-grade rating and is subject to regulations regarding fiduciary funds on deposit under, or similar to, Title 12 of the Code of Federal Regulations Section 9.10(b) that, in either case, has corporate trust powers, acting in its fiduciary capacity.
“Eligible Institution” means an institution (i) whose commercial paper, short-term debt obligations or other short-term deposits are rated at least “A–1” by S&P, “P–1” by Moody’s and/or “F–1” by Fitch, and whose long-term senior unsecured debt obligations are rated at least “A-” by S&P, “A” by Fitch, and “A2” by Moody’s and whose deposits are insured by the FDIC or (ii) with respect to which the Rating Condition is satisfied.
“Embargoed Person” means any Person subject to trade restrictions under any Federal Trade Embargo.
“Engineering Report” means a structural and seismic engineering report or reports (including a “probable maximum loss” calculation, if applicable) with respect to each of the Properties prepared by an independent engineer approved by Lender and delivered to Lender in connection with the Loan, and any amendments or supplements thereto delivered to Lender.
“Environmental Claim” means any written notice, claim, proceeding, notice of proceeding, investigation, demand, abatement order or other order or directive by any Person or Governmental Authority alleging or asserting liability with respect to Borrower, Operating Lessee or any Property arising out of, based on, in connection with, or resulting from (i) the actual or alleged presence, Use or Release of any Hazardous Substance, (ii) any actual or alleged violation of any Environmental Law, or (iii) any actual or alleged injury or threat of injury to property, health or safety, natural resources or to the environment caused by Hazardous Substances.
“Environmental Indemnity” means that certain Environmental Indemnity Agreement executed by Borrower and Sponsor as of the Closing Date, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Environmental Laws” means any and all present and future federal, state and local laws, statutes, ordinances, orders, rules, regulations and the like, as well as common law, any judicial or administrative orders, decrees or judgments thereunder, and any permits, approvals, licenses, registrations, filings and authorizations, in each case as now or hereafter in effect, relating to (i) the pollution, protection or cleanup of the environment, (ii) the impact of Hazardous Substances on property, health or safety, (iii) the Use or Release of Hazardous Substances, (iv) occupational safety and health, industrial hygiene or the protection of human, plant or animal health or welfare or (v) the liability for or costs of other actual or threatened danger to health or the environment.  The term “Environmental Law” includes, but is not limited to, the following statutes, as amended, any successors thereto, and any regulations promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations and the like addressing similar issues:  the Comprehensive Environmental Response, Compensation and Liability Act; the Emergency Planning and Community Right-to-Know Act; the Hazardous 

 

Materials Transportation Act; the Resource Conservation and Recovery Act (including Subtitle I relating to underground storage tanks); the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational Safety and Health Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the National Environmental Policy Act; and the River and Harbors Appropriation Act.  The term “Environmental Law” also includes, but is not limited to, any present and future federal state and local laws, statutes ordinances, rules, regulations and the like, as well as common law, conditioning transfer of property upon a negative declaration or other approval of a Governmental Authority of the environmental condition of a property; or requiring notification or disclosure of Releases of Hazardous Substances or other environmental conditions of a property to any Governmental Authority or other Person, whether or not in connection with transfer of title to or interest in property.
“Environmental Reports” means “Phase I Environmental Site Assessments” as referred to in the ASTM Standards on Environmental Site Assessments for Commercial Real Estate, E 1527-13 (and, if necessary, “Phase II Environmental Site Assessments”), prepared by an independent environmental auditor approved by Lender and delivered to Lender in connection with the Loan and any amendments or supplements thereto delivered to Lender, and shall also include any other environmental reports delivered to Lender pursuant to this Agreement and the Environmental Indemnity.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated thereunder.
“ERISA Affiliate,” at any time, means each trade or business (whether or not incorporated) that would, at the time, be treated together with Borrower or Operating Lessee as a single employer under Title IV or Section 302 of ERISA or Section 412 of the Code.
“Event of Default” has the meaning set forth in Section 7.1.
“Excess Cash Flow Reserve Account” has the meaning set forth in Section 3.9(a).
“Exception Report” means the report prepared by Borrower and attached to this Agreement as Schedule B, setting forth any exceptions to the representations set forth in Article IV.
“Exculpated Person” means each Person that is an affiliate, equityholder, beneficiary, trustee, member, officer, director, agent, manager, independent manager, employee, advisor or partner of Borrower, Operating Lessee or Sponsor.
“FF&E” means furniture, fixtures and equipment used in connection with the Property.
“FF&E Reserve Period” means a period commencing upon the occurrence of a Manager FF&E Reserve Failure, Trigger Period or Event of Default and continuing until, as 

 

applicable, such Manager FF&E Reserve Failure has been cured, such Trigger Period is no longer continuing, and/or such Event of Default has been waived by Lender.
“FF&E Reserve Account” has the meaning set forth in Section 3.5(a).
“Federal Trade Embargo” means any federal law imposing trade restrictions, including (i) the Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), (ii) the International Emergency Economic Powers Act (50 U.S.C. §§ 1701 et seq., as amended), (iii) any enabling legislation or executive order relating to the foregoing, (iv) Executive Order 13224, and (v) the PATRIOT Act.  
“Fiscal Quarter” means the three-month period ending on March 31, June 30, September 30 and December 31 of each year, or such other fiscal quarter of Borrower as Borrower may select from time to time with the prior consent of Lender, such consent not to be unreasonably withheld, delayed or conditioned.
“Fiscal Year” means the 12-month period ending on December 31 of each year, or such other fiscal year of Borrower as Borrower may select from time to time with the prior consent of Lender, not to be unreasonably withheld, delayed or conditioned.
“Fitch” means Fitch, Inc. and its successors.
“Force Majeure” means a delay due to acts of God, governmental restrictions, stays, judgments, orders, decrees, enemy actions, civil commotion, fire, casualty, strikes, work stoppage, shortages of labor or materials or similar causes beyond the reasonable control of Borrower; provided that (1) any period of Force Majeure shall apply only to performance of the obligations necessarily affected by such circumstance and shall continue only so long as Borrower is continuously and diligently using all reasonable efforts to minimize the effect and duration thereof; and (2) Force Majeure shall not include the unavailability or insufficiency of funds. 
“Form W-8BEN” means Form W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding) of the Department of Treasury of the United States of America, and any successor form.
“Form W-8ECI” means Form W-8ECI (Certificate of Foreign Person’s Claim for Exemption from Withholding of Tax on Income Effectively Connected with the Conduct of a Trade or Business in the United States) of the Department of the Treasury of the United States of America, and any successor form.
“Form W-9” means Form W-9 (Request for Taxpayer Identification Number and Certification) of the Department of the Treasury of the United States of America, and any successor form.

 

“GAAP” means generally accepted accounting principles in the United States of America, consistently applied.
“Governmental Authority” means any federal, state, county, regional, local or municipal government, any bureau, department, agency or political subdivision thereof and any Person with jurisdiction exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (including any court). 
“Guaranty” means that certain Guaranty, dated as of the Closing Date, executed by Sponsor for the benefit of Lender, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith. 
“Hazardous Substances” means any and all substances (whether solid, liquid or gas) defined, listed, or otherwise classified as pollutants, hazardous wastes, hazardous substances, hazardous materials, extremely hazardous wastes, toxic substances, toxic pollutants, contaminants, pollutants or words of similar meaning or regulatory effect under any present or future Environmental Laws or that may have a negative impact on human health or the indoor or outdoor environment or the presence of which on, in or under any of the Properties is prohibited or requires monitoring, investigation or remediation under Environmental Law, including petroleum and petroleum by-products, asbestos and asbestos-containing materials, toxic mold, polychlorinated biphenyls, lead and radon, and compounds containing them (including gasoline, diesel fuel, oil and lead-based paint), pesticides and radioactive materials, flammables and explosives and compounds containing them, but excluding those substances commonly used in the operation and maintenance of properties of kind and nature similar to those of the Properties that are used at the Properties in compliance with all Environmental Laws and in a manner that does not result in contamination of  any of the Properties or in a Material Adverse Effect. 
“Holiday Inn Franchise Agreement” means that certain License Agreement, dated as of December 20, 2011, by and between Hyatt Herald Square Operating Lessee and Holiday Hospitality Franchising, Inc.
“Hyatt Flag Trigger Event” has the meaning set forth in Section 5.2.
“Hyatt Herald Square” means the Property commonly and currently known as the Holiday Inn New York City Midtown-31st Street.  
“Hyatt Herald Square Account Control Agreement” means an account control agreement or blocked account agreement by and among Hyatt Herald Square Borrower or Hyatt Herald Square Operating Lessee (as applicable), Lender and the Eligible Institution at which the Hyatt Herald Square Manager FF&E Account and the Hyatt Herald Square Operating Account are maintained. 
“Hyatt Herald Square Borrower” means CHSP 31st Street LLC, a Delaware limited liability company.

 

“Hyatt Herald Square FF&E Reserve Account” has the meaning set forth in Section 3.5(a).
“Hyatt Herald Square Franchise Agreement” means that certain Hyatt Hotel Franchise Agreement, dated as of January 30, 2014, by and between Hyatt Herald Square Operating Lessee and Hyatt Franchising, L.L.C., and any other franchise agreement with an Approved Franchisor that is approved by Lender in its reasonable discretion and with respect to which the Rating Condition is satisfied, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Hyatt Herald Square Management Agreement” means that certain Management Agreement, dated as of December 22, 2011, by and between Hyatt Herald Square Operating Lessee and Real Hospitality Group, LLC, and any other management agreement that is reasonably approved by Lender and with respect to which the Rating Condition is satisfied, in each case as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith. 
“Hyatt Herald Square Manager FF&E Account” means an account established by the Approved Property Manager pursuant to a Hyatt Herald Square Management Agreement, which account is (i) in the name of and owned by the Hyatt Herald Square Borrower or Hyatt Herald Square Operating Lessee, (ii) pledged to Lender and (iii) subject to a Hyatt Herald Square Account Control Agreement, pursuant to which Lender shall have the right to control the disbursement of the funds contained therein during the continuance of a Trigger Period or Event of Default. 
 “Hyatt Herald Square Monthly FF&E Amount” means the greater of (i) Revenues from the Hyatt Herald Square for the most recently ended calendar month, times 4% and (ii) the amount required to be deposited into the Hyatt Herald Square Manager FF&E Account pursuant to the Hyatt Herald Square Franchise Agreement and the Hyatt Herald Square Management Agreement (calculated on a monthly basis) or the Hyatt Herald Square FF&E Reserve Account pursuant to this Agreement.
“Hyatt Herald Square Operating Account” means one or more accounts established by the Approved Property Manager pursuant to a Hyatt Herald Square Management Agreement, which account or accounts are (i) owned by the Hyatt Herald Square Operating Lessee and pledged to Lender and (ii) subject to a Hyatt Herald Square Account Control Agreement, pursuant to which Lender shall have the right to control the disbursement of the funds contained therein, in the event the Hyatt Herald Square Management Agreement is terminated.
“Hyatt Herald Square Operating Lessee” means CHSP TRS 31st Street LLC, a Delaware limited liability company.
“Hyatt Place” means the Property commonly known as the Hyatt Place New York Midtown South.  

 

“Hyatt Place Account Control Agreement” means an account control agreement or blocked account agreement by and among Hyatt Place Borrower or Hyatt Place Operating Lessee (as applicable), Lender and the Eligible Institution at which the Hyatt Place Manager FF&E Account and the Hyatt Place Operating Account are maintained. 
“Hyatt Place Borrower” means CHSP 36th Street LLC, a Delaware limited liability company.
 “Hyatt Place FF&E Reserve Account” has the meaning set forth in Section 3.5(a).
“Hyatt Place Franchise Agreement” means that certain Hyatt Place Hotel Franchise Agreement, dated as of March 14, 2013, by and between Hyatt Place Operating Lessee and Hyatt Place Franchising, L.L.C., and any other franchise agreement with an Approved Franchisor that is approved by Lender in its reasonable discretion and with respect to which the Rating Condition is satisfied, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Hyatt Place Management Agreement” means that certain Hyatt Place New York City, Midtown 36th Street Hotel Management Agreement, dated as of March 8, 2013, by and between Hyatt Place Operating Lessee and Real Hospitality Group, LLC, and any other management agreement that is reasonably approved by Lender and with respect to which the Rating Condition is satisfied, in each case as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith. 
“Hyatt Place Manager FF&E Account” means an account established by the Approved Property Manager pursuant to a Hyatt Place Management Agreement, which account is (i) in the name of and owned by the Hyatt Place Borrower or Hyatt Place Operating Lessee, (ii) pledged to Lender and (iii) subject to a Hyatt Place Account Control Agreement, pursuant to which Lender shall have the right to control the disbursement of the funds contained therein during the continuance of a Trigger Period or Event of Default.
“Hyatt Place Monthly FF&E Amount” means the greater of (i) Revenues from the Hyatt Place for the most recently ended calendar month, times 4% and (ii) the amount required to be deposited into the Hyatt Place Manager FF&E Account pursuant to the Hyatt Place Franchise Agreement and the Hyatt Place Management Agreement (calculated on a monthly basis) or the Hyatt Place FF&E Reserve Account pursuant to this Agreement.
“Hyatt Place Operating Account” means one or more accounts established by the Approved Property Manager pursuant to a Hyatt Place Management Agreement, which account or accounts are (i) owned by the Hyatt Place Operating Lessee and pledged to Lender and (ii) subject to a Hyatt Place Account Control Agreement, pursuant to which Lender shall have the right to control the disbursement of the funds contained therein, in the event the Hyatt Place Management Agreement is terminated.

 

“Hyatt Place Operating Lessee” means CHSP TRS 36th Street LLC, a limited liability company.
“Increased Costs” has the meaning set forth in Section 1.4(d).
“Indebtedness” means the Principal Indebtedness, together with interest and all other obligations and liabilities of Borrower under the Loan Documents, including all transaction costs, Yield Maintenance Premiums, late fees and other amounts due or to become due to Lender pursuant to this Agreement, under the Notes or in accordance with any of the other Loan Documents, and all other amounts, sums and expenses reimbursable by Borrower to Lender hereunder or pursuant to the Notes or any of the other Loan Documents.
“Indemnified Liabilities” has the meaning set forth in Section 9.19(b).
“Indemnified Parties” has the meaning set forth in Section 9.17.
“Independent Director” of any corporation or limited liability company means an individual who is provided by CT Corporation, Corporation Service Company, National Registered Agents, Inc., Wilmington Trust Company, Stewart Management Company, Lord Securities Corporation or, if none of those companies is then providing professional independent directors or managers, another nationally-recognized company reasonably approved by Lender, in each case that is not an affiliate of Borrower and that provides professional independent directors or managers and other corporate services in the ordinary course of its business, and which individual is duly appointed as a member of the board of directors or board of managers of such corporation or limited liability company and is not, and has never been, and will not while serving as Independent Director be, any of the following: 
(i)    a member (other than an independent, non-economic member), partner, equityholder, manager, director, officer or employee of such corporation or limited liability company or any of its equityholders or affiliates (other than as an independent director or manager of an affiliate of such corporation or limited liability company that is not in the direct chain of ownership of such corporation or limited liability company and that is required by a creditor to be a single purpose bankruptcy remote entity, provided that such independent director or manager is employed by a company that routinely provides professional independent directors or managers); 
(ii)    a creditor, supplier or service provider (including provider of professional services) to such corporation or limited liability company or any of its equityholders or affiliates (other than a nationally recognized company that routinely provides professional independent managers or directors and that also provides lien search, entity filings and other similar services to such corporation or limited liability company or any of its equityholders or affiliates in the ordinary course of business); 
(iii)    a family member of any such member, partner, equityholder, manager, director, officer, employee, creditor, supplier or service provider; or

 

(iv)    a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.
A natural person who otherwise satisfies the foregoing definition other than subparagraph (i) by reason of being the Independent Director of a Single-Purpose Entity affiliated with the corporation or limited liability company in question shall not be disqualified from serving as an Independent Director of such corporation or limited liability company, provided that the fees that such natural person earns from serving as Independent Director of affiliates of such the corporation or limited liability company in any given year constitute in the aggregate less than five percent of such natural person’s annual income for that year.  The same natural persons may not serve as Independent Directors of a corporation or limited liability company and, at the same time, serve as Independent Directors of an equityholder or member of such corporation or limited liability company.
“Initial Principal Payment Date” means the Payment Date in August 2016.
“Insurance Requirements” means, collectively, (i) all material terms of any insurance policy required pursuant to this Agreement and (ii) all material regulations and then-current standards applicable to or affecting the Property or any portion thereof or any use or condition thereof, which may, at any time, be recommended by the board of fire underwriters, if any, having jurisdiction over the Property, or any other body exercising similar functions.
“Interest Accrual Period” means each period from and including the sixth day of a calendar month through and including the fifth day of the immediately succeeding calendar month; provided, that, prior to a Securitization, Lender shall have the right, in connection with a change in the Payment Date in accordance with the definition thereof, to make a corresponding change to the Interest Accrual Period.  Notwithstanding the foregoing, the first Interest Accrual Period shall commence on and include the Closing Date. 
“Interest Rate” means 4.3005% per annum (subject to Section 1.1(c)).  
“Lease” means any lease (other than the Operating Lease) license, letting, concession, occupancy agreement, sublease to which Borrower and/or Operating Lessee is a party or has a consent right, or other agreement (whether written or oral and whether now or hereafter in effect) under which Borrower and/or Operating Lessee is a lessor, sublessor, licensor or other grantor existing as of the Closing Date or thereafter entered into by Borrower and/or Operating Lessee, in each case pursuant to which any Person is granted a possessory interest in, or right to use or occupy all or any portion of any space in any of the Properties, and every modification or amendment thereof, and every guarantee of the performance and observance of the covenants, conditions and agreements to be performed and observed by the other party thereto, excluding short-term agreements in the ordinary course of business pursuant to which hotel rooms and facilities are made available to individual hotel guests.
“Leasing Commissions” means leasing commissions required to be paid by Borrower or Operating Lessee in connection with the leasing of space to Tenants at any of the Properties pursuant to Leases entered into by Borrower or Operating Lessee in accordance 

 

herewith and payable in accordance with third‐party/arm’s‐length written brokerage agreements, provided that the commissions payable pursuant thereto are commercially reasonable based upon the then current brokerage market for property of a similar type and quality to such Property in the geographic market in which such Property is located.
“Legal Requirements” means    all governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities (including Environmental Laws and zoning restrictions) affecting Borrower, Operating Lessee, Sponsor, the Property or any other Collateral or any portion thereof or the construction, ownership, use, alteration or operation thereof, or any portion thereof (whether now or hereafter enacted and in force), and all permits, licenses and authorizations and regulations relating thereto.
“Lender” has the meaning set forth in the first paragraph of this Agreement and in Section 9.7. 
“Lender 80% Determination” means a reasonable determination by Lender that, based on a current or updated appraisal, a broker’s price opinion or other written determination of value using a commercially reasonable valuation method satisfactory to Lender, the fair market value of the Property securing the Loan at the time of such determination (but excluding any value attributable to property that is not an interest in real property within the meaning of section 860G(a)(3)(A) of the Code) is at least 80% of the Loan’s adjusted issue price within the meaning of the Code.
“Letter of Credit” means an irrevocable, unconditional, freely transferable, clean sight draft evergreen letter of credit in favor of Lender, with respect to which Borrower has no reimbursement obligation, entitling Lender to draw thereon in New York, New York, issued by a domestic Eligible Institution or the U.S. agency or branch of a foreign Eligible Institution.  
“Lien” means any mortgage, lien (statutory or other), pledge, hypothecation, assignment, preference, priority, security interest, restrictive covenant, easement or any other encumbrance or charge on or affecting any Collateral or any portion thereof, or any interest therein (including any conditional sale or other title retention agreement, any sale-leaseback, any financing lease or similar transaction having substantially the same economic effect as any of the foregoing, the filing of any financing statement or similar instrument under the Uniform Commercial Code or comparable law of any other jurisdiction, domestic or foreign, and mechanics’, materialmen’s and other similar liens and encumbrances, as well as any option to purchase, right of first refusal, right of first offer or similar right).
“Loan” has the meaning set forth in Section 1.1(a).
“Loan Amount” means $90,000,000.
“Loan Documents” means this Agreement, the Note, the Mortgages (and related financing statements), the Environmental Indemnity, each of the Subordination of Management Agreements, the Cash Management Agreement, the Cooperation Agreement, the Guaranty, the 

 

Completion Guaranty, each Account Control Agreement, any Defeasance Pledge Agreement and all other agreements, instruments, certificates and documents necessary to effectuate the granting to Lender of first-priority Liens on the Collateral or otherwise in satisfaction of the requirements of this Agreement or the other documents listed above or hereafter entered into by Lender and Borrower in connection with the Loan, as all of the aforesaid may be amended, restated, replaced, supplemented or otherwise modified from time to time in accordance herewith.
“Lockout Period” means the period from the Closing Date to but excluding the first Payment Date following the earlier to occur of (i) the third anniversary of the Closing Date and (ii) the second anniversary of the date on which the entire Loan (including any subordinated interest therein) has been Securitized pursuant to a Securitization or series of Securitizations.
“Loss Proceeds” means amounts, awards or payments payable to Borrower, Operating Lessee or Lender in respect of all or any portion of any of the Properties in connection with a Casualty or Condemnation thereof (after the deduction therefrom and payment to Borrower, Operating Lessee and Lender, respectively, of any and all reasonable expenses incurred by Borrower, Operating Lessee and Lender in the recovery thereof, including all attorneys’ fees and disbursements, the fees of insurance experts and adjusters and the costs incurred in any litigation or arbitration with respect to such Casualty or Condemnation).
“Loss Proceeds Account” has the meaning set forth in Section 3.3(a).
“Major Lease” means any Lease that (i) when aggregated with all other Leases at the applicable Property with the same Tenant (or affiliated Tenants), and assuming the exercise of all expansion rights and all preferential rights to lease additional space contained in each such Lease, is expected to cover more than 5,000 rentable square feet, (ii) contains an option or preferential right to purchase all or any portion of such Property, (iii) is with an affiliate of Borrower as Tenant, (iv) is entered into during the continuance of an Event of Default, or (v) pertains to food and beverage, fitness or parking facilities at any Property.  
“Manager FF&E Reserve Failure” shall have the meaning set forth in Section 3.5(b).
“Material Adverse Effect” means a material adverse effect upon (i) Borrower’s title to any Property, (ii) the ability of the Property to generate net cash flow sufficient to service the Loan, (iii) the ability of Borrower or Sponsor to perform any material provision of any Loan Document, (iv) Lender’s ability to enforce and derive the principal benefit of the security intended to be provided by the Mortgage and the other Loan Documents, or (v) the value, use or enjoyment of an individual Property or the operation or occupancy thereof.
“Material Agreements” means the Operating Lease and each other contract and agreement (other than Leases) relating to the Properties, or otherwise imposing obligations on Borrower or Operating Lessee, under which Borrower or Operating Lessee would have the obligation to pay more than $250,000 per annum and that cannot be terminated by Borrower or Operating Lessee without cause upon 60 days’ notice or less without payment of a termination fee in excess of $10,000, or that is with an affiliate of Borrower or Operating Lessee.     

 

“Material Alteration” means any Alteration (other than as set forth in the Capital Plan) to be performed by or on behalf of Borrower or Operating Lessee at any of the Properties that (a) is reasonably expected to result in a Material Adverse Effect with respect to the applicable Property, (b) is reasonably expected to cost in excess of 5% of the Allocated Loan Amount of the applicable Property, as determined by an independent architect, (c) is reasonably expected to permit (or is reasonably likely to induce) any Tenant under any Major Lease to terminate its Lease or abate rent or (d) is reasonably expected to cause the closure of 10% or more of the guest rooms at the applicable Property for more than 10 consecutive days.  
“Maturity Date” means the Payment Date in July 2024, or such earlier date as may result from acceleration of the Loan in accordance with this Agreement.
“Maximum Management Fee” means 3%, or such greater percentage as Lender shall approve in writing in its reasonable discretion, of the gross revenues of the applicable Property.
“Minimum Balance” has the meaning set forth in Section 3.2(a).
“Moody’s” means Moody’s Investors Service, Inc. and its successors.
“Mortgage” means that certain Amended, Restated and Consolidated Fee and Leasehold Mortgage, Assignment of Rents and Leases, Collateral Assignment of Property Agreements, Security Agreement and Fixture Filing encumbering such Property and the Operating Lease executed by Borrower and Operating Lessee as of the Closing Date, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith. 
“Net Operating Income” means, with respect to any Test Period, the excess of (i) Operating Income for such Test Period, minus (ii) Operating Expenses for such Test Period. 
“Nonconsolidation Opinion” means the opinion letter, dated the Closing Date, delivered by Borrower’s counsel to Lender and addressing issues relating to substantive consolidation in bankruptcy.
“Note(s)” means that certain Promissory Note, dated as of the Closing Date, made by Borrower to the order of Lender to evidence the Loan, as such note may be replaced by multiple Notes in accordance with Section 1.1(c) and as otherwise assigned (in whole or in part), amended, restated, replaced, supplemented or otherwise modified in accordance herewith.  
“Note Component” has the meaning set forth in Section 1.1(c).
“OFAC List” means the list of specially designated nationals and blocked persons subject to financial sanctions that is maintained by the U.S. Treasury Department, Office of Foreign Assets Control and any other similar list maintained by the U.S. Treasury Department, Office of Foreign Assets Control pursuant to any applicable governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions of Governmental Authorities, 

 

including trade embargo, economic sanctions, or other prohibitions imposed by Executive Order of the President of the United States.  The OFAC List currently is accessible at http://www.treasury.gov/ofac/downloads/t11sdn.pdf.
“Officer’s Certificate” means a certificate delivered to Lender that is signed by an authorized officer of Borrower, certifies the information therein to the best of such officer’s knowledge and is otherwise reasonably acceptable to Lender in form and substance.  
“Operating Expenses” means, for any period, all operating, renting, administrative, management, legal and other ordinary expenses of Borrower, the Properties and, without duplication, Operating Lessee during such period, determined in accordance with GAAP, plus a deemed expenditure in respect of FF&E in an amount equal to the aggregate of (x) Hyatt Herald Square Monthly FF&E Amount plus (y) the Hyatt Place Monthly FF&E Amount, in each case required to be reserved hereunder during such period; provided, however, that such expenses shall not include (i) depreciation, amortization or other non-cash items (other than expenses that are due and payable but not yet paid), (ii) interest, principal or any other sums due and owing with respect to the Loan (or for the 12-month period immediately prior to the Closing Date, interest, principal or any other sums paid under the Prior Loan), (iii) income taxes or other taxes in the nature of income taxes, (iv) Capital Expenditures, (v) equity distributions or (vi) any extraordinary or non-recurring expenses. 
“Operating Income” means, for any period, all operating income from each of the Properties during such period, determined in accordance with GAAP and the Uniform System of Accounts (but without straight-lining of rents), other than (i) Loss Proceeds (but Operating Income will include rental loss/business interruption insurance proceeds to the extent allocable to such period), (ii) any revenue attributable to a Lease that is not a Qualifying Lease, (iii) any revenue attributable to a Lease to the extent it is paid more than 30 days prior to the due date, (iv) any interest income from any source, (v) any repayments received from any third party of principal loaned or advanced to such third party by Borrower, (vi) any proceeds resulting from the Transfer of all or any portion of the Collateral, (vii) sales, use and occupancy or other taxes on receipts required to be accounted for by Borrower to any government or governmental agency and (viii) any other extraordinary or non-recurring items.
“Operating Lease(s)” means individually or collectively as the context may require, (i) as to the Hyatt Herald Square, (a) until July 31, 2014, that certain Lease Agreement, dated as of December 22, 2011 by and between the Hyatt Herald Square Borrower and Hyatt Herald Square Operating Lessee, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith and (b) from and after August 1, 2014, that certain Amended and Restated Lease Agreement made as of June 25, 2014 to be effective as of August 1, 2014, by and between Hyatt Herald Square Borrower and Hyatt Herald Square Operating Lessee, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith and (ii) as to the Hyatt Place, that certain Lease Agreement, dated as of March 8, 2013 by and between the Hyatt Place Borrower and the Hyatt Place Operating Lessee, as the same may be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.

 

“Operating Lessee” means, individually or collectively as the context may require, the Hyatt Place Operating Lessee and the Hyatt Herald Square Operating Lessee.
“Overpaying Borrower” has the meaning set forth in Section 9.30. 
“Participation” has the meaning set forth in Section 9.7(b).
“PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001), as amended from time to time.
“Payment Date” means, with respect to each Interest Accrual Period, the sixth day of the calendar month in which such Interest Accrual Period ends (or, if such day is not a Business Day, the first preceding Business Day); provided, that prior to a Securitization, Lender shall have the right to change the Payment Date so long as a corresponding change to the Interest Accrual Period is also made. 
“Performance Reserve Account” has the meaning set forth in Section 3.8.
“Performance Disbursement Amount” means $2,500,000.
“Permits” means all licenses, permits, variances and certificates used in connection with the ownership, operation, use or occupancy of the Property (including certificates of occupancy, business licenses, state health department licenses, licenses to conduct business and all such other permits, licenses, consents, approvals and rights, obtained from any Governmental Authority or private Person concerning ownership, operation, use or occupancy of such Property).
“Permitted Debt” means: 
(i)    the Indebtedness;
(ii)    Taxes not yet delinquent; 
(iii)    tenant allowances and Capital Expenditure costs and property improvement costs required under Leases, the Operating Lease, the Approved Franchise Agreement or the Approved Management Agreement or otherwise permitted to be incurred under the Loan Documents that are paid on or prior to the date when due; and
(iv)    (1) Trade Payables not represented by a note, customarily paid by Borrower or Operating Lessee within 60 days of incurrence and in fact not more than 60 days outstanding (to the extent cash flow from the applicable Property is sufficient for the payment thereof), which are incurred in the ordinary course of Borrower’s or Operating Lessee’s business with respect to the Properties in amounts reasonable and customary for similar properties, and (2) Permitted Equipment Leases, provided that the amount of such Trade Payables and Permitted Equipment Leases do not in the aggregate at any time exceed 3.0% of the Loan Amount.

 

“Permitted Encumbrances” means: 
(i)      the Liens created by the Loan Documents; 
(ii)      all Liens and other matters specifically disclosed on Schedule B of the Title Insurance Policy; 
(iii)      Liens, if any, for Taxes not yet delinquent;
(iv)      mechanics’, materialmen’s or similar Liens, if any, and Liens for delinquent taxes or impositions, in each case only if being diligently contested in good faith and by appropriate proceedings, provided that no such Lien is in imminent danger of foreclosure and provided further that either (a) each such Lien is released or discharged of record or fully insured over by the title insurance company issuing the Title Insurance Policy within 30 days of filing of a claim for lien, or (b) Borrower deposits with Lender, by the expiration of such 30-day period, an amount equal to 150% of the dollar amount of such Lien or a bond in the aforementioned amount from such surety, and upon such terms and conditions, as is reasonably satisfactory to Lender, as security for the payment or release of such Lien; 
(v)      rights of existing and future Tenants as tenants only pursuant to written Leases entered into in conformity with the provisions of this Agreement;
(vi)     liens consisting of encumbrances in the nature of zoning restrictions, easements and rights or restrictions of record on the use of the Properties that (i) arise in the ordinary course of Borrower’s business and (ii) would not reasonably be expected to have a Material Adverse Effect; and
(vii)    Permitted Equipment Leases.
“Permitted Equipment Leases” means financing leases and purchase money debt in connection with the financing or purchase of equipment and other personal property used on the Property, the removal of which would not materially damage any of the improvements thereon or materially impair the value of such improvements, in each case incurred in the ordinary course of operating the Properties and not evidenced by a note or secured by property other than the item of equipment or personal property so financed.
“Person” means any natural person, corporation, limited liability company, partnership, joint venture, estate, trust, unincorporated association or Governmental Authority and any fiduciary acting in such capacity on behalf of any of the foregoing.
“Plan Assets” means assets of any (i) employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, (ii) plan (as defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code, or (iii) governmental plan (as defined in Section 3(32) of ERISA) subject to federal, state or local laws, rules or regulations substantially similar to Title I of ERISA or Section 4975 of the Code.

 

“Policies” has the meaning set forth in Section 5.15(b).
“Prepayment Period” means the final three Interest Accrual Periods prior to the Maturity Date.
“Prime Rate” means the “prime rate” published in the “Money Rates” section of The Wall Street Journal.  If The Wall Street Journal ceases to publish the “prime rate,” then Lender shall select an equivalent publication that publishes such “prime rate,” and if such “prime rate” is no longer generally published or is limited, regulated or administered by a governmental or quasi-governmental body, then Lender shall reasonably select a comparable interest rate index.
“Principal Indebtedness” means the principal balance of the Loan outstanding from time to time.
“Prior Loan” has the meaning set forth in Section 4.17(c).
“Prohibited Change of Control” means the occurrence of either or both of the following:  (i) the failure of Borrower to be Controlled by one or more Qualified Equityholders (individually or collectively), or (ii) the failure of any other Required SPE to be Controlled by the same Qualified Equityholder(s) that Control Borrower. 
“Prohibited Pledge” has the meaning set forth in Section 7.1(f).
“Properties” means the real property described on Schedule A, together with all buildings and other improvements thereon and all personal property appurtant thereto; and “Property” means an individual property included in the Properties or all Properties collectively, as the context may require.
“Proportional Amount” has the meaning set forth in Section 9.30.
“Qualified Equityholder” means (i) Sponsor, (ii) any Person approved by Lender with respect to which the Rating Condition is satisfied, or (iii) a bank, saving and loan association, investment bank, insurance company, trust company, commercial credit corporation, pension plan, pension fund or pension advisory firm, mutual fund, government entity or plan, real estate company, investment fund or an institution substantially similar to any of the foregoing, provided in each case under this clause (iii) that such Person (x) has total assets (in name or under management) in excess of $650,000,000 and (except with respect to a pension advisory firm or similar fiduciary) capital/statutory surplus or shareholder’s equity in excess of $250,000,000 (in both cases, exclusive of the Property), and (y) is regularly engaged in the business of owning and operating comparable properties in major metropolitan areas. 
“Qualifying Lease” means a Lease to a Tenant that is in occupancy at a Property, open for business at such Property, not in default under its Lease and not the subject of a bankruptcy or similar insolvency proceedings (unless such Tenant has assumed such Lease in bankruptcy).

 

“Rating Agency” shall mean, prior to the final Securitization of the Loan, each of S&P, Moody’s, DBRS and Fitch, or any other nationally-recognized statistical rating agency that has been designated by Lender and, after the final Securitization of the Loan, shall mean any of the foregoing that have rated and continue to rate any of the Certificates (excluding unsolicited ratings).
“Rating Condition” means, with respect to any proposed action, the receipt by Lender of confirmation in writing from each of the Rating Agencies that such action shall not result, in and of itself, in a downgrade, withdrawal, or qualification of any rating then assigned to any outstanding Certificates; except that if any portion of the Loan has not been Securitized pursuant to a Securitization rated by the Rating Agencies, then “Rating Condition” shall instead mean the receipt of prior written approval of both (x) the applicable Rating Agencies (if and to the extent that any portion of the Loan has been Securitized pursuant to a Securitization or series of Securitizations rated by such Rating Agencies), and (y) Lender in its sole discretion.  No Rating Condition shall be regarded as having been satisfied unless and until any conditions imposed on the effectiveness of any confirmation from any Rating Agency shall have been satisfied.  Lender shall have the right in its sole discretion to waive a Rating Condition requirement with respect to any Rating Agency that Lender determines has declined to review the applicable proposal; provided that if Lender determines that any Rating Agency has declined to review a Defeasance, then the Rating Condition requirement shall not be waived but shall instead be deemed satisfied as it relates to such Rating Agency for such Defeasance.
“Regulatory Change” means any change after the Closing Date in federal, state or foreign laws or regulations or the adoption or the making, after such date, of any interpretations, directives or requests applying to a class of banks or companies controlling banks, including Lender, of or under any federal, state or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof.
“Release” with respect to any Hazardous Substance means any release, deposit, discharge, emission, leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing or other movement of Hazardous Substances into the indoor or outdoor environment (including the movement of Hazardous Substances through ambient air, soil, surface water, ground water, wetlands, land or subsurface strata), and “Released” has the meaning correlative thereto.
“REMIC” means a “real estate mortgage investment conduit” as defined in Section 860D of the Code.
“Representative Borrower” has the meaning set forth in Section 9.4. 
“Required SPE” means Borrower and Operating Lessee.
“Revenues” means all rents  (including percentage rent), rent equivalents, moneys payable as damages pursuant to a Lease or in lieu of rent or rent equivalents (including all termination fees), royalties (including all oil and gas or other mineral royalties and bonuses), 

 

income, receivables, receipts, revenues, deposits (including security, utility and other deposits), accounts, cash, issues, profits, charges for services rendered, and other consideration of whatever form or nature received by or paid to or for the account of or benefit of Borrower or (without duplication) Operating Lessee or Approved Property Manager from any and all sources including any obligations now existing or hereafter arising or created out of the sale, lease, sublease, license, concession or other grant of the right of the use and occupancy of property or rendering of services by Borrower or Operating Lessee and proceeds, if any, from business interruption or other loss of income insurance.
“S&P” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, and its successors.
“Securitization” means a transaction in which all or any portion of the Loan is deposited into one or more trusts or entities that issue Certificates to investors, or a similar transaction; and the term “Securitize” and “Securitized” have meanings correlative to the foregoing.
“Securitization Vehicle” means the issuer of Certificates in a Securitization of the Loan.
“Service” means the Internal Revenue Service or any successor agency thereto.
“Servicer” means the entity or entities appointed by Lender from time to time to serve as servicer and/or special servicer of the Loan.  If at any time no entity is so appointed, the term “Servicer” shall be deemed to refer to Lender.
“Severed Loan Documents” has the meaning set forth in Section 7.2(f).
“Single Member LLC” means a limited liability company that either (x) has only one member, or (y) has multiple members, none of which is a Single-Purpose Entity that (1) is a limited liability company or corporation formed under the laws of the State of Delaware, (2) owns at least a 1% direct equity interest in Borrower, and (3) serves as the general partner or managing member of Borrower. 
“Single-Purpose Entity” means a Person that:
 (a)     was formed under the laws of the State of Delaware solely for the purpose of (i) acquiring, holding, leasing, subleasing, operating, managing, maintaining, developing and improving, in the case of Borrower or Operating Lessee, a fee or leasehold ownership interest in one or more of the Properties, together with all personal property owned in connection therewith or related thereto (or, if applicable, Defeasance Collateral), or (ii) in the case of the Borrower (x) entering into and incurring the Indebtedness and Obligations under this Agreement and the other Loan Documents, and engaging in any activities related or incidental thereto and (ii) entering into one or more Prior Loans, for which it has no further obligations or liabilities, as of the date hereof;

 

(b)     does not engage in any business unrelated to the applicable Property (or, if applicable, Defeasance Collateral);
(c)     does not own any assets other than those related to its interest in the applicable Property (or, if applicable, Defeasance Collateral), and in the case of Borrower, does not and will not own any assets on which Lender does not have a Lien, other than as otherwise permitted hereunder and with respect to excess cash that has been released to Borrower pursuant hereto;
(d)     does not have any Debt other than Permitted Debt (provided that, for the purpose of this clause (d), Debt shall not include claims against such Person pursuant to lawsuits filed by unaffiliated third parties);
(e)     maintains books, accounts, records, financial statements, stationery, invoices and checks that are separate and apart from those of any other Person (except that such Person’s financial position, assets, results of operations and cash flows may be included in the consolidated financial statements of an affiliate of such Person in accordance with GAAP, provided that (i) any such consolidated financial statements do not suggest in any way that such Person’s assets are available to satisfy the claims of its affiliate’s creditors and (ii) such assets shall also be listed on such Person’s own separate balance sheet); 
(f)     is subject to and complies with all of the limitations on powers and separateness requirements set forth in the organizational documentation of such Person as of the Closing Date;
(g)     holds itself out as being a Person separate and apart from each other Person and not as a division or part of another Person; 
(h)     conducts its business in its own name or in a name franchised or licensed to it by an entity other than an Affiliate; 
(i)     exercises reasonable efforts to correct any known misunderstanding actually known to it regarding its separate identity, and maintains an arm’s-length relationship with its affiliates; 
(j)     pays its own liabilities out of its own funds, including the salaries of its own employees, if any (provided that (i) the foregoing shall not require such Person’s equityholders to make any additional capital contributions to such Person and (ii) any failure to pay liabilities as a result of insufficient cash flow shall not be a violation of this clause (j), except to the extent that such insufficiency is the result of such Person making distributions to its equityholders so as to cause such insufficiency) and reasonably allocates any overhead that is shared with an affiliate, including paying for shared office space and services performed by any officer or employee of an affiliate; 

 

(k)     maintains a sufficient number of employees, if any, in light of its contemplated business operations;
(l)     conducts its business so that the assumptions made with respect to it that are contained in the Nonconsolidation Opinion shall at all times be true and correct in all material respects; 
(m)     maintains its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any other Person; 
(n)     observes all applicable entity-level formalities, to the extent necessary to comply with the other clauses of this definition; 
(o)     does not commingle its assets with those of any other Person, except pursuant to the Loan Documents, and holds its assets in its own name; 
(p)     does not assume, guarantee or become obligated for the debts of any other Person, and does not hold out its credit as being available to satisfy the obligations or securities of others, except in connection with a Prior Loan for which it has no further liabilities or obligations; 
(q)     does not acquire obligations or securities of its direct or indirect equityholders; 
(r)     does not pledge its assets for the benefit of any other Person (except, in the case of Operating Lessee, a pledge of its assets for the benefit of Borrower pursuant to any Loan Document and, in the case of Borrower and Operating Lessee, a pledge of its assets to secure a Prior Loan from which all such assets have been released as of the date hereof) and does not make any loans or advances to any other Person other than as contemplated by the Loan Documents with respect to co-Borrowers;
(s)     maintains adequate capital in light of its contemplated business operations (provided that (i) the foregoing shall not require such Person’s partners, members or shareholders to make any additional capital contributions to such Person and (ii) the failure to maintain adequate capital as a result of insufficient cash flow shall not be a violation of this clause (s), except to the extent that such insufficiency is the result of such Person making distributions to its equityholders so as to cause such insufficiency); 
(t)     has two Independent Directors on its board of directors or board of managers, and has organizational documents that (i) provide that the Independent Directors shall consider only the interests of Borrower, including its creditors, and shall have no fiduciary duties to Borrower’s equityholders (except to the extent of their respective interests in Borrower), and (ii) prohibit the replacement of any Independent Director without Cause and without giving at least two Business Days’ prior written notice to Lender (except in the case of the death, legal incapacity, or voluntary non-collusive resignation of an Independent Director, in which case no prior notice to Lender 

 

or the Rating Agencies shall be required in connection with the replacement of such Independent Director with a new Independent Director that is provided by any of the companies listed in the definition of “Independent Director”); 
(u)     if such entity is a Single Member LLC, has organizational documents that provide either (i) for so long as the Loan remains outstanding, the Independent Members are admitted as members of the Single Member LLC or (ii) upon the occurrence of any event (other than a permitted equity transfer) that causes its sole member to cease to be a member while the Loan is outstanding, at least one of its Independent Directors shall automatically be admitted as the sole member of the Single Member LLC and shall preserve and continue the existence of the Single Member LLC without dissolution; and
(v)     has by-laws or an operating agreement, which provides that, for so long as the Loan is outstanding, such Person shall not take or consent to any of the following actions except to the extent expressly permitted in this Agreement and the other Loan Documents:  
		
	(i)  
	the dissolution, liquidation, consolidation, merger or sale of all or substantially all of its assets;

		
	(ii)  
	the engagement by such Person in any business other than the acquisition, development, management, leasing, financing, improving, ownership, maintenance and operation of the applicable Property and activities incidental thereto; 

		
	(iii)  
	the filing, or consent to the filing, of a bankruptcy or insolvency petition, any general assignment for the benefit of creditors or the institution of any other insolvency proceeding, the seeking or consenting to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official in respect of such Person, admitting in writing such Person’s inability to pay its debts generally as they become due, or the taking of any action in furtherance of any of the foregoing, in each case, in respect of itself, without the affirmative vote of both of its Independent Directors; and 

		
	(iv)  
	any amendment or modification of any provision of its organizational documents relating to qualification as a “Single-Purpose Entity”.

“Smith Travel Reports” means a “STAR Program Report” with respect to the Property prepared by Smith Travel Research, Inc.
“Sponsor” means Chesapeake Lodging, L.P., a Delaware limited partnership.
“Subordination of Management Agreement” means, individually or collectively as the context may require, (i) that certain consent and agreement of manager and subordination of management agreement executed by the Hyatt Herald Square Operating Lessee and the 

 

Approved Property Manager as of the Closing Date and (ii) that certain consent and agreement of manager and subordination of management agreement executed by the Hyatt Place Operating Lessee and the Approved Property Manager as of the Closing Date, as each may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith and any other subordination, non-disturbance and attornment agreement entered into by Borrower, Operating Lessee and any other Approved Property Manager in accordance herewith, as the same may from time to time be amended, restated, replaced, supplemented or otherwise modified in accordance herewith.
“Successor Borrower” means a Single-Purpose Entity that is Controlled by one or more Qualified Equityholders. 
“Successor Operating Lessee” means a Single-Purpose Entity that is Controlled by the same Qualified Equityholders that Control Successor Borrower and is a successor to the Operating Lessee under the Operating Lease.
“Survey” means, with respect to each Property, a current land title survey thereof, certified to Borrower, the title company issuing the applicable Title Insurance Policy and Lender and their respective successors and assigns, in form and substance reasonably satisfactory to Lender.
“Tax and Insurance Escrow Account” has the meaning set forth in Section 3.4(a).
“Taxes” means all real estate and personal property taxes, assessments, fees, taxes on rents or rentals, water rates or sewer rents, facilities and other governmental, municipal and utility district charges or other similar taxes or assessments now or hereafter levied or assessed or imposed against the Properties, Borrower or Operating Lessee with respect to the Properties or rents therefrom or that may become Liens upon any of the Properties, without deduction for any amounts reimbursable to Borrower or Operating Lessee by third parties.
“Tenant” means any Person liable by contract or otherwise to pay monies (including a percentage of gross income, revenue or profits) pursuant to a Lease.
“Tenant Improvements” means, collectively, (i) tenant improvements to be undertaken for any Tenant that are required to be completed by or on behalf of Borrower or Operating Lessee pursuant to the terms of such Tenant’s Lease, and (ii) tenant improvements paid or reimbursed through allowances to a Tenant pursuant to such Tenant’s Lease.
“Test Period” means each 12-month period ending on the last day of a Fiscal Quarter.
“Threshold Amount” means, with respect to each Property, an amount equal to 5.0% of such Property’s Allocated Loan Amount. 
“Title Insurance Policy” means, with respect to each Property, an American Land Title Association lender’s title insurance policy or a comparable form of lender’s title insurance 

 

policy approved for use in the applicable jurisdiction, in form and substance reasonably satisfactory to Lender.  
“Trade Payables” means unsecured amounts payable by or on behalf of Borrower or Operating Lessee for or in respect of the operation of the Property in the ordinary course and that would under GAAP and the Uniform System of Accounts be regarded as ordinary expenses, including amounts payable to suppliers, vendors, contractors, mechanics, materialmen or other Persons providing property or services to the Property, Borrower or Operating Lessee and the capitalized amount of any ordinary-course financing leases.
“Transaction” means, collectively, the transactions contemplated and/or financed by the Loan Documents.
“Transfer” means the sale or other whole or partial conveyance of all or any portion of any of the Collateral or any direct or indirect interest therein to a third party, including granting of any purchase options, rights of first refusal, rights of first offer or similar rights in respect of any portion of the Collateral or the subjecting of any portion of the Collateral to restrictions on transfer; except that the conveyance of a space lease at such Property in accordance herewith shall not constitute a Transfer.  
“Treasury Constant Yield” means the arithmetic mean of the rates published as “Treasury Constant Maturities” as of 5:00 p.m., New York time, for the five Business Days preceding the date on which acceleration has been declared, as shown on the USD screen of Reuters (or such other page as may replace that page on that service, or such other page or replacement therefor on any successor service), or if such service is not available, the Bloomberg Service (or any successor service), or if neither Reuters nor the Bloomberg Service is available, under Section 504 in the weekly statistical release designated H.15(519) (or any successor publication) published by the Board of Governors of the Federal Reserve System, for “On the Run” U.S. Treasury obligations corresponding to the commencement of the Prepayment Period.  If no such maturity shall so exactly correspond, yields for the two most closely corresponding published maturities shall be calculated pursuant to the foregoing sentence and the Treasury Constant Yield shall be interpolated or extrapolated (as applicable) from such yields on a straight-line basis (rounding, in the case of relevant periods, to the nearest month). 
“Trigger Level” means $8,500,000.
“Trigger Period” means (a) any period during which a Hyatt Flag Trigger Event shall be continuing and/or (b) any period from (i) the conclusion of any Test Period during which Net Operating Income is less than the Trigger Level, to (ii) the conclusion of any Test Period ending on a Fiscal Quarter thereafter during which (x) Net Operating Income for such Test Period is equal to or greater than the Trigger Level and (y) no Hyatt Flag Trigger Event is then continuing.
“Unfunded Obligations” means the items described in Schedule D.
“Unfunded Obligations Account” has the meaning set forth in Section 3.7(a).

 

“Unfunded Obligations Amount” means $0.
“Uniform System of Accounts” means the “Uniform System of Accounts for the Lodging Industry” (tenth edition) published by The Financial Management Committee of the American Hotel and Lodging Association or such more recent edition thereof as shall be in effect from time to time hereafter. 
“Use” means, with respect to any Hazardous Substance, the generation, manufacture, processing, distribution, handling, possession, use, discharge, placement, treatment, disposal, disposition, removal, abatement, recycling or storage of such Hazardous Substance or transportation of such Hazardous Substance.
“U.S. Person” means a United States person within the meaning of Section 7701(a)(30) of the Code.
“U.S. Tax” means any present or future tax, assessment or other charge or levy imposed by or on behalf of the United States of America or any taxing authority thereof.
“Waste” means any material abuse or destructive use (whether by action or inaction) of any Property.
“Yield Maintenance Premium” means, with respect to any payment of principal on a Note or Note Component following acceleration of the Loan during the continuance of an Event of Default, the product of: 
(A)     a fraction whose numerator is the amount so paid and whose denominator is the outstanding principal balance of the Note or Note Component before giving effect to such payment, times
(B)     the excess of (1) the sum of the respective present values, computed as of the date of prepayment, of the remaining scheduled payments of principal and interest with respect to the Note or Note Component, including the balloon payment on the scheduled Maturity Date (assuming no prepayments or acceleration of the Loan), determined by discounting such payments to the date on which such prepayment is made at the Treasury Constant Yield, over (2) the outstanding principal balance of the Note or Note Component on such date immediately prior to such prepayment;  
provided that the Yield Maintenance Premium shall not be less than 3% of the amount prepaid.  The calculation of the Yield Maintenance Premium shall be made by Lender and shall, absent manifest error, be final, conclusive and binding upon all parties.
(b)    Rules of Construction.  Unless otherwise specified, (i) all references to sections, schedules and exhibits are to sections, schedules and exhibits in or to this Agreement, (ii) all meanings attributed to defined terms in this Agreement shall be equally applicable to both the singular and plural forms of the terms so defined, (iii) “including” means “including, but not limited to”, (iv) “mortgage” means a mortgage, deed of trust, deed to secure debt or similar 

 

instrument, as applicable, and “mortgagee” means the secured party under a mortgage, deed of trust, deed to secure debt or similar instrument, (v) the words “hereof,” “herein,” “hereby,” “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision, article, section or other subdivision of this Agreement, (vi) all references to “this Section” shall refer to the Section of this Agreement in which such reference appears in its entirety and not to any particular clause or subsection or such Section, and (vii) unless otherwise indicated, terms used herein and defined by cross-reference to another agreement or document shall have the meaning set forth in such other agreement or document as of the Closing Date, notwithstanding any subsequent amendment or restatement of or modification to such other agreement or document.  Except as otherwise indicated, all accounting terms not specifically defined in this Agreement shall be construed in accordance with GAAP, as the same may be modified in this Agreement.  Each covenant of Borrower contained herein with respect to the operation and maintenance of or otherwise relating to the Property shall be construed to mean that Borrower shall comply or cause the Operating Lessee to comply with such covenant; and any failure by the Operating Lessee to comply therewith shall constitute a Default hereunder even though Operating Lessee is not a party to this Agreement.  

 

Article I 
GENERAL TERMS  
Section 1.1.    The Loan.On the Closing Date, subject to the terms and conditions of this Agreement, Lender shall make a loan to Borrower (the “Loan”) in an amount equal to the Loan Amount.  The Loan shall initially be represented by a single Note that shall bear interest as described in this Agreement at a per annum rate equal to the Interest Rate.  Interest payable hereunder shall be computed on the basis of a 360-day year and the actual number of days elapsed in the related Interest Accrual Period. 
(b)    The Loan shall be secured by the Collateral pursuant to the Mortgage and the other Loan Documents.  
(c)    Upon written notice from Lender to Borrower, the Note will be deemed to have been subdivided into multiple components (“Note Components”).  Each Note Component shall have such notional balance and interest rate as Lender shall specify in such notice, provided that the sum of the principal balances of all Note Components shall equal the then-current Principal Indebtedness, and the initial weighted average of the component interest rates, weighted on the basis of their respective principal balances, shall equal the Interest Rate.  Borrower shall be treated as the obligor with respect to each of the Note Components, and Borrower acknowledges that each Note Component may be individually beneficially owned by a separate Person.  The Note Components need not be represented by separate physical Notes, but if requested by Lender, each Note Component shall be represented by a separate physical Note, in which case Borrower shall execute and return to Lender each such Note promptly following Borrower’s receipt of an execution copy thereof.  If requested by Lender, Borrower shall deliver to Lender, together with such replacement Notes, an opinion of counsel with respect to the due authorization and enforceability of such replacement Notes.  Upon receipt by Lender of such replacement Notes, Lender shall promptly return the original Note to Borrower.  Voluntary and involuntary prepayments of principal on the Loan shall be applied to the Notes or Note Components as Lender shall determine, provided that, except with respect to amounts applied toward principal during the continuance of an Event of Default, no such allocation of principal to the Notes or Note Components shall have the effect of increasing the weighted average of the component interest rates (but amounts applied toward principal during the continuance of an Event of Default may increase the weighted average interest rate of the Notes or Note Components, with the result that the Interest Rate might increase).    
Section 1.2.    Interest and Principal.  
(a)    On each Payment Date prior to the Initial Principal Payment Date, Borrower shall pay to Lender interest on each Note for the applicable Interest Accrual Period at the applicable Interest Rate (except that in each case, interest shall be payable on the Indebtedness, including due and unpaid interest, at the Default Rate with respect to any portion of such Interest Accrual Period falling during the continuance of an Event of Default). Commencing with the Initial Principal Payment Date, and on each and every Payment Date thereafter,  Borrower shall pay to Lender a constant monthly payment of $445,410.72, which amount shall be applied first toward the payment of interest on each Note for the applicable 

 

Interest Accrual Period at the applicable Interest Rate (except that in each case, interest shall be payable on the Indebtedness, including due but unpaid interest, at the Default Rate with respect to any portion of such Interest Accrual Period falling during the continuance of an Event of Default, in which case the monthly payment shall be increased by the amount of Default Interest accrued on the Notes during the applicable Interest Accrual Period), and the balance shall be applied toward the reduction of the outstanding principal balances of the Notes or Note Components pro rata in accordance with their then outstanding principal balances. 
Notwithstanding the foregoing, on the Closing Date, Borrower shall pay interest from and including the Closing Date through the end of the first Interest Accrual Period, in lieu of making such payment on the first Payment Date following the Closing Date (unless the Closing Date falls on a Payment Date, in which case, no interest will be collected on the Closing Date, and Borrower shall make the payment required pursuant to this Section commencing on the first Payment Date following the Closing Date).    
(b)    No prepayments of the Loan shall be permitted except for (i) prepayments resulting from Casualty or Condemnation as described in Section 5.16, and (ii) a prepayment of the Loan in whole (but not in part) during the Prepayment Period on not less than ten Business Days prior written notice; provided that any prepayment hereunder shall be accompanied by all interest accrued on the amount prepaid, plus the amount of interest that would have accrued on the amount prepaid if the Loan had remained outstanding through the end of the Interest Accrual Period in which such prepayment occurs, plus all other amounts then due under the Loan Documents.  Borrower’s notice of prepayment shall create an obligation of Borrower to prepay the Loan as set forth therein, but may be rescinded with five days’ written notice to Lender (subject to payment of any out-of-pocket costs and expenses resulting from such rescission).  In addition, Defeasance shall be permitted after the expiration of the Lockout Period as described in Section 2.1.  The entire outstanding principal balance of the Loan, together with interest through the end of the applicable Interest Accrual Period and all other amounts then due under the Loan Documents, shall be due and payable by Borrower to Lender on the Maturity Date.
(c)    If all or any portion of the Principal Indebtedness is paid to Lender following acceleration of the Loan prior to the Prepayment Period, Borrower shall pay to Lender an amount equal to the applicable Yield Maintenance Premium; provided, however, that no Yield Maintenance Premium shall be due and payable with respect to any prepayment of the Loan as a result of a Casualty or Condemnation, so long as no Event of Default is continuing.  Amounts received in respect of the Indebtedness during the continuance of an Event of Default shall be applied toward interest, principal and other components of the Indebtedness (in such order as Lender shall determine) before any such amounts are applied toward payment of Yield Maintenance Premiums, with the result that Yield Maintenance Premiums shall accrue as the Principal Indebtedness is repaid but no amount received from Borrower shall constitute payment of a Yield Maintenance Premium until the remainder of the Indebtedness shall have been paid in full.  Borrower acknowledges that (i) a prepayment will cause damage to Lender; (ii) the Yield Maintenance Premium is intended to compensate Lender for the loss of its investment and the expense incurred and time and effort associated with making the Loan, which will not be fully repaid if the Loan is prepaid; (iii) it will be extremely difficult and impractical to ascertain the 

 

extent of Lender’s damages caused by a prepayment after an acceleration or any other prepayment not permitted by the Loan Documents; and (iv) the Yield Maintenance Premium represents Lender’s and Borrower’s reasonable estimate of Lender’s damages from the prepayment and is not a penalty.
(d)    Any payments of interest and/or principal not paid when due hereunder shall bear interest at the applicable Default Rate and, in the case of all payments due hereunder other than the repayment of the Principal Indebtedness on the Maturity Date, when paid shall be accompanied by a late fee in an amount equal to the lesser of four percent of such unpaid sum and the maximum amount permitted by applicable law, in order to defray a portion of the expense incurred by Lender in handling and processing such delinquent payment and to compensate Lender for the loss of the use of such delinquent payment.
Section 1.3.    Method and Place of Payment.  Except as otherwise specifically provided in this Agreement, all payments and prepayments under this Agreement and the Notes (including any deposit into the Cash Management Account pursuant to Section 3.2(c)) shall be made to Lender not later than 1:00 p.m., New York City time, on the date when due and shall be made in lawful money of the United States of America by wire transfer in federal or other immediately available funds to the account specified from time to time by Lender.  Any funds received by Lender after such time shall be deemed to have been paid on the next succeeding Business Day.  Lender shall notify Borrower in writing of any changes in the account to which payments are to be made.  If the amount received from Borrower (or from the Cash Management Account pursuant to Section 3.2(b)) is less than the sum of all amounts then due and payable hereunder, such amount shall be applied, at Lender’s sole discretion, either toward the components of the Indebtedness (e.g., interest, principal and other amounts payable hereunder) and the Notes and Note Components, in such sequence as Lender shall elect in its sole discretion, or toward the payment of Property expenses.
Section 1.4.    Taxes; Regulatory Change.  
(a)    Borrower shall indemnify Lender and hold Lender harmless from and against any present or future stamp, documentary or other similar or related taxes or other similar or related charges now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority by reason of the execution and delivery of the Loan Documents and any consents, waivers, amendments and enforcement of rights under the Loan Documents.
(b)    Reasonably promptly following Borrower’s request, the initial Lender shall complete and deliver to Borrower a duly executed Form W-9 certifying that is not subject to backup withholding.  If Borrower is required by law to withhold or deduct any amount from any payment hereunder in respect of any Borrower Tax, Borrower shall withhold or deduct the appropriate amount, remit such amount to the appropriate Governmental Authority and pay to the Lender and each Person to whom there has been an Assignment or Participation of a Loan such additional amounts as are necessary in order that the net payment of any amount due hereunder, after deduction for or withholding in respect of any Borrower Tax imposed with respect to such payment, will not be less than the amount stated in this Agreement to be then due and payable; except that the foregoing obligation to pay such additional amounts shall not apply (i) to any net 

 

income or franchise taxes imposed by the jurisdiction under the laws of which the Lender is organized, has its principal place of business or where its applicable lending office is located, (ii) with respect to any amount of U.S. Tax in effect and applicable to payments to the Lender on the date of this Agreement (or, for payments made under this Agreement to any Person  to whom there has been an Assignment or Participation, with respect to any amount of U.S. Tax imposed by any law in effect and applicable to payments to such Person on the date of such Assignment or Participation) or (iii) to any amount of Borrower Taxes imposed solely by reason of the failure by an assignee to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connections with the United States of America of such Person (or beneficial owner, as the case may be) if such compliance is required by statute or regulation of the United States of America as a precondition to relief or exemption from such Borrower Taxes.   If Borrower shall fail to pay any Borrower Taxes or other amounts that Borrower is required to pay pursuant to this Section, and Lender or any Person to whom there has been an Assignment or Participation of a Loan pays the same, Borrower shall reimburse Lender or such Person promptly following demand therefore in the currency in which such Taxes or other amounts are paid, whether or not such Taxes were correctly or legally asserted, together with interest thereon from and including the date of payment to but excluding the date of reimbursement at a rate per annum equal to the Default Rate. 
(c)    Within 30 days after paying any amount from which it is required by law to make any deduction or withholding, and within 30 days after it is required by law to remit such deduction or withholding to any relevant taxing or other authority, Borrower shall deliver to Lender satisfactory evidence of such deduction, withholding or payment (as the case may be).
(d)    If, as a result of any Regulatory Change, any reserve, special deposit or similar requirements relating to any extensions of credit or other assets of, or any deposits with, Lender or any holder of all or a portion of the Loan is imposed, modified or deemed applicable and the result is to increase the cost to such Lender or such holder of making or holding the Loan, or to reduce the amount receivable by Lender or such holder hereunder in respect of any portion of the Loan by an amount deemed by Lender or such holder to be material (such increases in cost and reductions in amounts receivable, “Increased Costs”), then Borrower agrees that it will pay to Lender or such holder upon Lender’s or such holder’s request such additional amount or amounts as will compensate Lender and/or such holder for such Increased Costs to the extent that such Increased Costs are reasonably allocable to the Loan.  Lender will notify Borrower in writing of any event occurring after the Closing Date that will entitle Lender or any holder of the Loan to compensation pursuant to this Section as promptly as practicable after it obtains knowledge thereof and determines to request such compensation and will designate a different lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the reasonable judgment of such Lender, be otherwise disadvantageous to such Lender.  If such Lender shall fail to notify Borrower of any such event within 90 days following the end of the month during which such event occurred, then Borrower’s liability for any amounts described in this Section incurred by such Lender as a result of such event shall be limited to those attributable to the period occurring subsequent to the 90th day prior to the date upon which such Lender actually notified Borrower of the occurrence of 

 

such event.  Notwithstanding the foregoing, in no event shall Borrower be required to compensate Lender or any holder of the Loan for any portion of the income or franchise taxes of Lender or such holder, whether or not attributable to payments made by Borrower.  If a Lender requests compensation under this Section, Borrower may, by notice to Lender, require that such Lender furnish to Borrower a statement setting forth in reasonable detail the basis for requesting such compensation and the method for determining the amount thereof.
Section 1.5.    Release.  Upon payment of the Indebtedness in full when permitted or required hereunder, Lender shall execute instruments prepared by Borrower and reasonably satisfactory to Lender, which, at Borrower’s election and at Borrower’s sole cost and expense, either (a) release and discharge all Liens on all Collateral securing payment of the Indebtedness (subject to Borrower’s obligation to pay any associated fees and expenses), including all balances in the Collateral Accounts, or (b) assign such Liens (and the Loan Documents) to a new lender designated by Borrower.  Any release or assignment provided by Lender pursuant to this Section shall be without recourse, representation or warranty of any kind.  
Article II 
DEFEASANCE AND ASSUMPTION  
Section 2.1.    Defeasance.  
(a)    On any date after the expiration of the Lockout Period, subject to the notice requirement described in Section 2.1(c), Borrower may obtain the release of the  Collateral from the Liens of the Loan Documents upon the payment to Lender of all sums then due under the Loan Documents and the delivery of the following to Lender:
(i)    Defeasance Collateral sufficient to provide payments on or prior to, and in any event as close as possible to, all successive Payment Dates in an amount sufficient to make all payments of interest and principal due hereunder, including the then outstanding Principal Indebtedness, on the first Payment Date in the Prepayment Period or such other Payment Date in the Prepayment Period as Borrower shall elect;
(ii)    written confirmation from an independent certified public accounting firm reasonably satisfactory to Lender that such Defeasance Collateral is sufficient to provide the payments described in clause (i) above; 
(iii)    a security agreement, in form and substance reasonably satisfactory to Lender, creating in favor of Lender a first priority perfected security interest in such Defeasance Collateral (a “Defeasance Pledge Agreement”); 
(iv)    an opinion of counsel for Borrower, in form and substance reasonably satisfactory to Lender and delivered by counsel reasonably satisfactory to Lender, opining that (1) the Defeasance Pledge Agreement has been duly authorized and is enforceable against Borrower in accordance with its terms and that Lender has a perfected first priority security interest in such Defeasance Collateral; (2) if the Loan has been Securitized, the Defeasance (including the assumption pursuant to Section 2.1(b))  

 

does not cause a tax to be imposed on the Securitization Vehicle or, if the Securitization Vehicle is a REMIC, does not cause any portion of the Loan to cease to be a “qualified mortgage” within the meaning of section 860G(a)(3) of the Code, and (3) the Defeasance does not constitute a “significant modification” of the Loan under Section 1001 of the Code; 
(v)    if all or any portion of the Loan has been Securitized, the Rating Condition with respect to such Defeasance shall have been satisfied or deemed satisfied pursuant to the definition of “Rating Condition”; 
(vi)    instruments reasonably satisfactory to Lender releasing and discharging or assigning to a third party Lender’s Liens on the Collateral (other than the Defeasance Collateral);
(vii)    such other customary certificates, opinions, documents or instruments as Lender and the Rating Agencies may reasonably request; and
(viii)    reimbursement for any costs and expenses incurred in connection with this Section (including Rating Agency and Servicer fees and expenses, reasonable fees and expenses of legal counsel and accountants and any revenue, documentary stamp or intangible taxes or any other tax or charge due in connection herewith).
Lender shall reasonably cooperate with Borrower to avoid the incurrence of mortgage recording taxes in connection with a Defeasance, at Borrower’s sole cost and expense.  For the avoidance of doubt, a Defeasance shall be permitted only with respect to the entire Loan, and no partial defeasance, or release of any individual Property, shall be permitted.
(b)    At the time of the Defeasance, the Loan shall be assumed by a bankruptcy-remote entity established or designated by the initial Lender hereunder or its designee, to which Borrower shall transfer all of the Defeasance Collateral (a “Defeasance Borrower”).  The right of the initial Lender hereunder or its designee to establish or designate a Defeasance Borrower shall be retained by the initial Lender notwithstanding the sale or transfer of the Loan unless such obligation is specifically assigned to and assumed by the transferee.  Such Defeasance Borrower shall execute and deliver to Lender an assumption agreement in form and substance reasonably satisfactory to Lender, such Uniform Commercial Code financing statements as may be reasonably requested by Lender and legal opinions of counsel reasonably acceptable to Lender that are substantially equivalent to the opinions delivered to Lender on the Closing Date, including new nonconsolidation opinions reasonably satisfactory to Lender and satisfactory to the Rating Agencies; and Borrower and the Defeasance Borrower shall deliver such other documents, certificates and legal opinions as Lender shall reasonably request.
(c)    Borrower must give Lender and each Rating Agency at least 30 days’ (and not more than 60 days’) prior written notice of any Defeasance under this Section, specifying the date on which the Defeasance is to occur.  If such Defeasance is not made on such date (x) Borrower’s notice of Defeasance will be deemed rescinded, and (y) Borrower shall on such 

 

date pay to Lender all reasonable losses, costs and expenses suffered by Lender as a consequence of such rescission.  
(d)    Upon satisfaction of the requirements contained in this Section, Lender will execute and deliver to Borrower such instruments, prepared by Borrower and approved by Lender, as shall be necessary to release the Property from the Liens of the Loan Documents and to release Borrower, Operating Lessee and Sponsor of their obligations, liabilities, guarantees and indemnities under the Loan Documents, except for (i) any obligations, liabilities, guarantees and indemnities that by their express terms survive the repayment of the Indebtedness in full and (ii) claims arising under any indemnity or guaranty prior to the date on which the Loan is Defeased in full.
Section 2.2.    Assumption.  From and after the first anniversary of the Closing Date, the initial Borrower shall have the right to contemporaneously Transfer all of the Collateral to a Successor Borrower that will assume all of the obligations of Borrower hereunder and under the other Loan Documents (an “Assumption”), provided no Event of Default or monetary Default is then continuing or would result therefrom and the following conditions are met to the reasonable satisfaction of Lender:  
(i)    such Successor Borrower shall have executed and delivered to Lender an assumption agreement (including an assumption of the Mortgage in recordable form, if requested by Lender), in form and substance reasonably acceptable to Lender, evidencing its agreement to abide and be bound by the terms of the Loan Documents and containing representations substantially equivalent to those contained in Article IV (recast, as necessary, such that representations that specifically relate to Closing Date are remade as of the date of such assumption), and such other representations (and evidence of the accuracy of such representations) as Lender shall reasonably request (and upon such assumption and the satisfaction of the other conditions set forth in this Section, Borrower and Operating Lessee shall be released from such all obligations, liabilities, guarantees and indemnities under the Loan Documents);
(ii)    unless the Operating Lease shall have been terminated pursuant to Section 5.21(ii), the obligations of Operating Lessee under the Operating Lease shall have been assumed by a Successor Operating Lessee pursuant to an assumption agreement, in form and substance reasonably acceptable to Lender (and upon such assumption and the satisfaction of the other conditions set forth in this Section, Operating Lessee shall be released from such all obligations, liabilities, guarantees and indemnities under the Loan Documents), and such Successor Operating Lessee shall have delivered to Lender all documents reasonably requested by Lender relating to the existence of such Successor Operating Lessee and the due authorization of such Operating Lessee to assume the obligations under the Operating Lease, each in form and substance reasonably satisfactory to Lender, including a certified copy of the applicable resolutions from all appropriate persons, certified copies of the organizational documents of the Successor Operating Lessee, together with all amendments thereto, and certificates of good standing or existence for the Successor Operating Lessee issued as of a recent date by its state of 

 

organization and each other state where such entity, by the nature of its business, is required to qualify or register;
(iii)    such Uniform Commercial Code financing statements as may be reasonably requested by Lender shall be filed;
(iv)    a party satisfactory to Lender in its sole discretion assumes all obligations, liabilities, guarantees and indemnities of Sponsor and any other guarantor under the Loan Documents pursuant to documentation satisfactory to Lender (and upon such assumption by such party, Sponsor and any other such guarantor shall be released from such obligations, liabilities, guarantees and indemnities);
(v)    such Successor Borrower shall have delivered to Lender legal opinions of counsel reasonably acceptable to Lender that are equivalent to the opinions delivered to Lender on the Closing Date, including new nonconsolidation opinions that are reasonably satisfactory to Lender and satisfactory to each of the Rating Agencies; and Borrower and the Successor Borrower shall have delivered such other documents, certificates and legal opinions, including relating to REMIC matters, as Lender shall reasonably request;
(vi)    such Successor Borrower shall have delivered to Lender all documents reasonably requested by it relating to the existence of such Successor Borrower and the due authorization of the Successor Borrower to assume the Loan and to execute and deliver the documents described in this Section, each in form and substance reasonably satisfactory to Lender, including a certified copy of the applicable resolutions from all appropriate persons, certified copies of the organizational documents of the Successor Borrower, together with all amendments thereto, and certificates of good standing or existence for the Successor Borrower issued as of a recent date by its state of organization and each other state where such entity, by the nature of its business, is required to qualify or register;
(vii)    the Title Insurance Policies shall have been properly endorsed to reflect the Transfer of the Properties to the Successor Borrower; 
(viii)    if the Loan has been Securitized, the Rating Condition shall have been satisfied with respect to the legal structure of the Successor Borrower, the documentation of the Assumption and the related legal opinions; and
(ix)    Borrower shall have paid to Lender a nonrefundable assumption fee in an amount equal to 1.0% of the Principal Indebtedness at the time of such Assumption, and Borrower shall have reimbursed Lender for its reasonable out-of-pocket costs and expenses incurred in connection with such assumption.
Section 2.3.    Transfers of Equity Interests in Borrower.  
(a)    Except as set forth in clause (b) of this Section 2.3, no direct or indirect equity interests in Borrower shall be conveyed or otherwise transferred to any Person prior to the 

 

first anniversary of the Closing Date.  From and after the first anniversary of the Closing Date, no direct or indirect equity interests in Borrower shall be conveyed or otherwise transferred to any Person, unless the following conditions are satisfied:  
(i)    no Event of Default or monetary Default shall be continuing at the time of such conveyance or transfer;
(ii)    no Prohibited Change of Control shall occur as a result thereof;
(iii)    if any such conveyance or transfer results in Borrower ceasing to be Controlled by Sponsor (and in connection with each subsequent conveyance or transfer that again changes the identity of the Qualified Equityholder that Controls Borrower),  Borrower shall have paid to Lender a transfer fee in an amount equal to 1.0% of the Principal Indebtedness at the time of such conveyance or transfer; 
(iv)    if such conveyance or transfer results in any Person acquiring more than 49% of the direct or indirect equity interest in any Required SPE (even if not constituting a Prohibited Change of Control), Borrower shall have delivered to Lender with respect to such Person a new non-consolidation opinion that in Lender’s reasonable judgment satisfies the then-current criteria of the Rating Agencies (and, to the extent that the criteria of the Rating Agencies has not changed in any material respect since the Closing Date, Lender’s approval of any such non-consolidation opinion that is in substantially the form of the Nonconsolidation Opinion shall not be unreasonably withheld, delayed or conditioned); 
(v)    Borrower shall have paid the costs and expenses (if any) of the Rating Agencies and Servicers and reimbursed Lender for its reasonable out-of-pocket costs and expenses incurred in connection with any such conveyance or transfer; and
(vi)    Lender shall have received 10 days advance written notice of such conveyance or transfer.  
(b)    Notwithstanding anything to the contrary contained in this Section, the following transfers of indirect equity interests in Borrower shall be permitted at any time without the consent of Lender: (i) the issuance of additional shares, or the transfer of existing shares on any national securities exchange, of Chesapeake Lodging Trust, and (ii) the issuance of additional partnership interests, or the transfer of existing partnership interests, in Sponsor, so long as the same does not result in a Prohibited Change of Control.  
 
Article III
 
ACCOUNTS

Section 3.1.    Cash Management Account.  

 

(a)    On or prior to the Closing Date, Borrower and Operating Lessee shall establish, or cause to be established, the Approved Operating Accounts and the Approved FF&E Accounts and deliver to Lender a fully executed Account Control Agreement with respect to each such respective account.  All credit card receivables, all cash Revenues and all other money received by  (w) the Hyatt Place Borrower, Hyatt Place Operating Lessee or the Approved Property Manager with respect to the Hyatt Place shall be deposited into the Hyatt Place Operating Account and (x) the Hyatt Herald Square Borrower, Hyatt Herald Square Operating Lessee or the Approved Property Manager with respect to the Hyatt Herald Square shall be deposited into the Hyatt Herald Square Operating Account, which accounts have been pledged to Lender pursuant to this Agreement.  All costs and expenses incurred in connection with the operation of (y) the Hyatt Place shall be paid solely from the Hyatt Place Operating Account or, solely with respect to FF&E related to the Hyatt Place, from the Hyatt Place Manager FF&E Account and (z) the Hyatt Herald Square shall be paid solely from the Hyatt Herald Square Operating Account or, solely with respect to FF&E related to the Hyatt Herald Square, from the Hyatt Herald Square Manager FF&E Account  (or, to the extent permitted or required herein, the Cash Management Account), and no other account.  Borrower shall not permit the amounts contained in the Approved Operating Account, the Approved FF&E Account or any other account owned by Borrower or Operating Lessee to be commingled with the funds of any other Person except as set forth in this Agreement.  Subject and pursuant to the Approved Management Agreement and the Subordination of Management Agreement, the Approved Property Manager shall be permitted to pay all costs and expenses incurred in connection with the operation of each Property and all other amounts required or permitted to be paid by the Approved Property Manager (including the base management fee payable to the Approved Property Manager pursuant to the Approved Management Agreement, to the extent such fee does not exceed the Maximum Management Fee) in the performance of its duties and obligations with respect to each Property out of the respective Approved Operating Account or the respective Approved FF&E Account; provided, however, that in no event shall more than $592,000 in the aggregate be disbursed from the Hyatt Herald Square Manager FF&E Account to pay for FF&E or any other costs and expenses incurred in connection with the execution of the Capital Plan. 
(b)    Operating Lessee shall cause any and all amounts otherwise required to be paid or remitted by the Approved Property Manager to Borrower or Operating Lessee (including all amounts payable to Operating Lessee pursuant to Section 6.01 of each of the Approved Management Agreements in effect as of the Closing Date) to be remitted directly into an Eligible Account specified from time to time by Lender (the “Cash Management Account”), and in the event any such amounts are paid directly to Borrower or Operating Lessee, Borrower or Operating Lessee, as applicable, shall cause such amounts to be deposited into the Cash Management Account within one Business Day following Borrower’s or Operating Lessee’s receipt thereof.  The Cash Management Account shall be subject to the Cash Management Agreement which shall provide, among other things, that no party other than Lender and Servicer shall have the right to withdraw funds from the Cash Management Account and that the Cash Management Bank shall comply with all instructions and entitlement orders of Lender relating to the Cash Management Account and the other Collateral Accounts maintained at the Cash Management Bank pursuant to the Cash Management Agreement, in each case, without the consent of Borrower, Operating Lessee or any other Person.     

 

(c)    Each Approved FF&E Account and each Approved Operating Account shall at all times be subject to an Account Control Agreement, pursuant to which such accounts shall be in the sole dominion and control of Lender, provided that the Approved Property Manager shall have unrestricted access to such accounts for the purposes set forth in each Approved Management Agreement, unless and until, (i) with respect to the Approved Operating Account, such Approved Management Agreement shall be terminated, in which case, only Lender shall have access to the amounts in such account and/or (ii) with respect to the Approved FF&E Account, a Manager FF&E Reserve Failure, or a Trigger Period or Event of Default shall occur, in which case, the FF&E Reserve Account will be maintained by Lender pursuant to Section 3.5.  Borrower and Operating Lessee shall not make any withdrawals out of, or transfers from, the Approved FF&E Account and the Approved Operating Account during the continuance of an Event of Default.  The Approved FF&E Account and the Approved Operating Account are pledged to Lender pursuant to Section 3.10.
(d)    Lender shall have the right at any time and from time to time in its sole discretion to change the Eligible Institution at which any one or more of the Collateral Accounts is maintained (other than the Approved Operating Account and Approved FF&E Account, so long as (i) they are maintained as Eligible Accounts in accordance with the Approved Management Agreement and (ii) are subject to an Account Control Agreement in accordance with the terms hereof), provided that, in the case of any such change if an Event of Default is not then continuing, Lender shall deliver not less than five Business Days’ prior written notice to Borrower.    
Section 3.2.    Distributions from Cash Management Account.  
(a)    Lender shall transfer from the Cash Management Account to the Distribution Account, at the end of each Business Day (or, at Borrower’s election, on a less frequent basis), the amount, if any, by which amounts then contained in the Cash Management Account exceed the aggregate amount required to be paid to or reserved with Lender on the next Payment Date pursuant hereto (the “Minimum Balance”); provided, however, that Lender shall terminate such remittances during the continuance of an Event of Default or Trigger Period.  
(b)    On each Payment Date, provided no Event of Default is continuing (and, if and to the extent Lender so elects in its sole discretion, during the continuance of an Event of Default until the Loan has been accelerated), Lender shall transfer amounts from the Cash Management Account, to the extent available therein, to make the following payments in the following order of priority:
(i)    to the Tax and Insurance Escrow Account, the amounts then required to be deposited therein pursuant to Section 3.4;
(ii)    to Lender, the amount of all scheduled or delinquent interest and principal on the Loan and all other amounts then due and payable under the Loan Documents (with any amounts in respect of principal paid last); 

 

(iii)    if an FF&E Reserve Period shall be in effect, to the Hyatt Herald Square FF&E Reserve Account and the Hyatt Place FF&E Reserve Account, the respective amounts required to be deposited therein pursuant to Section 3.5;
(iv)    during the continuance of a Trigger Period or Event of Default, all remaining amounts to the Excess Cash Flow Reserve Account; and
(v)    if no Trigger Period or Event of Default is continuing, all remaining amounts to the Distribution Account.
(c)    If on any Payment Date the amount in the Cash Management Account is insufficient to make all of the transfers described above (other than remittance of excess cash to the Excess Cash Flow Reserve Account or the Distribution Account), then Borrower shall remit to the Cash Management Account on such Payment Date the amount of such deficiency.  If Borrower fails to remit such amount to the Cash Management Account, the same shall constitute an Event of Default and, in addition to all other rights and remedies provided for under the Loan Documents, Lender may disburse and apply the amounts in the Collateral Accounts in accordance with Section 3.9(c).
Section 3.3.    Loss Proceeds Account.  
(a)    Upon the occurrence of a Casualty or Condemnation, Lender will establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of depositing any Loss Proceeds (the “Loss Proceeds Account”). 
(b)    Provided no Event of Default is continuing, funds in the Loss Proceeds Account shall be applied in accordance with Section 5.16.
Section 3.4.    Tax and Insurance Escrow Account.  
(a)    Lender will establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving amounts payable by Borrower in respect of Taxes and insurance premiums (the “Tax and Insurance Escrow Account”). 
(b)    On the Closing Date, Borrower shall deposit, or cause to be deposited, into the Tax and Insurance Escrow Account an amount sufficient to pay all Taxes by the 30th day prior to the date they come due, assuming subsequent monthly fundings on Payment Dates of 1/12 of projected annual Taxes.  
(c)    On each subsequent Payment Date, an additional deposit shall be made therein in an amount equal to 1/12 of the Taxes that Lender reasonably estimates, based on information provided by Borrower, will be payable during the next ensuing 12 months; provided, however, that if at any time Lender reasonably determines that the amount in the Tax and Insurance Escrow Account will not be sufficient to accumulate (upon payment of subsequent monthly amounts in accordance with the provisions of this Agreement) the full amount of all 

 

installments of Taxes by the date on which such amounts come due, then Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to the Tax and Insurance Escrow Account by the amount that Lender reasonably estimates is sufficient to achieve such accumulation.
(d)    Within five Business Days following the date on which the Property is no longer insured under a blanket insurance program reasonably acceptable to Lender and satisfying to Lender’s reasonable satisfaction all Rating Agency requirements, Borrower shall deposit, or cause to be deposited, into the Tax and Insurance Escrow Account an amount sufficient to pay all insurance premiums relating to the Property by the 30th day prior to the date they come due, assuming subsequent monthly fundings on Payment Dates of 1/12 of projected annual insurance premiums relating to the Property.  On each subsequent Payment Date, an additional deposit shall be made therein in an amount equal to 1/12 of the insurance premiums relating to the Property that Lender reasonably estimates, based on information provided by Borrower, will be payable during the next ensuing 12 months; provided, however, that if at any time Lender reasonably determines that the amount in the Tax and Insurance Escrow Account will not be sufficient to accumulate (upon payment of subsequent monthly amounts in accordance with the provisions of this Agreement) the full amount of all insurance premiums by the date on which such amounts come due, then Lender shall notify Borrower of such determination and Borrower shall increase its monthly payments to the Tax and Insurance Escrow Account by the amount that Lender reasonably estimates is sufficient to achieve such accumulation.
(e)    Borrower shall provide Lender with copies of all tax and insurance bills relating to the Property promptly after Borrower’s receipt thereof.  Lender will apply amounts in the Tax and Insurance Escrow Account toward the purposes for which such amounts are deposited therein (or, so long as no Event of Default is then continuing, within 10 Business Days following Borrower’s written request, reimburse Borrower from such reserves for payment of such Taxes and insurance premiums, if applicable, subject to Lender’s receipt of evidence of payment of such Taxes and insurance premiums).  In connection with the making of any payment from the Tax and Insurance Escrow Account, Lender may cause such payment to be made according to any bill, statement or estimate provided by Borrower or procured from the appropriate public office or insurance carrier, without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax, assessment, sale, forfeiture, tax lien or title or claim thereof unless given written advance notice by Borrower of such inaccuracy, invalidity or other contest.  Notwithstanding the foregoing, Lender shall not make any payment in respect of Taxes if it has received from Borrower satisfactory written evidence of payment of such Taxes no less than 10 Business Days prior to when such Taxes are due and payable. 
(f)    If Lender so elects at any time, Borrower shall provide, at Borrower’s expense, a tax service contract for the term of the Loan issued by a tax reporting agency reasonably acceptable to Lender.  If Lender does not so elect, Borrower shall reimburse Lender for the cost of making annual tax searches throughout the term of the Loan.

 

Section 3.5.    FF&E Reserve Accounts.  
(a)    Lender will establish and maintain (i) an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving amounts in respect of expenditures for FF&E in respect of the Hyatt Place (the “Hyatt Place FF&E Reserve Account”) and (ii) an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving amounts in respect of expenditures for FF&E in respect of the Hyatt Herald Square (the “Hyatt Herald Square FF&E Reserve Account”, and together with the Hyatt Place FF&E Reserve Account, individually or collectively as the context may require, the “FF&E Reserve Account”). 
(b)    No amounts shall be reserved in either FF&E Reserve Account for so long as (i) the Hyatt Herald Square Manager FF&E Account is maintained and funded in an amount equal to the Hyatt Herald Square Monthly FF&E Amount and the Hyatt Place Manager FF&E Account is maintained and funded in an amount equal to the Hyatt Place Monthly FF&E Amount, (ii) Borrower shall deliver to Lender each month the bank statement for each Approved FF&E Account and a reconciliation thereof, and (iii) promptly following Lender’s request, Borrower shall deliver invoices or other evidence that disbursements from each Approved FF&E Account have been made in accordance with the applicable Approved Management Agreement.  If any Approved Property Manager shall fail to maintain any Approved FF&E Account and fund them in an amount equal to, respectively, the Hyatt Herald Square Monthly FF&E Amount and the Hyatt Place Monthly FF&E Amount on a monthly basis (any such failure, a “Manager FF&E Reserve Failure”), or if a Trigger Period or Event of Default shall occur and be continuing, Lender shall have the right to cause all funds contained in each Approved FF&E Account to be transferred to the respective FF&E Reserve Account, and Borrower shall thereafter be required to fund the FF&E Reserve Account in accordance with this Agreement.  Promptly following the cure of any Manager FF&E Reserve Failure, the termination of any Trigger Period or the waiver by Lender of an Event of Default, as applicable, all amounts contained in each FF&E Reserve Account shall be transferred to the respective Approved FF&E Account, and the FF&E Reserve Account shall no longer be funded, unless and until, a subsequent Manager FF&E Reserve Failure, Trigger Period or Event of Default shall occur and be continuing.
(c)    During an FF&E Reserve Period, on each Payment Date, there shall be deposited into (i) the Hyatt Herald Square FF&E Reserve Account an amount equal to the Hyatt Herald Square Monthly FF&E Amount and (ii) the Hyatt Place FF&E Reserve Account an amount equal to the Hyatt Place Monthly FF&E Amount (and, in each case, no further amounts shall be required to be deposited in the Approved FF&E Account).
(d)    Upon the request of Borrower at any time that no Event of Default is continuing (but not more often than once per calendar month), Lender shall cause disbursements to Borrower from the applicable FF&E Reserve Account, to the extent of funds contained therein, to reimburse Borrower for expenditures in respect of FF&E for the applicable Property that are consistent with the Approved Annual Budget; provided that: 
(i)    Borrower shall deliver to Lender invoices evidencing that the costs for which such disbursements are requested are due and payable; 

 

(ii)    Borrower shall deliver to Lender an Officer’s Certificate confirming that all such costs have been previously paid by Borrower or will be paid from the proceeds of the requested disbursement and that all conditions precedent to such disbursement required by the Loan Documents have been satisfied; 
(iii)    Lender may condition the making of a requested disbursement on (1) reasonable evidence establishing that Borrower has applied any amounts previously received by it in accordance with this Section for the expenses to which specific draws made hereunder relate, (2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and waivers from any contractors, subcontractors and others with respect to such amounts; and
(iv)    No amount shall be disbursed from the FF&E Reserve Account for the payment of expenditures other than expenditures in respect of FF&E (for the avoidance of doubt, expenditures under the Capital Plan shall not constitute expenditures in respect of FF&E).
Section 3.6.    Deferred Maintenance and Environmental Escrow Account.  
(a)    If the Deferred Maintenance Amount is greater than zero, Lender will establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving amounts anticipated to be required to correct Deferred Maintenance Conditions (the “Deferred Maintenance and Environmental Escrow Account”). 
(b)    On the Closing Date, Borrower shall deposit into the Deferred Maintenance and Environmental Escrow Account, from the proceeds of the Loan, an amount equal to the Deferred Maintenance Amount.  
(c)    Upon the request of Borrower at any time that no Event of Default is continuing (but not more often than once per calendar month), Lender shall cause disbursements to Borrower from the Deferred Maintenance and Environmental Escrow Account to reimburse Borrower for reasonable costs and expenses incurred in order to correct Deferred Maintenance Conditions, provided that 
(i)    Borrower shall deliver to Lender invoices evidencing that the costs for which such disbursements are requested are due and payable; 
(ii)    Borrower shall deliver to Lender an Officer’s Certificate confirming that all such costs have been previously paid by Borrower or will be paid from the proceeds of the requested disbursement and that all conditions precedent to such disbursement required by the Loan Documents have been satisfied; and
(iii)    Lender may condition the making of a requested disbursement on (1) reasonable evidence establishing that Borrower has applied any amounts previously received by it in accordance with this Section for the expenses to which specific draws 

 

made hereunder relate, (2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and waivers from any contractors, subcontractors and others with respect to such amounts. 
(d)    Upon substantial completion (as reasonably determined by Lender) of the portion of the Deferred Maintenance Conditions identified on any line on Schedule C, and provided no Event of Default is then continuing, the remainder of the portion of the Deferred Maintenance Reserve Account held for such line item (as shown adjacent to such line item on Schedule C) shall promptly be remitted to Borrower.  Upon the correcting of all Deferred Maintenance Conditions, provided no Event of Default or Trigger Period is then continuing, any amounts then remaining in the Deferred Maintenance Reserve Account shall promptly be remitted to Borrower and the Deferred Maintenance and Environmental Escrow Account will no longer be maintained.   
Section 3.7.    Unfunded Obligations Account.  
(a)    If the Unfunded Obligations Amount is greater than zero, Lender shall establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving for Unfunded Obligations required to be funded by Borrower (the “Unfunded Obligations Account”). 
(b)    On the Closing Date, Borrower shall deposit into the Unfunded Obligations Account, from the proceeds of the Loan, an amount equal to the Unfunded Obligations Amount.
(c)    Borrower shall perform its obligations in respect of the Unfunded Obligations when and as due under the respective Leases or other applicable agreements.  Upon the request of Borrower at any time that no Event of Default is continuing (but not more often than once per calendar month), Lender shall cause disbursements to Borrower from the Unfunded Obligations Account to reimburse Borrower for reasonable costs and expenses incurred in the performance of Unfunded Obligations, provided that 
(i)    Borrower shall deliver to Lender invoices evidencing that the costs for which such disbursements are requested are due and payable; 
(ii)    Borrower shall deliver to Lender an Officer’s Certificate confirming that all such costs have been previously paid by Borrower or will be paid from the proceeds of the requested disbursement and that all conditions precedent to such disbursement required by the Loan Documents have been satisfied; and
(iii)    Lender may condition the making of a requested disbursement on (1) reasonable evidence establishing that Borrower has applied any amounts previously received by it in accordance with this Section for the expenses to which specific draws made hereunder relate, (2) a reasonably satisfactory site inspection, and (3) receipt of lien releases and waivers from any contractors, subcontractors and others with respect to such amounts. 

 

(d)    Upon payment or performance, as applicable, of the Unfunded Obligations identified on any line on Schedule D, and provided no Event of Default is then continuing, the remainder of the portion of the Unfunded Obligations Account held for such line item (as shown adjacent to such line item on Schedule D) shall promptly be remitted to Borrower.  Upon the payment or performance in full of all Unfunded Obligations, provided no Event of Default or Trigger Period is then continuing, any amounts then remaining in the Unfunded Obligations Account shall promptly be remitted to Borrower and the Unfunded Obligations Account will no longer be maintained.
Section 3.8.    Performance Reserve Account.  
(a)    Lender shall establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the purpose of reserving the Performance Disbursement Amount (the “Performance Reserve Account”). 
(b)    On the Closing Date, Borrower shall deposit into the Performance Reserve Account, from the proceeds of the Loan, an amount equal to the Performance Disbursement Amount.   
(c)    Provided that no Event of Default or Hyatt Flag Trigger Event is then continuing, the Performance Disbursement Amount shall be disbursed to Borrower from the Performance Reserve Account on October 31, 2014; provided, however that in the event that a Hyatt Flag Trigger Event shall be continuing on October 31, 2014, the Performance Disbursement Amount shall be disbursed to Borrower on the first Payment Date following the date on which the Hyatt Flag Trigger Event shall no longer be continuing, so long as no Event of Default shall be continuing on such Payment Date.
Section 3.9.    Excess Cash Flow Reserve Account.  
(a)    Lender will establish and maintain an Eligible Account (which may be a subaccount of the Cash Management Account) for the deposit of amounts required to be deposited therein in accordance with Section 3.2(b) (the “Excess Cash Flow Reserve Account”). 
(b)    Provided that no Event of Default is then continuing, Lender shall release to the Cash Management Account all amounts then contained in the Excess Cash Flow Reserve Account on the first Payment Date after Borrower delivers to Lender evidence reasonably satisfactory to Lender establishing that no Trigger Period is then continuing.  Such a release shall not preclude the subsequent commencement of a Trigger Period and the deposit of amounts into the Excess Cash Flow Reserve Account as set forth in Section 3.2(b).
Section 3.10.    Account Collateral.  
(a)    Each of Borrower and Operating Lessee hereby pledges the Account Collateral to Lender as security for the Indebtedness, together with all rights of a secured party with respect thereto, it being the intention of the parties that such pledge shall be a perfected first-priority security interest.  Each Collateral Account shall be an Eligible Account under the 

 

sole dominion and control of Lender.  Each of Borrower and Operating Lessee shall have no right to make withdrawals from any of the Collateral Accounts other than the Distribution Account.  Funds in the Collateral Accounts shall not be commingled with any other monies at any time.  Each of Borrower and Operating Lessee shall execute any additional documents that Lender in its reasonable discretion may require and shall provide all other evidence reasonably requested by Lender to evidence or perfect its first-priority security interest in the Account Collateral.  Funds in the Collateral Accounts shall not be invested.  All fees of the Cash Management Bank shall be paid by Borrower.  After the Loan and all other Indebtedness have been paid in full, the Collateral Accounts shall be closed and the balances therein, if any, shall be paid to Borrower.  
(b)    The insufficiency of amounts contained in the Collateral Accounts shall not relieve Borrower from its obligation to fulfill all covenants contained in the Loan Documents.  
(c)    During the continuance of an Event of Default, Lender may, in its sole discretion, apply funds in the Collateral Accounts either toward the components of the Indebtedness (e.g., interest, principal and other amounts payable hereunder), the Loan, the Note Components and the Notes in such sequence as Lender shall elect in its sole discretion, and/or toward the payment of Property expenses.
Section 3.11.    Bankruptcy.  Each of Borrower, Operating Lessee and Lender acknowledge and agree that upon the filing of a bankruptcy petition by or against Borrower or Operating Lessee under the Bankruptcy Code, the Account Collateral and the Revenues (whether then already in the Collateral Accounts, or then due or becoming due thereafter) shall be deemed not to be property of Borrower’s or Operating Lessee’s, as applicable, bankruptcy estate within the meaning of Section 541 of the Bankruptcy Code.  If, however, a court of competent jurisdiction determines that, notwithstanding the foregoing characterization of the Account Collateral and the Revenues by Borrower, Operating Lessee and Lender, the Account Collateral and/or the Revenues do constitute property of Borrower’s or Operating Lessee’s, as applicable, bankruptcy estate, then Borrower, Operating Lessee and Lender further acknowledge and agree that all such Revenues, whether due and payable before or after the filing of the petition, are and shall be cash collateral of Lender.  Each of Borrower and Operating Lessee acknowledges that Lender does not consent to Borrower’s or Operating Lessee’s use of such cash collateral and that, in the event Lender elects (in its sole discretion) to give such consent, such consent shall only be effective if given in writing signed by Lender.  Except as provided in the immediately preceding sentence, neither Borrower nor Operating Lessee shall have the right to use or apply or require the use or application of such cash collateral (i) unless Borrower or Operating Lessee, as applicable, shall have received a court order authorizing the use of the same, and (ii) Borrower or Operating Lessee, as applicable, shall have provided such adequate protection to Lender as shall be required by the bankruptcy court in accordance with the Bankruptcy Code.
Article IV 
 
REPRESENTATIONS  

 

Each individual Borrower represents to Lender with respect to itself and the other Borrower, and each Operating Lessee represents to Lender with respect to itself and the other Operating Lessee, that, as of the Closing Date, except as set forth in the Exception Report:
Section 4.1.    Organization.  
(a)    Each Required SPE is duly organized, validly existing and in good standing under the laws of the State of Delaware, and is in good standing in the State of New York, and each Required SPE has all power and authority under such laws and its organizational documents and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted.
(b)    The organizational chart contained in Exhibit A is true and correct as of the date hereof.
Section 4.2.    Authorization.  Borrower has the power and authority to enter into this Agreement and the other Loan Documents, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated by the Loan Documents and has by proper action duly authorized the execution and delivery of the Loan Documents.
Section 4.3.    No Conflicts.  Neither the execution and delivery of the Loan Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof will (i) violate or conflict with any provision of its formation and governance documents, (ii) violate any Legal Requirement, regulation (including Regulation U, Regulation X or Regulation T), order, writ, judgment, injunction, decree or permit applicable to it, (iii) violate or conflict with contractual provisions of, or cause an event of default under, any material indenture, loan agreement, mortgage, contract or other Material Agreement to which Borrower, Operating Lessee or Sponsor is a party or may be bound, or (iv) result in or require the creation of any Lien or other charge or encumbrance upon or with respect to the Collateral in favor of any party other than Lender.
Section 4.4.    Consents.  To the best of Borrower’s knowledge, no consent, approval, authorization or order of, or qualification with, any court or Governmental Authority is required in connection with the execution, delivery or performance by Borrower of this Agreement or the other Loan Documents, except for any of the foregoing that have already been obtained.
Section 4.5.    Enforceable Obligations.  This Agreement and the other Loan Documents have been duly executed and delivered by Borrower and constitute Borrower’s legal, valid and binding obligations, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency and similar laws of general applicability relating to or affecting creditors’ rights and to general equity principles.  The Loan Documents are not subject to any right of rescission, offset, abatement, counterclaim or defense by Borrower, including the defense of usury or fraud.

 

Section 4.6.    No Default.  No Default or Event of Default will exist immediately following the making of the Loan.
Section 4.7.    Payment of Taxes.  Borrower and Operating Lessee each have filed, or caused to be filed, all tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes due (including interest and penalties) except for taxes that are not yet delinquent and has paid all other taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangible taxes) owing by it necessary to preserve the Liens in favor of Lender.
Section 4.8.    Compliance with Law.  Borrower, Operating Lessee, each Property and the use thereof comply in all material respects with all applicable Insurance Requirements and Legal Requirements, including building and zoning ordinances and codes, except as may be specified in the Engineering Report and/or Environmental Report delivered to Lender in connection with the Loan.  Each Property conforms to current zoning requirements (including requirements relating to parking) and is neither an illegal nor a legal nonconforming use except as specified in the zoning report delivered to Lender in connection with the Closing.  Neither Borrower nor Operating Lessee is in default or violation of any order, writ, injunction, decree or demand of any Governmental Authority the violation of which could materially adversely affect any Property or the condition (financial or otherwise) or business of Borrower or Operating Lessee.  There has not been committed by or on behalf of Borrower, Operating Lessee or, to Borrower’s knowledge, any other person in occupancy of or involved with the operation or use of any Property, any act or omission affording any federal Governmental Authority or any state or local Governmental Authority the right of forfeiture as against any Property or any portion thereof or any monies paid in performance of its obligations under any of the Loan Documents.  None of Borrower, Operating Lessee or Sponsor has purchased any portion of the Properties with proceeds of any illegal activity.
Section 4.9.    ERISA.  None of Borrower, Operating Lessee or any ERISA Affiliate of Borrower or Operating Lessee has incurred or could be subjected to any liability under Title IV or Section 302 of ERISA or Section 412 of the Code or maintains or contributes to, or is or has been required to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code.  The consummation of the transactions contemplated by this Agreement will not constitute or result in any non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code or substantially similar provisions under federal, state or local laws, rules or regulations.
Section 4.10.    Investment Company Act.  Neither Borrower nor Operating Lessee is an “investment company”, or a company “controlled” by an “investment company”, registered or required to be registered under the Investment Company Act of 1940, as amended.  
Section 4.11.    No Bankruptcy Filing.  Neither Borrower nor Operating Lessee is contemplating either the filing of a petition by it under any state or federal bankruptcy or insolvency laws or the liquidation of all or a major portion of its assets or property.  Neither Borrower nor Operating Lessee has knowledge of any Person contemplating the filing of any 

 

such petition against it.  During the ten year period preceding the Closing Date, no petition in bankruptcy has been filed by or against any Required SPE or Sponsor and no such Persons have been convicted of a felony.  
Section 4.12.    Other Debt.  Neither Borrower nor Operating Lessee has outstanding any Debt other than Permitted Debt.
Section 4.13.    Litigation.  There are no actions, suits, proceedings, arbitrations or governmental investigations by or before any Governmental Authority or other court or agency now filed or otherwise pending, and to Borrower’s knowledge there are no such actions, suits, proceedings, arbitrations or governmental investigations threatened, against or affecting Borrower, Operating Lessee, Sponsor or the Collateral, in each case, except as listed in the Exception Report (and none of the matters listed in the Exception Report, even if determined against Borrower, Operating Lessee or such Collateral, would reasonably be expected to have a Material Adverse Effect).
Section 4.14.    Leases; Material Agreements.  
(a)    Except as set forth in Schedule E, there are no Leases and neither Borrower nor Operating Lessee is currently engaged in negotiations with any prospective tenant to enter into a Lease.  The Leases set forth on Schedule E are valid and enforceable and are in full force and effect and, except as set forth on the Exception Report, all work to be performed by the landlord under such Leases has been substantially performed and all contributions to be made by the landlord to the Tenants thereunder have been made, all other conditions to each Tenant’s obligations thereunder have been satisfied, no Tenant has the right to require Borrower to perform or finance Tenant Improvements or Material Alterations and no Leasing Commissions are owed or would be owed upon the exercise of any Tenant’s existing renewal or expansion options, and Borrower has no other monetary obligation to any Tenant under such Leases.
(b)    There are no Material Agreements except as described in Schedule F.  Borrower has made available to Lender true and complete copies of all Material Agreements.  Each Material Agreement has been entered into at arm’s length in the ordinary course of business by or on behalf of Borrower or Operating Lessee.  The Material Agreements are in full force and effect and there are no defaults thereunder by Borrower, Operating Lessee or, to Borrower’s knowledge, any other party thereto.  Neither Borrower nor Operating Lessee is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any Permitted Encumbrance or any other agreement or instrument to which it is a party or by which it or each of the Properties is bound.
Section 4.15.    Full and Accurate Disclosure.  No statement of fact heretofore delivered by Borrower or Operating Lessee to Lender in writing in respect of the Property or Borrower or Operating Lessee contains any untrue statement of a material fact or omits to state any material fact necessary to make statements contained therein not misleading unless subsequently corrected (except that the foregoing representation, as it relates to any Environmental Report, Engineering Report, Title Policy, zoning report or other third party report delivered to Lender in connection with the closing of the Loan, shall be limited to Borrower’s 

 

knowledge).  There is no fact, event or circumstance presently known to Borrower or Operating Lessee that has not been disclosed to Lender that has had or could reasonably be expected to result in a Material Adverse Effect.
Section 4.16.    Financial Condition.  Borrower has heretofore delivered to Lender financial statements and operating statements with respect to the Properties for the past three calendar years (or such portion thereof during which Borrower owned each respective Property), and trailing twelve-month operating statements.  Such statements are accurate and complete in all material respects and fairly present in accordance with GAAP the financial position of  Borrower and Operating Lessee, in all material respects as of their respective dates and do not omit to state any fact necessary to make statements contained herein or therein not misleading.  Since the delivery of such data, except as otherwise disclosed in writing to Lender, there have occurred no changes or circumstances that have had or are reasonably expected to result in a Material Adverse Effect.
Section 4.17.    Single-Purpose Requirements.  
(a)    Each Required SPE is now, and has always been since its formation, a Single-Purpose Entity and has conducted its business in substantial compliance with the provisions of its organizational documents.  Borrower has never (i) owned any property other than its respective Property and related personal property, (ii) engaged in any business, except the ownership and operation of the Properties or (iii) had any material contingent or actual obligations or liabilities unrelated to the Properties, other than in connection with Prior Loans for which Borrower and Operating Lessee have no further obligations or liabilities (and from which all assets of Borrower and Operating Lessee have been released).  Operating Lessee has never (i) owned any property other than its leasehold interest in its respective Property and related personal property, (ii) engaged in any business, except the operation of its respective Property or (iii) had any material contingent or actual obligations or liabilities unrelated to the Properties, other than in connection with Prior Loans for which Borrower and Operating Lessee have no further obligations or liabilities (and from which all assets of Borrower and Operating Lessee have been released).        
(b)    Borrower has provided Lender with true, correct and complete copies of (i) the current financial statements of Borrower and Operating Lessee, and (ii) Borrower’s and Operating Lessee’s current operating agreement together with all amendments and modifications thereto.
(c)    On or prior to the Closing Date, Borrower and Operating Lessee shall have been fully released from any loan (other than the Loan) secured by the Property or any of the Collateral (a “Prior Loan”), and Borrower shall not have any continuing liability, actual or contingent, for any Prior Loan, and no recourse whatsoever against any portion of the Property shall be available to satisfy any Prior Loan under any circumstances.
Section 4.18.    Use of Loan Proceeds.  No part of the proceeds of the Loan will be used for the purpose of purchasing or acquiring any “margin stock” within the meaning of Regulations T, U or X of the Board of Governors of the Federal Reserve System or for any other 

 

purpose that would be inconsistent with such Regulations T, U or X or any other Regulations of such Board of Governors, or for any purpose prohibited by Legal Requirements or by the terms and conditions of the Loan Documents.  The Loan is solely for the business purpose of Borrower or for distribution to Borrower’s equityholders in accordance with Legal Requirements.
Section 4.19.    Not Foreign Person.  Neither Borrower nor Operating Lessee is a “foreign person” within the meaning of Section 1445(f)(3) of the Code.
Section 4.20.    Labor Matters.  Neither Borrower nor Operating Lessee is a party to any collective bargaining agreements.
Section 4.21.    Title.  Borrower owns good, marketable and insurable title to the Properties and good and marketable title to the FF&E and related personal property, to the Collateral Accounts and to any other Collateral, in each case free and clear of all Liens whatsoever except the Permitted Encumbrances.  The Mortgages, when properly recorded in the appropriate records, together with any Uniform Commercial Code financing statements required to be filed in connection therewith, will create (i)  valid, perfected first priority Liens on the Properties and the rents therefrom, enforceable as such against creditors of and purchasers from Borrower or Operating Lessee and subject only to Permitted Encumbrances, and (ii) perfected Liens (pursuant to the Uniform Commercial Code of the State of New York) in and to all personalty, all in accordance with the terms thereof, in each case subject only to any applicable Permitted Encumbrances.  The Permitted Encumbrances do not and will not, individually or in the aggregate, materially and adversely affect or interfere with the value, or current or contemplated use or operation, of the Properties, or the security intended to be provided by the Mortgage, the ability of the Properties to generate net cash flow sufficient to service the Loan or Borrower’s ability to pay its obligations as and when they come due, including the ability to repay the Indebtedness in accordance with the terms of the Loan Documents.  Except as insured over by a Title Insurance Policy, there are no claims for payment for work, labor or materials affecting the Property that are or may become a Lien prior to, or of equal priority with, the Liens created by the Loan Documents.  No creditor of Borrower (other than Lender) or Operating Lessee has in its possession any goods that constitute or evidence the Collateral. 
Section 4.22.    No Encroachments.  Except as shown on the applicable Survey, all of the improvements on each Property lie wholly within the boundaries and building restriction lines of such Property, and no improvements on adjoining property encroach upon any Property, and no easements or other encumbrances upon any Property encroach upon any of the improvements, so as, in either case, to adversely affect the value, use or marketability of the applicable Property, except those that are insured against by a Title Insurance Policy.
Section 4.23.    Physical Condition.  
(a)    Except for matters set forth in the Engineering Reports, each Property and all building systems (including sidewalks, storm drainage system, roof, plumbing system, HVAC system, fire protection system, electrical system, equipment, elevators, exterior sidings and doors, irrigation system and all structural components) are free of all material damage and are in 

 

good condition, order and repair in all respects material to such Property’s use, operation and value.  
(b)    Borrower is not aware of any material structural or other material defect or damages in any of the Properties, whether latent or otherwise.  
(c)    Borrower has not received and is not aware of any other party’s receipt of notice from any insurance company or bonding company of any defects or inadequacies in any of the Properties that would, alone or in the aggregate, adversely affect in any material respect the insurability of the same or cause the imposition of extraordinary premiums or charges thereon or of any termination or threatened termination of any policy of insurance or bond.
(d)    None of the ECB Violations could have a Material Adverse Effect.  
Section 4.24.    Fraudulent Conveyance.  Borrower has not entered into the Transaction or any of the Loan Documents with the actual intent to hinder, delay or defraud any creditor.  Borrower has received reasonably equivalent value in exchange for its obligations under the Loan Documents. On the Closing Date, the fair salable value of Borrower’s aggregate assets is and will, immediately following the making of the Loan and the use and disbursement of the proceeds thereof, be greater than Borrower’s probable aggregate liabilities (including subordinated, unliquidated, disputed and Contingent Obligations).  Borrower’s aggregate assets do not and, immediately following the making of the Loan and the use and disbursement of the proceeds thereof will not, constitute unreasonably small capital to carry out its business as conducted or as proposed to be conducted.  Borrower does not intend to, and does not believe that it will, incur debts and liabilities (including Contingent Obligations and other commitments) beyond its ability to pay such debts as they mature (taking into account the timing and amounts to be payable on or in respect of obligations of Borrower).
Section 4.25.    Management.  Except for any Approved Management Agreement, no property management agreements are in effect with respect to the Properties.  The Approved Management Agreement is in full force and effect and to the Borrower’s knowledge, there is no event of default thereunder by any party thereto and to the Borrower’s knowledge, no event has occurred that, with the passage of time and/or the giving of notice would constitute a default thereunder.
Section 4.26.    Condemnation.  No Condemnation has been commenced or, to Borrower’s knowledge, is contemplated or threatened with respect to all or any portion of any of the Properties or for the relocation of roadways providing access to any of the Properties.
Section 4.27.    Utilities and Public Access.  Each Property has adequate rights of access to dedicated public ways (and makes no material use of any means of access or egress that is not pursuant to such dedicated public ways or recorded, irrevocable rights-of-way or easements) and is adequately served by all public utilities, including water and sewer (or well and septic), necessary to the continued use and enjoyment of such Property as presently used and enjoyed.

 

Section 4.28.    Environmental Matters.  Except as disclosed in the Environmental Reports:
(i)    To Borrower’s knowledge, no Hazardous Substances are located at, on, in or under any of the Properties or have been handled, manufactured, generated, stored, processed, or disposed of at, on, in or under, or have been Released from, the any of the Properties.  Without limiting the foregoing, to Borrower’s knowledge, there is not present at, on, in or under any of the Properties, any PCB-containing equipment, asbestos or asbestos containing materials, underground storage tanks or surface impoundments for any Hazardous Substance, lead in drinking water (except in concentrations that comply with all Environmental Laws), or lead-based paint.  To Borrower’s knowledge, there is no threat of any Release of any Hazardous Substance migrating to any of the Properties.
(ii)    Each Property is in compliance in all material respects with all Environmental Laws applicable to such Property (which compliance includes, but is not limited to, the possession of, and compliance with, all environmental, health and safety permits, approvals, licenses, registrations and other governmental authorizations required in connection with the ownership and operation of such Property under all Environmental Laws).  No Environmental Claim is pending with respect to any of the Properties, nor, to Borrower’s knowledge, is any threatened, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other administrative or judicial requirements outstanding under any Environmental Law with respect to Borrower, Operating Lessee or any of the Properties.
(iii)    No Liens are presently recorded with the appropriate land records under or pursuant to any Environmental Law with respect to the Property and, to Borrower’s knowledge, no Governmental Authority has been taking any action to subject any of the Properties to Liens under any Environmental Law.
(iv)    There have been no material environmental investigations, studies, audits, reviews or other analyses conducted by or that are in the possession of Borrower or Operating Lessee in relation to any of the Properties that have not been made available to Lender.
Section 4.29.    Assessments.  There are no pending or, to Borrower’s knowledge, proposed special or other assessments for public improvements or otherwise affecting any of the Properties, nor are there any contemplated improvements to any of the Properties that may result in such special or other assessments.  No extension of time for assessment or payment by Borrower of any federal, state or local tax is in effect.
Section 4.30.    No Joint Assessment.  Borrower has not suffered, permitted or initiated the joint assessment of any of the Properties (i) with any other real property constituting a separate tax lot, or (ii) with any personal property, or any other procedure whereby the Lien of any Taxes that may be levied against such other real property or personal property shall be assessed or levied or charged to any of the Properties as a single Lien.  

 

Section 4.31.    Separate Lots.  No portion of any of the Properties is part of a tax lot that also includes any real property that is not Collateral.
Section 4.32.    Permits; Certificate of Occupancy.  Borrower, Operating Lessee and/or Approved Property Manager have obtained all Permits necessary for the present and contemplated use and operation of each Property.  The uses being made of each Property are in conformity in all material respects with the certificate of occupancy and/or Permits for such Property and any other restrictions, covenants or conditions affecting such Property.
Section 4.33.    Flood Zone.  None of the improvements on any of the Properties is located in an area identified by the Federal Emergency Management Agency or the Federal Insurance Administration as a “100 year flood plain” or as having special flood hazards (including Zones A and V), or, to the extent that any portion of any of the Properties is located in such an area, such Property is covered by flood insurance meeting the requirements set forth in Section 5.15(a)(ii).
Section 4.34.    Security Deposits.  Borrower and Operating Lessee are in compliance in all material respects with all Legal Requirements relating to security deposits.
Section 4.35.    Acquisition Documents.  Borrower has delivered to Lender true and complete copies of all material agreements and instruments under which Borrower, Operating Lessee or any of its affiliates or the seller of any of the Properties have remaining rights or obligations in respect of Borrower’s acquisition of the Properties.
Section 4.36.    Insurance.  Borrower or Operating Lessee has obtained insurance policies reflecting the insurance coverages, amounts and other requirements set forth in this Agreement.  All premiums on such insurance policies required to be paid as of the Closing Date have been paid for the current policy period.  No Person, including Borrower and Operating Lessee, has done, by act or omission, anything that would impair the coverage of any such policy.
Section 4.37.    No Dealings.  Borrower and Operating Lessee are not aware of any unlawful influence on the assessed value of any of the Properties.
Section 4.38.    Intentionally Deleted.  
Section 4.39.    Federal Trade Embargos.  Each Required SPE is in compliance with all Federal Trade Embargos in all material respects.  To the best of Borrower’s knowledge, no Embargoed Person owns any direct or indirect equity interest (excluding holders of publicly traded shares) in any Required SPE.  To Borrower’s knowledge and Operating Lessee’s knowledge, no Tenant at any of the Properties is identified on the OFAC List.  Borrower has implemented procedures, and will consistently apply those procedures throughout the term of the Loan, to ensure that the foregoing representations and warranties remain true and correct during the term of the Loan.  

 

Section 4.40.    Capital Plan; Property Improvement Plan.  The Capital Plan includes all work necessary to convert the Hyatt Herald Square from a Holiday Inn branded hotel to a Hyatt branded hotel as required under the terms of the Hyatt Herald Square Franchise Agreement.  Borrower reasonably expects that the remaining amount to be expended in connection with the completion of the Capital Plan will not exceed $4,250,000.  Borrower has spent, as of the date hereof, $2,840,000 in connection with the Capital Plan.  
Section 4.41.    Franchise Agreement.  Borrower has delivered to Lender a true and complete copy of each Approved Franchise Agreement.  Neither Operating Lessee nor, to Borrower’s knowledge, any other party to the Approved Franchise Agreement is in default under the Approved Franchise Agreement beyond any applicable notice or cure periods. 
Section 4.42.    Survival.  All of the representations of Borrower set forth in this Agreement and in the other Loan Documents shall survive for so long as any portion of the Indebtedness is outstanding.  All representations, covenants and agreements made by Borrower in this Agreement or in the other Loan Documents shall be deemed to have been relied upon by Lender notwithstanding any investigation heretofore or hereafter made by Lender or on its behalf.  On the date of any Securitization, on not less than three days’ prior written notice, Borrower shall deliver to Lender a certification (x) confirming that all of the representations contained in this Agreement are true and correct as of the date of such Securitization, or (y) otherwise specifying any changes in or qualifications to such representations as of such date as may be necessary to make such representations consistent with the facts as they exist on such date.
 
Article V
AFFIRMATIVE COVENANTS  
Each individual Borrower covenants and agrees as follows with respect to itself,  and the other Borrower, and each Operating Lessee covenants and agrees with respect to itself and the other Operating Lessee:
Section 5.1.    Existence; Licenses; Tax Status.  Each Required SPE shall do or cause to be done all things necessary to remain in existence.  Borrower shall do or cause to be done all things necessary to preserve, renew and keep in full force and effect all rights, licenses, Permits, franchises, certificates of occupancy, consents, approvals and other agreements necessary for the continued use and operation of the Properties.  Each Required SPE shall deliver to Lender a copy of each amendment or other modification to any of its organizational documents promptly after the execution thereof.  Each Required SPE shall at all times elect to be treated for tax purposes as a “disregarded entity” that is not taxable as a corporation for U.S. federal tax purposes.  At all times while any portion of the Loan is outstanding, Borrower shall be qualified to do business in the state in which the Property is located. 

 

Section 5.2.    Maintenance of Property.  
(a)    Borrower shall cause each Property to be maintained in good and safe working order and repair, reasonable wear and tear excepted, and in keeping with the condition and repair of properties of a similar use, value, age, nature and construction, and otherwise in accordance with the terms of the Approved Franchise Agreement.  Borrower and Operating Lessee shall not, and shall not cause or permit Approved Property Manager pursuant to the terms of the Approved Management Agreement, to use, maintain or operate any Property in any manner that constitutes a public or private nuisance or that makes void, voidable, or cancelable, or materially increases the premium of, any insurance then in force with respect thereto.  Subject to Section 6.13, no improvements or equipment located at or on any Property shall be removed, demolished or materially altered without the prior written consent of Lender (except for replacement of equipment in the ordinary course of Borrower’s or Operating Lessee’s business with items of the same utility and of equal or greater value and sales or disposition of obsolete equipment no longer needed for the operation of the applicable Property), and Borrower shall from time to time make, or cause to be made, all reasonably necessary and desirable repairs, renewals, replacements, betterments and improvements to the Properties.  Borrower and Operating Lessee shall not, and shall not cause or permit Approved Property Manager to, make any change in the use of any Property that would materially increase the risk of fire or other hazard arising out of the operation of any Property, or do or permit to be done thereon anything that may in any way impair the value of any Property in any material respect or the Lien of the Mortgage or otherwise cause or reasonably be expected to result in a Material Adverse Effect.  Borrower shall not install or permit to be installed on any Property any underground storage tank.  Borrower shall not, without the prior written consent of Lender, permit any drilling or exploration for or extraction, removal, or production of any minerals from the surface or the subsurface of any Property, regardless of the depth thereof or the method of mining or extraction thereof. 
(b)    Borrower shall remediate the Deferred Maintenance Conditions within the time periods following the Closing Date as specified in Schedule C (or if no time periods are specified on Schedule C, within 12 months following the Closing Date), subject to Force Majeure, and upon request from Lender after the expiration of such period shall deliver to Lender an Officer’s Certificate confirming that such remediation has been substantially completed and that all associated expenses and penalties have been paid.  Borrower shall comply with all material terms of any asbestos operating and maintenance program in effect as of the Closing Date or otherwise required to be implemented by Borrower.
(c)    Borrower shall complete the work under the Capital Plan according to the schedule set forth on Schedule G, but in any event all such work under the Capital Plan shall be substantially completed, and the Hyatt Herald Square shall be open for business as a “Hyatt” branded hotel, on or before the day after the Payment Date falling in October 2014.  Failure to both complete the work under the Capital Plan and to have the Hyatt Herald Square open for business as a “Hyatt” branded hotel, in each case, on or before the day after the Payment Date falling in October 2014 (a “Hyatt Flag Trigger Event”) shall cause a Trigger Period to commence, and failure to cure a Hyatt Flag Trigger Event on or before June 30, 2015 shall 

 

constitute an immediate Event of Default.  For the avoidance of doubt, no amounts in respect of the Capital Plan shall be funded from the FF&E Reserve Accounts, except for the amounts specified in the last sentence of Section 3.1(a).   In addition, except for the amounts funded from the Hyatt Herald Square Manager FF&E Reserve Account pursuant to the immediately preceding sentence, all amounts needed to complete the work under the Capital Plan shall be funded from Borrower’s equity.  Following completion of the work under the Capital Plan, Borrower may request from Lender written confirmation of termination of the Completion Guaranty and Lender shall provide such written confirmation upon such request.
(d)    Borrower and Operating Lessee shall diligently perform to substantial completion all work as and to the extent required under any property improvement plans or similar capital improvement or expenditure obligations provided for in any Approved Franchise Agreement.
(e)    Borrower shall use commercially reasonable efforts to cure the ECB Violations as promptly as reasonably possible and to have the same listed as “RESOLVED” on the New York City Department of Building’s website, which efforts shall include, to the extent applicable, the payment of any related fines and the filing of a Benchmarking Report of Energy Use as required by the New York City Department of Buildings.
Section 5.3.    Compliance with Legal Requirements.  Borrower and Operating Lessee shall comply with, and shall cause each Property to comply with and be operated, maintained, repaired and improved in material compliance with, all Legal Requirements, Insurance Requirements and all material contractual obligations by which Borrower is legally bound.
Section 5.4.    Impositions and Other Claims.  Except to the extent that Lender is reserving for and paying Taxes pursuant to Section 3.4, Borrower shall pay and discharge all taxes, assessments and governmental charges levied upon it, its income and its assets as and when such taxes, assessments and charges are due and payable, as well as all lawful claims for labor, materials and supplies or otherwise, subject to any rights to contest contained in the definition of Permitted Encumbrances.  Borrower shall file all federal, state and local tax returns and other reports that it is required by law to file.  If any law or regulation applicable to Lender, any Note, any of the Collateral or any of the Mortgages is enacted that deducts from the value of property for the purpose of taxation any Lien thereon, or imposes upon Lender the payment of the whole or any portion of the taxes or assessments or charges or Liens required by this Agreement to be paid by Borrower, or changes in any way the laws or regulations relating to the taxation of mortgages or security agreements or debts secured by mortgages or security agreements or the interest of the mortgagee or secured party in the property covered thereby, or the manner of collection of such taxes, so as to affect any of the Mortgages, the Indebtedness or Lender, then Borrower, upon demand by Lender, shall pay such taxes, assessments, charges or Liens, or reimburse Lender for any amounts paid by Lender.  If in the opinion of Lender’s counsel it would be unlawful to require Borrower to make such payment or the making of such payment would result in the imposition of interest beyond the maximum amount permitted by 

 

applicable law, Lender may elect to declare all of the Indebtedness to be due and payable 180 days from the giving of written notice by Lender to Borrower.
Section 5.5.    Access to Properties.  Borrower and Operating Lessee shall, and shall cause Approved Property Manager pursuant to the terms of the Approved Management Agreement to, permit agents, representatives and employees of Lender and the Servicer to enter and inspect the Properties or any portion thereof, and/or inspect, examine, audit and copy the books and records of Borrower, Operating Lessee and Approved Property Manager (including all recorded data of any kind or nature, regardless of the medium of recording), at such reasonable times as may be requested by Lender upon reasonable advance written notice.  If Lender shall determine that an Event of Default exists, the cost of such inspections, examinations, copying or audits shall be borne by Borrower, including the cost of all follow up or additional investigations, audits or inquiries deemed reasonably necessary by Lender.  The cost of such inspections, examinations, audits and copying, if not paid for by Borrower following demand, may be added to the Indebtedness and shall bear interest thereafter until paid at the Default Rate.  If Borrower prohibits or bars agents, representatives and employees of Lender and the Servicer from entering and inspecting the Properties or from inspecting, examining, auditing and copying the books and records of Borrower, Operating Lessee and Approved Property Manager, as required by this Section, for more than five days after a written request is made by Lender to do so, Borrower agrees to pay Lender on demand the sum of $1,000.00 for each day after such five-day period that Borrower so prohibits or bars such inspection, and such sum or sums shall be part of the Indebtedness.
Section 5.6.    Cooperate in Legal Proceedings.  Except with respect to any claim by Borrower or Operating Lessee against Lender, Borrower and Operating Lessee shall cooperate fully with Lender with respect to any proceedings before any Governmental Authority that may in any way affect the rights of Lender hereunder or under any of the Loan Documents and, in connection therewith, Lender may, at its election, participate or designate a representative to participate in any such proceedings.
Section 5.7.    Leases.  
(a)    Borrower shall furnish Lender with executed copies of all Leases.  All new Leases and renewals or amendments of Leases must (i) be entered into on an arms-length basis with Tenants that are not affiliates of Borrower and whose identity and creditworthiness is appropriate for tenancy in property of comparable quality, (ii) provide for rental rates and other economic terms that, taken as a whole, are at least equivalent to then-existing market rates, based on the applicable market, and otherwise contain terms and conditions that are commercially reasonable, (iii) have an initial term of not more than 10 years, (iv) not reasonably be expected to result in a Material Adverse Effect and (v) be subject and subordinate to the Mortgage and contain provisions for the agreement by the Tenant thereunder to attorn to Lender and any purchaser at a foreclosure sale, such attornment to be self-executing and effective upon acquisition of title to the applicable Property by any purchaser at a foreclosure sale.    
(b)    Any Lease that does not conform to the standards set forth in Section 5.7(a) shall be subject to the prior written consent of Lender, which consent shall not be 

 

unreasonably withheld, delayed or conditioned.  In addition, all new Leases that are Major Leases, and all terminations, renewals and material amendments of Major Leases, and any surrender of rights under any Major Lease, shall be subject to the prior written consent of Lender, which consent shall not be unreasonably withheld, conditioned or delayed.   
(c)    Borrower and Operating Lessee shall (i) observe and punctually perform all the material obligations imposed upon the lessor under the Leases; (ii) enforce all of the material terms, covenants and conditions contained in the Leases on the part of the lessee thereunder to be observed or performed, short of termination thereof, except that Borrower may terminate any Lease following a material default thereunder by the respective Tenant; (iii) not collect any of the rents thereunder more than one month in advance; (iv) not execute any assignment of lessor’s interest in the Leases or associated rents other than the assignment of rents and leases under the Mortgage; (v) not cancel or terminate any guarantee of any of the Major Leases without the prior written consent of Lender; and (vi) not permit any subletting of any space covered by a Lease or an assignment of the Tenant’s rights under a Lease, except in strict accordance with the terms of such Lease.  
(d)    Security deposits of Tenants under all Leases shall be held in compliance with Legal Requirements and any provisions in Leases relating thereto.  Borrower or Operating Lessee shall maintain books and records of sufficient detail to identify all security deposits of Tenants separate and apart from any other payments received from Tenants.  Subject to Legal Requirement, any bond or other instrument held by Borrower or Operating Lessee in lieu of cash security shall name Lender as payee or mortgagee thereunder or be fully assignable to Lender.  Borrower hereby pledges to Lender each such bond or other instrument as security for the Indebtedness.  Upon the occurrence of an Event of Default, Borrower shall, upon Lender’s request, deposit with Lender in an Eligible Account pledged to Lender an amount equal to the aggregate security deposits of the Tenants (and any interest theretofore earned on such security deposits and actually received by Borrower or Operating Lessee), and any such bonds, that Borrower had not returned to the applicable Tenants or applied in accordance with the terms of the applicable Lease (and failure to do so shall constitute a misappropriation of funds pursuant to Section 9.19(b)).
(e)    Borrower shall promptly deliver to Lender a copy of each written notice from a Tenant under any Major Lease claiming that Borrower or Operating Lessee is in default in the performance or observance of any of the material terms, covenants or conditions thereof to be performed or observed by Borrower or Operating Lessee.  Borrower shall use commercially reasonable efforts to provide in each Major Lease executed after the Closing Date to which Borrower or Operating Lessee is a party that any Tenant delivering any such notice shall send a copy of such notice directly to Lender.  
Section 5.8.    Plan Assets, etc.  Borrower and Operating Lessee will do, or cause to be done, all things necessary to ensure that neither Borrower nor Operating Lessee will be deemed to hold Plan Assets at any time.  
Section 5.9.    Further Assurances.  Borrower and Operating Lessee shall, at Borrower’s sole cost and expense, from time to time as reasonably requested by Lender, execute, 

 

acknowledge, record, register, file and/or deliver to Lender such other instruments, agreements, certificates and documents (including amended or replacement mortgages), and Borrower hereby consents to the filing by Lender of any Uniform Commercial Code financing statements, in each case as Lender may reasonably request to evidence, confirm, perfect and maintain the Liens securing or intended to secure the obligations of Borrower and the rights of Lender under the Loan Documents and do and execute all such further lawful and reasonable acts, conveyances and assurances for the better and more effective carrying out of the intents and purposes of this Agreement and the other Loan Documents as Lender shall reasonably request from time to time  (including the payment and application of Loss Proceeds).  Upon foreclosure, the appointment of a receiver or any other relevant action, Borrower and Operating Lessee shall (and, use reasonable efforts to cause Approved Property Manager pursuant to the terms of the Approved Management Agreement to), at its sole cost and expense, cooperate fully and completely to effect the assignment or transfer of any license, permit, agreement or any other right necessary or useful to the operation of the Collateral.  Upon receipt of an affidavit of Lender as to the loss, theft, destruction or mutilation of any Note, Borrower shall issue, in lieu thereof, a replacement Note in the same principal amount thereof and in the form thereof.  Borrower hereby authorizes and appoints Lender as its attorney-in-fact to, during the continuance of an Event of Default, execute, acknowledge, record, register and/or file such instruments, agreements, certificates and documents, and to do and execute such acts, conveyances and assurances, should Borrower fail to do so itself in violation of this Agreement or the other Loan Documents following written request from Lender, in each case without the signature of Borrower.  The foregoing grant of authority is a power of attorney coupled with an interest and such appointment shall be irrevocable for the term of this Agreement.  Borrower hereby ratifies all actions that such attorney shall lawfully take or cause to be taken in accordance with this Section.  
Section 5.10.    Management of Collateral.  
(a)    Each Property shall be managed at all times by an Approved Property Manager pursuant to an Approved Management Agreement.  Pursuant to the respective Subordination of Property Management Agreement, each Approved Property Manager shall agree that its Approved Management Agreement and all incentive fees payable to the Approved Property Manager thereunder are subject and subordinate to the Indebtedness.   In the event Real Hospitality Group, LLC, shall cease to be the Approved Property Manager for a Property, Borrower may appoint a replacement Approved Property Manager to manage the applicable Property pursuant to an Approved Management Agreement, and such successor manager shall execute for Lender’s benefit a subordination and non-disturbance of property management agreement in form and substance reasonably satisfactory to Lender, Borrower and such replacement Approved Property Manager.  The per annum base management fees of the Approved Property Manager under each Approved Management Agreement shall not, at any time, exceed the Maximum Management Fee. 
(b)    Borrower shall cause each Approved Property Manager (including any successor Approved Property Manager) to maintain at all times worker’s compensation insurance as required by Governmental Authorities.

 

(c)    Borrower shall notify Lender in writing of any default of Borrower, Operating Lessee or the Approved Property Manager under any Approved Management Agreement, after the expiration of any applicable cure periods, of which Borrower has actual knowledge.  Subject to the terms of the applicable Subordination of Management Agreement, Lender shall have the right, after reasonable notice to Borrower, to cure defaults of Borrower or Operating Lessee under such Approved Management Agreement.  Any out-of-pocket expenses incurred by Lender to cure any such default shall constitute a part of the Indebtedness and shall be due from Borrower upon demand by Lender.
(d)    During the continuance of a material default by the Approved Property Manager under an Approved Management Agreement (after the expiration of any applicable notice and/or cure periods), Lender shall have the right to require Borrower to exercise any and all available remedies under such Approved Management Agreement, and if the exercise of such remedies shall result in the termination of  such Approved Management Agreement, engage an Approved Property Manager reasonably acceptable to Lender to serve as replacement Approved Property Manager pursuant to an Approved Management Agreement.  Notwithstanding anything to the contrary contained herein or in any other Loan Document, Lender’s approval of any replacement Approved Management Agreement shall be subject to such agreement providing for a cash management system that is reasonably acceptable to Lender and, as a condition to Lender’s approval of any replacement Approved Management Agreement, Lender may require this Agreement and the Cash Management Agreement to be amended to the extent required to conform such agreements to any such cash management system.   
(e)    Subject to any closure of the Hyatt Herald Square necessary to complete the Capital Plan, each Property shall at all times be branded pursuant to an Approved Franchise Agreement between Borrower or Operating Lessee and an Approved Franchisor.  Except with respect to the Holiday Inn Franchise Agreement, each Approved Franchisor shall execute and deliver to Lender a franchisor comfort letter reasonably acceptable to Lender.  During the continuance of a material default by the Approved Franchisor under an Approved Franchise Agreement (after the expiration of any applicable notice and/or cure periods), Lender shall have the right to require Borrower to exercise any and all available remedies under such Approved Franchise Agreement, and if the exercise of such remedies shall result in the termination of such Approved Franchise Agreement, engage an Approved Franchisor reasonably acceptable to Lender to serve as replacement Approved Franchisor pursuant to an Approved Franchise Agreement.
Section 5.11.    Notice of Material Event.  Borrower shall give Lender prompt notice (containing reasonable detail) of (i) any material change in the financial or physical condition of any Property, as reasonably determined by Borrower, including the termination or cancellation of any Major Lease and the termination or cancellation of terrorism or other insurance required by this Agreement, (ii) any notice from the Approved Property Manager, to the extent such notice relates to a matter that is reasonably expected to result in a Material Adverse Effect, (iii) to the extent Borrower has knowledge thereof, any litigation or governmental proceedings pending or threatened in writing against Borrower, Operating Lessee or the Property that is reasonably expected to result in a Material Adverse Effect, (iv) the insolvency or bankruptcy filing of any Required SPE, Sponsor or an affiliate of any of the 

 

foregoing and (v) any other circumstance or event reasonably expected to result in a Material Adverse Effect.  In addition to the foregoing, Borrower shall deliver to Lender copies of (x) any property improvement plan that requires Borrower or Operating Lessee to perform upgrades or improvements on any Property, (y) any notification that the Property is not in compliance with the Approved Franchise Agreement delivered to Borrower by, or on behalf of, the Approved Franchisor and (z) at Lender’s request, any franchise, brand or flag inspection report.
Section 5.12.    Annual Financial Statements.  As soon as available, and in any event within 85 days after the close of each Fiscal Year, Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, annual financial statements of Borrower and Operating Lessee, including a combined balance sheet of the Borrowers and Operating Lessees (and no other entities) and operating statement of Borrowers and Operating Lessees as of the end of such year, together with related combined statements of operations and equityholders’ capital and cash flow for such Fiscal Year audited by a “Big Four” accounting firm whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP applied on a consistent basis and shall not be qualified as to the scope of the audit or as to the status of Borrower as a going concern.  Together with Borrower’s annual financial statements, Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format: 
(i)    a statement of cash flows and income and expenses in the format set forth in the most recent Uniform System of Accounts (as shown on Exhibit B); 
(ii)    then current rent roll, average daily room rates, sales reports, Smith Travel Reports and occupancy reports; and
(iii)    such other information as Lender shall reasonably request.
Section 5.13.    Quarterly Financial Statements.  As soon as available, and in any event within 45 days after the end of each Fiscal Quarter (including year-end), Borrower shall furnish to Lender, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, quarterly and year-to-date unaudited financial statements prepared for such Fiscal Quarter with respect to each Borrower and Operating Lessee, including a balance sheet and operating statement of each Borrower and Operating Lessee as of the end of such Fiscal Quarter, which statements shall include income and expenses in the format set forth in the most recent Uniform System of Accounts (as shown on Exhibit B-1) and be accompanied by an Officer’s Certificate certifying that the same are true, correct and complete and were prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from audit and normal year-end audit adjustments.  Each such quarterly report shall be accompanied by the following, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format:

 

(i)    a statement in reasonable detail that calculates Net Operating Income as of the end of each of the Fiscal Quarters in the Test Period ending in such Fiscal Quarter;
(ii)    copies of each of the Leases signed during such quarter; 
(iii)    then current rent roll, average daily room rates, sales reports, Smith Travel Reports and occupancy reports; 
(iv)    a reasonably detailed report of Borrower’s progress on the Capital Plan, including information regarding whether the deadlines set forth on Schedule G hereto have been met; 
(v)    an Officer’s Certificate executed by the chief financial officer of Borrower certifying that the amount contained in the Approved FF&E Account complies with the requirements of this Agreement and the other Loan Documents; and 
(vi)    such other information as Lender shall reasonably request.
Section 5.14.    Monthly Financial Statements.  
(a)    Until the occurrence of a Securitization and during the continuance of a Trigger Period or an Event of Default (or, in the case of item (iii) below, at all times), Borrower shall furnish within 30 days after the end of each calendar month, in an Excel spreadsheet file in electronic format (which may be via an intralinks site at Borrower’s sole cost and expense), or, in the case of predominantly text documents, in Adobe pdf format, monthly and year-to-date unaudited financial statements prepared for the applicable month with respect to each Borrower and Operating Lessee, including a balance sheet and operating statement as of the end of such month, which statements shall include income and expenses with departmental detail as set forth in the format set forth in the most recent Uniform System of Accounts (as shown on Exhibit B) and be accompanied by an Officer’s Certificate certifying that the same are true, correct and complete and were prepared in accordance with GAAP applied on a consistent basis, subject to changes resulting from audit and normal year-end audit adjustments.  Each such monthly report shall be accompanied by the following:
(i)    a summary of Leases signed during such month, which summary shall include the Tenant’s name, lease term, base rent, escalations, Tenant Improvements, leasing commissions paid, free rent and other concessions; 
(ii)    then current rent roll, average daily room rates, sales reports, Smith Travel Reports and occupancy reports; and 
(iii)    such other information as Lender shall reasonably request.
(b)    If Borrower fails to provide to Lender the financial statements and other information specified in Sections 5.12, 5.13 and this Section within the respective time period specified in such Sections, then if Borrower fails to provide such financial statements within five Business Days following written notice from Lender, (i) such failure shall, at Lender’s election, 

 

constitute an Event of Default, and/or (ii) a Trigger Period shall be deemed to have commenced for all purposes hereunder and shall continue until such failure is remedied and the financial statements delivered to Lender evidence that no Trigger Period is in effect.  
Section 5.15.    Insurance.  
(a)    Borrower shall obtain and maintain with respect to the Properties, for the mutual benefit of Borrower and Lender at all times, the following policies of insurance:
(i)    Property insurance against loss or damage by standard perils included within the classification “All Risks” or “Special Form” Cause of Loss, including coverage for damage caused by windstorm (including named storm) and hail.  Such insurance shall (A) be in an amount equal to the full insurable value on a replacement cost basis of the Properties and, if applicable, all related furniture, furnishings, equipment and fixtures (without deduction for physical depreciation); (B) have deductibles acceptable to Lender (but in any event not in excess of $50,000, except in the case of windstorm and earthquake coverage, which shall have deductibles not in excess of 5% of the total insurable value of the Properties); (C) be paid annually in advance; (D) be written on a “Replacement Cost” basis, waiving depreciation (E) be written on a no coinsurance form or contain an “Agreed Amount” endorsement, waiving all coinsurance provisions; (F) include ordinance or law coverage on a replacement cost basis, with no co-insurance provisions, containing Coverage A: “Loss Due to Operation of Law” (with a limit equal to replacement cost), Coverage B: “Demolition Cost” and Coverage C: “Increased Cost of Construction” coverages with limits reasonably acceptable to Lender; and (G) permit that the improvements and other property covered by such insurance be rebuilt at another location in the event that such improvements and other property cannot be rebuilt at the location on which they are situated as of the date hereof.  If such insurance excludes mold, then Borrower shall implement a mold prevention program satisfactory to Lender;
(ii)    if any material portion of one or more of the Properties is located in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards, flood insurance in an amount equal to the maximum limit of coverage available under the National Flood Insurance Program, plus such additional excess limits as shall be reasonably requested by Lender, with a deductible not in excess of $25,000;
(iii)    commercial general liability insurance, including broad form coverage of property damage, contractual liability for insured contracts and personal injury (including bodily injury and death), to be on the so-called “occurrence” form containing minimum limits per occurrence of not less than $1,000,000 with not less than a $2,000,000 general aggregate for any policy year (with a per location aggregate, or a $35,000,000 general aggregate, if the Properties are on a blanket policy), with a deductible not in excess of $50,000.  In addition, at least $50,000,000 excess and/or umbrella liability insurance shall be obtained and maintained for any and all claims, including all legal liability imposed upon Borrower and all related court costs and attorneys’ fees and disbursements;

 

(iv)    rental loss and/or business interruption insurance covering actual loss sustained during restoration from all risks required to be covered by the insurance provided for herein, including clauses (i), (ii), (v), (vii), (viii) and (ix) of this Section, and covering the period from the date of any Casualty to the date that the Property is repaired or replaced and operations are resumed (regardless of the length of such period), and containing an extended period of indemnity endorsement covering the 12 month period commencing on the date on which the applicable Property or Properties have been restored, as reasonably determined by the applicable insurer (even if the policy will expire prior to the end of such period).  The amount of such insurance shall be increased from time to time as and when the gross revenues from the Property increase;
(v)    insurance for steam boilers, air conditioning equipment, high pressure piping, machinery and equipment, pressure vessels or similar apparatus now or hereafter installed in any of the improvements (without exclusion for explosions) and insurance against loss of occupancy or use arising from any breakdown, in such amounts as are generally available and are generally required by institutional lenders for properties comparable to the Properties, in each case, with a deductible not in excess of $50,000;
(vi)    worker’s compensation insurance with respect to all employees of Borrower as and to the extent required by any Governmental Authority or Legal Requirement and employer’s liability coverage of at least $1,000,000 (if applicable);
(vii)    during any period of repair or restoration, and only if the property and liability coverage forms do not otherwise apply, (A) commercial general liability and umbrella liability insurance covering claims related to the repairs or restoration at the Properties that are not covered by or under the terms or provisions of the insurance provided for in Section 5.15(a)(iii) and (B) the insurance provided for in Section 5.15(a)(i), which shall, in addition to the requirements set forth in such Section, (1) be written in a so-called builder’s risk completed value form or equivalent coverage, including coverage for 100% of the total costs of construction on a non-reporting basis and against all risks insured against pursuant to clauses (i), (ii), (iv), (v), (viii) and (ix) of Section 5.15(a) and (2) include permission to occupy the Properties;
(viii)    if required by Lender, earthquake insurance (A) with minimum coverage equivalent to the greater of  1.0x SUL (scenario upper loss) and 1.5x SEL (scenario expected loss) multiplied by the full replacement cost of the building plus business income, (B) having a deductible not in excess of 5% of the total insurable value of the Properties, and (C) if one or more of the Properties is legally nonconforming under applicable zoning ordinances and codes, containing ordinance of law coverage in amounts as required by Lender; 
(ix)    so long as the Terrorism Risk Insurance Program Reauthorization Act of 2007 (“TRIPRA”) or a similar or subsequent statute is in effect, terrorism insurance for foreign and domestic acts (as such terms are defined in TRIPRA or similar or subsequent statute) in an amount equal to the full replacement cost of the Properties (plus rental loss and/or business interruption insurance coverage for a term set forth in clause (iv) above).  

 

If TRIPRA or a similar or subsequent statute is not in effect, then provided that terrorism insurance is commercially available, Borrower shall be required to carry terrorism insurance throughout the term of the Loan as required by the preceding sentence, but in such event Borrower shall not be required to spend on terrorism insurance coverage more than two times the amount of the insurance premium that is payable at such time in respect of the property and business interruption/rental loss insurance required hereunder on a stand alone-basis (without giving effect to the cost of terrorism and earthquake components of such casualty and business interruption/rental loss insurance), and if the cost of terrorism insurance exceeds such amount, Borrower shall purchase the maximum amount of terrorism insurance available with funds equal to such amount.  In either such case, such insurance shall not have a deductible in excess of $500,000; 
(x)    liquor liability insurance in an amount of at least $10,000,000 or in such greater amount as may be required by applicable Legal Requirements against claims or liability arising directly or indirectly to persons or property on account of the sale or dispensing of alcoholic beverages at one or more of the Properties and public liability insurance in an amount of at least $10,000,000 or in such greater amount as may be required by applicable Legal Requirements providing coverage against such claims or liability;
(xi)    [Intentionally Deleted];
(xii)    auto liability coverage for all owned and non owned vehicles, including rented and leased vehicles containing minimum limits per occurrence of $1,000,000.00 (if applicable); and 
(xiii)    such other insurance as may from time to time be reasonably requested by Lender.
(b)    All policies of insurance (the “Policies”) required pursuant to this Section shall be issued by one or more insurers having a claims-paying ability of at least “A”  by S&P (or “Api” with respect to FM Global companies) and “A3” by Moody’s, if Moody’s rates such insurer and is rating the Certificates, or by a syndicate of insurers through which at least 75% of the coverage (if there are 4 or fewer members of the syndicate) or at least 60% of the coverage (if there are 5 or more members of the syndicate) is with insurers having such ratings and all such insurers shall have ratings of not less than “BBB+”  by S&P and “Baa1” by Moody’s, if Moody’s rates such insurer and is rating the Securities. Notwithstanding the foregoing, (1) Starr Surplus Lines Insurance Company (rated as of the Closing Date as “A XV” with AM Best) and (2) Technical Risk Underwriters (rated as of the Closing Date as “A IX” with AM Best) shall be acceptable insurers for the property Policy, for so long as the rating of each insurer is not withdrawn or downgraded below the rating in effect as of the Closing Date.  In the event such insurer's rating is withdrawn or downgraded below this rating, Borrower shall promptly notify Lender and replace such insurer with an insurer meeting the rating requirements set forth herein. 
(c)    All Policies required pursuant to this Section:
(i)    shall contain deductibles that, in addition to complying with any other requirements expressly set forth in Section 5.15(a), are approved by Lender (such 

 

approval not to be unreasonably withheld, delayed or conditioned, but subject to the requirements of each Rating Agency) and are no larger than is customary for similar policies covering similar properties in the geographic market in which the Property is located but in no event in excess of $50,000 (except as otherwise provided herein and in the case of windstorm and earthquake coverage which shall have deductibles not in excess of 5% of the total insurable value of each of the Properties);
(ii)    shall be maintained throughout the term of the Loan without cost to Lender and shall name Borrower as the named insured (or additional insured with respect to the coverage maintained by the management company);
(iii)    with respect to property and rental or business interruption insurance policies, shall contain a standard noncontributory mortgagee clause naming Lender and its successors and assigns as their interests may appear as first mortgagee and loss payee; 
(iv)    with respect to liability policies, except for workers compensation, employers liability and auto liability, shall name Lender and its successors and assigns as their interests may appear as additional insureds;
(v)    with respect to property and rental or business interruption insurance policies, shall either be written on a no coinsurance form or contain an endorsement providing that neither Borrower nor Lender nor any other party shall be a co‐insurer under said Policies;
(vi)    with respect to property and rental or business interruption insurance policies, shall contain an endorsement or other provision providing that Lender shall receive at least 30 days’ prior written notice of any cancellation thereof (or, in the case of cancellation due to non-payment of premium, 10 days’ prior written notice);
(vii)    with respect to property and rental or business interruption insurance policies, shall contain an endorsement providing that no act or negligence of Borrower or of a Tenant or other occupant or any foreclosure or other proceeding or notice of sale relating to one or more of the Properties shall affect the validity or enforceability of the insurance insofar as a mortgagee is concerned;
(viii)    shall not contain provisions that would make Lender  liable for any insurance premiums thereon or subject to any assessments thereunder;
(ix)    with respect to property, rental or business interruption, commercial general liability and umbrella liability insurance policies, shall contain a waiver of subrogation against Lender, as applicable;
(x)    may be in the form of a blanket policy, provided that Borrower shall provide evidence satisfactory to Lender that the insurance premiums for the Properties are separately allocated to the Properties, and such blanket policy shall provide the same protection as would a separate Policy as reasonably determined by Lender; and

 

(xi)    shall otherwise be reasonably satisfactory in form and substance to Lender and shall contain such other provisions as Lender deems reasonably necessary or desirable to protect its interests.
(d)    Except to the extent that Lender is reserving for and paying insurance premiums pursuant to Section 3.4, Borrower shall pay the premiums for all Policies as the same become due and payable.  Not later than 30 days prior to the expiration date of each Policy, Borrower shall deliver to Lender evidence, reasonably satisfactory to Lender, of its renewal.  Borrower shall promptly forward to Lender a copy of each written notice received by Borrower of any modification, reduction or cancellation of any of the Policies or of any of the coverages afforded under any of the Policies.  Within 30 days after request by Lender, Borrower shall obtain such increases in the amounts of coverage required hereunder as may be reasonably requested by Lender, taking into consideration changes in the value of money over time, changes in liability laws, changes in prudent customs and practices, and the like.
(e)    Borrower shall not procure any other insurance coverage that would be on the same level of payment as the Policies or would adversely impact in any way the ability of Lender or Borrower to collect any proceeds under any of the Policies.  If at any time Lender is not in receipt of written evidence that all Policies are in full force and effect when and as required hereunder, Lender shall have the right to take such action as Lender deems necessary to protect its interest in the Properties, including the obtaining of such insurance coverage as Lender in its sole discretion deems appropriate (but limited to the coverages and amounts required hereunder).  All premiums, costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Lender in connection with such action or in obtaining such insurance and keeping it in effect shall be paid by Borrower to Lender upon demand and, until paid, and shall bear interest at the Default Rate.
(f)    In the event of foreclosure of one or more of the Mortgages or other transfer of title to  one or more of the Properties in extinguishment in whole or in part of the Indebtedness, all right, title and interest of Borrower in and to the Policies then in force with respect to such Properties and all proceeds payable thereunder shall thereupon vest in the purchaser at such foreclosure or in Lender or other transferee in the event of such other transfer of title.
Section 5.16.    Casualty and Condemnation.  
(a)    Borrower shall give prompt notice to Lender of any Casualty or Condemnation or of the actual or threatened commencement of proceedings that would result in a Condemnation
(b)    Lender may participate in any proceedings for any taking by any public or quasi-public authority accomplished through a Condemnation or any transfer made in lieu of or in anticipation of a Condemnation, to the extent permitted by law.  Upon Lender’s request, Borrower shall deliver to Lender all instruments reasonably requested by it to permit such participation.  Borrower shall, at its sole cost and expense, diligently prosecute any such proceedings, and shall consult with Lender, its attorneys and experts, and cooperate with them in 

 

the carrying on or defense of any such proceedings.  Borrower shall not consent or agree to a Condemnation or action in lieu thereof without the prior written consent of Lender in each instance, which consent shall not be unreasonably withheld, delayed or conditioned in the case of a taking of an immaterial portion of any Property.    
(c)    Lender may (x) jointly with Borrower settle and adjust any claims, (y) during the continuance of an Event of Default, settle and adjust any claims without the consent or cooperation of Borrower, or (z) allow Borrower to settle and adjust any claims; except that if no Event of Default is continuing, Borrower may settle and adjust claims aggregating not in excess of the Threshold Amount if such settlement or adjustment is carried out in a competent and timely manner, but Lender shall be entitled to collect and receive (as set forth below) any and all Loss Proceeds.  The reasonable expenses incurred by Lender in the adjustment and collection of Loss Proceeds shall become part of the Indebtedness and shall be reimbursed by Borrower to Lender upon demand therefor.
(d)    All Loss Proceeds from any Casualty or Condemnation shall be immediately deposited into the Loss Proceeds Account (monthly rental loss/business interruption proceeds to be initially deposited into the Loss Proceeds Account and subsequently deposited into the Cash Management Account in installments as and when the lost rental income covered by such proceeds would have been payable).  Following the occurrence of a Casualty, Borrower, regardless of whether proceeds are available, shall in a reasonably prompt manner proceed to restore, repair, replace or rebuild the applicable Property to be of at least equal value and of substantially the same character as prior to the Casualty, all in accordance with the terms hereof applicable to Alterations.  If, at any Property, a Condemnation or Casualty occurs as to which, in the reasonable judgment of Lender:
(i)    in the case of a Casualty, the cost of restoration would not exceed 25% of the applicable Allocated Loan Amount and the Casualty does not render untenantable, or result in the cancellation of Leases covering, more than 25% of the gross rentable area of such Property, or result in cancellation of Leases covering more than 25% of the base contractual rental revenue of such Property;
(ii)    in the case of a Condemnation, the Condemnation does not render untenantable, or result in the cancellation of Leases covering, more than 15% of the gross rentable area of such Property;
(iii)    restoration of such Property is reasonably expected to be completed prior to the expiration of rental interruption insurance and at least 90 days prior to the Maturity Date; 
(iv)    after such restoration, the fair market value of the Property is reasonably expected to equal at least the fair market value of such Property immediately prior to such Condemnation or Casualty; and
(v)    all necessary approvals and consents from Governmental Authorities will be obtained to allow the rebuilding and re-occupancy of the Property; 

 

or if Lender otherwise elects to allow Borrower to restore such Property, then, provided no Event of Default is continuing, the Loss Proceeds after receipt thereof by Lender and reimbursement of any reasonable expenses incurred by Lender in connection therewith shall be applied to the cost of restoring, repairing, replacing or rebuilding such Property or part thereof subject to the Casualty or Condemnation, in the manner set forth below (and Borrower shall commence, as promptly and diligently as practicable, to prosecute such restoring, repairing, replacing or rebuilding such Property in a workmanlike fashion and in accordance with applicable law to a status at least equivalent to the quality and character of such Property immediately prior to the Condemnation or Casualty).  Provided that no Event of Default shall have occurred and be then continuing,  Lender shall disburse such Loss Proceeds to Borrower upon Lender’s being furnished with (i) evidence reasonably satisfactory to it of the estimated cost of completion of the restoration, (ii) funds, or assurances reasonably satisfactory to Lender that such funds are available and sufficient in addition to any remaining Loss Proceeds, to complete the proposed restoration (including for any reasonable costs and expenses of Lender to be incurred in administering such restoration) and for payment of the Indebtedness as it becomes due and payable during the restoration, and (iii) such architect’s certificates, waivers of lien, contractor’s sworn statements, title insurance endorsements, bonds, plats of survey and such other evidences of cost, payment and performance as Lender may reasonably request; and Lender may, in any event, require that all plans and specifications for restoration reasonably estimated by Lender to exceed the Threshold Amount be submitted to and approved by Lender prior to commencement of work (which approval shall not be unreasonably withheld, delayed or conditioned).  If Lender reasonably estimates that the cost to restore will exceed the Threshold Amount, Lender may retain a local construction consultant to inspect such work and review Borrower’s request for payments and Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and expenses of such consultant (which fees and expenses shall constitute Indebtedness).  No payment shall exceed 90% of the value of the work performed from time to time until such time as 50% of the restoration (calculated based on the anticipated aggregate cost of the work) has been completed, and amounts retained prior to completion of 50% of the restoration shall not be paid prior to the final completion of the restoration.  Funds other than Loss Proceeds shall be disbursed prior to disbursement of such Loss Proceeds, and at all times the undisbursed balance of such proceeds remaining in the Loss Proceeds Account, together with any additional funds irrevocably and unconditionally deposited therein or irrevocably and unconditionally committed for that purpose, shall be at least sufficient in the reasonable judgment of Lender to pay for the cost of completion of the restoration free and clear of all Liens or claims for Lien. 
(e)    Borrower shall cooperate with Lender in obtaining for Lender the benefits of any Loss Proceeds lawfully or equitably payable to Lender in connection with the Properties.  Lender shall be reimbursed for any expenses reasonably incurred in connection therewith (including reasonable attorneys’ fees and disbursements, and, if reasonably necessary to collect such proceeds, the expense of an Appraisal on behalf of Lender) out of such Loss Proceeds or, if insufficient for such purpose, by Borrower.  Borrower hereby irrevocably constitutes and appoints Lender as the attorney-in-fact of Borrower for matters in excess of the Threshold Amount with respect to the Property, with full power of substitution, subject to the terms of this Section, to settle for, collect and receive all Loss Proceeds and any other awards, damages, insurance proceeds, payments or other compensation from the parties or authorities making the 

 

same, to appear in and prosecute any proceedings therefor and to give receipts and acquittance therefor (which power of attorney shall be irrevocable so long as any of the Indebtedness is outstanding, shall be deemed coupled with an interest, and shall survive the voluntary or involuntary dissolution of Borrower).
(f)    If Borrower is not entitled to apply Loss Proceeds toward the restoration of a Property pursuant to Section 5.16(d) and Lender elects not to permit such Loss Proceeds to be so applied, such Loss Proceeds shall be applied on the first Payment Date following such election to the prepayment of the Principal Indebtedness and shall be accompanied by interest through the end of the applicable Interest Accrual Period (calculated as if the amount prepaid were outstanding for the entire Interest Accrual Period).  If the Note has been bifurcated into multiple Notes or Note Components pursuant to Section 1.1(c), all prepayments of the Loan made by Borrower in accordance with this Section shall be applied to the Notes or Note Components on a pro rata basis in accordance with their then outstanding principal balances, so long as no Event of Default is continuing.
(g)    Notwithstanding the foregoing provisions of this Section, if the Loan is included in a REMIC and immediately following a release of any portion of the applicable Property from the Lien of the Loan Documents in connection with a Casualty or Condemnation the Loan would fail to satisfy a Lender 80% Determination (taking into account the planned restoration of the Property), then Borrower shall prepay the Principal Indebtedness in accordance with Section 5.16(f) in an amount equal to either (i) so much of the Loss Proceeds as are necessary to cause the Lender 80% Determination to be satisfied, or if the aggregate Loss Proceeds are insufficient for such purpose, then 100% of such Loss Proceeds, or (ii) a lesser amount, provided that Borrower delivers to Lender an opinion of counsel, in form and substance reasonably satisfactory to Lender and delivered by counsel reasonably satisfactory to Lender, opining that such release of Property from the Lien does not cause any portion of the Loan to cease to be a “qualified mortgage” within the meaning of section 860G(a)(3) of the Code.
Section 5.17.    Annual Budget.  At least 30 days prior to the commencement of each Fiscal Year during the term of the Loan, and within 30 days after the commencement of any Trigger Period or Event of Default, Borrower shall deliver to Lender an Annual Budget for the Properties for the ensuing Fiscal Year and, promptly after preparation thereof, any subsequent revisions to the Annual Budget, which delivery shall be for informational purposes only so long as no Trigger Period or Event of Default is continuing.  During the continuance of any Trigger Period or Event of Default, such Annual Budget and any revisions thereto shall be subject to Lender’s approval, not to be unreasonably withheld (the Annual Budget, as so approved, the “Approved Annual Budget”).   Borrower shall not amend any Approved Annual Budget more than once in any 60-day period.  For so long as Lender shall withhold its consent to any Annual Budget or any revisions thereto, the Annual Budget in effect prior to any such request for approval shall remain in effect.  
Section 5.18.    Nonbinding Consultation.  Lender shall have the right to consult with and advise Borrower regarding significant business activities and business and financial 

 

developments of Borrower and Operating Lessee, provided that any such advice or consultation or the result thereof shall be completely nonbinding on Borrower.
Section 5.19.    Compliance with Encumbrances and Material Agreements.  Borrower, with respect to Borrower, and Operating Lessee, with respect to Operating Lessee, covenant and agree as follows: 
(i)    Borrower and Operating Lessee shall comply with all material terms, conditions and covenants of each Material Agreement and each material Permitted Encumbrance, including any reciprocal easement agreement, ground lease, declaration of covenants, conditions and restrictions, and any condominium arrangements.  
(ii)    Borrower and Operating Lessee shall promptly deliver to Lender a true and complete copy of each and every notice of default received by Borrower or Operating Lessee with respect to any obligation of such Borrower or Operating Lessee under the provisions of any Material Agreement and/or material Permitted Encumbrance.
(iii)    Borrower and Operating Lessee shall deliver to Lender copies of any written notices of default or event of default relating to any Material Agreement and/or material Permitted Encumbrance served by Borrower.
(iv)    Without the prior written consent of Lender, not to be unreasonably withheld, conditioned or delayed, Borrower and Operating Lessee shall not grant or withhold any material consent, approval or waiver under any Material Agreement or material Permitted Encumbrance unless no Event of Default is continuing and the same would not be reasonably likely to have a Material Adverse Effect.  
(v)    At Lender’s request, Borrower shall deliver to each other party to a material Permitted Encumbrance and any Material Agreement notice of the identity of Lender and each assignee of Lender of which Borrower is aware if such notice is required in order to protect Lender’s interest thereunder.
(vi)    Borrower shall, and shall cause Operating Lessee to, enforce, short of termination thereof, the performance and observance of each and every material term, covenant and provision of each Material Agreement and material Permitted Encumbrance to be performed or observed, if any. 
Section 5.20.    Prohibited Persons.  No Required SPE or any of their direct or indirect equityholders (excluding holders of publicly traded shares) shall (i) knowingly conduct any business, or engage in any transaction or dealing, with any Embargoed Person, including the making or receiving of any contribution of funds, goods, or services, to or for the benefit of a Embargoed Person, or (ii) knowingly engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any Federal Trade Embargo.  Borrower shall cause the representation set forth in Section 4.39 to remain true and correct at all times.

 

Section 5.21.    Operating Lease.  
(a)    Operating Lessee shall comply with the affirmative and negative covenants relating to the Operating Lessee contained in this Agreement, and no Default hereunder shall be excused by virtue of the fact that such Default was caused by Operating Lessee.  Lender acknowledges that Operating Lessee is not liable for the Indebtedness.
(b)    Notwithstanding anything to the contrary contained herein, Borrower shall cause each Operating Lease, to remain in effect in accordance with its terms so long as any portion of the Indebtedness is outstanding; provided, however, that Borrower shall have the right to terminate an Operating Lease if: (i) no Event of Default is then continuing or would result therefrom; (ii) all of such Operating Lessee’s tangible and intangible assets (including, without limitation, all of Operating Lessee’s right, title and interest in, to and under the applicable Approved Management Agreement, the applicable Approved Franchise Agreement and all licenses, permits, contract rights and FF&E) shall have been transferred to the applicable Borrower in a manner reasonably satisfactory to Lender, and, if requested by Lender, reasonably satisfactory legal opinions shall have been delivered with respect thereto; (iii) no Material Adverse Effect would result therefrom; and (iv) without duplication, Borrower shall have paid all reasonable out-of-pocket costs and expenses of Lender (including reasonable attorney’s fees) incurred by Lender in connection therewith.
(c)    Notwithstanding anything to the contrary herein or in any other Loan Documents or in the Operating Lease, upon conveyance of a Property by foreclosure or deed in lieu of foreclosure, Lender may, at its sole option and regardless of whether the applicable Operating Lessee is in default or compliance with the terms of the applicable Operating Lease, terminate such Operating Lease without payment of any termination fee, penalty or other amount, such termination to be effective upon such conveyance or such later date as Lender shall determine in its sole discretion.  In addition, upon acceleration of the Loan, Lender may, at its sole option and regardless of whether Operating Lessee is in default or compliance with the terms of the Operating Lease, deliver a termination notice to Borrower and Operating Lessee terminating the Operating Lease without payment of any termination fee, penalty or other amount, such termination to be effective upon the conveyance of the Property by foreclosure or deed in lieu of foreclosure.
(d)    Operating Lessee hereby consents to the Loan and acknowledges that it derives substantial benefit from the making thereof.  Borrower acknowledges that, pursuant to the Operating Lease, all amounts remitted to Lender or deposited into the Cash Management Account by the Approved Property Manager or Operating Lessee shall be credited against any rent payable by the Operating Lessee to Borrower under the Operating Lease.
 
Article VI

NEGATIVE COVENANTS  

 

Each individual Borrower covenants and agrees as follows with respect to itself, and each other Borrower, and each Operating Lessee covenants and agrees with respect to itself and the other Operating Lessee:
Section 6.1.    Liens on the Collateral.  No Required SPE shall permit or suffer the existence of any Lien on any of its assets, other than Permitted Encumbrances.  
Section 6.2.    Ownership.  Neither Borrower nor Operating Lessee shall own any assets other than the Property and related personal property and fixtures located therein or used in connection therewith. 
Section 6.3.    Transfer; Prohibited Change of Control.  Neither Borrower nor Operating Lessee shall Transfer any Collateral other than in compliance with Article II and other than the replacement or other disposition of obsolete or non-useful personal property and fixtures in the ordinary course of business, and neither Borrower nor Operating Lessee shall hereafter file a declaration of condominium with respect to any of the Properties.  No Prohibited Change of Control or Prohibited Pledge shall occur.
Section 6.4.    Debt.  Neither Borrower nor Operating Lessee shall have any Debt, other than Permitted Debt.
Section 6.5.    Dissolution; Merger or Consolidation.  No Required SPE shall dissolve, terminate, liquidate, merge with or consolidate into another Person without first causing the Loan to be assumed by a Successor Borrower or Successor Operating Lessee, as the case may be, pursuant to Section 2.2.
Section 6.6.    Change in Business.  Neither Borrower nor Operating Lessee shall make any material change in the scope or nature of its business objectives, purposes or operations or undertake or participate in activities other than the continuance of its present business.
Section 6.7.    Debt Cancellation.  Neither Borrower nor Operating Lessee shall cancel or otherwise forgive or release any material claim or Debt owed to it by any Person, except for adequate consideration or in the ordinary course of its business.
Section 6.8.    Affiliate Transactions.  Neither Borrower nor Operating Lessee shall enter into, or be a party to, any transaction with any affiliate of Borrower and/or Operating Lessee, except on terms that are intrinsically fair, commercially reasonable and substantially similar  to those that Borrower or Operating Lessee would have obtained in a comparable arm’s length transaction with an unrelated third party.
Section 6.9.    Misapplication of Funds.  Neither Borrower nor Operating Lessee shall (a) distribute any Revenue or Loss Proceeds in violation of the provisions of this Agreement (and shall promptly cause the reversal of any such distributions made in error of which Borrower becomes aware), (b) fail to remit amounts to the Cash Management Account as 

 

required by Section 3.1, (c) make any distributions to equityholders during the continuance of a Trigger Period or Event of Default, or (d) misappropriate any security deposit or portion thereof.
Section 6.10.    Jurisdiction of Formation; Name.  Neither Borrower nor Operating Lessee shall change its jurisdiction of formation, its jurisdiction of fiscal residence or name without receiving Lender’s prior written consent and promptly providing Lender such information and replacement Uniform Commercial Code financing statements and legal opinions as Lender may reasonably request in connection therewith.
Section 6.11.    Modifications and Waivers.  Unless otherwise consented to in writing by Lender:
(i)    Borrower and/or Operating Lessee shall not amend, modify, terminate, renew, or surrender any rights or remedies under any Lease, or enter into any Lease, except in compliance with Section 5.7, provided that Lender’s consent to the foregoing shall not be unreasonably withheld, delayed or conditioned; 
(ii)    No Required SPE shall terminate, amend or modify its organizational documents (including any operating agreement, limited partnership agreement, by-laws, certificate of formation, certificate of limited partnership or certificate of incorporation), provided that Lender’s consent to any such amendment or modification shall not be unreasonably withheld, delayed or conditioned, to the extent the same does not affect such Required SPE’s status and a Single-Purpose Entity or otherwise have a Material Adverse Effect;
(iii)    Borrower and/or Operating Lessee shall not terminate, amend or modify the Approved Management Agreement in any manner which would have a Material Adverse Effect; 
(iv)    Borrower and/or Operating Lessee shall not amend or modify the Capital Plan in any material respect; provided, that if no Event of Default is the continuing, such consent shall not to be unreasonably withheld; 
(v)    Borrower and/or Operating Lessee shall not terminate, amend or modify the Approved Franchise Agreement (except that Borrower shall be permitted to terminate the Holiday Inn Franchise Agreement provided that the Hyatt Herald Square shall be subject to the Hyatt Herald Square Franchise Agreement upon such termination) or any property improvement plan or similar capital improvement plan required by the Approved Franchisor or pursuant to the Approved Franchise Agreement; and
(vi)    Borrower and Operating Lessee shall not (x) enter into any Material Agreement, or amend, modify, surrender or waive any material rights or remedies under any Material Agreement, except, in each case, on arms-length commercially reasonable terms and in a manner that would not have a Material Adverse Effect, (y) terminate any Material Agreement without the consent of Lender (such consent not to be unreasonably withheld, delayed or conditioned), or (y) default in its obligations under any Material 

 

Agreement in any manner that would result in the termination of such Material Agreement, the creation of any Lien (other than a Permitted Lien) or otherwise have a Material Adverse Effect. 
Section 6.12.    ERISA.  
(a)    Neither Borrower nor Operating Lessee shall maintain or contribute to, or agree to maintain or contribute to, or permit any ERISA Affiliate to maintain or contribute to or agree to maintain or contribute to, any employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV or Section 302 of ERISA or Section 412 of the Code.
(b)    Neither Borrower nor Operating Lessee shall engage in a non-exempt prohibited transaction under Section 406 of ERISA, Section 4975 of the Code, or substantially similar provisions under federal, state or local laws, rules or regulations or in any transaction that would cause any obligation or action taken or to be taken hereunder (or the exercise by Lender of any of its rights under the Notes, this Agreement, the Mortgage or any other Loan Document) to be a non-exempt prohibited transaction under such provisions.
Section 6.13.    Alterations and Expansions.  During the continuance of any Trigger Period or Event of Default, Borrower and Operating Lessee shall not perform or contract to perform any capital improvements requiring Capital Expenditures that are not consistent with the Approved Annual Budget or the Capital Plan.  Borrower and Operating Lessee shall not perform, undertake, contract to perform or consent to any Material Alteration without the prior written consent of Lender, which consent (in the absence of an Event of Default) shall not be unreasonably withheld, delayed or conditioned, but may be conditioned on the delivery of additional collateral in the form of cash or cash equivalents acceptable to Lender in respect of the amount by which any such Material Alteration exceeds the Threshold Amount.  If Lender’s consent is requested hereunder with respect to a Material Alteration, Lender may retain a construction consultant to review such request and, if such request is granted, Lender may retain a construction consultant to inspect the work from time to time.  Borrower shall, on demand by Lender, reimburse Lender for the reasonable fees and disbursements of such consultant. 
Section 6.14.    Advances and Investments.  Neither Borrower nor Operating Lessee shall lend money or make advances to any Person, or purchase or acquire any stock, obligations or securities of, or any other interest in, or make any capital contribution to, any Person. 
Section 6.15.    Single-Purpose Entity.  No Required SPE shall cease to be a Single-Purpose Entity.  No Required SPE shall remove or replace any Independent Director without Cause and without providing at least two Business Days’ advance written notice thereof to Lender and the Rating Agencies (except in the case of the death, legal incapacity, or voluntary non-collusive resignation of an Independent Director, in which case no prior notice to Lender or the Rating Agencies shall be required in connection with the replacement of such Independent Director with a new Independent Director that is provided by any of the companies listed in the definition of “Independent Director”).

 

Section 6.16.    Zoning and Uses.  Neither Borrower nor Operating Lessee shall do any of the following without the prior written consent of Lender:
(i)    initiate or support any limiting change in the permitted uses of the Property (or to the extent applicable, zoning reclassification of any of the Properties) or any portion thereof, seek any variance under existing land use restrictions, laws, rules or regulations (or, to the extent applicable, zoning ordinances) applicable to a Property, or use or permit the use of a Property in a manner that would result in the use of a Property becoming a nonconforming use under applicable land-use restrictions or zoning ordinances or that would violate the terms of any Lease, Material Agreement or Legal Requirement (and if under applicable zoning ordinances the use of all or any portion of a Property is a nonconforming use, Borrower shall not cause or permit such nonconforming use to be discontinued or abandoned);
(ii)    impose or consent to the imposition of any restrictive covenants, easements or encumbrances upon any of the Properties in any manner that is reasonably likely to have a Material Adverse Effect;
(iii)    execute or file any subdivision plat affecting any of the Properties, or institute, or permit the institution of, proceedings to alter any tax lot comprising any of the Properties; or
(iv)    permit or consent to any of the Properties being used by the public or any Person in such manner as might make possible a claim of adverse usage or possession or of any implied dedication or easement.
Section 6.17.    Waste.  Borrower and Operating Lessee shall not commit or permit any Waste on any of the Properties, nor take any actions that might invalidate any insurance carried on any of the Properties (and Borrower shall promptly correct any such actions of which Borrower becomes aware).
 
Article VII
DEFAULTS  
Section 7.1.    Event of Default.  The occurrence of any one or more of the following events shall be, and shall constitute the commencement of, an “Event of Default” hereunder (any Event of Default that has occurred shall continue unless and until waived by Lender in writing in its sole discretion):
(a)    Payment. 
(i)    Borrower shall default in the payment when due of any principal or interest owing hereunder or under the Notes (including any mandatory prepayment required hereunder); or

 

(ii)    Borrower shall default, and such default shall continue for at least five Business Days after notice to Borrower that such amounts are owing, in the payment when due of fees, expenses or other amounts owing hereunder, under the Notes or under any of the other Loan Documents (other than principal and interest owing hereunder or under the Note).
(b)    Representations.  Any representation made by Borrower, Sponsor or Operating Lessee in any of the Loan Documents, or in any report, certificate, financial statement or other instrument, agreement or document furnished to Lender shall have been false or misleading in any material respect (or, with respect to any representation that itself contains a materiality qualifier, in any respect) as of the date such representation was made. 
(c)    Other Loan Documents.  (i) Any Loan Document shall fail to convey the material Liens, rights, powers and privileges purported to be created thereby (and Borrower fails to correct such defect promptly following written request from Lender); or (ii) a default by Borrower, Operating Lessee or Sponsor shall occur under any of the other Loan Documents beyond the expiration of any applicable cure period; or (iii) a default by Borrower, Operating Lessee or any of their respective affiliates shall occur under any Material Agreements, or a default by Borrower or Operating Lessee shall occur under the Approved Management Agreement or the Approved Franchise Agreement, in each case with respect to this clause (iii) beyond the expiration of any applicable cure period and in any manner that would result in the termination of such Material Agreement or Approved Management Agreement, the creation of any Lien (other than Permitted Liens) or otherwise have a Material Adverse Effect.
(d)    Bankruptcy, etc.  
(i)    Any Required SPE shall commence a voluntary case concerning itself under Title 11 of the United States Code (as amended, modified, succeeded or replaced, from time to time, the “Bankruptcy Code”); 
(ii)    any Required SPE shall commence any other proceeding under any reorganization, arrangement, adjustment of debt, relief of creditors, dissolution, insolvency or similar law of any jurisdiction whether now or hereafter in effect relating to such Required SPE, or shall dissolve or otherwise cease to exist; 
(iii)    there is commenced against any Required SPE an involuntary case under the Bankruptcy Code, or any such other proceeding, which remains undismissed for a period of 60 days after commencement;
(iv)    any Required SPE is adjudicated insolvent or bankrupt; 
(v)    any Required SPE suffers appointment of any custodian or the like for it or for any substantial portion of its property and such appointment continues unchanged or unstayed for a period of 60 days after commencement of such appointment; 

 

(vi)    any Required SPE makes a general assignment for the benefit of creditors; or 
(vii)    any Required SPE takes any action for the purpose of effecting any of the foregoing.  
Each of the foregoing is referred to in this Agreement as a “Bankruptcy Event”.
(e)    Prohibited Change of Control.  
(i)    A Prohibited Change of Control shall occur; or
(ii)    Borrower shall fail to deliver any Nonconsolidation Opinion required to be delivered pursuant to Section 2.3.
(f)    Equity Pledge; Preferred Equity.  Any direct or indirect equity interest in or right to distributions from Borrower or Operating Lessee shall be subject to a Lien in favor of any Person, or Borrower, Operating Lessee or any holder of a direct or indirect interest in Borrower shall issue preferred equity (or debt granting the holder thereof rights substantially similar to those generally associated with preferred equity); except that the following shall be permitted:
(i)    any pledge of direct or indirect equity interests in and rights to distributions from a Qualified Equityholder, including a pledge of direct or indirect equity interests in Chesapeake Lodging Trust; and 
(ii)    the issuance of direct or indirect preferred equity interests (or debt granting the holder thereof rights substantially similar to those generally associated with preferred equity) in a Qualified Equityholder, including the issuance of direct or indirect preferred equity interests in Chesapeake Lodging Trust.
Any act, action or state of affairs that would result in an Event of Default pursuant to this subsection shall be referred to in this Agreement as a “Prohibited Pledge”.
(g)    Insurance.  Borrower shall fail to maintain in full force and effect all Policies required hereunder.
(h)    ERISA; Negative Covenants.  A default shall occur in the due performance or observance by Borrower or Operating Lessee of any term, covenant or agreement contained in Section 5.8 or in Article VI. 
(i)    Legal Requirements.  Borrower shall fail to cure properly any violations of Legal Requirements affecting all or any portion of any Property within 30 days after Borrower first receives written notice of any such violations; provided, however, if any such violation is reasonably susceptible of cure, but not within such 30 day period, then Borrower shall be permitted such additional time as permitted by Legal Requirements (but in no event in excess of 

 

90 days) to cure such violation provided that Borrower commences a cure within such initial 30 day period and thereafter diligently and continuously pursues such cure.
(j)    Operating Lease.   The Operating Lease shall no longer be in effect for any reason whatsoever other than the termination thereof pursuant to Section 5.21(ii) or 5.21(iii), including, without limitation, expiration of the Operating Lease by its terms absent renewal or extension of the Operating Lease or the prior written consent of Lender. 
(k)    Express Events of Default.  Any event shall occur that is explicitly identified as an “Event of Default” under any provision contained herein or in any of the other Loan Documents.
(l)    Other Covenants.  A default shall occur in the due performance or observance by Borrower of any term, covenant or agreement (other than those referred to in any other subsection of this Section) contained in this Agreement or in any of the other Loan Documents, except that in the case of a default that can be cured by the payment of money, such default shall not constitute an Event of Default unless and until it shall remain uncured for 10 days after Borrower receives written notice thereof; and in the case of a default that cannot be cured by the payment of money but is susceptible of being cured within 30 days, such default shall not constitute an Event of Default unless and until it remains uncured for 30 days after Borrower receives written notice thereof, provided that within 5 days of its receipt of such written notice, Borrower delivers written notice to Lender of its intention and ability to effect such cure within such 30 day period; and if such non-monetary default is not cured within such 30 day period despite Borrower’s diligent efforts but is susceptible of being cured within 90 days of Borrower’s receipt of Lender’s original notice, then Borrower shall have such additional time as is reasonably necessary to effect such cure, but in no event in excess of 90 days from Borrower’s receipt of Lender’s original notice, provided that prior to the expiration of the initial 30 day period, Borrower delivers written notice to Lender of its intention and ability to effect such cure prior to the expiration of such 90 day period.  
Section 7.2.    Remedies.  
(a)    During the continuance of an Event of Default, Lender may by written notice to Borrower, in addition to any other rights or remedies available pursuant to this Agreement, the Notes, the Mortgage and the other Loan Documents, at law or in equity, declare by written notice to Borrower all or any portion of the Indebtedness to be immediately due and payable, whereupon all or such portion of the Indebtedness shall so become due and payable, and Lender may enforce or avail itself of any or all rights or remedies provided in the Loan Documents against Borrower and the Collateral (including all rights or remedies available at law or in equity); provided, however, that, notwithstanding the foregoing, if an Event of Default specified in Section 7.1(d) shall occur, then the Indebtedness shall immediately become due and payable without the giving of any notice or other action by Lender.  Any actions taken by Lender shall be cumulative and concurrent and may be pursued independently, singly, successively, together or otherwise, at such time and in such order as Lender may determine in its sole discretion, to the fullest extent permitted by law, without impairing or otherwise affecting the 

 

other rights and remedies of Lender permitted by law, equity or contract or as set forth in this Agreement or in the other Loan Documents.
(b)    If Lender forecloses on any Collateral, Lender shall apply all net proceeds of such foreclosure to repay the Indebtedness, the Indebtedness shall be reduced to the extent of such net proceeds and the remaining portion of the Indebtedness shall remain outstanding and secured by the remaining Collateral.  At the election of Lender, the Notes shall be deemed to have been accelerated only to the extent of the net proceeds actually received by Lender with respect to the Properties and applied in reduction of the Indebtedness.
(c)    During the continuance of any Event of Default (including an Event of Default resulting from a failure to satisfy the insurance requirements specified herein), Lender may, but without any obligation to do so and without notice to or demand on Borrower and without releasing Borrower from any obligation hereunder, take any action to cure such Event of Default.  Lender may enter upon any or all of the Properties upon reasonable notice to Borrower for such purposes or appear in, defend, or bring any action or proceeding to protect its interest in the Collateral or to foreclose the Mortgage or collect the Indebtedness.  The costs and expenses incurred by Lender in exercising rights under this Section (including reasonable attorneys’ fees), with interest at the Default Rate for the period after notice from Lender that such costs or expenses were incurred to the date of payment to Lender, shall constitute a portion of the Indebtedness, shall be secured by the Mortgage and other Loan Documents and shall be due and payable to Lender upon demand therefor.
(d)    Interest shall accrue on any judgment obtained by Lender in connection with its enforcement of the Loan at a rate of interest equal to the Default Rate.
(e)    Notwithstanding the availability of legal remedies, Lender will be entitled to obtain specific performance, mandatory or prohibitory injunctive relief, or other equitable relief requiring Borrower to cure or refrain from repeating any Default.
(f)    Upon the occurrence and during the continuance of an Event of Default, Lender shall have the right from time to time to sever the Note and the other Loan Documents into one or more separate notes, mortgages and other security documents (the “Severed Loan Documents”) in such denominations as Lender shall determine in its sole discretion for purposes of evidencing and enforcing its rights and remedies provided hereunder.  Borrower shall execute and deliver to Lender from time to time, promptly after the request of Lender, a severance agreement and such other documents as Lender shall request in order to effect the severance described in the preceding sentence, all in form and substance reasonably satisfactory to Lender.  Borrower hereby absolutely and irrevocably appoints Lender as its true and lawful attorney, coupled with an interest, in its name and stead to execute the Severed Loan Documents (Borrower ratifying all that its said attorney shall do by virtue thereof); provided, however, that Lender shall not make or execute any such Severed Loan Documents under such power until the expiration of three days after written notice has been given to Borrower by Lender of Lender’s intent to exercise its rights under the aforesaid power.  Borrower shall be obligated to pay any costs or expenses incurred in connection with the preparation, execution, recording or filing of the Severed Loan Documents.  The Severed Loan Documents shall not contain any 

 

representations, warranties or covenants not contained in the Loan Documents, and any such representations and warranties contained in the Severed Loan Documents will be given by Borrower only as of the Closing Date.
Section 7.3.    Application of Payments after an Event of Default.  Notwithstanding anything to the contrary contained herein, during the continuance of an Event of Default, all amounts received by Lender in respect of the Loan shall be applied at Lender’s sole discretion either toward the components of the Indebtedness (e.g., Lender’s expenses in enforcing the Loan, interest, principal and other amounts payable hereunder) and the Notes or Note Components in such sequence as Lender shall elect in its sole discretion, or toward the payment of Property expenses.
Article VIII
CONDITIONS PRECEDENT  
Section 8.1.    Conditions Precedent to Closing.  This Agreement shall become effective on the date that all of the following conditions shall have been satisfied (or waived in accordance with Section 9.3), provided that upon disbursement of the Loan to Borrower all such conditions shall be deemed to have been satisfied or waived:   
(a)    Loan Documents.  Lender shall have received a duly executed copy of each Loan Document.  Each Loan Document that is to be recorded in the public records shall be in form suitable for recording.
(b)    Collateral Accounts.  Each of the Collateral Accounts shall have been established and funded to the extent required under Article III.
(c)    Opinions of Counsel.  Lender shall have received, in each case in form and substance satisfactory to Lender, (i) a New York legal opinion, (ii) a legal opinion with respect to the laws of the state in which the Properties are located, (iii) a bankruptcy nonconsolidation opinion with respect to each Person owning at least a 49% direct or indirect equity interest in any Required SPE, and any affiliated property manager, and (iv) a Delaware legal opinion regarding matters related to Single Member LLC’s. 
(d)    Organizational Documents.  Lender shall have received all documents reasonably requested by Lender relating to the existence of Borrower and Operating Lessee, the validity of the Loan Documents and other matters relating thereto, in form and substance satisfactory to Lender, including:
(i)    Authorizing Resolutions.  To the extent the required authorizations are not contained directly in the organizational documents of any Required SPE and Sponsor, certified copies of the resolutions authorizing the execution and delivery of the Loan Documents by Sponsor and Borrower.
(ii)    Organizational Documents.  Certified copies of the organizational documents of Sponsor and each Required SPE (including any certificate of formation, 

 

certificate of limited partnership, certificate of incorporation, operating agreement, limited partnership agreement or by-laws), in each case together with all amendments thereto.
(iii)    Certificates of Good Standing or Existence.  Certificates of good standing or existence for Sponsor and each Required SPE issued as of a recent date by its state of organization and, for Borrower and Operating Lessee, by the state in which the Properties is located.
(e)    Lease; Material Agreements.  Lender shall have received true, correct and complete copies of all Leases and all Material Agreements.
(f)    Lien Search Reports.  Lender shall have received satisfactory reports of Uniform Commercial Code, tax lien, bankruptcy and judgment searches conducted by a search firm acceptable to Lender with respect to the Properties, Sponsor, each Required SPE and Borrower’s immediate predecessor, if any, such searches to be conducted in such locations as Lender shall have requested.
(g)    No Default or Event of Default.  No Default or Event of Default shall have occurred and be continuing on such date either before or after the execution and delivery of this Agreement.
(h)    No Injunction.  No Legal Requirement shall exist, and no litigation shall be pending or threatened, which in the good faith judgment of Lender would enjoin, prohibit or restrain, or impose or result in the imposition of any material adverse condition upon, the making or repayment of the Loan or the consummation of the Transaction.
(i)    Representations.  The representations in this Agreement and in the other Loan Documents shall be true and correct in all respects on and as of the Closing Date with the same effect as if made on such date.
(j)    No Material Adverse Effect.  No event or series of events shall have occurred that Lender reasonably believes has had or is reasonably expected to result in a Material Adverse Effect.
(k)    Transaction Costs.  Borrower shall have paid all transaction costs (or provided for the direct payment of such transaction costs by Lender from the proceeds of the Loan).
(l)    Insurance.  Lender shall have received certificates of insurance on ACORD Form 25 for liability insurance and ACORD Form 28 for casualty insurance demonstrating insurance coverage in respect of the Properties of types, in amounts, with insurers and otherwise in compliance with the terms, provisions and conditions set forth in this Agreement.  Such certificates shall indicate that Lender and its successors and assigns are named as additional insured on each liability policy, and that each casualty policy and rental interruption 

 

policy contains a loss payee and mortgagee endorsement in favor of Lender, its successors and assigns.
(m)    Title.  Lender shall have received a marked, signed commitment to issue, or a signed pro-forma version of, a Title Insurance Policy in respect of each Property, listing only such exceptions as are reasonably satisfactory to Lender.   If any Title Policy is to be issued by, or if disbursement of the proceeds of the Loan are to be made through, an agent of the actual insurer under such Title Policy (as opposed to the insurer itself), the actual insurer shall have issued to Lender for Lender’s benefit a so-called “Insured Closing Letter.” 
(n)    Zoning.  Lender shall have received evidence reasonably satisfactory to Lender that each Property is in compliance with all applicable zoning requirements (including a zoning report, a zoning endorsement if obtainable and a letter from the applicable municipality if obtainable).
(o)    Permits; Certificate of Occupancy.  Lender shall have received a copy of all Permits necessary for the use and operation of each Property and the certificate(s) of occupancy, if required, for each Property, all of which shall be in form and substance reasonably satisfactory to Lender.
(p)    Engineering Report.  Lender shall have received a current Engineering Report with respect to each Property, which report shall be in form and substance reasonably satisfactory to Lender.
(q)    Environmental Report.  Lender shall have received an Environmental Report (not more than six months old) with respect to each Property that discloses no material environmental contingencies with respect to the Properties.
(r)    Survey.  Lender shall have received a Survey with respect to each Property in form and substance reasonably satisfactory to Lender.
(s)    Appraisal.  Lender shall have obtained an Appraisal of each Property satisfactory to Lender.
(t)    Consents, Licenses, Approvals, etc.  Lender shall have received copies of all consents, licenses and approvals, if any, required in connection with the execution, delivery and performance by Borrower, Sponsor and Operating Lessee, and the validity and enforceability, of the Loan Documents, and such consents, licenses and approvals shall be in full force and effect.
(u)    Financial Information.  Lender shall have received financial information relating to the Sponsor, Borrower and the Properties that is satisfactory to Lender.
(v)    Annual Budget.  Lender shall have received the Annual Budget for the current calendar year (and, if the Closing Date occurs in December, the Annual Budget for the next calendar year).

 

(w)    Know Your Customer Rules.  At least 10 days prior to the Closing Date, the Lender shall have received all documentation and other information required by bank regulatory authorities under applicable “know-your-customer” and anti-money laundering rules and regulations, including the PATRIOT Act.
(x)    Additional Matters.  Lender shall have received such other certificates, opinions, documents and instruments relating to the Loan as may have been reasonably requested by Lender.  All corporate and other proceedings, all other documents (including all documents referred to in this Agreement and not appearing as exhibits to this Agreement) and all legal matters in connection with the Loan shall be reasonably satisfactory in form and substance to Lender.
 
Article IX

MISCELLANEOUS  
Section 9.1.    Successors.  Except as otherwise provided in this Agreement, whenever in this Agreement any of the parties to this Agreement is referred to, such reference shall be deemed to include the successors and permitted assigns of such party.  All covenants, promises and agreements in this Agreement contained, by or on behalf of Borrower, shall inure to the benefit of Lender and its successors and assigns.
Section 9.2.    GOVERNING LAW.  
(A)     THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CHOICE OF LAW RULES TO THE EXTENT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
 (B)    ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST LENDER, BORROWER OR OPERATING LESSEE ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS (OTHER THAN ANY ACTION IN RESPECT OF THE CREATION, PERFECTION OR ENFORCEMENT OF A LIEN OR SECURITY INTEREST CREATED PURSUANT TO ANY LOAN DOCUMENTS NOT GOVERNED BY THE LAWS OF THE STATE OF NEW YORK) MAY BE INSTITUTED IN ANY FEDERAL OR STATE COURT IN NEW YORK, NEW YORK.  BORROWER, OPERATING LESSEE AND LENDER HEREBY (i) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM, (ii) IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING, AND (iii) IRREVOCABLY CONSENT  TO SERVICE OF PROCESS BY MAIL, PERSONAL SERVICE OR IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW, AT THE ADDRESS SPECIFIED IN SECTION 9.4 (AND AGREES THAT SUCH SERVICE AT SUCH ADDRESS 

 

IS SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER ITSELF IN ANY SUCH SUIT, ACTION OR PROCEEDING IN ANY SUCH COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT).
Section 9.3.    Modification, Waiver in Writing.  Neither this Agreement nor any other Loan Document may be amended, changed, waived, discharged or terminated, nor shall any consent or approval of Lender be granted hereunder, unless such amendment, change, waiver, discharge, termination, consent or approval is in writing signed by Lender and all other parties to the applicable Loan Document.
Section 9.4.    Notices.  All notices, consents, approvals and requests required or permitted hereunder or under any other Loan Document shall be given in writing by expedited prepaid delivery service, either commercial or United States Postal Service, with proof of delivery or attempted delivery, addressed as follows (except that any party hereto may change its address and other contact information for purposes hereof at any time by sending a written notice to the other parties to this Agreement in the manner provided for in this Section).  A notice shall be deemed to have been given when delivered or upon refusal to accept delivery.  
If to Lender:
Goldman Sachs Mortgage Company
6011 Connection Drive, Suite 550 
Irving, Texas 75039 
Attention: General Counsel
with copies to:
Goldman Sachs Mortgage Company 
    200 West Street 
    New York, New York 10282 
    Attention:  J. Theodore Borter and Rene Theriault
 
and
 
    Cleary Gottlieb Steen & Hamilton LLP 
    One Liberty Plaza 
    New York, New York 10006 
    Attention: John V. Harrison, Esq. 
 
    If to Borrower:
CHSP 31st  Street LLC
c/o Chesapeake Lodging Trust
1997 Annapolis Exchange Parkway, Suite 410
Annapolis, Maryland 21401
Attention: Graham Wootten

 

 
with a copy to:
Polsinelli PC 
        1515 Wynkoop Street, Suite 600 
        Denver, CO 80202
Attention:  Patricia L. Gruber, Esq.

Borrowers hereby appoint the individual Borrower named as notice party above (the “Representative Borrower”) to serve as agent on behalf of all Borrowers to receive any notices required to be delivered to any or all Borrowers hereunder or under the other Loan Documents and to be the sole party authorized to deliver notices on behalf of the Borrowers hereunder and under each of the other Loan Documents.  Any notice delivered to the Representative Borrower shall be deemed to have been delivered to all Borrowers, and any notice received from the Representative Borrower shall be deemed to have been received from all Borrowers.  Borrowers shall be entitled from time to time to appoint a replacement Representative Borrower by written notice delivered to Lender and signed by both the new Representative Borrower and the Representative Borrower being so replaced.

Section 9.5.    TRIAL BY JURY.  LENDER, OPERATING LESSEE AND BORROWER, TO THE FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THE LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH.  THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY LENDER, BORROWER AND OPERATING LESSEE AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE.  LENDER, OPERATING LESSEE AND BORROWER ARE EACH HEREBY INDIVIDUALLY AUTHORIZED TO FILE A COPY OF THIS PARAGRAPH IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER.
Section 9.6.    Headings.  The Article and Section headings in this Agreement are included in this Agreement for convenience of reference only and shall not constitute a part of this Agreement for any other purpose.
Section 9.7.    Assignment and Participation.  
(a)    Except as expressly set forth in Article II, Borrower may not sell, assign or otherwise transfer any rights, obligations or other interest of Borrower in or under the Loan Documents.  
(b)    Lender and each assignee of all or a portion of the Loan shall have the right from time to time in its discretion and without the consent of Borrower to sell one or more of the Notes or Note Components or any interest therein (an “Assignment”) and/or sell a 

 

participation interest in one or more of the Notes or Note Components  (a “Participation”).  Borrower shall reasonably cooperate with Lender, at Lender’s request, in order to effectuate any such Assignment or Participation, and Borrower shall promptly provide such information, legal opinions and documents relating to each Required SPE, Sponsor, the Property, the Approved Property Manager and any Tenants as Lender may reasonably request in connection with such Assignment or Participation.  In the case of an Assignment, (i) each assignee shall have, to the extent of such Assignment, the rights, benefits and obligations of the assigning Lender as a “Lender” hereunder and under the other Loan Documents, (ii) the assigning Lender shall, to the extent that rights and obligations hereunder have been assigned by it pursuant to an Assignment, relinquish its rights and be released from its obligations under this Agreement, and (iii) one Lender shall serve as agent for all Lenders and shall be the sole Lender to whom notices, requests and other communications shall be addressed and the sole party authorized to grant or withhold consents hereunder on behalf of the Lenders (subject, in each case, to appointment of a Servicer, pursuant to Section 9.22, to receive such notices, requests and other communications and/or to grant or withhold consents, as the case may be).  Goldman Sachs Mortgage Company or, upon the appointment of a Servicer, such Servicer, shall maintain, or cause to be maintained, as non-fiduciary agent for Borrower, a register on which it shall enter the name or names of the registered owner or owners from time to time of the Notes.  Upon effectiveness of any Assignment of any Note in part, Borrower will promptly provide to the assignor and the assignee separate Notes in the amount of their respective interests (but, if applicable, with a notation thereon that it is given in substitution for and replacement of an original Note or any replacement thereof), and otherwise in the form of such Note, upon return of the Note then being replaced.  Each potential or actual assignee, participant or investor in a Securitization, and each Rating Agency, shall be entitled to receive all information received by Lender under this Agreement.  After the effectiveness of any Assignment, the party conveying the Assignment shall provide notice to Borrower and each Lender of the identity and address of the assignee.  Notwithstanding anything in this Agreement to the contrary, after an Assignment, the assigning Lender (in addition to the assignee) shall continue to have the benefits of any indemnifications contained in this Agreement that such assigning Lender had prior to such assignment with respect to matters occurring prior to the date of such assignment.  Lender shall promptly reimburse Borrower for all costs and expenses incurred by Borrower, Sponsor or Operating Lessee in connection with the foregoing, except that Borrower, Sponsor and Operating Lessee shall pay their own legal expenses with respect thereto.
(c)    If, pursuant to this Section, any interest in this Agreement or any Note is transferred to any transferee, such transferee shall, promptly upon receipt of written request from Borrower, furnish to Borrower Form W-9, Form W-8BEN or Form W-8ECI, as applicable.  
Section 9.8.    Severability.  Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.  All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or 

 

would otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.
Section 9.9.    Preferences; Waiver of Marshalling of Assets.  Lender shall have no obligation to marshal any assets in favor of Borrower or any other party or against or in payment of any or all of the obligations of Borrower pursuant to the Loan Documents.  Lender shall have the continuing and exclusive right to apply or reverse and reapply any and all payments by Borrower to any portion of the obligations of Borrower hereunder and under the Loan Documents.  If any payment to Lender is subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy law, state or federal law, common law or equitable cause, then the obligations hereunder or portion thereof intended to be satisfied by such payment shall be revived and continue in full force and effect, as if such payment had not been made.  Borrower hereby waives any legal right otherwise available to Borrower that would require the sale of any Collateral either separate or apart from other Collateral, or require Lender to exhaust its remedies against any Collateral before proceeding against any other Collateral.  Without limiting the foregoing, to the fullest extent permitted by law, Borrower hereby waives and shall not assert any rights in respect of a marshalling of Collateral, a sale in the inverse order of alienation, any homestead exemption, the administration of estates of decedents, or any other matters whatsoever to defeat, reduce or affect the right of Lender under the Loan Documents to a sale of the Collateral or any portion thereof in any sequence and any combination as determined by Lender in its sole discretion.  
Section 9.10.    Remedies of Borrower.  If a claim is made that Lender or its agents have unreasonably delayed acting or acted unreasonably in any case where by law or under this Agreement or the other Loan Documents any of such Persons has an obligation to act promptly or reasonably, Borrower agrees that no such Person shall be liable for any monetary damages, and Borrower’s sole remedy shall be limited to commencing an action seeking specific performance, injunctive relief and/or declaratory judgment; provided, however, that the forgoing shall not prevent Borrower from obtaining a monetary judgment against Lender if it is determined by a court of competent jurisdiction that Lender acted with gross negligence, bad faith or willful misconduct.  Notwithstanding anything herein to the contrary, Borrower shall not assert, and hereby waives, any claim against Lender and/or its affiliates, directors, employees, attorneys, agents or sub-agents, on any theory of liability, for special, indirect, consequential or punitive damages (whether or not the claim therefor is based on contract, tort or duty imposed by any applicable Legal Requirement) arising out of, as a result of, or in any way related to, the Loan Agreement or any other Loan Document or any agreement or instrument contemplated hereby or thereby or referred to herein or therein, the transactions contemplated hereby or thereby, the Loan or the use of the proceeds thereof or any act or omission or event occurring in connection therewith, and Borrower hereby waives, releases and agrees not to sue upon any such claim for any such damages, whether or not accrued and whether or not known or suspected to exist in its favor.
Section 9.11.    Offsets, Counterclaims and Defenses.  All payments made by Borrower hereunder or under the other Loan Documents shall be made irrespective of, and 

 

without any deduction for, any offsets, counterclaims or defenses.  Borrower waives the right to assert a counterclaim, other than a mandatory or compulsory counterclaim, in any action or proceeding brought against it by Lender arising out of or in any way connected with the Notes, this Agreement, the other Loan Documents or the Indebtedness.  Any assignee of Lender’s interest in the Loan shall take the same free and clear of all offsets, counterclaims or defenses against the assigning Lender.
Section 9.12.    No Joint Venture.  Nothing in this Agreement is intended to create a joint venture, partnership, tenancy-in-common or joint tenancy relationship between Borrower and Lender, nor to grant Lender any interest in any Property other than that of mortgagee or lender.
Section 9.13.    Conflict; Construction of Documents.  In the event of any conflict between the provisions of this Agreement and the provisions of the other Loan Documents, the provisions of this Agreement shall prevail.  The parties acknowledge that they were each represented by competent counsel in connection with the negotiation, drafting and execution of the Loan Documents and that the Loan Documents shall not be subject to the principle of construing their meaning against the party that drafted same.
Section 9.14.    Brokers and Financial Advisors.  Borrower represents that neither it nor Sponsor has dealt with any financial advisors, brokers, underwriters, placement agents, agents or finders in connection with the transactions contemplated by this Agreement.  Borrower agrees to indemnify and hold Lender harmless from and against any and all claims, liabilities, costs and expenses of any kind in any way relating to or arising from a claim by any Person that such Person acted on behalf of Borrower in connection with the transactions contemplated in this Agreement.  The provisions of this Section shall survive the expiration and termination of this Agreement and the repayment of the Indebtedness.
Section 9.15.    Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument.  Any counterpart delivered by facsimile, pdf or other electronic means shall have the same import and effect as original counterparts and shall be valid, enforceable and binding for the purposes of this Agreement.
Section 9.16.    Estoppel Certificates.  
(a)    Borrower shall execute, acknowledge and deliver to Lender, within five Business Days after receipt of Lender’s written request therefor at any time from time to time (but no more than two times during any consecutive 12 month calendar period), a statement in writing setting forth (A) the Principal Indebtedness, (B) the date on which installments of interest and/or principal were last paid, (C) any offsets or defenses to the payment of the Indebtedness, (D) that the Notes, this Agreement, the Mortgages and the other Loan Documents are valid, legal and binding obligations and have not been modified or if modified, giving particulars of such modification, (E) that neither Borrower nor, to Borrower’s knowledge, Lender, is in default under the Loan Documents (or specifying any such default), (F)  that all Leases are in full force and effect and have not been modified (except in accordance with the Loan Documents), (G) 

 

whether or not, to Borrower’s knowledge, any of the Tenants under the Leases are in material default under the Leases (setting forth the specific nature of any such material defaults) and (H) such other matters as Lender may reasonably request.  Any prospective purchaser of any interest in a Loan shall be permitted to rely on such certificate.
(b)    Upon Lender’s written request, Borrower shall use commercially reasonable efforts to obtain from each Tenant under a Major Lease which by its terms required the Tenant to deliver an estoppel certificate, and thereafter promptly deliver to Lender duly executed estoppel certificates from any one or more such Tenants specified by Lender, attesting to such facts regarding the Major Leases as Lender may reasonably require, including attestations that each Lease covered thereby is in full force and effect with no material defaults thereunder on the part of any party, that rent has not been paid more than one month in advance, except as security, and that the Tenant claims no defense or offset against the full and timely performance of its obligations under the Lease.  Borrower shall not be required to deliver such certificates more frequently than one time in any 12-month period, other than the 12-month period during which a Securitization occurs or is attempted.
Section 9.17.    General Indemnity; Payment of Expenses.  
(a)    Borrower, at its sole cost and expense, shall protect, indemnify, reimburse, defend and hold harmless Lender and its officers, partners, members, directors, trustees, advisors, employees, agents, sub-agents, affiliates, successors, participants and assigns of any and all of the foregoing (collectively, the “Indemnified Parties”) for, from and against any and all Damages of any kind or nature whatsoever that may be imposed on, incurred by, or asserted against any of the Indemnified Parties, in any way relating to or arising out of Lender’s interest in the Loan; provided, however, that no Indemnified Party shall have the right to be indemnified hereunder to the extent that such Damages have been found by a final, non-appealable judgment of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such Indemnified Party or arise from acts or events that occur at the Property after foreclosure or other taking of title to the Property by an Indemnified Party or any successor to or assignee of an Indemnified Party.  
(b)    If for any reason (including violation of law or public policy) the undertakings to defend, indemnify, pay and hold harmless set forth in this Section are unenforceable in whole or in part or are otherwise unavailable to an Indemnified Party or insufficient to hold it harmless, then Borrower shall contribute to the amount paid or payable by the Indemnified Party as a result of any Damages the maximum amount Borrower is permitted to pay under Legal Requirements.  The obligations of Borrower under this Section will be in addition to any liability that Borrower may otherwise have hereunder and under the other Loan Documents.  
(c)    To the extent any Indemnified Party has notice of a claim for which it intends to seek indemnification hereunder, such Indemnified Party shall give prompt written notice thereof to Borrower, provided that failure by Lender to so notify Borrower will not relieve Borrower of its obligations under this Section, except to the extent that Borrower suffers actual prejudice as a result of such failure.  In connection with any claim for which indemnification is 

 

sought hereunder, Borrower shall have the right to defend the applicable Indemnified Party (if requested by the applicable Indemnified Party, in the name of such Indemnified Party) from such claim by attorneys and other professionals reasonably approved by the applicable Indemnified Party.  Upon assumption by Borrower of any defense pursuant to the immediately preceding sentence, Borrower shall have the right to control such defense, provided that the Applicable Indemnified Party shall have the right to reasonably participate in such defense and Borrower shall not consent to the terms of any compromise or settlement of any action defended by Borrower in accordance with the foregoing without the prior consent of the applicable Indemnified Party, unless such compromise or settlement (i) includes an unconditional release of the applicable Indemnified Party from all liability arising out of such action and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of the applicable Indemnified Party.  The applicable Indemnified Party shall have the right to retain its own counsel if (i) Borrower shall have failed to employ counsel reasonably satisfactory to the applicable Indemnified Party in a timely manner, or (ii) the applicable Indemnified Party shall have been advised by counsel that there are actual or potential material conflicts of interest between Borrower and the applicable Indemnified Party, including situations in which there are one or more legal defenses available to the applicable Indemnified Party that are different from or additional to those available to Borrower.  So long as Borrower is conducting the defense of any action defended by Borrower in accordance with the foregoing in a prudent and commercially reasonable manner, Lender and the applicable Indemnified Party shall not compromise or settle such action defended without Borrower’s consent, which shall not be unreasonably withheld or delayed.  Upon demand, Borrower shall pay or, in the sole discretion of the applicable Indemnified Party, reimburse the applicable Indemnified Party for the payment of reasonable fees and disbursements of attorneys, engineers, environmental consultants, laboratories and other professionals retained by the Applicable Indemnified Party in accordance with this Section in connection with defending any claim subject to indemnification hereunder.  
(d)    Any amounts payable to Lender by reason of the application of this Section shall be secured by the Mortgage and shall become immediately due and payable and shall bear interest at the Default Rate from the date Damages are sustained by the Indemnified Parties until paid.
(e)    The provisions of and undertakings and indemnification set forth in this Section shall survive the satisfaction and payment in full of the Indebtedness and termination of this Agreement.
(f)    Borrower shall reimburse Lender upon receipt of written notice from Lender for (i) all out-of-pocket costs and expenses incurred by Lender (or any of its affiliates) in connection with the origination of the Loan, including reasonable legal fees and disbursements, accounting fees, and the costs of the Appraisals, the Engineering Reports, the Title Insurance Policies, the Surveys, the Environmental Reports and any other third-party diligence materials; (ii) all out-of-pocket costs and expenses incurred by Lender (or any of its affiliates) in connection with (A) monitoring Borrower’s ongoing performance of and compliance with Borrower’s agreements and covenants contained in this Agreement and the other Loan Documents on its part to be performed or complied with after the Closing Date, including confirming compliance with 

 

environmental and insurance requirements, (B) the negotiation, preparation, execution, delivery and administration of any consents, amendments, waivers or other modifications to this Agreement and the other Loan Documents and any other documents or matters relating hereto (including Leases, Material Agreements, and Permitted Encumbrances), (C) filing, registration and recording fees and expenses and other similar expenses incurred in creating and perfecting the Liens in favor of Lender pursuant to this Agreement and the other Loan Documents (including the filing, registration or recording of any instrument of further assurance) and all federal, state, county and municipal, taxes (including, if applicable, intangible taxes), search fees, title insurance premiums, duties, imposts, assessments and charges arising out of or in connection with the execution and delivery of the Loan Documents, any mortgage supplemental thereto, any security instrument with respect to the Collateral or any instrument of further assurance, (D) enforcing or preserving any rights, in response to third party claims or the prosecuting or defending of any action or proceeding or other litigation, in each case against, under or affecting Borrower, this Agreement, the other Loan Documents or any Collateral, and (E) the satisfaction of any Rating Condition in respect of any matter required or requested by Borrower hereunder; and (iii) all actual out-of-pocket costs and expenses (including reasonable attorney’s fees and, if the Loan has been Securitized, special servicing fees) incurred by Lender (or any of its affiliates) in connection with the enforcement of any obligations of Borrower, or a Default by Borrower, under the Loan Documents, including any actual or attempted foreclosure, deed-in-lieu of foreclosure, refinancing, restructuring, settlement or workout and any insolvency or bankruptcy proceedings (including any applicable transfer taxes).  Without limiting the foregoing, Borrower shall pay all costs, expenses and fees of Lender and its Servicer, operating advisor and securitization trustee resulting from Defaults or reasonably imminent defaults by Borrower or requests by Borrower (including enforcement expenses and any liquidation fees, workout fees, special servicing fees, operating advisor consulting fees or any other similar fees and interest payable on advances made by the Servicer or the securitization trustee with respect to delinquent debt service payments or expenses of curing Borrower’s defaults under the Loan Documents, and any expenses paid by Servicer or a trustee in respect of the protection and preservation of any Property, such as payment of taxes and insurance premiums); and the costs of all property inspections and/or appraisals (or any updates to any existing inspection or appraisal) that Servicer may be required to obtain due to a request by Borrower or the occurrence of a Default.    
Section 9.18.    No Third-Party Beneficiaries.  This Agreement and the other Loan Documents are solely for the benefit of Lender and Borrower, and nothing contained in this Agreement or the other Loan Documents shall be deemed to confer upon anyone other than Lender, Borrower and Indemnified Parties any right to insist upon or to enforce the performance or observance of any of the obligations contained herein or therein.  All conditions to the obligations of Lender to make the Loan hereunder are imposed solely and exclusively for the benefit of Lender, and no other Person shall have standing to require satisfaction of such conditions in accordance with their terms or be entitled to assume that Lender will refuse to make the Loan in the absence of strict compliance with any or all thereof, and no other Person shall under any circumstances be deemed to be a beneficiary of such conditions, any or all of which may be freely waived in whole or in part by Lender if, in Lender’s sole discretion, Lender deems it advisable or desirable to do so.

 

Section 9.19.    Recourse.  
(a)    Subject to the qualifications herein, Lender shall not enforce Borrower’s obligation to pay the Indebtedness by any action or proceeding wherein a deficiency judgment or other judgment establishing personal liability shall be sought against Borrower or any of its affiliates, or any Exculpated Person, except for foreclosure actions or any other appropriate actions or proceedings in order to fully exercise Lender’s remedies in respect of, and to realize upon, the Collateral, and except for any actions to enforce any obligations expressly assumed or guaranteed by any guarantor, indemnitor or similar party (whether or not such party is an Exculpated Person) under the Loan Documents.  
(b)    Borrower (but not any Exculpated Person, except Sponsor) shall indemnify Lender and hold Lender harmless from and against any and all Damages to Lender (including the legal and other expenses of enforcing the obligations of Borrower under this Section and the Sponsor under the Guaranty) resulting from or arising out of any of the following (the “Indemnified Liabilities”), which Indemnified Liabilities shall be guaranteed by Sponsor pursuant to the Guaranty:    
(i)    any intentional or grossly negligent material physical Waste at any of the Properties committed or permitted by Borrower, Operating Lessee, the Sponsor or any of their respective affiliates;
(ii)    any fraud or willful misrepresentation committed by Borrower, Operating Lessee, the Sponsor or any of their respective affiliates;
(iii)    any willful misconduct by Borrower, Operating Lessee the Sponsor or any of their respective affiliates  (including wrongful interference by any such Person with the exercise of remedies by Lender during the continuance of an Event of Default);
(iv)    the misappropriation or intentional misapplication by Borrower, Operating Lessee, the Sponsor or any of their respective affiliates of any funds in violation of the Loan Documents, including the failure to comply with the first sentence of Section 3.1(a) and misappropriation or intentional misapplication of Revenues, security deposits, Loss Proceeds (to the extent not applied toward repayment of the Loan or restoration of any of the Properties pursuant to this Agreement) and/or amounts contained in the Approved FF&E Account or Approved Operating Account; 
(v)    any voluntary Debt incurred by Borrower or Operating Lessee if and to the extent the continued existence of such Debt is prohibited hereunder (excluding , however, any Debt that constituted Permitted Debt on the date that it was incurred); 
(vi)    any breach by Borrower, Operating Lessee or the Sponsor of any representation or covenant regarding environmental matters contained in this Agreement or in the Environmental Indemnity;

 

(vii)    the failure to pay or maintain the Policies or pay the amount of any deductible required thereunder following a Casualty or other insurance claim, provided cash flow from the Properties is sufficient for such purpose (it being agreed that cash flow from the Properties shall be deemed to have been sufficient if cash flow during the immediately prior policy year would have been sufficient to accumulate sufficient funds in a reserve account to fully pay premiums for the Policies for the policy year in question, had Lender been reserving funds in respect of the Policies during such immediately prior policy year) and Lender permits the same to be applied for such purpose, (and neither Borrower nor Sponsor shall have an liability under this clause (vii) for Damages that arise from Lender’s failure to properly apply amounts reserved by Lender, if any, for the purpose of paying insurance premiums);
(viii)    the failure of Borrower or Operating Lessee to be, and to at all times have been, a Single-Purpose Entity (for the avoidance of doubt, the recourse described in this clause shall be in addition to the full recourse for a substantive consolidation described below), except for the unilateral resignation of an Independent Director;
(ix)    removal of personal property or FF&E from any of the Properties during or in anticipation of an Event of Default, except as a result of obsolescence or unless replaced with personal property or FF&E of the same or greater value and utility; 
(x)    any fees or commissions paid by Borrower or Operating Lessee to any affiliate in violation of the terms of the Loan Documents;
(xi)    the failure to fund either Approved FF&E Account in accordance with this Agreement (it being agreed that Damages in such event shall include the amount of any funds not deposited into the Approved FF&E Account), provided cash flow from the applicable Property is sufficient to fund the applicable Approved FF&E Account and Lender permits the same to be applied for such purpose;
(xii)    the failure to convert the Hyatt Herald Square into a Hyatt branded hotel pursuant to the Capital Plan and for the same to be open for business as a “Hyatt” branded hotel, in each case, on or before June 30, 2015; and
(xiii)    any claims or demands by Holiday Hospitality Franchising, Inc. as a result of the termination of the Holiday Inn Franchise Agreement.  
In addition to the foregoing, the Loan shall be fully recourse to Borrower and Sponsor, jointly and severally, if (i) there is any unauthorized Transfer of any of the Properties or any unauthorized transfer of any Collateral Account, the Approved Operating Account, the Approved FF&E Account or any Prohibited Change of Control, in each case, in violation of the Loan Documents, (ii) any petition for bankruptcy, insolvency, dissolution or liquidation under the Bankruptcy Code or any similar federal or state law is filed by, consented to, or acquiesced in by, any Required SPE, (iii) any Required SPE or any of their respective affiliates (including Sponsor) shall have colluded with other creditors to cause an involuntary bankruptcy filing with respect to any Required SPE, or (iv) any Required SPE fails to be, and to at all times have been, 

 

a Single-Purpose Entity, which failure results in a substantive consolidation of Borrower and/or Operating Lessee with any affiliate in a bankruptcy or similar proceeding.  The Loan shall be recourse to Sponsor in an amount equal to its unpaid Guaranteed Obligations (as such term is defined in the Completion Guaranty) under the Completion Guaranty.  
(c)    The foregoing limitations on personal liability shall in no way impair or constitute a waiver of the validity of the Notes, the Indebtedness secured by the Collateral, or the Liens on the Collateral, or the right of Lender, as mortgagee or secured party, to foreclose and/or enforce its rights with respect to the Collateral after an Event of Default.  Nothing in this Agreement shall be deemed to be a waiver of any right which Lender may have under the Bankruptcy Code to file a claim for the full amount of the debt owing to Lender by Borrower or to require that all Collateral shall continue to secure all of the Indebtedness owing to Lender in accordance with the Loan Documents.  Lender may seek a judgment on the Note (and, if necessary, name Borrower in such suit) as part of judicial proceedings to foreclose on any Collateral or as a prerequisite to any such foreclosure or to confirm any foreclosure or sale pursuant to power of sale thereunder, and in the event any suit is brought on the Notes, or with respect to any Indebtedness or any judgment rendered in such judicial proceedings, such judgment shall constitute a Lien on and may be enforced on and against the Collateral and the rents, profits, issues, products and proceeds thereof.  Nothing in this Agreement shall impair the right of Lender to accelerate the maturity of the Note upon the occurrence of an Event of Default, nor shall anything in this Agreement impair or be construed to impair the right of Lender to seek personal judgments, and to enforce all rights and remedies under applicable law, jointly and severally against any indemnitors and guarantors to the extent allowed by any applicable Loan Documents.  The provisions set forth in this Section are not intended as a release or discharge of the obligations due under the Note or under any Loan Documents, but are intended as a limitation, to the extent provided in this Section, on Lender’s right to sue for a deficiency or seek a personal judgment except as required in order to realize on the Collateral.
Section 9.20.    Right of Set-Off.  In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, during the continuance of an Event of Default, Lender may from time to time, without presentment, demand, protest or other notice of any kind (all of such rights being hereby expressly waived), set-off and appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by Lender (including branches, agencies or affiliates of Lender wherever located) to or for the credit or the account of Borrower against the obligations and liabilities of Borrower to Lender hereunder, under the Notes, the other Loan Documents or otherwise, irrespective of whether Lender shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured, and any such set-off shall be deemed to have been made immediately upon the occurrence of an Event of Default even though such charge is made or entered on the books of Lender subsequent thereto.
Section 9.21.    Exculpation of Lender.  Lender neither undertakes nor assumes any responsibility or duty to Borrower or any other party to select, review, inspect, examine, supervise, pass judgment upon or inform Borrower or any third party of (a) the existence, quality, 

 

adequacy or suitability of appraisals of the Properties or other Collateral, (b) any environmental report, or (c) any other matters or items, including engineering, soils and seismic reports that are contemplated in the Loan Documents.  Any such selection, review, inspection, examination and the like, and any other due diligence conducted by Lender, is solely for the purpose of protecting Lender’s rights under the Loan Documents, and shall not render Lender liable to Borrower or any third party for the existence, sufficiency, accuracy, completeness or legality thereof.
Section 9.22.    Servicer.  Lender may delegate any and all rights and obligations of Lender hereunder and under the other Loan Documents to the Servicer upon notice by Lender to Borrower, whereupon any notice or consent from the Servicer to Borrower, and any action by Servicer on Lender’s behalf, shall have the same force and effect as if Servicer were Lender.
Section 9.23.    No Fiduciary Duty.  
(a)    Borrower acknowledges that, in connection with this Agreement, the other Loan Documents and the Transaction, Lender has relied upon and assumed the accuracy and completeness of all of the financial, legal, regulatory, accounting, tax and other information provided to, discussed with or reviewed by Lender for such purposes, and Lender does not assume any liability therefor or responsibility for the accuracy, completeness or independent verification thereof.  Lender, its affiliates and their respective equityholders and employees (for purposes of this Section, the “Lending Parties”) have no obligation to conduct any independent evaluation or appraisal of the assets or liabilities (including any contingent, derivative or off-balance sheet assets and liabilities) of Sponsor, Borrower or any other Person or any of their respective affiliates or to advise or opine on any related solvency or viability issues.
(b)    It is understood and agreed that (i) the Lending Parties shall act under this Agreement and the other Loan Documents as an independent contractor, (ii) the Transaction is an arm’s-length commercial transaction between the Lending Parties, on the one hand, and Borrower, on the other, (iii) each Lending Party is acting solely as principal and not as the agent or fiduciary of Borrower, Sponsor or their respective affiliates, stockholders, employees or creditors or any other Person and (iv) nothing in this Agreement, the other Loan Documents, the Transaction or otherwise shall be deemed to create (A) a fiduciary duty (or other implied duty) on the party of any Lending Party to Sponsor, Borrower, any of their respective affiliates, stockholders, employees or creditors, or any other Person or (B) a fiduciary or agency relationship between Sponsor, Borrower or any of their respective affiliates, stockholders, employees or creditors, on the one hand, and the Lending Parties, on the other.  Borrower agrees that neither it nor Sponsor nor any of their respective affiliates shall make, and hereby waives, any claim against the Lending Parties based on an assertion that any Lending Party has rendered advisory services of any nature or respect, or owes a fiduciary or similar duty to Borrower, Sponsor of their respective affiliates, stockholders, employees or creditors.  Nothing in this Agreement or the other Loan Documents is intended to confer upon any other Person (including affiliates, stockholders, employees or creditors of Borrower and Sponsor) any rights or remedies by reason of any fiduciary or similar duty.  
(c)    Borrower acknowledges that it has been advised that the Lending Parties are a full service financial services firm engaged, either directly or through affiliates in various 

 

activities, including securities trading, investment banking and financial advisory, investment management, principal investment, hedging, financing and brokerage activities and financial planning and benefits counseling for both companies and individuals.  In the ordinary course of these activities, the Lending Parties may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and/or financial instruments (including loans) for their own account and for the accounts of their customers and may at any time hold long and short positions in such securities and/or instruments.  Such investment and other activities may involve securities and instruments of affiliates of Borrower, including Sponsor, as well as of other Persons that may (i) be involved in transactions arising from or relating to the Transaction, (ii) be customers or competitors of Borrower, Sponsor and/or their respective affiliates, or (iii) have other relationships with Borrower, Sponsor and/or their respective affiliates.  In addition, the Lending Parties may provide investment banking, underwriting and financial advisory services to such other Persons.  The Lending Parties may also co-invest with, make direct investments in, and invest or co-invest client monies in or with funds or other investment vehicles managed by other parties, and such funds or other investment vehicles may trade or make investments in securities of affiliates of Borrower, including Sponsor, or such other Persons.  The Transaction may have a direct or indirect impact on the investments, securities or instruments referred to in this paragraph.  Although the Lending Parties in the course of such other activities and relationships may acquire information about the Transaction or other Persons that may be the subject of the Transaction, the Lending Parties shall have no obligation to disclose such information, or the fact that the Lending Parties are in possession of such information, to Borrower, Sponsor or any of their respective affiliates or to use such information on behalf of Borrower, Sponsor or any of their respective affiliates.
(d)    Borrower acknowledges and agrees that Borrower has consulted its own legal and financial advisors to the extent it deemed appropriate and that it is responsible for making its own independent judgment with respect to this Agreement, the other Loan Documents, the Transaction and the process leading thereto.    
Section 9.24.    Borrower Information.  Borrower shall make available to Lender all information concerning its business and operations that Lender may reasonably request.  Lender shall have the right to disclose any and all information provided to Lender by Borrower or Sponsor regarding Borrower, Operating Lessee, Sponsor, the Loan and the Property (i) to affiliates of Lender and to Lender’s agents and advisors, (ii) to any actual or potential assignee, transferee or participant in connection with the contemplated assignment, transfer, participation or Securitization of all or any portion of the Loan or any participations therein, and to any investors or prospective investors in the Certificates, and their respective advisors and agents, including the operating advisor, or to any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to Borrower and its obligations, or to any Person that is a party to a repurchase agreement with respect to the Loan, (iii) to any Rating Agency in connection with a Securitization or as otherwise required in connection with a disposition of the Loan, (iv) to any Person necessary or desirable in connection with the exercise of any remedies hereunder or under any other Loan Document following an Event of Default, (v) to any governmental agency, including the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the FDIC, the Securities and Exchange 

 

Commission and any other regulatory authority that may exercise authority over Lender or any investor in the Certificates (including the Servicer, the Securitization trustee and their respective agents and employees) or any representative thereof, and to the National Association of Insurance Commissioners, in each case if requested by such governmental agency or otherwise required to comply with the applicable rules and regulations of such governmental agency or if required pursuant to legal or judicial process, and (vi) in any Disclosure Document (as defined in the Cooperation Agreement).  In addition, Lender may disclose the existence of this Agreement and the information about this Agreement to market data collectors, similar services providers to the lending industry, and service providers to Lender in connection with the administration and management of this Agreement and the other Loan Documents.  Each party hereto (and each of their respective affiliates, employees, representatives or other agents) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Transaction and all materials of any kind (including opinions and other tax analyses) that are provided to any such party relating to such tax treatment and tax structure.  For the purpose of this Section, “tax structure” means any facts relevant to the federal income tax treatment of the Transaction but does not include information relating to the identity of any of the parties hereto or any of their respective affiliates.  Notwithstanding anything set forth herein to the contrary, for so long as the Sponsor is a publicly traded company, Lender shall not disclose information about the Sponsor (including in any Disclosure Document) that is not publicly available, without the prior consent of Borrower, which consent shall not to be unreasonably withheld, delayed or conditioned.    
Section 9.25.    PATRIOT Act Records.  Lender hereby notifies Borrower that pursuant to the requirements of the PATRIOT Act, it is required to obtain, verify and record information that identifies Borrower, Operating Lessee and Sponsor, which information includes the name and address of Borrower and Sponsor and other information that will allow Lender to identify Borrower or Sponsor in accordance with the PATRIOT Act.
Section 9.26.    Prior Agreements.  THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS CONTAIN THE ENTIRE AGREEMENT OF THE PARTIES HERETO AND THERETO IN RESPECT OF THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, AND ALL PRIOR AGREEMENTS AMONG OR BETWEEN SUCH PARTIES, WHETHER ORAL OR WRITTEN, INCLUDING ANY TERM SHEETS, CONFIDENTIALITY AGREEMENTS AND COMMITMENT LETTERS, ARE SUPERSEDED BY THE TERMS OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS (EXCEPT THAT ANY ORIGINATION FEE SPECIFIED IN ANY TERM SHEET, COMMITMENT LETTER OR FEE LETTER SHALL BE AN OBLIGATION OF BORROWER AND SHALL BE PAID AT CLOSING, AND ANY INDEMNIFICATIONS,  FLEX PROVISION, EXIT FEES AND THE LIKE PROVIDED FOR THEREIN SHALL SURVIVE THE CLOSING).
Section 9.27.    Publicity.  If the Loan is made, Lender may issue press releases, advertisements and other promotional materials describing in general terms or in detail Lender’s participation in such transaction, and may utilize photographs of the Property in such promotional materials.  Borrower shall not make any references to Lender in any press release, advertisement or promotional material issued by Borrower or Sponsor, unless Lender shall have 

 

approved of the same in writing prior to the issuance of such press release, advertisement or promotional material, which approval shall not be unreasonably withheld, conditioned or delayed, provided however, that Lender’s approval shall not be required to the extent Borrower is required by Legal Requirements to make such references to Lender.  
Section 9.28.    Delay Not a Waiver.  Neither any failure nor any delay on the part of Lender in insisting upon strict performance of any term, condition, covenant or agreement, or exercising any right, power, remedy or privilege hereunder, under any other Loan Document or under any other instrument given as security therefor, shall operate as or constitute a waiver thereof, nor shall a single or partial exercise thereof preclude any other future exercise, or the exercise of any other right, power, remedy or privilege.  In particular, and not by way of limitation, by accepting payment after the due date of any amount payable hereunder or under any other Loan Document, Lender shall not be deemed to have waived any right either to require prompt payment when due of all other amounts due under this Agreement, the Note or the other Loan Documents, or to declare a default for failure to effect prompt payment of any such other amount.  
Section 9.29.    Schedules and Exhibits Incorporated.  The Schedules and Exhibits annexed hereto are hereby incorporated herein as a part of this Agreement with the same effect as if set forth in the body hereof.
Section 9.30.    Joint and Several Liability.  The representations, covenants, warranties and obligations of Borrower hereunder are joint and several.  In the event of (a) any payment by any one or more of the Borrowers of any amount in excess of its respective Proportional Amount, or (b) the foreclosure of, or the delivery of deeds in lieu of foreclosure relating to, any of the Collateral owned by one or more of the Borrowers, each Borrower (the “Overpaying Borrower”) that has paid more than its Proportional Amount or whose Collateral or assets have been utilized to satisfy obligations under the Loan or otherwise for the benefit of one or more other Borrowers shall be entitled, after payment in full of the Note and the satisfaction of all the Borrowers’ other obligations to the Lender under the Loan Documents, to contribution from each of the benefited Borrowers (i.e., the Borrowers, other than the Overpaying Borrower, who have paid less than their respective Proportional Amount or whose Collateral or assets have not been so utilized to satisfy obligations under the Loan) for the amounts so paid, advanced or benefited, up to such benefited Borrower’s then current Proportional Amount.  Such right to contribution shall be subordinate in all respects to the Loan.  As used herein, the “Proportional Amount” with respect to any Borrower shall equal the amount derived as follows: (a) the ratio of the Allocated Loan Amount with respect to the Property or Properties in which such Borrower has an interest to the original Loan Amount hereunder; times (b) the aggregate amount paid or payable by the Borrowers under the Loan Documents (including interest).
[Signatures appear on following page]

 

Lender and Borrower are executing this Agreement as of the date first above written.
	
		
	 
	 

	 
	LENDER:
GOLDMAN SACHS MORTGAGE COMPANY, a New York limited partnership

By:  Goldman Sachs Real Estate Funding Corp.,
       a New York corporation, its General Partner

   
       By: /s/ Rene J. Theriault                                
            Name: Rene J. Theriault    
            Title: Authorized Signatory

[Signatures continue on following page]

Holiday Inn/Hyatt Place - Signature Page to Loan Agreement

 

	
		
	 
	BORROWER:
CHSP 31st STREET LLC, a Delaware limited liability company
 
 
By: /s/ Graham J. Wootten                          
      Name: Graham J. Wootten
      Title: Vice President  

	 
	CHSP 36th STREET LLC, a Delaware limited liability company
 
 
By: /s/ Graham J. Wootten                          
      Name: Graham J. Wootten
      Title: Vice President  

[Signatures continue on following page]

Holiday Inn/Hyatt Place - Signature Page to Loan Agreement

 

JOINDER BY OPERATING LESSEE

The undersigned, Operating Lessee, hereby joins in and executes the Agreement solely for the purposes of acknowledging the representations and agreeing to its obligations expressly set forth therein.  

OPERATING LESSEE:
CHSP TRS 31ST  STREET LLC, a Delaware limited liability company
 
 
By: /s/ Graham J. Wootten                            
      Name: Graham J. Wootten
      Title: Vice President

[Signatures continue on following page]

Holiday Inn/Hyatt Place - Signature Page to Joinder to Loan Agreement By Operating Lessee

 

OPERATING LESSEE:

CHSP TRS 36TH STREET LLC, a Delaware limited liability company
 
 
By: /s/ Graham J. Wootten                            
      Name: Graham J. Wootten
      Title: Vice President

Holiday Inn/Hyatt Place - Signature Page to Joinder to Loan Agreement By Operating LesseeCAO Employment Agreement Exhibit 10.1

EXECUTION COPY
    
 July 30, 2014

Mr. James McNichols
105 Shooting Star Way
Sunset, South Carolina 29685
U.S.A.

Dear Jim,

I am pleased to offer you the position of Chief Actuary at Greenlight Reinsurance, Ltd. (the “Company”), subject to our customary background checks which you authorize us to conduct and the issuance of a work permit from the Cayman Islands Department of Immigration.   This position reports directly to the Chief Executive Officer. The following letter outlines the key terms and conditions of your employment relationship with the Company.

		
	•
	Start Date:  September 15, 2014, subject to a Work Permit being approved by Immigration.

		
	•
	Place of Employment: The Company’s offices located in Camana Bay, 65 Market Street, Suite 1207, Grand Cayman Island, B.W.I.

		
	•
	Employment Status:  Employee at will.  Your employment may be terminated by the Company for any reason upon 180 days written notice and may be terminated immediately by the Company for cause, which shall include, without limitation, your violation of the Company’s Code of Conduct, the Tax Operating Guidelines or any other Operating Guidelines or the revocation of your Cayman Islands working status as a result of any action or inaction taken by you.

		
	•
	Work Hours: The standard work hours are 8:30 a.m. to 6:00 p.m., Monday through Friday.  As a professional employee you will be expected to work overtime without any additional remuneration. 

		
	•
	Holidays:  The Company will observe Caymanian statutory holidays.

		
	•
	Travel and Expenses: You may be required to travel as necessary to perform your job duties.  The Company will reimburse you for reasonable and customary expenses incurred during the course of business travel upon presentation of expense statements or vouchers or such other information as the Company may reasonably require in accordance with Company policies.

		
	•
	Vacation: You will be entitled to 20 days of vacation leave per year.  Scheduling of vacation time will be subject to prior approval.  Vacation time does not rollover without prior approval of the Chief Executive Officer.

		
	•
	Sick days:  You will be entitled to 10 sick days per year for actual illness.  If you are absent from work for more than three consecutive days, you may be required to produce a doctor’s note.

		
	•
	Benefits:  You will be entitled to participate in such employee benefit plans and insurance programs offered by the Company, or which it may adopt from time to time, for its employees, in accordance with the eligibility requirements for participation therein and applicable law.

		
	•
	Remuneration:

		
	i.
	Base Salary: Annual Base Salary of US$350,000, which will be paid monthly on or about the 23rd of each month to a local bank account.  Salary reviews will take place, at a minimum, every three years.   Changes in salary, if any, will be instituted in March effective as of January 1.  

		
	ii.
	Relocation Allowance: Within 30 days of the Start Date, a relocation allowance of US$25,000 will be paid to the employee.

		
	iii.
	Bonus: Your annual target bonus is US$165,000. Bonus awards will be based on the Company’s performance in relation to targets established by the Board of Directors annually and your individual performance in relation to your assigned duties.  The bonus, if any, will be evaluated annually in February of the following year.  The bonus may contain a cash portion and a deferred portion the latter of which is dependent on the Company’s results.   For the 2014 performance year, 30% of your target bonus will be evaluated based on qualitative factors such as personal goals and objectives and 70% will be based on quantitative factors such as underwriting results.  The quantitative bonus can vary up or down based on the Company’s underwriting performance.  The 2014 quantitative bonus, if any, will be paid in three installments as follows: 33% on or before March 15, 2018 and March 15, 2019 and 34% on or before March 15, 2020.  Thereafter, the quantitative bonus, if any, will be paid in accordance with the Company’s Compensation Plan.

		
	iv.
	Sign-On Shares:  In connection with you accepting the position offered hereby, the Company will recommend to the Board that you will be awarded Restricted Class A Ordinary shares of the Company’s stock, with an issuance value of US$100,000.  The shares shall be evidenced by, and subject to, the terms and conditions of the Greenlight Capital Re, Ltd. 2004 Stock Incentive Plan.  The shares will fully vest on third anniversary of issuance.

		
	v.
	Long-term Incentive Plan: You will be eligible for the Company’s Long-term Incentive Plan.  As a participant in the plan you will be eligible for further grants of restricted shares as well as option grants, from time to time, subject to the approval of the Board.  Vesting of options and/or restricted share grants and other terms and conditions of any such awards will be specified in your award agreement(s), if any. Your target LTIP will be US$205,000.

		
	vi.
	Pension:  The Company has established a pension plan in compliance with the Cayman Pension Act.  The Company will pay the employee share of the required pension amounts on your behalf.  This benefit is subject to change in the event that the requirements of the Cayman Pension Act are amended or revised.

		
	•
	Tax Advice:  For U.S., Canadian and British citizens filing tax returns, the Company has arranged to have Federal Tax returns prepared at the Company’s expense, subject to a limit of US$5,000 annually.  The service provider will be agreed by the Company.

		
	•
	Work Permit:  As a non-Caymanian, the Company will be required to obtain a work permit for you from the Cayman Islands Immigration Department prior to your employment by the Company.   This offer is predicated on the work permit being acquired and becomes null and void if the Company is unable to obtain the work permit from the Immigration Department. 

		
	•
	Notice: You may terminate your employment with the Company upon 180 days written notice.  Upon your voluntary termination and satisfaction of the 180 day notice period, you will be paid any accrued but unpaid base salary and any unused vacation time.  If you do not satisfy the 180 day notice period, all unused vacation time shall be forfeited.

		
	•
	Contingencies:  Your employment will be contingent upon compliance with the Code of Conduct (to be promulgated by the Company), the Tax Operating Guidelines, and any other Operating Guidelines promulgated by the Company.

		
	•
	Representation:  You represent and warrant to the Company and you acknowledge that the Company has relied on such representation in offering employment to you and that:

		
	i.
	the performance of your duties to the Company hereunder will not violate the terms of any agreement with any third party and;

		
	ii.
	you have not made material misrepresentations nor omissions to the Company in respect of any previous employment, qualifications or generally.

		
	•
	Restrictive Covenants:  

		
	i.
	Non-Compete.  In consideration of the benefits provided for in this letter, you covenant and agree that during your term of employment and for a period of six (6) months following the termination of  employment for whatever reason, or following the date of cessation of the last violation of this Agreement, or from the date of entry by a court of competent jurisdiction of a final, unappealable judgment enforcing this covenant, whichever of the foregoing is last to occur, you will not, for yourself, or in conjunction with any other person, firm, partnership, corporation or other form of business organization or arrangement (whether as a shareholder, partner, member, principal, agent, lender, director, officer, manager, trustee, representative, employee or consultant), directly or indirectly, be employed by, provide services to, in any way be connected, associated or have any interest in, or give advice or consultation to any business which competes, directly or indirectly with any aspect of the Company’s business.

		
	ii.
	Non-Solicitation of Employees. In consideration of the benefits provided for in this Agreement, you covenant and agree that during the term of employment and for a period of one (1) year thereafter, you shall not, without the prior written permission of the Company, (i) directly or indirectly solicit, employ or retain, or have or cause any other person or entity to solicit, employ or retain, any person who is employed or is providing services to the Company at the time of your termination of employment or was or is providing such services within the twelve (12) month period before or after your termination of employment or (ii) request or cause any employee of the Company to breach or threaten to breach any terms of said employee’s agreements with the Company or to terminate his/her employment with the Company.

		
	iii.
	Non-Solicitation of Clients and Customers.  In consideration of the benefits provided for in this letter, you covenant and agree that during the term of employment and for a period of one (1) year thereafter, you will not, for yourself, or in conjunction with any other person, firm, partnership, corporation or other form of business organization or arrangement (whether as a shareholder, partner, member, lender, principal, agent, director, officer, manager, trustee, representative, employee or consultant), directly or indirectly:  (i) solicit or accept any business that is directly related to the business of the Company from any person or entity who, at the time of, or at the time during the twenty-four (24) month period preceding, termination was an existing or prospective customer or client of the Company; (ii) request or cause any of the Company’s clients or customers to cancel or terminate any business relationship with the Company involving services or activities which were directly or indirectly the responsibility of the Company during your employment or (iii) pursue any Company project known to you upon termination of your employment that the Company is actively pursuing (or was actively pursuing within six months of termination) while the Company is (or is contemplating) actively pursuing such project. 

		
	iv.
	Other.  Your employment is contingent upon your execution of our Intellectual Property and Confidentiality agreement.

This offer expires on August 6, 2014.

If you accept this offer, please indicate your acceptance by signing below. 

Sincerely,

/s/ Bart Hedges                                                                                                                  
Bart Hedges
Chief Executive Officer
Greenlight Reinsurance, Ltd. 

I accept this offer of employment and all terms and conditions as outlined above.

/s/ Jim McNichols                    
Jim McNichols                        Dated: July 31, 2014

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}]]